Opinion ID: 441817
Heading Depth: 1
Heading Rank: 1

Heading: THE GRANDFATHER PROVISION: SECTION 1611(h) OF THE SOCIAL

Text: SECURITY AMENDMENTS OF 1972
5 The SSI program, adopted on January 1, 1974, is the most recent major amendment relating to aid to the blind of the Social Security Act of 1935, Pub.L. No. 74-271, ch. 531, tit. X, 49 Stat. 645. Under the original 1935 Social Security Act scheme, the federal government assisted state aid programs for poor families, the blind, aged and disabled through provision of matching funds for state programs meeting federal requirements. See generally A. LaFrance, M. Schroeder, R. Bennett, W. Lloyd, Law of the Poor 261-66 (1973). In the 1950 amendments to the Social Security Act, Pub.L. No. 81-734, ch. 809, Secs. 341 and 344, 64 Stat. 553-54, Congress created special rules for the needy blind, which required states to exempt a certain amount of blind persons' earnings in calculating their benefits. These provisions were to encourage blind persons to become self-supporting while receiving benefits to help meet their special needs. See Liberty Alliance, 568 F.2d at 336-37 (quoting S.Rep. No. 1669, 81st Cong., 2d Sess., reprinted in 1950 U.S.Code Cong.Serv. 3287, 3345-46). By 1972, some state programs of aid to the blind contained more generous income exclusion provisions than those required by the federal government. Pennsylvania's program, the subject of the Liberty Alliance litigation, was one. California's was another. 6 The Social Security Amendments of 1972, Pub.L. No. 92-603, 86 Stat. 1465 (codified as amended at 42 U.S.C. Secs. 1381-1385 (1976 & Supp. V 1981)), combined aid to the blind, elderly and disabled in one federally administered and funded system: the Supplemental Security Income program. SSI increased the level of uniformity in eligibility standards and calculation of benefits, but gave states the option of supplementing the federal benefits. See H.R.Rep. No. 231, 92d Cong., 2d Sess. 4-5, reprinted in 1972 U.S.Code Cong. & Ad.News 4989, 4992 (hereinafter cited as H.R.Rep. No. 231). 7 Two sections of the new SSI program expressly addressed the question of setting the level of SSI benefits for blind persons who had received aid from more generous state plans prior to the enactment of SSI. One section, 1611(g), 42 U.S.C. Sec. 1382(g), permitted recipients to have a greater amount of independent financial resources than did the new federal plan. That section deemed these recipients to fall within the federal limits for owned resources, if the amount did not exceed the maximum allowable under the former state plan. 1 8 The other section, 1611(h), 42 U.S.C. Sec. 1382(h), concerned the calculation of income the government would not include when it determined the recipient's income. For persons who had received state aid to the blind prior to SSI and met certain other requirements, 2 section 1611(h) permitted disregarding the amount that would have been disregarded under the old state plan if it was greater than the amount that would be disregarded under the new federal plan: 9 there shall be disregarded an amount equal to the greater of (A) the maximum amount of any earned or unearned income which could have been disregarded under the State plan, as in effect for October 1972, under which he or they received such aid or assistance for December 1973, and (B) the amount which would be required to be disregarded under section 1382a of this title [the federal income test] without application of this subsection. 10 42 U.S.C. Sec. 1382(h) (Sec. 1611(h) of the Social Security Amendments of 1972). 11 The dispute between the parties in this case is over HHS's interpretation of section 1611(h). Plaintiffs argue that Congress intended the section to prevent the new law from diminishing the amount blind beneficiaries were receiving under prior law. They argue that Congress did so by requiring state rules to be used in SSI benefit calculation if they would lead to a more generous result for prior recipients who now applied for SSI. The statute, according to plaintiffs, grandfathers in all earlier more generous income counting rules from prior state aid to the blind programs for those who had received benefits under them. 12 That is not the way that HHS is administering the program, however. Prior to the passage of SSI, the agency had promulgated regulations prescribing income counting procedures for states in the matching program, 45 C.F.R. Sec. 233.20(a)(4)-(11) (1972). The government argues that Congress intended section 1611(h) to grandfather only those particular income exclusions recognized in the preexisting regulations. Congress, it is argued, intended section 1611(h) to create an alternative uniform counting system.
13 Plaintiffs here challenge the agency on the same grounds and seek the same relief that Pennsylvania blind plaintiffs obtained from the Third Circuit in Liberty Alliance of the Blind v. Califano, 568 F.2d 333 (3d Cir.1977). The government there agreed, as it agrees here, that section 1611(g), relating to resources, was intended to grandfather in all state resource counting rules for those who had been receiving aid under prior, more liberal state plans. It unsuccessfully argued, however, that the income counting provision of section 1611(h) was different. The government in Liberty Alliance asserted that the preexisting federal regulations, not state counting rules, were to be the alternative to the new SSI test. 568 F.2d at 339. 14 The Third Circuit disagreed with the government and concluded that the two sections were both patently aimed at the same problem--a state plan which was more generous in disregarding resources and income than the succeeding federal plan. 568 F.2d at 340. The court decided that the two sections must be read together to create a comprehensive savings clause, grandfathering into SSI the entire state plan provision for both exclusion of resources and exclusion of income of blind persons. Id. 15 The Secretary in this case presents a slightly different defense of its position. It argues here that one word in section 1611(h)--the word disregarded--gives that section a very different purpose from section 1611(g). According to the Secretary, because the 1972 (pre-SSI) federal regulations, describing procedures for states to use in counting income benefits under the federal-state matching program, 45 C.F.R. Sec. 233.20 (1972), contained several sections with headings describing income categories to be disregarded, 45 C.F.R. Sec. 233.20(a)(4)-(11) (1972), Congress in essence incorporated by reference those categories, and only those categories, as types of income to be excluded in calculation of SSI benefits for former state aid recipients. 3 The Secretary thus asks us to apply the term disregard as a very narrow term of art. 16 History does not confirm the government's theory. At the time the Social Security amendments were drafted, the term disregard was used widely in the context of Social Security income counting as a synonym for words and phrases like exclusion, deduction, and not included. None of the authorities cited to us, nor any we have unearthed, support the Secretary's position that disregard had a more restrictive meaning. We can find no evidence that there existed, as agency counsel argued orally, a strict category of rules known as income disregard rules, encompassed in 45 C.F.R. Sec. 233.20(a)(4)-(11) (1972). Agency counsel admitted at oral argument that the word disregard was never coherently defined, and we agree. 17 Indeed, the federal income exclusions listed in the SSI statute itself, 42 U.S.C. Sec. 1382a, are not described as disregards, although some are identical to items HHS points to in its regulations as disregards. Nor does use of the word disregard in the legislative history of SSI support the Secretary's contention that it was subject to limited, specialized usage. A report by the House of Representatives on the proposed SSI program explains that the first $85 of earned income per month would be excluded from consideration. H.R.Rep. No. 231 at 151, reprinted in 1972 U.S.Code Cong. & Ad.News at 5137. It did not say that income was to be disregarded. A Congressional study of SSI after passage of the amendments but before implementation defined countable income as income other than allowable exclusions--not allowable disregards. Staff of the Subcommittee on Fiscal Policy of the Joint Economic Committee, 93d Cong., 1st Sess., The New Supplemental Security Income Program--Impact on Current Benefits and Unresolved Issues 45 (Joint Comm. Print. 1973). In the section of the study concerning income limits and benefit levels, the words exclusion and disregard are used interchangeably. Id. at 48-51. 18 The interchangeable nature of the terms is illustrated in state usage as well. The Eligibility and Assistance Manual (EAS) of the California Department of Social Welfare Sec. 44, which included in 1972 all of the income counting rules of the California Aid to the Blind program, including those now considered to be disregards by the Secretary, identified amounts left out of the income calculations as exclusions. 19 Finally, the Secretary's own list of the items the agency considers disregards among the California exclusions does not conform to the definition of the word disregard we are asked to accept. The Secretary recognizes sixteen California income exclusions as having been grandfathered into SSI income calculation via section 1611(h). Social Security Administration, Program Operations Manual System (POMS) Sec. SI 00840.360. A number of those, however, are not found in 45 C.F.R. Sec. 233.20(a)(4)-(11) (1972), the disregard section which the Secretary asserts contains all the categories of income Congress intended to be considered excluded. 20 For example, the Secretary allows the California category of loans and grants. This category did not appear in the prior regulations as a disregard, rather it appeared at 45 C.F.R. Sec. 233.20(a)(3)(iv) (1972), which stated that in determining the availability of income and resources, [loans and grants] will not be included as income. The California exclusion of home produce of a recipient consumed in his or her household also appeared in the federal regulations as an amount not included as income. 45 C.F.R. Sec. 233.20(a)(3)(iv)(c) (1972). California excluded all earnings of children under 14 years of age. The corresponding federal regulation, 45 C.F.R. Sec. 233.20(a)(3)(iii), provided only that no inquiry will be made of the amount of earnings of a child under 14 years of age. Thus, the agency in fact grandfathers California income exclusions that are not included in regulations the Secretary insists are the only source of disregards. The agency's own practice contradicts the Secretary's position on the highly technical use of disregard. 21 The legislative history of SSI shows that the purpose of the grandfather provisions was to avoid causing hardship to the blind under the new program. In a 1973 hearing before the Senate Committee on Finance, Senator Russell Long, Chairman of the Committee, expressed concern that some welfare recipients would lose their benefits under the new program. Caspar Weinberger, then Secretary of the Department of Health, Education, and Welfare, responded that [t]he conferees did specifically grandfather the blind and the disabled recipients into the SSI program .... Supplemental Security Income Program: Hearing Before the Senate Committee on Finance, 93d Cong., 1st Sess. 9 (1973). An earlier Congressional summary of the program voiced the same concerns: 22 as under present law, any income necessary for the fulfillment of the plan for achieving self-support would be disregarded for persons qualifying on the basis of blindness. A savings clause would assure that blind persons would not receive any reduction in benefits due to those provisions. 23 Senate Finance Committee and House Committee on Ways and Means, Summary of Social Security Amendments of 1972 as Approved by the Conferees 27 (Comm.Print.1972), quoted in Liberty Alliance, 568 F.2d at 340. The Secretary's position here has resulted in a reduction of benefits. It is therefore contrary to the statute. 24 In both Liberty Alliance and this case, the Secretary has pointed to an uncodified statute, Title II, section 212, of Pub.L. No. 93-66, as support for its argument that Congress did not intend the grandfathering provisions of 42 U.S.C. Secs. 1382(g) and 1382(h) to guarantee that the blind would suffer no reductions in their benefits when the state programs were converted to SSI. 4 Section 212 appears to condition a state's eligibility for federal assistance in some programs on the state's implementation of a supplementary payments plan. Liberty Alliance, 568 F.2d at 340. The Secretary maintains that Public Law 93-66 was passed to avoid hardship to grandfathered-in recipients of aid to the blind, aged and disabled, and, therefore, that section 1611(h) cannot be read to do the same thing. 25 As the Liberty Alliance court pointed out, however, the Secretary's argument misconstrues the aims of sections 212 and 1611(h). Section 212 was drafted after the passage date of the Act to ensure that no pre-SSI recipient would receive a smaller benefit when SSI came into effect. See Supplemental Security Income Program: Hearing Before the Senate Committee on Finance, 93d Cong., 1st Sess. 7-14 (1973). This is very different from the promise of sections 1611(g) and 1611(h), limited to blind recipients, that there would be a carryover of certain calculation methods for those who had been receiving benefits under a more generous system of calculation. 26 The only other basis the Secretary offers for upholding the regulations is the general principle that this court should defer to the agency's interpretation of the statute at issue. Although under this long-established rule courts show great deference to the interpretation given the statute by the officers or agency charged with its administration, Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965), this rule has never required the court to abdicate its own role in deciding in questions of statutory interpretation. Volkswagenwerk Aktiengesellschaft v. Federal Maritime Commission, 390 U.S. 261, 272, 88 S.Ct. 929, 935, 19 L.Ed.2d 1090 (1968). Agency interpretations of statutes are important, but they are not controlling in a court's decision. Batterton v. Francis, 432 U.S. 416, 424, 97 S.Ct. 2399, 2405, 53 L.Ed.2d 448 (1977). It is beyond doubt that the Social Security Administration possesses expertise in a very complicated area of administrative law. Nevertheless, as this court has recognized, we are obliged to reject the agency's interpretation of the statute ... if 'there are compelling indications that it is wrong.'  Cruz v. Zapata Ocean Resources, Inc., 695 F.2d 428 (9th Cir.1982) (quoting Red Lion Broadcasting Co. v. Federal Communications Commission, 95 U.S. 367, 381, 89 S.Ct. 1794, 1802, 23 L.Ed.2d 371 (1969)). 27 The Secretary here has shown no basis for her interpretation of the statute. Neither the language of the statute nor its legislative history, nor for that matter the agency's own practice, supports the argument that the word disregard in section 1611(h) is a term of art with a well-defined narrow meaning. The agency has not interpreted section 1611(h)--it has attempted to rewrite it. Such an objective cannot be tolerated in the name of deference to agency expertise. Therefore, we affirm the district court on the interpretation of section 1611(h).
28 The district court ordered recalculation of benefits erroneously calculated as well as prospective implementation of the correct formula. The Secretary contends on appeal that the sovereign immunity of the United States precludes any relief other than prospective relief. This is incorrect. 42 U.S.C. Sec. 405(g), the section of the Social Security Act authorizing judicial review, is a broad waiver of sovereign immunity which authorizes injunctive and other relief. See Califano v. Yamasaki, 442 U.S. 682, 705, 99 S.Ct. 2545, 2559, 61 L.Ed.2d 176 (1979); Cash v. Califano, 621 F.2d 626, 632 (4th Cir.1980); Wright v. Califano, 603 F.2d 666, 670 (7th Cir.1979), cert. denied, 447 U.S. 911, 100 S.Ct. 2999, 64 L.Ed.2d 862 (1980); Liberty Alliance, 568 F.2d at 343-47. 29 The Secretary also has questioned jurisdiction over the class in this case, since not all unnamed class members have met the requirement in section 405(g) of exhausting administrative remedies prior to suit. The question was explored thoroughly by the Third Circuit in Liberty Alliance, and we follow that court's reasoning. This is a question of statutory interpretation in which the Secretary has taken a final position on an issue, and further administrative appeals would be futile. Mathews v. Eldridge, 424 U.S. 319, 330, 96 S.Ct. 893, 900, 47 L.Ed.2d 18 (1976). Compare Heckler v. Ringer, --- U.S. ----, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984) (Secretary's nonbinding instruction did not render administrative exhaustion futile). Moreover, as the Liberty Alliance court pointed out, [r]esolution of the issue in a single judicial review proceeding conserves both administrative and judicial resources. 30