- Overview of collection of overpaid CalFresh benefits
- Allotment reduction
- Compromising claims
- Voluntary repayment
- Offsets to restored benefits
- Intercepts of tax refunds, unemployment benefits and other payments
- Canceling or terminating claims
- Overpayment collection changes because of COVID-19
Overview of collection of overpaid CalFresh benefits
The CalFresh office has many ways of collecting overissued (overpaid) CalFresh benefits. Most commonly, it reduces the amount of CalFresh benefits that the household currently gets until all the overpaid benefits have been paid back. Sometimes the CalFresh office can repay itself from any back benefits that it owes the household. This is called “offsetting” underissued (underpaid) CalFresh benefits.
The county may also ask the household to enter into a payment plan to pay back the overissued CalFresh benefits voluntarily. If the household is no longer receiving CalFresh benefits and does not agree to one of these voluntary arrangements, or if it misses a payment it agreed to make, the claim may be considered “delinquent.” In that case, the CalFresh office can take steps to recoup the CalFresh benefits by intercepting state or federal tax refunds, suing the person, or other means such as taking unemployment compensation benefits or Social Security payments. [7 C.F.R. §§ 273.18(f)-(j), 273.18(n).]
Counties can only collect administrative error and inadvertent household error overissuances for three years from the date of discovery of the overissuance. [ACL 18-99 (implementing settlement of Brown and Espinosa-Tapia v. Lightbourne litigation).]
Counties can only collect overissuances for three years from the date the claim is considered delinquent. except for federal tax intercept through the Treasury Offset Program (see below). [ACL 20-24; 7 C.F.R. § 273.18(e)(8)(ii)(E).] A claim is delinquent if not paid within 30 days of the date the Notice of Action is mailed, or when a payment is not made in accordance with a repayment agreement. The current California regulation, MPP § 63-801.53, is invalid because it gives counties discretion to continue collection after three years by means other than treasury offset. [Id.]
The state can write off overissuances that are established and delinquent more than three years, unless the agency intends to do a tax intercept under either the state or federal program. [7 C.F.R. § 273.18(8)ii.] CalFresh regulations discuss whether a claim is delinquent, but only provide for writing off debts under $25 or if the household cannot be located. [MPP §§ 63-801.45 and 63-801.512.] However, states can establish a cost-effectiveness threshold and decide to not collect overissuances under that amount. California determined that it is not cost-effective to collect overissuances under $400 for administrative errors or inadvertant household errors in closed cases and will no longer take collection action in those cases. [ACL 19-50.]
These various methods are described below.
Allotment reduction
“Allotment reduction” occurs when the county reduces a household’s monthly CalFresh benefits to get back benefits that were overissued. [MPP §§ 63-801.44 and 63-801.731; 7 C.F.R. § 273.18(g)(1).] Allotment reduction is the most common method used by counties to recover overissued CalFresh benefits.
The collection rate depends on the cause of the overissuance:
- For overissuances the agency caused, the allotment reduction is limited to 5% or $10, whichever is greater. [MPP § 63-801.222.]
- For overissuances the household caused by mistake, the allotment reduction is limited to 10% or $10, whichever is greater. [MPP § 63-801.736(a); 7 C.F.R. §§ 273.18(f)(1), 273.18(g)(1)(iii).] If the household gets less than $100 a month in CalFresh benefits, the CalFresh office will reduce the CalFresh benefits by $10 a month. [MPP § 63-801-736(a); 7 C.F.R. § 273.18(r)(1)(iii).]
- The county can collect intentional program violations (IPV) claims at a 20% or $20, whichever is greater. [MPP § 63-801.736(b).] States have the option of basing the 20% recoupment amount on either (1) the amount of the household’s SNAP allotment — i.e., the amount the household receives after the member who committed fraud is disqualified — or (2) the amount of the household’s SNAP entitlement — i.e., the amount the household would receive if the disqualified member were still receiving benefits. [7 C.F.R. § 273.18(g)(1)(ii).] California has opted for the former option, which is a smaller amount and thus causes less hardship to the remaining household members. [MPP § 63-801.736(b); see 7 C.F.R. § 273.18(g)(1)(ii).]
The county may reduce the allotments of any household containing an adult member who was liable for the overissuance. This includes collecting from more than one CalFresh benefits household at a time. [ACIN I-58-08, p. 12.]
The CalFresh office may not take the household’s initial allotment of CalFresh benefits, even if they are paid late. [MPP § 63-802.54; 7 C.F.R. § 273.18(g)(1)(iv).] If the CalFresh office is collecting the overissuance by reducing ongoing benefits, it cannot take any other action to collect the overissuance without the household’s permission, except possibly “offsets.”
Compromising claims
Under federal law, a household may be able to pay back less than the full amount of overissued CalFresh benefits by getting the SNAP program to agree to “compromise” or settle the overissuance if it believes the household cannot pay it back in three years. According to the Food Research and Action Center (FRAC), a state’s compromise policy could take one of several forms. One good model is the policy in the Supplemental Security Income (SSI) program, which waives overissuances if the recipient was not at fault and repayment would defeat the purpose of the program or would be “against equity and good conscience” (i.e., would be a hardship). [20 C.F.R. § 416.550.] FNS has stated that this idea “does have some merit,” and that states already have authority to implement such a model. [See 65 Fed.Reg. 41752, 41765 (July 6, 2000).] A state SNAP program might also agree to compromise any claim where the household’s income was under a certain percentage of the federal poverty line.
California has issued a policy for compromising claims when at least one member of the household is elderly or disabled. Counties will compromise Administrative Error (AE) and Inadvertent Household Error (IHE) overissuances for active and inactive households that include at least one elderly and/or disabled household member. AE and IHE claims for active and inactive households consisting solely of members who are elderly and/or disabled at the time of discovery of the claim will be reduced by 100 percent. AE and IHE claims for active and inactive households that include at least one elderly and/or disabled household member and only an elderly and/or disabled household member is responsible for the claim will be reduced by 100 percent. AE and IHE claims for active and inactive households that include at least one household member is elderly and/or disabled and one who is not and the non-elderly or disabled household member is responsible for the claim will be reduced by 50 percent. [ACL 21-118.] Automation of the overissuance compromise policy and revised Notices of Action is expected to be completed by May 1, 2023, which is the final date that the policy can become effective. [ACL 22-61.]
The date of discovery is the date the county determined that an overissuance occurred.
For active and inactive cases, counties must use the most recently verified information to determine household composition at the time of discovery. [Id.]
Household members who become elderly and/or disabled during collection of an overissuance are eligible for reduction. The household must inform the county and verify their elderly and/or disabled status verified by the county to have their remaining overissuance claim reduced. [Id.]
Counties are only required to inform households of a reduction if the household’s claim is reduced by 100 percent on an already established claim. No notice is required if a household’s overissuance is reduced by 100 percent prior to establishment of the claim. Counties must give notice to households of a 50 percent compromise and of the remaining overissuance balance. [Id.]
The elderly/disabled policy does not affect claims already in collection. However, households can request a reduction if they become elderly or disabled after the new policy is in effect. [Id.]
The elderly/disabled compromise policy does not apply to overissuances incurred while waiting for a unsuccessful hearing decision, also known as aid paid pending overissuances. [Id.]
The elderly/disabled compromise policy is anticipated to become effective in Fall, 2022. CDSS will issue final guidance when the implementation date is determined. [Id.]
Voluntary repayment
The CalFresh office can ask a household to voluntarily pay back any overissuances. Forms of voluntary repayment are:
- Recouping at a higher rate than 5% or 10% of the monthly benefit;
- Recouping from benefits already stored in the household’s EBT account;
- Accepting cash, either in a lump sum or via a payment plan.
[MPP § 63-801.7; 7 C.F.R. §§ 273.18(g)(1)(ii)-(iv), 273.18(g)(2)-(5).]
Even though the CalFresh office does not have to agree to compromise any claims, it should accept installments payments when offered by the household member. [MPP § 63-801.721 (county “shall negotiate” if the recipient chooses).] For those on aid, the installment payment must be more than the office would collect through reducing the monthly CalFresh benefits allotment. [MPP § 63-801.723.] If the office is reducing the household’s CalFresh allotment, the household can just let the CalFresh office continue to reduce their current benefits by 5% or 10% and not pay any additional amount. But if the person receiving CalFresh benefits offers to make installment payments and the CalFresh office accepts this, the household’s benefits cannot be reduced so long as those payments are made on time. [MPP §§ 63-801.733 and 63-801.43(i).]
If the person is not currently receiving CalFresh benefits, the CalFresh office will ask them to make arrangements to pay back the overissuance voluntarily through installment payments, lump sum payments or unemployment benefit intercepts. If the person does not agree to do voluntary repayments, he can be sued or be subject to the intercept programs described below. [MPP §§ 20-403.1, 20-403.2.] If the household agrees to a payment plan, he must make the payments on time. If the person misses a payment, the CalFresh office may renegotiate a plan. (See the section about the overissuance demand letter / notice of action for more details.)
In some instances the state will consider the overissuance “delinquent”. [MPP § 20-403.22.] If the household is already paying off a prior overissuance through recoupment or through a payment plan, the CalFresh office will not consider a new overissuance to be delinquent as long as it expects to start collecting the new overissuance once the prior over issuance is paid off. [MPP § 63-801.454; 7 C.F.R. § 273.18(e)(5)(iv).]
Once delinquent, the county may move to other methods of collection, such as referring the debt to a collection agency, suing the person, or relying one of the collection methods described below. [MPP § 63-801.7; 7 C.F.R. § 273.18(e)(5).] Although federal law permits states to write off debts delinquent more than three years, if not pursuing tax intercept, California does not do this unless the debt is less than $25 or the household cannot be located. [See 7 C.F.R. § 273.18(8)(ii); MPP §§ 63-801.45 and 63-801.512.]
Paying by installments may protect a person who is not currently receiving CalFresh benefits from tax, Social Security or other intercepts. [MPP § 20-403.2.] But if a household misses an agreed upon payment and has an intentional program violation (IPV), the county may collect and need not reach agreement on a new payment plan. [MPP § 63-801.722(b)(3).] For other non-IPV claims, when the household misses payments, California requires the county to allow a new payment plan if the household makes up the missed payments. [MPP § 63-801.722(b)(i).] (See the section about when the CalFresh office thinks the household has committed fraud for related information.)
Offsets to restored benefits
Another way the CalFresh office can collect an overissuance is by deducting the amount of the overissuance from the amount of an underissuance that is owed to the household. This is called an “offset.” Unfortunately, the CalFresh office can only correct underissuance errors that occurred within one year prior to the date they were discovered, or within one year of the date that the household requests correction of the underissuance. [MPP §§ 63-801.313, 63-801.735, and 63-802.54; 7 C.F.R. § 273.17(a)-(b); see also, 7 C.F.R. §§ 273.17(d)(4), 273.18(g)(3).] (See the section about getting too few CalFresh benefits for more details.)] The period the state can go back in figuring overissuances, however, is three years from discovery for agency and household mistakes, and six years for intentional program violations. [MPP § 63-801.311.]
In California, an administrative-error overissuance may not be “offset” or “applied”. [MPP § 63-801.313 (Handbook); see also, Lopez v. Espy, 83 F.3d 1095 (9th Cir. 1996) (offset of past erroneous food stamp underissuances and overissuances contrary to plain meaning of 7 U.S.C. § 2020(e)(11)).] If the overissuance was caused by the agency, the CalFresh office may not offset the overissuance against the underissuance. [MPP § 63-801.313.] Note that 7 C.F.R. § 273.18(g)(3) was amended after the Lopez decision to allow offsets of underissuances and overissuances in administrative error cases. Because of that change, it is uncertain whether Lopez remains good law.
If the agency’s claim for an overissuance is more than the benefits owed (i.e., the amount of the underissuance), the entire amount of the restored benefits can be taken. The CalFresh office will take the household’s restored benefits even if the overissuance is already being recouped from ongoing benefits. [MPP §§ 63-801.313 and 63-801.735; 7 C.F.R. § 273.18(g)(3).] But it may not take any of the first CalFresh benefits allotment after application, even if those are issued late. [MPP § 63-802.541; 7 C.F.R. § 273.17(d)(4).]
The CalFresh office may also offset “dormant” or “expunged” amounts on a person’s EBT card. [MPP § 16-750.12 and .13.] Expunged amounts are amounts left on an EBT card where no activity has occurred for 270 days. [MPP § 16-120.13.] Dormant amounts are those where no activity has occurred on the card for 90 days. [MPP § 16-120.12.] For dormant amounts, the CalFresh office must give 10 days notice prior to recouping those amounts. [MPP § 16-750.12.] This will give the household a chance to object. [See ACL 03-58 (December 22, 2003); ACL 05-28 (September 14, 2005).]
Even so, if the person is no longer getting CalFresh benefits because she thought the amount was not worth the trouble of reapplying and the household has an overissuance, it may be a good idea to reapply for CalFresh benefits. Becoming a CalFresh recipient again and allowing allotment reduction — even if all of the CalFresh benefits are recouped — will protect the person’s tax refunds or Social Security payments from being taken to repay the overissuance. [MPP § 20-403.21.]
Intercepts of tax refunds, unemployment benefits and other payments
NOTE: Franchise Tax Board collection of CalFresh overissuances is suspended until the end of 2020 because of COVID-19. Treasury Offset Program intercepts to collect CalFresh overissuances are suspended until August 7, 2020 because of COVID-19. [ACWDL, July 30, 2020; ACWDL, April 16, 2020.] Counties may, but are not required to, approve refunds for individuals for circumstances related to COVID-19 during the suspension period. [Id.]
California Franchise Tax Board State Tax Refund Intercept Program
The federal law allows states to use “other means” to collect from households. [7 C.F.R. § 273.18(f)(5).] This includes California’s Tax Intercept Program, administered by the California Department of Social Services (CDSS). [MPP § 20-400 et. seq.; see California Government Code § 12419.5; California State Administrative Manual § 8790.]
The county will refer a claim to CDSS and the State Franchise Tax Board for collection. When a person subsequently files their taxes and is eligible for a tax refund, the state will “intercept” all or part of that refund to pay back the CalFresh debt. [MPP § 20-400.] Methods other than tax intercepts are supposed to be used first, if they will result in collection. [MPP § 20-400.21.] Advocates should also note that California law allows offsets of other state payments due the person, such as lottery winnings. [California Government Code § 12419.5.]
To refer a debt to the intercept programs, the county must have determined that the debt is “legally enforceable” and that the county has a “right to recovery.” This right to recovery has been interpreted as the ability to collect based on the regulations, All County Letters (ACLs), and court cases. [MPP § 20-401(i)(1); ACIN I-53-89, page 3; MPP § 20-402.1] California counties submit a list of debts to the state for referral to the Tax Intercept Program and/or the U.S. Treasury Offset Program (TOP) on an ongoing basis. [MPP §§ 20-402.2, 20-404.]
No intercept is allowed if:
- The current CalFresh allotment is being adjusted;
- The time to request a fair hearing has not lapsed; or
- The time to request a fair hearing is pending; or
- Regular restitution is being paid.
[MPP § 20-403.2.] Note that under MPP § 22-009.1, the time to appeal does not run if the individual has not received notice of the claim.
Under MPP § 20-403, claims may be referred to offset if the county determines:
- The claim is not being recouped and there is a court order to repay an intentional program violation (IPV);
- There is an order of restitution resulting from an IPV disqualification hearing; or
- The household failed to respond to a demand letter.
Franchise Tax Board intercepts are suspended through July 31, 2021because of COVID-19. [ACWDL, April 8, 2021.] Counties can approve refund requests for individuals with circumstances related to COVID-19 for Franchise Tax Board collections that occurred starting March 1, 2020 through the end of the suspension of Franchise Tax Board intercepts. [Id.]
Federal Treasury Offset Program (TOP)
The CalFresh office can also “intercept” federal tax refunds, unemployment compensation benefits, Social Security (not SSI) and other federal payments to collect a CalFresh overissuance through the federal Treasury Offset Program (TOP). [MPP § 63-801.74 and 63-801.76; 7 C.F.R. § 273.18(n).] Unemployment benefits cannot be intercepted unless the person agrees in writing or a court orders the intercept. [MPP § 63-801.76; 7 C.F.R. § 273.18(g)(6).]
Federal law permits TOP intercept referral only for debts delinquent more than 120 days. The starting point for counting the 120 days is the delinquency date, which is defined as the due date of the missed installment payment unless the claim was delinquent prior to entering into a repayment agreement, in which case the due date will be the due date on the initial notification/demand letter. [7 C.F.R. § 273.18(e)(5)(iii).]
Under federal law, if a CalFresh claim is delinquent for 120 or more days, then the county or state may refer the claim to the U.S. Treasury Offset Program (TOP). [7 C.F.R. § 273.18(n)(1).] The state must certify that the debt is “legally enforceable.” [Id.]
Once the claim is referred to the Treasury Offset Program to pay the debt, the federal government may take payments that are owed by the federal government to the household, such as federal income tax refunds, federal salary, and federal retirement benefits. [7 U.S.C. § 2022(d).] It may also take the amount of the social security payments over $750 per month, up to 15% of the monthly social security payments. [31 C.F.R. § 285.4(e).] (Supplemental Security Insurance (SSI) benefits can not be intercepted in this way.) In addition, the federal government can charge “collection or processing fees.” [7 C.F.R. §§ 273.18(n)(2)(D)(ii), 273.18(n)(3)(ii).]
If the individual goes back on CalFresh, the overissuance can be collected by grant reduction. [ACL 23-07.] In that instance, the case must be removed from TOP because grant adjustment is the only allowed method of collection. [Id.]
If the individual stops receiving benefits, the case is then returned to TOP for collection as long as the case is delinquent. [Id.] The case is considered delinquent until the individual establishes or resumes a repayment agreement, the individual makes a satisfactory payment, the individual pays the entire debt, or, the individual begins receiving CalFresh again. [Id.]
Pre-intercept Notice of Action (NOA) and hearing rights
When a referral to the Treasury Offset Program is made, the CalFresh office must send a notice informing the household about the referral. [7 C.F.R. § 273.18(n); see ACL 18-86 (transmitting form notices).] California’s state tax intercept program also requires a pre-offset notice. [MPP § 20-406.] The notice should have information about the right to appeal and where to get further information. [MPP § 20-406.1; 7 C.F.R. § 273.18(n)(2).] This notice or “pre-offset warning” must also advise the household of the right to an administrative “review” by the county. Federal statute says that failure to receive the notice does not prevent the intercept. [31 U.S.C. § 3716(c)(7)(B).] The fee is limited to the actual cost to the federal government of operating the program. [31 U.S.C. 3716(c)(4).]
The pre-offset notice is sent on the 31st day after the notice of action alleging the overissuance is sent. [ACL 16-108.] Specifically, the pre-offset notice must contain the following information:
- The amount of the delinquency;
- The right to contest the referral for an intercept;
- The name, address and phone number of the county’s contact to contest the intercept;
- The right to an “administrative” review including a face-to-face meeting; and
- Possible reasons the household might disagree with the action.
[MPP § 20-406.1.]
The Treasury Offset Program process is suspended if the household requests an administrative review within 60 days of the date of the pre-offset notice, an administrative hearing within 90 days of the overissuance notice or the household files bankruptcy. [ACL 16-108.]
An agency review may be requested at any time during the calendar year in which an intercept occurred. When the household requests it, the review must include a face-to-face meeting. The review must be conducted by an impartial person (in the agency). The person may ask that the meeting be held right away, i.e., within 10 days. The agency official must review the case information that proves the debt is “recoverable” and “legally enforceable”. A written decision must be sent by the agency within 10 days. [See MPP § 20-407.1-.14.]
If the person is unhappy with the result of the agency review, the person can request review by the federal Food and Nutrition Service within 30 days. CDSS has taken the position that a state hearing is not available to challenge the result of the agency review. [ACL 18-86.]
Any excess benefits intercepted must be promptly restored. [7 C.F.R. § 273.18(h); MPP § 20-407.16.] Once it determines that the intercept was incorrect, the county must pay the person back immediately, i.e., within ten days, even if the state hasn’t returned the money to the county. [MPP § 20-408.1; ACIN I-53-89 (Attachment 1, page 6, No. 5).] In addition, the county must correct all records, any automated systems, and update the CDSS intercept referral list. [MPP § 20-407.16.]
Canceling or terminating claims
The CalFresh office may also decide to terminate an overissuance (i.e., stop trying to collect it) or write-off an overissuance (i.e., remove it from its books). The CalFresh office will not collect agency or household error claims that are $35 or less if the household is on CalFresh at the time of the allotment reduction, or $400 or less if the household will not be on aid when collection would begin . [MPP § 63-801.411 and ACL 19-50.] The county can also suspend claims after sending a demand letter if it decides that it would not be cost effective to pursue the debt. [MPP §§ 63-801.512(b), 63-801.522 (regarding intentional program violations). Note here that California’s rules permit “suspension” of claims, but do not require it.
Also, when all the adult household members have died, a claim should be cancelled. [7 C.F.R. § 273.18(e)(8)(ii)(B); MPP § 63-801.5.] The CalFresh office must also terminate and write-off a claim if it cannot locate the CalFresh household. [7 C.F.R. § 273.18(e)(8)(ii)(F); MPP §§ 63-801.51; 63-801.411(b) and 63-801.512.] The county can terminate a claim if no recovery action has occurred for three years. This is called being “in suspense”. [7 C.F.R. § 273.18(c)(8)(ii)(E); MPP § 63-801.53.] Counties can also appear in bankruptcy hearings to object to a discharge or to petition to revoke a discharge. [MPP § 63-801.54.]
Even after a claim is “cancelled” or “terminated,” the county may still be able to offset the amount against a corrective payment, but only if it is not an agency error overissuance. [MPP §§ 63-801.53, 63-801.313 (Handbook).]
Overpayment collection because of COVID-19
Beginning in March, 2020, all CalFresh households have been receiving maximum amount of CalFresh. Households entitled to less than the full allotment have been receiving the difference between their entitled allotment and the full allotment as an emergency allotment. For any month a household receives an emergency allotment, there cannot be an overissuance unless the household is found to have been completely ineligible. [ACIN I-87-20.]
Nonrecurring lump sum payments, including any government stimulus payment or retroactive unemployment insurance payments, do not count as income for CalFresh. [Id.]
When determining if an overissuance is administrative error or inadvertent household error, counties must consider the circumstances at the time of the overissuance. These circumstances include various waivers because of COVID-19 including waiver of periodic reporting and extension of certification periods, and elimination of the interview requirement at initial certification and recertification. In addition, COVID-19 created significant application and call volume and changes in county operations that may have resulted in a households inability to complete required reports. Counties must consider these circumstances when establishing an overissuance claim. These circumstances are likely to have impacted a household’s ability to report timely, increasing the occurrence of overissuance claims caused by administrative error. [Id.]