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
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