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Foster Care Independence Act Signed Into Law - Provisions Included On SSI Overpayments, Treatment Of Trusts And Transfer Of Assets

For Immediate Release, 16 Dec 99
Contact: Chris Marshall

On December 14, President Clinton signed legislation to increase funding and services for children up to age 21 leaving foster care. The bill, known as the Foster Care Independence Act of 1999 (HR 3443) includes a number of changes to the Supplemental Security Income (SSI) program designed to combat fraud and abuse. These provisions were needed to "offset" the costs of expanded services (including Medicaid eligibility) for children between the ages of 18 and 21 transitioning out of foster care. These changes are very similar to legislation (HR 1802) that passed the House in June 1999 and focus primarily on treatment of trusts as a resource and reinstatement of a transfer of assets penalty.

It is important to note that these changes to the SSI program are substantially scaled back from a package of fraud and abuse changes that the House Ways and Means had considered early in 1999. These changes would have made deep cuts in benefits for persons living in group homes, altered the definition of disability for children and negatively impacted existing special needs trusts. After an outpouring of opposition from disability advocates (including NAMI), Congress abandoned these proposals and instead moved forward on these more modest reforms designed to combat fraud.

Included below is an analysis, compiled by the National Organization of Social Security Claimants' Representatives (NOSSCR), of provisions impacting SSI that are a part of the new law. More detailed information is available through the Social Security Administration's website at http://www.ssa.gov/legislation/legis_bulletin_112499.html

National Organization of Social Security Claimants' Representatives (NOSSCR)


  • Starting with overpayments made 12 months or more after December 14, 1999, a representative payee is liable for repayment of an SSI or Tide II payment is made to the payee after the beneficiary has died (Sec. 201).

  • Also starting with overpayments outstanding on or after twelve months after December 14, 1999, SSA is required to recover SSI overpayments from SSI lump sum payments by offsetting at least 50 percent of the lump sum or the amount of the overpayment, whichever is less (Sec. 202).

  • Applicable to overpayments outstanding on or after December 14, 1999, SSA is authorized to use Tide II debt collection tools [see 42 U.S.C. 404(f) to recover SSI overpayments, including the use of private collection agencies and state and federal tax intercepts (Sec. 203).


  • Individuals who fraudulently claim benefits by providing false or misleading statements are barred from receiving benefits for increasing periods of time: 6 months for the first determination; 12 months for the second; 24 for the third or subsequent determination (Sec. 207).

  • Health care providers and representatives convicted of specified violations, mostly dealing with fraud and misrepresentation, are (to) be barred from participation in any Social Security program for at least 5 years, 10 years for a second conviction, and permanently for a third (Sec. 208).


  • Computer matches with Medicare and Medicaid are required to ensure that institutionalized individuals are not receiving incorrect benefits (Sec. 212).

  • Applicants or recipients arc required to authorize SSA to obtain financial information from financial institutions. Refusal to provide the authorization may be a ground for denial (Sec. 213).


A new benefit program (Title VIII of the Social Security Act) will pay 75% of the SSI benefit rate to certain elderly World WarII veterans of the U.S. Armed Forces who reside outside of the United States (Sec. 251).


Section 205 amends 42 U.S.C. 1382b(c) to count trusts, established on or after January 1, 2000, as resources for SSI purposes. The trusts will be considered regardless of whether they are revocable or irrevocable, the purposes for which they are established, whether the trustees have discretion, or any restrictions on the use of distributions. Earnings to the corpus will be counted as income.

There are a number of exceptions to application of the new rule which are similar to those found in the Medicaid program:

  • Trusts established with assets transferred by will. 42 U.S.C. 1382b(e)(2)A).

  • Trusts established for the benefit of disabled persons (as defined in SSI) under age 65 by a parent, grandparent, legal guardian or a court if the State will receive amounts remaining in trust upon beneficiary's death for Medicaid services received. 42 U.S.C. 1382b(e)(5). This is the exception for "(d)(4)(A)" trusts. See 42 U.S.C. 1396p(d)(4)(A).

  • "Pooled" trusts containing the assets of an individual who is disabled (as defined in SSI). 42 U.S.C. 1382b(e)(5). These trusts, authorized by 42 U.S.C. 1396p(d)(4)(C), can be established by the individual and have no age requirement, so long as the individual is disabled.

  • The Commissioner may waive application of the new trust rule if it would work an "undue hardship" on the individual based on criteria established by the Commissioner. 42 U.S.C. 1382b(e)(4).

The Medicaid Act is amended for states that provide noncategorical Medicaid and use SSI criteria to determine eligibility. If the individual is not "receiving" SSI, the State may not use the SSI trust rules to determine eligibility for noncategorical Medicaid.


Section 206 amends 42 U.S.C. 1382b(c) to reinstate an SSI transfer of assets penalty to transfers made on or after the date of enactment, December 14, 1999. A person who disposes of resources for less than fair market value (FMV) will have their SSI benefits reduced for the period of time equal to the uncompensated value of the transferred resource divided by the maximum monthly SSI benefit and any SSI State supplement.

There is a 36-month "look-back" period starting with the later of the SSI application date or the date of the transfer. 42 U.S.C. 1382b(c)(1)(A)(ii)(I) and (II). The maximum penalty period is 36 months, starting with the month of the transfer. 42 U.S.C. 1382b(c)(1)(A)(iv). There is no "double-counting," i.e., the transfer is either treated as an available resource or a transfer for purposes of the penalty, but not both. 42 U.S.C. 1382b(c)(1)(B)(i).

Similar to Medicaid, there are a number of important exceptions to application of the penalty:

  • The individual intended to dispose of the assets at fair market value or for other valuable consideration. 42 U.S.C. 1382b(c)(1)(C)(iii)(I).

  • Resources were transferred exclusively for a purpose other than to qualify for SSI. 42 U.S.C. 1382b(c)(1)(C)(iii)(II).

  • All resources transferred for less than fair market value have been returned to the individual. 42 U.S.C. 1382b(c)(1)(C)(iii)(III).

  • Denial of eligibility due to application of the penalty would work an "undue hardship" on the individual. 42 U.S.C. 1382b(c)(1)(C)(iv).

  • In addition, the transfer of assets penalty will not apply where the resources are a home and title to the home transferred to:

      (I) the spouse of the transferor;

      (II) the transferor's child who is under age 21 or who is blind or disabled, regardless of age;

      (III) the sibling of the transferor who has an equity interest in the home and was residing in the home for at least one year immediately before the date the transferor becomes institutionalized; or

      (IV) the transferor's child who was residing in the home for at least two years before the transferor becomes institutionalized and who provided care to the transferor which permitted the transferor to reside at home rather than in an institution.

      See 42 U.S.C. 1382c(l)(C)(i).

  • The penalty also does not apply where the resources are transferred:

      (I) to the transferor's spouse or to another for the sole benefit of the transferor's spouse;

      (II) from the transferor's spouse to another for the sole benefit of the transferor's spouse;

      (III) to the transferor's disabled or blind child or to a trust established solely for the benefit of the transferor's disabled or blind child, including, but not limited to, a "(d)(4)(A)" trust; or

      (IV) to a trust, including, but not limited to, a "(d)(4)(A)" trust established solely for the benefit of an individual under age 65 who is disabled.

      See 42 U.S.C. 1382c(l)(C)(ii).

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