JEROME BROWN, PETITIONER V. LOUIS W. SULLIVAN, SECRETARY OF HEALTH AND HUMAN SERVICES No. 90-6174 In The Supreme Court Of The United States October Term, 1990 On Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Second Circuit Brief For The Respondent In Opposition OPINIONS BELOW The opinion of the court of appeals (Pet. App. A1-A15) is reported at 905 F.2d 632 (2d Cir. 1990). The opinions of the district court (Pet. App. B1-B14), of the Appeals Council (Pet. App. C2-C6), and of the Administrative Law Judge (Pet. App. D2-D5) are unreported. JURISDICTION The judgment of the court of appeals was entered on June 4, 1990, and rehearing was denied on August 6. A petition for a writ of certiorari was filed on November 5, 1990. The jurisdiction of the Court is invoked under 28 U.S.C. 1254(1). QUESTION PRESENTED Whether 42 U.S.C. 403(b), 403(f)(3) -- provisions of the Social Security Act that provide for a decrease in the amount of old age insurance benefits on account of earned income -- deprive petitioner of the equal protection of the laws in violation of the Fifth Amendment. STATEMENT 1. On October 19, 1983, shortly after his 65th birthday, petitioner applied for Social Security Retirement benefits. Pet. App. A4. Petitioner projected that he would retire from his job early in 1984 and would have an income of $6,960 for that year. Ibid. However, he did not retire until June 1985, id. at A5, and his actual 1984 income was $25,173. Id. at A4. Petitioner did not report his earnings for 1984 to the Social Security Administration until July 1985. Ibid. The Social Security Administration therefore failed to account for petitioner's outside earnings by making the appropriate reductions in his Social Security benefits as required by 42 U.S.C. 403(b) and 403(f)(3). /1/ As a result, he and his wife received benefit overpayments in 1984 of $8,845.80. Pet. App. A5. In April 1986, the Social Security Administration requested a refund of the overpayments and assessed a late filing penalty. It further refused petitioner's request to waive the recovery of the overpayment. Pet. App. A5. Petitioner then requested a hearing before an Administrative Law Judge, who found that petitioner was not "without fault" in causing the benefit overpayments, see 20 C.F.R. 404.507, and denied waiver of recovery of the overpayments by the government. Pet. App. A5; D2-D6. The Appeals Council affirmed this decision. Id. at A5-A6; C1-C6. 2. Petitioner then brought the present action under 42 U.S.C. 405(g), to review the Secretary's determination. Pet App. A6. The district court upheld the Secretary's final decision (id. at B2-B14). It rejected petitioner's assertion that the provisions in the Social Security Act for reducing benefits on account of earned income denied him equal protection of the laws in violation of the Fifth Amendment, id. at B7, and also rejected petitioner's objection to the determination that he was not without fault in accepting or causing the overpayments, id. at B1-B3. The court of appeals affirmed. Pet. App. A1-A15. The court first observed that, under this Court's decisions, "(d)istinctions made in social welfare statutes are typically reviewed for rational basis." Id. at A6. The court concluded that this was the appropriate standard for evaluating the earned income deduction, and rejected petitioner's arguments for applying a higher standard of scrutiny. Id. at A7. As the court explained, "the statute does not directly and substantially interfere" with the right to work, does not place any "legal barriers in front of those who wish to work for pay," and does not completely eliminate the benefits of such work. Id. at A8. The court also held that the failure of the statute to reduce benefits based on unearned income did not create a wealth-based distinction, since "(t)he earned income of both (rich and poor) is taxed identically." /2/ Ibid. The court then concluded that the earned income deduction had a rational basis. /3/ The court explained that it was reasonable to make deductions only for income from employment -- and not for unearned (or passive) income -- because Social Security was designed as retirement insurance against the loss of wages (rather than as a replacement for passive income or a welfare program for the needy). It was therefore appropriate for Congress to take the "economy measure" of "relat(ing) benefits more directly to actual retirement than to a presumed time of retirement." Pet. App. A10. The court also concluded that it was rational to avoid taxing investment income so as not to "discourage savings during productive years." Id. at A10-A11. Finally, the court held that "there is simply no constitutional basis" for petitioner's claim that the exemption from the earned income deduction for individuals over age 70 "is an illegal age discrimination." Pet. App. A11. The court observed that "bias" in favor of the aged permeates the Social Security system as well as other social service programs. But, even if such discrimination were suspect, the court explained, the distinction at issue is justified. Ibid. To the extent that those over 70 have continued to work after age 65, they are likely to have paid more into the system and to be entitled to more benefits. Ibid. Also, the financial needs of those in the older group are generally greater, since they are "employable for a shorter period of time," id. at A12, are "closer to facing costly health problems," and are "less likely to be self-sufficient and more likely to be experiencing financial burdens." Ibid. In addition, the removal of the deduction for older workers would have a smaller adverse financial impact on the program because workers over 70 are "more likely to have actually retired than 65-year olds." Id. at A11-A12. /4/ ARGUMENT The court of appeals correctly concluded that the Social Security Act provisions reducing benefits for earned income are valid if they have a rational basis, and that the provisions at issue here meet that test. There are no conflicting court of appeals decisions and no conflict between the result below and this Court's decision in Jimenez v. Weinberger, 417 U.S. 627 (1974). Further review is therefore unwarranted. Since this case involves an attack on an ordinary economic classification, the scheme at issue is properly scrutinized under a rational basis standard. See, e.g., Dandridge v. Williams, 397 U.S. 471 (1970); Califano v. Aznavorian, 439 U.S. 170, 175 (1978); Bowen v. Owens, 476 U.S. 340, 345-350 (1985); Bowen v. Gilliard, 483 U.S. 587 (1987). The provisions in question contain no features that would demand any form of "heightened scrutiny." As the court of appeals observed, the earned income deduction does not discriminate between rich and poor, since all individuals, regardless of income, have their benefits reduced if they work past 65. Nor is the exemption for those over 70 constitutionally suspect, since, as detailed in the court of appeals opinion, there are many good reasons for providing more generous benefits to the most elderly group of Social Security beneficiaries. Moreover, as the court of appeals also explained, a partial reduction of retirement payments in proportion to employment earnings "does not directly and substantially interfere with" the right to sell one's labor, since beneficiaries are permitted to retain a substantial portion of their earnings. Furthermore, as the court of appeals made clear, there is no question that the earned income deduction, including the exemption for workers over 70, has a reasonable basis. Social Security is a retirement insurance program into which workers pay while they are employed, and from which they draw when they cease to earn income. Given the underlying purpose of the program -- to provide retirees with a replacement for employment income -- it is rational for Congress to conserve resources by relating benefits "more directly to actual retirement than to a presumed time of retirement." Pet. App. A10. By effecting a partial reduction in benefits on the basis of earnings, the statutory provisions at issue direct a finite pool of resources away from individuals who have not really "retired" -- and thus are neither in need of nor, strictly speaking, entitled to, full benefits -- in order to make more money available to those who have completely ceased to earn wages. Moreover, the decision to eliminate the earnings deduction beginning at age 70 is rational in light of the greater financial burdens faced by those over 70 and the relatively small savings the program would realize by applying the earned income deduction to that group. There is no conflict between the court of appeals' decision and this Court's decision in Jimenez v. Weinberger, supra. See Pet. 7-8. The Court in Jimenez found that the classification at issue in that case -- which excluded certain categories of illegitimate children of disabled workers from receiving benefits -- was not rationally related to the proffered basis for the classification -- the elimination of spurious claims. Here, in contrast, there are ample reasons for categorizing beneficiaries on the basis of earned income and age. /5/ And, to the extent that the Court in Jimenez may be said to have applied "heightened scrutiny" to a classification based on illegitimacy of birth, its analysis has no application here, since there is no doubt that the earned income deduction is properly analyzed under the rational basis standard of review. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. KENNETH W. STARR Solicitor General STUART M. GERSON Assistant Attorney General WILLIAM KANTER ROBERT D. KAMENSHINE Attorneys JANUARY 1991 /1/ At the time petitioner applied for benefits, there was a $1 reduction in benefits for every $2 earned (above a specified exempt amount) up to age 70. Presently, the Act provides a $1 reduction for every $3 earned above the exempt amount. /2/ The court stated that, in complaining of the distinction between earned and unearned income, petitioner was appearing to urge heightened scrutiny based on a "fail(ure) to discriminate based on wealth." Pet. App. A9. The court observed that, insofar as that objection rested on the theory that "those who have more should pay more or receive less," petitioner's complaint would render suspect a wide range of filing and licensing fees as well as sales taxes. Ibid. /3/ The court rejected petitioner's reliance on Jimenez v. Weinberger, 417 U.S. 628 (1974), in which this Court struck down a provision denying Social Security disability benefits to certain illegitimate children. Pet. App. A7. Jimenez was distinguished on the ground that the Court in that case determined the provision at issue not to be rationally related to the proffered reason for its existence -- the prevention of spurious claims -- whereas here there was ample rational basis for the earned income exclusion. /4/ The court also addressed petitioner's contention that an exemption for individuals over 70 undermines the original statutory goal of encouraging retirement at 65 so as to free jobs for younger workers. Pet. App. A12. Although acknowledging that the exemption did not appear to advance that purpose, the court observed that there was no constitutional requirement that "(a) complex statute, especially one that has been frequently amended at different times, * * * function() with all parts in perfect harmony," since, if there were, "few complex statutes would survive." Id. at A13. Given that "(t)here is a firm reasonable basis in service of the objectives of this statute for the distinctions here questioned," the fact that the provision at issue did not serve every possible valid statutory goal was not fatal to the scheme. Ibid. The court also affirmed the district court's holding that there was substantial evidence to support the Secretary's factual finding that petitioner was at fault in receiving the overpayment. Pet. App. A14-A15. Petitioner does not challenge that holding before this Court. /5/ Relying on Jimenez, 417 U.S. at 637, petitioner asserts (Pet. 9) that Section 403 is both over and under-inclusive with regard to "Congress's goal * * * to encourage Social Security Beneficiaries to remain in the work force," because it discourages work in the under 70 age group, and provides an incentive to work for some "higher earning individuals over 70 who would have stayed in the work force without the exemption." Petitioner is certainly correct that there is not a particularly good "fit" between the decision to reduce Social Security benefits on the basis of earnings and the goal of encouraging beneficiaries to work. The problem with petitioner's analysis is that there is no evidence whatsoever that Congress enacted the earned income deduction for this purpose.