Domingo Musquiz, a former rail industry employee, applied for a reduced-age annuity in 2012. He initially failed to report that he had been rehired by a non-rail employer, Santa Barbara Cottage Hospital, leading the Railroad Retirement Board to overpay his annuity. The Board later discovered the outside earnings and notified Musquiz that his annuity had been adjusted to account for them in letters sent in 2013, 2014, and 2015. Despite these notifications, the Board continued to pay the higher amount and later demanded repayment of the overpayments plus a penalty. The Board denied Musquiz's request for a waiver, concluding he was at fault for the entire overpayment period because he should have known his reporting requirements. Musquiz appealed, arguing that once the Board informed him it had adjusted his payments based on his outside earnings, he could not reasonably be expected to report the same information again.
The Ninth Circuit applied the two-part waiver standard under 20 C.F.R. § 255.10, which requires that an individual be without fault and that recovery be contrary to the purpose of the Railroad Retirement Act or against equity or good conscience. The court agreed with the Board that Musquiz was at fault for the initial overpayment period from August 2012 to June 2, 2013, as he had signed an agreement to report re-employment and failed to do so. However, the court distinguished the subsequent period. On June 3, 2013, the Board sent Musquiz a letter stating, 'Your monthly annuity payments have been adjusted. Additional wages that you earned outside the railroad industry are now available to include in the tier 1 portion of your annuity.' The court reasoned that it was unreasonable to expect Musquiz to report earnings that the Board had already acknowledged and adjusted for in its own calculations. The court held that these overpayments were the result of Board error of which Musquiz was not aware and could not reasonably have been expected to be aware. Because the Board had concluded Musquiz was at fault for the entire period, it never addressed the second element of the waiver standard. The court noted that recovery might be against equity or good conscience given Musquiz's age, health conditions, fixed income, and financial deficits, but determined that the Board must develop a current factual record to make this determination in the first instance.
The Railroad Retirement Board must reopen the case to evaluate whether recovering the overpayments made after June 3, 2013, would be against equity or good conscience. The Board is required to develop a current factual record regarding Musquiz's financial situation, as the previous record was not current. If the Board finds that recovery would be against equity or good conscience, it must waive the repayment and penalty for that specific period. The decision clarifies that an individual is not at fault for failing to report earnings when the agency has already adjusted payments based on that same information.
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