Expanded Authority for Cross-Program Recovery of Benefit Overpayments

AGENCY:

Social Security Administration.

ACTION:

Final rules with request for comment.

SUMMARY:

To implement part of the Social Security Protection Act of 2004 (SSPA), we are revising our rules on the recovery of overpayments incurred under one of our programs from benefits payable to the overpaid individual under other programs we administer. Provisions of the SSPA expand the authority for cross-program recovery of overpayments made in our various programs. Implementation of these regulatory revisions when they become effective will yield significant program savings.

Although we are issuing these rules as final rules, we are also requesting comments on certain material changes from the proposed rules we previously published concerning expanded cross-program recovery. These changes would allow us to use cross-program recovery if: an individual is no longer receiving benefits under a particular program but is making regular monthly installments to refund an overpayment previously received under that program; or an individual is receiving monthly payments under a particular program and we are recovering a previous overpayment made under that program by adjusting the amount of those monthly benefits. We will not implement these changes before we consider comments which we receive by the date provided below and publish a document in the Federal Register. If we determine that any further changes in these sections are warranted, we will publish revised rules. See “Additional Changes” in the SUPPLEMENTARY INFORMATION section for further discussion.

DATES:

These rules are effective January 3, 2005. We invite public comments on §§ 404.530(b), 408.930(b), and 416.572(b). To be sure that we consider your comments on these changes, we must receive them by February 2, 2005.

ADDRESSES:

You may give us your comments by: using our Internet site facility (i.e., Social Security Online) at http://policy.ssa.gov/pnpublic.nsf/LawsRegs or the Federal eRulemaking Portal at http://www.regulations.gov;; e-mail to regulations@ssa.gov; telefax to (410) 966-2830; or letter to the Commissioner of Social Security, P.O. Box 17703, Baltimore, Maryland 21235-7703. You may also deliver them to the Office of Regulations, Social Security Administration, 100 Altmeyer Building, 6401 Security Boulevard, Baltimore, Maryland 21235-6401, between 8 a.m. and 4:30 p.m. on regular business days. Comments are posted on our Internet site at http://policy.ssa.gov/pnpublic.nsf/LawsRegs or you may inspect them on regular business days by making arrangements with the contact person shown in this preamble.

Electronic Version

The electronic file of this document is available on the date of publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html. It is also available on the Internet site for SSA (i.e., Social Security Online) at http://policy.ssa.gov/pnpublic.nsf/LawsRegs.

FOR FURTHER INFORMATION CONTACT:

Richard Bresnick, Social Insurance Specialist, Office of Regulations, Social Security Administration, 100 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD 21235-6401, (410) 965-1758 or TTY (410) 966-5609. For information on eligibility or filing for benefits, call our national toll-free number, 1-800-772-1213 or TTY 1-800-325-0778, or visit our Internet site, Social Security Online, at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Background

Section 210 of the SSPA, Public Law 108-203, enacted on March 2, 2004, significantly expands our ability to recover overpayments made in one of our programs from benefits payable to the overpaid individual under other programs we administer. These programs are Social Security benefits under title II of the Social Security Act (the Act), Special Veterans Benefits (SVB) under title VIII of the Act and Supplemental Security Income (SSI) benefits under title XVI of the Act.

Prior to enactment of the SSPA, sections 808, 1147 and 1147A of the Act allowed cross-program adjustment to recover overpayments as follows:

• We could withhold no more than 10 percent of any title II benefit payment (i.e., a current monthly payment and a past-due payment) to recover an SSI overpayment, if the person is not currently eligible for SSI;
• We could withhold any title II benefit payment to recover an SVB overpayment, if the person is not qualified for SVB;
• We could withhold no more than 10 percent of any SVB payment to recover an SSI overpayment, if the person is not currently eligible for SSI;
• We could withhold any SVB payment to recover a title II overpayment, if the person is not currently receiving title II benefits.

The Act did not allow us to withhold SSI payments to recover title II or SVB overpayments.

Section 210 of the SSPA repealed section 1147A and cross-program recovery provisions in section 808 of the Act and amended section 1147 to expand our cross-program recovery authority to allow recovery of an overpayment occurring under any of these programs from benefits or payments due in any other of these programs at a rate not to exceed 10 percent of the monthly benefit. It allows for unlimited withholding of past-due benefits in one program to recover an overpayment paid under another program. It also allows for cross-program recovery even if the individual is entitled under the program in which the overpayment was made.

Explanation of Changes

We are changing the regulations in 20 CFR parts 404, 408 and 416 to reflect the expanded cross-program recovery authority.

Currently, part 404 has no provisions permitting cross-program recovery. In part 404, we are adding new §§ 404.530, .535, .540, and .545, which parallel existing regulations at §§ 408.930 through 408.933, to include the expanded authority to recover title II overpayments as follows:

• We may withhold from a current monthly SSI payment no more than the lesser of that payment or 10 percent of the monthly income (as defined in the regulation) to recover a title II overpayment;
• We may withhold no more than 10 percent of current monthly SVB payments to recover a title II overpayment;
• We may withhold up to 100 percent of SSI and SVB past-due payments to recover a title II overpayment.

We are changing §§ 408.930 through 408.933 to reflect the expanded authority to recover title VIII overpayments as follows:

• We may withhold from a current monthly SSI payment no more than the lesser of that payment or 10 percent of the monthly income to recover an SVB overpayment;
• We may withhold no more than 10 percent of current monthly title II benefits to recover an SVB overpayment;
• We may withhold up to 100 percent of title II and SSI past-due payments to recover an SVB overpayment.

We are changing the regulations at § 416.570 to delete obsolete information. We are changing the regulations at § 416.572 and adding §§ 416.573, .574, and .575 to reflect the expanded authority to recover title XVI overpayments as follows:

• We may withhold no more than 10 percent of current monthly title II benefits to recover an SSI overpayment;
• We may withhold no more than 10 percent of current monthly SVB payments to recover an SSI overpayment;
• We may withhold up to 100 percent of title II and SVB past-due payments to recover an SSI overpayment.

The new sections follow the same structure as the existing regulations at §§ 408.930 through 408.933. We believe that this format is easy for members of the public to understand. We are removing the title II example from § 416.572 because the example illustrated how we applied the 10 percent limit to past-due title II benefits. Under the new law, this limitation no longer applies. We are removing the title VIII example from § 416.572 because we have added a cross-reference to the title VIII regulations that explain how title VIII benefits are computed.

We are removing from the SVB and SSI regulations the provisions that preclude cross-program recovery when the overpaid person is currently eligible for payment under the program from which we made the overpayment. The amended statute does not contain that restriction. As revised, § 416.572(b) also states that if we are already recovering an overpayment from title II benefits, the maximum amount which may be withheld from title XVI monthly benefits is the lesser of the person's title XVI benefit for that month or 10 percent of the person's total income for that month, not including the title II income used to compute the title XVI benefit.

Like the current regulations in 20 CFR part 408, subpart I, and part 416, subpart E, the final regulations for each program require that, before we impose cross-program recovery, we will notify the overpaid person of the proposed action and allow the overpaid person an opportunity to pay the remaining balance of the overpayment debt, to request review of the status of the debt, to request waiver of recovery, and to request recovery of the debt from current monthly benefits at a different rate than that stated in the notice. We will not begin cross-program recovery from current monthly benefits until 30 calendar days have elapsed after the date of the notice. If within that time period the person requests review of the debt, waiver of recovery of the debt, or reduction of the rate of recovery from current monthly benefits stated in the notice, we will not take any action to reduce current monthly benefits before we notify the debtor of our determination on the request. As permitted by section 1147(b)(2)(A) of the Act, the regulations provide that, if we find that the overpaid person or that person's spouse was involved in willful misrepresentation or concealment of material information in connection with the overpayment, we can withhold the entire amount of the current monthly benefit.

Following the discussion of our responses to public comments, we address changes that we made in §§ 404.530(b), 408.930(b) and 416.572(b) from the versions published in the notice of proposed rulemaking. See below under the heading Additional Changes.

Public Comments

On August 24, 2004, we published proposed rules in the Federal Register at 69 FR 51962 and provided a 30-day period for interested parties to comment. We received comments from six organizations. Because some of the comments received are quite detailed, we have condensed, summarized or paraphrased them in the discussion below. We address all of the significant issues raised by the commenters that are within the scope of the proposed rules.

Comment: Four organizations commented that the terms “willful misrepresentation” and “concealment of material fact” are not defined adequately in these regulations. They also commented that the actions of a recipient's spouse do not always reflect the intentions of the recipient and the recipient may not even be aware of his or her spouse's actions. Concerns were expressed that imposition of the 100 percent withholding could adversely affect innocent spouses and that the 100 percent withholding would be imposed improperly or without appropriate development to make a determination of willful misrepresentation or concealment of material information.

Response: The concepts of willful misrepresentation and concealment of material information for the purpose of cross-program recovery are not new. Since 2000, we have applied the same policy and procedures regarding willful misrepresentation and concealment of material information for cross-program recovery purposes as we apply when we collect SSI overpayments from monthly SSI benefits under section 1631(b) of the Act and 20 CFR 416.571. The new regulations continue this practice under the expanded cross-program recovery authorized by section 210 of the SSPA. The new regulations include cross-references to the definition of the term “concealment of material information” in other regulations. Also, our operating instructions provide more detailed definitions and examples to guide SSA staff in determining whether willful misrepresentation or concealment of material information occurred.

In order to determine a person's continuing eligibility for SSI and the amount payable, we need to have accurate information about his or her spouse's income, living arrangements and resources. If the person is overpaid because the spouse willfully misrepresented or concealed material information, we think it is our stewardship duty to apply the 100 percent collection rule when appropriate. Our field offices have detailed instructions regarding the process for imposing 100 percent withholding due to willful misrepresentation or concealment of material information in connection with an overpayment. Whenever we propose to collect at the 100 percent rate, the person will be notified and have the opportunity to protest before we would take this action. We would take all factors into consideration before imposing 100 percent withholding. Moreover, an overpaid person whose spouse caused the overpayment may request that we waive collection, and we will grant waiver to a person who is without fault and satisfies the other waiver criteria.

Comment: Three organizations stated that we should include in the notices described in §§ 404.540, 408.932 and 416.574 the same information about the cause of the overpayment and the overpaid amount that we include in the initial notice of overpayment. They state that the information should be included because they feel a person cannot adequately identify or question an overpayment without more information. Two of the organizations also suggested that the notice advise the person that waiver can be requested at any time.

Response: After considering the comments, we decided not to adopt the suggested changes regarding information about the causes and original amount of the overpayment. The new notice described in §§ 404.540, 408.932 and 416.574 will show the balance of the overpayment at the time we send the notice. The initial notice of overpayment previously sent to the overpaid individual includes information such as the beginning balance of the overpayment, the cause of the overpayment, and the monthly amounts received compared to the monthly amounts that the person should have received for each month of the overpaid period. We include the more detailed information in initial notices of overpayment because those notices give overpaid individuals the right to request appeal of the fact or amount of the overpayment. To exercise that right, the overpaid individual needs to know specifically the overpayment amount, when the overpayment occurred, how the overpayment was calculated, and why the overpayment occurred.

The notices described in §§ 404.540, 408.932 and 416.574 are sent to the overpaid individual after the individual has had the opportunity to appeal the initial overpayment determination. At the time that this additional notice is sent, the individual has either appealed the initial overpayment determination and received our decision or has chosen not to appeal and the time to appeal the overpayment determination has expired. Accordingly, the detailed information about the overpayment is not required in the new notice regarding cross-program recovery in order to afford the individual due process of law on the decision to collect the overpayment balance by cross-program recovery. Under the new regulation, the overpaid individual would have the right to have us review whether he or she still owes all or part of the overpayment balance. For example, the individual may have evidence that he or she refunded all or part of the balance or that we previously waived collection. We believe that the new notice of cross-program recovery gives sufficient information about the overpayment for the individual to determine whether to ask for such review.

In addition, it is our long-held policy to provide the detailed information on the amount of the initial overpayment and the cause of the overpayment in the initial overpayment notice. We do not repeat that information with each subsequent overpayment-related notice that we send. In subsequent notices to overpaid individuals, we invite them to ask for more information if they want to know more detail. To make it easier for overpaid individuals to obtain additional information, we provide in our subsequent notices contact information, such as the Agency's national toll-free telephone number and the address and telephone number of the local office that is closest to them. We will include this contact information in the new notices described in §§ 404.540, 408.932, and 416.574. When overpaid persons ask for more information, we provide them with the details contained in our records, including why the overpayment occurred, when it occurred, and how we calculated the overpayment.

As to the suggestion that the notice advise that waiver can be requested at any time, the new notices described in §§ 404.540, 408.932 and 416.574 will advise that waiver may be requested at any time.

Comment: One organization raised a concern about cross-program recovery of overpayments from monthly title XVI benefits, claiming that “[t]itle XVI beneficiaries are presumed to be unable to afford to repay overpayments under the law” and “[t]hey need only prove lack of fault in causing the overpayment to receive a waiver.” The comment states that SSA should include this information in the notices that propose recovery from title XVI payments.

Response: This comment is based on an apparent misunderstanding of our existing regulations. A title XVI recipient does not have to show only that he or she is without fault to have overpayment recovery waived. In addition, the individual must demonstrate that recovery would defeat the purpose of title XVI, be against equity and good conscience, or impede efficient or effective administration of the program. Our regulation at 20 CFR 416.553(a) states that recovery defeats the purpose of the SSI program “if the individual's income and resources are needed for ordinary and necessary living expenses.” This explanation is included in our notice language about waiver. Section 416.553(b) explains the alternative criteria that meet the requirement described in § 416.553(a). Nowhere does the regulation say that a title XVI recipient is automatically deemed to meet the criteria for “defeat the purpose” of the SSI program.

Comment: Two organizations asserted that there are problems in the administration of our programs that cause overpayments; specifically, timely processing of reports of work activity and earned income which potentially affect eligibility or benefit amounts.

Response: Overpayments and underpayments of benefits occur for many reasons. We take our responsibility for stewardship of the programs that we administer very seriously, which is why we constantly track our payment accuracy and strive to minimize overpayments and to determine eligibility and process claims timely. In addition, we are pursuing several initiatives that address both the causes of overpayments and the timely processing of reports affecting eligibility. Regardless of the reasons for overpayments, we are responsible for recovering as much of the overpaid money as possible consistent with the law.

Comment: One organization suggested that special language be added to the regulations to protect the health and welfare of individuals when they are receiving medical assistance in either a nursing facility, state institution or a home and community-based setting. They are concerned about the impact cross-program recovery “will have on these individuals because it will reduce their countable income which Medicaid cannot supplement and then the provider will not receive full reimbursement.”

Response: The comment is not clear regarding the impact that cross-program recovery would have on the individuals described in the comment, and the organization does not specify the change(s) in the regulations that the organization wants. The Agency assumes that the organization wants special arrangements in the regulations that would apply while the overpaid person receives the medical assistance described in the comment. Such a change is not necessary because appropriate arrangements are already available in the rules governing waiver of recovery and recovering at a rate that is less than 10 percent of the current monthly benefits. Therefore, this suggestion is not being implemented since a special rule is not required to cover this situation. The general rules for overpayment recovery take into consideration a person's financial circumstances.

Additional Changes

Upon further review and consideration, we have deleted from §§ 404.530(b), 408.930(b) and 416.572(b), as published on August 24, 2004, the provisions that would exclude certain types of cases from cross-program recovery. Under one of the exclusions, we would not apply cross-program recovery when the overpaid person is no longer eligible for payment under the program where the overpayment occurred but is refunding that overpayment voluntarily by making monthly installment payments. Under the other exclusion, we would not recover an overpayment in one program by adjusting benefits payable under another program when we already are adjusting those benefits to recover an overpayment of benefits within that program.

As amended by section 210 of the SSPA, section 1147 of the Act permits us to apply cross-program recovery in both situations described above. By eliminating these exclusions from paragraph (b) of §§ 404.530, 408.930, and 416.572, we believe that we will fulfill our stewardship responsibilities regarding the programs more effectively. For example, if an individual is not eligible for SSI benefits and is refunding an SSI overpayment by making monthly installment payments, we would be able to recover the SSI overpayment balance by cross-program recovery against a title II past-due benefit. Cross-program recovery is a more efficient and reliable collection method than collection by installment payments. This approach is consistent with our policy under amended section 1147 of the Act to apply cross-program recovery in addition to adjusting benefits payable under the program in which the overpayment was made. Moreover, if an individual incurred both an SSI overpayment and a title II overpayment, we would be able to recover both the title II overpayment and the title XVI overpayment simultaneously from the title II benefits. For example, if we are collecting a title II overpayment by title II benefit adjustment and a large title II underpayment becomes payable, we could collect the title II overpayment balance from that underpayment and apply any remaining title II past-due benefits to the SSI overpayment.

Because these are material changes from the proposed rule, we have decided to offer an additional opportunity for public comment before we implement them.

In addition to the changes described above, we made a few non-substantive clarifying revisions in §§ 404.535(b), 408.931(b), and 416.573(b).

Regulatory Procedures

Pursuant to section 702(a)(5) of the Social Security Act, 42 U.S.C. 902(a)(5), SSA follows the Administrative Procedure Act rulemaking procedures specified in 5 U.S.C. 553 in the development of regulations. Subject to certain exceptions, 5 U.S.C. 553(d) requires that an agency publish a final rule at least 30 days before the rule becomes effective. Except for the changes in paragraph (b) of §§ 404.530, 408.930, and 416.572 discussed above, we find “good cause” under 5 U.S.C. 553(d)(3) for applying these regulations immediately. Waiting an additional 30 days would delay for no legitimate reason collection of overpayments made under titles II, VIII and XVI of the Act under the expanded authority for cross-program recovery. Such delay would be unnecessary and contrary to the public interest. There is a significant public interest in recovering those overpayments as soon as possible consistent with applicable law. We do not need 30 more days to prepare to begin implementing the expanded authority, and the regulations do not require any action by individuals or organizations to prepare for cross-program recovery.

Executive Order 12866

The Office of Management and Budget (OMB) has reviewed these rules in accordance with Executive Order 12866, as amended by Executive Order 13258. We have also determined that these rules meet the plain language requirement of Executive Order 12866, as amended by Executive Order 13258.

Regulatory Flexibility Act

We certify that these rules will not have a significant economic impact on a substantial number of small entities because it affects only individuals. Thus, a regulatory flexibility analysis as provided in the Regulatory Flexibility Act, as amended, is not required.

Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA) says that no persons are required to respond to a collection of information unless it displays a valid OMB control number. In accordance with the PRA, SSA is providing notice that the Office of Management and Budget has approved the information collection requirements contained in § 408.932(c), (d) and (e) of these final rules. The OMB control number for this collection is 0960-0692, expiring 11/30/2007.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social Security-Disability Insurance; 96.002, Social Security-Retirement Insurance; 96.004, Social Security-Survivors Insurance; 96.006, Supplemental Security Income; and 96.020, Special Benefits for Certain World War II Veterans)

List of Subjects

20 CFR Part 404

• Administrative practice and procedure
• Blind
• Disability benefits
• Old-Age
• Survivors and Disability Insurance; Reporting and recordkeeping requirements
• Social Security

20 CFR Part 408

• Administrative practice and procedure
• Aged; Reporting and recordkeeping requirements
• Social Security; Special Veterans benefits
• Veterans

20 CFR Part 416

• Administrative practice and procedure
• Aged
• Blind
• Disability benefits
• Public assistance programs;

For the reasons set out in the preamble, we are amending subpart F of part 404, subpart I of part 408 and subpart E of part 416 of chapter III of title 20 of the Code of Federal Regulations as set forth below:

PART 404—FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE (1950- )

Subpart F—[Amended]

1. The authority citation for subpart F of part 404 is revised to read as follows:

Authority: Secs. 204, 205(a), 702(a)(5), and 1147 of the Social Security Act (42 U.S.C. 404, 405(a), 902(a)(5), and 1320b-17); 31 U.S.C. 3720A.

2. Sections 404.530, 404.535, 404.540 and 404.545 are added to read as follows:

PART 408—SPECIAL BENEFITS FOR CERTAIN WORLD WAR II VETERANS

Subpart I—[Amended]

3. The authority citation for subpart I of part 408 is revised to read as follows:

Authority: Secs. 702(a)(5), 808, and 1147 of the Social Security Act (42 U.S.C. 902(a)(5), 1008, and 1320b-17); 31 U.S.C. 3720A.

4. Section 408.930 is revised to read as follows:

5. Section 408.931 is revised to read as follows:

6. Section 408.932 is revised to read as follows:

7. Section 408.933 is revised to read as follows:

PART 416—SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND DISABLED

Subpart E—[Amended]

8. The authority citation for subpart E of part 416 continues to read as follows:

Authority: Secs. 702(a)(5), 1147, 1601, 1602, 1611(c) and (e), and 1631(a)-(d) and (g) of the Social Security Act (42 U.S.C. 902(a)(5), 1320b-17, 1381, 1381a, 1382(c) and (e), and 1383(a)-(d) and (g)); 31 U.S.C. 3720A.

9. Section 416.570 is revised to read as follows:

10. Section 416.572 is revised and sections 416.573, 416.574 and 416.575 are added to read as follows: