SSR 78-20c: SECTION 205(c) (42 U.S.C. 405(c)) SELF- EMPLOYMENT INCOME -- CORRECTION OF EARNINGS RECORD AFTER EXPIRATION OF TIME LIMITATION

20 CFR 404.804

SSR 78-20c

BLANCO v. SEC'Y H.E.W., (1977-1978 Transfer Binder) Unempl. Ins. Rep. ¶ 15,434 (E.D. Va. 1976)

The claimant inquired in 1970 as to the status of his Social Security earnings record. He was informed that he must file Income Tax returns for 1967 and 1968. Although he received the necessary tax forms in July 1970, he did not file self-employment tax returns until October 1972. Held, since the time limitation of 3-years, 3-months and 15-days from the end of taxable years 1967 and 1968 had expired, the claimant's earnings record could not be credited with the self- employment income or the additional quarters of coverage required for entitlement to retirement benefits.

WILLIAMS, District Judge:

This section was brought by Plaintiff to review the "final decision" of the Secretary of Health, Education and Welfare pursuant to Section 205(g) of the Social Security Act, 42 U.S.C.A. § 405(g).

The sole issue before the Court is whether the Plaintiff has met the special earnings requirements of the Social Security Act for purposes of establishing eligibility for Retirement Insurance Benefits. It is agreed by both parties that Plaintiff is required to have twenty one quarter years of coverage to qualify for Retirement Insurance Benefits. Plaintiff presently has fifteen quarter years and both parties agree that if credit is given for 1967 and 1968, the years in question, Plaintiff would possess the requisite number of credits necessary to receive the benefits.

Plaintiff first approached the Social Security District Office in Puerto Rico on October 25, 1968 and requested a copy of his earnings record. Such notification was sent in the mail to the plaintiff shortly thereafter.

Plaintiff returned to the District Office in 1970 to apply for retirement at age 62, at which time he was informed that he must file Income Tax Returns for years including 1967 and 1968. Plaintiff claims that on one at the District Office explained to him that such returns were required to be filed within a certain time in order for earnings for those years to be credited. Plaintiff also claims that the Social Security information booklet, explaining in Spanish the necessary steps to follow in order to receive Retirement Insurance Benefits, made no mention of any time requirement.

Plaintiff received the required tax forms from the Internal Revenue Service in July of 1970, but did not file the forms indicating self-employment income for the years ending December 31, 1967-69 until October 29, 1972. This was apparently done in an effort to have the required number of quarters credited to his earnings record in order to become eligible for the benefits. Plaintiff's application for Retirement Age Benefits, however, was denied at the administrative level. Plaintiff requested a hearing on the matter, and on May 19, 1975 the hearing examiner rendered a decision denying Plaintiff's claim, finding that "the claimant is not now eligible to receive Retirement Insurance Benefits under the Social Security Act, because he has earned only 15 of the 21 quarter years of Social Security coverage he must have to be eligible." On October 20, 1975 the Appeals Council declined to overrule the hearing decision, and notified the plaintiff that the decision stood as the final decision of the Secretary in the case.

42 U.S.C.A. § 405(g) provides that "the findings of the Secretary as to any fact, if supported by substantial evidence, shall be conclusive." See e.g., Richardson v. Perales, 402 U.S. 389, 410 (1971); Torphy v. Weinberger, 384 F.Supp. 1117 (E.D. Wisc. 1974); Hamlin v. Finch, 313 F.Supp. 1128 (W.D. Va. 1970); Rodgers v. Cohen, 304 F.Supp. 91 (E.D. 1968). See also Sabbagha v. Celebrezze, 345 F.2d 509, 511 (4th Cir. 1965).

However this Court is not so bound with respect to the Secretary's conclusions of law, and where the law has been misapplied the Court may properly correct the error below. See e.g., Conley v. Ribicoff, 294 F.2d 190, 194 (9th Cir. 1961); Torphy v. Weinberger, supra; Allen v. Richardson, 366 F.Supp. 316, 519 (E.D. Mich. 1973). Therefore the Secretary's findings may be over-ruled if he failed to use the correct legal standard in arriving at this conclusion. Hultzman v. Weinberger, 495 F.2d 1276, 1281 (3rd Cir. 1974); Torphy v. Weinberger, supra.

The Secretary contends that because the statutory limitation has expired, he is without statutory authority to change in any way the records of Plaintiff regarding the number of quarter years earned.

Section 205 of the Social Security Act, 42 U.S.C.A. § 405 not only governs the review of this action but it also sets out the applicable law. Social Security Act § 205(C)(2), 42 U.S.C.A. § 405(C) provides that the Secretary of Health, Education and Welfare is responsible for maintaining earnings records for each individual receiving self-employment income, and further provides in § 405(C)(3) that such records are, by statute, regarded as evidence on the question whether such earnings were in fact received during the period in question. But upon expiration of the Act's "time limitation" of three years, three months, and fifteen days set out in Section 205(c)(1)(B), 42 U.S.C.A. § 405(c)(1)(B) and 20 C.F.R. § 404.801 following each of the years in question, the Secretary's records become conclusive evidence on the question of receipt of covered self-employment earnings. Specifically, Section 205 of the Act, 42 U.S.C.A. § 405 provides in part:

(c)(1) For the purposes of this subsection -- * * *
(B) The term 'time limitation' means a period of three years, three months,and fifteen days.
* * *
(4) * * * After the expiration of the time limitation following any year --
* * *
(C) the absence of an entry in the Secretary's records as to the self-employment income alleged to have been derived by an individual in such year shall be conclusive for the purposes of this subchapter that no such alleged self-employment income was derived by such individual in such year unless it is shown that he filed a tax return of his self-employment income for such year before the expiration of the time limitation following such year, in which case the Secretary shall include in his records the self-employment income of such individual for such year.
(5) After the expiration of the time limitation following any year in which wages were paid or alleged to have been paid to, or self-employment income derived by, an individual, the Secretary may change or delete any entry with respect to wages or self- employment income in this records of such year for such individual or include in his records of such year for such individual any omitted item of wages or self- employment income but only --
(A) if an application for monthly benefits or for a lump-sum death payment was filed within the time limitation following such year; except that no such change * * may be made pursuant to this subparagraph after a final decision upon the application * * ;
* * *
(F) to conform his records to --
(i) tax returns or portions thereof
* * *;
* * *
except that no amount of self-employment income of an individual for any taxable year (if such return or statement was filed after the expiration of the time limitation following the taxable year) shall be included in the Secretary's records pursuant to this sub-paragraph * * *. (emphasis added)

In Martlew v. Celebrezze, 320 F.2d 887 (5th Cir. 1963) the court summarized the statutory provisions regarding self-employment income by stating that "[t]o add self-employment income to his earnings record, a claimant must show that he timely filed a tax return of his self-employment income." id. at 889.

Plaintiff in the present action failed to so file within the applicable time limitation of three years, three months and 15 days from the end of the years in question, 1967 and 1968. Therefore the Secretary is precluded from making any changes in this records which show no entry of self-employment income for such years. This was made very clear in Williams v. Celebrezze, 243 F.Supp. 103, 107 (E.D. Ark. 1965) when the court stated:

With respect to wages, an absence of record entries during a quarter is after the expiration of the limitations period, presumptive evidence that no wages were received during that quarter. 42 U.S.C.A. § 405(c)(4)(B). This presumption would seem to be rebuttable, and perhaps it can be rebutted by any substantial evidence of earning during the quarter in question. With respect to self-employment income, however, an absence of record entries of such income with respect to a particular year is, after the expiration of the limitations period, conclusive evidence of the absence of such income unless it is shown that the claimant 'filed a tax return of his self-employment income for such year before the expiration of the time limitation following such year * * *. 42 U.S.C.A. § 405(c)(4)(C).'[1]

See also Breeden v. Weinberger, 493 F.2d 1002 (4th Cir. 1974) (dicta supporting "conclusive" as equivalent to statute of limitations); Crawford v. Cohen, 295 F.Supp. 624, 627 (D. S.C. 1969).

Although it is unfortunate that Plaintiff in the immediate action is precluded by the terms of the statute from receiving benefits based in part on his earnings from 1967 and 1968, the orderly administration of Social Security Benefits by the Department of Health, Education and Welfare demands a reasonable time limitation for ending disputes about benefits. Lasch v. Richardson, 457 F.2d 435, 440 (7th Cir. 1972). See also Martlew v. Celebrezze, supra.

Plaintiff contends, however, that the Social Security Office was negligent in not informing him that there was a statute of limitation when they sent him his earnings record that included no entry for the years 1967 and 1968. Plaintiff further asserts that he had no way of learning of the requirement that he file a tax return for social security reporting purposes within three years, three months and 15 days from the end of the taxable year in order to receive credit on his earnings record.

Plaintiff is in effect asking that the Secretary be "estopped" from relying on the statute of limitations in barring Plaintiff's claim for Retirement Age Benefits. Plaintiff, however, has alleged no facts or circumstances that even constitute an estoppel, . . . "as estoppel arises where one party by words or action makes a false representation of fact and the other party reasonably relies on that representation and is prejudiced thereby." Brown v. Richardson, 395 F.Supp. 185, 191 (W.D. Pa. 1975).

Although an omission or mere silence can constitute the required "misrepresentation," it is far from certain that plaintiff relied to his detriment on a misrepresentation by the Social Security Office regarding any deadline for filing the tax returns for Social Security purposes. The Defendant does not assert that an employee of the Social Security Office actually informed the plaintiff personally of the requirement when he visited the office in 1968. However the summary of earnings form that plaintiff received in the mail from the Bureau of Data Processing and Accounts, Department of Health, Education and Welfare, Social Security Administration, Baltimore, Maryland stated in part:

If this statement does not agree with your own record, please write or call at your nearest Social Security District Office, or write directly to us. . . . Unless you report an error within three years, three months and fifteen days after the year in which the wages were paid or after the taxable year in which self-employment income was derived, correction of our records may not be possible.
T.at 91.

Although the statement was certainly not as clear as it could have been and the enclosed booklet Plaintiff received along with the earnings statement made no mention of the time limitation, Plaintiff should have at least become suspicious that the Social Security records showing no earnings for 1967 and 1968 could not be amended after a certain date, and inquired further:

'One who claims the benefits of an estoppel on the ground that he has been misled by the misrepresentations of another must not have been misled by his own lack of reasonable care and circumspection. A lack of diligence by a party claiming an estoppel is generally fatal. If the party conducts himself with careless indifference to the means of information reasonably at hand or ignores highly suspicious circumstance, he may not invoke the doctrine of estoppel.' 28 AM.Jur.2d §§ 79-80.

Brown v. Richardson, supra at 191.

But even if estoppel arises from the facts in this case, it cannot be used by the plaintiff against the government in this action. Estoppel will not lie against the government because of a misrepresentation or omission on the part of a government employee. Felice v. Celebrezze, 319 F.2d 443 (9th Cir. 1963); Mahr v. Mathews, 402 F.Supp. 1165 (D. Del. 1975); Brown v. Richardson, supra; Eastland v. Tennessee Valley Authority, 398 F.Supp. 185 (N.D. Ala. 1974); Terrell v. Finch, 302 F.Supp. 1063 (S.D. Tex. 1969); Feil V. Gardner, 281 F.Supp. 983 (E.D. Wis. 1968), aff'd, 402 F.2d 481 (7th Cir. 1968); Flamm v. Ribicoff, 203 F.Supp. 507 (S.D. N.Y. 1961); Taylor v. Flemming, 186 F.Supp. 280 (W.D. Ark. 1960). See generally United States Immigration & Naturalization Service v. Hibi, 414 U.S. 5 (1973); Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947).

In Terrell v. Finch, supra, one of the Social Security Administration's employees mistakenly told the plaintiff that her remarriage would not affect her benefits. Although she relied on that statement to her detriment when she remarried, the court held that the Administration was not estopped to deny her benefits in part because "[P]laintiff must comply with the statutory requirements in order to have an enforceable right." Id. at 1064. In so holding, the court emphasized that "the unauthorized cat of a government employee cannot vary the requirements established by an Act of Congress." Ibid. For similar results, see Brown v. Richardson, supra; Flamm v. Ribicoff, supra;[2] Taylor v. Flemming, supra.

In United States Immigration & Naturalization Service v. Hibi, supra, the Court held in part that the government was not estopped from relying on a time deadline for filing naturalization applications because of its failure to fully publicize the rights to naturalization afforded by the Nationality Act of 1940 to non-citizens who served in the United States Armed Forces during World War II. The rationale of the Hibi opinion certainly supports the view that even if the Social Security Administration was wrong in failing to give notice, such failure cannot create an estoppel against the Government to claim the benefit of the limitation period of three years, three months and fifteen days expressly fixed by Congress in Section 205 of the Act, 42 U.S.C.A. § 405(c)(1)(B). See Mahr v. Mathews, supra, where the court held that poor performance on the part of the Social Security Administration in notifying the plaintiff of certain facts concerning his eligibility for the receipt of benefits did not give rise to an implied contract to certain benefits, nor to estoppel against the federal government.

Although the outcome in the immediate case may be harsh, this Court has no authority to waive the "conditions defined by Congress for charging the public treasury." Federal Crop Insurance Corp. v. Merrill, supra at 385.

Since Plaintiff has failed to establish that he is entitled to Retirement Age Benefits, Plaintiff's action to overturn the decision of the Secretary of Health, Education and Welfare must therefore fail. Accordingly, it is adjudged and ORDERED that the decision of the Secretary in this case be and hereby is AFFIRMED.

[1] The court in Williams went on to emphasize in footnote 6 on page 110 that:

If self-employment income is not reflected on the Secretary's record within the limitations period, it simply cannot be considered unless the recipient of the income has shown it on a self-employment tax return filed within that period.

[2] In Flamm v. Ribicoff, supra, the court stated that: * * * parties dealing with the Government are charged with knowledge of and are bound by statutes and lawfully promulgated regulations despite reliance to their pecuniary detriment upon incorrect information received from Government agents or employees. Failure to comply with the applicable statute and regulations precluded recovery against the Government 'no matter with what good reason' the claimant believed she had come within the requirements. Estoppel will not lie regardless of the financial hardship 'resulting from innocent ignorance.' Federal Crop Insurance Corp. v Merrill, supra; * * * * * *; James v. United States, 185 F.2d 115, 22 A.L.R.2d 830 (4th Cir. 1950).

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