• Allotment reduction
• Compromising claims
• Voluntary repayment
• Offsets to restored benefits
• Intercepts of tax refunds, unemployment benefits and other payments
• Canceling or terminating claims
• County retention of overissuances recovered

The food stamp office has many ways of collecting “overpaid” food stamp benefits. Most commonly, it reduces the amount of food stamps that the household currently gets until all the overissued food stamps have been paid back. Sometimes, the food stamp office can repay itself from any back benefits that it owes the household (called “offsetting” underissuances). It may also ask the household to enter into a payment plan to pay back the overissued food stamps voluntarily. If the household is no longer receiving food stamps and does not agree to one of these voluntary arrangements, or if it misses a payment it agreed to make, the claim may be considered “delinquent.” In that case, the food stamp office can take steps to recoup the food stamps by intercepting state or federal tax refunds, suing the person, or other means such as taking unemployment compensation benefits or Social Security payments. [7 C.F.R. §§ 273.18(f)-(j), 273.18(n).]  The state can write off accounts that are delinquent more than 3 years, unless the agency intends to do a tax intercept (either the state or federal program).  7 C.F.R. § 273.18(8)ii.  California’s regulations discusses determining whether a claim is delinquent, but only provide for writing off debts under $25 or if the household cannot be located. [MPP § 63-801.45 and .512.]

These various methods are described below:

Allotment reduction

Allotment reduction is the most common situation whereby excess food benefits are paid back.  Allotment reduction is when the county reduces monthly food stamps to get back food stamps that were overissued. [MPP §63-801.44 and .731; 7 C.F.R. §273.18(g)(1).] The collection rate depends on the cause of the overissuance:

• For overissuances that the agency caused, the allotment reduction is limited to five percent or $10, whichever is greater. [MPP §63-801.222.] (NOTE: MPP §63-801.736(a) erroneously states that administrative errors can be collected at 10%.  This is wrong and county must only collect at 5% per 63-801.222.   ACIN I-24-13.)
• For overissuances that the household caused by mistake, the allotment reduction is limited to ten percent or $10, whichever is greater. [MPP §63-801.736(a); 7 C.F.R. § 273.18(f)(1), (g)(1)(iii).] If the household gets less than $100 a month in food stamps, the food stamp office will reduce the food stamps by $10 a month. [MPP § 63-801-736(a); 7 C.F.R. § 273.18(r)(1),(iii).]
  
• The county can collect Intentional Program Violations claims at a 20% or $20, whichever is greater. [MPP §63-801.736(b).]  The food stamp office has the option of basing the 20% recoupment amount on either (1) the amount of the household’s allotment (i.e., the amount the household receives after the member who committed fraud is disqualified) or (2) the amount of the household’s entitlement (i.e., the amount the household would receive if the disqualified member were still receiving food stamps). [7 C.F.R. § 273.18(g)(1)(ii).] California has opted for the former option which is a smaller amount and thus causes less hardship to the remaining household members. [MPP §63-801.736(b); see 7 C.F.R. § 273.18(g)(1)(ii).].  Until an intentional program violation is established through a decision or a disqualification agreement, the related overissuance is collected only at the rate of 10% and treated as an inadvertent household error. [MPP § 63-801.231.]
  

The county may reduce the allotments of any household containing an member who was liable for the overissuance (and an adult member of the overpaid household); this includes collecting from more than one food stamps household at a time. ACIN I-58-08, p. 12. (Example: if two sisters are in one household, and overissued benefits, and then move into separate households. The county may collect from each sister’s new food stamp household, but is responsible for figuring out the total collected.)

The food stamp office may not take the household’s initial allotment of food stamp benefits, even if they are paid late. [MPP § 63-802.54; 7 C.F.R. § 273.18(g)(1)(iv).] If the food stamp office is collecting the overissuance by reducing ongoing benefits, it cannot take any other action to collect the overissuance without the household’s permission, except possibly “offsets.”

Compromising claims

Under federal law, a household may be able to pay back less than the full amount of overissued food stamps by getting the food stamp office to agree to “compromise” or settle the overissuance if it believes the household cannot pay it back in three years. According to the Food Research and Action Center (FRAC), a state’s compromise policy could take one of several forms. One good model is the policy in the Supplemental Security Income (SSI) program, which waives overissuances if the recipient was not at fault and repayment would defeat the purpose of the program or would be “against equity and good conscience” (i.e., would be a hardship). [20 C.F.R. § 416.550.] FNS has stated that this idea “does have some merit,” and that states already have authority to implement such a model. [See 65 Fed.Reg. 41752, 41765 (July 6, 2000).] A state might also agree to compromise any claim where the household’s income was under a certain percentage of the federal poverty line.

Voluntary repayment

The food stamp office can ask a household to voluntarily pay back any overissuances. Forms of voluntary repayment are:

• recouping at a higher rate than 5% or 10% of the monthly benefit;
• recouping from benefits already stored on the EBT account;
• accepting cash, either in a lump sum, or via a payment plan.

[MPP § 63-801.7; 7 C.F.R. §§ 273.18 (g)(1)(ii)-(iv), (2), (4), (5).]

Even though the food stamp office does not have to agree to compromise any claims, it should accept installments payments when offered by the household member. [MPP § 63-801.721, ("shall negotiate" if the person chooses).] For those on aid, the installment payment must be more than the office would collect through reducing the monthly food stamps allotment. [MPP § 63-801.723.] If the office is reducing the household’s food stamp allotment, the household can just let the food stamp office continue to reduce their current benefits by 5% or 10% and not pay any additional amount. But if the person receiving food stamps offers to make installment payments and the food stamp office accepts this, the household’s benefits cannot be reduced so long as those payments are made on time. [MPP § 63-801.733 and .441(c).]

If the person is not currently receiving food stamps, the food stamp office will ask them to make arrangements to pay back the overissuance voluntarily through installment payments, lump sum payments or unemployment benefit intercepts. If the person does not agree to do voluntary repayments, s/he can be sued or be subject to the intercept programs described below. [MPP § 20-403.1, § 403.2.] If the household agrees to a payment plan, s/he must make the payments on time. If the person misses a payment, the food stamp office may renegotiate a plan. (See the section of this guide about the overissuance demand letter/notice of action for more details.)

In some instances the state will consider the overissuance “delinquent”. [MPP §20-403.22.] If the household is already paying off a prior overissuance through recoupment or through a payment plan, the food stamp office will not consider a new overissuance to be “delinquent” as long as it expects to start collecting the new overissuance once the prior over issuance is paid off. [MPP § 63-801.454; 7 C.F.R. §273.18(e)(5)(iv).] Once delinquent, the county may move to other methods of collection, such as referring the debt to a collection agency, suing the person, or relying one of the collection methods described below. [MPP § 63-801.7; 7 C.F.R. §273.18(e)(5).]  Although federal law permits states to writ off debts delinquent more than 3 years, if not pursuing tax intercept [7 C.F.R. § 273.18(8)(ii), California does not do this unless the debt is less than $25 or the household cannot be located. [MPP § 63-801.45 and .512.]

Paying by installments may protect a person who is not currently receiving food stamps from tax, social security or other intercepts. [MPP § 20-403.2.] But if a household misses an agreed upon payment and has an intentional program violation (IPV), the county may collect and need not reach agreement on a new payment plan. [MPP § 63-801.722(b) (3).] For other non-IPV claims, when the household misses payments, California requires the county to allow a new payment plan, if the household makes up the missed payments. [MPP § 63-801.722 (b) (i).] (See the section about when the food stamp office thinks the household has committed fraud for related information.)

Offsets to restored benefits

Another way the food stamp office can collect an overissuance is by deducting the amount of the overissuance from the amount of an underissuance that is owed to the household. This is called an “offset.” Unfortunately, the food stamp office can only correct underissuance errors that occurred within one year prior to the date they were discovered, or within one year of the date that the household requests correction of the underissuance. [MPP § 63-801.313, .735, and 63-802.54; 7 C.F.R. § 273.17(a), (b); see also, 7 C.F.R. §§ 273.17(d)(4), 273.18(g)(3).] (See the section about getting too few stamps (underissuances) for more details.)  The period the state can go back in figuring overissuances, however, is 3 years from discovery for agency and household mistakes, and 6 years on intentional program violations. [MPP § 63-80163-801.311.]

However, if the overissuance was caused by the agency, the food stamp office may not offset the overissuance against the underissuance. [MPP § 63-801.313; 7 C.F.R. § 273.18(g)(3).] Nor, as in other instances where the household did not cause the overissuance, does the household have to agree to a “voluntary” offset or other repayment agreement. [MPP § 63-801.45, .454, and 63-802.54, MPP § 20-403.21; 7 C.F.R. §§ 273.18(g)(1)(v), (g)(3).]

If the agency’s claim for an overissuance is more than the benefits owed (i.e., the amount of the underissuance), the entire amount of the restored benefits can be taken. The food stamp office will take the household’s restored benefits even if the overissuance is already being recouped from ongoing benefits. [MPP § 63-801.313 and .735; 7 C.F.R. § 273.18(g)(3).] But it may not take any of the first food stamps allotment after application, even if those are issued late. [MPP § 63-802.541; 7 C.F.R. § 273.17(d) (4).]

The food stamp office may also offset “dormant” or “expunged” amounts on a person’s EBT card. [MPP § 16-750.12 and .13.] Expunged amounts are amounts left on an EBT card where no activity has occurred for 270 days. [MPP § 16-105 (e) (6); §16-120.13.] Dormant amounts are those where no activity has occurred on the card for 90 days. [MPP § 16-105 (d)(3), § 16-120.12.] For dormant amounts, the food stamp office must give 10 days notice prior to recouping those amounts. [MPP §16-750.12.] This will give the household a chance to object. [See All County Letter 03-58 (December 22, 20030; All County Letter 05-28 (September 14, 20050.]

Even so, if the person is no longer getting food stamps because s/he thought the amount was not worth the trouble of reapplying and the household has an overissuance, it may be a good idea to reapply for food stamps. Becoming a food stamp recipient again and allowing allotment reduction — even if all of the food stamps are recouped — will protect the person’s tax refunds or social security payments from being taken to repay the overissuance. [MPP § 20-403.21.]

Intercepts of tax refunds, unemployment benefits and other payments

1. California Franchise Tax Board State Tax Refund Intercept Program:

The federal law allows states to use “other means” to collect from households. [7 C.F.R. § 273.18(f)(5).] This includes California’s tax “intercept” program. [MPP §20-400 et. seq.; see California Government Code § 12419.5; California State Administrative Manual §§ 8790.1 - 8790.8.] The California Department of Social Services (CDSS) administers a federal and state Income Tax Refund Intercept Program. The program also authorizes the offset of lottery winnings and other sums due the individual from the state. [See California Government Code § 12419.5.]

The county will refer a claim to CDSS and the State Franchise Tax Board for collection. When a person subsequently files their taxes and is eligible for a tax refund, the state will “intercept” all or part of that refund to pay back the food stamp debt. [MPP §20-400.] Methods other than tax intercepts are supposed to be used first, if they will result in collection. [MPP § 20-400.21.]) Advocates should also note that California law allows offsets of other state payments due the person, such as lottery winnings. [California Government Code § 12419.5.]

To refer a debt to the intercept programs, the county must have determined that the debt is “legally enforceable” and that the county has a “right to recovery.” This right to recovery has been interpreted as the ability to collect based on the regulations, all county letters, and court cases. [MPP § 20-401(i)(1); All County Information Notice I-53-89, page 3 (August 3, 19890; MPP § 20-402.1.] California counties submit a list of debts to the state for referral to the intercept and/or U.S. Treasury Offset Program (TOP) on an on-going basis. [MPP§ 20-402.2, MPP §20-404.]

No intercept is allowed if:

• the current food stamp allotment is being adjusted;
• the time to request a fair hearing has not lapsed; or
• the time to request a fair hearing is pending; or
• regular restitution is being paid.

[MPP § 20-403.2.]  Note that under MPP § 22-009.1, the time to appeal does not run if the individual has not received notice of the claim.

Under MPP § 20-403, claims may be referred to offset if the county determines:

• the claim is not being recouped and there is a court order to repay an intentional program violation (IPV) ;
• there is an order of restitution resulting from an IPV disqualification hearing; or
• the household failed to respond to a demand letter.

2. Federal Treasury Offset Program (TOP):

The food stamp office can also “intercept” federal tax refunds, unemployment compensation benefits, Social Security (not SSI) and other federal payments to collect a food stamp overissuance through the federal Treasury Offset Program (TOP). [MPP § 63-801.74 and .807.76; 7 C.F.R. § 273.18(n).] Unemployment benefits cannot be intercepted unless the person agrees in writing or a court orders the intercept. [MPP § 63-801.76; 7 C.F.R. § 273.18(g)(6).]

Under federal law, if a food stamp claim is delinquent for 180 or more days, then the county or state may refer the claim to the Treasury Offset Program . [7 C.F.R. §273.18(n)(1).] The state must certify that the debt is “legally enforceable.” [Id.]

Once the claim is referred to the Treasury Offset Program to pay the debt, the federal government may take payments that are owed by the federal government to the household, such as federal income tax refunds, federal salary, and federal retirement benefits. [7 U.S.C. § 2022(d).] It may also take the amount of the social security payments over $750 per month, up to 15% of the monthly social security payments. [31 C.F.R. § 285.4(e).] (Supplemental Security Insurance (SSI) benefits can not be intercepted in this way.) In addition, the federal government can charge “collection or processing fees.” [7 C.F.R. § 273.18(n)(2)(D)(ii), 273.18(n)(3)(ii).]

3. Pre-Intercept Notice of Action and Hearing Rights

When a referral to the Treasury Offset Program is made, the food stamp office must send a notice informing the household about the referral. [7 C.F.R. § 273.18(n).] California’s state tax intercept program also requires a pre-offset notice. [MPP §20-406.] The notice should have information about the right to appeal and where to get further information. [MPP § 63-406.1; 7 C.F.R. § 273.18(n)(2).] This notice or “pre-offset warning” must also advise the household of the right to an administrative “review” by the county.

Specifically, the pre-offset notice must contain the following information:

• the amount of the delinquency;
• the right to contest the referral for an intercept;
• the name, address and phone number of the county’s contact to contest the intercept;
• the right to an “administrative” review including a face-to-face meeting; and
• possible reasons the household might disagree with the action.

[MPP § 20-406.1.]

An agency review may be requested at any time during the calendar year in which an intercept occurred. [MPP § 20-407.1.] When the household requests it, the review must include a face-to-face meeting. [MPP § 20-407.1.] The review must be conducted by an impartial person (in the agency). [MPP § 20-407.11.] The person may ask that the meeting be held right away (within 10 days). [Id.] The agency official must review the case information that proves the debt is “recoverable” and “legally enforceable”. [MPP § 20- 407.12.] A written decision must be sent by the agency within 10 days. [MPP § 20-407.14.]

If the person is unhappy with the result of the agency review, a state fair hearing is allowed. [ACL 90-14 (February 9, 1990) (implementing the settlement in the Anderson v. McMahon court case.] The hearing is limited to the issue of the appropriateness of the tax intercept referral. [ACL 90-14; MPP §20-407.15.] However, advocates may also be able to raise the issue of the validity of the underlying overissuance, if an adequate notice was not sent, since the 90-day deadline to request a hearing would not have run. This includes when the notice went to the wrong address, when no notice was sent to the individual (such as when there were several adult household members and the notice was sent only to one person and did not list the individual against whom the intercept is proposed), and when it is not language compliant.  See MPP §22-001(j) and 22-009.1.

Any excess benefits intercepted must be promptly restored. [7 C.F.R. § 273.18(h); MPP § 20-407.16.] Once it determines that the intercept was incorrect, the county must pay the person back immediately (within ten days), even if the State hasn’t returned the money to the county. [ACIN I-53-89, August 3, 1989 (Attachment 1, page 6, #5).] In addition, the county must correct all records, any automated systems, and update the CDSS intercept referral list. [MPP§ 20-407.16.]

Canceling or terminating claims

The food stamp office may also decide to terminate an overissuance (i.e., stop trying to collect it), or write-off an overissuance (i.e., remove it from its books). The food stamp office will not collect agency or household error claims that are less than $35. [MPP § 63-801.411; California's rules permit "suspension" of claims, but don't require it.] The county can also suspend claims after sending a demand letter if it decides that it would not be cost effective to pursue the debt. [MPP § 63-801.512(b), § 63-801.522 (regarding intentional program violations).]

Also, when all the adult household members have died a claim should be cancelled. [7 C.F.R. § 273.18(e)(8)(ii)(B); MPP § 63-801.5.] The food stamp office must also terminate and write-off a claim if it cannot locate the food stamp household. [7 C.F.R. § 273.18(e)(8)(ii)(F); MPP § 63-801.51; .801.411(b); and 801.512.] The county can terminate a claim if no recovery action has occurred for three years (this is called “in suspense”). [7 C.F.R. § 273.18(c)(8)(ii)(E); MPP§ 63-801.53.] Counties can also appear in bankruptcy hearings to object to a discharge or to petition to revoke a discharge. [MPP § 63-801.54.]

Even after a claim is “cancelled” or “terminated,” the county may still be able to offset the amount against a corrective payment, but only if it is not an agency error overissuance. [MPP § 63-801.53; MPP § 63-801.313 (Handbook).]

County retention of overissuances recovered

As an incentive to agencies to pursue and collect IPV and inadvertent household errors, federal law permits the agencies to keep a portion of the funds collect. 7 U.S.C. § 2025(a)(8) permits States to retain 35 percent collected for Intentional Program Violation (IPV) claims and 20 percent for Inadvertent Household Error (IHE) claims.  There is no retention where payments are not returned to the State because the court orders a household to perform community service in lieu of a claim or in situations where payments made to a court are not forwarded to the State. 7 C.F.R. §273.18(k)(2)