This issue of The Voice was written by Special Needs Alliance member Tara Anne Pleat, a founding partner of the law firm of Wilcenski & Pleat PLLC in Clifton Park, New York. She practices in the areas of Special Needs Planning, Elder Law, and Trust and Estate Planning and Administration. Tara writes and lectures frequently on issues affecting individuals with disabilities and their families.
The Supplemental Security Income Program (SSI) is a means-tested government benefit program that provides financial assistance to individuals with disabilities in the form of a monthly cash payment. In order to be eligible for SSI, an individual must meet the Social Security Administration’s (SSA) definition of disability or blindness and must not have resources or income that exceed program limitations. “Resources” are items that the individual retains from month to month, like a bank account or a stock. “Countable resources” are all resources except those that SSI rules consider not countable. There is a limit of $2,000 for an individual for countable resources.
Income must also be limited in order for one to receive SSI benefits, and income isn’t defined in the traditional sense for SSI purposes. “Income” is something of value that the individual receives in a given month that can be used to provide food or shelter. It doesn’t have to be traditional wage or interest income. It can come in the form of room and board provided free of charge by a parent or someone else, payment from a trust, or an insurance settlement, among a variety of other sources. Some types of income are counted and others aren’t, making the income calculation somewhat difficult for most folks to understand. In very simple terms, the monthly SSI benefit amount is calculated by subtracting countable income from the SSI federal benefit rate, which in 2012 is $698 per month.
Many children with disabilities under the age of 18 do not receive SSI because of rules that cause the income and resources of the custodial parents to be deemed to belong to the child. If the custodial parents do not fall within the income and resource thresholds for SSI benefits themselves, their minor child will not be entitled to SSI. However, once the child turns 18, the SSI program no longer considers the income and resources of the parents and only looks to those of the individual with a disability.
In many cases involving a child with a disability, on or after the child’s 18th birthday an application for SSI will be submitted to the SSA, presuming the income and resource limitations are satisfied. As part of that application, the applicant or the applicant’s representative payee (the person or entity designated by the SSA to receive the SSI benefit on behalf of the applicant) confirms that he or she will report any change in circumstance to the SSA that would impact the SSI benefit payment.
What is an overpayment?
Since it is incumbent on the SSI recipient or the representative payee to give notice to the SSA regarding a change in the recipient’s circumstance (i.e. living situation, marriage, an increase in income or resources, etc.), an overpayment generally occurs when a change in circumstance has the impact of reducing or eliminating the SSI benefit to which the individual with a disability is entitled and goes unreported for a period of time.
For example, assume Jacob is 18 years old. He has no income and no resources and meets the SSA’s definition of disability. When Jacob applies for SSI, it is determined based on his income, resources and living arrangement that he is entitled to the full federal SSI benefit of $698. Two years later, Jacob’s father passes away and leaves him $10,000 which he receives directly in the month of October 2012. By mid-January of the following year the $10,000 has been spent down to less than $2,000 by purchasing a computer and other electronic equipment for Jacob. Since Jacob didn’t manage to spend-down the $10,000 in resources until the end of January, he was technically ineligible for SSI in October, November, December and January due to having excess income in the month he received the inheritance (October) and resources in excess of $2,000 in the next three months. The payments made in the months of October, November, December and January are overpayments to Jacob since he was not entitled to the SSI benefit payment in those four months.
An unavoidable overpayment may also occur when an SSI recipient is working. Earnings are reported by the 10th day of the next month and the SSI benefit is adjusted in the month after that – the second month from when the earnings were received. If earnings fluctuate, it will result in an overpayment in months when earnings exceed the amount the SSA is using to calculate the SSI benefit amount.
In some cases where the SSA failed to take into account a reported fact that affected the SSI recipient’s eligibility or the amount of the cash benefit, the agency will limit the amount of the overpayment to a two-year period, even if the problem existed for a much longer period of time. This is referred to as “administrative finality.”
How is an SSI recipient notified of an overpayment?
The SSA will send the SSI recipient a written notice that he or she was overpaid. The notice will state the amounts and dates of the overpayments. The notice provides either a request for a full refund (if the change of circumstance caused elimination of the SSI benefit) or will propose the withholding of a portion of future SSI benefits on a monthly basis until the overpayment is fully repaid (generally for those who have their benefit reduced by the change in circumstance but not eliminated).
In addition, the notice should contain a detailed, plain-language explanation of the cause of the overpayment. If you’ve ever seen one of these notices it is easy to see how reasonable minds could differ on the definition of “plain language,” but nevertheless the notice should identify the source of the overpayment and the SSI recipient’s appeal rights.
What should the SSI recipient do upon receipt of a notice of overpayment?
Generally speaking an SSI recipient has three options if he or she receives notice of an overpayment: (1) request reconsideration and possibly appeal an unfavorable decision; (2) request a waiver; or (3) request an alternative payment plan.
Reconsideration and appeal
Typically it would be prudent for an individual to seek reconsideration if he or she believes that the amount of the overpayment or the reason supporting the assessment of the overpayment is incorrect. The reconsideration process is handled within the local SSA office, and it is an opportunity to provide the local office with additional information to establish that the overpayment or the amount of the overpayment is incorrect.
If one plans to seek reconsideration, it must be done within 60 days of receiving the notice of overpayment. If one wishes to receive his or her full SSI benefit during the reconsideration process, the request for reconsideration should be filed within 10 days of receipt of the notice of overpayment. The SSA has a form, Form SSA-561, on which SSI redeterminations should be requested. This form can be found on the SSA’s website www.ssa.gov. On the reconsideration form one must elect one of three options: a case review, an informal conference, or a formal conference. The best option usually depends upon the issues in the case.
If the SSA does not change its mind in the reconsideration process, then the SSI recipient must file a Request for Hearing on a form HA-501-U5. This form can also be found on the SSA website. The hearing will be held before an administrative law judge, and if that decision is unfavorable, the next step is to file an appeal with the Appeals Council and, if the appeal is denied, then file a petition in federal court.
If the SSI recipient or the representative agrees that there was an overpayment, but the overpayment was not the fault of the recipient or representative, a request can be made for the waiver of all or a portion of the overpayment amount.
Consider Jacob’s initial determination of entitlement to the maximum federal benefit amount of $698. If Jacob reported that he had monthly unearned income of $200 per month in his initial application, but his caseworker neglected to include that in the initial determination, and it is later discovered in a review or scheduled redetermination, the overpayment was clearly not the fault of Jacob or his representative.
As a general rule, in order to receive a waiver of an overpayment the recipient must show that the overpayment was not the fault of the recipient or representative payee and that forced repayment would create an undue hardship on the SSI recipient, resulting in an inability to meet everyday living expenses. Jacob would need to show that the monthly reduction in his SSI benefit taken to repay the overpayment would prevent him from meeting his basic shelter and sustenance needs.
If an SSI recipient wishes to request waiver of an overpayment, he or she must file a Form SSA-632. There is no time deadline for requesting a waiver of an overpayment but it should be filed soon after receipt of the notice of overpayment to eliminate or limit the withholdings from future benefit payments.
Alternate Payment Plan
If a request for waiver or reconsideration is denied, the SSI recipient can request an alternate payment arrangement with the SSA. This can take the form of a smaller amount withheld from future SSI checks on a monthly basis, often at the rate of a 10% reduction in the SSI benefit amount. In cases where the SSI benefit has been eliminated and the former recipient has limited ability to repay the full payment owed, the SSA will sometimes accept periodic payments or compromise the amount owed.
Who can repay the overpayment?
It is not uncommon to encounter a circumstance where an SSI beneficiary has a small withholding each month and a parent or other concerned individual wishes to satisfy the overpayment on behalf of the recipient so that the full benefit amount can be restored. In other circumstances, trustees of Supplemental Needs Trusts have asked if they can payoff an overpayment on behalf of the Trust beneficiary. This is allowable—third parties may indeed satisfy the overpayment on behalf of the SSI recipient.
Can overpayments be avoided?
Yes, many overpayments can be avoided. For example, if an overpayment results from a circumstance described in Jacob’s case when he received a direct inheritance from his father, it was caused by poor planning. Had Jacob’s father sought proper advice from a competent special needs planning attorney, he could have left Jacob’s inheritance to a trust for Jacob’s benefit without adversely impacting his SSI benefits because SSA could not have classified the trust assets as a countable resource.
That said, given the complexity of the SSI rules and the definitions and exclusions that apply to income and resources, it is fair to say most individuals, including, frankly, most attorneys, don’t fully understand the applicable rules and regulations that apply to an SSI recipient. As result of that complexity, overpayments will necessarily occur and may very well be difficult to avoid. Being aware of the need to report a change in circumstance and, when possible, evaluating a potential change in circumstance before it occurs will help to mitigate the likelihood of an overpayment or other adverse impact on SSI benefits in the future.
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