2017 ssi update - amazon s3 · 3/13/2017 3 federal regulations - attorney rules of conduct 20 cfr...

3/13/2017

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2017 SSI Update

David Lillesand, Esq.

Lillesand, Wolasky, Waks & Hitchcock, P.L.

[email protected]

Materials

Title XVI SSI Update as of March 4, 2017

• 2016 Statutory Changes - BBA and SNT Fairness

Act

• 2016 Federal Regulations - Attorney Rules of

Conduct

• 2016-2017 Court Decisions - Eight Federal and

Seven State, including four state supreme court cases

• 2017 New SNT POMS and non-SNT POMS

• 2016-2017 RCC Precedents – 22 dealing with SNTs

mailto:[email protected]

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Sources of SSI Law

The largest law library of original materials is available free, online:

• “SSI Law and Regulations Finder—2016 Edition” (https://www.ssa.gov/ssi/law-regs-finder.htm)

• SSA materials - Statute, regulations, rulings, POMS, HALLEX, RCC precedents, plus helpful materials –Spotlights series, the SSA Handbook, and our “Understanding SSI” book, and more.

• Caselaw – all federal cases reported online, but not by SSA itself [I like http://Scholar.Google.com ]

2017 SSI Benefits (0.3%) COLA)

Federal Benefit Rate (FBR) SSI payment

amounts for 2017:

$735 for Individual/Child

$1,103 for Couple

Countable Resources (assets) limits:

$2,000 Individual

$3,000 Couple

http://scholar.google.com/

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Federal Regulations - Attorney

Rules of Conduct 20 CFR §416.1540 Rules of conduct for attorneys

(b) Affirmative duties:

1. Act with reasonable promptness

2. Assist the claimant in complying with SSA requests

3. Conduct his or her dealings in a manner that furthers the efficient, fair and orderly conduct of the administrative decision-making process, including duties to:

i. Provide competent representation to a claimant

ii. Act with reasonable diligence and promptness in representing a claimant

Federal Regulations - Attorney

Rules of Conduct

20 CFR §416.1540 Rules of conduct for attorneys

(c) Prohibited Actions…

2. Charge from any source, directly or indirectly, any fee for services in violation of law

3. Make or present false or misleading oral or written statements

9. Refuse to comply with any of our rules or regulations

10. Suggest, assist, or direct another person to violate our rules

11. Advise any claimant or beneficiary not to comply with any of our rules

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Statutory Changes - BBA

Bipartisan Budget Act of 2015, Public L. 114-74

1. Expands criminal penalties for attorneys and others:

• Creates new felony for “conspiracy to commit Social Security fraud.”

• Increases from 5 to 10 years the time in prison for attorneys and others “who make or cause to be made a false statement or misrepresentation.”

2. Expands the CDI (Cooperative Disability Investigation) unitswhich will be established in all 50 states by October 2022 (Sec. 811)

Statutory Changes - BBA

Bipartisan Budget Act of 2015, Public L. 114-74

3. Requires SSA to test a benefit offset starting at or below the current trial work month level ($780 in 2015) (Sec. 823).

4. Presumption that earnings are earned when paid (Sec. 825).

5. Electronic reporting of earnings (Sec. 826).

6. Reallocates Old Age and Survivors Trust Funds with the Disability Insurance Trust Funds to keep both solvent through 2034 (Sec. 833)

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Statutory Changes –

SNTFA

Special Needs Trust Fairness Act

SEC. 2. FAIRNESS IN MEDICAID SUPPLEMENTAL NEEDS TRUSTS.

(a) IN GENERAL.—Section 1917(d)(4)(A) of the Social Security Act (42 U.S.C.

1396p(d)(4)(A)) is amended by inserting “the individual,” after “for the benefit of such

individual by”.

(b) EFFECTIVE DATE .—The amendment made by subsection (a) shall apply to trusts

established on or after the date of the enactment of this Act.

Statutory Changes -

SNTFASpecial Needs Trust Fairness Act

Congressional Research Service’s unfortunate description:

“Amends title XIX (Medicaid) of the Social Security Act with respect to the treatment of revocable trusts for the benefit of an individual for purposes of meeting income requirements for Medicaid coverage.

“Extends the supplemental needs trust exemption from treatment of a trust as resources available to the individual to supplemental needs trusts for Medicaid beneficiaries established by those beneficiaries.”

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Intro to Federal Court Decisions -

SSA Processing of Claims

Seven steps of application and appeals.

The FOUR SSA administrative review steps:

1. Initial determination

2. Reconsideration

3. Federal Administrative Law Judge (ALJ) Hearing

4. SSA Appeals Council review on the record

Federal Court – SSA Appeals

Then claimant has THREE levels of federal court

review:

5. United States District Court

6. United States Circuit Court of Appeals

7. United States Supreme Court

We’re now going to talk about federal court cases

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Federal Court Decisions -

2016

Newsome V. National Casualty Company, Unpublished decision, U. S. Circuit Court of Appeals, Fifth Circuit

• Blind man became quadriplegic in auto accident, DPOA agent hired PI attorney

• PI Attorney and judge secretly create SNT for $3.8 million the night before the settlement

• Plaintiff ’s subsequent attorneys failed to appeal SNT order in time, file Rule 60(b) Motion and lose


2016

D.U. v. Rhoades, U. S. Circuit Court of Appeals, Seventh

Circuit

• Medicaid Waiver recipient’s services were cut, files appeal in

federal court seeking preliminary injunction to continue

services pending final hearing

• Injunction denied because SNT money, even if exhausted,

will be replaced by money judgment

• Court notes that chance of winning depends not on proving

that nursing services are helpful, but that they are

“medically necessary”

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2016

Corporation of Guardianship v. BrajerU. S. District Court, M.D. North Carolina

• E-Ferol class action where federal judge sought to

have all medical liens filed prior to settlement

• North Carolina Medicaid didn’t file

• Client got settlement, then died, and fight is over

the Medicaid lien amount - $696k vs $78k


2016

Corporation of Guardianship v. Brajer, cont.

• Issue – repay Medicaid from date of SNT or for life

• Plaintiff sent check for $77,587.91 (full amount)

with notation “Full Payment in Satisfaction of

Disputed Claim”

• North Carolina cashed the check

• Court set case for trial – (Tune in later)

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2016

Orr v. Colvin, USDC E.D. California

• Defective SNT but attorney wins at ALJ hearing 9/2013

• Appeals Council doesn’t timely appeal, but re-opens case 5 months later in 2/2014, then claimant appeals

• Federal judge rules that trust was defective, but forces SSA to give 90 day period to amend under Early Termination POMS

• Note: the second defect (funeral expenses) did NOT have a 90 day amendment right.


2016

Lessons from Orr v. Colvin – When is an

ALJ decision final?

SSA Rules state that appeals must be filed within 65 days

But “Re-opening” can occur by the Appeals Council within 2

years if “good cause” is found:

(1) New and material evidence is furnished;

(2) A clerical error was made; or

(3) The evidence that was considered in making the determination

or decision clearly shows on its face that an error was made.

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2016

Nat’l Found. v. Reese, USDC S.D. Ind.

• Pooled SNT accepts $250k from beneficiary who dies 5 weeks later with $240k in SNT and no Medicaid lien

• Trustee decides to keep the $240k alleging that the Joinder Agreement lists the deceased beneficiary as remainder beneficiary

• PI atty had referred cl to PSNT and PI paralegal witnessed the signing of Joinder Agreement


2016

Hanover Ins. Co v. Clemmons, USDC M.D. Tenn.

• Clients sue malp ins carrier when atty/SNT trustee steals funds and goes to prison for 18 years

• Federal court grants Ins. Co. Motion for Summary Judgement

• LESSON: Is the individual trustee or Pooled SNT covered for theft? State bar remedy adequate?

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2016

Kleinert v. Commissioner, U.S District Ct., N.D.

California

• Deceased mom’s RLT left funds to disabled son

• Before distribution, Trustee gets court modification to

create SNT for son rather than make an outright

disqualifying distribution

• SSA determines it should be a first party not third party

SNT on issue of vesting, but ALJ overturns SSA


2016

Kleinert v. Commissioner, cont.

• Appeals Council doesn’t appeal, but re-opens 5 months

later under standard 24 month “good cause” for re-

opening

• Federal judge rules that vesting for probate vs. vesting

for trust are different, and SSA’s AC lacked “good

cause” to re-open, so ALJ decision stands

• And, “the rest of the story…”

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2016

Kleinert v. Commissioner, cont.

• The attorney had taken the case pro bono

• When he won, I suggested and sent sample pleadings

so he would file a claim for EAJA attorney’s fees

• Without SSA opposition, court awarded over $10,000

which comes from SSA’s budget, not the claimant’s

money!

State Court Decisions - 2016

Pikula v. Dept. of Social Services, Conn. Supreme

Ct.

• Medicaid nursing home recipient denied LTC due to

deceased father’s HEMS standard trust.

• State argues it’s a general support trust.

• Applicant argues deceased dad INTENDED to create

TP-SNT

• Court rules for applicant.

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Kroll v. NY State Dept of Health, NY App.

Division

• Grandfather’s trust allowed 20-yr-old to withdraw all

principal at age 21

• Parents seek to exercise Power of Appointment to

create TP-SNT using state decanting statute

• State argues it must be FP-SNT with Medicaid payback

• Court rules for beneficiary


In re Corn, Arkansas Supreme Court

• Corn’s deceased girlfriend funds TP-SNT but forgets about some assets

• Corn seeks to place forgotten $260k life insurance proceeds in FP-SNT via court-established SNT

• Local judge goes off on unfairness and denies petition as “against public policy.”

• Arkansas Supreme Court reverses – he who pays piper calls tune

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State v. Wilson, Del. Super. 2016

• Mom appointed SNT trustee of PI award then steals kid’s money

• Special Needs lawyer testifies he 1) explained SNT and types of distributions allowed; 2) provided written materials as well; 3) advised she had to account for “every penny” of SNT

• LESSON: a) Re-consider appointing layperson as Trustee, and b) document, document instructions


In re V., Alaska Supreme Court 2016

• Minor’s PI settlement directed to ARC of Alaska as

SNT trustee

• Minor, acting pro se, sought to recover his funds from

ARC of Alaska

• Alaska Supreme Court upheld denial of motion to

remove funds from SNT because pro se claimant failed

to secure jurisdiction over the ARC of Anchorage

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In re Petition of Hagenbuch, New Hampshire

Supreme Court 2017

• Food stamp (SNAP) appeal. Parties stipulated the PI

SNT is not a countable asset for SNAP benefits

• State included $20k direct distributions for legal and

trustee expenses as F.S. recipient’s countable income

• N.H. S.Ct. analyzed the federal food stamp regs in

detail to conclude that TP direct payments are not

income


Hernandez v. (Florida) AHCA (3rd DCA) and

Goheagan v. AHCA (4th DCA)

• Medicaid Third Party liability liens in wrongful death

suits

• U.S. Supreme Court decisions in Ahlborn and Woz that

restricted state’s right of TP lien recovery applies only

to living clients, not to protect estate from claim in

wrongful death

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Court Decision Lessons - 2017

Dave’s 10 takeaways from federal court decisions:

1. Read and apply the POMS!! – and don’t get creative

2. Quickly Report to SSA – with provable CRRR mail to avoid overpayments and trigger right to 90-day amendment

3. Do the (calendar) math – length of time to appeal and cost-benefit analysis of compliance; consider putting funds in SSA-approved pooled SNTs instead of appeals

4. It ain’t over ‘til the fat lady sings – Appeals Council has 65 days to take own-motion review (appeal) but two years to re-open “for good cause”


2017Dave’s 10 takeaways from federal court decisions:

5. Last year: Close is NOT good enough – “Although

plaintiff may have intended to create an SNT, the trust

simply does not meet the requirements of an SNT under

42 U.S.C. 1396p(d)(4)(A)” – federal court decision

6. This year: Maybe close IS good enough – proof that dad

“intended” to create SNT may defeat HEMS standard

7. Don’t be afraid of overpayments – recovery is 10% of

FBR from future SSI checks with no interest on the debt

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2017Dave’s 10 takeaways from federal court decisions:

8. Federal Court “Standard of Review” makes it a

definite uphill battle, chance of winning miniscule

9. Consult with other attorneys – before heading

down the appeal route, even to ALJ level, given the

length of time to get a hearing – currently 18

months

10. Courts can make bad decisions, too – e.g.,

Pennsylvania court remand on broken trust issue

The New 2017 SNT POMS

The brand new, revised,

Special Needs Trust POMS

are on their way “in early 2017.”

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The New 2017 SNT POMS

As of the Date of Preparation

of these materials (3-4-17), we have:

(the sound of crickets…)

A New 2017 Non- SNT

POMS

iAppeal – Good news, bad newsGood news - Beginning December 10, 2016, you can file non-

medical appeals online at

https://www.ssa.gov/disabilityssi/appeal.html

Bad news – the transition is difficult; and soon SSA will require

that if you are an attorney you must be trained and get access to

Electronic Records Express (ERE) to review file and upload briefs

and documents.

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A New 2017 Non- SNT

POMS

iAppeal – Good news, bad newsMore Good News - New sections of the Program Operations

Manual System (POMS) were released with more information

about the iAppeals non-medical appeals process.

Those sections include GN 03101.127 iAppeals Non-Medical -

General and Title II Instructions.

Benefits continue through the first appeal level if appeal initiated

within ten days. See SI 02301.310 Appeal and the Right to

Goldberg Kelly (GK) Payment Continuation.

SSA Office of General

CounselOffice of General Counsel provides:

• legal advice to SSA staff in connection with the operation and administration of SSA

• coordinates program litigation strategy nationwide and is responsible for comprehensive analyses of litigation trends. .

The Ten Regional Chief Counsels provide

• litigation support and legal services and advice to the SSA staff, and

• legal and managerial expertise to OGC about their geographic region

https://secure.ssa.gov/apps10/poms.nsf/lnx/0203101127

https://secure.ssa.gov/apps10/poms.nsf/lnx/0502301310

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SSA Regions

RCC Precedents

What are “RCC Precedents”

• The POMS is a primary source of information used by Social Security employees to process claims for Social Security benefits

• The Precedents are a part of the POMS and are opinion letters written under the authority of the Regional Chief Counsel (RCC) who, as attorney for the staff of SSA in that particular region, advises SSA staff on application of the state and federal laws to program operations

• RCCs and staff - Not our enemy, but are not on our team either. They are your opposing counsel in federal litigation, along with the USDOJthrough the U.S. Attorney’s Office

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RCC Precedents

PS 09905.002 Atlanta Region (2007)

PS 08-111 In-Kind support and Maintenance, Proposed Attorney Letter to SSI Claimants.

This opinion addresses an attorney’s request for the Social Security Administration (SSA) to approve language used in a letter that instructs his Supplemental Security Income (SSI) clients on the information needed by SSA to establish a valid loan agreement.

The Social Security Administration does not provide legal advice; but would provide the attorney with the Program Operations Manual System (POMS) section used when determining whether or not allegations of a loan agreement is a bona fide loan of in-kind support and maintenance.

POMS Table of Contents

RM - Records Maintenance

GN - General

RS - Retirement and Survivors Insurance

DI - Disability Insurance

SI - Supplemental Security Income

HI - Health InsuranceNL - Notices, Letters and

Paragraphs

VB - Special Veterans Benefits

PR - Title II Regional Chief Counsel Precedents

PS - Title XVI Regional Chief Counsel Precedents

SL - State and Local Coverage Handbook

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28 SNT RCC Precedents

of interest in 2016-17

22 reviewed pooled trusts – 11 approved and 11

found invalid

6 Reviewed non-pooled trusts - either FP-SNTs

or TP-SNTs with 3 approved and 3 found

invalid

10 Pooled SNTs declared safe harbors

This year’s ten academy award

winners are…

Arizona A - Jewish Family and Children’s

Service of Southern Arizona, Inc. Pooled

Supplemental Benefits Trust

California E – Special Needs Foundation Self-

Settled Master Trust

Florida A – Settlement Solutions National

Pooled Trust Second Restatement

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This year’s academy award

winners are…

Florida B – Public Guardianship Pooled

Special Needs Trust

Florida E – Family Network on Disabilities

National Pooled Trust

Indiana B – Kentucky Pooled Special Needs

Trust

New Mexico A – ARCA Foundation Grantor

Pooled Trust Restatement

This year’s academy award

winners are…

New York B – United Cerebral Palsy Association of New York State, Inc.

New York D – The Wolf Foundation, Inc. Amended and Restated First Party Pooled Trust Funded by People with Developmental Disabilities

South Carolina A – Babcock Center Foundation, Inc., Pooled Fund Trust

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Those not receiving an award

this year are…

Planned Lifetime Assistance Network of

California (PLAN of California); Z Pooled

Trust; California Charities Pooled Trust (CPT);

Foundation for Indigent Guardianship, Inc., for

State of Florida Public Guardianship Pooled

Special Needs Trust; Lifetime Care Foundation

for the Jewish Disabled Community Trust II;

Dakota Pooled Trust; the Third Restated South

Dakota Pooled Advocate Trust; and the Utah

Pooled Trust.

So what to do if you placed

business with a loser

• Contact Pooled Trust administrator and make sure they are amending the trust to conform

• Determine which of your clients had funds placed in the defective trust, secure a copy of the amended master trust (and joinder agreement, if applicable)

• Send copy of amended documents to clients asking them to retain and show SSA in future re-certifications

• Advise clients to contact you immediately if SSA contacts them for recertification.

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What went wrong?

Early termination provisions

• Didn’t provide for Medicaid payback

• Allowed Medicaid payback too early

• Permitted court to direct funds to third parties before Medicaid payback

• Requires Medicaid lien to be enforceable under state law

Sole Benefit rule violations

• Permitted trustee to use Pooled SNT beneficiary’s funds to be used to defend another’s termination of benefits

RCC Precedents – State Survey

#1

REGION IV (ATLANTA) Southeastern States

Survey on "Dry" or "Empty" Trusts (2016) -

EXAMPLE

Florida:

“Florida case law, however, indicates an express trust is not

created until property is conveyed for the purpose of the trust. See

McLemore v. McLemore, 675 So. 2d 202, 205 (Fla. Dist. Ct. App.

1996); In re Herskowitz’s Estate, 338 So. 2d 210, 212 (Fla. Dist. Ct.

App. 1976). Thus, Florida law does not appear to recognize a trust

that is established with no funds.”

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#1

REGION IV (ATLANTA) Southeastern States Survey on "Dry" or "Empty" Trusts (2016) - EXAMPLE

Florida: “Florida case law, however, indicates an express trust is not created until property is conveyed for the purpose of the trust. See McLemore v. McLemore, 675 So. 2d 202, 205 (Fla. Dist. Ct. App. 1996); In re Herskowitz’s Estate, 338 So. 2d 210, 212 (Fla. Dist. Ct. App. 1976). Thus, Florida law does not appear to recognize a trust that is established with no funds.”

Similar for all states in southeast – Alabama, Kentucky, Georgia, Mississippi, North and South Carolina, and Tennessee


#2

REGION V (CHICAGO) Upper Midwest (2016) –

See Illinois A, but applied ONLY in Indiana A

Doctrine of Worthier Title Issue:

Survey of state law in Region V concerning the

revocability of grantor trusts, specifically whether a

trust’s final distribution grantor’s estate creates a

residual beneficiary interest so that grantor is not the

sole beneficiary.

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#2

Compare Chicago RCC to Dallas RCC and Atlanta RCC

• Those RCC Precedents looked at each state, and found that about half the states had abandoned the Doctrine of Worthier Title and halve had not, and discussed each state specifically.

• When evaluating or defending a particular SNT you have to review the SSI SNT POMS but also whether the DWT was violated; look for Regional POMS

RCC Precedents

Promissory Note as Evidence of a Valid Mortgage on Non-Home Real Property for SSI eligibility (2016)

• SSI Claimant’s second home – sought to exempt it as resource by daughter giving her parents a note and mortgage to reduce equity value under the $2,000 SSI resource limit

• The amount of the note tracked personal loans parents gave since 2002

• “The mortgage therefore wants for consideration, as Recipient’s parents did not part with anything of value or forego an existing right at the time the promissory note was executed, and are actually in a better position than before the execution of the promissory note,” citing Florida cases in 1953 and 1976.

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RCC Precedents before 2016

Examples of earlier Florida RCCs:

• $50,000 private annuity approved (2005)

• Personal Services Contract approved (2014) for same parties

as PSC disallowed in 2013

• “Nunc Pro Tunc” doesn’t work under Florida law for

substantive changes EVEN IF the state judge signs the order

(2011)

• State law allowed “null and void clauses” in 2006, but they’re

not effective now since national POMS issued

Questions?

If not asked & answered here, emailed questions to me areencouraged, phone conferences as necessary. No charge forroutine issues.

Let’s just do it right for the clients!

David Lillesand, Esq.Lillesand, Wolasky, Waks & Hitchcock, P.L.

635 Court Street, Suite 202Clearwater FL [email protected]

(727) 330-7895

2017 ssi update - amazon s3 · 3/13/2017 3 federal regulations - attorney rules of conduct 20 cfr...

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