EFFECTIVE/PUBLICATION DATE: 07/16/90
Whether a dependent's portion of an augmented Department of Veterans Affairs (VA) benefit paid directly to a veteran or a veteran's surviving spouse [hereinafter called the designated beneficiary] may be counted as unearned income to the dependent in calculating the dependent's Supplemental Security Income (SSI) benefits.
Section 1612(a)(2)(B) of the Social Security Act (42 U.S.C. 1382a); 20 C.F.R. 416.1100-1182; SSR 82-31, Policy Statement 1.
NINTH (ALASKA, ARIZONA, CALIFORNIA, HAWAII, IDAHO, MONTANA, NEVADA, NORTHERN MARIANA ISLANDS, OREGON, WASHINGTON)
Paxton v. Secretary of Health and Human Services, 856 F.2d 1352 (9th Cir. 1988)
This Ruling applies to determinations or decisions at all administrative levels (i.e., initial, reconsideration, Administrative Law Judge hearing and Appeals Council review).
This Ruling supersedes Policy Statement 1 of Social Security Ruling 82-31 (SSR 82-31) as it relates to determining eligibility and computing SSI payments for dependents, for cases arising in the Ninth Circuit only.
Florence Paxton receives SSI benefits as a disabled individual. Her husband receives a VA pension, based on need, and is ineligible for SSI. Mr. Paxton's VA benefit is augmented to provide support for his dependent spouse, Florence and their minor child.
Until 1981, the entire VA benefit was treated as Mr. Paxton's income. None of Mr. Paxton's VA benefit was counted as income to Mrs. Paxton. In 1981, the Ninth Circuit held in Whaley v. Schweiker, 663 F.2d 871, 875 (9th Cir. 1981), ". . . that the portion of increased pension benefits paid to a veteran for the support of his dependent children does not constitute income to the veteran for the purpose of computing his SSI benefits." In response to Whaley and other court decisions, the Commissioner changed the policy of how VA benefits are counted as income for SSI purposes, effective November 1, 1981.
The policy change, published as Policy Statement 1 of SSR 82-31, provided that a dependent's portion of an augmented VA benefit, i.e., that portion paid directly to the designated beneficiary for support of the veteran's dependent(s), (also referred to as the augmented portion) is not counted as income to the designated beneficiary but as unearned income to the dependent(s). This meant that Mrs. Paxton's SSI benefit would be reduced because she now had countable income from the VA benefit paid to her spouse. The new policy was applied to Mrs. Paxton in 1984, causing a reduction in her SSI benefit amount and creating an overpayment because of excess SSI benefits received from 1982 to 1984. Mrs. Paxton appealed this decision.
After a hearing, the Administrative Law Judge (ALJ) found that Mrs. Paxton's SSI benefits should have been reduced by the amount of the dependents' portion attributable to her from her husband's VA benefit. The Appeals Council denied Mrs. Paxton's request for review. She appealed to the United States District Court for the Eastern District of California, which affirmed the Secretary's decision. Mrs. Paxton then appealed to the United States Court of Appeals for the Ninth Circuit.
The Court of Appeals disagreed with the Secretary's interpretation of Whaley and found that the current policy, as stated in Policy Statement 1 of SSR 82-31, is not supported by either the Whaley decision or the SSI regulations. The court examined 20 C.F.R. Sections 416.1100-416.1182 (1988) (Subpart K-Income) and found that the current regulations "reveal that the dependent's portion of VA benefits may never be counted directly as unearned income to the dependent, and may only sometimes indirectly be deemed or counted as in-kind income to the dependent."
Specifically, the court interpreted Section 416.1103, which provides that when someone other than the SSI claimant uses money to pay the claimant's bills, the money is not counted directly as unearned income to the claimant. Rather, the food, clothing, or shelter which the claimant receives as a result of the payment may be in-kind income to the claimant. The court concluded that under Section 416.1103 the dependent's portion of an augmented VA benefit may not be counted as unearned income to the dependent and used to reduce the dependent's SSI benefits. Part of the court's rationale is that the designated beneficiary is the only one who received the benefit directly and therefore, it is inappropriate to count a dependent's portion as unearned income to the dependent. In addition, the court reasoned that how each designated beneficiary handles the VA payment should not affect the status of that income for SSI purposes. Therefore, how the augmented portion is treated should not depend on whether or not the designated beneficiary gives the dependent a cash allowance or income in-kind. The court's decision indicates that the regulations permit a VA dependent's portion to be counted as in-kind income to the dependent in some cases.
The court went on to state, however, that when the dependent's portion of a VA benefit, based on need, is treated as in-kind income, that Section 416.1142, which precludes the counting of in-kind support and maintenance between members of a public assistance household applies. Therefore, in the case of a public assistance household, a dependent's portion of a VA benefit is not countable even indirectly to the dependent.
Under Social Security policy expressed in SSR 82-31, Policy Statement 1, the portion of the augmented VA benefit attributable to a dependent is counted as unearned income to the dependent. Therefore, SSA treats the augmented portion of a VA benefit as if it were paid directly to the dependent(s). In Paxton, the Ninth Circuit held that a dependent's portion of an augmented VA benefit may not be counted directly as unearned income to the dependent.
This Ruling applies only to applicants or recipients residing 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.
In cases where an individual receives an augmented VA benefit, the augmented portion of the VA benefit (that is included in the VA payment made to the designated beneficiary) is not to be counted as income to the dependent(s).
However, this ruling does not apply to cases in which the designated beneficiary and dependent are members of an SSI eligible couple, (i.e., a couple in which both spouses are eligible to receive SSI) and no one member of the couple is subject to the $30 payment limit. In eligible couple cases, the couple's income is counted as a unit to determine the couple's SSI eligibility and benefit amount. It is unnecessary to determine whether income is received or attributable to one member of the couple or the other. Accordingly, the Paxton decision does not apply to cases involving eligible couples. Of course, when there are additional dependents on whose behalf the VA benefit is augmented, the augmented portion attributable to the additional dependents may not be counted when determining the amount attributable to the SSI couple nor may that portion be counted to the other dependents.
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