A Prompt Payment Act for Beneficiaries

 

Congress passed the Prompt Payment Act in 1982 because federal agencies were taking months to pay contractors. Those delays created real cash-flow problems, particularly for small businesses. Congress established a basic principle: when the government owes someone money, it should pay promptly. When it fails, there should be a consequence.

Social Security beneficiaries deserve the same protection.

Federal regulations define an underpayment and an overpayment in essentially the same way: the difference between what a beneficiary was paid and what the beneficiary should have been paid. The calculation may be symmetrical. The consequences are not.

This is not a small problem. According to SSA’s historical payment-accuracy data, the agency made an estimated $2.2 billion in SSI underpayments and $13.4 billion in SSI overpayments during fiscal years 2017 through 2019. Under current policy, SSA can generally withhold 50 percent of a Social Security benefit or 10 percent of an SSI payment each month. Beneficiaries may appeal, request a waiver, or negotiate a lower recovery rate. Navigating those options, however, takes time, knowledge, and persistence.

When SSA underpays someone, that person may wait months or years to receive money needed for rent, food, medicine, or utilities. When the payment finally arrives, the government generally pays only what it should have paid in the first place. There is no interest and no meaningful consequence for the delay.

The regulations recognize that underpayments should not be held indefinitely while SSA investigates a possible overpayment. Section 416.538 generally limits that delay for an eligible SSI recipient to the end of the month following the month in which the underpayment was discovered. But that protection begins only after SSA finds the error. It does nothing for the beneficiary whose underpayment went undetected for months or years.

We live in a world of modern technology. The government should be able to identify payment errors and correct them within a reasonable period. Beneficiaries should not bear the financial consequences when it cannot.

Congress should enact a Prompt Payment Act for beneficiaries.

The standard should be simple. When the government underpays a beneficiary, it should pay interest at the five-year Treasury rate from the date each payment was due. When SSA fails to identify an overpayment within the fiscal year in which it occurred, the debt should be dismissed, absent fraud or an intentional failure to report required information.

If the government owes you money, it must pay promptly or pay interest. If the government believes you owe it money, it must identify the debt promptly or lose the right to collect.

The law already treats underpayments and overpayments as two sides of the same calculation. It is time to treat them as two sides of the same obligation.

Accountability should work both ways.