TN 18 (10-98)
SI 02301.100 Assessing Penalties
Section 1631(e)(2) of the Social Security Act
Social Security Act;
20 CFR 416.722 - 416.732
The Social Security Act requires penalties when SSI recipients fail to report changes on time that adversely affect SSI benefits unless they have good cause for the reporting failure. SSA deducts specific amounts for penalties from Federal SSI payments.
Penalties may help encourage recipients to comply with their reporting responsibilities, thereby reducing overpayments.
The definitions in this section are only for developing penalties.
1. Excess Payment
An excess payment is payment that is more than what was due for any period. An excess payment may or may not result in an overpayment. See SI 02201.005 for the definition of an overpayment.
2. Good Cause
Good cause for failing to report a change on time means that the failure was not willful or that the recipient is without fault in connection with an overpayment caused by the change.
NOTE: FOs must develop and evaluate good cause when a penalty may apply in SI 02301.100D. FOs notify recipients of all good cause/penalty decisions.
3. Penalty Deduction
A penalty deduction is the amount SSA deducts from a recipient's Federal SSI payment to collect a penalty.
4. Penalty Period
A penalty period is a specific period that a penalty deduction applies regardless of the number of reporting failures in the period.
5. Reporting Failure
A reporting failure is a failure to report a required change or report a required change on time. It is also a failure to report information that SSA asks for to determine correct benefits.
6. Timely Report
A timely report is a report of a change by a recipient or representative payee to SSA within 10 calendar days after the month in which the change occurred. A timely report by mail occurs when the postmark date of the report is within the same 10-day period.
7. Willful Failure
Willful failure means that the recipient was fully aware of the reporting requirements and intentionally, knowingly and purposely failed to report on time.
8. Without Fault
Without fault generally means that a recipient did not cause or help cause an overpayment.
NOTE: Without fault findings relate only to requests for waiver of overpayment adjustment or recovery. However, the guidelines in SI 02260.010 on developing without fault are the same for evaluating good cause for a reporting failure.
1. When a penalty applies
A penalty applies if all of these conditions exist:
the recipient fails to report a change on time that causes a reduction, suspension, or termination of SSI benefits, and
the change causes any excess Federal SSI payment (not State supplementary payments only), and
the recipient accepts the excess payment, and
good cause does not exist for the reporting failure.
A penalty may apply even when:
the penalty deduction could be larger than the excess Federal payment, or
there is no overpayment determination, or
the excess payment does not result in overpayment, or
the recipient is not currently receiving a Federal SSI payment.
NOTE: See SI 02301.105 on when actual collection of a penalty may occur.
2. Who may receive a penalty
Only capable adult recipients may receive a penalty. These are usually adults who do not have representative payees. (See when to develop capability, GN 00502.020).
3. Who may not receive a penalty
These individuals may not receive a penalty:
children, as defined in SI 00501.010, incapable, and incompetent adults who have or need payees, and
4. Payee fails to report
When a payee, regardless of the relationship to the recipient, fails to report a change on time and causes an excess payment, the FO evaluates the payee's suitability to serve and the need for a new payee. (See GN 00504.100 for instructions.)
5. Who assesses a penalty
Service representatives (SRs), claims representatives (CRs), or higher level employees consider and assess penalties. (See SI 02301.010 on How to Act on Reports.)
6. Penalty periods and deductions
These are the penalty periods and the required deductions:
First Penalty Period - $25.00 Deduction
This period begins with the effective filing date for SSI and ends with the date that SSA first discovers a change that the recipient failed to report timely which results in a penalty.
Second Penalty Period - $50.00 Deduction
The second period begins with the day after the first penalty period ends. It ends with the date that SSA discovers the second reporting failure which results in a penalty.
Subsequent Penalty Periods - $100.00 Deduction
Subsequent periods begin with the day after the last date that SSA discovered a reporting failure resulting in a penalty and ends with the date that SSA discovers the next reporting failure which results in a penalty.
7. How penalties work
An eligible individual may receive only one penalty deduction for a penalty period regardless of multiple changes, failures to report and excess payments in the period.
A member of an eligible couple receives a full deduction for a penalty period. Separate penalty periods may exist for each member when a reporting failure results in an excess payment to both. However, the penalty period and the appropriate deduction may differ for each member. For example, a first period and a $25.00 deduction may apply for one member and a second period and a $50.00 deduction may apply for the other member.
D. Procedure - when to consider a penalty
Consider whether a penalty may apply whenever you discover a late report of a change. Follow these decision steps:
Does the change result in a past or future excess Federal cash payment?
Did the recipient or payee accept the excess payment? (See GN 02604.115 on acceptance of benefits.)
IF YES, go to Step 4.
IF NO, go to Step 3.
Does the change result in a future excess Federal cash payment?
IF YES, consider a penalty if and when the recipient or payee accepts the excess payment.
IF NO, a penalty cannot apply. STOP.
Is the recipient a capable adult?
IF YES, a penalty may apply. Develop good cause, see SI 02301.100E.
IF NO, a penalty cannot apply. STOP.
NOTE: You need not document the file that a penalty cannot apply.
E. Procedure - developing good cause
When a penalty may apply in D. above, follow these procedures to conduct penalty interviews and develop good cause before assessing a penalty.
1. When to Conduct A Penalty Interview
Follow these guidelines on the best times to conduct penalty interviews:
Conduct the interview at the time a recipient makes a late report in person or by telephone when possible.
Conduct the interview as soon as possible after the FO receives a late report or discovers a reporting failure.
Coordinate the interview with redetermination and overpayment activities when possible.
CAUTION: Do not suppress a systems overpayment notice through the automated overpayment notices system (AONS) or unreasonably delay a manual overpayment notice to conduct a penalty interview.
2. Whom to Interview
Conduct a penalty interview with the recipient whenever possible. Also:
Conduct a penalty interview with a DAA's payee to develop good cause when, for example:
you are unable to contact the recipient for reasons such as illness or incapacity of the recipient, or
the recipient believes that the payee made or should have made the report, or
you cannot locate the recipient or the recipient does not cooperate.
Interview other individuals when needed to support a finding of good cause.
NOTE: Interviews may be conducted in FOs, or by telephone or personal visit.
3. How to Conduct A Penalty Interview
Follow these steps to conduct a penalty interview with a recipient or payee:
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Explain the change that resulted in an excess payment and the period involved.
Explain that SSA did not receive a timely report of the change.
Remind the individual of the reporting requirements and how to report. (in writing, by telephone, or in person).
Ask if the individual understood the responsibility for reporting the change on time and if there was a good reason for the failure.
Ask about the recipient's circumstances surrounding the change and the ability to report.
Welcome any information the individual wants to give. Offer assistance in obtaining additional information to support the individual's statements when needed.
Explain penalty deductions and the possibility that a penalty may apply unless the recipient clearly had a good reason for the reporting failure.
Tell the individual that no penalty will apply and document the file if there is enough information to find good cause. Provide the individual with a written notice of the good cause decision only if he or she requests it.
NOTE: See SI 02301.110 about notification requirements when good cause exists or the decision is to collect a penalty.
F. Procedure - evaluating good cause/penalty decisions
1. Guidelines - general
Follow these guidelines when evaluating good cause for a reporting failure:
Use the guidelines in SI 02260.010 on finding without fault in addition to the guidelines in this section.
Consider carefully all the circumstances surrounding the failure, especially the recipient's ability to understand and report and whether he or she acted in good faith. Be alert to changes in circumstances.
Remember that only capable adult recipients may receive a penalty. Stop penalty development if you find that a recipient is incapable regardless of capability at the time of the failure. See D. above on when a penalty cannot apply.
2. Some factors to consider
Use the guidelines in this chart when evaluating good cause for capable adult recipients:
|If the recipient...|| ||then...|
did not understand the reporting requirements
consider circumstances surrounding the failure.
lacked the ability to understand the reporting requirements due to a physical, mental, educational, or linguistic limitation (lack of facility with the English language) and acted in good faith
FIND good cause. DO NOT assess a penalty.
attempted to report on time
consider all circumstances surrounding the failure.
believed the change would not affect SSI
evaluate the significance of the change (see SI 02260.015B.4.).
believed that a payee or someone else made or should have made the report
consider all circumstances including whether the recipient knew to report.
received a penalty before for a similar failure
do not assume fault or willful failure. Consider whether there were changes in the recipient's circumstances and ability to report.
met without fault for waiver of overpayment regardless of whether he or she met other conditions for waiver
FIND good cause. DO NOT assess a penalty.
refused to cooperate with the FO in developing good cause and there is insufficient information to find good cause
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fully understood the reporting requirements and intentionally, knowingly and purposely failed to report on time
FIND willful failure. Assess a penalty.
Try to obtain the recipient's statement/signature on Form SSA-795 if he or she admits to willful failure.
Consider fraud development (see GN 04110.005).
3. List of documentation requirements
Document all penalty decisions in the recipient's file with:
Form SSA-5002 (Report of Contact). Indicate briefly the decision and the basis for it
Form SSA-795 (Statement of Claimant or Other Person), when possible, for a signed admission of willful failure to report
NOTE: See notification requirements in SI 02301.110.
4. Documentation examples
These are examples of penalty decisions and are not complete case examples.
Recipient: George Roth, XXX-XX-XXXX AI
Decision: Assess a penalty of $25.00 for the period 10/14/91 - 5 /14/93.
Reason: Willful failure to report. Mr. Roth's wages were discovered 5 /14/93 from an employer's report. He admitted on a signed SSA-795 that he knew to report but did not because he thought his SSI checks would stop. We are curtailing fraud development because Mr. Roth is age 71 and has refunded the overpayment.
Recipient: Jean Bleu, XXX-XX-XXXX DI
Decision: No Penalty.
Reason: Without fault met for overpayment. Ms. Bleu was overpaid because she reported her husband's wages 6 weeks after they started. She stated on her waiver request that it was not her fault because her husband concealed income from her and she reported his employment as soon as she found out about it.