This section provides guidance to make a fault determination for individuals requesting a waiver of a Title II overpayment resulting from earnings.

An individual is not at fault if the overpayment occurred because the individual was unaware of the deduction or entitlement provisions or because the individual did not understand the deduction or entitlement provisions.

1. 1. 

   Allegation of filing work report

   We presume the overpaid individual is not at fault if they made a timely report, refer to GN 02250.016.B.1. If an individual did not timely report, determine whether the individual is not at fault by considering the circumstances in GN 02250.005. If the individual made a report that was not timely and we continued making payments, we can presume they were not at fault for any overpayment after they made the report, refer to GN 02250.016B.2. If there is no record of the alleged report, refer to GN 02250.021B.3.

2. 2. 

   Trial work period

   When an individual who receives disability benefits reports they are returning to work, we may notify the individual that they are entitled to a 9 month trial work period (TWP) and that checks will continue for some time. If we later find the individual is overpaid for any of the TWP, we presume the individual is not at fault for accepting checks in the TWP.

3. 3. 

   Work increases to substantial gainful activity

   An individual who receives disability benefits may report that they returned to work, and we will find that the work is not substantial gainful activity (SGA). We tell the individual that the work is not SGA and will not change their benefit. If the individual continues to work at the same job and under the same conditions, we will presume the individual is not at fault in causing any overpayment that resulted from a gradual increase in salary roughly equal to the rate of inflation. For information regarding undocumented allegations, refer to GN02250.021B.3.

4. 4. 

   Special wage payments

   When an overpaid individual receives special wage payments (SWP), such as bonuses, vacation pay, or similar payments, during periods of absence from work, we presume the individual not at fault if they did not know that such payments constitute earnings for purposes of the annual earnings test (AET). We must verify the type of special payment and the amount of such payment with the employer or the individual (e.g. paystub). It is immaterial whether the overpaid individual anticipated this payment, or if it was unexpected.

   NOTE: If the overpaid individual’s regular and ordinary earnings (exclusive of the special payment) exceed the annual limit, we may still find the individual not at fault after considering their circumstances. For factors to consider when making a special wage payment fault determination, refer to GN 02250.005. For examples regarding special wages payments, refer to GN 02250.025C.

   For additional information on Special Wage Payments (SWP) RS 02505.025.

5. 5. 

   Net and gross earnings

   We presume an individual is not at fault if they believed the earnings test was based on take-home pay, rather than gross pay. We will deem recovery against equity and good conscience, refer to GN 02250.150.

6. 6. 

   Earnings prior to month of entitlement

   We will presume an individual is not at fault if they believed that earnings prior to the Month of Entitlement (MOE) or after termination of entitlement would not count as earnings for deduction purposes, unless the earnings from the months of entitlement alone exceeded the earnings limitation amount for the year. If we presume the individual is not at fault:

   • •

     We will also deem recovery against equity and good conscience but only for months in which the individual’s earnings do not exceed the total monthly benefits affected for that month.

   • •

     For any months that we cannot deem recovery against equity and good conscience, we will develop for defeat the purpose.

7. 7. 

   Returning to work or increasing work

   We will presume an overpaid individual not at fault if they believed earnings over the AET would only affect benefits starting the month in which earnings exceeded the AET. They must have reported to us timely when their earnings reached the AET limit for that particular year.

8. 8. 

   Overpayment from earnings or income greater than anticipated

   1. a. 

      A retroactive increase in pay or work at higher rate than realized

      We presume an individual is not at fault if there is:

      • •

        a retroactive increase in pay (including backpay awards or retroactive pay increases); or

      • •

        work at a higher rate of pay than realized

   2. b. 

      Employer failed to keep records

      We presume an individual is not at fault if there is evidence showing an employer failed to keep accurate records to restrict the amount of earnings or the number of hours worked, as agreed to by the employer and the overpaid individual.

      NOTE: An agreement can only exist when the agreement is feasible. For example, if the individual is a salesperson whose pay depends on volume of sales, they would be unable to make an agreement because they cannot predict what their sales will be.

   3. c. 

      Calendar months with more than 4 weeks

      The occurrence of five Saturdays (or similar workdays) in a month can cause some months to exceed earnings limits. An individual is not at fault when their weekly rate totals less than the annual limit but, in some calendar months of more than 4 weeks, exceeds the monthly limit.

   NOTE: Verify all earnings allegations with the employer.

This section includes examples for making the fault determination. If you find an overpaid individual not at fault, you must then determine if the individual meets any of these waiver provisions:

• •

  Deemed to defeat the purpose, refer to GN 02250.110, or

• •

  Against equity and good conscience, refer to GN 02250.150, or

• •

  Defeats the purpose of the Act, refer to GN 02250.100.

If you find the overpaid individual at fault, you must send the case to an independent decision maker who will schedule a file review and personal conference.

Example 1: Special wage payments

(Not at fault): Sera retired in June 2023. Sera received a lump sum payment of $5,000 instead of receiving vacation leave, which resulted in an overpayment of $2,500. Sera was not aware the vacation pay was included as wages for the annual earnings test. The technician determined that Sera is not at fault for the overpayment. Next, the technician must determine if the overpayment can be waived under any of the waiver provisions.

Example 2: Special wage payments

(At fault): Ash filed for retirement benefits and informs us they will continue to work as a substitute teacher. Before the school year begins, the school board makes an agreement with substitute teachers. They will receive a $1,000 bonus as part of their regular pay for every thirty days of substitute teaching. Before the school year begins, Ash informs us of this agreement. The technician explains the bonus money will count as earnings, and they need to report the bonus money when they receive it. The technician documents the conversation on a Report of Contact (RPOC). Ash later receives a $1,000 bonus and is overpaid $3,000 because they did not report the bonus money. They requested a waiver after receiving the overpayment notice.

Because Ash knew the bonus money would count as earnings and there is a prior agreement that they would report the bonus, the technician cannot presume that Ash is not at fault for the overpayment. The technician considers all the circumstances related to the overpayment and there is no evidence indicating that Ash was limited in understanding the reporting instructions or unable to report. The technician determines Ash was at fault and must refer the case to an independent decisionmaker who will schedule a file review and personal conference.

Example 3: Net and gross earnings

(Not at fault): Rhain filed for retirement benefits. Rhain reported only their take-home pay, rather than gross pay, which resulted in an overpayment. Rhain requested a waiver. Rhain alleged that they believed that the earnings test was based on take-home pay rather than gross salary. The technician determines that Rhain is not at fault and deems recovery against equity and good conscience.

Example 4: Earnings prior to month of entitlement

(Not at fault): Sotoria, age 63, became entitled to retirement benefits in March 2021. They earned $9,000 in January and February. The annual earnings test (AET) for 2021 is $18,960 per year for an individual who will not reach full retirement age (FRA) during the year. Sotoria’s employer reported earnings of $27,960 for 2021 on their W-2, which resulted in an overpayment of benefits for 2021. When the technician developed the waiver request, Sotoria asserted that they believed that earnings prior to the month of entitlement would not count as earnings. Sotoria explained that they believed they could earn the allowable limit ($18,960) in the months after entitlement began.

To determine if the presumption of not at fault applies, the technician subtracted the amount Sotoria earned before the entitlement to retirement benefits began from the total earnings for the year:

$27,960 -$9,000 =$18,960

Sotoria earned $18,960 in the months during entitlement to retirement benefits. Because this amount does not exceed the annual earnings test and the individual alleged that they believed the earnings in the months prior to entitlement did not count, the technician presumes that Sotoria is not at fault for this overpayment. The technician will determine if deemed against equity and good conscience applies, refer to GN 02250.150.

Example 5: Returning to work or increasing work

(Not at fault): Bele filed for retirement insurance benefits (RIB) with a month of entitlement (MOE) of January 2023. Prior to filing, Bele reduced their monthly gross wages from $7,220 to $1,700 per month. On April 30, 2023, Bele’s coworker suddenly quit, and Bele’s boss asked them to come back full time for the rest of the year.

A few days before the end of June 2023, Bele called the local field office to report that as of June 30, 2023, their wages would reach the AET limit of $21,240. As the year passes, Bele does not receive any more payments from us, just as they expected. In March 2024, Bele received a notice of overpayment for $21,660 due to the 2023 gross wages of $64,560. Bele requested a waiver. Bele explained that they timely reported their earnings and that they thought their benefits would be affected only for the months after reaching the AET limit. The technician determined that Bele is not at fault for causing the overpayment because they timely reported when their earnings reached the AET and reasonably believed that their benefits would be affected only for months after reaching the AET limit.