Darrel Van Hoose, DAB CR6195 (2022)

DECISION

This decision affirms the validity of a debt that Petitioner owes the United States government due to the Social Security Administration’s (SSA’s) failure to deduct health benefit premiums from Petitioner’s paycheck for 12 pay periods.  Petitioner’s benefits were retroactively reinstated, resulting in no loss of coverage of health care benefits.

I.      Background and Procedural History

By letter dated May 16, 2022, SSA informed Petitioner, Darrel Van Hoose, an SSA employee, that he received an overpayment of pay.  The letter informed Petitioner that he owed $1,519.04 in retroactive deductions because SSA failed to deduct health benefit premiums from Petitioner’s paycheck for 12 pay periods.  E-Filing System (E-File) Document No. 1a at 1.  The letter stated that, if the debt was not paid within 30 days from the date of the notice, then interest of 1.000% per annum and a late penalty of 6.000% per annum would accrue until the debt was paid in full.  E-File Document No. 1a at 1.  The notice also explained that if Petitioner did not make arrangements to pay the debt voluntarily, then the debt would be collected through salary deductions.  E-File

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Document No. 1a at 1.  The notice included several attachments including a description of the debt collection process, an indebtedness payment agreement, and information on due process rights, including the right to a hearing and the right to request a waiver.  E-File Document No. 1a at 2-8.  The attachment describing hearing rights stated that the request for a hearing must be postmarked no later than 15 days from the date of the notice letter.  E-File Document No. 1a at 8.

By letter postmarked June 3, 2022, Petitioner requested a hearing before an administrative law judge to dispute the existence of the SSA debt.  A review of the record shows that SSA received Petitioner’s hearing request on June 7, 2022.  On September 29, 2022, SSA forwarded Petitioner’s hearing request, by email, to the Civil Remedies Division (CRD) of the United States Department of Health and Human Services, Departmental Appeals Board.

An Acknowledgment and Prehearing Order was issued by the Civil Remedies Division (CRD) on September 30, 2022.  The Order directed SSA to provide an explanation for its delay in forwarding Petitioner’s hearing request.  On October 7, 2022, SSA provided a statement explaining the delay.  SSA filed a Motion for Summary Judgment, along with four exhibits (SSA Exs. 1-4), on October 14, 2022.

Petitioner filed a cross motion for summary judgment (P. Br.), along with seven exhibits (P. Exs. 1-7), on October 17, 2022.  SSA filed a reply to Petitioner’s motion and objections to P. Exs. 4-6 (SSA Reply).  Petitioner responded to SSA’s evidentiary objections on October 24, 2022.

An informal conference was held on November 7, 2022.  In summary, Petitioner appeared on his own behalf; Nancy Weiss and Patricia Stewart appeared on behalf of SSA; Tony Tran, Attorney Advisor, Civil Remedies Division, was present to assist; and Rochelle Washington, Departmental Appeals Board, was present to observe.  At the conference, both parties agreed that a hearing was not necessary and that this matter could be decided on the written record.  As a result, both Motions for Summary Judgment are moot, and this matter will be decided on the written record.

Both parties further confirmed that the repayment schedule is not at issue.  At the conference, when asked about a bill for his wife’s hospital visit that was denied by Kaiser Permanente, Petitioner stated that the bill was eventually covered with covid funding.  Petitioner also indicated that he did not resubmit the bill to Kaiser.

II.     Issues

The issues to be decided in this case are: 

1)  Whether Petitioner owes a debt to the United States government; and

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2)  If so, whether $1,519.04 is the correct amount of the debt owed to the United States government.

III.    Jurisdiction

The statute authorizing these proceedings specifies that the head of an agency may appoint an administrative law judge to adjudicate an employee’s appeal of an alleged debt.  See 5 U.S.C. § 5514(a)(2); see also 20 C.F.R. § 422.810(d) (definition of Hearing official), (i)(1).  SSA maintains an interagency agreement under which administrative law judges with CRD adjudicate SSA federal salary overpayment cases.  See Portia L. Pierce, DAB CR2049 at 5 (2009); Jan Donsbach, DAB CR1536 (2006).¹

IV.     Admission of Exhibits

SSA filed four exhibits on October 14, 2022.  On November 4, 2022, SSA filed a motion to substitute SSA Ex. 1, to modify the redactions in that document.  SSA’s motion to substitute SSA Ex. 1 is accepted.  The substituted SSA Ex. 1² and SSA Exs. 2-4 are admitted into evidence, without objection.

Petitioner filed seven exhibits.  SSA objected to P. Exs. 4-6.  SSA argues that P. Ex. 4, a letter from Petitioner’s colleague detailing his overpayment issue with SSA, is irrelevant.  SSA Reply at 5.  SSA argues that P. Exs. 5 and 6 are email chains addressing issues that are irrelevant to this case.

The ALJ determines admissibility and may choose to “apply the Federal Rules of Evidence where appropriate, for example, to exclude unreliable evidence.”  Civ. Remedies Div. P. § 20.

P. Exs. 4 and 5 will be admitted into evidence over SSA’s objection and those exhibits will be given the proper weight and consideration.  SSA’s objection to P. Ex. 6 is sustained as it involves a salary issue not addressed in this case.  P. Exs. 1-5 and 7 are admitted into evidence.

V.      Findings of Fact

Petitioner is a federal employee who was employed by the Transportation Security Administration (TSA) prior to November 7, 2021.  As a TSA employee, Petitioner

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participated in the Federal Employee Health Benefits (FEHB) program and was enrolled in the Kaiser Permanente health plan, Standard Option for Self and Family Coverage, enrollment code 635.

Effective November 7, 2021, Petitioner was appointed to a position as a customer service representative with SSA.  SSA Ex. 1.  On the same date, a Notice of Change in Health Benefits Enrollment was issued, indicating that the SSA payroll office accepted the transfer of Petitioner’s health care enrollment and that the benefits would continue.  SSA Ex. 2.  A Notification of Personnel Action (SF 50), issued on November 5, 2021, also indicated that Petitioner’s health benefit coverage would continue.  SSA Ex. 1; P. Ex. 3.

Due to an “administrative error,” the enrollment code for Petitioner’s Kaiser Permanente Benefit plan was not entered into SSA’s payroll database.  SSA Ex. 4.

On February 18, 2022, Petitioner’s wife visited the emergency room for a medical issue.  On April 28, 2022, Petitioner was informed by Kaiser Permanente that his health insurance was cancelled on November 6, 2021.  P. Br. at 2.  On the same date, Petitioner emailed his supervisor to make him aware of the issue.  P. Br. at 2.  On April 29, 2022, Petitioner received notice by phone that the hospital bill from his wife’s emergency room visit was denied by Kaiser Permanente because he was uninsured.  P. Br. at 2; P. Exs. 1-2.  The bill was later paid through federal covid funding.  P. Br. at 2.

On May 12, 2022, Petitioner contacted Kaiser Permanente and learned that his health insurance was reinstated, but that his family’s benefits were still inactive.  P. Br. at 2.  The issue was resolved shortly thereafter and coverage for Petitioner’s family was reinstated.

By letter dated May 16, 2022, the SSA informed Petitioner that he owed $1,519.04 for health benefit premiums that were not deducted from his paycheck for 12 pay periods in 2021 and 2022.

According to the Earnings and Leave Statement that SSA issued at the end of Petitioner’s first pay period of work with SSA (pay period 24 in 2021), SSA stated:  “Health Benefit Plan Change Processed This Pay Period.”  SSA Ex. 3 at 1.

Earnings and Leave Statements from pay periods 24-26 in 2021 and pay periods 1-9 in 2022, show that SSA did not pay its portion of Petitioner’s FEHB plan premium, nor was money deducted from Petitioner’s salary for his portion of the FEHB plan premium.  SSA Ex. 3.

The Earnings and Leave Statement from pay period 10 of 2022 shows that code 635 was entered and that $124.89 was deducted from Petitioner’s check for pretax health benefits.

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SSA Ex. 3 at 13.  The statement also indicated that FEHB benefits of $4,931.83 were paid by the government.  SSA Ex. 3 at 13.

Kaiser Permanente confirmed that benefits for Petitioner and his family were reinstated, and that coverage was made retroactive to November 7, 2021, to reflect no lapse in coverage.  SSA Ex. 4 at 3.

VI.      Analysis and Conclusions of Law

1. Petitioner owes a debt to the United States government due to a salary overpayment.

Petitioner was an employee of TSA who was enrolled to receive federal health benefits through Kaiser Permanente.  Petitioner transferred his employment from TSA to SSA on November 7, 2021.  The Office of Personnel Management (OPM) civil service regulations provide that enrollment continues when an employee transfers without a break in service of more than three days.  5 C.F.R. § 890.303(a)(1).  In this case, Petitioner did not have a break in service and the intent to transfer health coverage benefits is well documented in the documentary evidence.  SSA Ex. 4 (¶¶ 4-5).

The Notification of Personnel Action (SF 50), approved on November 5, 2021, and effective on November 7, 2021, states, “Health Benefits Coverage Continues.”  SSA Ex. 1.  The Notice of Change in Health Benefits Enrollment indicates that the SSA payroll office accepted transfer of enrollment and would continue Petitioner’s enrollment.  SSA Ex. 2.  Petitioner’s Earnings and Leave Statement from pay period 24 in 2021 states, “health benefit plan change processed this pay period.”  SSA Ex. 3 at 1 (capitalization omitted).

Despite the intent to continue Petitioner’s FEHB coverage, an “administrative error” occurred when SSA failed to enter the correct code to ensure continued coverage of Petitioner’s FEHB benefits.  SSA Ex. 4.  As a result, Petitioner’s health care premiums were not paid by SSA nor were they deducted from Petitioner’s paycheck during the first 12 pay periods of Petitioner’s employment with SSA.  SSA Ex. 3.

Petitioner was first notified by Kaiser Permanente on April 28, 2022, that his health insurance had been canceled effective November 6, 2021, his last day with TSA.  P Br. at 2; Hearing Req. at 3.  Subsequently, Petitioner received an Emergency Physician Statement indicating that Kaiser Permanente had denied coverage of the $1,015.71 in medical expenses for his wife’s emergency room visit, because the expenses were incurred after coverage was terminated.  P. Ex. 1.  The medical bill was later paid by HEPA Inc. through Federal Covid funding.  P. Br. at 2. In the informal hearing, Petitioner indicated that he did not resubmit the bill to Kaiser Permanente.

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Petitioner informed his supervisor of the insurance issue on April 28, 2022.  His supervisor forwarded Petitioner’s concern to SSA’s human resources department.  Human resources then contacted Kaiser Permanente, who reinstated Petitioner’s coverage retroactive to November 7, 2021.  SSA Ex. 4 at 3.

By letter dated May 16, 2022, Petitioner was informed of a debt arising from an overpayment of pay resulting from Petitioner owing health benefit deductions retroactively.  E-File Document No. 1a.  The letter detailed that Petitioner owed $124.89 for pay periods 2-9 in 2022 and $129.98 for pay periods 1 in 2022 and 24-26 in 2021, totaling $1,519.04.

Petitioner argues that he did not ask for retroactive coverage of his health benefits and if given the choice, he would have declined retroactive coverage.  P. Br. at 3.  SSA argues that Petitioner did not have the option to decline the retroactive coverage and that he owes the debt because, despite their errors, he has had continuous FEHB benefits since his transfer on November 7, 2021.

Jennifer Johnson, a Human Resource Specialist with SSA, provided a declaration which states that “[w]hen employees transfer from agency to agency, they may not make changes in their FEHB enrollment until they either have a life changing event or during open season.  [Petitioner] did not have a life changing event (i.e. birth, marriage, divorce, etc.) and did not make an open season change in 2021.”  SSA Ex. 4 at 2.

The FEHB program permits federal employees to enroll in health benefit plans established by statute.  5 U.S.C. §§ 8903, 8905(a).  OPM is authorized to promulgate regulations to implement the statute establishing the FEHB program.  5 U.S.C. § 8913.  OPM regulations require FEHB insurance coverage elected by an employee to continue if the employee transfers to another position in the federal government without a break in service of more than three days.  5 C.F.R. § 890.303(a)(1).  It is undisputed that Petitioner’s health coverage would have continued without interruption, but for the error made by SSA.  SSA Ex. 1; P. Ex. 3.  Therefore, there is legal authority to conclude that FEHB insurance cannot be terminated simply because an employee transfers to another agency and an administrative mistake occurs at the time of transfer.

OPM has a process in place to recoup overpayments from employees when agencies fail to deduct an employee’s share of the FEHB premium.  When this happens, the agency is liable to pay the employee’s share to the Employees Health Benefits Fund within 60 days after the agency concludes there was an “under-deduction.”  5 C.F.R. § 890.502(c).

OPM regulations also authorize the agency to recover the money from the employee.  “The employing office may make retroactive corrections of administrative errors that occur after December 31, 1994.”  5 C.F.R. § 890.103(a).  These “[r]etroactive corrections are subject to withholdings and contributions under the provisions of [5 C.F.R.]

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§ 890.502.”  5 C.F.R. § 890.103(e).  Section 890.502 makes it clear that an agency’s failure to properly withhold the money an employee is to pay for FEHB insurance coverage creates a debt for the employee:

Employees and annuitants are responsible for paying the enrollee share of the cost of enrollment for every pay period during which they are enrolled.  An employee or annuitant incurs a debt to the United States in the amount of the proper employee or annuitant withholding required for each pay period during which they are enrolled if the appropriate health benefits withholdings or direct premium payments are not made.

5 C.F.R. § 890.502(a)(1).

Despite the administrative error that caused the FEHB premiums not to be deducted for several pay periods, the error was corrected, and coverage was applied retroactively to November 7, 2021.  Therefore, Petitioner has had continuous health coverage which requires the payment of premiums.  Petitioner does not dispute that his coverage was reinstated retroactive to November 7, 2021. P. Br. at 2.  Because the premiums were not deducted from Petitioner’s paycheck for 12 pay periods, he now owes the government for the premiums paid.  Though I understand Petitioner’s frustration with this process and the time spent to remedy this matter, it does not invalidate the debt owed.  Petitioner argues that incurring the debt will cause a financial hardship.  P. Br. at 3. Similarly, even accepting Petitioner’s assertation that the debt will cause a financial hardship, that may serve as a basis to waive the debt, but not to invalidate it, which is the issue before me.

2. Petitioner owes a debt of $1,519.04 to the US Government.

Prior to transferring to SSA, Petitioner was employed with TSA and enrolled in the FEHB program.  The SSA’s debt letter detailed that Petitioner owed $124.89 for pay periods 2-9 in 2022 and $129.98 for pay periods 1 in 2022 and 24-26 in 2021, totaling $1,519.04.  Petitioner does not dispute the amount of the debt.

3. The repayment schedule is not an issue in this case.

A federal employee has the right to dispute the “terms of the repayment schedule” of a debt when an agency imposes a repayment schedule other than by a written agreement between the employee and the agency.  5 U.S.C. § 5514(a)(2)(D).

Before imposing a repayment schedule on Petitioner, I urge SSA to come to an agreement with Petitioner concerning the repayment schedule.  See 5 U.S.C. § 5514(a)(2)(C).  However, if SSA ultimately imposes a repayment schedule on

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Petitioner, Petitioner may request a hearing seeking review of the terms by an administrative law judge.

4. Petitioner did not file a baseless claim and he did not dispute the debt with the intention to delay SSA’s collection activity.

The regulations provide that my decision include “a determination whether the employee’s petition for hearing was baseless and resulted from an intent to delay the creditor agency’s collection activity.”  20 C.F.R. § 422.810(h)(4)(ii)(B).  I find that Petitioner did not file a baseless request for hearing, nor did he dispute the debt with the intention to delay SSA’s collection activity.  Petitioner’s dispute of the debt is valid given the challenges and delays that he encountered in the transfer of his benefits.  There is no indication that Petitioner sought to delay payment of the debt.

5. SSA’s failure to timely refer Petitioner’s hearing request to CRD is not a basis for finding that Petitioner owes no debt.

Petitioner appears to argue that the debt is invalid because of SSA’s errors and failure to adhere to the timeline provided by the regulations.  P. Br. at 3.  Despite receiving Petitioner’s request for hearing on June 7, 2022, SSA did not forward the hearing request to CRD for the appointment of an administrative law judge until September 29, 2022.  Petitioner further asserts that this is not an isolated issue with SSA.  Petitioner notes that a colleague experienced the same delays arising from a similar issue.  P. Ex. 4.  Petitioner asserts that SSA’s actions violate the requirement, in 5 U.S.C. § 5514(a)(2)(D), that a decision be issued within 60 days of the filing of his hearing request.  Petitioner states that, under the regulations, only Petitioner can permit a delay in the 60-day deadline for a decision to be issued and not SSA.”

In SSA’s October 7, 2022 Late Submission Statement, SSA concedes that it failed to comply with its own regulatory requirement to “expeditiously” refer Petitioner’s hearing request to CRD for an administrative law judge adjudication.  SSA stated that the failure to do so was inadvertent, unintentional, and not meant to delay the proceedings or harm Petitioner.  SSA explained that the SSA official who received the hearing request inadvertently forwarded it to Petitioner’s servicing personnel office (SPO) instead of CRD and didn’t realize the mistake until September 29, 2022, when the SPO contacted the official’s office (Office of Finance) to inquire about the status of the hearing.

Petitioner is correct that the statute and regulations require an ALJ to issue a decision in this case within 60 days of SSA’s receipt of Petitioner’s hearing request.  5 U.S.C. § 5514(a)(2)(D); 20 C.F.R. §§ 422.810(f)(1)(xiii) and 422.810(h)(4)(i).  SSA’s regulations specify that “[t]he recipient of an employee’s request for a hearing must forward the request expeditiously to the hearing official to avoid jeopardizing the hearing official’s ability to issue a decision within this 60-day period.”  20 C.F.R.

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§ 422.810(h)(4)(i).  Further, “[t]he timely filing of a petition for hearing shall stay the commencement of collection proceedings.”  5 U.S.C. § 5514(a)(2)(D); see 20 C.F.R. § 422.810(f)(1)(xi), (xii).  Once a hearing is requested, salary offset deductions cannot commence until after the hearing official issues a decision upholding the debt.  20 C.F.R. § 422.810(l)(4).

There is no doubt in this case that SSA violated its own regulations by failing to expeditiously refer Petitioner’s hearing request to CRD and that SSA’s actions made it impossible for me to adjudicate this case within 60 days of Petitioner’s filing of his hearing request.  However, the delay in this case does not serve as a legal basis to invalidate a debt owed to the United States government.  Despite this conclusion, SSA must act to expeditiously reform its system for receiving and forwarding salary overpayment hearing requests for adjudication.

SSA’s letter informing Petitioner of his debt indicated that it would charge Petitioner interest on the debt if Petitioner did not pay the entire debt within 30 days of the date that the May 16, 2022 letter was mailed.  E-File Document No. 1a at 1.  It is suggested that the parties resolve the repayment of Petitioner’s debt through a repayment agreement.  Also, I urge SSA to waive any interest that has accrued.  As found above, SSA delayed these proceedings by nearly four months when it failed to promptly refer Petitioner’s hearing request to CRD.  Further, I have found that Petitioner’s hearing request was neither baseless nor filed with the intent to delay SSA’s collection of the debt.  As a result, SSA should waive the interest that would accrue from the time that SSA received Petitioner’s hearing request until the date SSA referred the hearing request to CRD.  Charging interest during a time-period while SSA was in violation of its own regulations, which in turn caused a violation of a statutory deadline for the adjudication in this case, would be against equity and good conscience and would not be in the best interest of the United States.  See 20 C.F.R. § 422.807(g)(2).

VII.   Conclusion

Petitioner is indebted to the United States government in the amount of $1,519.04.

This is the final agency decision pursuant to 5 U.S.C. § 5514(a)(2)(D).

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Lastly, P. Exs. 1 and 3, as well as SSA Ex. 1 (both the original and the substitute) include Petitioner’s personal information including salary, date of birth, address, and social security number.  As a result, I order SSA Ex. 1 and P. Exs. 1 and 3 be sealed to protect Petitioner’s personal information.

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Endnotes:

¹  Previous decisions issued by administrative law judges with CRD can be found at:  https://www.hhs.gov/about/agencies/dab/decisions/alj-decisions/index.html

²  Citations to SSA Ex. 1 below will refer to the substituted SSA Ex. 1