How Do Work-Related Overpayments Affect the Earnings of Overpaid Social Security Disability Insurance Beneficiaries?

Work-related overpayments occur when the Social Security Administration (SSA) issues a monthly Social Security Disability Insurance (SSDI) benefit to which a beneficiary is not entitled because he or she engaged in substantial gainful activity (SGA). SGA was defined in 2020 as monthly work activity valued at over $1,260 in 2020 for nonblind individuals and $2,110 for blind individuals.

Overpaid beneficiaries must reimburse SSA for any overpaid benefits, which have a median value of more than $9,000 according to a recent study (Hoffman et al., 2019). Some qualitative reports suggest that notification of a work-related overpayments cause beneficiaries to take a negative view of work and to stop engaging in SGA. Others suggest that beneficiaries work more following an overpayment to help repay their debt.

In this study, we used SSA administrative data to estimate the relationship between notification of overpayment debt and subsequent engagement in SGA. Our empirical analysis focused on a sample of SSDI beneficiaries who were likely not expecting an overpayment debt notification. We exploited the randomness in the timing of the overpayment debt notification by comparing beneficiary work activity right after the notification with work activity right before; this enabled us to gauge the causal impact of an overpayment debt notification on earnings.