QUESTIONS PRESENTED
This memorandum is in response to your request for a review of whether a May 2016
New Mexico state court order directing the Social Security Administration (agency
or SSA) to split payment of an underpayment of Social Security benefits owed to the
deceased number holder C~ (NH) between his surviving spouse D~ (D~) and his daughter
H~ (H~) as his estate’s representative, conforms to Social Security law. In addition,
you asked for our assistance in amending, rescinding, or vacating the court order
if we determine it does not conform to Social Security law.
SHORT ANSWER
A state court order cannot supersede federal law. The May 2016 New Mexico state court
order directing the agency to split the NH’s underpayment of Social Security benefits
between D~ and H~ is an improper assignment of benefits that violates section 207(a)
of the Social Security Act (Act). Additionally, under section 204(d) of the Act’s
priority of distribution of an underpayment, D~ is entitled to the full underpayment
as the surviving spouse. Thus, the agency is not bound to follow the state court’s
order because it conflicts with federal law. Additionally, to the extent the state
court is attempting to order the agency to take a specific action as to the underpayment,
the New Mexico state court does not have jurisdiction over SSA, a federal agency entitled
to sovereign immunity. Therefore, the state court is prohibited under federal law
from directing how Social Security benefits are to be paid and lacks jurisdiction
to direct SSA as to how the agency is to pay the benefits.
Regarding your request for assistance in amending, rescinding, or vacating the court
order, OGC will respond to the court explaining the controlling federal law regarding
the priority of underpayments set out in the Social Security Act and regulations.
Without addressing the specifics of the court case, which SSA is not a party to, we
will explain that under controlling sovereign immunity, the state court does not have
jurisdiction over SSA, and further, that under the supremacy of federal law, the Social
Security Act does not permit the state court’s assignment of Social Security benefits
and controls as to the priority of who is to receive an underpayment from a deceased
beneficiary.
BACKGROUND
According to the information provided in your request, in October 2014, the agency
approved the NH’s Title II disability insurance benefits application and sent the
NH a check for $14,703.75 representing payments due. The NH died on March XX, 2015,
without negotiating the check. In December 2015, the Treasury Department returned
a credit to Social Security, which represents an underpayment on the NH’s record.
On May XX, 2015, H~ completed a form SSA-1724-F4 Claim for Amounts Due in the Case
of a Deceased Social Security Recipient (form SSA-1724-F4), in which she claimed she
was due the NH’s underpayment. H~ indicated she was the “daughter/legal [representative]”
of the NH.
On June XX, 2015, D~ also completed an SSA-1724-F4 form in which she claimed that
she was due the NH’s underpayment. She indicated she was the NH’s surviving spouse,
did not live in the same household with the NH at the time of his death, and was entitled
to a monthly benefit on the same earnings records as the NH at the time of his death.
The evidence shows that D~ accurately stated she was not living with the NH at the
time of his death, but that she incorrectly stated she was entitled to monthly widow’s
benefits on the NH’s record. The evidence indicates that D~ had not filed an application
for widow’s benefits, was earning more than the annual earnings test allowed for widow’s
benefits, and that no child or parent existed who was entitled to a monthly benefit
on the deceased NH’s earnings record.
On May XX, 2016, District Judge Mark Sanchez of the Fifth Judicial District Court
in L~, New Mexico (state court), issued a First Amended Final Order Disposing of Funds
and Consolidating Cases (Amended Final Order, or state court order) in the cases H~,
as Personal Representative of the Estate of C~ v. D~, No. D-506-CV-2015-00652 and D~ v. C~, No. D-506-DM-2013-522. The state court noted that the court’s earlier finding of
fact awarding $14,000 of the NH’s underpayment to D~ was predicated on an inaccurate
potential selling price of $92,500.00 for the parties’ residence, while the residence
sold for $60,000. Amended Final Order at 2. The state court then made new findings
of fact with regard to disposing of funds finding that $12,000 of the NH’s “Social
Security Disability benefits” should be payable “to the Estate of C~, H~, Personal Representative” and $2,000 should be allocated to D~. Amended Final
Order at 3. The state court found that “[t]he Social Security Administration for the
United States of America should pay to the Estate of C~ the sum of fourteen thousand dollars ($14,000.00) to be disbursed as set forth herein
above, through the Trust Account of the Attorney for the Estate of C, Max Houston Proctor.” The state court then ordered, adjudged, and decreed that “[t]he
amount of twelve thousand dollars ($12,000.00) held by [SSA] is hereby awarded to
H~ as Personal Representative over the Estate of C~,” and the “sum of two thousand dollars ($2,000.00) is hereby awarded to D~ from the
Social Security Disability benefits held by [SSA].” Final Amended Order at 4. H~ provided
this state court order to the agency in support of her claim to the NH’s underpayment.
ANALYSIS
I. The State Court Order Does Not Bind the Agency Because it is Contrary to the Order
of Priority for Underpayments in Section 204(d) of the Act and it is an Invalid Assignment
under Section 207(a) of the Act
H~ presented the agency with a state court order purporting to divide the underpayment
owed to the NH between herself and D~ and ordering the agency to pay the underpayment
per the terms of the order; however, as explained below, the agency is not required
to distribute the NH’s underpayment as the order directs because it directs payment
contrary to the order of priority for underpayments that section 204(d) of the Act
directs and because it operates as an invalid assignment of benefits in violation
of section 207(a) of the Act. Thus, the state court order conflicts with federal law
governing the management of Social Security benefits. A state court order cannot supersede
federal law. See U.S. Const. Art. VI, cl. 2 (the Supremacy Clause declares the Constitution and the
laws of the United States as the supreme law of the land and that judges in every
state are bound by federal law); Bush v. Vera, 517 U.S. 952, 991-992 (1996) (“The Supremacy Clause obliges the States to comply
with all constitutional exercises of Congress’ power.”).
a. The State Court Order Does Not Bind the Agency Because it Conflicts with the Order
of Priority for Distributing a Title II Underpayment under Section 204(d) of the Act
An underpayment is any monthly Social Security benefit amount (or portion of a monthly
benefit amount) due a person which the agency has not paid. See 20 C.F.R. § 404.501(a); POMS GN 02301.001A. When the agency determines that it has paid less than the correct amount of Title
II benefits to an individual, the agency makes an adjustment to correct the underpayment.
See 42 U.S.C. § 404(a)(1)(B). The Act specifies an order of distribution for an underpayment
due to an individual who dies before receiving payment or negotiating a check representing
that payment. See 42 U.S.C. § 404(d); 20 C.F.R. § 404.503(b); POMS GN 02301.030A. First, the agency applies any amount due to the deceased individual against an overpayment
the deceased owed, unless the agency has waived recovery of the overpayment. 20 C.F.R.
§ 404.503(b). Then, the agency distributes any remaining underpayment to living persons
in the following order of priority:
1) The deceased individual’s surviving spouse (as defined in section 216(c), (g),
or (h) of the Act) who either lived in the same household as the deceased at the time
of death, or was entitled to a monthly benefit on the basis of the same earnings record
as was the deceased individual
2) The child or children of the deceased individual who, for the month of death, were
entitled to a monthly benefit on the basis of the same earnings records as was the
deceased individual.
3) The parent or parents of the deceased individual who, for the month of death, were
entitled to a monthly benefit on the basis of the same earnings records as was the
deceased individual.
4) The surviving spouse of the deceased individual who does not qualify under provision
1.
5) The child or children of the deceased individual who do not qualify under provision
2.
6) The parent or parents of the deceased individual who do not qualify under provision
3.
7) The legal representative of the deceased individual’s estate.
42 U.S.C. § 404(d)(1)-(7); 20 C.F.R. § 404.503(b)(1)-(7); POMS GN 02301.030A(a)-(g).
Because there is no evidence that the NH had an overpayment, the first priority of
distribution for the NH’s underpayment would be to a surviving spouse who either lived
with the NH at the time of his death, or who was entitled to benefits on the same
earnings records as was the NH. See 42 U.S.C. § 404(d)(1); 20 C.F.R. § 404.503(b)(1). In a previous opinion, we determined
D~ was the NH’s surviving spouse. See POMS PR 02605.034, A. PR 16-032, Effective Date of Divorce for NH’s Widow - New Mexico State Law (November
19, 2015). In D~’s June 25, 2015 Form SSA-1724-F4, she represented that she was not
living with the NH in the same household at the time of his death, but that she was
entitled to a monthly benefit on the same earnings records as the NH at the time of
his death. However, you informed us that D~ was not entitled to monthly widow’s benefits,
and was instead only entitled for a lump sum death payment. Therefore, D~ is not entitled
to the NH’s underpayment under the first priority group.
The next highest group in the order of distribution would be to a child or children
of the NH who were entitled to monthly benefits on the same basis as was the NH in
the month of the NH’s death. See 42 U.S.C. § 404(d)(2); 20 C.F.R. § 404.503(b)(2). In H~’s Form SSA-1724-F4, she indicated
she was the NH’s “daughter/legal [representative].” However, you informed us that
no children or parents existed who were entitled to a monthly benefit on the same
earnings records as the NH in the month of his death. Therefore, H~ is not entitled
to the NH’s underpayment under the second priority group. In addition, because there
are no parents who were entitled to a monthly benefit on the same earnings records
as the NH in the month of his death, there is no person who qualifies to receive the
underpayment under the third priority group. See 42 U.S.C. § 404(d)(3); 20 C.F.R. § 404.503(b)(3).
D~ is entitled to receive the underpayment owed to the NH under the fourth priority
group. Section 204(d)(4) provides that if no person meets the requirements of the
first three priority groups then payment will be made to a surviving spouse of the
deceased individual. As discussed, D~ was the NH’s legal widow, or surviving spouse,
but did not meet the other requirements of the first priority group, and neither H~
nor anyone else qualifies under the second or third priority group. Therefore, because
D~ was a surviving spouse and nobody met the requirements of a higher priority group,
the Act provides that she is entitled to receive the NH’s full underpayment. Therefore,
the state court order splitting the underpayment between D~ and H~ is in clear conflict
with federal law, which directs the full underpayment to D~. Consequently, the agency
should not comply with this state court order.
b. The State Court Order Does Not Bind the Agency Because it is an Invalid Assignment
under Section 207(a) of the Act
The state court order purports to divide the underpayment owed to the NH between H~
and D~; however, the agency is not required to distribute the NH’s underpayment under
the order because it operates as an invalid assignment of benefits. Section 207(a)
provides that “[t]he right of any person to any future payment under this title shall
not be transferable or assignable, at law or in equity, and none of the moneys paid
or payable or rights existing under this title shall be subject to execution, levy,
attachment, garnishment, or other legal process, or to the operation of any bankruptcy,
or insolvency law.” See 42 U.S.C. § 407(a); see also 20 C.F.R. § 404.1820(a). This provision therefore prohibits “the transfer of control
over money to someone other than the beneficiary, recipient, or the representative
payee.” POMS GN 02410.001A. As explained, under section 204(d)(4), D~ is entitled to the underpayment. Because
the statutory provision authorizing the agency’s payment of a deceased NH’s underpayment,
42 U.S.C. § 404(a)(1)(B), (d), and the prohibition on assignment of future payments
and protection of rights, 42 U.S.C. § 407(a), are both found in title II of the Act,
the statutory protection from assignments and legal process applies to the underpayment
owed to the NH and the particular state court order at hand. C.f. Bennett v. Arkansas, 485 U.S. 395, 397 (1988) (invalidating Arkansas statute that attached Social Security
benefits paid to individuals incarcerated in Arkansas prisons); see also POMS PR 08305.011 A. PR 14-041 Settlement of Claims and Debts – Florida Summary Administration (January
7, 2014) (determining that the agency was not bound by the Florida state court order
directing the agency to distribute an underpayment because it was an invalid assignment
and that submitting to the state court order would be a violation of section 207 and
section 204(d) of the Act).
Here, the state court order splits the underpayment between a surviving spouse and
the child/legal representative of the estate. The agency’s order of distributing an
underpayment does not provide for splitting underpayments between individuals found
in separate priority groups. Therefore, the state court order necessarily transfers
control of money to someone other than the recipient, no matter if D~ or H~ is the
appropriate recipient. POMS GN 02410.001D.1.a, specifically notes the prohibition of payment to the wrong person applies even if
“a court orders SSA to make payment to a party other than the beneficiary or recipient,
unless one of the specific exceptions in GN 02410.001B in this section exists.” Because none of the exceptions apply, the state court order
does not affect the right of the proper recipient to receive the NH’s underpayment,
and the agency should not distribute the underpayment as directed in the state court
order.
II. The State Court Order Does Not Bind the Agency Because the State Court Does Not Have
Jurisdiction Over the Agency
Finally, the state court has ordered the agency to make this payment per the terms
of the state court order. The agency is not a party to the state case and has not
been served with any legal process, but to the extent this state court is attempting
to exert authority over the agency, we emphasize that the state court does not have
jurisdiction over SSA, a federal agency. See F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994) (“Absent a waiver, sovereign immunity shields the Federal
Government and its agencies from suit.”); United States v. Mitchell, 463 U.S. 206, 212 (1983) (“It is axiomatic that the United States may not be sued
without its consent and that the existence of consent is a prerequisite for jurisdiction.”).
Therefore, the agency should not comply with this state court order.
Regarding your request for assistance in amending, rescinding, or vacating the court
order, OGC will respond to the court explaining the controlling federal law regarding
the priority of underpayments set out in the Social Security Act and regulations.
Without addressing the specifics of the court case, which SSA is not a party to, we
will explain that under controlling sovereign immunity, the state court does not have
jurisdiction over SSA, and further, that under the supremacy of federal law, the Social
Security Act does not permit the state court’s assignment of Social Security benefits
and controls as to the priority of who is to receive an underpayment from a deceased
beneficiary.
CONCLUSION
The state court order conflicts with federal statutory and regulatory laws, which
govern the management of Social Security benefits. The Amended Final Order from a
New Mexico state court does not bind the agency as it violates the protections of
section 207(a) and is contrary to the order of priority for underpayments in section
204(d). Based on the statutory distribution priority per the Act, D~ is entitled to
the NH’s underpayment. Furthermore, the state court does not have jurisdiction to
order SSA, a federal agency, to take any action with regard to the underpayment. Regarding
your request for assistance in amending, rescinding, or vacating the court order,
we will respond to the court.
Michael McGaughran
Regional Chief Counsel
By: M. Hasan Aijaz
Assistant Regional Counsel