Overissuances: Getting too many CalFresh benefits

What is an overissuance?

An overissuance occurs when a household gets more CalFresh benefits than it should. While the regulations use the use the word “claim,” case workers in California use the terms “claim” and “overissuances” interchangeably. Although all overissuances are claims, there is another sort of claim that is not an overissuance: A claim to recover benefits that have been “trafficked,” i.e., traded for cash or other ineligible items. [7 U.S.C. § 2022(b); 7 C.F.R. § 273.18(a)(1)(i)-(ii); MPP §§ 63-102(o)(1), 63-102(r)(2), 63-801.1.]

When the CalFresh office finds the mistake it will re-calculate the correct amount. Then it will send the household a notice demanding it to pay back what was overpaid. The notice must include a budget that shows how the overissuance was calculated. [ACL 11-26.] The CalFresh office can recoup the overissuance by reducing benefits, by “offsets” (collecting the overissuance from benefits owed to the household), through installment payments, and by intercepting money owed to the family. (For more details, see the section about how the CalFresh office collects overpaid benefits.)

What is NOT an overissuance?

A household is NOT considered to have an overissuance if they were categorically eligible for CalFresh benefits, unless the issue was incorrect budgeting of the household’s net income or household size for the CalFresh benefit. [MPP § 63-801.312.] The designation of the household as categorically eligible shall not be rescinded retroactively. [See 54 Fed.Reg. 24510 (June 7, 1989.] Thus, even if the household is later determined not to have been eligible for the cash aid program, the household remains treated as categorically eligible and will not receive an overissuance. [Id. See also, SNAP Quality Control Review Handbook, Section 1061.3 (October 2016.] If the county erred, and the household was not categorically eligible at the time (for example, not everyone in the household received public assistance), an overissuance may be found.

Nonrecurring lump sum payments are not income when determining whether a CalFresh overissuance occurred.  [ACIN I-19-12.]  For example, a retroactive SSI payment does not cause an overissuance for the month covered by the retroactive payment.

What are the different types of overissuances

There are three types of overissuances:

  • Agency (administrative) errors;
  • Inadvertent household errors; and
  • Intentional program violations (IPVs).

An agency error is an overissuance caused by the CalFresh office (also called “administrative error.”) [MPP § 63-102(a)(3).] Examples of agency error include such things as failing to count income reported on a SAR 7 or issuing benefits based on a household of four when there were only three people in the household.

An inadvertent household error is an overissuance caused by the household’s mistake. [MPP § 63-102(i)(5).] An example would be writing down net rather than gross income on a SAR 7 reporting form.

An intentional program violation (IPV) is an overissuance the household caused on purpose to get CalFresh benefits it should not have gotten. [MPP § 63-102(i)(9); MPP § 20-300.1.] An example would be intentionally failing to report wages from a new job. Intentional program violations also include “trafficking” in CalFresh benefits. [Id.]

Who must pay back an overissuance?

All adult members of a CalFresh household are equally responsible for any overissuance that the household receives. [MPP § 63-801.1; 7 C.F.R. § 273.18(a)(4)(i).] The county cannot collect civilly or through tax intercept from a person who was a minor at the time the household was overissued benefits. [Id.; see also, ACIN 1-58-08 (discussion of adult members and collections)].

A person who moves from the original household into a new household remains liable for an overissuance. If the adults in the household that received the overissuance have split up and now live in two or more households receiving CalFresh benefits, the CalFresh office can choose to recoup the benefits from all of the households containing adult members of the orginal, overissued household; the CalFresh office may also collect from just one of the households, if it chooses. [7 C.F.R. § 273.18(g)(1)(vi)-(vii); MPP § 63-801.611; 7 C.F.R. § 273.18(g), (h).]

The California program takes the position that a household composed entirely of minors can have their allotment reduced, even though they are not individually liable for the debt. [ACIN 1-16-05 (April 4, 2005), page 11; but see also, 7 C.F.R. §§ 273.18(a)(4)(I), 273.18(e)(3)(iv)(B) (stating that only adults are liable for repayment of claims); and 7 U.S.C. § 2022, 2022 (b)(1); 7 C.F.R. § 273.18(g)(1) (requiring collection of claims from “households”).

Using a fair hearing to challenge overissuances

Advocates should carefully review any Notice of Action (NOA) and underlying claim and request a fair hearing if there is any problem. Keep in mind, the burden is on the county welfare department to prove and validate a claim. [MPP § 22-073.3-.36; Evidence Code §§ 410, 412.] This “validation” requires more than computer evidence. The county must provide a paper trail as well.

Even allowing for the more flexible rules of evidence common to administrative hearings, use and reliance upon unsupported computer print-outs is improper hearsay. The CalFresh office must prove, using proper evidence, that the household did receive an overissuance. [See MPP § 22-073.34; see also, Kaye v. Department of Health and Rehab. Servs., 654 So.2d 298 (Fla.Dist.Ct. App. 1995) (hearsay evidence is admissible in administrative hearings to supplement or explain other evidence but is insufficient by itself to support a finding).] If the county cannot actually prove the overissuance, the Administrative Law Judge (ALJ) or the county should cancel the overissuance and stop all collections.

There is no overissuance if no one made a mistake, or the household did not get any additional benefits it was not entitled to get. For example, if a household does not report an increase in income before its next SAR 7 is due, and the household was not required to report that change mid-period, then there can be no overissuance. (For related information, see the section about budgeting for “change-reporting” households.)

Be alert to the practical reality that in some counties case workers (or perhaps the computer system) may be generating incorrect overissuances. [See ACL 03-18, pp. 71, 74.]

Statute of limitations on establishing overissuances

Effective September 14, 2018, counties can collect administrative error and inadvertent household error overissuances going back only three years from the date of discovery of the overissuance.  [ACL 18-99 (September 14, 2018.]  This timeframe will be reduced to two years effective July 1, 2022, or when automation can be completed, whichever is later.  [ACL 21-109.]  DSS previously interpreted these two sections in such a way as to allow for collection of administrative error and inadvertent household errors for up to six years prior to the date of discovery. [ACIN I-03-02, Overissuance Q and A (January 14, 2002) and ACIN I-52-02 (July 22 2002), Questions 1-1b.] CDSS maintains that interpretation for overissuances established prior to September 14, 2018.  [ACL 18-99.]

The establishment timeframe does not apply to fraudulent overpayment/overissuances.  A fraudulent overpayment/overissuance is an Intentional Program Violation.  An Intentional Program Violation can only be established by an administrative disqualification hearing finding that fraud has occurred, a signed administrative disqualification waiver, a criminal prosecution, or a signed disqualification consent agreement.  [ACL 21-109.]

Counties can reclassify nonfraudulent overpayments/overissuances if the county later determines that fraud occurred.  [Id.]  An Intentional Program Violation can include overpayment/overissuances beyond the 24 month limit.  [Id.]  When reclassification occurs, the county must issue a new notice of action.  [Id.]

An overissuance is “established” on the date of the demand letter, citing 7 C.F.R. § 273.18(e)(3)(iii). [See ACIN I-03-02 (January 14, 2002) (overissuance question).]

Statute of limitations on collecting overissuances

When a claim is delinquent for 3 years, county welfare departments and county revenue and recovery departments must stop all collection efforts except for submitting the debt to the Treasury Offset Program. [ACL 20-24.]  ACL 20-24 supercedes MPP § 63-801.53 because that section violates 7 C.F.R. § 273.18(e)(8)(ii)(E).

A CalFresh overissuance claim is delinquent if the claim has not been paid by the due date and payment arrangements have not been made, or a repayment agreement has been made and a payment not made.  [ACL 20-24.]  A claim is established when the initial notice of action is sent to the household.  When the claim is established, the household has 30 days to respond to state how they have chosen to pay or to request a hearing.  If a household that is no longer receiving aid does not respond in 30 days, the claim is delinquent.  [Id.]

A claim is not delinquent if it is being paid through a repayment agreement or through allotment adjustment.  [Id.]  A claim is delinquent on the date of a missed installment payment.  [Id.]  A claim remains delinquent until either a repayment agreement is established or resumed, a payment is made by a former recipient, payment is received in full, or the recipient reenrolls in CalFresh and allotment reduction begins.  [Id.]