Retirement crisis: Social Security chief Martin O’Malley clears up myths

Social Security chief Martin O’Malley has had a string of challenges since being confirmed by Congress as commissioner of the federal agency nearly a year ago.
Before O’Malley walked in the door, the agency had been under fire for deadly delays for claiming Social Security benefits, long phone wait times and lack of staffing. And he faced the aftermath of an exposé on “60 Minutes” on CBS about shocking collection efforts to reclaim overpayments of benefits, many involving situations that are decades old.
And then there’s the ongoing fake news and outright scams.
Social Security’s 800 number — 800-772-1213 — can see all sorts of spikes in calls, which trigger more time on hold for callers. Back in June, for example, call volume spiked after fake reports about a supposedly new $600 June increase in benefits.
O’Malley, the former governor of Maryland, noted on X that the agency was “slammed” on June 3 with 463,000 calls — some 140,000 more calls than the agency had received a few days earlier. The agency worked to get the word out that the rumors and reports of a $600 extra payment ahead were false. “Don’t fall for this stunt,” warned O’Malley in a news release.
“We are alerting the public to these falsehoods, and we are addressing these bogus claims at the source. No Cost-of-Living Adjustment (COLA) increase will occur until January 2025,” O’Malley stated in June.
We will hear the official word on the COLA adjustment for 2025 shortly after the consumer price index for September is released, which is scheduled for Oct. 10 at 8:30 a.m. The current estimate is a 2.5% automatic hike.
O’Malley — who visited the Social Security Administration office in Roseville in late September — talked at length with me by phone about several issues involving Social Security, including phone service and how he was appointed by President Joe Biden to fix some key issues. O’Malley’s term expires Jan. 19.
Social Security ranks as “one of the top” issues or a “very important” issue people consider when determining who they will vote for in the upcoming U.S. presidential election, according to one CNBC poll of 1,101 registered voters done from July 31 through Aug. 4.
Here are some topics O’Malley addressed in our conversation:
O’Malley brought up his concerns about a big myth being pushed during election season that migrants not in the U.S. legally “are bankrupting Social Security.”
Former President Donald Trump made that claim in June in his debate with President Joe Biden, and earlier, stating that “this man is going to single-handedly destroy Social Security.” A similar claim was made in 2016 in political ads when Trump suggested people in the country illegally were “skipping the line” to Social Security benefits.
“In truth,” O’Malley said, “immigrant people working in the United States outside of having legal status cannot by law receive any benefits from Social Security.” This group of workers pays about $20 billion into the system each year, he said, money that migrants not legally in the country will never see.
The Social Security Act does not permit payment of benefits to noncitizens residing in the U.S. if they’re not lawfully present here, according to the Social Security Administration. In 1996, Congress prohibited the payment of Social Security benefits to noncitizens in the U.S. who are not lawfully present.
The Social Security Protection Act of 2004 added restrictions, stopping the credit of prior payments to a migrant who later became a legal resident. That could be the case earlier, experts said, if the worker could prove he or she had made previous payments to the Social Security system.
Before 2004, migrants without legal status were not required to have work authorization to qualify for Social Security benefits. And they could qualify for benefits based solely on unauthorized work. Therefore, the work authorization requirement does not apply to such migrants who applied for and received benefits based on a Social Security number assigned before Jan. 1, 2004. Such individuals today may qualify for benefits without having had authorization to work in the United States at any point.
Karen Holden, a professor emerita at the University of Wisconsin-Madison in the La Follette School of Public Affairs and Department of Consumer Science, researches Social Security and the economic status of elderly people. She maintains that the system overall benefits from receiving payroll tax payments from migrants without legal status who cannot collect benefits.
Some employers will pay workers without legal status off the books and in cash without making required Social Security payroll tax and insurance contributions for those employees, which is illegal. And in other cases, other workers will use false documentation.
Many such workers “will use a false Social Security number, someone else’s number, or a previously valid number when getting a job,” according to research by the Bipartisan Policy Center on “Immigrations Effect on the Social Security System.”
But the taxes withheld are based on someone else’s Social Security number and the worker using it would be unable to claim these benefits. “These unclaimed payroll taxes represent a substantial windfall for Social Security,” the report noted.
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“Social Security is not going bankrupt and cannot go bankrupt,” O’Malley said. “It’s a pay-as-you go system.” O’Malley calls this one another big myth, which many may see on social media.
Trust funds used to shore up payments to Social Security beneficiaries are projected to become insolvent in 2035, one year later than estimated last year by the Social Security Board of Trustees. Social Security pays out more each year to recipients than it collects each year in revenue.
It is key to note, though, that the program primarily relies on payroll taxes, which continue to be collected and provide money for benefits.
After 2035, Social Security would only be able to pay 83% of scheduled benefits without the money from the trust fund. Congress could act before then to shore up finances with various moves.
One often-discussed option: collect more money via Social Security payroll taxes by eliminating the limit on how much annual wages will be taxed. Other options: reducing benefits in some fashion, including raising the age for full retirement benefits. The age is now 67 for those born in 1960 or latter but some GOP proposals have suggested increasing the age for full retirement benefits from 67 to 69 over an eight-year period beginning in 2026.
In 2024, workers pay Social Security taxes on up to $168,600 in earnings in the year. For 2023, the tax limit was $160,200. Social Security payroll taxes stop being taken out in the year once your income reaches a certain amount.
The official announcement of the limit for 2025 will be made in October. Earlier estimates had suggested that the 2025 tax limit could rise to $174,900. This limit changes each year with changes in the national average wage index.
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O’Malley says he visited the Roseville field office and its Detroit East field office in late September, as part of his goal to visit the front lines whenever possible, often in connection with regional meetings. (Social Security has references to local offices by ZIP code at ssa.gov/locator.)
“We’ve been pushed into a customer service crisis with Congress reducing our staffing to a 50-year low, even as baby boomers swell in customer ranks to an all-time high,” he said.
On local visits, he said, he’ll often talk with people in the lobby and Social Security employees. “I thank the people here for hanging in. If they’ve hung in with this type of workload, it’s because of their heart and their commitment.”
During his first visit to a field office in Chicago, he recalled, he asked a Social Security employee what the commissioner could do that would help a front-line employee to do his job better. The answer: “Educate the public.” O’Malley noted that Social Security is a simple program in concept but addresses complex details in individual lives.
“There are 8 million people every month who walk into a Social Security office,” he said. Many are looking to have questions answered about eligibility for a program or programs, such as if there is a disability preventing someone from being able to work.
He met one couple where the wife was in tears in metro Detroit. Her 62-year-old husband was still able to work but he was dealing with renal failure. “But they’re scared,” O’Malley said. “They want to know what’s their next step and what should they be getting prepared for in terms of eligibility requirements.”
More people are setting up their own “my Social Security” accounts online, which will help people learn on their own about Social Security, he said. But often, people do need to talk with someone in a local office or via an 800 number.
At one point, he said, consumers faced hour-and-a-half-long wait times when calling the 800 number. Recently, though, he said, wait times were down to about 25 minutes on average. The system also now provides an option for some callers to receive a call back instead of waiting.
O’Malley, who was also once the mayor of Baltimore said that in Maryland people can wait 365 days to get word if they qualify for Social Security disability benefits from the time you submit an initial application. Illinois is in the neighborhood of 240 days, he said.
The overall average processing time in Michigan is about 195 days; nationwide the average is about 231 days.
More cases are being cleared, he said, but the backlog remains unacceptable and an ongoing challenge for a program that used to be able to make such determinations in 120 days.
“Congress is going to have to help us on that score,” he said.
As commissioner, O’Malley said one step that he took was to make sure that the agency stopped an extreme practice of intercepting 100% of a benefit’s check at some point when dealing with the collection of an overpayment.
The 100% default had come into play when someone failed to respond to notices from Social Security and the demand for repayment.
The Social Security Administration contacts more than 1 million people each year to recover payments sent in error and many work out repayment plans. Only about 8% of people notified over the years did not call to work out an overpayment arrangement, and that group faced the loss of 100% of benefits to handle repayments, O’Malley said.
“Congress requires that we recoup these overpayments,” O’Malley said.
In March, the agency announced four key changes to address how collections would be handled. For example, the agency now uses a default withholding rate of 10% of monthly benefits when there is no evidence of fraud. At one point, he said, the agency was intercepting the entire checks for about 14,000 people a month, but that has now been driven down to “next to nothing.”
The agency often can work out something less than 10% for people who call the agency back, he said.
The agency also will approve repayment plans of up to 60 months, instead of just 36 months.
And the agency said it has made it easier for overpaid beneficiaries to request a waiver of repayment in some cases, particularly if the beneficiary doesn’t have the financial means to repay the money and is without fault regarding the overpayment.
“Why the hell would we try to recoup what in the larger scheme of things for the agency is a relatively small dollar amount, if we would have a really unjust impact on the recipient,” O’Malley told the Detroit Free Press.
In testimony before the U.S. Senate Special Committee on Aging and the U.S. Senate Committee on Finance, O’Malley said the agency recognized the stories of people losing their homes or being put in dire financial straits when they suddenly saw their benefits cut off completely to recover a decades-old overpayment.
In some cases, disability beneficiaries attempted to do some work but found their efforts rewarded with large overpayments. “Innocent people can be badly hurt,” O’Malley stated. “And these injustices shock our shared sense of equity and good conscience as Americans.”
More efforts are being discussed by members of Congress. There is no limit for how many years the agency can go back to address such overpayments. But some talk exists of instituting a four-year limit.
Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X (Twitter) @tompor.