SSR 64-7: SECTION 204(a) and (b). -- OVERPAYMENTS -- LIABILITY WHERE THERE IS A REPRESENTATIVE PAYEE -- WAIVER OF ADJUSTMENT OR RECOVERY

20 CFR 404.506-404.511

SSR 64-7

The child's insurance benefits of a girl under age 18 paid or her behalf to her uncle as representative payee. The payee applied all benefit payments he received, including an overpayment of $280, for the use and benefit of the beneficiary. The overpayment arose because of a misunderstanding by the representative payee of certain technical provisions relating to work deductions. The beneficiary is employed and her monthly income exceeds her ordinary and necessary living expenses by $40. Held, (1) the representative payee is not personally liable for refund of the overpayment; and (2) recovery of the overpayment from the beneficiary would not defeat the purpose of title II or be against equity and good conscience, and therefore the $280 must be refunded even though she was without fault in causing the overpayment.

A girl became entitled on her deceased father's earnings record to child's insurance benefits beginning January 1958, when she was 13 years old. The Social Security Administration designated her uncle as representative payee to receive and use her benefits in her best interest. The payee received benefits for all months January 1958 through October 1962. With the latter month the girl's entitlement ended, since she attained age 18 in November 1962 and was not then under a disability.

The beneficiary, meanwhile, obtained a job in June 1962 and has been working since that time. Her work and earnings were sufficient, under section 203 of the Act, to require deductions precluding payment of any benefits for the months June through October 1962. Though instructed to notify the Administration promptly of work and earnings requiring deductions, the payee did not do so in time to prevent an erroneous requiring deductions, the payee did not do so in time to prevent an erroneous payment of $280, her monthly benefit for 5 months at the rate of $56 per month.

Upon being notified of the deductions and the overpayment of $280, the payee protested, contending that no deductions were applicable and that he had used the benefits as well as his own resources for the girl's support. The following facts were established with regard to the overpayment:

The payee had tried conscientiously to comply at all times with the instructions of the Administration. He has expended on his niece more in 1962 (as in previous years) than the benefit payments he received. His failure to report her work and earnings arose from his belief that no deductions were applicable if her earnings arose from his belief that no deductions were applicable if her earnings arose from his belief that no deductions were applicable if her earnings prior to the month she attained age 18 were less than $1,200. He did not know that her earnings in November and December 1962 (after her entitlement to benefits had ended), which made her total 1962 earnings more than $1,200, required deductions for earlier months of 1962 in which she had earned wages of over $100. The beneficiary herself similarly did not know that deductions were required because of her work and earnings. Her monthly income exceeds her ordinary and necessary living expenses by $40.

Where a representative payee receives an overpayment of benefits on behalf of a beneficiary, the payee and the beneficiary may, under certain circumstances, be jointly and individually liable for the overpayment. However, the payee is not liable if he used the amounts received for the benefit of the beneficiary and was without fault with regard to the overpayment. In the present case, the payee met these requirements. The beneficiary, however, has received the use and benefit of the overpayment, and a question remains as to whether the overpayment should be recovered from her.

Section 204(b) of the Social Security Act provides that there shall be no recovery in any case where an incorrect payment has been made to an individual who is without fault if adjustment or recovery would either defeat the purpose of title II of the Act, or be against equity and good conscience.

Under § 404.508 of Regulations No. 4, recovery would "defeat the purpose of title II' if such recovery would deprive the beneficiary of resources required to meet his ordinary and necessary living expenses.

Under § 404.509, recovery will be considered "against equity and good conscience" if the individual (regardless of his financial circumstances) has, by reason of the overpayment, relinquished a valuable right or changed his position for the worse.

Where the benefits of a child are paid to a representative payee, the responsibility for reporting events which might effect payment of the child's benefits rests primarily with the payee rather than the child. In such a situation the child is presumed to be "without fault" as to an overpayment of such benefits in the absence of evidence to evidence to the contrary (e.g., evidence that the child knew the payments to be incorrect, or deliberately concealed or misrepresented material facts contributing to the overpayment). In the present case, since there was no such evidence, the beneficiary is considered to be without fault in regard to the overpayment. However, the beneficiary has income exceeding her "ordinary and necessary living expenses"; hence, recovery of the overpayment would not defeat the purpose of title II. Furthermore, recovery would not be "against equity and good conscience" since there is no evidence indicating that she has relinquished a valuable right or changed her position for the worse by reason of the incorrect payments.

Accordingly, it is held that recovery of the overpayment may not be waived and, therefore, the beneficiary must refund the $280.

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