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WHITE v. BOWEN

May 23, 1986

WILLIAM R. WHITE, MADELEINE HYMAN, JUAN ROSARIO, MARTHA BESS, RAMON VALLE, and CONSTANCE MIRAGLIA, individually and on behalf of all others similarly situated, Plaintiffs,
v.
OTIS R. BOWEN,1 as Secretary of the Department of Health and Human Services, Defendant. CAROLYN CLEE, SHARON GRANT, sole heirs of HAROLD JOHNSON, deceased, Plaintiffs, v. OTIS R. BOWEN, as Secretary of the Department of Health and Human Services, Defendant. GEORGE ORTEGA, Plaintiff, v. The Secretary of the Department of Health and Human Services, Defendant.



The opinion of the court was delivered by: CARTER

CARTER, District Judge

On October 24, 1985, the court, in an opinion with which familiarity is assumed, certified this case as a class action. White v. Heckler, 108 F.R.D. 85 (S.D.N.Y. 1985) (Carter, J.). Clee v. Heckler and Ortega v. Secretary were consolidated with this case by Stipulation and Order dated April 1, 1986. The case is now before the court on defendant's motion for judgment on the pleadings and plaintiffs' motion for partial summary judgment.

 Facts

 Plaintiff class consists of "all persons residing in New York State who concurrently applied for, or were concurrently determined eligible for, disability benefits under Titles II and XVI of the Social Security Act ["the Act"] and whose retroactive Title II benefits were or will be reduced by defendant because defendant has paid or will pay to a local social services agency an amount alleged to be the benefit recipient's retroactive SSI benefits." The class challenges the way in which the Secretary calculates its retroactive benefits and in a multi-pronged attack asserts that the Secretary's method of calculation violates federal regulations, i.e. 20 C.F.R. §§ 404.408 and 404.1123(d); the Social Security Act, 42 U.S.C. §§ 407 and 1320a-6; the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551 et seq.; the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552; the Federal Register Act, 44 U.S.C. § 1501; and the due process clause of the Fifth Amendment to the United States Constitution.

 A. The Statutory Scheme

 Each of the class members is a disabled worker who was found eligible for Old Age, Survivors and Disability Insurance ("OASDI") benefits under Title II of the Act, 42 U.S.C. §§ 401 et sec. At roughly the same time, each was also found eligible for Supplemental Security Income ("SSI") under Title XVI of the Act, 42 U.S.C. §§ 1381 et seq. OASDI and SSI share the same definition of disability, but each imposes a further prerequisite to eligibility. OASDI is an insurance program; OASDI claimants must be contributors to the social security trust fund, either through their own or through a family member's past earnings in covered employment. SSI, on the other hand, is a need-based program; SSI claimants must have income or resources that fall below a minimum subsistence level. 42 U.S.C. § 1382. The two programs differ in one other relevant way. OASDI benefits cannot be assigned to any creditor, 42 U.S.C. § 407, including state welfare agencies, Philpott v. Essex County Welfare Board, 409 U.S. 413, 416, 34 L. Ed. 2d 608, 93 S. Ct. 590 (1973). SSI benefits may, with the claimant's written permission, be paid to a state in order to reimburse it "for interim assistance furnished on behalf of the individual 42 U.S.C. § 1383(g)(1).

 Benefits under both OASDI and SSI are awarded retroactively from the date eligibility is determined to the date of application. In addition, OASDI benefits may be awarded for up to twelve months prior to application. 20 C.F.R. § 404.621. Claimants receive their retroactive benefits in one lump-sum payment which, given the delay in processing claims, may reflect many months of benefits. These checks are counted as income for the purposes of SSI eligibility only in the month in which they are received. 42 U.S.C. § 1382(c); 20 C.F.R. §§ 416.1121(a) and 416.1123(a). Prior to 1981, this scheme generated a windfall for all SSI claimants eligible to receive retroactive OASDI benefits, including concurrent applicants. For the purpose of illustrating this windfall, assume a disabled claimant who received SSI benefits for months in which he or she would also be eligible to receive OASDI benefits. If the OASDI payments that the claimant is entitled to receive were paid in those months, the claimant's SSI benefits would have been lower or even non-existent, because the OASDI payments would be included in the claimant's income. The windfall was the SSI benefits that claimants would not have received but for the delay in OASDI payments. So long as retroactive SSI was calculated without regard to OASDI, concurrent applicants would receive the same windfall.

 In 1980, Congress tried to close this loophole by amending the Act "to provide that an individual's entitlement under [SSI and OASDI] shall be considered as a totality S.Rep. No. 96-408, 96th Cong., 2d Sess. 78 (1979), reprinted at 1980 U.S.Code Cong. & Ad.News 1277 at 1356. The 1980 enactment ("the windfall offset statute"), Pub.L. 96-265, Title V, § 501(a), 94 Stat. 469, codified at 42 U.S.C. § 1320a-6, *fn1" allows SSI payments to be offset from the OASDI retroactive payment. As will be discussed more fully below, this bill did not explicitly cover the situation of a claimant who concurrently applied for SSI and OASDI benefits. The Secretary, however, applied the windfall offset statute to concurrent applications. 20 C.F.R. § 404.408 Binn. 1984, Congress revised the windfall offset statute. Pub.L. 98-369, Title VI, § 2615(a), 98 Stat. 1132, codified at 42 U.S.C. § 1320a-6. The new windfall offset statute explicitly covers concurrent applicants. *fn2"

 B. The Challenged Procedure

 While awaiting their first federal benefit checks, the members of the plaintiff class were forced to subsist on state welfare payments. Plaintiffs' 3(g) Statement, P 5. Once they were found eligible for SSI and OASDI, the Secretary computed their benefits as follows. *fn3" First, the SSI payment was calculated as though the claimant were not eligible for OASDI. Then, the SSI payment was sent to the state welfare agency. The Secretary then calculated each claimant's OASDI, subtracting the full sum of SSI that had been forwarded to the state welfare agency. By means of this calculation, SSI benefits that the claimants never received were subtracted from their OASDI payment, and retained by state welfare agencies. This procedure is mandated by an internal memorandum, Program Operations Manual System, ("POMS"), §§ GN2610.005 and GN2610.045. POMS is not published in the Federal Register; it is, however, available to the public for photocopying.

 Discussion

 The practice at issue in this case has already been scrutinized by three Courts of Appeal and one court in this Circuit. See McKenzie v. Bowen, F.2d , No. 85-5103 (8th Cir. March 28, 1986); Burnett v. Heckler, 756 F.2d 621 (8th Cir. 1985); Wheeler v. Heckler, F.2d , No. 85-5435 (3d Cir. March 27, 1986); Detson v. Schweiker, 788 F.2d 372 (6th Cir. 1986); Gallo v. Heckler, 600 F. Supp. 1513 (E.D.N.Y. 1985). Each of these courts has upheld the practice at issue here; McKenzie v. Bowen, supra, sustained it against an identical challenge. We see no reason to depart from these rulings.

 We begin by looking at the words of the 1980 statute. Plaintiffs make much of the words "were paid" in the second subsection, interpreting them to mean that the windfall offset statute applies only to persons who actually received SSI benefits (i.e. does not apply to concurrent applicants). At best the statute is ambivalent on this score, because it also speaks of individuals who received payments "for" one or more months, rather than "in" those months. Thus, the statute is open to the interpretation that the Secretary has given it in 20 C.F.R. § 404.408b, applying it to concurrent applicants. See Wheeler, supra, slip op. at 9. Of course, we are bound to uphold the Secretary's interpretation of the Act so long as it is reasonable. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). Given the lack of precision in the wording of the original statute, we cannot say that the Secretary's interpretation was unreasonable. The Secretary did not violate the original windfall offset statute by applying it to concurrent applicants.

 The amended statute explicitly covers concurrent applicants. Therefore, the challenged practice violates § 1320a-6 neither as originally passed, nor as amended. The question then becomes, does the practice of calculating SSI first in determining retroactive benefits violate § 407 of the Act, the anti-assignment provision? We join with the chorus of other courts that have addressed this issue, and hold that it does not. ...


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