EFFECTIVE/PUBLICATION DATE: 04/29/88
SSR 88-6c: SECTIONS 204(a) AND (b) OF THE SOCIAL SECURITY ACT (42 U.S.C. 404(a) AND (b)) OVERPAYMENT -- WITHOUT FAULT -- WAIVER OF RECOVERY AND ADJUSTMENT
20 CFR 404.506, 404.507, 404,510, and 404.511
Tarvin v. Bowen,  1A Unempl. Ins. Rep. (CCH) ¶ 17,556 (S.D. Ind., New Albany Div.)
- From 1978 through 1982, the claimant was overpaid $6,872.50 in mother's insurance benefits. She requested waiver of recovery of the overpayment under section 205(b) of the Social Security Act, 42 U.S.C. 404(b), but an administrative law judge (ALJ) denied her request. The claimant alleged at the ALJ hearing that a Social Security Administration (SSA) employee had advised her in the early 1970's that she could cash certain checks which she had attempted to return. The ALJ found that, since the claimant had failed to provide material information which she should have know was important (i.e., accurate and timely estimates of her annual earnings), the claimant had not been without fault in causing the overpayment. The Appeals Council denied the claimant's request for review. The claimant then filed a court appeal. The evidence of record showed that the claimant's overpayment problems began in 1970, the year she became entitled to benefits. The overpayments occurred because the claimant had consistently underestimated her annual earnings instead of providing accurate estimates of her earnings as she had agreed to do when she applied for benefits. The evidence further showed that the claimant had received frequent notices from SSA about the overpayments and the adjustments made to her benefits to recover them. (The claimant had previously requested that $50.00 be withheld from her benefits each month until the overpayments she had incurred in 1974 and 1977 were recovered.) Nearly all of these notices had reminded the claimant of the requirement to report promptly any changes in her earnings which might affect her benefits. Nonetheless, the claimant continued to underestimate her earnings and failed to notify SSA on a timely basis of changes in her earnings so as to avoid overpayments. The claimant did not request waiver until November 24, 1983, when her entitlement to mother's insurance benefits had ceased and it was no longer possible to adjust her benefits to recover the overpayments. Since any alleged communication to the claimant by the SSA employee would have occurred prior to 1978 (the year the employee retired), the district court found that the claimant could not have been misinformed by the SSA employee about the overpayments that had occurred from 1978 through 1982. Considering the continuing notices from SSA to the claimant from 1978, the court could not reasonably assume that the claimant continued to rely on the SSA employee's alleged earlier statements. Moreover, the court found that, assuming that the SSA employee made the alleged statements about cashing earlier checks, there was no evidence in the record that the SSA employee ever said it was proper to continually underreport earnings. In view of the foregoing, the district court found that there was substantial evidence to support the ALJ's findings and the Secretary's decision that the claimant was not without fault in causing the overpayments. The district court held that the Secretary's decision that the claimant was not entitled to a waiver was affirmed.
Sandra J. Tarvin commenced this action by timely filing her Complaint on September 23, 1985, against Margaret M. Heckler, Secretary of the Department of Health and Human Services. The Honorable Otis R. Bowen, M.D., the current Secretary, has been substituted as party defendant herein pursuant to Fed.R.Civ.P. 25(d)(1) and 42 U.S.C. § 405(g).
Plaintiff brings this action pursuant to 42 U.S.C. § 405(g) for review of an adverse decision by the Appeals Council of the Department which denied plaintiff's request for review of the Administrative Law Judge's ("A.L.J.") decision denying her request to waive an overpayment of Six Thousand Eight Hundred Seventy-Two Dollars and Fifty Cents ($6,872.50). The issues were joined by the defendant's answer, filed December 20, 1985, together with a certified copy of the transcript of the record, including the evidence upon which the findings and decision complained of are based.
The Court having reviewed the pleadings, the briefs of the parties, the transcript of the record, and being duly advised, AFFIRMS the decision of the defendant Secretary for the reasons set forth below.
Plaintiff requested a waiver of her overpayments which was denied. A personal conference was held before an operations supervisor on March 21, 1984. On April 24, 1984, the decision to deny plaintiff's waiver was determined correct. Ms. Tarvin then requested a hearing before an A.L.J.
The A.L.J. conducted a statutory hearing on August 8, 1984, in Madison, Indiana. Plaintiff, who was represented by her attorney Michael L. Rogers, appeared and testified. Subsequently, the A.L.J. found that Ms. Tarvin was not entitled to a waiver of the overpayment.
After considering the evidence, the A.L.J. made the following findings, dated February 27, 1985:
- 1. The claimant received an overpayment in retirement insurance in the amount of $6,872.50.
- 2. The claimant was overpaid benefits.
- 3. The claimant was not without fault in causing the overpayment (20 CFR 404.507).
- 4. The claimant shall re-pay this overpayment at the rate of $50.00 per month.
- 5. The claimant failed to provide material information which she should have known was important.
- 6. Recovery of the overpayment is not waived (20 CFR 404.506).
The plaintiff then timely perfected her appeal. The A.L.J.'s decision became the final decision of the Secretary on September 3, 1985, when the Appeals Council denied plaintiff's request for review of the A.L.J.'s decision. This action followed.
Issues Before the Court
The sole issue before the Court is whether the record contains substantial evidence to support the decision of the Secretary, 42 U.S.C. § 405(g). The phrase "substantial evidence" is defined as:
- Such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. We must affirm the [Secretary's decision] if the record contains substantial evidence to support the A.L.J.'s findings and there has been no error of law.
Strunk v. Heckler, 732 F.2d 1357, 1359 (7th Cir. 1984) (citations omitted).
Review of Record
Plaintiff filed an application for Social Security mother's insurance benefits on October 26, 1970. The application form explained the effect of yearly earnings on social security benefits. Plaintiff agreed on the form to report her annual earnings to the Social Security Administration.
Ms. Tarvin was first notified of overpayment problems in 1971 with respect to her 1970 and 1971 benefits checks. On March 18, 1972, plaintiff received notice of overpayments in 1970, 1971 and 1972 totaling $509.00. The overpayments occurred because Ms. Tarvin failed to provide accurate earnings estimates and to timely report changes in her yearly earnings. After 1976, plaintiff consistently underestimated her steadily increasing income. However, she did not report changes in her estimates except for the years 1971 and 1980 when she lowered her estimates. Her earnings for those two years exceeded the lowered estimates resulting in even greater overpayments.
Plaintiff received frequent notices from the Social Security Administration regarding the overpayments and the adjustments to benefit amounts necessary to recover the overpayments. Meanwhile, the overpayments continued to be made based upon plaintiff's yearly underestimates of her earnings. On May 17, 1976, plaintiff requested that the 1974 overpayment be withheld at the rate of $50 per month. When notified of the 1977 overpayment, plaintiff again requested that only $50.00 be withheld each month.
Plaintiff was frequently notified of the importance of reporting significant changes in her income. In a statement made on May 19,1980, Ms. Tarvin said "I understand now when I make an estimate, that any time I see I will earn more -- that I am to contact social security right away." Plaintiff was also frequently notified of her right to apply for a waiver.
As the yearly overpayments continued, plaintiff's benefits were constantly adjusted for overpayments in prior years. By 1982, $6,872.50 in overpayments had accumulated because overpayments from previous years were recovered at the rate of only $50 per month. On November 25, 1983, plaintiff requested waiver of the overpayment.
The Social Security Act Provides:
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 by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience.
42 U.S.C. § 404(b)
The regulations state in part:
Sections 204(b) and 1870(c) of the Act provide that there shall be no adjustment or recovery in any case where an incorrect payment . . . has been made . . . with respect to an individual:
- (a) Who is without fault, and
(b) Adjustment or recovery would either:
- (1) Defeat the purpose of title II of the Act, or
- (2) Be against equity and good conscience. 20 C.F.R. § 404.506.
Under 20 C.F.R. § 404.507, "fault" is defined, in part, as:
"Fault" as used in "without fault" (see § 404.506 and 42 CFR 405.355) applies only to the individual. Although the Administration may have been at fault in making the overpayment, that fact does not relieve the overpaid individual or any other individual from whom the Administration seeks to recover the overpayment from liability for repayment if such individual is not without fault. In determining whether an individual is at fault, the Administration will consider all pertinent circumstances, including his age, intelligence, education, and physical and mental condition. What constitutes fault (except for "deduction overpayments" -- see § 404.510) on the part of the overpaid individual or on the part of any other individual from whom the Administration seeks to recover the overpayment depends upon whether the fact show that the incorrect payment to the individual or to a provider of services or other person, or an incorrect payment made under section 1814(e) of the Act, resulted from:
- (a) An incorrect statement made by the individual which he knew or should have known to be incorrect; or
- (b) Failure to furnish information which he knew or should have known to be material; or
- (c) With respect to the overpaid individual only, acceptance of a payment which he either knew or could have been expected to know was incorrect.
In a deduction-overpayment case such as this, the regulations provide an even higher degree of care for an individual to be "without fault." 20 C.F.R. § 404.511 provides:
- (a) Degree of care. An individual will not be "without fault" if the Administration has evidence in its possession which shows either a lack of good faith or failure to exercise a high degree of care in determining whether circumstances which may cause deductions from his benefits should be brought to the attention of the Administration by an immediate report or by return of a benefit check. The high degree of care expected of an individual may vary with the complexity of the circumstances giving rise to the overpayment and the capacity of the particular payee to realize that he is being overpaid. Accordingly, variances in the personal circumstances and situations of individual payees are to be considered in determining whether the necessary degree of care has been exercised by an individual to warrant a finding that he was without fault in accepting a "deduction overpayment."
- (b) Subsequent deduction-overpayments. An individual will not be without fault where, after having been exonerated for a "deduction overpayment" and after having been advised of the correct interpretation of the deduction provision, he incurs another "deduction overpayment" under the same circumstances as the first overpayment.
An examination of the record demonstrates there is substantial evidence to support the Secretary's decision and that plaintiff is not entitled to a waiver. When Ms. Tarvin completed her application for mother's insurance benefits on October 26, 1970, she agreed to make timely reports of any changes in her income to the Social Security Administration ("SSA"). As early as April 1, 1971, plaintiff indicated in a letter that she was aware of the overpayment problem. On April 18, 1972, she again acknowledged awareness of an overpayment problem and the necessity to pay back what she had been overpaid.
On March 16, 1972, plaintiff received notification that an overpayment resulted because of her work and estimated earnings for 1971 and 1972. Ms. Arvin was again notified of overpayments which were the result of her yearly underestimates on May 23, 1975, October 1, 1975, January 16, 1976, April 22, 1976, April 13, 1977, June 14, 1978, September 22, 1978, March 6, 1979, July 6, 1979, April 28, 1980, May 23, 1980, June 25, 1981, November 17, 1982, and September 13, 1983. Nearly all of these notices reminded plaintiff of the requirement to promptly report any changes in income which would affect her payments. However, from 1970 to 1983, Ms. Tarvin not only underestimated her earnings in nine (9) out of thirteen (13) years, she also failed to promptly notify the SSA of her income changes in order to avoid overpayment.
The record also establishes that plaintiff possessed a good working knowledge of the SSA requirements in 1971 and 1980 because she promptly changed her estimated earnings for those years to a lower amount. In addition, even though plaintiff stated on May 19, 1980, "I understand now that when I make an estimate, that any time I see I will earn more -- that I am to contact Social Security right away." She did not adjust her earnings estimates upward in order to reflect her higher income.
In addition, the evidence establishes that although Ms. Tarvin was frequently notified of her right to apply for a waiver, she never requested a waiver until November 25, 1983, when her benefits had ceased and it was no longer possible to adjust her benefits to recover the overpayments. Thus the documentation in the record establishes that plaintiff was aware of SSA requirements and aware of the fact that she repeatedly underestimated her earnings throughout the years she received benefits.
During hearing, Ms. Tarvin stated that she had attempted to return the checks with the overpayments but had been assured by Mr. James Kelly, an SSA employee, that it was all right to cash them. A person may be "without fault" if he or she relies on erroneous information from an official source within the SSA which caused an acceptance of an overpayment. 20 C.F.R. § 404.510(b). In this case, plaintiff's contacts with Mr. Kelly related to her overpayments in the early 1970's. Plaintiff could not remember when she last talked with Mr. Kelly, but believed it might be in 1972 or 1973. When the A.L.J. inquired on Mr. Kelly regarding plaintiff's allegations, Mr. Kelly responded that he had retired in about 1978 and had no memory of plaintiff's case.
The record therefore establishes that any information Mr. Kelly related to Ms. Tarvin was with regard to her overpayments prior to 1978. Because the overpayments at issue in the present case occurred from 1978 through 1982, Mr. Kelly could not have erroneously informed Ms. Tarvin as to her payments during these years. Furthermore, it is not reasonable to assume that plaintiff continued to rely upon Mr. Kelly's alleged statements in the early 1970's and believe all subsequent checks were proper in light of the continuing notices to the contrary from SSA in the late 1970's and 1980's. Finally, even assuming that Mr. Kelly did say in the early or middle 1970's that it was not illegal to "cash" the checks, there is no evidence in the record that he ever communicated that it was proper to continually underreport earnings.
Because there is substantial evidence to support the decision of the Secretary that plaintiff is not without fault, the Court need not reach the issue of whether recovery would defeat the purpose of the Act or would be against equity and good conscience. See 20 C.F.F. § 404.506.
After careful review and consideration of the record as contained in the transcript and pleadings, the Court finds that there is substantial evidence to support the findings made by the A.L.J. The totality of the evidence supports the Secretary's determination that the plaintiff was not without fault in causing the overpayments and not entitled to a waiver.
Accordingly, the Court finds that the Secretary correctly applied the applicable regulations and finds against the plaintiff herein and AFFIRMS the decision of the Secretary with costs assessed against plaintiff.
The undersigned United States Magistrate recommends the adoption of the above entry by the United States District Judge.
Adoption of Entry and Judgment
Barker, District Judge: The Magistrate, having submitted his Report of Review and Recommendation which reads as follows:
and counsel having been afforded due opportunity pursuant to statute and the Rules of this Court to file objections thereto, the Court having considered the Magistrate's Report and being duly advised, the Magistrate's Report and Recommended Entry are hereby approved and adopted by the Court.
IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED by the Court that the Plaintiff take nothing by way of her complaint and that the decision of the defendant, Secretary of the Department of Health and Human Services, be AFFIRMED. Costs versus plaintiff.