The opinion of the court was delivered by: SAND
In this action, plaintiff challenges a decision of the Secretary of the Department of Health, Education and Welfare ("Secretary" or "HEW") that, for purposes of determining his eligibility for benefits under the federal Supplemental Security Income ("SSI") program, plaintiff's "resources" include amounts he has saved from prior state benefit payments. Plaintiff also challenges the Secretary's determinations that he has not been entitled to receive SSI benefits at any time and terminating those benefits, that plaintiff was overpaid in the full amount of such benefits, and that he must repay overpayments made from January, 1975 through July, 1975. Review is sought pursuant to 42 U.S.C. §§ 1383(c)(3) and 405(g).
I. Plaintiff's Eligibility for SSI Benefits
There appears to be no dispute that but for his resources, plaintiff would be eligible for SSI benefits today, and that he would have been so eligible at the time he began receiving SSI benefits in January, 1974. Plaintiff was released in December, 1971 from Rockland State Hospital, in which he had been confined for 27 years. He presently resides in the Aberdeen Hotel, New York City, a residence for discharged mental patients which provides plaintiff with a structured environment and comprehensive services.
From the time of his release until December 31, 1973, plaintiff received public assistance benefits under New York State's program of Aid to the Aged, Blind and Disabled (AABD); those benefits constituted his sole source of income, with the exception of a few additional dollars which plaintiff earns by helping to serve meals at the Aberdeen. Effective January 1, 1974, the AABD program was replaced by the federal SSI program, which provided uniform national eligibility standards and benefit levels for assistance to the needy aged, blind and disabled. Plaintiff now receives Social Security disability benefits.
The issue before us regarding plaintiff's eligibility is whether he was correctly receiving AABD benefits as of December 31, 1973. If he was, then under the federal SSI regulations he was "converted" into the SSI program as of January 1, 1974.1A If plaintiff was not so eligible, he concedes that he also was not eligible for SSI benefits as a new enrollee, (Pl. Br. at 2),
and will continue to be ineligible until he reduces his current level of resources to $ 1,500, the maximum allowed under the SSI program.2A As we shall see, however, the issue of plaintiff's eligibility under the prior AABD program has serious consequences with respect to any future entitlement he may have to state supplemental SSI benefits.
Shortly after plaintiff began receiving AABD benefits in December, 1971, he began a pattern of "compulsive" saving: he deposited substantial portions of his benefit checks in a savings account and never made any withdrawals.
As a consequence, plaintiff had $ 3,074 in savings as of December, 1973. There is no dispute that this amount consisted entirely of savings from plaintiff's AABD benefits.3A After plaintiff's conversion to the SSI program, he continued this pattern of saving and had accumulated the amount of $ 4,933 as of November 27, 1974. On that date he was interviewed by the Social Security Administration ("SSA"), which administers the SSI program, as part of the routine redetermination procedure.
Plaintiff at that time informed SSA of the existence of his savings account. He was immediately notified that as of November 1974 he was not entitled to SSI benefits and would be terminated from the program as of January 1975. Plaintiff also received on that date the "reconsideration" required for further review of the initial SSA decision.
Plaintiff requested and received a hearing with respect to the termination, which hearing was held on January 7, 1975. Shortly thereafter, the hearing examiner determined that an additional hearing
was necessary to determine whether the SSI benefits plaintiff had received in 1974 constituted "overpayments" and whether, within the meaning of the SSI regulations, plaintiff was "at fault" in receiving such overpayments. If he was at fault in receiving overpayments, repayment would be required. The second hearing was held over plaintiff's objections that the matter of overpayment was not properly before the hearing examiner. On February 7, 1975, the hearing examiner ruled that plaintiff was ineligible for SSI benefits, that he had been overpaid since January 1, 1974, that he had been "at fault" in receiving such overpayments since November 27, 1974, but that plaintiff should have been suspended, rather than terminated. Plaintiff obtained Appeals Council review of this ruling on June 7, 1977; the Appeals Council upheld the decision below, with the modification that plaintiff was at fault in receiving overpayments only after January 1, 1975, and that repayment would be required only as to the 1975 portion of the overpayments. The Appeals Council made no findings or conclusions as to whether plaintiff should have been terminated or suspended. Plaintiff continued to receive SSI benefits through July, 1975.
The basic eligibility requirements for SSI recipients are set forth in § 1611 of the Social Security Act, as amended, 42 U.S.C. § 1382(a). An "eligible individual" may have no more than $ 1,500 in "resources", other than "resources excluded pursuant to section 1382b . . .". As noted Supra, plaintiff concedes that he does not meet this test of eligibility, as at all relevant times he has had more than $ 1,500 in a bank account, which excess is not excludable under the SSI definition of "resources".
Plaintiff was converted to SSI from the New York State AABD program, however, and the SSI program provides that such converted recipients' resources will be deemed not to exceed the $ 1,500 maximum set in § 1382(a) if such resources do not exceed the maximum allowed by the state plan under which they received AABD benefits in December, 1973. Id. § 1382(g); 20 C.F.R. § 416.1260.
Plaintiff contends that he falls within the coverage of this provision, and that the New York AABD plan contained no limit on the amount of savings from the benefit grant itself. Consequently, plaintiff argues, he was entitled to retain the full amount of his savings when he was converted to the SSI program, and his termination was incorrect.
Plaintiff faces two hurdles in advancing this argument. First, the state plan referred to in § 1382(g) must have been an "approved" plan within the meaning of Titles I, X, XIV, or XVI of the Social Security Act as in effect in December, 1973, and of Title 45 C.F.R. Ch. II as in effect in October, 1972. 20 C.F.R. § 416.1260. Secondly, plaintiff must have been receiving state AABD benefits under such an approved plan "correctly". 20 C.F.R. § 416.121(a). Defendant Secretary contends that while the New York plan was an "approved" plan, plaintiff has misconstrued the requirements of New York's AABD program, and has not met the second requirement. We concur.
The requirements for an "approved" state AABD plan were set forth in former § 1602(a) of the Social Security Act, 42 U.S.C. § 1382(a) (1970): One of the requisites was that the plan
(14) provide that the State agency shall, in determining need for aid to the aged, blind, or disabled, take into consideration any other income and resources of an individual claiming such aid. . . .
More precisely, the regulations provided that state plans were required to specify:
the amounts and types of real and personal property, including liquid assets, that may be reserved, i. e., retained to meet the current and future needs while the assistance is received on a continuing basis. In addition to the home, personal effects, automobile and income producing property allowed by the agency, the amount of real and personal property, including liquid assets, that can be reserved for each individual recipient shall not be in excess of Two thousand dollars (emphasis added).
45 C.F.R. § 233.20(a)(3)(i) (1972).
Plaintiff contends that these federal provisions limiting the amount of resources that an AABD recipient could accumulate were not intended to apply to savings out of benefits; further, plaintiff argues that New York construed the federal resource limit as not applying to benefits out of grants, and permitted unlimited savings from AABD assistance payments.
In support of his first contention, plaintiff cites the federal Handbook of Public Assistance Administration, which set forth the "money payment" principle of the AABD program:
The provision that assistance shall be in the form of money payments is one of several provisions in the act designed to carry out the basic principle that assistance comes to needy persons as a right. The right carries with it the individual's freedom to manage his affairs; to decide what use of his assistance check will best serve his interests; and to make his purchases through normal channels of exchange, enjoying the same rights and discharging the same responsibilities as do friends, neighbors, and other members of the community. The Social Security Administration's interpretation of "money payments' recognizes that a recipient of assistance does not, because he is in need, lose his capacity to select how, when and whether each of his needs is to be met.
Id. Part IV, § 5120. In light of this passage, plaintiff argues, the AABD program clearly was not intended to restrict in any way the disposition by recipients of their benefit payments, and this freedom must necessarily have extended to saving past benefits.
The "money payment" principle as set forth in the above passage, however, is no more than a general statement of policy; it does not address the precise question before us, and cannot be dispositive. A similar statement is found in the federal SSI regulations:
Under the federal program, payments are made under conditions that are as protective of people's dignity as possible. No restrictions, implied or otherwise, are placed on how recipients spend the Federal payments.
20 C.F.R. § 416.110(c). Nevertheless, as plaintiff concedes, savings accumulated from federal SSI benefits do count as "resources" for purposes of eligibility ...