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