Penalty Checks Arriving for Late Hearings

State penalty checks for some people in the Community-Based Adult Services program have begun to arrive in the mail, but a consumer advocacy group said yesterday that cashing those checks could have unintended consequences.

“Medi-Cal benefits are not affected in any way. But some people could lose SSI (Social Security Income) dollars” from the unexpected windfall of penalty money, according to Elizabeth Zirker, staff attorney at Disability Rights California.

The state has to pay penalties to some people who were initially denied eligibility to the CBAS program. If the state took more than 90 days to process a request for a hearing and the appeal was granted, a penalty is owed.

In some cases the checks can be relatively substantial. Zirker said one of her clients recently received a check for about $11,000. The money should be immediately reported to the Social Security Administration, Zirker said. The federal program could withhold some amount of need-based SSI from the people who receive these penalty checks, she said.

About 2,400 Californians filed a request for a CBAS hearing, but not all of those people will receive penalty checks, Zirker said. Only those who won their appeal hearing and went more than 90 days without a decision qualify for penalties, she said.

“We just realized people would need more information about what to do with these checks,” Zirker said. “Mainly we wanted to get people information about what to do, and how to manage this money.”

For instance, she said, recipients who also receive SSI checks need to report the penalty money to federal officials. SSA treats that sudden income as a windfall, like when people win the lottery or get an inheritance. Recipients could lose SSI as a result, Zirker said.

“You can’t give the money away,” she said. “You can prepay rent, you can get other essential things for living, you could buy a burial plot. But you don’t want to keep the money sitting in the bank.”

As long as you have it, federal administrators can withhold SSI, Zirker said.

“If you spend it on rent, a car, household goods and personal effects, credit card debt, that kind of thing, you’ll still have a problem on the month you got the check in, no matter what,” Zirker said. “But if you spend it in that month, you won’t have a problem after that.”

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