Plaintiff worked in the restaurant industry as a server (a position formerly known as a waiter). He earned wages and tips after he began receiving social security benefits. Although he reported both his wages and tips as income to the IRS for tax purposes, he reported only his wages and not his tips to social security.

When social security discovered this error, it assessed an overpayment and began recovering the overpayment through a reduction in plaintiff’s ongoing benefits.

Social security conceded that plaintiff was not at fault for the overpayment. But that did not necessarily mean he did not need to pay back the overpaid benefits.

Social security regulations provided that if a claimant is not at fault for an overpayment then there are two tests for determining whether or not recovery of the overpayment should be barred: 1) if recovery of the overpayment would “defeat the purpose” of the Act (which is to provide at least a subsistence level of income for an individual to meet ordinary living expenses), or 2) if recovery of the overpayment would be against equity or good conscience.

Whether recovery would be against equity or good conscience was further determined by: 1) whether the beneficiary relinquished a valuable right — for example, a wage earner who has retired from employment which he or she cannot regain, or 2) whether the beneficiary changed his position for the worse — for example, a worker who enters employment based on the erroneous advice of a social security employee that the subsequent employment need not be reported.

None of these special circumstances applied in the instant case, so recovery of the overpayment was appropriate.

See Gettenger v. Celebrezze, 218 F.Supp. 161 (S.D.N.Y. 1963). Affirmed on decision below, 330 F.2d 959 (2nd Cir., 1964). See also Social Security Ruling (SSR) 65-24c.

Just a reminder: always show appreciation to those in the service industry and remember to tip at least 15% to 20%.