Adkison v. SSA
Filing
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OPINION & ORDER : 1. Magistrate's Recommended Disposition 16 is ADOPTED IN PART. Court ADOPTS the Magistrate's findings Adkison's mileage stipend & incentive payment counted as income, but DECLINES TO ADOPT finding Adkison's ear nings were properly calculated during 2011; 2. Adkison's Motion for Summary Judgment 12 is GRANTED; 3. Commissioner's Motion for Summary Judgment 13 is DENIED; 4. Case is REMANDED for further proceedings 5. JUDGMENT reversing and remanding will be entered. Signed by Judge Gregory F. VanTatenhove on 09/29/2016.(KM)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
LEXINGTON
RACHEL D. ADKISON,
Plaintiff,
V.
CAROLYN COLVIN,
Acting Commissioner of Social Security,
Defendant.
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Civil No. 15-171-GFVT
OPINION
&
ORDER
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Before the Court is Magistrate Judge Edward B. Atkins’s Recommended Disposition.
[R. 16.]
On June 11, 2015, Plaintiff Rachel D. Adkison sought judicial review of the
Commissioner of Social Security’s decision that she “had been erroneously paid disability
benefits beginning in January 2011, creating an overpayment of benefits in the amount of
$23,344.10.” [R. 1 at 1.] The Court referred this matter to Judge Atkins for preparation of a
recommended disposition, and Judge Atkins submitted that recommendation on August 1, 2016.
[R. 16.] For the reasons explained below, the Court will ADOPT IN PART the Magistrate’s
recommendation, GRANT Adkison’s Motion for Summary Judgment and DENY the
Commisioner’s motion.
I
Judge Atkins thoroughly detailed the factual background to this dispute, and the Court
now incorporates that narrative by reference. [R. 16 at 1-3.] To summarize, the Social Security
Administration (“SSA”) found Adkison disabled in August 2008. [R. 12-1 at 2.] Around that
same time, she was “elected as a magistrate in Garrard County, Kentucky.” [Id.] But this new
job did not necessarily prevent her from receiving disability benefits; instead, Adkison entered
what is known as a “trial work period” (TWP), which allows a “disabled person to work for nine
months and continue receiving disability benefits.” [Id. at 3.] Adkison’s TWP ended in October
2008, after which she entered yet another phase of the disability gauntlet: the “Extended Period
of Eligibility” (EPE).1 [Id. at 4.]
During the EPE, a claimant will receive benefits only on those months that she does not
engage in “substantial gainful activity” (SGA).2 [Id. at 6.] Most relevant here, work resulting in
an income of $1,000 or more per month qualified as SGA at the time. [Id. at 7.] So if the
claimant earned $1,000 or more in a given month during her EPE, she would not receive benefits
for that month. But if she earned less than $1,000 in some other month during this period—even
if she had already exceeded the SGA in a previous month—she would still receive benefits for
that month.
Adkison continued to receive periodic benefits until April 2012, when the SSA notified
her that her EPE had ended. [Id. at 4-6.] But this notice not only announced that Adkison would
no longer receive benefits; the agency also found that her earnings had consistently exceeded
$1,000 per month dating back to January 2011. [Id. at 6.] The SSA thus found that “it had
overpaid [her] for sixteen months, from January 2011 through April 2012, [resulting in]
$23,344.10 in [undue] disability benefits,” and demanded that she repay that amount in full. [Id.
at 7.]
Adkison filed a Request for Reconsideration the following month, which the SSA denied.
[R. 12-1 at 7.] She then requested a hearing with Administrative Law Judge (ALJ) Greg
Holsclaw. In August 2013, Holsclaw found that “the claimant’s earnings, including base pay,
The EPE may also be called the “reentitlement period,” depending on whom you ask. [R. 12-1 at 5-6.]
This is a somewhat streamlined description of the way the EPE operates. A more detailed description
appears later in this order, infra at 5.
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travel stipend, and voluntary incentive training [were] correctly considered [SGA].” [Tr. 16.]
He also concluded that the agency had properly calculated her monthly earnings over the
relevant time period. [Tr. 16-18.]
On appeal, Adkison argued, among other things, that federal regulations prohibited the
SSA from averaging her monthly income during the latter phase of her EPE. [R. 12-1 at 10.]
The Appeals Council agreed that her “earnings should not have been averaged for the months
during [her EPE] after [her] disability ceased due to performance of [SGA],” and that the ALJ
had erred in calculating her monthly income this way. [Tr. 7.] But the Appeals Council also
found that this error was harmless because her monthly income of “$1,017.40” was “uniform
throughout the period at issue,” and thus her earnings exceeded the $1,000 threshold regardless
of whether they were averaged. [Id.]
Adkison then sought review from this Court. Her challenge to the ALJ’s decision
initially rested on two claims: first, that her “mileage stipend” and “voluntary incentive training
payment” should not count as income for the purpose of meeting the $1,000 threshold; and
second, that the ALJ and the Appeals Council improperly averaged her monthly income in
deciding whether she met this threshold. [R. 12-1 at 8-14.] In his Report and Recommendation,
Judge Atkins concluded that (1) both the mileage stipend and incentive payment should count as
income and (2) the Appeals Council properly calculated her earnings. [R. 16 at 6-10.] Adkison
did not object to the Magistrate’s finding that the mileage stipend and incentive payment should
count as income, and she has waived her right to raise that issue on appeal. See Neuman v.
Rivers, 125 F.3d 315, 322 (6th Cir. 1997) (“[O]nly those specific objections to the magistrate’s
report made to the district court will be preserved for appellate review; making some objections
but failing to raise others will not preserve all the objections a party may have.”). In any case,
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the Court has carefully reviewed the Magsitrate’s reasoning on this point, and agrees that both
forms of payment counted as income. The only remaining questions before the Court are (1)
whether the SSA improperly averaged Adkison’s monthly income and (2) whether this error was
harmless.
II
A
In reviewing an ALJ’s decision, courts must decide whether substantial evidence in the
record supports the agency’s judgment. 42 U.S.C. § 405(g); Wright v. Massanari, 321 F.3d 611,
614 (6th Cir. 2003); Shelman v. Heckler, 821 F.2d 316, 319-20 (6th Cir. 1987). To find
“substantial evidence,” courts must perceive “more than a scintilla of evidence but less than a
preponderance,” which is to say that a court need only find “such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.” Cutlip v. Sec’y of Health &
Human Servs., 25 F.3d 284, 286 (6th Cir. 1994); Longworth v. Comm’r of Soc. Sec., 402 F.3d
591, 595 (6th Cir. 2005). The substantial evidence standard “presupposes that there is a zone of
choice within which decision makers can go either way, without interference from the court.”
Mullen v. Bowen, 800 F.2d 535, 545 (6th Cir. 1986) (en banc) (internal quotations omitted)
(citation omitted).
When searching the record for such evidence, courts must examine the record as a whole.
Cutlip, 25 F.3d at 286 (citing Kirk v. Sec’y of Health & Human Servs., 667 F.2d 524, 535 (6th
Cir. 1981), cert. denied, 461 U.S. 957 (1983)). This examination, however, is limited “to the
particular points that [the claimant] appears to raise in her brief on appeal.” Hollon v. Comm’r of
Soc. Sec., 447 F.3d 477, 491 (6th Cir. 2006). Courts are not empowered to conduct a de novo
review, resolve conflicts in evidence, or make credibility determinations. Ulman v. Comm’r of
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Soc. Sec., 693 F.3d 709, 713 (6th Cir. 2012) (citations omitted); see also Bradley v. Sec’y of
Health & Human Servs., 862 F.2d 1224, 1228 (6th Cir. 1988). Rather, if the Court finds
substantial evidence to support the Commissioner’s judgment, it must affirm that decision even if
the reviewing court would decide the matter differently, and even if substantial evidence also
supports the opposite conclusion. Ulman, 693 F.3d at 714; Bass v. McMahon, 499 F.3d 506, 509
(6th Cir. 2007).
B
This is an odd case. Unfortunately, the record reveals that almost every party to this
dispute—including the ALJ, the Appeals Council, the Magistrate, and counsel for the
Commissioner—made some version of the same mistake. To locate this error, a brief review of
the applicable regulations is in order.
In calculating a claimant’s income during her EPE, federal regulations permit the SSA to
begin by averaging her monthly earnings.
20 C.F.R. § 404.1592a(a)(1).
The claimant’s
disability ceases on the first month that her income, averaged across the relevant work period,
qualifies as SGA. She will then receive benefits for that month plus the two succeeding months.
20 C.F.R. § 404.1592a(2)(i). After this three-month period, however, the claimant may still requalify for benefits on any month that her income falls below the $1,000 threshold. During this
period, the SSA is not permitted to average her monthly earnings. Id.
All parties now concede that, in its initial determination of Adkison’s eligibility, the SSA
averaged her income even after this three-month period had ended. That was an error, and the
ALJ missed it. The Appeals Council did not, and agreed with Adkison that her “earnings should
not have been averaged for the months during [her EPE] after [her] disability ceased due to
performance of [SGA].” [Tr. 7.] But the Appeals Council went on to state that this was “not a
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material error” because her monthly income of “$1,017.40” was “uniform throughout the period
at issue.” [Tr. 7.] That was also an error. The Appeals Council noted that Adkison “received
$342.46 every two weeks for salary and $127.11 every two weeks for [her] expense stipend,”
and then announced that her “regular monthly earnings were thus $1,017.40 per month during
that period.” [Tr. 7.] Simple arithmetic demonstrates that a person who receives “$342.46 every
two weeks for salary and $127.11 every two weeks for [her] expense stipend” will earn $939.14
per month, not $1,017.40. The Appeals Council clearly reached this $1,017.40 figure by—you
guessed it—averaging her earnings. Because there are fifty-two weeks in a year, Adkison’s
income from these two sources totaled $12,208.82 annually; divided by twelve, that equals
$1,017.40. But this calculation does not change the fact that Adkison received only $939.14 on
most of the months in question.
In his recommended disposition, the Magistrate found that “the Appeals Council’s math
was assuredly correct.” [R. 16 at 10.] It was not. Apparently, the Commissioner did recognize
that the Appeals Council’s arithmetic was wrong, but then asked the Court to apply an equally
flawed calculation. The Commissioner now insists that a heretofore unknown “expense stipend”
pushed Adkison’s income over the $1,000 threshold, the SSA’s mathematical limitations
notwithstanding. [R. 19 at 2.] She cites the testimony of James Bushnell, a county payroll
executive, that Adkison “also received $275.40 per month [in what] was (1) called an “expense
stipend” (or ‘expense allowance’ or ‘expense reimbursement’); and (2) considered compensation
and income for serving on fiscal court committees.” [Tr. 124-25.]
The problem with this additional $275.40 “expense stipend” is that it does not exist.
Adkison’s payroll records establish that she did not receive any income beyond her wages,
mileage stipend, and incentive pay in 2011. [Tr. 85-94, 104-105, 109-110.] And her 2011 W-2
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“breaks down to $8,903.96 in wages, $3,678.60 in incentive pay and $3,304.86 in mileage
expense payments, which is precisely what her payroll records show she earned.” [R. 20 at 2, Tr.
131.] The $275.40 “expense stipend” mentioned in Bushnell’s testimony is simply a reference to
Adkison’s mileage stipend. That may sound surprising, given that she typically received only a
bi-weekly payment of $127.11, or $254.22 per month, for her mileage. But if you multiply this
bi-weekly payment by twenty-six (to account for the fifty-two weeks in a year) and divide by
twelve, you get $275.40. The Commissioner’s citation to this phantom “expense stipend,” then,
packaged two errors into one: first by double-counting Adkison’s mileage stipend, and then by
averaging the double-counted amount.
But that is not quite the end of the Court’s analysis. The Commissioner offers one more
argument in support of the ALJ’s finding, and this claim requires more careful attention.
Although she concedes that federal regulations prohibit averaging in this context, the
Commissioner also maintains that averaging Adkison’s income was harmless error because “the
agency’s sub-regulatory policy provides, more specifically, that an incentive payment should be
distributed over the period in which it was earned.” [R. 19 at 4.] This “sub-regulatory policy” is
POMS DI 10505.010(D), which instructs the SSA “to determine if [a claimant’s] bonus/incentive
payment represents a specific period of time, and if it does, distribute the earnings over the
period of time it was earned.” But “[i]f the amount does not represent a specific period of work
activity, or a specific time period is not determinable,” the agency should “distribute the
payment(s) monthly over the time period the person had worked for the employer up to but not
exceeding a year.” Id.
In May 2011, Adkison received a lump-sum incentive payment of $3,678.60. [Tr. 86.]
This payment served as compensation for her attendance at periodic training events throughout
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the year. [Tr. 64-65.] According to the Commissioner, then, POMS DI 10505.010(D) required
the agency to distribute that income over every month of 2011. Doing so would easily push
Adkison over the $1,000 threshold.
Adkison counters that “distributing” is essentially “averaging” by another name. She
directs the Court again to 20 CFR § 404.1592a(a)(2)(i), which states in relevant part:
In determining whether you do substantial gainful activity in a month for purposes of
stopping or starting benefits during the reentitlement period we will consider only your
work in, or earnings for, that month. Once we have determined that your disability has
ceased during the reentitlement period because of the performance of substantial gainful
activity . . . we will not apply the provisions of…§ 404.1574a regarding averaging of
earnings.
(emphasis added). With these regulatory requirements in mind, Adkison claims that “POMS DI
10505.010(D) cannot be applied in [her] case to distribute the incentive pay earnings to any
month other than the month she earned it.” [R. 20 at 4.] She also notes that the POMS “have no
legal effect and do not bind the SSA,” and thus they “are not entitled to deference to the extent
they contradict a Social Security regulation.” [Id. at 3.]
To some extent, Adkison’s argument simply begs the question. Application of POMS DI
10505.010(D) only “contradict[s] a Social Security regulation” if distribution of an incentive
payment violates § 404.1592a(a)(2)(i). This regulation prohibits averaging, not distribution. The
ultimate question, then, is whether distribution is so like averaging that doing the former violates
a regulation prohibiting the latter. Not surprisingly, no court has ever addressed this question. In
fact, the Court can identify no case that even discusses the sub-regulatory policy at issue here.
And neither the ALJ nor the Appeals Council ever cited POMS DI 10505.010(D) or otherwise
discussed the difference between distribution and averaging.
This Court is not well-situated to resolve novel and ambiguous distinctions between the
SSA’s regulatory and sub-regulatory directives. The Court does note, however, that distribution
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and averaging are not functionally equivalent in every case. Suppose, for example, that a
claimant earns wages of $950 per month. Her employer offers a merit-based incentive payment
of $300 every six months, but she only qualifies for that payment in the first six months of the
year. On these facts, distribution of her one-time incentive payment would require the agency to
divide $300 by six, resulting in an additional $50 in monthly earnings, for a total of $1,000 per
month in the first six months of the year. But averaging her income over the calendar year
would only amount to $975 per month. In that case, distribution would push the claimant over
the SGA threshold for six months, whereas annual averaging would keep her under the limit for
the entire year.3
And this distinction makes sense: because the claimant only earned the
incentive payment during the first six months of the year, spreading those earnings across the
remaining six months would be unreasonable. But if, by contrast, the employer offered an
annual incentive payment that reflected her work over the entire twelve-month period,
distribution and averaging would produce the same result. That outcome also makes sense:
because the claimant earned the incentive payment during every month of the year, spreading her
earnings across each month would be reasonable.
The Commissioner relatedly thinks distribution is “logical” here because Adkison’s
“incentive pay—unlike [her] wages—[was] not attributable only to the month in which it was
paid.” [R. 19 at 4.] Instead, she believes Adkison’s incentive payments were “based on her
work over the entire 12-month period.” [Id.] But the record does not suggest that these
payments reflected her work over the entire calendar year. Bushnell testified, for example, that
Of course, in other cases averaging would have the opposite effect. Suppose, for example, that
a claimant earned $950 per month and her employer offered a monthly merit-based incentive
payment of $600. If the claimant only qualified for this payment in one month out of the year,
distributing the payment would push her over the limit on only that month. But averaging the
payment would require the SSA to divide $600 by twelve, resulting in an additional $50 per
month, for a total of $1,000 per month.
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Adkison was “not required to attend incentive training every month.” [Tr. 126.] Adkison stated
that she attended these events “usually twice a year,” including “one in the spring and one in the
fall.” [Tr. 181.] And in its “Summary of [Adkison’s] Training Hours and Units Completed” for
the “County Elected Officials Training Incentive Program,” the Department for Local
Government indicates that Adkison attended training events on only three out of twelve months
in 2011, including a fall conference in October, a spring conference in April, and a “Governor’s
Local Issues Conference” in August. [Tr. 116.]
The record thus indicates that (1) the county paid Adkison for attending specific training
events in 2011 and (2) these events occurred on only three out of twelve months that year.
Because POMS permits the SSA to distribute an incentive payment over the entire calendar year
only “[i]f the amount [paid] does not represent a specific period of work activity, or a specific
time period is not determinable,” distributing Adkison’s incentive payment over every month of
2011 was likely a mistake even if distribution was otherwise warranted. The Appeals Council
recognized a similar problem when it stated “the earnings that were due to the trainings [she]
attended should have been counted when [she] completed the trainings in question, not averaged
over the entire year or counted when [she] received lump sum payments for those trainings.”
[Tr. 7.] Even accepting that distribution of Adkison’s incentive payment was proper, then, the
record does not support the Commissioner’s related claim that these payments were “based on
her work over the entire 12-month period.” [Id.]
III
Both the ALJ and the Appeals Council improperly averaged Adkison’s income in 2011.
They not only committed this error, but also failed to address two critical questions in this case.
The first is whether § 404.1592a(a)(2)(i) prohibited the distribution of Adkison’s incentive
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payment during her entire EPE. If it did not, the second question is whether this payment
reflected her work during every month of 2011, or whether it reflected only her attendance at
training events during specific periods of the year. The Court thus finds that the ALJ’s decision
was not supported by substantial evidence. Remand is necessary to recalculate the impact of
Adkison’s May 2011 incentive payment on her entitlement to benefits from January 2011
onward. Accordingly, the Court HEREBY ORDERS as follows:
1.
The Magistrate’s Recommended Disposition [R. 16] is ADOPTED IN PART.
The Court ADOPTS the Magistrate’s finding that Adkison’s mileage stipend and
incentive payment counted as income, but DECLINES TO ADOPT the finding
that Adkison’s earnings were properly calculated during the months of 2011;
2.
Adkison’s Motion for Summary Judgment [R. 12] is GRANTED;
3.
The Commissioner’s Motion for Summary Judgment [R. 13] is DENIED;
4.
This case is REMANDED for further proceedings; and
5.
JUDGMENT reversing and remanding this matter will be entered contemporaneously
herewith.
This 29th day of September, 2016.
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