TN 1 (07-17)

PR 07305.011 Florida

A. PR 17-066 Impact of State Court Equitable Distribution Judgment on Administrative Actions to Pursue Collection of Misused Funds by a Former Representative Payee

Date: March 16, 2017

1. Syllabus

The Final Judgment of Equitable Distribution issued by a Florida State court does not prevent SSA from completing its misuse administrative actions or from pursuing collection of misused funds from the former representative payee.

2. Opinion

QUESTION

You asked whether a Final Judgment of Equitable Distribution issued by a Florida State court affects the ability of the Social Security Administration (SSA) to complete its misuse administrative actions and pursue collection of misused funds from a former representative payee.

OPINION

The Final Judgment of Equitable Distribution does not prevent SSA from completing its misuse administrative actions or from pursuing collection of misused funds from the former representative payee.

BACKGROUND

According to the information provided, I~, the number holder (NH), was receiving disability insurance benefits under Title II of the Social Security Act (Act). NH’s former spouse, N~ (a/k/a N1~) was NH’s former representative payee (former RP).1 On September XX, 2016, NH filed an allegation with SSA that the former RP had misused the benefits to which he was entitled. SSA has determined that the former RP misused $25,586.36 of NH’s benefits.

On September XX, 2016, the Circuit Court, Seventh Judicial Circuit, in and for V~ County, Florida, issued a Final Judgment of Equitable Distribution (Final Judgment) in the former marriage between NH and the former RP. In the Final Judgment, the State court noted that NH had been awarded a “disability settlement” of $67,985.00, approximately $18,000.00 of which was paid to NH’s lawyer, leaving NH with approximately $50,000.00. See Final Judgment, pp. 1-2, ¶ 3. The State court found that the $50,000.00 was transferred to former RP, not for her personal use, but to be used for NH’s benefit. See id. at p. 2, ¶ 4. The State court found that the former RP, however, transferred $30,000.00 of the funds to an account in her name and used $18,500.00 of the funds to make improvements to the parties’ former marital home. See id. at p. 2, ¶ 5. The State court further found that the former RP gave NH the remaining $1,500.00 when he moved out of the home. See id. at p. 2, ¶ 6.

The State court found that the former RP improperly took $48,500.00 from NH. See id. at pp. 3-4, ¶ 8. The State court further found that there was insufficient equity in the parties’ former marital home where the former RP resided with which the former RP could repay NH. See id. NH agreed to accept, and was awarded, a one-half ownership and possessory interest in the former marital home with the understanding that the former RP would pay all expenses and upkeep related to the home. See id. at pp. 2-3, ¶ 8, pp. 3-4, ¶ 1-3. Upon the sale of the home, NH and the former RP are to equally divide the sale proceeds. See id. at pp. 3-4, ¶ 2.2

DISCUSSION

If SSA determines that a representative payee had misused a beneficiary’s benefits, the representative payee is indebted to the beneficiary and has an obligation to make restitution to the beneficiary. See 20 C.F.R. § 404.2041(a);3 Program Operations Manual System (POMS) GN 00604.060.A. SSA will make every reasonable effort to obtain restitution from the representative payee and return the misused funds to the beneficiary. See 20 C.F.R. § 404.2041(a); POMS GN 00604.060.A. Any amounts that a representative payee misuses and does not refund to the beneficiary will be treated as an overpayment to that representative payee. See 20 C.F.R. § 404.2041(f); POMS GN 00604.060.A.

To the extent that SSA questions whether the State court Final Judgment might prevent SSA from exercising its authority and obligations to recover the misused funds from the former RP, the Supremacy Clause of the United States Constitution generally precludes state courts from overriding Federal law. The Supremacy Clause of the United States Constitution provides:

This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

U.S. Const. art. VI, cl. 2. Thus, the United States Constitution, together with Federal statutes and regulations made in pursuance of the Constitution, are the supreme law of the land. See id. Carter v. Carter, 298 U.S. 238, 296 (1936). Furthermore, “as to persons that Congress [has] subjected to liability, individual States may not exempt such persons from federal liability by relying on their own [laws]. . . . States would then be free to nullify for their own people the legislative decisions that Congress has made on behalf of all the People.” Howlett v. Rose, 496 U.S. 356, 383 (1990). The Act and regulations provide the authority for SSA to collect overpayments from representative payees who misuse beneficiary funds. See Act § 204(a)(1)(A); 20 C.F.R. §§ 404.502, 404.2041(f). Thus, the Final Judgment cannot impede SSA’s authority or obligation to seek restitution from the former RP.

Additionally, the Regional Chief Counsel in another region, when opining on a different matter that pertained to representative payee misuse, noted that New York State laws would also hold a representative payee personally responsible for refunding any improperly expended benefits to the claimant. See POMS PR 07305.035.A (PR 10-102) (citing In re Estate of Kummer, 93 A.D.2d 135, 863, 865 (N.Y. App. Div. Apr. 4, 1983)). The opinion cited that case and the underlying law, not to suggest that the state law or court ruling in any way detracted from SSA’s ability to seek restitution from a representative payee, but rather, to bolster the proposition that the representative payee could properly be held personally liable for misuse of a beneficiary’s benefits. See id. We find that such an assessment consistent with our conclusion in this matter, as it suggests that Florida law may hold the former RP liable for the misuse of NH’s funds, separate from her liability under the Act and SSA’s regulations. As such, the Final Judgment should be considered to the extent that it evidences some refund of the misused benefits to NH.

SSA’s regulations provide that SSA will only treat as an overpayment “[a]ny amounts that the representative payee misuses and does not refund” to the beneficiary. 20 C.F.R. § 404.2041(f). Therefore, SSA should properly consider the Final Judgment to the extent it results in a refund to NH of the misused funds in determining the amount of any overpayment or efforts at restitution. However, the Final Judgment does not provide that any refund has occurred, only that some refund may occur in the future if the former RP and NH sell their former marital home. See Final Judgment, pp. 3-4, ¶ 2. We also note that the Final Judgment found that there was insufficient equity in the property to satisfy repaying the amount of NH’s funds that the former RP misused.4 See id., at p. 2, ¶ 8. Thus, because the State court’s Final Judgment is prospective and somewhat speculative in nature and does not provide that the former RP has actually refunded any of the misused benefits to NH, the Final Judgment does not affect SSA’s ability and obligation to assess an overpayment or otherwise seek restitution on behalf of NH.5

CONCLUSION

Because the Supremacy Clause of the United States Constitution prevents state court actions from interfering with SSA’s authority to seek restitution for NH and because the Florida court’s Final Judgment does not provide that the former RP has actually refunded the misused benefits to NH, SSA can proceed with completing its misuse administrative actions and pursuing collection of NH’s misused benefits. Sincerely,

Mary Ann Sloan

Regional Chief Counsel

By: Christopher Yarbrough

Assistant Regional Counsel


Footnotes:

[1]

. According to the information provided, the former RP has also served as representative payee for four other individuals.

[2]

. We note that it is not entirely clear that the “disability settlement” funds referred to by the State court are related to NH’s Title II disability insurance benefits. Based on the information provided and a United States District Court decision about attorney fees in NH’s case, NH was found to have past due benefits of $72,502.00, which is similar to the total amount the State court found he was awarded as a disability settlement. Additionally, according to the information provided, NH’s attorneys were paid approximately $23,504.28, which is close to the amount cited by the State court, particularly in light of the fact that NH had an auxiliary beneficiary. Despite the discrepancies in these amounts, they are not outcome determinative of the matter. Thus, we continue our analysis.

[3]

. Citations to the Code of Federal Regulations are to the 2016 version.

[4]

. We do note, however, that the State court determined that the former RP had misused $48,500 from NH, rather than the $25,586.36 amount SSA found. However, as with the discrepancies discussed above, this difference in calculation is not dispositive of the question asked.

[5]

. We acknowledge that where the former RP served fewer than fourteen beneficiaries, SSA could be liable for repayment if SSA’s negligent failure to investigate the former RP resulted in the misuse. See 20 C.F.R. § 404.2041(c); POMS GN 00604.060.B. While the former RP served fewer than 14 beneficiaries, there is no indication from the information provided that SSA was negligent in failing to investigate the former RP or that any failure to investigate resulted in the misuse.


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http://policy.ssa.gov/poms.nsf/lnx/1507305011
PR 07305.011 - Florida - 07/12/2017
Batch run: 07/12/2017
Rev:07/12/2017