TN 20 (09-15)

GN 02250.150 Against Equity and Good Conscience

Citations: Section 204(b) of the Act; 20 C.F.R. §404.509

A. When overpayment recovery is against equity and good conscience

Recovery is against equity and good conscience when:

1. A beneficiary because of a notice that we would make a payment or because of the actual payment:

  • relinquished a valuable right; or

  • changed his or her position for the worse; or

2. A beneficiary was receiving benefits on the same earnings record as the overpaid beneficiary; and

  • was living in a separate household from the overpaid person at the time of the overpayment; and

  • did not receive the money that resulted in an overpayment. For more information about contingent liability policy, see GN 02205.005.

Always provide a fair and equitable waiver determination and fully consider whether the criteria in this section are met before initiating, or resuming, overpayment collection actions.

IMPORTANT: A beneficiary’s financial circumstances are not material when we determine if it is against equity and good conscience for us to recover an overpayment.

B. How to define the terms “relinquish a valuable right” and “change of position for the worse”

1. Relinquish a valuable right

A beneficiary has given up a valuable privilege, claim, entitlement, or benefit having monetary worth because the beneficiary relied on a notice that we would pay benefits or relied on the actual benefit payment.

Example: Sara declined a job because she believed the benefit payments would take care of her monetary needs.

Example: Jim passed up state assistance because he received benefit payments and did not need additional financial assistance from the state.

For more detailed examples, see GN 02250.150C in this section.

2. Change of position for the worse

A beneficiary has changed his or her position for the worse when the beneficiary reasonably relied on receiving benefit payments and then decides to do something he or she would not have done, if he or she had not been entitled to benefits payments. To establish a change in position for the worse, the beneficiary would have to show that he or she did something he or she would not have done, but for the receipt of the overpaid benefits, not simply that he or she had spent the benefits payments received.

Example: Tom purchased a more expensive home because he could afford the home based on his benefit payments. Tom relied on the increased funds to meet his financial commitment to purchase the house. He is unable to withdraw from the commitment without incurring significant financial loss.

3. Things to consider

The following are examples of situations to consider when determining if the beneficiary relinquished a valuable right or changed his or her position for the worse:

  • A new mortgage payment that is significantly higher than the payment for the home he or she had previously,

  • Criminal or civil actions pending if the beneficiary defaults on a mortgage or loan.

C. Situations for deeming recovery against equity and good conscience

When we find that the beneficiary is without fault because he or she meets the criteria in the following situations, deem recovery as against equity and good conscience:

  • Misunderstanding about allowable wage earnings, (see GN 02250.060);

  • Reliance on misinformation from an official source, (see GN 02250.061); or,

  • Earnings prior to the first month of entitlement (see GN 02250.064).

D. Examples where the criteria for against equity and good conscience are met

The following are examples where we may determine or deem that overpayment recovery is against equity and good conscience.

If

Then

Mrs. James is receiving widow’s benefits on her deceased husband’s record. She purchased a more expensive home based on her receipt of these benefits and is paying a higher mortgage than she otherwise would have paid. Mrs. James based her decision to move on the additional income provided by the SSA benefit that she was entitled to as a widow.

A year later, we discover that Mrs. James’ deceased husband was not fully insured; therefore, she was not entitled to the benefits. Mrs. James is overpaid.

Mrs. James incurred a financial obligation by purchasing a more expensive home based on the benefit payments that she believed she would continue to receive.

Mrs. James files for waiver.

She is now in a worse financial position than if she had not received widow’s benefits.

We determine that Mrs. James is not at fault in causing the overpayment. Her overpayment is against equity and good conscience. We may grant the waiver.

Justification: Mrs. James changed her position for the worse because she relied on her widow’s benefit payments to buy a more expensive house then she would have, if she had not been receiving the benefits.

After we awarded retirement benefits to John Smith, he retires assuming that he would receive regular monthly benefit payments.

Three years later, we discover that Mr. Smith did not meet insured status and he is not entitled to benefits. Mr. Smith is overpaid.

Mr. Smith could not get his old job back because of his age and he is unable to get another job elsewhere. Mr. Smith gave up a valuable right to employment because he believed he would receive retirement benefits.

Mr. Smith files for waiver.

We determine that Mr. Smith is without fault in causing the overpayment and recovery of his overpayment is against equity and good conscience. We may grant the waiver.

Justification: Mr. Smith relinquished a valuable right, which was staying employed because of reliance upon a notice that he was entitled to retirement benefits.

Joe Jones, the wage earner, lives in household (HH) #1. His child, Jane Jones, receives student benefits and lives in HH #2.

Jane withdrew from school and did not report this to change to us. She continued to receive benefits. Six months later, Jane’s school reported that she had only been a full-time student for 2 months. We overpaid Jane for 4 months due to her failure to report that she was not in school.

Jane did not refund the overpayment. All of our attempts to collect from Jane have been unsuccessful.

Mr. Jones lives in a separate household from his daughter Jane and he is still receiving benefits. We propose recovery of Jane’s overpayment from Mr. Jones’ benefits. Mr. Jones is contingently liable for recovery of the overpayment because he is receiving benefits on the same earnings record as the overpaid person.

Mr. Jones files for waiver.

We determine that Mr. Jones is without fault in causing the overpayment and recovery of Jane’s overpayment from Mr. Jones is against equity and good conscience. We may grant the waiver.

Justification: Mr. Jones was living in a separate household from Jane at the time of the overpayment and did not receive the money that resulted in the overpayment.

We told James Cook that his earnings after retirement would not cause deductions for months in the same taxable year.

Mr. Cook’s earnings exceeded the annual earnings limits for his first year of entitlement causing an overpayment.

James files for waiver.

On review of the file, we discover documentation that supported Mr. Cook’s allegation that we misinformed him about the effect of his earnings on the benefits in his first year of entitlement.

We determine that Mr. Cook is without fault in causing the overpayment. We can deem recovery of his overpayment against equity and good conscience. We may grant the waiver.

Justification: Mr. Cook relied on incorrect information from an official source within SSA. He believed the individual provided reliable information about his RSDI benefits.

Mrs. Power became entitled to retirement benefits in February 2005. Her employer reported that she earned $18,750 in 2005, which exceeded the AET of $12,000. This caused an overpayment.

Mrs. Power files for waiver.

Mrs. Power submitted pay stubs showing that she had $11,869 in net earnings (take-home pay) through September of 2005.

Mrs. Power also had proof that she quit her job September 18th. She quit her job at this time because she was aware of the annual earnings limit and didn’t want additional earnings to cause her to exceed it. She did not understand that we look at gross wages.

We determine that Mrs. Power is without fault. We can deem recovery of her overpayment against equity and good conscience. We may grant the waiver.

Justification: Mrs. Power believed that we based the earnings test on take-home pay rather than gross salary, including extra and in-kind wages.

NOTE: To determine if the beneficiary is at fault, evidence must show that the beneficiary restricted his or her earnings so that the take-home pay would not exceed the allowable amount

Will Greene became entitled to retirement benefits in March 2005.

Mr. Greene’s employer reported earnings of $21,000 for 2005. The AET for 2005 is $12,000 per year for a person who will not reach full retirement age (FRA) during the year. This caused an overpayment.

Mr. Greene files for waiver.

Mr. Greene states that he believed he could earn the allowable limit ($12,000) in the months after his entitlement began. He submits proof that he earned $9,000 of his salary in January and February of 2005.

Subtract the amount earned before the MOE, from the total earnings for the year:

$21,000 total

- 9,000 prior to MOE

$12,000 after MOE

We determine that Mr. Greene is without fault and recovery of his overpayment is deemed against equity and good conscience. We may grant the waiver.

Justification: Mr. Greene reasonably believed that earnings prior to the first month of entitlement would not count as earnings for deduction purposes.

NOTE: If earnings in the taxable year beginning with the MOE exceeded the annual limit for the year, we cannot find without fault. Waiver of the overpayment will not apply.

E. Examples where the criteria for against equity and good conscience are not met

The following are some examples of situations where the beneficiary does not meet the criteria for waiver on the basis of against equity and good conscience:

  • The beneficiary will not be able to continue his or her “pay-as-you-go membership” at a fitness club or gym;

  • The beneficiary will not be able to continue ordering clothing and household goods from an online retailer; or,

  • The beneficiary made a non-refundable deposit on an expensive vacation.

F. References

GN 02250.005 Fault/Without Fault Findings – Waiver

GN 02250.244 Waiver Development Check List

GN 02250.315 Documenting the Waiver Determination


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