TN 6 (08-07)

A. Background

Effective June 1976, there was a change of position which stated that we could no longer use benefit conversions and Cost of Living Adjustments (COLAs) as a “device” for “freezing” or reducing a PIA or monthly benefit amount which had been computed incorrectly and which was precluded from being reopened under the rules of administrative finality. “Freezing” was an attempt by SSA to stop paying the claimant more than he was entitled to. It was an old policy that applied to benefits prior to June 1976.

Effective June 1976, the conversion of a benefit rate or COLA constitutes an initial determination to which the rules of administrative finality apply in the same manner as to any other initial determination. (See GN 03101.050 and GN 04001.040B. for what constitutes the notice of the conversion/COLA.)

EXCEPTION: There are a few cases where the “new” position was applied prior to June 1976. This was done based upon individual case submissions to Central Office. This premature application of the change of position rules will be considered correct and should not be disturbed.

NOTE: A Social Security Administration COLA notice is not considered to be a change in the factual situation.

B. Definitions

1. Benefit Conversion

Increase in the Primary Insurance Amount (PIA) or monthly benefit amount (MBA) that was allocated before 06/1975.

2. Cost of Living Adjustment (COLA)

Increase in the Primary Insurance Amount (PIA) or monthly benefit amount (MBA) that was allocated 06/1975 or later. These increases were given to beneficiaries in June of each year, starting in 06/1975 as explained in SM 04901.001. After 06/1982 percentage increases in beneficiaries’ benefit amounts were increased effective December of each year. There was no COLA in 12/1982 or 06/1983.

NOTE: For a complete list of the conversion and COLA percentage rate increases, see RS 00601.120.

C. Policy

1. Conversion/COLA Done Correctly

The policy on reopening benefit conversions/COLAs is:

• If, at some point in the past, a substantive error was made in computing the benefit amount (for example, the wrong reduction factor was used), and it cannot be reopened and revised under the rules of administrative finality; and

• A conversion/COLA was made on that erroneous benefit amount within the 4 years prior to the discovery of the error, but the conversion operation or COLA itself was done correctly (the correct percentage increase was calculated on the cost of living increase); then

• The resulting benefit amount (the amount after the conversion/COLA) cannot be adjusted; i.e., “frozen” or reduced, as a means of, at least to some extent, correcting the error which was made in the benefit amount more than 4 years earlier.

EXAMPLE

NH filed 02/02/71, entitled to RIB at age 62 (02/02/71). PIA $71.50. His rate was erroneously established as the full PIA, $71.50. Notice of award was sent in 05/71. Rates were paid as follows:

The error was discovered in 07/76 when the NH reported a change of address.

Since the error occurred in the initial determination (over 4 years prior to 07/76) it may not be reopened. Furthermore, since no error occurred in any subsequent conversion/COLA, no revision will be made on this record and the erroneous rate will continue to be converted upward in subsequent conversions/COLAs.

2. Clerical Error in Computing Conversion/COLA

• If there has been some clerical error made in computing a conversion/COLA (for example increasing it by the wrong percentage), we are only permitted to correct that error and any successive errors resulting from it, following the rules of administrative finality (see GN 04010.010 and GN 04020.080).

• We cannot at the same time correct, even prospectively, a substantive computation error which is barred to reopening.

• If a clerical error or error on the face of the evidence, including a substantive computation error, was unfavorable to the claimant, we can always go all the way back and correct it.

EXAMPLE

NH filed 02/02/99, entitled to RIB at age 62 (02/99). PIA $771.50. His rate was erroneously established due to a computation error involving incorrect reduction factors used. His benefit amount established in 02/99 was $672.90. Notice of award was sent in 05/99. Rates were paid as follows:

The error in the number of reduction factors was discovered in 07/05. Since the error occurred in the initial determination made in 02/99 and it has been over 4 years we discovered the error, it cannot be reopened.

During this same time (07/05) we noticed that in 12/2001, we used the incorrect COLA in figuring his benefit increase. We used 3.7% instead of 2.7% which resulted in more benefits being paid than should have been paid. Since correcting the error would be disadvantageous we had to have discovered the error within 4 years. Since we did discover the error within four years, we can correct the error in the COLAs beginning in 12/01 but we cannot correct the initial error in the computation of his benefits.

3. Increasing Rates Frozen Under Old Policy

Any rates which had already been “frozen” under the old policy were increased by 6.4 percent as a result of the June 1976 conversion/COLA. They should also continue to be increased whenever there are any subsequent conversions/COLAs.

D. Policy — Errors on Simultaneous or Dual Entitlement Benefit Conversion/COLA Rates

1. When Administrative Finality Applies

A determination that a beneficiary is simultaneously or dually entitled to a RIB or DIB and to an auxiliary or survivor's benefit in a higher amount is an initial determination and is subject to the rules of administrative finality (see GN 03101.070). Therefore, we use the same rules for these cases as for conversion/COLA cases.

For additional information on simultaneous and dual entitlement see RS 00615.768.

2. How Administrative Finality Applies

An error in reduction made at the time of initial determination of simultaneous or dual entitlement cannot be corrected after 4 years unless the initial determination was unfavorable to the claimant.

a. Example

In 01/72, Elaine became entitled to unreduced RIB (PIA $70.40) and unreduced WIB ($73.40 on PIA of $88.90). Notice of award was sent in 01/72. Instead of being paid $3.00 as a D, she was paid the full $73.40, in addition to her RIB of $70.40. Payments were made as follows:

The error was discovered in 01/78.

We must continue to pay each benefit as originally established and increased by subsequent conversions/COLAs.

NOTE: If the RIB MBA ever exceeds the WIB PIA, the WIB would terminate under normal rules.

• Error Made in Subsequent Conversion Operation/COLA – If the initial determination of simultaneous entitlement was done correctly, but an error was made in a subsequent conversion operation/COLA (for example, an incorrect reduction factor was used for the conversion/COLA), and the conversion/COLA where the error was initially made was done within 4 years of the date of discovery of the error, we can correct the conversion/COLA error and any subsequent errors resulting from it.

• We can go back more than 4 years to correct an error in a conversion operation/COLA, if it was unfavorable to the claimant (see GN 04010.010 and GN 04010.020).

b. Example

In 01/72, Madelyn became entitled to RIB (PIA $70.40) and wife's benefits (PIA $244.20). 36 Reduction Factors (RF) applied at the time.

In the 09/72 conversion and all subsequent conversions/COLAs, she was paid the B excess unreduced, as follows:

The error was discovered in 03/78.

Since reopening is precluded, we must increase the combined amount at subsequent conversions/COLAs by the applicable percentage.

NOTE: If the NH’s PIA (PIC A) ever exceeds one-half of the spouse’s PIA (PIC B), the spouse’s benefits would terminate under normal rules.

3. When Administrative Finality Does Not Apply

If a beneficiary is simultaneously entitled to auxiliary or survivor's benefits on more than one earnings record and should not be, the failure to terminate or suspend payments on one of the earnings records is not an initial determination. Therefore, the rules of administrative finality do not apply and, whenever the failure is noted, the termination or suspension may be effected as of the time it should have occurred (see GN 03101.100B.).