|Date: September 1, 1994|
|TO:||STATE AGENCIES ADMINISTERING APPROVED PUBLIC
ASSISTANCE PROGRAMS AND OTHER INTERESTED PARTIES AND ORGANIZATIONS
|SUBJECT:||CLARIFICATION OF QUESTIONS RAISED REGARDING ACF-AT-94-11
(INSTRUCTION ON PRIORITY ORDER OF RECOVERY ACTION AGAINST OVERPAID RECIPIENTS)
|APPLICABILITY:||Aid to Families with Dependent Children (AFDC) Program
|Sections 402(a)(22), 402(a)(33), and 406(a) of the Social
Security Act ("the Act"); Federal regulations at 45 C.F.R. §§
233.20(a)(13); 237.50(b); 233.90(c)(1)(v)(A)(1)-(4); 47 Fed. Reg. 5671-5672
(1982); ACF-AT-91-33; ACF-AT-94-11.
|PURPOSE:||To clarify questions raised regarding ACF-AT-94-11 which
states ACF policy on recovery of overpayments by States under the AFDC program.
|BACKGROUND:||ACF-AT-94-11 instructs States on the priority order of recovery
action against overpaid AFDC recipients. Specifically, States are told to
first "look to the caretaker relative recipient" to recover the
overpayment, because that individual generally is the "individual responsible
for the overpayment", (ie., the individual who receives and administers
the AFDC payment.) If, however, the caretaker relative recipient is "unavailable
due to death or disappearance" then the State must "seek recovery
from members of the overpaid assistance unit (or their current assistance
units)." Since ACF-AT-94-11 was issued policy questions have arisen
concerning terms that were used in the action transmittal ("AT").
This AT addresses these questions.
As it is used in ACF-AT-94-11, what is the definition
of the term "caretaker relative?"
The term "caretaker relative" has long been used to refer to an individual,
identified in section 406(a) of the Act, with whom a needy child must
be living in order to qualify as a "dependent child." A caretaker
relative may also be an AFDC
As set forth at 45 C.F.R. § 233.90(c)(1)(v)(A)(1)-(4), a caretaker relative may be:
"(1) Any blood relative, including those of half-blood, and including
first cousins, nephews, or nieces, and persons of preceding generations
as denoted by prefixes of grand, great, or great-great.
ACF-AT-91-33 further clarifies that the "caretaker relative"
concept includes "any relation by blood, marriage or adoption who
is within the fifth degree of kinship to the dependent child." Degree
of kinship is determined by using the civil law method which has been
adopted, by statute or court decision, in most jurisdictions.
What does the term "responsible" mean as it is used in ACF-At-94-11?
"Responsible" 1 as used in reference to overpayment recovery refers to the management and administration of the AFDC grant. Responsible does not mean that the overpayment was the fault or error of the individual. This is a critical distinction since section 402(a)(22) of the Act does not limit overpayment recovery to such situations, but rather requires States "to correct any overpayment." (emphasis added). Moreover, the preamble to 45 C.F.R. § 233.20(a)(13), the implementing regulation, specifically rejected a suggestion that States not be required to recover overpayments resulting from administrative errors as inconsistent with the statute. See 47 Fed. Reg. 5648, 5672 (1982).
Therefore, when ACF-AT-94-11 provides that States must seek recovery "from 'the individual responsible for the overpayment' (or from that individual's current assistance unit)," this means that States are required to pursue collection of the overpayment from the person who managed and administered the AFDC funds, provided, that this individual was also a recipient (i.e., a member of the overpaid assistance unit). There is, however, no obligation to repay the overpayment if the individual responsible for managing and administering the grant was not a member of the overpaid assistance unit as this person was not an overpaid individual since s/he did not receive the benefit of the overpayment. As ACF-AT-94-11 states "if the caretaker relative was not an overpaid individual because she was not a member of an assistance unit on whose behalf she received AFDC payments, the State will be required to seek recovery from members of the overpaid assistance unit (or their current assistance units)."
Thus, while in most circumstances the individual responsible for managing and administering the grant will be the caretaker relative recipient, if this is not the case, as when the individual responsible for controlling the grant was not a recipient (e.g., a judicially appointed payee, as provided for in § 1111 of the Act, or a caretaker relative who was not a member of the overpaid unit) there can be no recovery from this individual and overpayment recovery will have to be pursued from the overpaid individuals in the overpaid assistant unit.
|QUESTION (3):||As used in ACF-AT-94-11, what is the definition of the phrase
"cannot be located?"
ACF-AT-94-11 states that when 45 C.F.R §§233.20(a)(13)(i)(A)(1) and 233.20(a)(13)(i)(B) read together "they require a State to look to the caretaker relative recipient in the overpaid assistance unit (or the current assistance unit of which she is a member) for purposes of collecting any overpayment for which she was responsible." (emphasis added).
Thus the sole purpose of locating the caretaker relative recipient is so the State may collect the overpayment. Therefore, the term "locate" is interpreted to mean that: (1) the State has identified the physical whereabouts of the caretaker relative; and (2)(a) the State must be able to obtain a repayment/recoupment from the AFDC grant, or (b) the State must be able to effectuate legal process, 2 if necessary, to collect the overpayment from the caretaker relative recipient. For example, if a State determines that "A" (the caretaker relative recipient) is residing in Country X and is not a current AFDC recipient nor can the State effectuate legal process against her, then "A" is not located.
As for the procedures used in locating the caretaker relative recipient 45 C.F.R §233.20 (a)(13)(i)(A) requires a State to "take all reasonable steps necessary to promptly correct any overpayment" and location efforts must begin "by the end of the quarter following the quarter in which the overpayment is first identified." 45 C.F.R §233.20(a)(13)(i)(E). Moreover, 45 C.F.R §233.20(a)(13)(iv) provides "[i]n locating former recipients who have outstanding overpayments the State should use appropriate data sources such as State unemployment insurance files, State Department of Revenue information from tax returns, State automobile registration, Bendex, and other files relating to current or former recipients." 3
What is appropriate regarding location searches in particular cases is
left to State discretion, so long as the State makes all reasonable efforts,
as defined by the regulations, to locate the caretaker relative recipient
and utilizes appropriate data sources such as those identified above.
If the State has done this then it has fulfilled Federal requirements.
|QUESTION (4):||Are there any time limits regarding how long a State may
continue to search for the caretaker relative recipient?
|ANSWER:||No. There are no Federal time limits as to how long a State
may continue to search for the caretaker relative recipient. In the preamble
to 45 C.F.R §233.20(a)(13), the suggestion of a time limit was specifically
rejected. See 47 Fed. Reg. 5671 (1982).
|QUESTION (5):||When ACF-AT-94-11 refers to a "discharge" what
does this mean?
As discussed above, the statute requires the State to "take all necessary steps to correct any overpayment" and enumerates the methods by which the overpayment may be recovered. See section §402(a)(22) of the Act. Implicit in the statute is the concept of "discharge." "Discharge" means that there has been a "permanent release" of the obligation to repay the overpayment. "Discharge" (permanent release) is accomplished, with respect to an overpayment, once the overpayment is fully recovered. When this occurs all of the overpaid individuals are "discharged" (permanently released) from any further repayment obligation regardless of the extent to which they shared in the repayment of the debt since the statute does not mandate that the debt recovery be pro-rated among the overpaid individuals, but rather focuses solely on the recovery of the overpayment. Thus, the full recovery of the overpayment is the exclusive method, under the statute, for all overpaid individuals to be "discharged" (permanently released) from having to repay the overpayment.
Therefore when ACF-AT-94-11 refers to the "discharge" of certain individuals under various circumstances, it is understood that there may be no "discharge" (permanent release), under the statute, of the duty to repay the overpayment until it has been collected by the State.
For example, when 45 C.F.R §233.20(a)(13)(i)(A)(1) and 45 C.F.R
§233.20(a)(13)(i)(B) are read together, we believe that a reading
to require a State to look first to the caretaker relative recipient in
the overpaid assistance unit (or the current assistance unit of which
she is a member) for purposes of collecting any overpayment for which
she was responsible best harmonizes their provisions. Thus, in this example,
a "discharge" of the other overpaid individuals would be premised,
in application, upon the existence of a person from whom the State has
the legal ability to collect the overpayment and from whom the State does
secure full recovery of the overpayment.5
If a deceased caretaker relative recipient has an estate, does the State have an obligation to file a claim against the estate if the time for filing a claim has not run?
As noted in the answer to question five, when 45 C.F.R §§233.20(a)(13)(i)(A)(1) and 233.20(a)(13)(i)(B) are read together, we believe that a reading to require a State to look first to the caretaker relative recipient in the overpaid assistance unit (or the current assistance unit of which she is a member) for purposes of collecting any overpayment for which she was responsible best harmonizes their provisions. Only when the caretaker relative recipient cannot be located, as defined in answer three,6 may the State seek to recover from the other overpaid individuals in the assistance unit.
In many circumstances, when the caretaker relative recipient is deceased there is no estate to collect from or the time for filing a claim against the estate has expired. If, however, the State should become aware of the caretaker relative recipient's demise in time to file a claim and this is allowed under State law, then, under these circumstances, the State has an obligation to file a claim against the estate. This is based on the regulatory preference for overpayment collection from the caretaker relative recipient.
|QUESTION (7):||When a caretaker relative recipient cannot be located, as
defined in answer three, what are the repayment obligations of the other
members of the overpaid assistance unit?
|ANSWER:||ACF-AT-94-11 defines every member of the overpaid assistance
unit as an "overpaid individual". Hence, every member of the overpaid
assistance unit has an obligation to repay the overpayment. When the State
determines that the caretaker relative recipient cannot be located, as defined
in answer three, the State then has the obligation to recover the overpayment
but has the discretion to determine the priority for recovering the overpayment
from the member(s) of the overpaid assistance unit. There is no priority
order among the overpaid members in these circumstances. For example, overpayment
recovery can occur in sequence against only one member at a time, moving
from member to member until the debt is recovered; or the collection can
be concurrent, collecting from all members at once.
|INQUIRIES TO:||ACF Regional Administrators.
Office of Family Assistance
1"Responsible," as defined above, should not be confused with the term "responsibility" which is used on page two of ACF-AT-94-11. Responsibility means the obligation to repay the overpayment that all members of an overpaid assistance unit have.
2 The phrase "effectuate legal process" refers to State law remedies for collecting debts. In effectuating legal process, States are expected to fully pursue all State law remedies in order to recover the overpayment.
3 The list of "appropriate data sources" set forth at 45 C.F.R. § 233.20(a)(13)(iv) is not exclusive and States may also consult other, similar sources during the course of its location efforts for purposes of overpayment recovery. For instance, location efforts under Title IV-A of the Act, may in practical application parallel location efforts in Title IV-D of the Act, but as these are distinct programs, any actual use of Title IV-D resources are subject to the applicable governing statutes and implementing regulations of the two programs. For instance, the impact of the different governing statutes of the two programs may be illustrated by looking at the Federal Parent Locator Service. 42 U.S.C. § 653(a) specifies that this Service may only be used " to locate . . . [an absent] parent for the purpose of enforcing child support obligations against such parent." Hence, use of the Federal Parent Locator Service for Title IV-A overpayment location efforts would be prohibited.
4It should be noted that the above analysis is premised on the overpayment being at least $35. In situations where the caretaker relative recipient is no longer receiving AFDC and the overpayment is less than $35, and fraud is not involved, the State may elect not to attempt to recover the overpayment (unless the individual subsequently becomes a recipient) and, thus, the above location procedures would not be applicable. § 402(a)(22) of the Act; 45 C.F.R. §233.20(a)(13)(vi).
5 If a State has fully pursued all available
overpayment recovery options, until it is determined that recovery of the overpayment
cannot be obtained from the caretaker relative recipient, overpayment collection
activities against the other overpaid members are suspended (although not "discharged"
(permanently released) as this cannot be effected, under the statute, until
the overpayment is recovered in full). For example, if the State secures a judgment
against "A," the overpaid caretaker relative recipient, as long as
the judgment is in effect so that the State may enforce it, it does not matter
that at the time the judgment is obtained "A" has no assets from which
to recover the overpayment. In addition, as long as this judgment is in effect,
collection activities against the other overpaid individuals, "A"'s
children "B", "C" and "D", are suspended until:
(1) "A" acquires assets so that the judgment is enforced and the full
overpayment recovered, and, hence, the obligation of "B,""C,"
and "D'" to repay the overpayment is "discharged"; or (2)
the judgment is no longer legally enforceable (e.g. for example, when "A"
dies and leaves insufficient or no assets from which to collect the overpayment
or when the debt has been dismissed by a bankruptcy court) and, hence, the State
is required to pursue collection activities from "B," "C,"
and "D" as their repayment obligation has not been "discharged"
since the overpayment has not been recovered.
However, it should be noted, ACF does not object to a State applying a time period, set forth in existing State debt collection procedures, after which a debt under the AFDC program would no longer be subject to active collection attempts on the ground that it is no longer cost effective to continue recovery efforts. 45 CFR § 233.20(a)(13)(vi). The State would reclassify the debt from "account receivable" to "inactive status". Thereafter, no active collection activities need be taken to locate the caretaker relative or any other overpaid individuals. (Note: An Information Memorandum further addressing this subject will be released in the near future.)
If the caretaker relative, though, again becomes an AFDC recipient and had not previously been declared bankrupt, collection efforts against him/her would need to be resumed. If the caretaker relative becomes an AFDC recipient, but had been previously declared bankrupt, the debt under the AFDC program would need to be reinstituted by the State as an account receivable if any of the remaining overpaid individuals were currently receiving AFDC. If only the remaining overpaid individuals become AFDC recipients, the State may not seek recovery from them unless the debt against the caretaker relative had been dismissed by a bankruptcy court, or he/she could not otherwise be located.
ACF does not require that an inactive debt be reinstituted as an account receivable simply because of a new source of income to an overpaid former recipient. However, if a State chooses to reinstitute an inactive debt as an account receivable, it will still be subject to the priority order set forth in this AT.
645 C.F.R. § 233.20(a)(13)(vi) also provides for an additional narrow exception to the regulatory mandate to seek recovery of the overpayment from the caretaker relative recipient. Namely, when the caretaker relative recipient is no longer receiving AFDC and the overpayment was not caused by the recipient's fraud then (1) if the debt is less than $35 the State may elect not recover from the individual; or (2) if the debt is $35 or more and the State has made reasonable efforts, as defined by the regulation, to recover the overpayment the State may determine when it is no longer cost effective to continue overpayment recovery from the individual. Should the caretaker relative recipient return to the AFDC rolls before the debt has been fully repaid by another individual, then the State would be required to recover the remainder of the overpayment from him/her. See footnote 5.