AR 86-25(9): Fagner v. Heckler , 779 F.2d 541 (9th Cir. 1985) -- Applicability of Section 1127 of the Social Security Act

AR 86-25(9)

EFFECTIVE DATE: 10/20/86

ISSUE:

Whether Section 1127 of the Social Security Act applies to determinations

or decisions made before July 1, 1981 (its effective date) but processed

for payment after that date.

STATUTE/REGULATION/RULING CITATION:

Section 1127 (42 U.S.C. 1320a-6); 20 C.F.R. 404.408b

CIRCUIT:

NINTH (ALASKA, ARIZONA, CALIFORNIA, HAWAII, IDAHO, MONTANA, NEVADA,

NORTHERN MARIANA ISLANDS, OREGON,

WASHINGTON) [1]

Fagner v. Heckler , 779 F.2d 541 (9th Cir. 1985)

APPLICABILITY OF RULING:

DESCRIPTION OF CASE:

On June 25, 1981, an Administrative Law Judge (ALJ) found Ms. Fagner

entitled to title II disability insurance benefits and supplemental

security income (SSI) benefits based on disability which began February 8,

1980. An SSI award certificate was issued on August 6, 1981, and a

disability insurance benefit award certificate was issued on September 21,

1981. In the latter certificate Ms. Fagner was advised that her benefits

for August 1980 through July 1981 would be withheld and that if she had

received SSI benefits for that period of time, Section 1127 of the Social

Security Act required that the benefits be

reduced. [2]

Ms. Fagner received $2,726.52 as payment of all SSI through August 1981.

SSA subsequently determined that Ms. Fagner's retroactive disability

insurance benefit payment was subject to a reduction of $2,103.46 under

Section 1127 of the Social Security Act, representing the amount of SSI

payments that she would not have received for the months of August 1980

through July 1981, had the Social Security Administration (SSA) paid the

title II disability insurance benefits when regularly due rather than

retroactively. The reduction was upheld by SSA's decision on Ms. Fagner's

request for reconsideration. She then requested an administrative hearing.

The ALJ held that Section 1127 of the Act applied to Ms. Fagner's case on

the ground that there was no final adjudication on her claims until after

July 1, 1981

paid the

title II disability insurance benefits when regularly due rather than

retroactively. The reduction was upheld by SSA's decision on Ms. Fagner's

request for reconsideration. She then requested an administrative hearing.

The ALJ held that Section 1127 of the Act applied to Ms. Fagner's case on

the ground that there was no final adjudication on her claims until after

July 1, 1981. [3] The Appeals

Council denied review, thereby making the ALJ's decision the final

decision of the Secretary. The district court granted summary judgment for

the Secretary. Ms. Fagner then appealed to the Ninth Circuit Court of

Appeals.

HOLDING:

The Court of Appeals held that the Secretary erroneously interpreted

Section 1127 of the Social Security Act, and found that Ms. Fagner's right

or legal title to the title II disability benefits was established on June

25, 1981, the date of the ALJ's decision, which was eight days before

Section 1127 became effective. It went on to find that because no appeal

or other action was taken, the June 25, 1981 decision had the effect of a

final entitlement decision which was not subject to the benefit reduction

provisions of Section 1127. The Court of Appeals reversed the judgment of

the district court and remanded the case with instructions to enter

judgment for Ms. Fagner.

STATEMENT AS TO HOW FAGNER DIFFERS FROM SOCIAL SECURITY

POLICY:

Under SSA's interpretation of Section 1127 of the Social Security Act,

entitlement to title II benefit payments is not actually established until

an award certificate is issued. Entitlement is established only when it

has been determined that a claimant meets all conditions of eligibility

(e.g., insured status, disability, age). An ALJ only determines whether

the requirements at issue in a claim are satisfied and not whether there

is entitlement to benefit payment. All of the issues of a claim must be

completely decided before payment is made.

The Court of Appeals rejected this policy observing that:

has been determined that a claimant meets all conditions of eligibility

(e.g., insured status, disability, age). An ALJ only determines whether

the requirements at issue in a claim are satisfied and not whether there

is entitlement to benefit payment. All of the issues of a claim must be

completely decided before payment is made.

The Court of Appeals rejected this policy observing that:

EXPLANATION OF HOW SSA WILL APPLY THE DECISION WITHIN THE CIRCUIT:

This ruling applies to claims involving an applicant for benefits under

both title II and title XVI whose entitlement to title II retroactive

benefits was determined prior to July 1, 1981 but whose award certificate

for title II benefits was not issued until July 1, 1981 or later and who

resides in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada,

Northern Mariana Islands, Oregon or Washington at the time of the

determination or decision at any level of administrative review, i.e.,

initial, reconsideration, administrative law judge hearing or Appeals

Council review.

If, prior to July 1, 1981, such a person is determined to be entitled to

retroactive title II benefits ("determined" as defined by the Court of

Appeals) but his or her award certificate is not issued until July 1, 1981

or later, Section 1127 of the Social Security Act will not apply and no

reduction of retroactive monthly Social Security benefits for months in

which SSI payments were received will be required.

EFFECTIVE DATE:

Date of Publication -- 10/20/86

[1] Guam has no SSI program;

therefore, Section 1127 would have no effect in Guam.

t his or her award certificate is not issued until July 1, 1981

or later, Section 1127 of the Social Security Act will not apply and no

reduction of retroactive monthly Social Security benefits for months in

which SSI payments were received will be required.

EFFECTIVE DATE:

Date of Publication -- 10/20/86

[1] Guam has no SSI program;

therefore, Section 1127 would have no effect in Guam.

[2] As applicable in this

ruling, Section 1127 provided that where a person is found to be entitled

to retroactive title II benefits for a particular period and has received

SSI benefits for the same period, the title II benefits must be reduced by

an amount equal to the amount of SSI benefits which would not have been

paid if the title II benefits had been paid when regularly due rather than

retroactively.

[3] Under section 501(a) of Pub.

L. 96-265, section 1127 of the Act is applicable only to payments of title

II benefits for which entitlement is "determined on or after July 1,

1981."