QUESTION
You asked us to evaluate whether a class action settlement award received by SSI recipient
NH (name redacted) would be countable as income and as a resource for SSI purposes.
SHORT ANSWER
Although the settlement award does not precisely meet the requirements for exclusion
from being counted as income or a resource, we believe there is support for excluding
the award. Specifically, the fund from which the award came is comparable to a fund
established by the State of Minnesota to aid crime victims, which would make the award
excludable under both the income and resource counting rules. We note, however, that
the resource exclusion would only apply for the first nine months after receipt of
the funds. Alternatively, we believe there is also legal support for finding the award
is not income or a resource for SSI purposes. First, the award may be considered tort
compensation and, as such, does not constitute income. Second, the award may be construed
as a blocked account or conservatorship account that is not a resource under the facts
of this case.
BACKGROUND
NH was a class member in a legal action filed in 2009 against the State of Minnesota
Department of Human Services (DHS), the Minnesota Extended Treatment Options (METO)
program, and certain individual named defendants in the U.S. District Court for the
District of Minnesota (Court).[1] The named plaintiffs filed on behalf of their sons, who were residents at METO, a
residential facility for persons with developmental disabilities. See Ombudsman for Mental Health and Development Disabilities, “Just
Plain Wrong”: Excessive Use of Restraints and Law Enforcement
Style Devices on Developmentally Disabled Residents at the Minnesota
Department of Human Services Minnesota Extended Treatment Program
(METO) Cambridge, MN iii, 11 (Sept. 2008), https://mn.gov/omhdd/assets/Just%20Plain%20Wrong%20%20%20Use%20of%20Restraints%20at%20METO%20File_tcm23-82019.pdf [hereinafter Ombudsman Report]. In their complaint, the plaintiffs alleged that the
State and DHS unlawfully and unconstitutionally permitted METO to routinely impose
seclusion and mechanical restraints upon residents. See Stipulated Class Action Settlement Agreement 2, http://mn.gov/mnddc/meto_settlement/documents/METO_Settlement_Agreement_6-23-11.pdf [hereinafter SA]. The lawsuit was based in part on a report by the Office of the
Ombudsman for Mental Health and Developmental Disabilities, which found that METO
staff regularly subjected residents to abusive and improper seclusion, use of mechanical
restraints including metal handcuffs and leg hobbles, and placement in a face-down
prone position, as a means of behavior modification, convenience, and retaliation
for behavior resulting from their disabilities. See Ombudsman Report at 15-18.
On December 5, 2011, the Court issued an Order granting final approval of a stipulated
class action settlement agreement in the matter. See Final Approval Order for Stipulated Class Action
Settlement Agreement, http://mn.gov/mnddc/meto_settlement/documents/METO_Final_Approval_Order.pdf [hereinafter Final Approval Order]; SA. The settlement amount per the agreement was
$3,000,000.00, which the Court reduced to $2,976,400.00 and directed to be paid in
its entirety by the defendants into the settlement class counsel”s trust account.
Final Approval
Order ¶ 4. The settlement agreement established a procedure by which apportionment of individual
class member settlement amounts would be based in part on “the number of documented times a
Class Member was ‘Restrained/Secluded.’”[2] SA pp. 31-32. Additionally, the settlement agreement gave the Court the authority,
when reviewing and approving the submitted claims, to consider other factors in the
interest of justice, including but not limited to “‘demonstrated serious physical injury.’” “Id”. at p. 32. The agreement further provided that any apportioned award of $3,000.00
or more was to be deposited with the Court. SA p. 34. In turn, before releasing the
funds, the Court would “ascertain whether the class member or legal guardian
ha[d] taken appropriate steps to safeguard eligibility for government
benefits satisfactory to the Court including consideration of financial
accounting and estate or trust planning issues involved”. Id. The express purpose of this step was to “further
ensure that class members [did] not lose eligibility for any government
benefits to which they may be entitled[.]” Id.
In its Order, the Court
-
f[ound] and conclude[d] that, both legally and as a matter of equity and fairness,
the individual settlement amount being awarded to each individual class member is
not a resource for eligibility purposes and, consequently, an individual settlement
amount will not affect, in any way, a Class Member’s eligibility for disability benefits
or other related benefits, or otherwise jeopardize the Class Member’s benefits or
programming.
Final Approval Order ¶ 7. The Court went on to state that if any agency, entity, or individual, private
or public, were to dispute the Court’s jurisdiction to make the above finding, both
as a matter of law and equity, or were to contend that a settlement award should affect
a class member’s eligibility, the agency or entity was required to file a motion and
come before the Court to address the claim. Id.
Likewise, in its January 30, 2012 Order approving the individual settlement claims,
the Court stated that the apportioned settlement amounts “are not deemed income, a tax liability, or a resource
to any Class Member” and that to treat the individual awards as such “would be contrary to the December 5[, 2011]
Order and the intent of all parties to the Settlement Agreement.” January 30, 2012 Order ¶ 2 n.2. The Court reemphasized that “if any individuals, agencies, programs, or entities take
a contrary position, they must proceed by motion to this Court[.]”Id. The Court further instructed each Class Member or his or her legal guardian to submit
a letter to the Court describing the steps taken to safeguard the Class Member’s funds
and eligibility for government benefits. Id. ¶ 3.
Subsequently, in response to letters received by various Class Members and concerns
expressed therein about settlement funds possibly affecting eligibility for Social
Security disability benefits, the Court issued an Order on February 14, 2012, in which
it emphasized that the settlement funds were to used solely to improve Class Members’
quality of life and were not to be used for paying costs of care. See February 14, 2012 Order ¶ 1, http://mn.gov/mnddc/meto_settlement/documents/09cv1775-Doc141.pdf. In an accompanying memorandum, the Court reiterated that point and explained that
the Class members were “being compensated for
what they have been subjected to and the manner in which they have
been treated or mistreated.”Id. at pp. 6-7.
According to a letter written by class counsel, in or about April 2012, the Court
and class counsel received letters from the U.S. Attorney’s Office expressing SSA’s
position that the Court’s orders notwithstanding, the issue of whether settlement
awards were income or a countable resource would have to be determined on a case-by-case
basis. The Court held a status conference on April 20, 2012, at which attorneys from
SSA and the U.S. Attorney’s Office appeared via telephone.
Three days later, the Court issued another Order in which it stated:
Solely to the extent necessary to maintain Class Members’ eligibility for governmental
benefits, including but not limited to Social Security benefits, the apportioned settlement
funds to each Class Member shall be considered a “blocked account”or “conservatorship account” consistent with applicable Social Security regulations, applicable Social Security
Administration guidance, including Program Operating Manual System (“POMS”) SI
01140.215 . . . and other applicable law[.]
April 23, 2012 Order ¶ 1, http://mn.gov/mnddc/meto_settlement/documents/09cv1775ord042312.pdf. The Court indicated that its prior Orders, which precluded the use of settlement
funds for costs of care, unpaid bills or rent and noted that the funds were not a
resource, were “consistent with the
use of a conservatorship account or blocked account, and mean[t] that
the Settlement Funds shall not be available or used for ‘support
of maintenance,’ including expenditures for food, clothing,
or shelter.” Id. The Court further stated that it had “apportioned the Settlement Funds to Class Members
based on documented incidents of restraint or seclusion, including
personal injuries sustained, and for the deprivation of Class Members’
civil and personal rights. As such, the settlement amounts are not
income to Class Members.” Id. ¶ 3. In doing so, the Court relied on case law finding that tort compensation was
excluded from income for SSI purposes. Id.
Subsequently, the Court issued an Order dated May 22, 2012, instructing the Minnesota
DHS to furnish SSA with a list of Class Members receiving awards, their Social Security
numbers, and the amounts received; the Court specified that SSA was to use that information
to ensure that the settlement funds were not a resource. See May 22, 2012 Order ¶¶ 1-2.
NH enrolled as a class member and Trillium Services, Inc. [3](Trillium) assisted him with managing his settlement award. On March 13, 2012, NH
was awarded $41,800.00 from the settlement agreement. His settlement check was given
to Trillium, which deposited the funds in a checking account. It appears that SSA
first became aware of NH’s settlement award during an SSI redetermination in December
2019.
DISCUSSION
1. A strict reading of the Social Security
Act and regulations indicates the settlement award should be counted
towards the SSI income and resource limitations.
To be eligible for SSI benefits, an individual’s (and spouse’s, if any) income and
resources must not exceed the statutory limit. See 42 U.S.C. § 1382(a); see
also 20 C.F.R. § 416.202(c), (d). Income is anything that an individual receives in cash
or in kind that he can use to meet his needs for food and shelter. See 20 C.F.R. § 416.1102. A resource is cash or other liquid assets or any real or personal
property that an individual (or spouse, if any) owns and could convert to cash to
be used for his support and maintenance. See 20 C.F.R. § 416.1201(a). Under the SSI program, all income and resources are generally
countable unless excluded from consideration by statute. See 42 U.S.C. § 1382(a).
As relevant here, an award is a type of unearned income. See 42 U.S.C. § 1382a(a)(2)(C). The agency’s regulation set forth at 20 C.F.R. § 416.1121(f)
defines an award as “usually something you receive as the result of a decision
by a court, board of arbitration, or the like.” Items received in cash or in kind during a month are evaluated first under the income
counting rules and, if retained until the following month, are subject to the resource
counting rules. See 20 C.F.R. § 416.1207(d).
42 U.S.C. § 1382a(b) itemizes a list of specific exclusions to the statute’s SSI income
counting requirements. The corresponding regulation at 20 C.F.R. § 416.1124 reflects
the unearned income exclusions of section 1382a(b) and provides for exclusions mandated
by other Federal laws. Similarly, 42 U.S.C. § 1382b(a) and its implementing regulation
at 20 C.F.R. § 416.1210 provide for exclusions from the SSI resource counting requirements.
In particular, the regulations include an exclusion from unearned income for “[p]ayments received
by you from a fund established by a State to aid victims of crime.” 20 C.F.R. § 416.1124(c)(17). Likewise, the regulations provide an exclusion from
resources for “[p]ayments received as compensation
for expenses incurred or losses suffered as a result of a crime as
provided in § 416.1229.” 20 C.F.R. § 416.1210(p). Under Section 416.1229, in determining the resources of
an individual, any amount received from a fund established by a State to aid victims
of crime is excluded from resources for a period of nine months beginning with the
month following the month of receipt. See 20 C.F.R. § 416.1229(a). To be excluded from resources under this section, the individual
“must demonstrate that any amount
received was compensation for expenses incurred or losses suffered
as the result of a crime.” 20 C.F.R. § 416.1229(b).
Here, the funds in question meet the above regulatory definition of an “award,” because they were approved and awarded to NH by the Court. Thus, the funds constitute
unearned income for SSI purposes. Consequently, unless they are excluded, they would
be counted as income in the month that he received them (March 2012), 20 C.F.R. §
416.1123(a), and any amount retained beyond that month would be counted as a resource
as of the beginning of each subsequent month. 20 C.F.R. § 416.1207(a), (d).
NH’s settlement award does not fall squarely within any of the exclusions from income
or resources authorized by Congress, including the exceptions under Sections 416.1124(c)(17)
and 416.1210(p) quoted above. First, as discussed below, both the victims’ compensation
income and resource exclusions apply only to payments from funds established to aid
crime victims. See 20 C.F.R. §§ 416.1124(c)(17), 416.1210(p), 416.1229. Here, however, the fund was
not established in response to a crime or crimes, but rather pursuant to a settlement
in a civil class action. Second, the resource exclusion requires the individual to
show that the amount received was compensation for “expenses incurred or losses suffered as the result of a
crime.” Here, NH has not produced such evidence and the Court’s Orders do not directly link
the award to compensation for expenses or financial losses. Therefore, a strict reading
of the statute and regulations would seem to require counting the class action settlement
awards as income and resources for SSI purposes.
2. There is support for excluding the settlement
award under the victims’ compensation income and resource exclusions.
Notwithstanding the foregoing, we believe that there is legal support for excluding
NH’s award from income and resource counting. We believe that a broader interpretation
of the statute and regulations is appropriate here, because the settlement award is
consistent with the policy and restitutionary nature of the victims’ compensation
exclusions discussed above.
A. The “Victims of Crime” Requirement
Both the income and resource exclusions apply to payments received from a fund established
by a State to aid victims of crime. See 20 C.F.R. §§ 416.1124(c)(17), 416.1210(p), 416.1229. As stated above, NH’s settlement
award came from a fund established by the State of Minnesota. But the fund was not
established specifically in response to a crime per se; rather, it was pursuant to a settlement in a civil class action. However, we believe
it would be inequitable to count the settlement awards as income or resources based
on that technicality alone.
We believe the objectives of the settlement award are analogous to those considered
under the state victims’ compensation exclusions considered by sections 416.1124(c)(17)
and 416.1210(p). For example, the Minnesota Crime Victims Reparations Board (Board),
established under the Minnesota Crime Victims Reparations Act (codified at Minn. Stat.
§§ 611A.51-611A.68), is a program established to “help victims with their financial losses and aid their recovery from
a violent crime.” Minn. Dep’t of Public Safety, Minnesota Crime Victims Reparations Board,https://dps.mn.gov/divisions/ojp/help-for-crime-victims/Pages/crime-victims-reparations.aspx (last visited Apr. 23, 2020). The Board’s mission is to “help crime victims and their family members recover their health
and economic stability by providing compensation for losses incurred
as a direct result of a crime.” Minn. Legislative Reference Library, Crime Victims Reparations Board,https://www.leg.state.mn.us/lrl/agencies/detail?AgencyID=336 (last visited Apr. 23, 2020).
Similarly, the Court stated that the Class Members, in receiving portions of the class
settlement, were “being compensated for
what they have been subjected to and the manner in which they have
been treated or mistreated.” April 23, 2012 Order ¶ 3. The Court additionally specified that it was apportioning
the awards “based on documented incidents of restraint or seclusion, including
personal injuries sustained, and for the deprivation of Class Members’
civil and personal rights.” Id. Thus, both funds — those awarded by the Board and those awarded by the Court — are
intended to compensate recipients financially for harm suffered. In NH’s case, his
settlement award was based on documented instances of seclusion and/or restraint he
was subjected to by METO staff, and the amount he received ($41,800.00) suggests that
he had been so subjected at least 200 times. See SA pp. 2, 32.
B. Additional Resource Exclusion Requirement
The resource exclusion for victims’ compensation payments under 20 C.F.R. § 416.1210(p)
has an additional requirement. Specifically, it requires the individual to demonstrate
that the amount received was compensation for expenses incurred or losses suffered
as the result of a crime. See 20 C.F.R. § 416.1229(b). Here, NH has not offered evidence that the settlement award
related to specific expenses or losses that he suffered, as required under the resource
exclusion. However, as discussed above, METO staff allegedly subjected NH, a developmentally
disabled individual, to hundreds of instances of seclusion and/or restraint. Such
mistreatment could have reasonably resulted in the need for NH or his family to incur
expenses for legal fees, medical bills, and/or mental health treatment. Thus, we believe
that you could reasonably find that the settlement award meets the resource exclusion
requirements.
C. Previous OGC opinions support excluding the settlement
award even though it does not precisely match the requirements for
exclusion.
Past OGC opinions provide support for excluding NH’s settlement funds from income
and resource counting, despite the fact that the funds do not meet the precise statutory
or regulatory requirements for exclusion. For example, OGC opined that there was support
for excluding payments made by the City of Chicago from its Reparations Fund for Burge
Torture Victims. See Memorandum from Reg’l Chief Counsel, Chicago, to Assistant Reg’l Comm’r-MOS, Chicago,
Whether Payments from the Reparations Fund for Burge
Torture Victims Should Be Excluded from Income or Resources (July 25, 2016). Although the fund in question was established by a city rather than
by a State, it was intended to provide assistance to victims of crimes, which was
in accordance with the purpose of the Illinois Crime Victims Compensation Act. See id. at 4. Additionally, although the recipient had not offered evidence that the payment
he received was related to specific expenses or financial losses incurred, he reasonably
could have incurred legal fees, lost wages, and costs for medical or mental health
treatment as a result of the mistreatment he had suffered. See id.
Similarly, in another opinion OGC opined that there was some support for excluding
payments made pursuant to the Redress Agreement between the Government of Canada and
the National Association of Japanese Canadians. See Memorandum from Chief Attorney to Office of SSI Div. of Program Requirements Policy,
Treatment of Canadian Reparations Payments to Individuals of Japanese Ancestry (July
12, 1991). At that time, SSA had no specific exclusion for such payments to Japanese
Canadians, although analogous payments from the United States government to Japanese
Americans were excludable. OGC noted that “Although Congress focused on the actions taken by the
U.S. Government against these individuals , we believe it would be
reasonable for the Agency to assume that Congress would have the same
concern for individuals who suffered by similar Canadian actions.” Id .
Likewise, OGC opined that there was some support for a broader position of excluding
various payments made by the Lower Manhattan Development Corporation after the September
11, 2001 terrorist attacks. See Memorandum from General Counsel to Deputy Comm’r for Disability and Income Security
Programs, The Effects of
Grants Made by the Lower Manhattan Development Corporation (“LMDC”) on the Supplemental Security Income (“SSI”) Program (February 12, 2003). Although not all of those payments met the precise exclusion
requirements, we noted that a broader interpretation might be appropriate, considering
the unusual circumstances surrounding the terrorist attacks. See id.
3. The settlement award may be considered tort
compensation, which would not constitute income.
Alternatively, we believe the award would not constitute income because it serves
to compensate injured parties for torts committed by METO staff. The Court highlighted
the non-income nature of the settlement awards in explaining that it apportioned the
settlement funds “based on documented incidents of restraint or seclusion,
including personal injuries sustained, and for the deprivation of
Class Members’ civil and personal rights” and that, “[a]s such, the settlement amounts [we]re not income to Class Members.” April 23, 2012 Order ¶ 3. The Court emphasized that the Class Members were “being compensated for what they ha[d] been subjected
to and the manner in which they ha[d] been treated or mistreated.” Id. In doing so, the Court specifically relied on case law finding that tort compensation
(including personal injury settlements and reparations payments for deprivation of
personal rights) did not constitute income, either for SSI or federal tax purposes.
Id.
The case law cited by the Court supports its position that the settlement awards are
not income. For example, in Grunfeder
v. Heckler, 748 F.2d 503, 509 (9th Cir. 1984) (en banc), the Ninth Circuit Court of Appeals
held that reparations payments the German Federal Republic made to survivors of the
Holocaust did not constitute countable income in determining eligibility for SSI,
even though Congress had not addressed the question at that time. Noting that Congress
had excluded the German government’s reparations payments from Federal income tax,
the Grunfeder court found that “Congress’s reaction to the Holocaust and its
recognition of the restitutionary nature of the reparations payments
indicate an intent to exclude those payments from countable income
for SSI purposes.” Id. at 507. Notably, in a concurring opinion, Judge Ferguson emphasized that the focus
of the analysis was “on the status of the funds received. Tort
compensation traditionally has been excluded from the definition of
income and, unless Congress specifically states otherwise, the Social
Security Act . . . should not be construed as modifying this longstanding
definition. Because the reparations payments at issue here are in
the nature of tort compensation . . . they neither constitute ‘income’
under the income tax laws . . . nor under the Act for purposes of
determining eligibility for supplemental security income.” Id. at 510.
4. The settlement funds may be considered a
blocked account or conservatorship account that is not a resource
in NH’s case.
In addition, we believe that the checking account into which Trillium deposited NH’s
settlement award could reasonably be construed as a blocked account or conservatorship
account, which would not be a resource under the facts of this case. In its April
2012 order, the Court stated:
Solely to the extent necessary to maintain Class Members’ eligibility for governmental
benefits, including but not limited to Social Security benefits, the apportioned settlement
funds to each Class Member shall be considered a “blocked account” or “conservatorship account” consistent with applicable Social Security regulations, applicable Social Security
Administration guidance, including Program Operating Manual System (“POMS”) SI
01140.215 . . . and other applicable law[.]
April 23, 2012 Order ¶ 1. A blocked account or conservatorship account is a financial
account in which a person or institution has been appointed by a court to manage and
preserve the assets of an individual which are held in the account. POMS SI 01140.215(A). Under agency policy, if State law requires that funds in a conservatorship account
be made available for the care and maintenance of an individual, then SSA assumes,
absent evidence to the contrary, that the funds are available for the individual’s
support and maintenance and, therefore, are a resource. POMS SI 01140.215(B).
Here, the Regional Office informed us that NH does not have a legal guardian and that
Trillium was not appointed as conservator. However, Trillium’s Director, Mr. L., wrote
to the Court in February 2012 about the funds NH was to receive from the settlement,
and the Court’s response to Mr. L. noted that he was “assisting NH A. Johnson in managing and protecting the funds he will
be receiving from the METO Class Action settlement.” The Court stated it would honor Mr. L.’s apparent decision to place NH’s funds in
a Master Pooled trust. This suggests that Trillium, although not appointed by a court,
was acting in a capacity akin to a conservator. See Minn. Stat. §§ 524.5-102(3) (conservator is appointed by court to manage estate of
protected person), 524.5-602(c) (conservator is appointed by court to administer property
of an adult). As noted above, Trillium ultimately placed the funds awarded to NH in
a checking account. Therefore, it appears that the checking account in which the funds
are held may reasonably be considered a blocked account.
It does not appear that Minnesota law requires funds in a blocked account to be made
available for the care and maintenance of an individual. Under Minnesota law, unless
specified in the court’s order, the conservator of the estate is not required to use
funds to pay expenses associated with the protected person’s support and maintenance.
See Minn. Stat § 524.5-417(a) (conservator is subject to the complete control and direction
of the court), (c)(1) (identifying duty to pay for “support, maintenance, and education
of the protected person” as among the powers and duties of conservator that may be granted by the court);
see also POMS SI CHI01140.215(B)(4). As such, any funds in a blocked account cannot be presumed to be a resource
under POMS SI 01140.215(B)(1). Rather, a review of any court order related to the account is necessary to
determine whether the expenditure of funds for support and maintenance is one of the
conservator’s duties. POMS SI CHI01140.215(B)(4). If the court order so directs, then the funds in a blocked account should
be considered accessible and countable as a resource. Id.
Here, the Court issued several orders about the use of the settlement funds, stressing
repeatedly that the funds awarded to a Class Member: (a) were not to be used for any
“residential costs of care” or “unidentified or unpaid bills”; (b) were instead to be used specifically to improve the Class Member’s “quality of life;” and (c) were not countable income or a resource. See Final Approval Order ¶ 7; January 30, 2012 Order ¶¶ 2 n.2, 3 n.4; February 14, 2012
Order ¶ 1; April 23, 2012 Order ¶¶ 1, 3. Indeed, the Court even specified that funds
were to be considered blocked accounts or conservatorship accounts and, as such, “shall not be available
or used for “support of maintenance,” including expenditures
for food, clothing, or shelter.” April 23, 2012 Order ¶ 1 (emphasis added). Instead, class members were to “use their
apportioned settlement amounts as a supplement to enhance the quality
of their lives.” Id. Therefore, since the checking account in which NH’s settlement award was deposited
may be considered a blocked account, and the funds cannot be used for support and
maintenance, we believe you may reasonably find they are not a resource.[4]
CONCLUSION
For the reasons discussed above, we believe that there is legal support for excluding
NH’s settlement award from income and resource counting despite the fact that the
award does not precisely match the victims’ compensation exclusion requirements. Alternatively,
we believe the award reasonably may be considered tort compensation, which is not
income. We also believe the account in which NH’s award is held reasonably may be
considered a blocked account, and the funds in the account are not a resource because
they cannot be used for support and maintenance.