Gray Matters: Beware illegal Social Security garnishment

An old problem is back, mostly because this recession has made banks and creditors more jittery (or greedy) than usual: the illegal garnishment of Social Security benefits paid through direct deposits.

One reason, says the National Committee to Preserve Social Security and Medicare, is a broad gap in the laws has enabled banks and other private creditors to seize Social Security funds from people's accounts that are supposed to be protected against such actions.

A frozen account, which may not be discovered until after the fact, can cause a great deal of pain.

Under the law, benefits are supposed to be protected from garnishment, except when money is owed for court-ordered child support or alimony, or the beneficiary owes federal taxes or a debt to another federal agency, Social Security spokesman Everett M. Lo said.

But, he said, "the Social Security Administration's responsibility for protecting benefits against legal process usually ends when the beneficiary is paid."

Here's the rub: "Benefits continue to be protected . . . as long as they are identifiable as Social Security benefits. . . . For example, when only Social Security benefits are deposited into a particular account."

That, of course, is rare. Most Social Security payments are deposited into household accounts.

According to a report last year by the Social Security Administration's inspector general, two-thirds of the nation's 12 largest banks have violated the law by placing garnishments of more than $30 million on accounts receiving government benefits -- Social Security, disability, veterans' and survivor payments.

And the banks collected more than $1 million in fees. Under present law, the violations are unenforceable because the banks can't tell which funds are protected and which are not.

According to the inspector general, the law does not specify how the banks are to protect the funds coming into accounts because the deposits are mixed with nonprotected funds.

Members of Congress have urged the Treasury Department to draft new, tougher rules protecting seniors from illegal bank garnishments.

In the meantime, Lo said, if a creditor is threatening collection or if you're in a dispute with a creditor, alert your bank that you will report it to the Social Security Administration if it honors an illegal garnishment. If it already has happened, you may take legal action.

In other matters, if the cost of your prescription drugs has gone up, despite or because of Part D, it's not your imagination.

The Kaiser Family Foundation noted last month that the Medicare drug benefits, "delivered entirely by private companies through both stand-alone prescription drug plans (PDPs) and Medicare Advantage plans, often are held up as a market-based model for providing government-subsidized coverage."

But premiums and co-pays for the PDPs have each gone up 35 percent in three years, Kaiser reported. Medicare Advantage beneficiaries are finding more of their drugs on more expensive "specialty tiers," which means co-pays are 33 percent of the drug price. Also, insurers won't cover even generic drugs in the "doughnut hole," where beneficiaries must pay the full price of the drug.

The nonpartisan Center for Medicare Advocacy (medicareadvocacy.org) has published a useful guide to "finding help to get prescription drugs."

It could be useful to the one out of five Americans who go without their medications, split pills or skip doses to save money. If you don't use computers, ask someone to help you gain access to the following site, which lists a number of resources for beneficiaries, caregivers and professionals. (Click here to connect.)

One of the most important resources for lowincome Part D beneficiaries is the full Low Income Subsidy (LIS), which pays practically all premiums, most co-pays and has no coverage gap (known as the doughnut hole).

It's available for anyone who earns less than $1,218 a month and has assets of less than $8,100. For couples, the income limit is $1,639 a month, with assets of less than $12,910. Individuals on Supplemental Security Income or Medicaid are entitled to the subsidy without applying.

In addition to help from the federal government and state prescription drug assistance plans, drug chains such as Walgreens and Rite Aid, the Pharmaceutical Research and Manufacturers Association, and individual drug companies offer programs to help lower-income consumers who have nowhere else to turn.

For further information visit medicareadvocacy.org (Click here to connect.) or call 800-633-4227 (800-MEDICARE) for your local state health insurance-counseling program.

Or send a self-addressed, stamped envelope to Saul Friedman-PROGRAMS, c/o Newsday Act2, 235 Pinelawn Rd., Melville, NY 11747, and I will send you the list.