TN 11 (08-91)

A. Policy

1. Without Fault

A person is without fault if he reasonably believed that earnings prior to the first month of entitlement would not count as earnings for deduction purposes.

2. Against Equity and Good Conscience

Recovery is deemed against equity and good conscience for months in which the individual's earnings do not exceed the total monthly benefits affected for that month.

B. Procedure

Ascertain whether or not the earnings in the taxable year beginning with the first month of entitlement exceeded the annual limit for the year. If such earnings are higher than the limit, without fault cannot be found.

If recovery cannot be deemed against equity and good conscience, develop defeat the purpose or other applications of against equity and good conscience.

C. Example

Will Power, age 63, became entitled to retirement benefits in March 2005. He earned $9,000 in January and February. The AET for 2005 is $12,000 per year for a person who will not reach full retirement age (FRA) during the year.

His employer reported earnings of $21,000 for 2005 on his W-2, which resulted in an overpayment of benefits for 2005. Development revealed that Mr. Power misunderstood the retirement test and believed he could earn the allowable limit ($12,000) in the months after his entitlement began.

To determine if this policy applies, subtract the amount Will earned before his entitlement to retirement benefits began, from the total earnings for the year:

$21,000
-$9,000
$12,000$

Will earned $12,000 in the months in which he was also entitled to retirement benefits. Since this amount does not exceed the annual earnings test, we can assume that Will misunderstood that the SSA annual earnings test also included his annual earnings before he became entitled to retirement benefits.

SSA can deem that Will is not at fault for causing this overpayment, based on GN 02250.150. In addition, SSA would find that recovery of this overpayment is against equity and good conscience, and therefore the overpayment would be waived.