Legal Liability for Social Security Overpayments

Legal Liability for Social Security Overpayments

March 10, 2015
Legal Liability for Social Security Overpayments
Overview
Contingent Liability
Social Security provides monthly cash benefits to retired or
Individuals who have received Social Security benefits
disabled workers and their family members and to the
based on the same earnings record as the overpaid
family members of deceased workers. Payroll taxes paid by
beneficiary may be contingently liable for the primary
covered workers and their employers primarily finance the
beneficiary’s overpayment. While SSA generally first seeks
program.
repayment from the beneficiary who is primarily liable,
An overpayment of Social Security benefits occurs when a
SSA will not pay benefits to individuals contingently liable
beneficiary receiving retirement, survivors, or disability
until an amount equal to the overpayment amount has been
insurance benefits is paid more than he should have been
withheld or refunded. 20 C.F.R. §404.502(a)(2).
paid for a given period. 20 C.F.R. §404.501(a). The
beneficiary incorrectly reporting or failing to report a
Individuals who may be contingently liable for
change in circumstances that could affect his benefits
overpayments include spouses, widow(er)s, children or
eligibility is the primary cause of an overpayment. For
parents of the overpaid beneficiary.
example, a Social Security disability beneficiary’s failure to
inform the Social Security Administration (SSA) that he has
Example of Contingent Liability: Carol is currently
begun to receive wages may result in an overpayment of
receiving a widow’s benefit of $210.00 based on her
benefits more than the amount due.
deceased husband’s work record. SSA has determined
that it overpaid Carol’s husband $980.00 due to an
Once the government has determined that an overpayment
incorrect reporting of earnings. Carol is likely to be
has been made, the overpayment becomes a debt owed to
contingently liable for the repayment of $980.00 as
the United States government. SSA generally recovers this
she is receiving the $210.00 widow’s benefit based on
debt through an adjustment of benefits payable, a full
her husband’s work record. SSA would likely propose
refund payment by the overpaid beneficiary, or a reduction
recovery by withholding the widow’s benefit.
in tax refunds.
This In Focus will examine who is liable for Social Security
Joint and Several Liability
overpayments, and thus who may be subject to these
recovery methods by SSA.
Joint and several liability means that two or more people
Primary Liability
have equal responsibility for the repayment of an
overpayment. Each person may be primarily liable for the
repayment of the entire overpayment. SSA’s Program
The beneficiary, who received the overpayment, is
Operations Manual System GN 02205.007.
primarily (directly) liable for the overpayment. Thus, he is
the main person responsible for repaying the overpayment.
SSA will generally stop benefit payments to this individual
Example of Joint and Several Liability: Alice is a
until an amount equal to the overpayment has been
representative payee for Bob and receives $142.00 in
withheld or refunded. This group of beneficiaries generally
benefits for him each month. Bob married, making him
includes those receiving benefits, such as retirement or
no longer eligible for benefits. If both Alice and Bob
disability, based on his earnings record. 42 U.S.C. §404(a);
knew of the marriage yet continued to receive the
20 C.F.R. §404.502(a)(1).
benefits, both Bob and Alice would be jointly and
several y liable for the resulting overpayment.
Example of Primary Liability: Lauren works while
receiving disability benefits, but does not report her
Joint and several liability typically appears in the context of
earnings in a timely manner. She is primarily liable for
a representative payee-beneficiary relationship. A
the overpayment because she received the benefits
representative payee is an individual or organization
overpaid based on her work record.
appointed by SSA to receive Social Security benefits for
someone who cannot manage, or direct someone else to
manage, his money. The primary responsibilities of a
representative payee include using the benefits to pay for
the current needs of the beneficiary and properly saving the
benefits not needed at the present time. Generally, a
beneficiary and the representative payee are jointly and
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Legal Liability for Social Security Overpayments
severally liable if they both had knowledge of the
event/information that led to the overpayment.
However, a representative payee may also be primarily
liable for an overpayment. For example, if a representative
payee misused the funds and the beneficiary did not have
access to the funds, the representative payee would be
primarily liable for the overpaid benefits and the
beneficiary is not jointly liable. Similarly, if a beneficiary
fails to inform a representative payee of a change that
would impact eligibility, only the beneficiary may be held
primarily liable for the overpayment. Referring to the
example above, if Bob married and failed to inform Alice
of the change in status, Bob would be primarily liable for
the overpayment.
No Recovery from Persons Without
Fault
The Social Security Act states that SSA cannot recover an
overpayment from a person who is without fault if the
recovery of an overpayment would defeat the purpose of
the benefits program or would be against equity and good
conscience. 42 U.S.C. §404(b).
SSA expects a Social Security beneficiary to exercise a
high degree of care in preventing overpayment. SSA will
find fault with the beneficiary who fails to exercise a high
degree of care in reporting circumstances that may affect
entitlement to or the amount of benefits. The degree of care
varies according to the individual’s circumstances and
capacity to understand that he was overpaid. SSA’s
Program Operations Manual System GN 02250.005.
Example of fault: Allison, who is currently receiving
disability insurance, failed to report to SSA a change in
medical circumstances that would have impacted her
benefits eligibility. SSA would likely find that Allison is
at fault because she failed to exercise a high degree of
care in failing to report this information to the agency.
Related Legislation in the 114th Congress
The “Stop Punishing Innocent Americans Act” (H.R. 409/S.
204) would prohibit the finding of liability of individuals
under the age of 18 for Social Security overpayments made
to or on behalf of these individuals.
Related Reports to Social Security
Overpayment
For more information on Social Security benefits, see CRS
Report R42035, Social Security Primer, by Dawn Nuschler.
Emily M. Lanza, elanza@crs.loc.gov, 7-6508

IF10146
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