The Chicago Regional Chief Counsel Precedent issued in May, 2010, restricts the use of “Retained Funds” after the member/beneficiary has died.
This decision represents “current policy, albeit unwritten” according to the head of the SSA office that drafts POMS in conversation on March 17, 2011. A similar decision was issued in New Jersey last summer. Another was applied by the San Francisco Regional Office against a pooled trust in Arizona. However, contemporaneously, there had been a proposed POMS on this subject last summer that was not issued – yet. Accordingly, SSA Regional Offices have been advised by the national office to consult the national office, and not apply this “precedent” below without consultation. However, in March, 2011, the San Francisco SSA Regional Office applied the policy to an Arizona trust.
Thus, the safest route is to draft pooled trusts to comply with the standards on retained trusts delineated in the following opinion. Basically, the analysis indicates that the national office believes that the retained funds belong to the pooled trust (to be used for other members of the pooled trust), and do not belong to the sponsoring non-profit agency.
Thus, the common practice of using retained funds to make “grants” to other agencies or the courts for the benefit of “disabled persons” in general, is not allowed under SSA’s view of the difference between d4A individual SNTs and d4C pooled SNTs].
Pooled Special Needs Trusts in three states – Minnesota, Arizona, and New Jersey – in three different regions of the country, have had their pooled trust disqualified based on the same analysis as in the Chicago Regional Office’s “Regional Chief Counsel Precedent” below. Note that in the body of the report, we find the language,
“However, we have recently received guidance from the Office of Income Security Programs (OISP) that funds retained by a pooled trust may be used only for the benefit of beneficiaries with accounts in the pooled trust. This means that the use of retained trust assets to add new trust beneficiaries (section 7.3B) and to aid disabled individuals generally (section 7.3C, D) are not acceptable under POMS SI 01120.203(B)(2)(g). Second, section 7.8 of the Trust appears to permit the Trust to avoid reimbursing Medicaid if the remainder beneficiaries agree to forego any distributions from the Trust. This provision is inconsistent with POMS SI 01120.203(B)(2)(g), which requires that, aside from certain allowable expenses, any amounts in the IBA not retained by the Trust must be used to reimburse the State for Medicaid.”
The language of the decision and the conversations with the national office in Baltimore are consistent. This is a problem to be aware of.
So what’s one to do? First, consider amending the language of the pooled trust so that it is consistent with the principles in this RCC Precedent, or at a minimum, is silent on what the pooled trust intends to do with any retained assets. There is nothing in the statute or existing POMS that requires that there be a statement that describes what happens to retained assets. There is nothing in the national POMS 8-step Action Checklist for SSA staff reviewing pooled SNTs that would lead the staff to question the retained asset provisions in a pooled trust.
Secondly, or perhaps, most importantly, do not let the time deadlines to appeal adverse decisions pass. The SSA procedure here is that some client member/beneficiary of the pooled trust will receive a Notice of Planned Action and then a Determination that the funds in their pooled trust account are “countable resources” and SSA is terminating the client’s SSI benefits effective “X” date, including retroactively back “X” number of years. The client has to act quickly and file a “Request for Reconsideration” checking the box in the middle of the form that indicates that they want a Formal Conference. The time limit is 65 days from the date of the SSA determination. If the client appeals within 10 days, SSA may continue their benefits pending the Reconsideration determination. If the Reconsideration is denied, the client can file a Request for Hearing before an SSA Administrative Law Judge – again, within the time limits stated above.
The “guidance” from national SSA is not based, in my opinion, on the d4C pooled trust statutory language. Congress did not limit how the retained funds could be spent, and did not clearly define whether the funds belonged to the sponsoring non-profit, or must stay in the trust for the benefit of other current members of the pooled trust. The argument that SSA is acting outside its authority is not a slam-dunk, however, because other parts of the Social Security Act give the Commissioner of Social Security extremely broad powers to carry out the purposes of the Act without specific or detailed direction from Congress.
If the ALJ hearing is lost, there is an appeal on the record to the Appeals Council in Falls Church, Virginia, and if denied there, to the U.S. District Court, Court of Appeals and the Supreme Court.
Our office would be interested in representing claimants on this issue anywhere in the country, or in assisting local counsel in other states who wish to challenge SSA’s new “guidance” on retained funds. Contact us at 727-330-7895 or David@LillesandLaw.com or Jessica@LillesandLaw.com.
David and Jessica Lillesand
