A self-employed claimant filed for old age social security retirement benefits in the 1980’s. He had not filed a tax return since 1983. Social Security asked him for detailed information about his self-employment in order to determine if he had retired. He refused to provide the requested information. Social Security then determined that he was rending substantial services and thus, was not eligible for retirement benefits. He appealed.
The claimants’ appealed was denied through all of the administrative levels of adjudication. After exhausting his administrative remedies, he appealed to federal district court. The district court upheld the administrative decision. He then appealed to the Second Circuit Court of Appeals.
In his appeal, the claimant argued that the social security statute set forth a conclusive presumption that he had no self-employment earnings if he had not filed a tax return for three years three months and fifteen days, which he had not. He also argued that it violated his Fifth Amendment right against self-incrimination to be compelled to provide detailed self-employment information in order to receive retirement benefits.
The Court rejected both of these arguments. The court held that the conclusive presumption of no self-employment earnings applies only to situations where an individual is attempting, after the time limitation, to prove coverage for social security benefits based on prior wages. If no tax return is filed for three years three months and fifteen days after wages were allegedly paid, then there is a conclusive presumption that there were no wages for that year.
However, this presumption does not apply to a deduction situation. The Court agreed with the Secretary’s position that requiring a self-employed person to provide detailed information about their self-employment is a legitimate prerequisite to receiving retirement benefits.
The claimant’s Fifth Amendment argument was equally unavailing. The Court reasoned that this is because the Fifth Amendment applies only to situations where the information being requested is compelled, testimonial, and incriminating. The Court held that, in the case at bar, the information was not being compelled because the claimant was not being forced to apply for benefits.
As an interesting side note, the claimant died after he had filed his appeal. Although no motion for a substitution of party was made, either in the district court or in the circuit court, the court found based on case law that this was not a fatal defect to its deciding the case.
An interesting and important principle stated in the dicta of this case is that social security benefits are not contractual in any true sense of the word. Even though payroll taxes are withheld for social security purposes, current payroll taxes go to pay current social security beneficiaries. They are not set aside for the individual making the contribution. The Court cited a prior decision which opined that noncontractual social security benefits are not in any meaningful sense analogous to the rights of a private annuitant, whose right to receive benefits is based on his or her contractual premium payments.
See Ciccone v. Sec. of HHS, 861 F.2d 14 (2nd Cir. 1988).
See also Social Security Ruling (SSR) 89-7c.
In other words, what the government giveth, the government may take away. However, it is almost universally believed that social security benefits will be maintained indefinitely into the future, at least at some level, even though entitlement reform may bring about some change in benefits in the dimly foreseeable future.
This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.
