[Federal Register Volume 60, Number 66 (Thursday, April 6, 1995)]
[Rules and Regulations]
[Pages 17443-17445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8399]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Part 404

RIN 0960-AD72


Computing Benefit Amounts, Disposing of Underpayments, Resolving 
Overpayments, and Payment Restriction

AGENCY: Social Security Administration, HHS.

ACTION: Final rules.

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SUMMARY: We are revising our rules on computation of benefits to define 
the term ``first becomes eligible'' as it relates to a pension based on 
noncovered employment. We are also revising the computation rules to 
provide that we will consider all government service used by a pension-
paying agency when we determine whether an individual first became 
eligible before 1986 for a pension based on noncovered employment. 
Further, we are also revising our rule on determining fault regarding 
overpayments to state that benefit deductions because of net earnings 
from self-employment are not applicable after an individual attains age 
70. Additionally, we are revising our rules on underpayments to clarify 
a misleading cross-reference. Finally, we are updating the list of 
countries to which benefit payments are withheld because of Treasury 
Department restrictions.

DATES: These regulations are effective April 6, 1995.

FOR FURTHER INFORMATION CONTACT:
Jack Schanberger, Legal Assistant, 3-B-1 Operations Building, 6401 
Security Boulevard, Baltimore, MD 21235, (410) 965-8471 for information 
about these rules. For information on eligibility or claiming benefits, 
call our national toll-free number 1-800-772-1213.

SUPPLEMENTARY INFORMATION: Section 215(a)(7) of the Social Security Act 
(the Act) requires us to use a modified formula for computing the 
primary insurance amount (the basic benefit amount) of an individual's 
old-age or disability insurance benefit if the individual first becomes 
eligible after 1985 for such a benefit and for a monthly periodic 
payment based on noncovered employment. The modified formula applies to 
individuals who are concurrently entitled to such a monthly periodic 
payment and to old-age or disability benefits under title II of the 
Act. It results in a lower primary insurance amount than would have 
been computed if the monthly periodic payment had not been considered. 
However, neither the Act nor our regulations at 20 CFR 404.213 define 
the phrase ``first becomes eligible.''
    In defining ``first becomes eligible,'' we have identified two 
interpretations which pertain to the date creditable service is 
acquired. One interpretation is that an individual first becomes 
eligible when he or she has currently acquired enough service to 
qualify for a pension. The other interpretation is that an individual 
first becomes eligible when he or she has acquired enough service to 
qualify for a pension, regardless of when the service was acquired.
    We recently became aware that some individuals have purchased 
credit for prior service, e.g., military service, which could affect 
their eligibility date and allow them to become eligible before 1986 
for a monthly pension based on noncovered employment. Such an 
individual would thus be excluded from the modified computation because 
he or she first became eligible for the monthly pension before 1986. 
There is no restriction in the Act which precludes using purchased 
credit to establish eligibility before 1986 for a monthly pension based 
on noncovered [[Page 17444]] employment and we see no reason not to 
consider purchased credits when deciding whether the modified 
computation applies.
    We have adopted the interpretation that we will consider all 
applicable service used by the pension-paying agency, regardless of 
when the service was acquired. Under this interpretation, an individual 
``first become eligible'' for a monthly periodic payment for the first 
month (including a past month) that the individual meets all the 
requirements for the payment except stopping work or applying for the 
payment. We are, therefore, amending Sec. 404.213(a) to include the 
definition of ``first becomes eligible'' and our policy on applicable 
service.
    Regarding underpayments, the current Sec. 404.503(b), which 
reflects section 204(d) of the Act, provides that if an individual dies 
before receiving a title II benefit payment, the underpayment so 
created is payable to a person or persons in an order of priority as 
specified in that section. Paragraph (3) of Sec. 404.503(b) provides 
that if there is no one higher in the order of priority, the 
underpayment may be paid to the ``parent or parents of the deceased 
individual (as defined in Sec. 404.374) entitled to a monthly benefit 
on the basis of the same earnings record as was the deceased 
individual'' in the month of death. Under paragraph (6) of 
Sec. 404.503(b), if there is no one higher in the order of priority, 
the underpayment may be paid to the ``parent or parents of the deceased 
individual (as defined in Sec. 404.374) who do not qualify under 
paragraph (b)(3).''
    Section 404.374 defines ``parent'' as the natural, adoptive, or 
stepparent of an insured person and is based on the statutory 
requirements for eligibility for benefits as the parent of an insured 
worker. However, these stringent criteria are not required for purposes 
of receiving an underpayment. Section 204(d) (3) and (6) of the Act 
require only that the individual be the parent of the deceased 
underpaid beneficiary. The cross reference to Sec. 404.374 in 
Sec. 404.503(b) (3) and (6) results in an unduly restrictive definition 
of a parent who is eligible for an underpayment. We are, therefore, 
revising Sec. 404.503(b) (3) and (6) so that for purposes of 
eligibility for an underpayment, the definition of ``parent'' in 
Sec. 404.374 is extended to a parent of any deceased individual who was 
entitled to social security benefits.
    Regarding overpayments, we are amending Sec. 404.510, which lists 
the situations where an individual may be considered to be ``without 
fault'' for accepting an incorrect benefit payment. Paragraph (l) of 
that section explains that the overpaid individual may be ``without 
fault'' in causing the overpayment if he or she reasonably believed 
that net earnings from self-employment after attaining age 72 in a 
taxable year would not be cause for deductions from benefits for months 
in the year of attaining age 72 that are before the month of 
attainment. For months after 1982, the age at which social security 
beneficiaries are no longer subject to an earnings test has been 
reduced from age 72 to age 70. This reduction from age 72 to 70 is 
based on section 302 of Pub. L. 95-216 (the Social Security Amendments 
of 1977) which became effective for months after December 1982, as 
provided in section 2204 of Pub. L. 97-35 (the Omnibus Budget 
Reconciliation Act of 1981). We are, therefore, revising 
Sec. 404.510(l) to change age 72 to age 70 for months after December 
1982.
    Our final amendment in these regulations is to delete Albania and 
the German Democratic Republic from the list in Sec. 404.460 of 
countries to which the Department of the Treasury will not send benefit 
checks. On November 7, 1991, the Department of the Treasury removed the 
German Democratic Republic from the Withheld Check List set out in 31 
CFR 211.1 by publishing final rules in the Federal Register at 56 FR 
56931. On September 30, 1992, the Department removed Albania from the 
list by publishing final rules in the Federal Register at 57 FR 44998.
    On July 20, 1994, we published proposed rules in the Federal 
Register at 59 FR 37000 with a 60-day comment period. We received no 
comments on those proposed rules. We are, therefore, publishing the 
proposed rules essentially unchanged as final rules.

Regulatory Procedures

Executive Order No. 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these rules do not meet the criteria for a 
significant regulatory action under E.O. 12866. Thus, they were not 
subject to OMB review.

Regulatory Flexibility Act

    We certify that these final rules will not have a significant 
economic impact on a substantial number of small entities since these 
rules affect only individuals. Therefore, a regulatory flexibility 
analysis as provided in Pub. L. 96-354, the Regulatory Flexibility Act, 
is not required.

Paperwork Reduction Act

    These final rules impose no additional reporting or recordkeeping 
requirements subject to Office of Management and Budget clearance.

(Catalog of Federal Domestic Assistance Program Nos. 93.802 Social 
Security--Disability Insurance; 93.803 Social Security--Retirement 
Insurance; 93.805 Social Security--Survivors Insurance).

List of Subjects in 20 CFR Part 404

    Administrative practice and procedure; Blind; Disability benefits, 
Old-Age, Survivors, and Disability Insurance; Reporting and 
recordkeeping requirements; Social Security.

    Dated: February 1, 1995.
Shirley S. Chater,
Commissioner of Social Security.
    Approved: March 30, 1995.
Donna E. Shalala,
Secretary of Health and Human Services.

    For the reasons set out in the preamble, we are amending subparts 
C, E, and F of part 404 of 20 CFR chapter III as follows:

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE 
(1950-    )

    1. The authority citation for subpart C of part 404 continues to 
read as follows:

    Authority: Secs. 202(a), 205(a), 215, and 1102 of the Social 
Security Act; 42 U.S.C. 402(a), 405(a), 415, and 1302.

    2. Section 404.213 is amended by adding two sentences after the 
first sentence of paragraph (a)(3) to read as follows:


Sec. 404.213  Computation where you are eligible for a pension based on 
your noncovered employment.

    (a) * * *
    (3) * * *
    We consider you to first become eligible for a monthly pension in 
the first month for which you met all requirements for the pension 
except that you were working or had not yet applied. In determining 
whether you are eligible for a pension before 1986, we consider all 
applicable service used by the pension-paying agency. * * *
* * * * *
    3. The authority citation for subpart E of part 404 continues to 
read as follows:

    Authority: Secs. 202, 203, 204 (a) and (e), 205 (a) and (c), 
222(b), 223(e), 224, 227, and 1102 of the Social Security Act; 42 
U.S.C. 402, 403, 404 (a) and (e), 405 (a) and (c), 422(b), 423(e), 
424, 427, and 1302.

    4. Section 404.460 is amended by revising the list of countries in 
paragraph (c)(3) to read as follows:


Sec. 404.460  Nonpayment of monthly benefits of aliens outside the 
United States.

* * * * * [[Page 17445]] 
    (c) * * *
    (3) * * *

Cuba
Democratic Kampuchea (formerly Cambodia)
North Korea
Vietnam
* * * * *
    5. The authority citation for subpart F of part 404 continues to 
read as follows:

    Authority: Secs. 204(a)-(d), 205(a), and 1102 of the Social 
Security Act; 31 U.S.C. 3720A; 42 U.S.C. 404(a)-(d), 405(a), and 
1302.

    6. Section 404.503 is amended by revising paragraphs (b)(3) and 
(b)(6) to read as follows:


Sec. 404.503  Underpayments.

* * * * *
    (b) * * *
    (3) The parent or parents of the deceased individual, entitled to a 
monthly benefit on the basis of the same earnings record as was the 
deceased individual for the month in which such individual died (if 
more than one such parent, in equal shares to each such parent). For 
this purpose, the definition of ``parent'' in Sec. 404.374 includes the 
parent(s) of any deceased individual who was entitled to benefits under 
title II of the Act.
* * * * *
    (6) The parent or parents of the deceased individual, who do not 
qualify under paragraph (b)(3) of this section (if more than one such 
parent, in equal shares to each such parent). For this purpose, the 
definition of ``parent'' in Sec. 404.374 includes the parent(s) of any 
deceased individual who was entitled to benefits under title II of the 
Act.
* * * * *
    7. Section 404.510 is amended by revising paragraph (l) to read as 
follows:


Sec. 404.510  When an individual is ``without fault'' in a deduction 
overpayment.

* * * * *
    (l) Reasonable belief, with respect to earnings activity for months 
after December 1982, that net earnings from self-employment after 
attainment of age 70 (age 72 for months after December 1972 and before 
January 1983) in the taxable year in which such age was attained would 
not cause deductions (see Sec. 404.430(a)) with respect to benefits 
payable for months in that taxable year prior to the attainment of such 
age.
* * * * *
[FR Doc. 95-8399 Filed 4-5-95; 8:45 am]
BILLING CODE 4190-29-M