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10/08/69 Margaret E. Gruver, v. Secretary of Health

October 8, 1969




Bazelon, Chief Judge, and Burger* and Robinson, Circuit Judges.


Date Reported: Certiorari Denied, March 9, 1970 at: 397 U.S. 977.



Since August, 1960, appellant has received old-age insurance benefits under Title II of the Social Security Act. *fn1 For 1965 and 1966, her wage earnings exceeded the statutory maximum of $125 per month an individual could then make without an automatic reduction in the monthly benefits payable. *fn2 Although appellant submitted timely reports of those earnings, the Social Security Administration did not decrease her benefits, and thereby overpaid $178 during 1965 and $603 during 1966.

To rectify the overpayments, the Administration invoked its statutory authority to make "proper adjustment . . . by . . . decreasing subsequent payments" to appellant. *fn3 The 1965 overpayment of $178 was corrected during 1966 by the return of checks covering benefits for two months together with an offset against benefits payable for two others, and no question as to the legality of these adjustments is raised. The Administration, however, recouped the 1966 overpayment of $603 by offsetting that amount against sums otherwise payable as benefits in 1967. The circumstance highlighting that recovery is that appellant's wage earnings for the entire year 1967 totaled only $48, although during that year she made more than $3,000 from stock transactions and also received unemployment compensation.

After completion of the administrative proceedings, appellant sued in the District Court to assert the claim that recapture of the $603 overpayment was statutorily foreclosed during the period -- the whole of the year 1967 -- that her earned wages fell beneath $125 per month. That position was predicated upon a proviso in Section 203(f) (1) of the Act 4 which, for purposes of calculating the amounts of monthly old-age insurance benefits payable, then barred the charge of excess earnings5 against any month in which a beneficiary's wage earnings did not exceed $125. The court granted summary judgment against appellant on the theory that Sections 204(a) and 204(b)6 specified the rules governing recoveries and adjustments of old-age insurance overpayments, and that the rules so prescribed did not produce the result for which appellant contended. We affirm. I

The Act sets the criteria for determining entitlement to monthly old-age insurance benefits and fixes the conditions that serve to diminish the benefits. Old-age insurance is retirement insurance and one such condition is excess earnings from employment. For the years relevant to this litigation, excess earnings were all wages greater than the product of $125 times the number of months in which wage income was greater than that amount.7 One-half of excess earnings up to $1,200 per year, and all excess earnings over that annual sum, were charged against benefits.8 Excess earnings are charged successively against the monthly benefits next accruing until the excess is eliminated or the year comes to an end.9

Section 203(f) (1) of the Act, however, imposes a significant limitation on the operation of this formula. During the relevant period it specified that despite the general rules "no part of the excess earnings of an individual shall be charged to any month . . . in which such individual . . . did not render services for wages . . . of more than $125."10 Where the earning pattern of an old-age insurance beneficiary is expected to be such that benefits for particular months must be lowered or cancelled, an overpayment may be avoided by withholding some of the monthly checks or by stepping down all checks proportionately.11 To this end, an estimate of anticipated earnings may be required.12

Where, however, there is an overpayment, Section 204(b) provides for waiver of its repayment if the recipient is without fault and collection of the overpayment "would defeat the purpose of [Title II of the Act] or would be against equity and good conscience."13

The Administration has implemented this provision by regulations defining the phase "defeat the purpose of Title II" in terms of a "defeat [of] the purpose of benefits" under Title II, that is, a deprivation "of income required for ordinary and necessary living expenses."14 So, under the regulations, whether reclamation of an overpayment will defeat statutory objectives "depends upon whether the person has an income or financial resources sufficient for more than ordinary and necessary needs, or is dependent upon all of his current benefits for such needs."15 Conformably, the regulations provide that "adjustment or recovery generally will defeat the purposes of Title II in (but is not limited to) situations where the overpaid person needs substantially all of his current income (including social security monthly benefits) to meet his current ordinary and necessary living expenses."16

The Administration has similarly undertaken a definition of the statutory phrase "against equity and good conscience." A regulation makes it known that adjustment or recovery of an overpayment will be so considered "if an individual, because of a notice that such payment would be made or by reason of the incorrect payment, relinquished a valuable right . . . or changed his position for the worse . . .."17 And "in reaching such a determination," the regulation continues, "the individual's financial circumstances are irrelevant."18

So it is that recipients of old-age insurance overpayments not attributable to their own fault19 may achieve complete exoneration from a responsibility for repayment. The regulations safeguard against the recipient's loss of income needed to accommodate current ordinary and necessary living expenses and, irrespective of personal financial circumstances, against detrimental consequences of a change of position. But where the conditions prerequisite to waiver are lacking, Section 204(a) mandates that "proper adjustment shall be made, under regulations prescribed by the Secretary, by increasing or decreasing subsequent payments to which such individual is entitled."20 The regulations prescribe the general rule that the person overpaid shall receive no further benefits until the overpayment is fully retrieved. There is no provision for deferring repayment, and repayments can be spread only in accordance with stated criteria.21 II

In identifying the precise issues and the specific arguments presented by appellant, we have, within the limits tolerated by an orderly functioning of judicial machinery, extended to her, as a litigant pro se, a liberal construction of her suit papers. We find three questions raised, only one of which requires extended consideration.22 That one springs from Section 204(b) of the Act which, as we have stated, forbids adjustment or recovery of old-age insurance overpayments where the recipient is faultless and "adjustment or recovery would defeat the purpose of" Title II.23 Appellant would read this language in conjunction with the proviso of Section 203(f) (1) , which then forbade a decrease in the benefits payable for any month in which a recipient earned less than $125 in wages.24 Her position, in substance, is that the prohibition effected by that proviso is incorporated into Section 204(b) as an implication of the prohibition established by the latter section against an adjustment or recovery of overpayments that would defeat the purposes of Title II of the Act. Thus appellant's contention is not that ...

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