Waiver of Food Assistance Overissuance

An overissuance of benefits from the Department of Human Services (DHS) occurs when a client group receives more benefits than they are entitled to receive. When an overissuance happens, DHS seeks to recoup the benefits that were paid in error. The overissuance can be caused by the client’s error or one made by DHS, but either way, DHS will seek recoupment.

According to DHS’s Bridges Administrative Manual (BAM) 705, an agency error overissuance is caused by “incorrect actions (including delayed or no action) by the Department of Human Services (DHS) or the Department of Information and Technology staff or department processes.

Some examples are:

• Available information was not used or was used incorrectly.
• Policy was misapplied.
• Action by local or central office staff was delayed.
• Computer errors occurred.
• Information was not shared between department divisions (services staff, Work First! agencies, etc.).”

Unlike Social Security benefits, where a recipient is given the opportunity to request a waiver of an overpayment as part of standard procedure, DHS regulations do not require that recipients be given this option. In fact, it is made clear that the recipient is responsible for paying back the overissuance regardless of whether it was the person’s or the DHS’s fault that it occurred. The series of forms that are sent to the client (DHS-4358A, B, C and D) do not make mention of the fact that the client may request a waiver. However, there are three governing laws/rules that state there is the possibility of having an overissuance waived.

Legal authority governing food assistance program (FAP) overissuances

First, DHS’s own manuals state that a FAP overissuance can be waived based on hardship: BAM 725 - FAP Only

DHS can compromise (reduce or eliminate) an overissuance (OI) if it is determined that a household’s economic circumstances are such that the OI cannot be paid within three years. A request for a policy exception must be made to the program office outlining the facts of the situation and the customer’s financial hardship.

Send to:

Food Assistance Policy Office
Suite 1301
235 S. Grand Ave
P.O. Box 30037
Lansing, MI 48909

Second, Michigan state law permits waiver of an overpayment under certain circumstances: MCLA 400.43a Definitions; recovery of overpayments; overpayment as result of criminal act; waiver; report of cost effectiveness.

1. As used in this section:
1. “Overpayment” means the difference between the amount of assistance to which an individual is entitled under this act and the amount of assistance actually received by that individual.
2. “Public assistance recipient” means an individual who is receiving, or who did receive, assistance under this act.
2. The state department shall take all necessary steps to recover an overpayment made to a public assistance recipient, including, but not limited to, administrative action or action in a court of competent jurisdiction. Procedures for the recovery of overpayments made under federally assisted programs shall be consistent with federal law and regulations.
3. This section does not limit or prevent the criminal prosecution of an individual who has received an overpayment as a result of fraud or other criminal act.
4. In the case of an individual who is no longer a public assistance recipient, the state department may waive recovery of an overpayment if the cost of recovery is equal to or greater than the amount of the overpayment or if the error was made by the department. Except as prohibited by federal law or regulation, the state department may waive recovery of an overpayment if the recovery would result in undue hardship to the public assistance recipient, as determined by the state department.
5. The state department shall report annually to the legislature on the cost effectiveness of the recovery of overpayments described in this section.

Finally, federal regulations allow for compromising an overissuance. 7 CFR 273.18(e)(7) states:

Compromising claims. (i) As a State agency, you may compromise a claim or any portion of a claim if it can be reasonably determined that a household's economic circumstances dictate that the claim will not be paid in three years.

DHS regulations do not permit an administrative law judge to waive an overissuance of any kind from any benefit program. Its procedures do not require that the recipient be offered the opportunity to request a waiver via BAM 7025. Despite these potential impediments, advocates can still request waiver of an overissuance at the administrative level. It is important to preserve the record at the administrative hearing and clearly request the equitable remedy being sought. Once the negative decision is received, the case can be appealed to the circuit court, which does have equitable powers. If the overissuance is particularly old or if the client was not afforded reasonable notice, one can also argue estoppel and denial of due process under the 14th amendment. Denial of due process can also be argued on the basis of DHS’s failure to provide notice to the recipient of the option of requesting a hardship waiver.

Circuit Court and Equitable Powers

An argument can be made that the circuit court cannot exercise its equitable powers when sitting as an appellate court for an administrative decision. However, there is case law that states that the circuit court does not lose its equitable powers simply because it is sitting as an appellate court. There is no black letter law on this issue, with many contradictory decisions that are very fact-specific. As such, I encourage advocates to evaluate these cases for possible representation with an eye on taking them to circuit court. I have pleadings and advice available.