The opinion of the court was delivered by: McLaughlin, J.
This case involves a decision by the Commissioner of Social Security that the plaintiff must pay back over $87,000 in disability payments he received during a period in which he was not eligible for them. The main issue in the case is whether the Commissioner should have waived recovery of the overpayment. The Commissioner should waive recovery of an overpayment when two requirements are met: (1) the overpaid individual was without fault in causing the overpayment; and (2) recovery of the overpayment would either defeat the purpose of the Act or be against equity and good conscience. 42 U.S.C. § 404(b). The Commissioner has found the plaintiff to be without fault and recovery would not defeat the purpose of the Act so the issue is whether recovery would be against equity and good conscience.
The plaintiff filed an application for disability insurance benefits ("DIB") in April 1991. The Social Security Administration ("SSA") found him to be disabled due to a visual impairment (blindness) and thus entitled to DIB as of March 1991. Tr. 29, 32.
In May 1994, the plaintiff began working for the Susquehanna Association for the Blind and Vision Impaired ("Susquehanna") as a material handler. Tr. 37. He testified that in February 2001, he was informed that due to an error by Susquehanna, the organization's employees were not paid for rest periods less than twenty minutes in violation of the Fair Labor Standards Act ("FLSA"). Tr. 37, 37, 203. To correct this error, Susquehanna paid the plaintiff retroactive wages for the twenty-four month period from March 1999 through February 2001. R. 34.
The SSA retroactively adjusted the plaintiff's earnings to reflect the additional wages paid to him. Tr. 58-59. This adjustment caused plaintiff's earnings to exceed the substantial gainful activity ("SGA") level for blind individuals. Tr. 60. Because this overpayment rendered the plaintiff ineligible for benefits as of April 2000, the SSA determined that he had erroneously received benefits from April 2000 through July 2004, when he reapplied for and was granted DIB. In the absence of this adjustment, the plaintiff's wages would have been below the maximum SGA level to receive DIB. Tr. 38, 78-97.
The SSA notified the plaintiff of this overpayment in 2005. In October 2006, the SSA adjusted the amount of overpayment after the plaintiff requested reconsideration, but did not discharge the overpayment. On July 11, 2007, the plaintiff requested waiver of the overpayment on behalf of himself and his daughters in the total amount of $114,539.67 ($87,089.00 - the plaintiff's overpayment; $27,450.67 - the daughters' overpayment). R. 101. On October 29, 2008, the agency denied the plaintiff's request for waiver of the overpayment and the plaintiff requested a hearing before the Administrative Law Judge ("ALJ"). R. 101, 105.
After a hearing on June 26, 2009, the ALJ found that the plaintiff was without fault in causing the overpayment, but that recovery would neither defeat the purpose of Title II, nor be against equity and good conscience. Tr. 27. The plaintiff requested a review of the ALJ's decision by the Appeals Council, which found that the plaintiff was not liable for the portion of the overpayment made to his daughters ($27,450.67), but affirmed the ALJ's finding that recovery of the plaintiff's portion of the repayment would neither defeat the purpose of Title II, nor be against equity and good conscience. Tr. 8-9, 12, 19-20. The Appeals Council's determination that the plaintiff must return this overpayment in the amount of $87,089.00 became the Commissioner's final decision. The plaintiff now seeks judicial review of this decision.
A. Statute and Regulations
An overpayment occurs where an individual receives payment of benefits in excess of the amount due. 20 C.F.R. § 404.501(a). Whenever there is an overpayment of benefits, the Commissioner has a statutory obligation to recover the overpayment. 42 U.S.C. § 404(a)(1).
However, recovery of an overpayment is waived where two requirements
are met. 42 U.S.C. § 404(b); 20 C.F.R. § 404-506(a). First, the
overpaid individual must be without fault in causing the overpayment.
Id. Fault by the agency does not relieve the overpaid individual from
proving that he was without fault. 20 C.F.R. § 404.507.*fn1
Second, recovery of the overpayment must either defeat the
purpose of the Act or be against equity and good conscience.
The Commissioner's regulations state that to defeat the purpose of the Act under Title II means to deprive a person of income required for ordinary and necessary living expenses. 20 C.F.R. § 404.507(a). The regulations state that this determination depends on 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. Id.
According to the regulations, a recovery of an overpayment is against equity and good conscience:
1. When an individual changed his or her position for the worse or relinquished a valuable right because of reliance upon a notice that a payment would be made or because of the overpayment itself; or
2. Was living in a separate household from the overpaid person at the time of the overpayment and did not receive the ...