TN 1 (05-08)
PS 09905.002 Atlanta Region
A. PS 08-111 In-Kind Support and Maintenance, Proposed Attorney Letter to Supplemental Security Income Claimants
DATE: July 12, 2007
This opinion addresses an attorney’s request for the Social Security Administration (SSA) to approve language used in a letter that instructs his Supplemental Security Income (SSI) clients on the information needed by SSA to establish a valid loan agreement.
The Social Security Administration does not provide legal advice; but would provide the attorney with the Program Operations Manual System (POMS) section used when determining whether or not allegations of a loan agreement is a bona fide loan of in-kind support and maintenance.
You asked us to review a letter, which a claimants' attorney drafted, concerning the issue of possible one-third reduction of Supplemental Security Income (SSI) due to in-kind support and maintenance. The attorney is seeking Agency approval of the letter's language that instructs his SSI claimant-clients on what information they should provide the Agency to establish the existence of loan agreements for support and maintenance.
We do not believe that the Agency should be providing the attorney with legal advice on this issue. At most, the Agency should refer the attorney to the relevant sections in the Program Operations Manual System (POMS) that the Agency uses when determining whether an alleged loan agreement constitutes a bona fide loan of in-kind support and maintenance.
SSI benefits are authorized by Title XVI of the Act and are funded by general tax revenues. See Social Security Handbook, § 2100 (14th ed. 2001). The SSI Program is a general public assistance measure providing an additional resource to the aged, blind, and disabled to assure that their income does not fall below the poverty line. See 20 C.F.R. § 416.110. Eligibility for SSI is based upon proof of indigence and disability. See 42 U.S.C. §§ 1382(a), 1382c(a)(3)(A)-(C). An SSI recipient is paid a flat monthly benefit, but that monthly benefit is reduced by the amount of non-excludable "income" which the recipient receives. See 42 U.S.C. § 1382(b). Under the applicable regulations, loans are not income. See 20 C.F.R. § 416.1103(f). For purposes of determining SSI benefits, "income" may include, however, "support and maintenance furnished in cash or in kind." See 42 U.S.C. § 1382(a)(2)(A), 1382a(a)(2); 20 C.F.R. §§ 416.1102, 416.1104, 416.1120, 416.1121(h). In this context, "[i]n-kind income is not cash, but is actually food, clothing, or shelter, or something [the recipient] can use to get one of these." 20 C.F.R. § 1102. In-kind income which is derived from someone else's payment of a recipient's food, clothing, or shelter is also referred to as in-kind support and maintenance. See 20 C.F.R. § 416.1130(b).
The fixed amount an SSI recipient receives in benefits is "reduced by the amount of income" to the SSI recipient. See 42 U.S.C. § 1382(b)(1). When an SSI recipient lives in the household of another person who provides both food and shelter, in-kind income is valued at one-third of the recipient's federal benefit rate, regardless of its actual value. See 20 C.F.R. § 416.1131 (describing the "one-third reduction rule"). Thus the SSI recipient is subject to a one-third reduction in SSI benefits. See 20 C.F.R. § 416.1131(a). If, however, the support and maintenance received in-kind was a loan, it is not considered income and the one-third reduction does not apply. See 20 C.F.R. § 416.1103(f).
The text of the attorney-drafted letter essentially encourages his clients to report to the Agency that a family member or friend provided them with support under an agreement to repay the person providing the support. The letter also informs the clients that the Agency will require a signed agreement documenting the loan. While the attorney is free to give this advice to his clients, the Agency should not be blessing the attorney's advice on this issue, which historically has been an area of high-abuse with SSI recipients. Moreover, the POMS indicates that the Agency should individually evaluate any allegation of a loan of in-kind support and maintenance, using five factors to determine whether or not the loan is bona fide. See POMS SI 00835.482 (Loans of In-Kind Support and Maintenance); see also POMS SI 01120.220 (Cash Loans). Specifically, the Agency looks at: whether the loan is enforceable under State law; whether a loan agreement exists at the time of the transaction; whether the loan agreement acknowledges an obligation to repay (that is, whether the person is required to repay regardless of whether SSI is awarded); whether the loan agreement includes a plan or schedule for repayment; and whether the plan is feasible in light of the borrower's income and resources including anticipated SSI. See POMS SI 00835.482.B.1-5. Thus, any approval of a blanket letter in this regard could be misinterpreted and might frustrate the Agency's ability to individually evaluate the merits of any given fact-pattern. Another problem we see with this letter is that the attorney indicates at the outset that the client has told him of such a loan, but the letter includes no indication that the attorney has truly verified whether or not any such loan agreement actually exists. Also, giving approval to this letter might lead the attorney to misinform his clients that all such loans will not be countable, whereas our POMS clearly indicate that only bona fide loans as defined in the five factors noted above are not countable. See id. Furthermore, SSA has no control over when the attorney sends the letter. If the attorney sent the letter to all SSI clients, without regard to whether they actually have such a loan arrangement, the letter could be construed as encouragement to create false, back-dated documents to create the impression of a loan.
Should the Agency learn that this attorney is sending the proposed letter or a similar letter to his clients and providing this advice, the Agency should take all proper steps to ensure that any alleged loans of in-kind support and maintenance actually exist and that such loans are supported by sufficient evidence. That is, the Agency must determine, in accordance with POMS SI 00835.482, that any allegations of loans for support and maintenance are bona fide and, if so, independently determine the amount the Agency will discount as in-kind maintenance and support in accordance with the POMS.
Finally, when responding to the attorney, we advise that the Agency graciously inform the attorney that we cannot give him advice one way or the other on the proposed letter. However, the Agency may direct the attorney to the above POMS sections that the Agency uses when considering alleged support and maintenance loans and whether or not to count in-kind support and maintenance to reduce a claimant's SSI.
Very truly yours,
Mary A~ S~
Regional Chief Counsel
Jerome M. A~
Assistant Regional Counsel