Supplemental Security Income for the Aged, Blind, and Disabled; Treatment of Augmented Veterans Benefits, Anderson, et al. v. Sullivan

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Part 416

RIN 0960-AC86

Supplemental Security Income for the Aged, Blind, and Disabled;

Treatment of Augmented Veterans Benefits, Anderson, et al. v. Sullivan

AGENCY: Social Security Administration, HHS.

ACTION: Final rules.

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SUMMARY: These final regulations set out our policy, under the

supplemental security income (SSI) program, regarding the treatment of

veterans benefits that are increased (``augmented'') to provide for

dependents. The effect of these regulations is to clarify our treatment

of the ``dependent's portion'' of the veterans benefits.

DATES: Effective Date: November 17, 1994.

Applicability Dates: The application dates of these final

regulations are discussed in the SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: Regarding this document--Duane Heaton,

Legal Assistant, 3-B-1 Operations Building, 6401 Security Boulevard,

Baltimore, MD 21235, (410) 965-8470; regarding eligibility or filing

for benefits--our national toll-free number, 1-800-772-1213.

SUPPLEMENTARY INFORMATION: Section 1612 of the Social Security Act (the

Act) specifies certain items that are included as earned and unearned

income under the SSI program. Section 1612(a)(2)(B) provides that

unearned income includes, among other things, payments received as an

annuity, pension, retirement, or disability benefit, including veterans

compensation and pensions.

With regard to veterans benefits, in certain situations the veteran

or the veteran's surviving spouse's benefits are augmented on account

of the dependents of the veteran. Prior to November 1981, the Social

Security Administration (SSA) counted the entire benefit, including the

augmented portion, as income to the veteran or veteran's surviving

spouse for SSI purposes. In 1981, after the policy was successfully

challenged in the courts, SSA changed its policy, effective November 1,

1981, and published a ruling (SSR 82-31) which explained that for SSI

purposes the dependent's portion of an augmented veterans benefit would

not be counted as unearned income to the veteran or the veteran's

surviving spouse but as unearned income to the dependent.

The Anderson Case

SSA was challenged in Anderson, et al. v. Sullivan, No. CV-88-036-

GF (D. Mont., Nov. 21, 1989), for not applying the policy published in

SSR 82-31 to a nationwide class of recipients of veterans pensions

known as ``protected pensions.'' The protected pensions under Pub. L.

95-588 include pensions which are means-tested and paid under

provisions that predate the current ``improved pension'' program. In

Anderson, the plaintiff was a veteran's widow who received a veterans

protected pension and SSI disability benefits. Her pension was

augmented due to the presence of a dependent in her household. SSA

considered the full amount of the veterans pension, including the

dependent's portion, as income to Mrs. Anderson in determining the

amount of her SSI benefits. She filed suit against the Secretary of

Health and Human Services (the Secretary) seeking relief from our

practice of counting the dependent's portion of her veterans protected

pension as income to her. SSA had counted this as income to her because

of incomplete information received from the computer match between the

Department of Veterans Affairs (VA) and SSA with regard to veterans

protected pensions. On November 21, 1989, the court in Anderson ordered

the Secretary to promulgate, within 6 months, interim final regulations

that provide that the augmented portion of a veterans pension is not to

be counted as unearned income to the veteran or the veteran's surviving

spouse.

Provisions of the Regulations Under Anderson

Interim final regulations implementing the Anderson order were

published on May 18, 1990 (55 FR 20598). Consistent with that order, we

revised section 416.1123 of our regulations, which sets out how we

count unearned income. We added a new paragraph (e) to explain that if

you receive a veterans benefit that includes an amount paid to you

because of a dependent, we do not count as your unearned income the

amount paid to you because of the dependent.

The Paxton Case

The treatment of the dependent's portion of an augmented benefit

was also challenged in Paxton v. Secretary of Health and Human

Services, 856 F.2d 1352 (9th Cir. 1988). In Paxton, the plaintiff was

an SSI recipient. Mr. Paxton, the plaintiff's husband, received a

pension from the VA. In determining the amount of Mrs. Paxton's SSI

benefit in accordance with SSR 82-31, SSA reduced her SSI benefit by

the amount of the dependent's portion attributable to her from her

husband's veterans pension. Mrs. Paxton filed suit against the

Secretary seeking relief from the practice of counting as her unearned

income that portion of her husband's veterans pension that was

attributed to her.

The court in Paxton held that, as written, the current regulations

did not support counting the dependent's portion of the veterans

pension directly as unearned income to the dependent. On the same date

that we published the interim final regulations pursuant to the

Anderson court order, we also published an NPRM at 55 FR 20612 to

clarify our policy on the treatment of augmented benefits to prevent

future misinterpretation of the regulations, as occurred in Paxton.

Further, we published Acquiescence Ruling AR 90-1(9) on July 16, 1990

(55 FR 28946) to reflect the decision of the Ninth Circuit in Paxton.

Under AR 90-1(9), we do not count the dependent's portion of the

veterans benefit as unearned income to the dependent in the Ninth

Circuit. Upon the effective date of these regulations, we will rescind

AR 90-1(9) and supersede SSR 82-31 with a ruling that contains only the

policy of the obsoleted SSR 82-31 that is not the subject of these

regulations.

Implementing These Regulations in the Ninth Circuit

Some recipients in the Ninth Circuit may lose SSI benefits as a

result of the rescission of AR 90-1(9). To lessen the effect of the

rescission on those recipients, we will apply these regulations to them

only prospectively upon routine redetermination of eligibility. While

we realize that, due to variances in the dates of redetermination, some

of these individuals will benefit more from this treatment than others,

none of these individuals will lose any more SSI benefits than if these

regulations were applicable to them on publication, rather than on

redetermination, and most will lose less. Moreover, since the

publication date will not be used as the effective date of these

regulations for these individuals, our implementation will avoid the

negative consequences of overpayment determinations. This method of

implementation was not contained in the NPRM. However, AR 90-1(9) was

published subsequent to the publication of the NPRM, and accordingly,

the NPRM did not contemplate the effect of the AR's rescission upon

some recipients to whom the AR applied. In order to fully apprise the

affected claimants of the impact of these new rules, we decided that

the publication of our plan for implementing the regulations

prospectively at redetermination for those to whom AR 90-1(9) had been

applied should be part of the final rules.

Public Comment

Both the interim final rule and the NPRM which were published on

May 18, 1990, provided for a 60-day comment period. We received one

comment in response to the NPRM and it was relevant to both the interim

final rule and the NPRM. This comment was from an assistant director

for a State agency that serves individuals with mental retardation and

developmental disabilities. The comment generally supported the

regulations, but recommended further changes. We have summarized and

responded to the comment below.

Comment: The commenter believes the proposed regulations may be

inequitable to those dependents who neither receive nor materially

benefit from their portion of the augmented veterans benefit. The

commenter cited case experience of dependents living apart from the

veteran who did not receive any benefit from their dependent's portion

of the augmented veterans benefit. He proposes that the regulations

also provide that the dependent's portion will not be counted as the

dependent's income when it can be documented that such portion has not

been made available to the dependent or that the dependent has not

received in-kind income equal in value to the dependent's portion.

Response: We agree it may not be appropriate to count the

dependent's portion of the augmented veterans benefit payment as income

to the dependent in those cases where the dependent lives apart from

the veteran or the veteran's surviving spouse and does not receive the

benefit of his or her portion. If all or part of the dependent's

portion is not available for the benefit of the dependent, but is

counted as the dependent's unearned income for SSI purposes, he or she

may experience hardship and the inability to meet daily needs. Such a

result could be viewed as inconsistent with the purpose of the SSI

program which is to provide for the beneficiary's current needs when

his or her income and resources are below specified amounts.

However, where the dependent lives with the veteran or the

veteran's surviving spouse and the dependent's augmented portion of the

veterans benefit is included in the veteran's or the veteran's

surviving spouse's check, we believe that it is reasonable to assume

that the dependent benefits from his or her portion in this living

arrangement by the dependent having and using, for example, heat,

electricity, food, and space. Not only is it likely that the dependent

would be advantaged in some way from living with the veteran or the

veteran's surviving spouse, but it would be administratively onerous to

monitor the exact percentage of food, electricity, and heat used by the

dependent and the designated beneficiary of the veterans benefit in

order to document to what extent the augmented portion is used on the

support and maintenance of the dependent. In those cases in which the

veteran or the veteran's surviving spouse provides cash or in-kind

support to a dependent who does not reside with him or her, we will

count such support under other SSI income rules appropriate to the

nature of the support. We believe that this interpretation is

consistent with the statutory requirements of the SSI program.

Therefore, we are responding to this comment by revising

Sec. 416.1123(e)(2) to provide that the dependent's portion will be

counted as the dependent's unearned cash income if the dependent

resides with the veteran or the veteran's surviving spouse, or if the

dependent receives his or her own portion in a separate payment from

the VA.

The United States Courts of Appeals for the Second, Fourth,

Seventh, and Tenth Circuits have held that it is reasonable to count

the augmented portion of VA benefits as unearned income of the

dependent on whose behalf it is paid, in White v. Shalala, 7 F.3d 296

(2nd Cir. 1993), Kennedy v. Shalala, 995 F.2d 28 (4th Cir. 1993), Inman

v. Shalala, Nos. 93-2305 and 93-2941 (7th Cir., July 19, 1994), and

Ryder v. Shalala, 25 F.3d 944 (10th Cir. 1994).

We are aware that the United States District Court for the Middle

District of Florida has rejected this reasoning in Fair v. Shalala, No.

90-1263-CIV-T-22A (M.D. Fla., Aug. 2, 1993). We have sought appellate

review in this case, but will apply the operative court order pending

the resolution of the appeal.

Except for the changes noted above and several nonsubstantive

technical revisions, we are adopting the rules as proposed on May 18,

1990, at 55 FR 20612 and are restating the interim final rule published

on that same date at 55 FR 20598.

Regulatory Procedures

Executive Order 12866

We have consulted with the Office of Management and Budget (OMB)

and determined that these rules do not meet the criteria for a

significant regulatory action under E.O. 12866. Thus, they were not

subject to OMB review.

Paperwork Reduction Act

These final regulations impose no reporting/recordkeeping

requirements requiring OMB clearance.

Regulatory Flexibility Act

We certify that these final regulations will not have a significant

economic impact on a substantial number of small entities because these

regulations will affect only individuals. Therefore, a regulatory

flexibility analysis as provided in Pub. L. 96-354, the Regulatory

Flexibility Act of 1980, is not required.

(Catalog of Federal Domestic Assistance: Program No. 93.807--

Supplemental Security Income.)

List of Subjects in 20 CFR Part 416

Administrative practice and procedure; Aged; Blind; Disability

benefits; Public assistance programs; Reporting and recordkeeping

requirements; Supplemental Security Income (SSI).

Dated: September 22, 1994.

Shirley Chater,

Commissioner of Social Security.

Approved: November 8, 1994.

Donna E. Shalala,

Secretary of Health and Human Services.

For the reasons set out in the preamble, Part 416 of Chapter III of

Title 20, Code of Federal Regulations, is amended as follows:

PART 416--[AMENDED]

1. The authority citation for Subpart K of Part 416 continues to

read as follows:

Authority: Secs. 1102, 1602, 1611, 1612, 1613, 1614(f), 1621,

and 1631 of the Social Security Act; 42 U.S.C. 1302, 1381a, 1382,

1382a, 1382b, 1382c(f), 1382j, and 1383; sec. 211 of Pub. L. 93-66,

87 Stat. 154.

2. Section 416.1123(e) is revised to read as follows:

Sec. 416.1123 How we count unearned income.

* * * * *

(e) Certain veterans benefits.

(1) If you receive a veterans benefit that includes an amount paid

to you because of a dependent, we do not count as your unearned income

the amount paid to you because of the dependent.

(2) If you are a dependent of an individual who receives a veterans

benefit and a portion of the benefit is attributable to you as a

dependent, we count the amount attributable to you as your unearned

cash income if--

(i) You reside with the individual who receives the veterans

benefit, or

(ii) You receive your own separate payment from the Department of

Veterans Affairs.

[FR Doc. 94-28324 Filed 11-16-94; 8:45 am]

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