Reduce Costs, Save Time When Recertifying Income

July 14, 2020

HUD recently published the final rule implementing Fixing America’s Surface Transportation (FAST) Act legislation. HUD’s December 2017 interim rule amended regulatory language that applies to Public Housing, Housing Choice Voucher program, Section 8, and Section 202/811 PAC/PRAC programs. And it amended regulations related to asset verification, utility allowance reimbursements, and triennial income verifications.

HUD recently published the final rule implementing Fixing America’s Surface Transportation (FAST) Act legislation. HUD’s December 2017 interim rule amended regulatory language that applies to Public Housing, Housing Choice Voucher program, Section 8, and Section 202/811 PAC/PRAC programs. And it amended regulations related to asset verification, utility allowance reimbursements, and triennial income verifications.

In publishing the final rule, HUD addressed comments related to the interim rule and made one modification to the interim rule, which clarifies when non-fixed income sources need not be verified. The final rule became effective June 8, 2020.

We’ll go over how the final rule streamlines the annual recertification process by modifying income and asset verification methods and how it may reduce burdens around utility reimbursements. According to HUD, if an owner chooses to implement the following streamlined methods, the site’s tenant selection plan should be updated where the site’s annual recertification requirements are discussed.

Streamlined Fixed-Income Verification

The final rule provides for a streamlined income determination or verification process for any fixed source of income. “Fixed income” is defined as periodic payments at reasonably predictable levels from one or more of the following sources:

  • Social Security, Supplemental Security Income, Supplemental Disability Insurance;
  • Federal, state, local, or private pension plans;
  • Annuities or other retirement benefit programs;
  • Insurance policies;
  • Disability or death benefits;
  • Other similar types of periodic receipts; and
  • Any other source of income subject to adjustment by a verifiable cost-of-living-adjustment (COLA) or current rate of interest.

Full recertifications every three years. Typically, third-party verification of all income amounts must be obtained for all members of a household at every recertification. With the final rule, owners are allowed to streamline income recertification procedures for families with income that comes from fixed-income sources.

Specifically, the new rule allows owners to require third-party documentation for fixed-income sources only every three years. In the intervening years, the owner could apply a previously determined or verified COLA or interest-rate adjustment specific to each source of fixed income. In other words, for the intermediate years, a household’s income can be calculated by adjusting existing income with COLA factors.

The rule greatly reduces the verification burden by permitting owners to verify a household’s fixed income every three years as opposed to every single year

90 percent threshold test. In the case of a household with at least 90 percent of the family’s unadjusted income from fixed income, an owner using streamlined income verification may, but is not required to, adjust the non-fixed income. But the owner may still choose to verify and update the non-fixed income.

Conversely, for households with at least one source of fixed income, but for which less than 90 percent of the household’s income is from fixed sources, owners must verify and adjust non-fixed sources annually.

Example: Here’s an example of a household that meets the 90 percent fixed-income threshold. Suppose a couple receives project-based rental assistance. They moved in Aug. 1, 2019, and had a full certification at the time. The husband receives $10,000 a year in Social Security benefits. The spouse receives $9,000 in Social Security benefits. The husband also works part time at a seasonal job and earns $2,000 a year. The gross annual household income is $21,000.

To meet the threshold test, 90 percent of the total gross household income or $18,900 ($21,000 x 90% = $18,900) needs to be from fixed-income sources. Since the fixed income received by this household totals $19,000, this household meets the 90 percent threshold test.

When the household’s first recertification is completed for July 1, 2020, their fixed-income source can be determined without verification. First, the fixed-income source can be determined by applying the verified COLA to both spouses’ benefit income. Next, the husband’s seasonal wages of $2,000, the non-fixed income source, isn’t required to be verified.

Remember that for households whose fixed income represents less than 90 percent of the total gross household income, the owner must verify non-fixed-income sources.

Medical expense deductions. You may have residents on fixed incomes with medical expenses. With the final rule, owners may elect a streamlined income determination for families on a fixed income. But it applies only to the verifications of sources of income. According to HUD, owners must continue to conduct third-party verification of deductions, including medical expense deductions.

Changes to Asset Verification Procedures

Annual income includes amounts derived from assets to which family members have access. Assets are items of value that may be turned into cash such as a savings account, stocks, and bonds. With a savings account, the bank pays interest on the asset. And the interest is the income from that asset.

Typically, households are required to report all assets annually. This final rule reduces the burden of verifying household assets upon recertification by permitting owners to verify a household’s assets every three years as opposed to every single year.

For Years 2 and 3 after a full third-party income certification has been conducted, the owner may choose to verify assets by accepting a self-certification from a household declaring that the household has net assets equal to or less than $5,000. Tenants with assets below $5,000 typically generate minimal income from these assets, which results in small changes, if any, to tenant rental payments. And owners can spend significant time verifying such assets. Being able to accept a family’s declaration that it has net assets equal to or less than, $5,000, without annually taking additional steps to verify the accuracy of the declaration, is a time and resource saver.

It’s important to note that third-party verification of all family assets will be required every three years.

Example: Here’s an example of how the asset verification procedure works. A household moved in on June 1, 2019. At the time of move-in, the household had only one asset, a checking account with a value of $200. Because this was the initial certification, the checking account was verified.

At the first certification due June 1, 2020, the household declared that their only asset is a checking account with a value of $300. Since the household declared that the net value of assets is less than $5,000, third-party verification of the checking account is not required.

When completing their second recertification due June 1, 2021, the household declares that their only asset is a checking account with a value of $500. Since the household declared that the net value of assets is less than $5,000, third-party verification of the checking account is not required.

At the third recertification due June 1, 2022, the household declares that their only asset is a checking account with a value of $600. Even though the household declared that the net value of assets is less than $5,000, third-party verification of the checking account is required. 

Utility Reimbursements

The final rule reduces the burden of issuing small utility reimbursements to tenants who receive project-based rental assistance. Where tenants pay for their utility usage, owners must reimburse tenants if the utility allowance exceeds the total tenant payment, but the regulations don’t specify how frequently such reimbursement must be made. This has led owners to make reimbursements on a monthly basis, causing them to process small monthly checks and expend postage to mail them to voucher holders, which could constitute an administrative and financial burden.

With the final rule, owners can make utility reimbursements on a quarterly basis if the reimbursement is $15 or less per month ($45 per quarter). For example, suppose a utility allowance for a unit is $100 a month. For a tenant with a Total Tenant Payment of $90, the utility reimbursement would be $10 per month. Since the monthly utility reimbursement is $15 or less, the owner can distribute the utility reimbursement quarterly as opposed to monthly.

Owners who implement this option will have to create a policy to assist tenants for whom the quarterly reimbursements will be a financial hardship.

Timeline for the Streamlined Income Verification Method

Here’s an example of how you would utilize the streamlined requirements for verifying and adjusting fixed-income sources for some households at each annual certification. In the initial year of a three-year cycle, you would complete an annual income determination consistent with all applicable HUD regulations and guidance.

In this example, the resident has the following income and expenses:

  • $500/month from Social Security Survivor’s Benefits;
  • $200/month from pension;
  • Medicare Part B Premium of $100; and
  • $2,250 in medical expenses.

Year 1:

  • You accept a printout from myssa.gov or an SSA award/benefit letter that’s not more than 120 days old at the time of receipt to verify the Social Security Survivor’s Benefits income and Medicare Part B premium.
  • You accept a letter from the pension plan manager stating that the resident receives $200 per month. The letter states that the amount will never change.
  • You accept 12 months of receipts to estimate other medical expenses for the upcoming year.

Year 2:

  • Social Security announces a 1 percent COLA increase. The household file must contain some document showing the COLA increase. This could be a printout of the Social Security website announcement.
  • You make a copy of the Year 1 letter from the Pension Plan manager stating that the resident receives $200 per month and that the amount will never change and include that letter in the household file.
  • You accept 12 months of receipts to estimate other medical expenses for the upcoming year.

Year 3:

  • Social Security announces a 3 percent COLA increase. The household file must contain some document showing the COLA increase. This could be a printout of the Social Security website announcement.
  • You make a copy of the Year 1 letter from the pension plan manager stating that the resident receives $200 per month and that the amount will never change and include that letter in the household file.
  • You accept 12 months of receipts to estimate other medical expenses for the upcoming year.

Year 4 (three-year cycle begins again):

  • You accept a printout from myssa.gov or an SSA award/benefit letter that’s not more than 120 days old at the time of receipt to verify the Social Security survivor’s benefits income and Medicare Part B premium.
  • You accept a letter from the pension plan manager stating that the resident receives $200 per month. The letter states that the amount will never change.
  • You accept 12 months of receipts to estimate other medical expenses for the upcoming year.  

 

 

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