SSR 83-3a: SECTIONS 204(a) AND (b) (42 U.S.C. 404(a) AND (b)) OVERPAYMENT -- RECOVERY OR ADJUSTMENT -- DEFEAT THE PURPOSE OF TITLE II -- AGAINST EQUITY AND GOOD CONSCIENCE
20 CFR 404.506, 404.508, and 404.509
SSR 83-3a
- When the claimant was informed that she had been overpaid $4,829.70 in wife's insurance benefits from September 1977 through October 1979, she requested waiver of recovery of the overpayment. Although it was subsequently determined that the claimant had been without fault in incurring the overpayment, the evidence did not support her allegation that repayment would defeat the purpose of title II of the Act by causing financial hardship. The claimant had $12,000 equity in real property in addition to owning her own home. Despite the claimant's contention that her expenses exceeded her income, no withdrawals were made from her savings of $20,000 to make up the alleged difference. Consequently, it was determined that recovery of the overpayment would not deprive the claimant of income required for ordinary and necessary living expenses. Moreover, there was no indication that recovery would be inequitable within the meaning of 20 CFR 404.509. Held, recovery of the overpayment would neither defeat the purpose of title II of the Social Security Act (the Act) nor be against equity and good conscience; therefore, recovery of the overpayment could not be waived.
The general issue before the Appeals Council was whether recovery of an overpayment incurred by the claimant could be waived. Specifically at issue was whether recovery would defeat the purpose of title II of the Act.
In June 1962, the claimant's daughter became entitled to child's insurance benefits on the record of her natural father. She the became entitled to child's insurance benefits on the record of her stepfather in October 1975, but continued to receive benefits on her natural father's record, since that resulted in a larger payment. The claimant became entitled to wife's insurance benefits on the record of her husband (her daughter's stepfather) in October 1975 because she had the entitled daughter in her care.
In September 1977, the daughter attained the age of 18. This event should have terminated the wife's insurance benefits payable to the claimant; however, because the two records were apparently inadequately cross-referred, that action was not taken. The error was not noticed until October 1979, by which time the claimant had been overpaid $4,829.70.
The claimant argued that she was without fault in incurring the overpayment because she was unaware that her benefits should have been terminated. She also argued that recovery of her overpayment would defeat the purpose of title II of the Act. On February 25. 1980, she indicated that herr expenses exceeded her income by $330 and that she had $16,700 in a saving account. In addition, she reported a second bank account in the amount of $3,200 which was encumbered by a passbook loan. Besides owning her own home, the claimant also had $12,000 equity in other real property. On February 25, 1981, the claimant reported that her monthly income was $1,032 and that her monthly expenses were $1,825.15.
An administrative law judge (ALJ) found that the claimant was without fault in incurring the overpayment. The ALJ also found that the claimant's expenses exceeded her income and that the balance of her savings "must be considered small in today's economic climate." He concluded that recovery of the overpayment would defeat the purpose of title II of the Act and should be waived.
Section 204(a) of the Act provides, in part, that whenever an incorrect payment has been made, recovery or adjustment of the incorrect payment shall be made.
Section 204(b) of the Act and § 404.506 of Regulations NO. 4 provide that in any case in which more than the correct amount of payment has been made, there shall be no adjustment of payments to, or recovery from, any person who is without fault if such adjustment or recovery would defeat the purpose of title II of the Act or would be against equity and good conscience.
Section 404.508(a) of Regulations NO. 4 defines "defeat the purpose of title II" as meaning to deprive a person of income required for ordinary and necessary living expenses. This depends upon whether the person has income or financial resources sufficient for more than ordinary and necessary needs, or is dependent upon all of his or her current benefits for such needs.
Section 404.509 of Regulations No. 4 provides, in part, that "against equity and good conscience" means that adjustment or recovery of an incorrect payment under title II will be considered inequitable if an individual, because of a notice that such payment would be made or by reason of the incorrect payment, relinquished a valuable right or changed his or her position for the worse, in reaching such a determination, the individual's financial circumstances are irrelevant.
The Appeals Council adopted the ALJ's finding that the claimant was without fault in incurring the overpayment. However, after careful consideration of the claimant's statements regarding her income, expenses, and resources, the appeals Council was of the opinion that recovery of the overpayment would not deprive the claimant of income required for ordinary and necessary living expenses so as to defeat the purpose of title II of the Act.
Although the claimant had indicated that her expenses substantially exceeded her income, there had been no withdrawals from her savings in over a year, with the exception of her interest which was already included in the income calculation. The Appeals Council also noted that the claimant had included a $1,200 net loss from rentals in her expenses without indicating the receipt of any rental income. If the claimant's deficit was accurately reported, then a corresponding withdrawal from savings would appear to have been necessary . Since there had been no such withdrawal, the Appeals Council was of the opinion that the claimant had failed to establish that her present income was insufficient to meet her ordinary and necessary living expenses.
The claimant's recitation of her resources indicated that she had savings of almost $20,000 as well equity in real property. Consequently, the claimant had sufficient means to make refund without depriving herself of income necessary to meet her living expenses and without depleting her resources below $5,000 -- the figure used by the Social Security Administration in determining when recovery would pose a hardship. Administration, there was no indication in this case that recovery would be inequitable within the meaning of § 404.509 of Regulations No. 4. In finding that recovery of the overpayment would neither defeat the purpose of title II of the Act nor be against equity and good conscience, the Appeals Council held that recovery of the overpayment could not be waived.