Monday, May 25, 2015

Retroactivity & Reimbursement

Rathbone v. Corse, 2015 VT 73

By Andrew Delaney

A derivative SSDI benefit—in this context meaning a social security payment to a child due to a parent’s disability—counts against a child-support obligation. There’s a case recent enough to be in our archives that says that, and it gets mentioned a lot in this opinion, so it must be important.

The parties never married but did have a child. Mom ended up with sole parental rights and responsibilities and dad ended up with a monthly obligation for child support. It appears he didn’t always show up for court, which might explain why he had the obligation he did. A couple wage-withholding orders ensured that dad kept up with payments.

Eventually dad filed a motion to modify in 2013. As it turns out, he became disabled in 2009, and the derivative benefit started back then too. Citing that case we talked about like a paragraph-and-a-half ago, the magistrate reasoned that dad was entitled to credit for overpayment of nearly $15K. Basically, the derivative benefit was pretty much the same as dad’s obligation, so it sorta meant dad was covered and essentially double-paying when he’d make payments.

Dad said he’d take half of the overpayment back, so this ended up being a $7K judgment against mom. “The magistrate ordered mother to repay father $100.00 per month upon becoming employed.”

Mom appealed to the family division, and the family division affirmed, “reasoning that mother would receive a double payment if she were allowed to keep both the SSDI derivative-benefit payment and the payments from father through the wage-withholding order.” If you can’t guess what happened next, I’m not going to explain it for you. Just take a wild guess.

The SCOV begins by noting that it can do whatever it feels like here, or if you like fancy lawyer talk, that its “review . . . is non-deferential and plenary” because whether dad’s entitled to reimbursement when derivative benefits are paid is a question of law.

Mom’s argument is that the magistrate’s order was a retroactive modification, which is prohibited under federal and state statute (interestingly, the federal statute is the proverbial “number of the beast”; I’m sure you’re expecting something more, but that’s all—it’s just interesting). The SCOV is not going down this path, though. As the SCOV puts it, “Our precedent militates against this conclusion.” So, uh, yeah—remember that case we were talking about?

The SCOV points out that it’s previously held that applying a retroactive credit is not the same as modifying an obligation. The obligation stays the same, and remains unmodified. All that’s happening is that a credit is being applied to that obligation. If you’d like it in fancy-lawyer speak again, the SCOV puts it thusly: “Because the identity of the payer changes—and the amount that the order required the obligor to pay does not—applying the credit retroactively is not a retroactive modification.”

There’s a fair amount of precedent-based discussion if you’re into that sort of thing. It’s a good overview of the principles at play with some research to back it all up. But we really don’t need to get into all that here.

What it boils down to is that dad should get credit for payments made directly to mom as derivative benefits due the child. Dad’s monthly payments that continued during the benefit-receiving period necessarily became overpayments. The magistrate ordered mom to pay back dad at $100 a month once she got a job for half those overpayments and the SCOV says that’s well within the magistrate’s discretion.

Mom argues that the whole SSDI derivative benefit should be considered a gratuity. The SCOV acknowledges that when the SSDI derivative payment exceeds the obligation (as it does under the current order) the overpayment is considered a gratuity for the child. But here the prior overpayments resulted from wage withholding, and should not be considered a gratuity for two reasons: (1) it has the potential to create a windfall when retroactive SSDI benefits are awarded and payments have been made during the pendency of the SSDI application; and (2) it would create an incentive for obligors to not pay while an application is pending. This is because the retroactive benefit would reduce the arrearages, yet the payments made would not be recoverable.

The SCOV adopts the trial court’s reasoning that “a sound policy would encourage obligor parents to make ongoing, regular payments during the pendency of an SSDI application.” The SCOV reasons that it’s sound public policy to allow reimbursement because it helps ensure that child-support payments are timely made during the pendency of an SSDI application. “The availability of reimbursement for these payments denies a shirking obligor the ability to use tomorrow’s retroactive credit as a justification for not meeting today’s obligations.”

And that’s the long and short of it. An obligor gets a credit for derivative SSDI benefits that apply retroactively, without retroactively modifying the underlying obligation.

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