I have seen several news stories recently that were critical of the Social Security Administration and the way the agency handles overpayments — money sent to Social Security beneficiaries that they were not due. I'm going to address that issue in today's column. But before I do, I've got to put things in perspective.

If you had read any of these news reports, you likely would come away thinking something like this. "Those dumb bureaucrats. They can't do anything right. They are sending millions of dollars in incorrect payments to people every year!" But here is a dose of perspective you need to understand. Social Security is a $1.6 trillion per year program. And those millions of dollars in overpayments make up less than one-half of 1% of the program's annual payout. Or to turn that around, more than 99.5% of the time, people are being paid correctly. So overpayments are a problem. But nowhere near as big a problem as sensational news stories would have you believe.

Still, millions of dollars is millions of dollars. And the Social Security overpayment problem is an issue that needs to be dealt with. Why do people get overpaid? The biggest reason has to do with a simple law that needs to be changed. More about that in a minute.

But first, let's briefly deal with one of the issues discussed in the news stories. Once it's been decided that someone has been overpaid, should the SSA take the money back? Some have alleged that the SSA was being too ruthless in its overpayment collection efforts.

In a nutshell, one part of the overpayment recovery rules says the incorrect benefits must be repaid if the person who got the extra money was at fault in causing the overpayment. Most people probably would agree that part of the rules makes sense. But what if the overpayment was the agency's fault? On the one hand, you could argue that even though the SSA made a mistake, the overpaid person still got money he or she was not due and the money should be repaid. But others would argue that the government screwed up and they should write off the overpayment as a loss. The rulebook actually says that even if the overpayment was the SSA's fault, it must be repaid IF the overpaid person can afford to repay it. And carrying out that rule can really get messy and be subject to different interpretations.

And on that issue, let me make this point. Many years ago, the SSA interpreted that part of the law much more liberally and was writing off ("waiving" is the legal term) many overpayments. And guess what? There were news stories back then critical of the agency for "wasting the taxpayers' money" by not more aggressively collecting overpayments. So you can understand why an old civil servant like me might be inclined to throw up his hands and say: "OK, people, what do you want? Do you want us to collect these overpayments or do you want us to write them off?"

But we wouldn't have to answer that question if a big part of the problem could be eliminated. So how do we do that? By getting rid of the major cause of overpayments: A provision of Social Security law that is rather archaically called the "annual earnings test." It is sometimes also called the "retirement test." (More about where those terms come from in a minute.) But I call it the Social Security earnings penalty, as I have never liked this law. Before I explain why, let me clarify what I am talking about.

The rules say that if you are a Social Security beneficiary who is under full retirement age and still working, one dollar must be deducted from your Social Security checks for every two dollars you earn over a limit that changes annually. It's currently $24,480. (Once you reach your full retirement age, that penalty goes away.)

On the surface, the law seems pretty straightforward. You may wonder why it causes so many overpayments. Well, it's because when you scratch beneath the surface, it is an absolute mess to administer. To illustrate, I'll use an example.

Fred is 63, getting Social Security benefits, but takes a part-time job paying more than $24,480 annually. So he reports his anticipated earnings to his local Social Security office. They would adjust his benefits accordingly, applying the one-dollar deduction for every two dollars earned.

But then, as the year goes on, Fred ends up working a little overtime or otherwise picking up a couple of extra hours of work. He would dutifully report the increase in anticipated earnings to the Social Security people, and further adjustments would be made to his monthly retirement checks. More often than not, he'd be charged with an overpayment and be asked to return some of the Social Security funds already paid to him.

Next, let's say Fred is laid off for a time, and so his anticipated 2026 earnings go down. Then he'd have to file yet another report with the SSA and there would be more adjustments to his benefits. And now perhaps the SSA owed him some extra money.

Eventually, once the year is over and Fred gets his W-2 form, he will make a final report of his earnings to the Social Security office, leading to yet another benefit adjustment — usually another overpayment. And on top of that, they would ask for an estimate of his anticipated earnings for the new year, yet more adjustments would be made, and the whole vicious cycle would start over again.

And of course, Fred is not alone. Millions of Social Security beneficiaries are under their full retirement age but working. And many of them are going through the same cycle of being either overpaid or underpaid.

I've always been puzzled by the earnings penalty law. From a philosophical perspective, I just don't understand why someone should be punished if they try to work and earn a little money to supplement their Social Security benefits.

Having voiced that philosophical concern, I should point out that I know the practicality of the law. It goes back to the very beginning of Social Security in the 1930s. Retirement benefits were intended to replace the earnings a person loses when he or she retires. Or to put that another way, a person had to retire to get "retirement" benefits. And this provision of the law was a "test" of their retirement status. (Thus, the term "retirement test.")

Initially, the law said you had to be completely retired. But over the years, Congress eased up on the restrictive nature of the original law. They said people over FRA could work full-time and get benefits. But they kept the messy earnings penalty for anyone under FRA. Why? I'm not sure. But get rid of that penalty and you will get rid of many millions of dollars in overpayments every year.

If you have a Social Security question, Tom Margenau has two books with all the answers. One is called "Social Security — Simple and Smart: 10 Easy-to-Understand Fact Sheets That Will Answer All Your Questions About Social Security." The other is "Social Security: 100 Myths and 100 Facts." You can find the books at Amazon.com or other book outlets. Or you can send him an email at thomas.margenau@comcast.net. To find out more about Tom Margenau and to read past columns and see features from other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

Photo credit: Alexander Grey at Unsplash