New Jersey Federal Court Grants Request for Waiver of Social Security Overpayment

In the April 28, 2014 Karlson v. Colvin decision, New Jersey’s Federal District Court reversed an Administrative Law Judge and granted a Social Security recipient’s request for waiver of his Social Security Disability (“SSD”) overpayment. Karlson v. Colvin, 2014 U.S. Dist. LEXIS 58942 (D.N.J. 2014)

Under the Social Security Act, if an individual incorrectly receives an overpayment of benefits, recovery of that overpayment is generally required from the individual. However, the individual may seek a waiver of recovery of the overpayment where the individual is “(1) without fault and (2) recovery would defeat the purposes of [the Social Security Act] or would be against equity and good conscience.” Id. at *7.

Gene Karlson had been receiving SSD benefits since 2002. In 2007, he began working until he was laid off in 2008. During this time period, Mr. Karlson made numerous telephone calls to the Social Security Administration (“SSA”) to inform them that he had begun working. He also sent the SSA two letters advising that he was employed; he even sent his paychecks to the SSA. He was told by SSA representatives to keep his SSD checks unless otherwise notified, and that he would not be billed later for those payments.

However, in January 2009, Mr. Karlson was notified that he should not have received SSD after his “trial work period” had ended, and that he had been overpaid from February through August 2008. SSA sought to recover the $11,902.80 overpayment from Mr. Karlson.

After he requested a waiver of collection of the overpayment and an in-person conference was held, SSA notified Mr. Karlson that, although they had determined that he was not at fault in causing the overpayment, the waiver was being denied because he could afford to repay the $11,902.80 overpayment.

Mr. Karlson appealed the decision to an Administrative Law Judge (“ALJ”), who found, contrary to SSA’s own finding of no fault, that Mr. Karlson was at fault in the overpayment.

On appeal of the ALJ decision, the District Court undertook a two-step analysis. First, with respect to the “fault” issue, given the substantial efforts Mr. Karlson had made to keep SSA informed of his employment, the District Court rejected the ALJ’s determination that he had been at fault in the overpayment.

Second, the District Court addressed whether requiring repayment “would defeat the purpose of the [Social Security] Act or be against equity and good conscience.” Id. at *17. Because the purpose of the Act would be defeated if overpayment deprives an individual of income required for living expenses, the court analyzed Mr. Karlson’s expenses, and found that repayment would deprive him of income necessary to meet those expenses. Moreover, given that he had made “extensive efforts to inform the SSA that he had returned to work,” and that an SSA representative had assured him that they would not later seek repayment, the court found that “it would be ‘against equity and good conscience’ to mandate that plaintiff repay the overpayment.” Id. at 21.

A copy of the Karlson v. Colvin decision can be found here: Karlson v. Colvin, 2014 U.S. Dist. LEXIS 58942 (D.N.J. 2014)

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