[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67108-67113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31311]



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RAILROAD RETIREMENT BOARD

20 CFR Part 255

RIN 3220-AA44


Recovery of Overpayments

AGENCY: Railroad Retirement Board.

ACTION: Proposed rule.

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SUMMARY: The Railroad Retirement Board (Board) revises part 255 of its 
regulations, currently entitled ``Recovery of Erroneous Payments'', to 
clarify and update its regulations with respect to recovery of 
overpayments. The revisions more clearly identify the individuals from 
whom recovery may be sought and under what circumstances recovery of an 
overpayment of benefits will be made. The revisions also cover the 
circumstances under which such recovery may be waived, and the 
circumstances under which such recovery may be terminated or suspended 
under the Board's authority concerning administrative relief from 
recovery.

DATES: Comments must be received by January 29, 1996.

ADDRESSES: Secretary to the Board, Railroad Retirement Board, 844 Rush 
Street, Chicago, Illinois 60611.

FOR FURTHER INFORMATION CONTACT:
Thomas W. Sadler, Assistant General Counsel, Railroad Retirement Board, 
844 Rush Street, Chicago, Illinois 60611, (312) 751-4513, TDD (312) 
751-4701).

SUPPLEMENTARY INFORMATION: Part 255 of the Board's regulations has not 
been revised since 1967. Although section 10 of the Railroad Retirement 
Act of 1974 (45 U.S.C. 231i) includes provisions for recovery and 
waiver of overpayments of benefits which are substantially the same 
provisions included in the Railroad Retirement Act of 1937 (45 U.S.C. 
228i, superseded), internal procedures dealing with overpayments of 
benefits have been developed which should properly be included in the 
regulations of the Board. In addition, in the Board's view, waiver 
should not be available with respect to certain types of overpayments 
and this proposed rule reflects those proosals. Because the proposed 
rule would make extensive changes in the existing regulation, a 
section-by-section analysis is provided below.
    The title of part 255 is proposed to be revised to ``Recovery of 
Overpayments''. The current title, ``Recovery of Erroneous Payments'', 
mistakenly implied that all such payments were caused by ``fault''. 
Overpayments can and do occur through no fault of the recipients of 
such payments. The purpose of part 255 is to set out regulations to 
govern those instances where more than the correct amount of benefits 
has been paid, regardless of whether or not ``fault'' exists.
    Section 255.1 would replace the present Sec. 255.1, which sets out 
statutory provisions, with an introductory statement to summarize what 
is included in part 255.
    Section 255.2 defines ``overpayment'' using essentially the same 
language that is used in the current Sec. 255.2 to define ``erroneous 
payments''.
    Section 255.3 states the general rule that overpayments shall be 
recovered in all cases except where recovery is waived under 
Sec. 255.10 or administrative relief from recovery is granted under 
Sec. 255.17 or where collection is suspended or terminated under these 
regulations or the Federal Claims Collection Standards.
    Section 255.4 would replace the current Sec. 255.4, which simply 
states in a summary manner the methods by which erroneous payments may 
be recovered, with a detailed description of those individuals from 
whom overpayments may be recovered.
    Section 255.5-255.8 set out the methods by which an overpayment of 
benefits may be recovered. These methods include recovery by cash 
payment (Sec. 255.5), recovery by setoff from any subsequent payment 
determined to be payable on the basis of the same record of 
compensation (Sec. 255.6), recovery by deduction in the computation of 
a residual lump-sum death benefit payable under the Railroad Retirement 
Act (Sec. 255.7), and recovery by actuarial adjustment of an annuity 
(Sec. 255.8). These sections are substantially similar to the current 
Secs. 255.5-255.8. However, Sec. 255.8, unlike the current section, 
provides that an actuarial adjustment is not effective until the 
overpaid annuitant negotiates the first check which reflects the 
actuarially adjusted rate.
    Section 255.9 provides that where recovery of an overpayment is by 
setoff which can be effected within 5 months and the individual from 
whom recovery is sought is an enrollee under Medicare Part B, the 
individual's monthly Medicare premium will be paid and the balance of 
the annuity amount will be applied toward recovery of the overpayment. 
This section is new and is intended both to save the agency the 
administrative costs of billing an annuitant for his or her Part B 
Medicare premium where his or her annuity would be offset in its 
entirety to recover an overpayment and also to avoid lapse of Medicare 
coverage.
    Section 255.10 sets out the general requirements for waiver of 
recovery of an overpayment as set forth in the Railroad Retirement Act 
and replaces the present Secs. 255.10 and 255.11.
    Section 255.11, as currently in effect, would be removed because it 
is redundant. The new section 255.11 would define ``fault'' and gives 
examples of when an individual is or is not at fault based upon past 
agency decisions. Section 255.12 defines when recovery is contrary to 
the purpose of the Railroad Retirement Act, based upon past agency 
decisions. Section 255.13 defines when recovery is against equity or 
good conscience. Each of these sections is new and together they expand 
on the present Sec. 255.12.
    Sections 255.14, 255.15, and 255.16 are new sections which describe 
special situations where waiver of recovery of an overpayment is not 
available. Specifically, Sec. 255.14 provides that waiver is not 
available under certain circumstances when recovery can be made from an 
accrual of social security benefits. Section 255.15 provides that 
waiver is not available to the estate of an individual.
    Section 225.16 would provide that recovery of a small overpayment 
of less than $500 will never be considered contrary to the purpose of 
the Railroad Retirement Act or against equity or good conscience. Under 
this rule, waiver of recovery would not be applicable for debts under 
$500. This proposed rule is similar to the rule contained in 
Sec. 340.10(e)(2) of the Board's regulations with respect to recovery 
of overpayments under the Railroad Unemployment Insurance Act (20 CFR 
340.10(e)(2)).
    Section 255.17 sets out internal Board policy governing those 
situations where recovery of an overpayment may not be waived under 
section 10(c) of the Railroad Retirement Act, thus extinguishing the 
debt, but where recovery will not be sought for equitable reasons. The 
regulations do not currently contain such a provision.
    Section 255.18 is new and explains how an overpayment is recovered 
when that overpayment was made to a representative payee under part 266 
of this chapter. 

[[Page 67109]]

    Sections 255.19 and 255.20, which deal with compromise, suspension, 
or termination of the collection of overpayments are substantively 
identical to the current Secs. 255.14 and 255.15 with the exception 
that references to the Federal Claims Collection Standards (4 CFR 
Chapter 2) have been added.
    This rule was previously published as a proposed rule on September 
19, 1991 (56 FR 47426). Because the Board has substantially revised the 
rule as originally published, it has been determined to republish the 
rule as a proposed rule and to seek further public comment.
    The Labor Member of the Board dissented from the action of the 
majority of the Board in approving this proposed rule. The Labor 
Member's reasons from dissenting from this action are set out below.

Views of the Labor Member of the Board

    The Labor Member finds it to be a document seriously lacking in 
fairness and in grant need of a balanced approach to sensible debt 
collection.
     Section 255.12 includes non-liquid assets in the list of 
resources to be considered when determining whether recovery of an 
overpayment will be contrary to the purpose of the Railroad Retirement 
Act. The Labor Member thinks it would be unconscionable to expect 
anyone to liquidate personal property, for the purpose of repaying an 
overpayment for which he or she was not at fault, and accordingly feels 
this has no place in any waiver consideration.
     Example (1) in this same section is meant to illustrate 
when recovery would not be contrary to the purpose of the Act, but, in 
fact, the Labor Member considers it to be a one-sided attempt to 
construct as narrow a definition of financial hardship as possible, 
with the intention to leave the individual with as little as possible 
in the recovery process. He takes issue with the majority's failure to 
consider imminent financial obligations when making financial hardship 
determinations, as well.
     Section 255.13(b) states that an individual's ability to 
repay an overpayment is relevant with respect to the credibility of the 
claim that the individual detrimentally relied on the incorrect 
payment, but the Labor Member believes that, consistent with the Social 
Security Administration's regulations, a person's financial 
circumstances are not material in this regard.
     Section 255.15 does not allow waiver when recovery is 
sought from the estate of an overpaid individual. However, the Labor 
Member submits that a literal reading of section 10(c) of the Act 
directs waiver consideration for estates, as well as individuals, when 
qualifying criteria is met. He feels that if the Act limited waiver to 
situations where there was no fault, and recovery would be ``contrary 
to the purpose of the Act,'' then this restrictive interpretation 
presented by the majority would possibly have merit. But, since the Act 
also allows for waiver when recovery would be ``against equity or good 
conscience,'' it should also be granted to the estate in situations 
where it would have been granted while the individual was alive. He 
sees the proposed regulation as being at odds with the statute on this 
point.
     Proposed Section 255.16 states that where the amount of an 
overpayment is less than $500 it may not be waived. The majority 
compares this proposal to the rule contained in section 340.10(e)(2) of 
the Board's regulations with respect to recovery of overpayments under 
the Railroad Unemployment Insurance Act (RUIA). The Labor Member does 
not see this as a valid comparison. He suggests that overpayments under 
the RUIA often involve working individuals whose income from employment 
is only temporarily halted, which is in direct contrast to the 
situations at hand involving elderly or disabled individuals on fixed 
incomes. Moreover, waiver requests for both RUIA and Railroad 
Retirement Act overpayments usually include a request to reconsider the 
amount of the overpayment. Small RUIA overpayments are usually less 
complex, thus less costly to recompute, providing more of an incentive 
to complete the recovery process. Conversely, Railroad Retirement Act 
overpayments can involve various issues and complexities adding to the 
cost of adjudication. He recommends as a more reasonable and fair 
approach the allowance of a blanket relief from recovery in these small 
overpayment situations. From a business standpoint, he believes that 
the cost to the agency in trying to collect small overpayments will 
outweigh the benefits. Furthermore, he argues that past experience has 
shown that overpayments under $500 because of their complexities 
routinely result from computational errors by the Board where the 
beneficiary would have no knowledge than an incorrect payment was made. 
As a government agency with a responsibility to pay benefits 
accurately, we, not the beneficiary, should be held accountable when we 
fail to do so.
     The Labor Member also points out that, on the issue of 
``fault,'' if an individual received an incorrect annuity rate for a 
period of more than 5 months after the Board has received information 
which should have caused it to reduce the benefits, it has been a long-
standing agency policy to consider the individual not at fault for any 
payment after the fifth month. This is provided that the continued 
issuance of the payments at the incorrect rate led the beneficiary to 
believe in good faith the he or she was entitled to the amount 
represented by the payment. The majority has refused to include such a 
provision in this proposed rule. Rather, it believes that the fault 
determination should be decided on a case-by-case basis. The Labor 
Member, on the other hand, believes that given the advanced technology 
available to the Board, the five-month rule should be incorporated into 
the proposed rule and, in fact, be reduced even further. He notes that 
the Social Security Administration has a provision similar to the one 
that he favors.
     The Labor Member also takes exception to the majority's 
decision not to include a provision which would allow blanket relief 
from overpayment recovery clearly resulting from the fault of the 
agency, contending that the Board must accept full responsibility for 
its own errors.
     In conclusion, he finds the proposed rule to be 
insensitive in tone and content and completely slanted against the 
overpaid individual. He notes that the Social Security Administration 
takes a far more sensible approach to handling overpayments than is 
presented in the proposal. He is of the opinion that his colleagues 
view the Board more as a collection agency than one whose primary 
mission is the payment of benefits,and would like to see as much 
attention paid to preventing overpayments as there is to collecting 
them.
    The agency has determined that this is not a significant regulatory 
action for purposes of Executive Order 12866; therefore, no regulatory 
impact analysis is required. There are no information collections 
associated with this rule.

List of Subjects in 20 CFR Part 255

    Railroad employees, Railroad retirement.

    1. For the reasons set out in the preamble, part 255 of title 20, 
chapter II of the Code of Federal Regulations is proposed to be revised 
to read as follows:

[[Page 67110]]


PART 255--RECOVERY OF OVERPAYMENTS

Sec.
255.1  Introduction.
255.2  Overpayments.
255.3  When overpayments are to be recovered.
255.4  Persons from whom overpayments may be recovered.
255.5  Recovery by cash payment.
255.6  Recovery by setoff.
255.7  Recovery by deduction in computation of death benefit.
255.8  Recovery by adjustment in connection with subsequent 
payments.
255.9  Individual enrolled under supplementary medical insurance 
plan.
255.10  Waiver of recovery.
255.11  Fault.
255.12  When recovery is contrary to the purpose of the Railroad 
Retirement Act.
255.13  When recovery is against equity or good conscience.
255.14  Waiver not available when recovery can be made from accrual 
of social security benefits.
255.15  Waiver not available to an estate.
255.16  Waiver not available for small overpayments.
255.17  Administrative relief from recovery.
255.18  Recovery of overpayments from a representative payee.
255.19  Compromise of overpayments.
255.20  Suspension or termination of the collection of overpayments.

    Authority: 45 U.S.C. 231f(b)(5), 231i.


Sec. 255.1  Introduction.

    Section 10 of the Railroad Retirement Act provides for the recovery 
of an overpayment of benefits to an individual. This part explains when 
an overpayment must be recovered, from whom an overpayment may be 
recovered, and when recovery of the overpayment may be waived for 
administrative relief from recovery granted, and circumstances under 
which the overpayment may be compromised, or circumstances under which 
recovery of the overpayment may be suspended or terminated.


Sec. 255.2  Overpayments.

    An overpayment, within the meaning of this part, is made in any 
case in which an individual receives a payment under the Railroad 
Retirement Act, all or part of which payment he or she is not entitled 
to receive.


Sec. 255.3  When overpayments are to be recovered.

    Overpayments shall be recovered in all cases except those in which 
recovery is waived under Sec. 255.10 or administrative relief from 
recovery is granted under Sec. 255.17, or where the overpayment is 
compromised or recovery is terminated or suspended under Secs. 255.19 
or 255.20.


Sec. 255.4  Persons from whom overpayments may be recovered.

    (a) Overpaid individual. The Board may recover an overpayment from 
the individual to whom the overpayment has been made by any method 
permitted by this part, or by the Federal Claims Collection Standards 
(4 CFR Chapter 2) (Example 1). If the overpaid individual dies before 
recovery is completed, then recovery may be effected by recovery from 
the estate or the heirs of such individual.
    (b) Other than overpaid individual. The Board may recover an 
overpayment from a person other than the overpaid individual if such 
person is receiving benefits under a statute administered by the Board 
based upon the same record of compensation as the overpaid individual. 
In such a case, the Board will ordinarily recover the overpayment by 
setoff against such benefits as are provided for in Sec. 255.6 (Example 
2). However, the Board may ask for a cash refund of the overpayment.
    (c) Individual not in the same household. Recovery under paragraph 
(b) of this section may be made from an individual who was not living 
in the same household, as defined in part 216 of this chapter, as the 
overpaid individual at the time of the overpayment, if the individual 
from whom recovery is to be made either was aware that benefits were 
paid incorrectly or benefited from the overpayment. (Example 3).
    (d) Examples. This section may be illustrated by the following 
examples:

    Example (1). An employee receiving a disability annuity returns 
to work without notifying the Board. The Board discovers that the 
employee is working and determines that the employee has recovered 
from his disability and has been overpaid. The Board requests that 
the employee repay the overpayment by cash refund either in one lump 
sum or in installment payments. If the employee refuses, the Board 
may refer the debt to a collection agency or the Department of 
Justice for civil suit or may collect the debt in any other manner 
permitted by law.
    Example (2). The employee in Example 1 agrees to refund the 
overpayment by cash installment payments. However, the employee dies 
before repaying the total amount of the overpayment. At his death 
the employee's widow, who was living with the employee at the time 
the overpayment was incurred, becomes entitled to a widow's annuity. 
The Board may recover the remainder of the overpayment from any 
benefits due the widow.
    Example (3). C, a child of a deceased employee by his first 
marriage, is receiving a disability annuity on the employee's record 
of compensation. W, the employee's second wife, is receiving a 
widow's annuity on the employee's record of compensation. C lives 
with his mother, the employee's first wife. C marries without 
notifying the Board. Marriage terminates a child's annuity. W is not 
aware of C's marriage. Upon discovery of C's marriage, the Board 
demands that C refund the overpaid annuities; C refuses. Even though 
W is receiving an annuity based upon the same record of compensation 
as that of C, the Board will not recover the overpayment from W 
because she is not in the same household as C, was not aware of the 
incorrect benefits paid, and did not benefit from them.


Sec. 255.5  Recovery by cash payment.

    The Board shall have the right to require that an overpayment to an 
individual be immediately and fully repaid in cash by that individual. 
However, if the Board determines that the individual is financially 
unable to pay the amount of the indebtedness in a lump sum, payment may 
be accepted in regular installments in accordance with the Federal 
Claims Collection Standards, found in 4 CFR chapter 2. These standards 
provide that whenever possible installment payments should be 
sufficient in amounts and frequency to liquidate the debt in not more 
than 3 years.


Sec. 255.6  Recovery by setoff.

    An overpayment may be recovered by setoff from any subsequent 
payment determined to be payable under any statute administered by the 
Board to the individual who received the overpayment. An overpayment 
may be recovered from someone other than the overpaid individual by 
setoff from a subsequent payment determined to be payable to that other 
individual on the basis of the same record of compensation as that of 
the overpaid individual.


Sec. 255.7  Recovery by deduction in computation of death benefit.

    In computing the residual lump sum provided for in part 234, 
subpart D, of this chapter, the Board shall include in the benefits to 
be deducted from the applicable percentages of the aggregate 
compensation provided for in that part all overpayments, whether waived 
under Sec. 255.10 or otherwise not recovered, that were paid to the 
employee or to his or her spouse or to his or her survivors with 
respect to the employee's employment.


Sec. 255.8  Recovery by adjustment in connection with subsequent 
payments.

    Recovery of an overpayment may be made by permanently reducing the 
amount of any annuity payable to the individual or individuals from 
whom recovery is sought. This method of recovery is called an actuarial 
adjustment of the annuity. The Board cannot require any individual to 
take an 

[[Page 67111]]
actuarial adjustment in order to recover an overpayment not is an 
actuarial adjustment available as a matter of right. An actuarial 
adjustment does not become effective until the overpaid individual 
negotiates the first annuity check which reflects the annuity rate 
after actuarial adjustment

    Example. An annuitant agrees to recovery of a $5,000 overpayment 
by actuarial adjustment. However, the annuitant dies before 
negotiating the first annuity check reflecting the actuarially-
reduced rate. The $5,000 is not considered recovered. If the 
annuitant had negotiated the check before he died, the $5000 would 
be considered fully recovered.


Sec. 255.9  Individual enrolled under supplementary medical insurance 
plan.

    Where recovery of the overpayment is by setoff as provided for in 
Sec. 255.6, and where recovery of the overpayment by such means will be 
accomplished within a period of 5 months, and the individual from whom 
recovery is sought is an enrollee under part B of title XVIII of the 
Social Security Act (Supplementary Medical Insurance Benefits for the 
Aged and Disabled), an amount of such individual's monthly benefit 
which is equal to his or her obligation for supplementary medical 
insurance premiums will be applied toward payment of such premiums, and 
the balance of the monthly benefit will be applied toward recovery of 
the overpayment.


Sec. 255.10  Waiver of recovery.

    There shall be no recovery from any person in any case where more 
than the correct amount of annuities or other benefits has been paid to 
an individual or where payment has been made to an individual not 
entitled thereto if in the judgment of the Board:
    (a) The overpaid individual is without fault; and
    (b) Recovery would be contrary to the purpose of the Railroad 
Retirement Act or would be against equity or good conscience.


Sec. 255.11  Fault.

    (a) Before recovery of an overpayment may be waived, it must be 
determined that the overpaid individual was without fault in causing 
the overpayment. If recovery is sought from other than the overpaid 
individual but the overpaid individual was not without fault, then 
waiver is not available. However, see Sec. 255.17 for provisions as to 
when administrative relief from recovery may be granted in such 
circumstances.
    (b) Fault means a defect of judgment or conduct arising from 
inattention or bad faith. Judgment or conduct is defective when it 
deviates from a standard of reasonable care taken to comply with the 
entitlement provisions of this chapter. Conduct includes both action 
and inaction. Unlike fraud, fault does not require a deliberate intent 
to deceive.
    (c) Whether an individual is at fault in causing an overpayment 
generally depends on all circumstances surrounding the overpayment. 
Among the factors the Board will consider are: the ability of the 
overpaid individual to understand the reporting requirements of the 
Railroad Retirement Act or to realize that he or she is being overpaid 
(e.g., age, education, comprehension, physical and mental condition); 
the particular cause of non-entitlement to benefits; and the number of 
instances in which the individual may have made erroneous statements.
    (d)(1) Circumstances in which the Board will find an individual at 
fault include but are not limited to:
    (i) Failure to furnish to the Railroad Retirement Board information 
which the individual knew or should have known to be material;
    (ii) An incorrect statement made by the Individual which he or she 
knew or should have known was incorrect (including furnishing an 
opinion or conclusion when asked for facts); and
    (iii) Failure to return a payment which the individual knew or 
should have known was incorrect.
    (2) Where any of the circumstances listed in paragraph (d)(1) of 
this section are found to have occurred, the individual shall be 
presumed to be not without fault. This presumption may be rebutted, but 
the burden of presenting evidence to rebut the presumption is on the 
individual.
    (3) For purposes of paragraph (d)(1)(i) of this section, furnishing 
information to the Social Security Administration or any other agency 
shall not be considered to constitute furnishing information to the 
Railroad Retirement Board.
    (4) For purposes of this section, an error on the part of the 
agency shall not extinguish fault on the part of the individual.
    (e) Circumstances in which the Board will find an individual not at 
fault include but are not limited to:
    (1) the overpayment is the result of Board error of which the 
overpaid individual was not aware and could not reasonably have been 
expected to be aware (Example 1).
    (2) The overpayment is the result of an adjustment tot the overpaid 
individual's annuity because of entitlement of another individual to an 
annuity on the same record of compensation as that of the overpaid 
individual (Example 2).
    (f) The application of this section may be illustrated by the 
following examples:

    Example (1). The Board makes a mathematical error in the 
computation of an employee's annuity, thus giving the employee a 
higher rate than he or she is entitled to but which is sufficiently 
close to the estimated rate given the employee at the time he or she 
applied for the annuity that the employee believed, in good faith, 
that the amount was correct. The employee is not at fault in causing 
the overpayment in this case. The overpayment may be waived if the 
requirements of Sec. 255.12 or Sec. 255.13 are met.
    Example (2). The widow and four minor children of a railroad 
employee are receiving benefits from the Board under the family 
maximum. Another minor child not living in the same household as the 
above individuals is also determined to be the child of the deceased 
employee. The widow was not aware of the existence of this child. An 
award of benefits to this child causes a reduction in benefits to 
the other individuals under the family maximum benefit provision of 
the Social Security Act. Because of normal administrative delay this 
reduction does not take place for a period of 2 months after its 
effective date. The widow and her children are without fault with 
respect to this overpayment. The overpayment may be waived if the 
requirements of Sec. 255.12 or Sec. 255.13 are met.


Sec. 255.12  When recovery is contrary to the purpose of the Railroad 
Retirement Act.

    (a) The purpose of the Railroad Retirement Act is to pay retirement 
and survivor annuities and other benefits to eligible beneficiaries. It 
is contrary to the purpose of the Act for an overpayment to be 
recovered from income and resources which the individual requires to 
meet ordinary and necessary living expenses. If either income or 
resources, or a combination thereof, are sufficient to meet such 
expenses, recovery of an overpayment is not contrary to the purpose of 
the Act.
    (b) For purposes of this section, income includes any funds which 
may reasonably be considered available for the individual's use, 
regardless of source. Income to the individual's spouse or dependents 
is available to the individual if the spouse or dependent lived with 
the individual at the time wavier is considered. Types of income 
include but are not limited to:
    (1) Government benefits, such as Black Lung, Social Security, 
Workers' Compensation, and Unemployment Compensation benefits;
    (2) Wages and self-employment income;
    (3) Regular incoming payments, such as rent or pensions; and
    (4) Investment income. 
    
[[Page 67112]]

    (c) For purposes of this section, resources may include:
    (1) Liquid assets, such as cash on hand, the value of stocks, 
bonds, savings accounts, mutual funds and the like;
    (2) Non-liquid assets at their fair market value; and
    (3) Accumulated, unpaid Federal benefits; and
    (d) For purposes of paragraphs (c) (1) and (2) of this section, 
assets disposed of on and after the date of notification of the 
overpayment, other than cash expended to meet ordinary and necessary 
living expenses, shall be included.
    (e) Whether an individual has sufficient income and resources to 
meet ordinary and necessary living expenses depends not only on the 
amount of his or her income and resources, but also on whether the 
expenses are ordinary and necessary. While the level of expenses which 
is ordinary and necessary may vary among individuals, it must be held 
at a level reasonable for an individual who is living on a fixed 
income. The Board will consider the discretionary nature of an expense 
in determining whether it is reasonable. Ordinary and necessary living 
expenses include:
    (1) Fixed living expenses such as food and clothing, rent, mortgage 
payments, utilities, maintenance, insurance (e.g., life, accident, and 
health insurance), taxes, installment payments, etc.;
    (2) Medical, hospital, and other similar expenses;
    (3) Expenses for the support of others for whom the individual is 
legally responsible; and
    (4) Miscellaneous expenses (e.g., newspapers, haircuts).
    (f) Where recovery of the full amount of an overpayment would be 
made from income and resources required to meet ordinary and necessary 
living expenses, but recovery of a lesser amount would leave income or 
resources sufficient to meet such expenses, recovery of the lesser 
amount is not contrary to the purpose of the Act.
    (g) This section may be illustrated by the following examples:

    Example (1). A remarried widow, W, is overpaid $6000 due to 
receipt of benefits on the wage records of both her late husbands. 
It has been determined that she is without fault. Her financial 
disclosure statement reveals monthly income greater than monthly 
expenses, and asset of $12,000, $10,000 of which is in cash. She 
claims to be saving these funds for future medical expenses, because 
she has a progressive disease. It is not contrary to the purposes of 
the Act to recover the overpayment. The desire, on the part of the 
beneficiary, to retain her assets to satisfy some potential future 
obligation, does not change the determination.
    Example (2). A disability annuitant, D, is overpaid $33,000 
because of simultaneous entitlement to workers' compensation 
payments. He is determined to be without fault. He claims he has 
assumed financial responsibility for his adult child and her 
children. A claimed expense for which the annuitant has no legal 
obligation to pay does not make recovery contrary to the purposes of 
the Act.


Sec. 255.13  When recovery is against equity or good conscience.

    (a) Recovery is considered to be against equity or good conscience 
if a person, in reliance on payments made to him or her or on notice 
that payment would be made, relinquished a significant and valuable 
right (Example 1) or changed his or her position to his or her 
substantial detriment (Example 2).
    (b) An individual's ability to repay an overpayment is not material 
to a finding that recovery would be against equity or good conscience 
but is relevant with respect to the credibility of a claim of 
detrimental reliance under paragraph (a) of this section.

    (c) This section may be illustrated by the following examples:

    Example (1). After being informed by the Board that he had been 
credited with sufficient years of railroad service to retire at age 
60, and employee quit his railroad job and applied for benefits 
under the Railroad Retirement Act. He receives benefits for six 
months when it is discovered that he had insufficient railroad 
service to retire at age 60 and was not entitled to the benefits he 
received. His annuity was terminated. Because the employee gave up 
his seniority rights when he quit his railroad job, he cannot get 
his job back. It is determined that the employee was not at fault in 
causing the overpayments. In this situation recovery of the 
overpayments would be against equity or good conscience because the 
overpaid individual gave up a valuable right.

    Example (2). A widow, having been awarded annuities for herself 
and her daughter, entered her daughter in a private school. The 
widow did not have substantial assets and her income, apart from the 
annuities she received in the amounts payable, would not have been 
sufficient for her to have undertaken the obligation to send her 
daughter to private school. In order to pay for the schooling she 
took out a loan and used the monthly annuities to pay interest and 
principal on the loan. After the widow and her daughter had received 
payments for almost a year, the deceased employee was found not to 
have been insured under the Railroad Retirement Act. Therefore, all 
payments to the widow and child were erroneous and the annuities 
were terminated. It is determined that the widow was not at fault in 
causing the overpayment. Having incurred a financial obligation (the 
school loan) toward which the benefits had been applied, the widow 
was in a worse position financially than if she and her daughter had 
never been entitled to benefits. In this situation, the recovery of 
the overpayment would be against equity or good conscience.


Sec. 255.14  Waiver not available when recovery can be made from 
accrual of social security benefits.

    Where the overpayment is the result of a reduction of benefits 
payable under the Railroad Retirement Act due to the overpaid 
individual's entitlement to social security benefits and recovery of 
such overpayment may be made by offset against an accrual of social 
security benefits, it shall not be considered to be against equity or 
good conscience or contrary to the purpose of the Railroad Retirement 
Act to recover the overpayment by offset against the accrual. 
Consequently, in such a case recovery of an overpayment is not subject 
to waiver consideration.


Sec. 255.15  Waiver not available to an estate.

    There shall be no waiver when recovery is sought from the estate of 
an overpaid individual.


Sec. 255.16  Waiver not available for small overpayments.

    Where the amount of the overpayment is less than $500, it shall not 
be considered contrary to the purpose of the Railroad Retirement Act or 
against equity or good conscience to recover the overpayment. 
Consequently, recovery may not be waived.


Sec. 255.17  Administrative relief from recovery.

    (a) Where the Board seeks to recover an overpayment from someone 
other than the overpaid individual, as provided for in Sec. 255.4 of 
this part, and where waiver of recovery, as provided for in Sec. 255.10 
of this part, is not available because the overpaid individual was at 
fault as defined in Sec. 255.11, the Board may forego recovery of the 
overpayment where the individual from whom recovery is sought was not 
at fault in causing the overpayment and where recovery is contrary to 
the purpose of the Railroad Retirement Act as defined in Sec. 255.12.
    (b) Application of administrative relief from recovery with respect 
to a given person from whom recovery may be made shall have no effect 
on the authority of the Board to recover the overpayment from anyone 
else from whom recovery may be sought.
    (c) This section may be illustrated by the following examples:

    Example (1): An employee, through his own fault, causes an 
overpayment in his annuity. The employee dies before the overpayment 
can be recovered from him and he leaves no estate. A widow's annuity 
is payable on the employee's compensation record. The widow was not 
at fault in 

[[Page 67113]]
causing the overpayment. The Board may recover the remainder of the 
overpayment by setoff against the widow's annuity. However, it may 
forego recovery under this section if such recovery would be 
contrary to the purpose of the Railroad Retirement Act as defined in 
Sec. 255.12. Since this is not a waiver of the overpayment, the 
Board is free to recover the overpayment from the widow at a later 
date, for example, if an accrual of benefits should become payable, 
or if it determines that such recovery would not be against the 
purpose of the Railroad Retirement Act.
    Example (2): A representative payee for a retarded child, 
through her own fault, causes an overpayment in the child's annuity. 
The overpaid amounts were used for the benefit of the child. The 
representative payee dies before the overpayment can be recovered 
from her and she leaves no estate. The Board may not waive the 
remainder of the overpayment with respect to the child since for 
purposes of waiver the representative payee is considered the 
overpaid individual (see Sec. 255.18) and the overpaid individual 
was at fault. However, if the child was not at fault in causing the 
overpayment and recovery would be contrary to the purpose of the 
Railroad Retirement Act as defined in Sec. 255.12, then the Board 
may forego recovery of the overpayment from the child's annuity 
under this section.


Sec. 255.18  Recovery of overpayments from a representative payee.

    (a) Joint liability. In general, if an overpayment is made to an 
individual receiving benefits as a representative payee (see part 266 
of this chapter) the Board may recovery the overpayment from either the 
representative payee or the beneficiary, or both. If the beneficiary is 
currently receiving benefits, either in his or her own right or through 
a representative payee, the Board will generally propose to recover the 
overpayment by setoff against those benefits as provided for in 
Sec. 255.6 of this part. If the beneficiary is not currently receiving 
benefits but the representative payee is receiving benefits, then the 
Board will generally propose to recover the overpayment by setoff 
against those benefits.
    (b) Waiver of overpayments. For purposes of Sec. 255.10 (Waiver of 
recovery), if it is determined that the representative payee was at 
fault in causing the overpayment there may be no waiver of the 
overpayment either as to the representative payee or the beneficiary. 
However, if the beneficiary was not at fault in causing the overpayment 
he or she may be eligible for administrative relief from recovery under 
Sec. 255.17.
    (c) This section may be illustrated by the following examples:

    Example (1). M is receiving a child's annuity as a 
representative payee for her disabled son, S. With M's knowledge S 
marries. Although both M and S know that marriage terminates the 
child's annuity, neither of them informs the Board of this event. 
Both M and S are liable for any overpayment caused. Wavier is not 
available since M would be considered at fault in causing the 
overpayment. Administrative relief from recovery is not available to 
S since he would also be considered at fault.
    Example (2). R is a representative payee for B, who resides in a 
skilled-care facility. R is found to be at fault in causing an 
overpayment of benefits to B. The Board may recover the overpayment 
from either R or B. Waiver is not available because R was at fault 
in causing the overpayment. However, if B was not at fault in 
causing the overpayment he or she may be entitled to administrative 
relief from recovery under Sec. 255.17.


Sec. 255.19  Compromise of overpayments.

    (a) This section sets forth the principal standards which the Board 
applies in exercising its authority under 31 U.S.C. 3711 to compromise 
an overpayment. In addition, the Board may compromise an overpayment 
under the Federal Claims Collection Standards set forth in 4 CFR part 
103.
    (b) An overpayment may be compromised only if it is in the best 
interest of the agency. Circumstances and factors to be considered are:
    (1) The overpayment cannot be collected because of the overpaid 
individual's inability to pay the full amount of the overpayment within 
a reasonable time;
    (2) The overpaid individual refuses to pay the overpayment in full 
and it appears that enforced collection procedures will take an 
inordinate amount of time or that the cost of collecting does not 
justify the enforced collection of the full amount; or
    (3) There is doubt that the Board could prove its case in court for 
the full amount claimed because of a bona fide dispute as to the facts 
or because of the legal issues involved.


Sec. 255.20  Suspension or termination of the collection of 
overpayments.

    This section sets forth the principal standards which the Board 
applies in approving the suspension or termination of the collection of 
an overpayment. In addition the Board may suspend or terminate 
collection under the Federal Claims Collection Standards set forth in 4 
CFR part 104.
    (a) Collection action on a Board claim may be suspended temporarily 
when the debtor cannot be located and there is reason to believe future 
collection action may be productive or collection may be effected by 
offset in the near future.
    (b) Collection action may be terminated when:
    (1) The debtor is unable to make any substantial payment;
    (2) The debtor cannot be located and offset is too remote to 
justify retention of the claim;
    (3) The cost of collection action will exceed the amount 
recoverable; or
    (4) The claim is legally without merit or cannot be substantiated 
by the evidence.

    Dated: December 20, 1995.

    By Authority of the Board.
    For the Board.
Beatrice Ezerski,
Secretary of the Board.
[FR Doc. 95-31311 Filed 12-27-95; 8:45 am]
BILLING CODE 7905-01-M