“Recent Evolving Policies of the Social Security Administration”

Lesley M. Mehalick, J.D., LL.M

A challenging and crucial element of special needs and disability law involves staying current with the continually evolving policies and regulations of public assistance agencies, including the Social Security Administration (SSA). These ever evolving policies have direct and immediate effects for persons receiving public benefits, and the failure to correctly observe these policies could result in an unnecessary termination or reduction of benefits. Conversely, if a policy has become more lenient, but the person receiving public benefits is unaware of that change, then the person could be unduly restricting himself. It is essential to carefully craft the language in a Special Needs Trust so that it will, to the extent possible, accommodate the beneficiary regardless of minor policy changes, and it is also important to provide language in the trust that can allow for a possible modification, if needed, while maintaining the irrevocable nature of the trust. While the SSA does not “approve” special needs trusts, it will deny a claim for benefits based on a defective trust or the improper use of special needs trust monies.

As a prime example of a past important policy change, the Social Security Administration previously treated purchases from a special needs trust for clothing as in kind support and maintenance, or income, to the trust beneficiary, which was reportable and would reduce the beneficiary’s Supplemental Security Income payment. This rule was changed in 2005, and since that time, a Special Needs Trust may purchase clothing on behalf of a disabled beneficiary with no reduction in his SSI payment. Regardless, we still see many post-2005 special needs trusts that unnecessarily prohibit a trustee from purchasing clothing.

Recently, the Social Security Administration lightened its stance on reimbursements to third parties from a special needs trust for purchases made on behalf of the disabled beneficiary. Previously, it was problematic for a special needs trust to reimburse a parent who, for example, paid out of pocket for a piece of therapeutic equipment for the child. Such reimbursements were treated as income to the child. This restriction made administering special needs trusts difficult and frustrating from a practical perspective, and often tied the hands of a Trustee, but it was an issue that Social Security viewed strictly. As of February, 2013, the SSA has stated that it will not treat as income monies provided to third parties as a reimbursement for purchases on behalf of the disabled individual, so long as those purchases do not involve food or shelter expenses. This change has greatly eased the use and administration of special needs trust for many families.

Equally important is another recent policy change from the Social Security Administration regarding a family member who is compensated from a special needs trust for providing essential care to the trust beneficiary. In 2012, the SSA issued a policy statement that if a special needs trust paid a family member for providing care to the trust beneficiary, the family member would need to be medically trained or certified; however, no definition for these terms was provided. This caused widespread concern as many parents have been forced to leave their employment in order to provide full time aide and attendant care for a child with a disability, yet that parent may not have an official medical certification. The SSA has since withdrawn this policy and it is re-examining the matter. We may not have heard the last on this issue, but for the moment, a trust can continue to compensate family members for this important work on behalf of the trust beneficiary.

Due to the constantly changing political and economic climates, as well as personnel changes and shifts in the country’s mores, these polices are destined to continue to evolve and change over time, and it is essential that to stay abreast of the constant changes.