EFFECTIVE DATE: 10/20/86
Whether Section 1127 of the Social Security Act applies to determinations or decisions made before July 1, 1981 (its effective date) but processed for payment after that date.
Section 1127 (42 U.S.C. 1320a-6); 20 C.F.R. 404.408b
NINTH (ALASKA, ARIZONA, CALIFORNIA, HAWAII, IDAHO, MONTANA, NEVADA, NORTHERN MARIANA ISLANDS, OREGON, WASHINGTON)
Fagner v. Heckler, 779 F.2d 541 (9th Cir. 1985)
On June 25, 1981, an Administrative Law Judge (ALJ) found Ms. Fagner entitled to title II disability insurance benefits and supplemental security income (SSI) benefits based on disability which began February 8, 1980. An SSI award certificate was issued on August 6, 1981, and a disability insurance benefit award certificate was issued on September 21, 1981. In the latter certificate Ms. Fagner was advised that her benefits for August 1980 through July 1981 would be withheld and that if she had received SSI benefits for that period of time, Section 1127 of the Social Security Act required that the benefits be reduced.
Ms. Fagner received $2,726.52 as payment of all SSI through August 1981. SSA subsequently determined that Ms. Fagner's retroactive disability insurance benefit payment was subject to a reduction of $2,103.46 under Section 1127 of the Social Security Act, representing the amount of SSI payments that she would not have received for the months of August 1980 through July 1981, had the Social Security Administration (SSA) paid the title II disability insurance benefits when regularly due rather than retroactively. The reduction was upheld by SSA's decision on Ms. Fagner's request for reconsideration. She then requested an administrative hearing. The ALJ held that Section 1127 of the Act applied to Ms. Fagner's case on the ground that there was no final adjudication on her claims until after July 1, 1981. The Appeals Council denied review, thereby making the ALJ's decision the final decision of the Secretary. The district court granted summary judgment for the Secretary. Ms. Fagner then appealed to the Ninth Circuit Court of Appeals.
The Court of Appeals held that the Secretary erroneously interpreted Section 1127 of the Social Security Act, and found that Ms. Fagner's right or legal title to the title II disability benefits was established on June 25, 1981, the date of the ALJ's decision, which was eight days before Section 1127 became effective. It went on to find that because no appeal or other action was taken, the June 25, 1981 decision had the effect of a final entitlement decision which was not subject to the benefit reduction provisions of Section 1127. The Court of Appeals reversed the judgment of the district court and remanded the case with instructions to enter judgment for Ms. Fagner.
Under SSA's interpretation of Section 1127 of the Social Security Act, entitlement to title II benefit payments is not actually established until an award certificate is issued. Entitlement is established only when it has been determined that a claimant meets all conditions of eligibility (e.g., insured status, disability, age). An ALJ only determines whether the requirements at issue in a claim are satisfied and not whether there is entitlement to benefit payment. All of the issues of a claim must be completely decided before payment is made.
The Court of Appeals rejected this policy observing that:
This ruling applies to claims involving an applicant for benefits under both title II and title XVI whose entitlement to title II retroactive benefits was determined prior to July 1, 1981 but whose award certificate for title II benefits was not issued until July 1, 1981 or later and who resides in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Northern Mariana Islands, Oregon or Washington at the time of the determination or decision at any level of administrative review, i.e., initial, reconsideration, administrative law judge hearing or Appeals Council review.
If, prior to July 1, 1981, such a person is determined to be entitled to retroactive title II benefits ("determined" as defined by the Court of Appeals) but his or her award certificate is not issued until July 1, 1981 or later, Section 1127 of the Social Security Act will not apply and no reduction of retroactive monthly Social Security benefits for months in which SSI payments were received will be required.
Date of Publication -- 10/20/86
 Guam has no SSI program; therefore, Section 1127 would have no effect in Guam.
 As applicable in this ruling, Section 1127 provided that where a person is found to be entitled to retroactive title II benefits for a particular period and has received SSI benefits for the same period, the title II benefits must be reduced by an amount equal to the amount of SSI benefits which would not have been paid if the title II benefits had been paid when regularly due rather than retroactively.
 Under section 501(a) of Pub. L. 96-265, section 1127 of the Act is applicable only to payments of title II benefits for which entitlement is "determined on or after July 1, 1981."
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