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August 12, 1981


The opinion of the court was delivered by: Robert D. Morgan, Chief Judge.


This action is one for judicial review of an adverse decision of the defendant Secretary reducing plaintiff's benefits under Supplemental Security Income (SSI) by one-third. Plaintiff had owned her own home until 1978, at which time she moved in with her daughter and son-in-law. At that time plaintiff had been receiving SSI since 1974, and had received similar benefits from the Illinois Department of Public Aid since 1966. She received a Notice of Planned Action from the Department of Health and Human Services on February 5, 1979, stating that her SSI would be reduced by one-third due to the change in her living situation. Plaintiff requested reconsideration, which was denied, and her benefits were reduced in April 1979.

Plaintiff requested and received a hearing before Administrative Law Judge (ALJ) Harrison L. Dod on July 9, 1979. That hearing was reopened for further evidence on December 19, 1979. The ALJ denied plaintiff's request for restoration of her full benefits. The Health and Human Services Appeals Council denied review on August 27, 1980. Thus the decision of the ALJ constitutes the final decision of the Secretary.

This case was filed October 22, 1980. It appears that plaintiff has exhausted her administrative remedies and is properly before this court pursuant to 42 U.S.C. § 405(g). Plaintiff has, in timely fashion, submitted a memorandum to the court. Defendant has not. Section 405(g) authorizes the court to enter judgment on the pleadings. After a thorough review of the record in this case, the decision of the Secretary must be affirmed in part and remanded in part.


This court reviews decisions of the Secretary within very narrow limits. Findings of fact are deemed conclusive if supported by substantial evidence, Lechelt v. Cohen, 428 F.2d 214 (7th Cir. 1970); 42 U.S.C. § 405(g). The court may also review whether the proceedings below were in conformity with the Regulations and the validity of the Regulations, 42 U.S.C. § 405(g).

Several sections of Title 42 and several Regulations under those sections are relevant here. 42 U.S.C. § 1382 establishes criteria to determine eligibility for SSI, based primarily on income. Section 1382(a) defines income as including both earned and unearned income. Section 1382(a)(2)(A) includes as unearned income any support and maintenance furnished in cash or in kind to an applicant. Further, that section directs that if both support and maintenance are furnished to a person living in another person's household, the benefits to the person are reduced by one-third in lieu of calculation of unearned income. Section 1382a(b)(2)(A) excludes $20 per month of any income from counting against benefits.

Relevant regulations under the Act are found at 20 C.F.R. § 416.1125. Section 416.1125(b) provides that the one-third reduction applies when the claimant is living in the household of another, unless claimant can show that he or she is paying a pro-rata share of the total household expenses, 416.1125(b)(3)(iv). The one-third reduction applies when the claimant lives in his or her own household and receives in-kind support and maintenance, 416.125(d)(2). The one-third reduction does not apply when only support or maintenance is furnished in kind. The value of the in-kind support or maintenance is considered unearned income, 416.1125(f). A person is living in his or her own household if the person is renting space at fair market value, 416.1125(b)(3).


Plaintiff moved in with her daughter in 1978. At that time they entered into an oral agreement whereby plaintiff would pay $150 per month for room and board. There was no designation of how much went for room and how much for board. After plaintiff received notice of reduction of her benefits, she entered into a written lease, dated May 9, 1981. She agreed to pay $110 per month for room and $40 per month for food. Petitioner's daughter purchased and prepared all the food consumed in the household consisting of three adults. On July 9, 1979, the agreement was changed. Plaintiff paid $110 per month for room and purchased her food separately.


At a hearing on July 9, 1979, the plaintiff and her daughter appeared and testified as to the living arrangements and the purchase and consumption of food. They also produced exhibits which show the rental agreement and the household expenses. After the hearing, plaintiff submitted evidence of monthly food expenses, which was considered by the ALJ. After the ALJ's decision was announced, plaintiff moved to reopen on grounds of inadequate notice of the issues to be considered. The motion was granted and a reconvened hearing was held on December 19, 1979. Plaintiff did not attend, but was represented by an attorney. No further testimony was taken, but additional documents were submitted showing expenses and living arrangements.

In a decision dated March 28, 1980, the ALJ made findings based on the prior testimony and all of the records that were submitted. The ALJ found, in pertinent part, that from November 1978 until May 1979 plaintiff was living in the household of another, and that her unapportioned contribution of $150 was not her pro-rata share of total household expenses. As a result, she received both support and maintenance in kind, and the one-third reduction applies to those months. Further, the ALJ found that after May 1979, claimant paid fair market rent of $110, and thus was living in her own household. He further found that she continued to receive support and maintenance in the form of food only, so that the presumptive one-third reduction in ยง ...

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