Social Security Changes Its Position on Reimbursements

Moorestown, NJ (Law Firm Newswire) March 26, 2012 – The Special Needs Task Force worked with Social Security to change how it reimburses third parties.

Historically, the Social Security Administration (SSA) permitted parents or other family members of disabled beneficiaries of special needs trusts to buy items for the beneficiary and be reimbursed from the special needs trust. Of course, the family members were required to keep receipts and records of these purchases and furnish them to the trustee. Items might include clothing and other relatively small items that were easier for the parent to pick up and pay for than to request a distribution from the trustee directly to the provider of the goods or services.

In the spring of 2012, the SSA stated that such items of reimbursement were “unearned income” to the trust beneficiary. This had the effect of reducing the SSI payment to the trust beneficiary dollar-for-dollar and, if the reimbursement items exceeded the maximum federal benefit rate (2013 rate is $710 per month for an individual), then the SSI payment was lost. If the trust beneficiary’s Medicaid was linked to SSI, then Medicaid was lost as well.

On May 21, 2012, SSA contended that it was “clarifying” the Program Operating Manual System (POMS) and began reducing and eliminating benefits of the disabled. It is the document that Social Security eligibility workers look to for guidance. While technically, the POMS do not have the force of law, they are given great deference by the courts and are followed scrupulously by eligibility workers. The effect of this clarification by SSA was chaos for trust beneficiaries with disabilities, as well as parents and trustees.

“In response, an advocacy group was assembled, led by the Special Needs Alliance,” stated Thomas D. Begley, Jr., New Jersey estate planning attorney and founding president of the Special Needs Alliance. “The Task Force held a series of meetings with SSA and was able to convince SSA that the policy enunciated in the spring made little sense and worked a hardship on all involved.”

On February 8, 2013, the POMS were changed, authorizing a special needs trust to reimburse a third party, such as a parent or other family member, for expenditures made on behalf of the special needs trust beneficiary with disabilities. Such distributions for reimbursement are no longer considered unearned income. The changes are found at POM SI 01120.200.E.1.d and POMS SI 01120.201.I.1.f.

This change brings a sigh of relief to trust lawyers, beneficiaries and trustees alike. The Task Force continues to work with SSA in identifying primary issues such as this and advocate for the clients it serves.

To learn more about Begley Law Group call 1.800.533.7227 or visit www.begleylawgroup.com.

Begley Law Group, P.C.
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
Tel: 800.533.7227

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