Social Security overpayments: what you need to prove to win!

By Tomasz Stasiuk, June 27th, 2008 | Definitions, Overpayment | 53 Comments

Overpayment cases are very tough to win.  If you decide to fight an overpayment, you need to know what you are up against.

Here is what the law says about how Social Security evaluates whether you have to pay back an overpayment or not.  This is taken from Social Security Ruling 88-6c.

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.

So, in order to have Social Security not collect an overpayment you have to be withouth “fault” for the overpayment AND the recovery would either defeat the purpose of the Social Security Act or be against equit and good conscience.

Lets take these one at a time:

You have to be without fault.

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.

This is critical!  It says that it does not matter that Social Security may have given you bad advice, that you met with them and showed them your paystubs and they still sent you a check.  If you are at fault, it may not matter if Social Security is also at fault.

The first hurdle is that you have to be without fault.  If you knew, or should have known that you were not entitled to receive Social Security benefits, you may have a hard time proving that you were not at fault.

Personally, I have a problem with this.  If you are meeting with Social Security and you honestly provide all necessary information and Social Security mistakenly sends you a check, unless you actually know you are not entitled to it, I believe you should be able to rely on a Social Security technician, whose job it is to know the regulations, telling you that your benefits will continue without you being “at fault” for accepting those the benefits.  Alas, that is not the law.

How does Social Security determine if you are at 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.

I can understand not being “without fault” if you fail to provide information or if you provide false or incorrect information, but the “knew or should have known” section in practice seems to expect people know the Social Security system better than the Social Security technicians themselves.

Lets say you are “without fault.”  then you still have to prove that the adjustment or recovery (repayment) 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.

Social Security Ruling 87-16c deals with the “defeat the purpose” portion.

The Secretary has promulgated regulations which interpret the meaning of the statutory phrases: “defeat the purpose of” and “against equity and good conscience.” Defeating the purpose of Title II is defined at 20 C.F.R. § 404.508 (1985):

(a) General. “Defeat the purpose of title II,” for purposes of this subpart, means defeat the purpose of benefits under this title, i.e., to deprive a person of income required for ordinary and necessary living expenses. This depends upon whether the person has an income or financial resources sufficient for more than ordinary and necessary needs, or is dependent upon all of his current benefits for such needs. An individual’s ordinary and necessary expenses include:

(1) Fixed living expenses, such as food and clothing, rent, mortgage payments, utilities, maintenance, insurance (e.g., life, accident, and health insurance including premiums for supplementary medical insurance benefits under the XVIII), taxes, installment payments, etc.;
(2) Medical, hospitalization, and other similar expenses;
(3) Expenses for the support of others for whom the individual is legally responsible; and
(4) Other miscellaneous expenses which may reasonably be considered as part of the individual’s standard of living.

(b) When adjustment or recovery will defeat the purpose of title II. Adjustment or recovery will defeat the purposes of title II in (but is not limited to) situations where the person from whom recovery is sought needs substantially all of his current income (including social security monthly benefits) to meet current ordinary and necessary living expenses.

I really cannot say it any better myself.  So to review, if you need all of your current income (including SSA benefits) for ordinary and necessary living expenses, the repayment may be “defeat the purpose of the act.”  Please note that Social Security does not list cell phone, cable, internet, eating out or going to movies as “ordinary and necessary living expenses.”  If you are spending money on any of these, you probably have income beyond just “ordindary and necessary living expense” and the repayment may not “defeat the purpsose of the act.”

But, if you meet this standard AND you are without fault for the overpayment, you may be able to win an overpayment case.

There is still the second prong, where repayment “would be against equity and good conscience.”  However, this requires a “reliance to one’s detriment.”  You may want to jump to examples which describe what this means in plain english.

Against equity and good conscience is defined at 20 C.F.R. § 404.509 (1985):

“Against equity and good conscience” means that adjustment or recovery of an incorrect payment (under title II of title XVIII) 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 (examples (1) and (4)) or changed his or her position for the worse (examples (2) and (3)). In reaching such a determination, the individual’s financial circumstances are irrelevant.

Example 1. A widow, having been awarded benefits for herself and daughter, entered her daughter in private school because the monthly benefits made this possible. After the widow and her daughter received payments for almost a year, the deceased worker was found to be not insured and all payments to the widow and child were incorrect. The widow has no other funds with which to pay the daughter’s private school expenses. Having entered the daughter in private school and thus incurred a financial obligation toward which the benefits had been applied, she was in a worse position financially than if she and her daughter had never been entitled to benefits. In this situation, the recovery of the payments would be against equity and good conscience.

Example 2. After being awarded old-age insurance benefits, an individual resigned from employment on the assumption he would receive regular monthly benefit payments. It was discovered 3 years later that (due to a Social Security Administration error) his award was erroneous because he did not have the required insured status. Due to his age, the individual was unable to get his job back and could not get any other employment. In this situation, recovery of the overpayments would be against equity and good conscience because the individual gave up a valuable right.

Example 3. M divorced K and married L. M died a few years later. When K files for benefits as a surviving divorced wife, she learns that L had been overpaid $3,200 on M’s earnings record. Because K and L are both entitled to benefits on M’s record of earnings and we could not recover the overpayment from L, we sought recovery from K. K was living in a separate household from L at the time of the overpayment and did not receive the overpayment. K requests waiver of recovery of the $3,200 overpayment from benefits due her as a surviving divorced wife of M. In this situation, it would be against equity and good conscience to recover the overpayment from K.

Example 4. G filed for and was awarded benefits. His daughter, T, also filed for student benefits on G’s earnings record. Since T was an independent, full-time student living in another State, she filed for benefits on her own behalf. Later, after T received 12 monthly benefits, the school reported that T had been a full-time student only 2 months and had withdrawn from school. Since T was overpaid 10 monthly benefits, she was requested to return the overpayment to SSA. T did not return the overpayment and further attempts to collect the overpayment were unsuccessful. G was asked to repay the overpayment because he was receiving benefits on the same earnings record. G requested waiver. To support his waiver request G established that he was not at fault in causing the overpayment because he did not know that T was receiving benefits. Since G is without fault and, in addition, meets the requirements of not living in the same household at the time of the overpayment and did not receive the overpayment, it would be against equity and good conscience to recover the overpayment from G.

There are few reported cases which discuss the recovery of overpayments under Title II of the Act. However, other federal programs have similar statutory and regulatory language governing the recovery of overpayments. For example, the recovery of overpaid Supplemental Security Income (“SSI”) benefits (Title XVI) is governed by 42 U.S.C. § 1383(b), which provides in part:

The Secretary (A) shall make such provision as he finds appropriate in the case of payment of more than the correct amount of benefits with respect to an individual with a view to avoiding penalizing such individual or his eligible spouse who was without fault in connection with the overpayment, if adjustment, or recovery on account of such overpayment in such case would defeat the purposes of this subchapter, or be against equity and good conscience. . . .

If you have read this far, first of all, thank you.  As you can see, the cards are pretty well stacked against anyone pursuing fighting to stop a repayment of a Social Security overpayment.   But it is not impossible.

To summarize, you have to be without fault for the overpayment and you either have to need all your income including Social Security benefit for the most basic of expenses or you relied to your detriment on the benefits continuing.

Good luck.

Tomasz Stasiuk is the founding attorney of the Stasiuk Firm - a law firm devoted to exclusively handling Social Security disability cases in Colorado. Contingent fees available.