AR 88-4(1): Dion v. Secretary of Health and Human Services, 823 F.2d. 669 (1st Cir. 1987) Applicability of the Windfall Offset Provision, Section 1127 of the Social Security Act

AR 88-4(1)

EFFECTIVE DATE: 07/18/88

ISSUE:

Whether Section 1127 of the Social Security Act (Act) applies to initial

claims filed under both titles II and XVI of the Act, in which claimants

are found entitled to title II benefits for months prior to July 1, 1981

(the effective date of the statute), even if the claims are not finally

adjudicated until after that

date. [1]

STATUTE/REGULATION/RULING CITATION:

Section 1127 of the Social Security Act (42 U.S.C. 1320a-6); 20 C.F.R.

404.408b

CIRCUIT:

FIRST (MAINE, NEW HAMPSHIRE, MASSACHUSETTS, RHODE ISLAND, PUERTO

RICO [2] )

Dion v. Secretary of Health and Human Services, 823 F.2d 669 (1st

Cir. 1987)

APPLICABILITY OF RULING:

This Ruling applies to determinations or decisions at all administrative

levels (i.e., initial, reconsideration, administrative law judge hearing

and Appeals Council).

DESCRIPTION OF CASE:

In June 1977, the plaintiff, Ms. Dion, applied for disability insurance

(DI) benefits under title II of the Act and supplemental security income

(SSI) benefits based on disability under title XVI of the Act. Her

applications were denied both initially and on reconsideration. She did

not request further administrative review of these denials. In November

1979, she reapplied under both programs, and after these applications were

also denied both initially in October 1980, and on reconsideration in

January 1981 by a notice dated June 1981, Ms. Dion requested a hearing

before an administrative law judge (ALJ). The ALJ reopened plaintiff's

prior claims of 1977, and in a decision dated February 1982, determined

that she had been disabled since May 5, 1977 and was entitled to benefits

based on the 1977 applications.

Ms. Dion's monthly DI benefits were paid beginning March 1982.

Subsequently, retroactive SSI payments were made for the months November

1979 through February 1982. No SSI payments were made from June 1977

through October 1979 pending action by the Appeals

Council. [3]

, determined

that she had been disabled since May 5, 1977 and was entitled to benefits

based on the 1977 applications.

Ms. Dion's monthly DI benefits were paid beginning March 1982.

Subsequently, retroactive SSI payments were made for the months November

1979 through February 1982. No SSI payments were made from June 1977

through October 1979 pending action by the Appeals

Council. [3]

On July 27, 1982, Ms. Dion received retroactive DI benefits for the

months November 1977 through February 1982. In August 1982, she received a

notice which advised that pursuant to Section 1127 of the Act, a total of

$6903.90 in excess SSI benefits for the period November 1979 through

February 1982 had been withheld from her DI benefits. Section 1127 then

provided that a beneficiary's retroactive payment of DI benefits was to be

offset by the amount of SSI payments that would not have been made if the

DI benefits had been paid when they were regularly due rather than

retroactively.

Ms. Dion then sought administrative review of the decision to offset her

DI benefits from November 1979 through February 1982 by her SSI benefits

for the same period. Upon review, the Appeals Council determined that,

because Ms. Dion's claim was not finally adjudicated until after July 1,

1981, the offset provision was applicable and the offset was properly

applied. Ms. Dion appealed to the United States District Court for the

District of New Hampshire. On November 27, 1986, the district court

reversed the Secretary's decision and ruled that, because Ms. Dion was

found to be entitled to benefits under title II of the Act for a period

prior to July 1, 1981, the offset provision was inapplicable and the

offset had been improperly applied. The Secretary appealed the decision of

the district court to the United States Court of Appeals for the First

Circuit.

HOLDING:

trict court

reversed the Secretary's decision and ruled that, because Ms. Dion was

found to be entitled to benefits under title II of the Act for a period

prior to July 1, 1981, the offset provision was inapplicable and the

offset had been improperly applied. The Secretary appealed the decision of

the district court to the United States Court of Appeals for the First

Circuit.

HOLDING:

The court of appeals affirmed the district court's decision that the

Secretary had improperly applied the offset. It held that the offset

provision should not be applied to claims in which a claimant is awarded

title II benefits for months prior to July 1981.

STATEMENT AS TO HOW DION DIFFERS FROM SOCIAL SECURITY POLICY:

In accordance with Pub. L. No. 96-265, section 501(d), the original

offset provision did not go into effect immediately upon its passage in

June 1980, but was declared to be applicable to cases in which entitlement

to title II benefits was determined on or after July 1, 1981.

As interpreted by the Social Security Administration (SSA), the word

"determined" as used in section 501(d) means finally adjudicated, i.e.,

the date the claims authorizer signs an award determination. Accordingly,

SSA applies the original offset provisions to title II initial claims

which are finally adjudicated on or after July 1, 1981, provided that the

retroactive benefits are actually payable prior to February 1985.

The court of appeals disagreed that the law controlling these cases is

the law in effect on the "final adjudication" date. It held that the word

"determined" in section 501(d) refers to the date on which a beneficiary

has met the statutory criteria which determine entitlement to benefits,

even if the claim is not finally adjudicated until a later date.

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

that the law controlling these cases is

the law in effect on the "final adjudication" date. It held that the word

"determined" in section 501(d) refers to the date on which a beneficiary

has met the statutory criteria which determine entitlement to benefits,

even if the claim is not finally adjudicated until a later date.

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

The Ruling applies to concurrent initial claims for benefits under both

titles II and XVI of the Act, involving both an award of benefits under

title II for months prior to July 1981, and a resulting payment prior to

February 1985 of retroactive title II benefits, to a beneficiary who

resides in Maine, New Hampshire, Massachusetts, Rhode Island, or Puerto

Rico at the time of the determination or decision at any administrative

level, i.e., initial, reconsideration, administrative law judge hearing,

or Appeals Council.

If such a claimant is found to be entitled to retroactive title II

benefits for one or more months prior to July 1981, section 1127 of the

Act will not apply to any months covered by the determination of

entitlement and no reduction of retroactive title II benefits for months

in which SSI payments were received will be required.

EFFECTIVE DATE:

Date of Publication (07/18/88)

[1] Section 1127 of the Act was

amended in its entirety by section 2615 of Pub.L. No. 98-369 effective

with respect to retroactive benefits payable after January 1985. For

claims in which retroactive benefits are actually paid after January 1985,

the application of the section 1127 offset must be determined based on the

new section 1127, rather than on the prior statutory provision construed

by the count in Dion .

as

amended in its entirety by section 2615 of Pub.L. No. 98-369 effective

with respect to retroactive benefits payable after January 1985. For

claims in which retroactive benefits are actually paid after January 1985,

the application of the section 1127 offset must be determined based on the

new section 1127, rather than on the prior statutory provision construed

by the count in Dion .

[2] Although Puerto Rico does

not have an SSI program, individuals who reside in Puerto Rico at the time

of final adjudication of a title II claim, or at the time of a

determination or decision at any administrative level, may also be

affected by this Ruling. If such residents filed for or received SSI

payments during the retroactive title II benefit period while a resident

of a State or other area which does have an SSI program, the Ruling will

apply to those individuals despite their lack of SSI eligibility for

months of residence in Puerto Rico.

[3] The Appeals Council reviewed

the ALJ decision of February 1982 and determined that the provisions of 20

C.F.R. 416.1488, which limit reopening of SSI claims by an ALJ to 2 years

after the date of the initial determination, applied to that decision.

Accordingly, in May 1983, the Appeals Council reopened the ALJ decision

and determined that plaintiff was not entitled to SSI benefits for the

period June 1977 through October 1979. Ms. Dion appealed this decision to

the United States District Court for the District of New Hampshire which,

in April 1984, reversed the Secretary's decision and ordered payment of

SSI benefits to plaintiff for that period.