[Federal Register Volume 60, Number 217 (Thursday, November 9, 1995)]
[Rules and Regulations]
[Pages 56511-56513]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27621]



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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 404

RIN 0960-AE04


Computing Benefit Amounts, Reducing Benefit Amounts, and Filing 
Annual Reports of Earnings

AGENCY: Social Security Administration.

ACTION: Final rules.

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SUMMARY: We are amending our regulations to reflect provisions of 
sections 307, 308, and 314 of the Social Security Independence and 
Program Improvements Act of 1994. Section 307 provides that we not 
modify the computation of the basic social security benefit amount 
under the windfall elimination provision of the Social Security Act 
(the Act) for individuals who are entitled to U.S. social security 
benefits only as result of a totalization agreement between the United 
States and another country. In addition, section 307 provides that we 
not modify the computation for an individual who receives a benefit 
from another country if the benefit is payable only as a result of a 
totalization agreement between the United States and that country and 
benefits paid by us do not depend on a totalization agreement. Section 
308 removes the modified computation requirement, as well as the 
requirement to reduce the social security benefits of an insured 
individual's spouse who is also receiving a benefit based on his or her 
noncovered government employment, i.e., the government pension offset 
provision, for certain individuals who are eligible to receive or are 
receiving a benefit based on inactive military reserve duty after 1956 
and before 1988. Section 314 increases the extended period for a 
working social security beneficiary to submit a report of earnings.

EFFECTIVE DATE: These regulations are effective November 9, 1995. Since 
these rules relieve restrictions previously applicable, the 30-day 
delay in effectuating rules, as provided by 5 U.S.C. 553(d), does not 
apply.

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: Sections 307, 308, and 314 of the Social 
Security Independence and Program Improvements Act of 1994 (Pub. L. 
103-296) amended sections 202, 203, and 215 of the Act. In these final 
regulations, we are amending sections 404.213, 404.408a, and 404.452 of 
20 CFR to reflect those amendments to the Act.

Section 307--Totalization Agreements and the Windfall Elimination 
Provision

    A totalization agreement between the U.S. and another country 
permits each country to establish entitlement to social security 
benefits by combining an individual's coverage under the social 
security systems of both countries, as provided in section 233(a) of 
the Act. Based on section 215(a)(7)(A) of the Act, the windfall 
elimination provision, as in effect for social security benefits 
payable before January 1995, we modified our computation of your basic 
benefit amount if: (1) You were entitled to a social security benefit 
which was based solely on your employment covered by our social 
security system without regard to work covered by a totalization 
agreement, as described in Secs. 404.1900ff, and you were also entitled 
to a pension from a foreign country even though it is one with which 
the U.S. has a totalization agreement; and (2) if your basic social 
security benefit was based on a combination of U.S. covered employment 
and foreign employment covered by a totalization agreement and you were 
also entitled to a benefit based on employment otherwise not covered 
under the Act, including a benefit from a nontotalization country.
    The social security benefit formula is weighted to replace a higher 
proportion of wages for individuals who worked many years for low wages 
in covered employment than for workers with high wages. The modified 
computation under the windfall elimination provision as required by 
section 215(a)(7)(A) of the Act is intended to eliminate the windfall 
that would otherwise occur if this weighting were to apply to workers 
who spent many years in noncovered employment and worked only a few 
years in covered employment. Under this provision, we use a modified 
formula, which yields a smaller benefit, to compute social security 
benefits for workers who first become eligible after 1985 for both 
social security benefits and a pension based on employment not covered 
by social security.
    The computation of a totalization benefit (see Sec. 404.1918) 
includes a prorating feature to account for the fact that an individual 
did not work for an 

[[Page 56512]]
entire career under the social security system (U.S. or foreign 
country) that is paying the benefits. Because of this prorating, the 
weighting advantage intended for workers with low wages has been 
largely removed from the computation. Consequently, section 307 of 
Public Law 103-296 amended section 215(a)(7)(A) of the Act to provide 
that the windfall elimination provision does not apply when we compute 
a social security totalization benefit. Similarly, section 307 also 
provides that we will not apply the windfall elimination provision for 
an individual who is entitled to both a U.S. social security benefit 
that is not based on totalized credits and to a benefit from a foreign 
country which is based on a totalization agreement with the United 
States. As an exception to the latter rule, we will apply the windfall 
elimination provision if, in addition to the foreign pension, an 
individual is also entitled to a benefit from another source that is 
based on employment not covered by U.S. social security, for example, a 
civil service retirement annuity.
    Accordingly, we are amending Sec. 404.213(e) to provide in a new 
paragraph (7) that we will not apply the modified computation if you 
are entitled to both U.S. social security benefits based solely on your 
covered work or self-employment and to benefits from a foreign country 
under a totalization agreement with the United States. However, this 
exception will not apply if, in addition, you are also eligible for 
benefits based on noncovered work, e.g., benefits from a foreign 
country not based on a totalization agreement with the United States, 
or noncovered work for a U.S. employer. Additionally, we are providing 
in a new paragraph (8) that we will not apply the windfall elimination 
provision if you are entitled to a social security totalization benefit 
paid by us, whether or not you are entitled to any other benefits. 
These provisions in paragraphs (7) and (8) are effective for U.S. 
social security benefits payable after December 1994.
    For clarity, we are amending the last sentence of 
Sec. 404.213(a)(3). Also, we are amending paragraph (f) of Sec. 404.213 
to limit the application of that paragraph to entitlement before 
January 1995.

Section 308--Military Reservists

    As required by the government pension offset provisions of sections 
202(b)(4), (c)(2), (e)(7), (f)(2), and (g)(4) of the Act, we will 
usually reduce your social security benefits as the spouse of a retired 
or deceased insured worker if you are also receiving a monthly benefit 
based on your noncovered government employment. These provisions are 
explained in Sec. 404.408a. Additionally, as required by section 
215(a)(7)(A) of the Act and Sec. 404.213(a) of these regulations, we 
will modify our computation of your basic benefit amount under the 
windfall elimination provision if you are also eligible after 1985 for 
a monthly pension based on your noncovered employment. ``Noncovered 
employment'' includes U.S. military service on inactive duty training 
after 1956 and before 1988, as explained in Sec. 404.1019. A pension 
based on such military service has been the only kind of pension based 
on military service which caused a reduced benefit under the government 
pension offset provision or a modified computation under the windfall 
elimination provision.
    Section 308 of Public Law 103-296 exempts entitlement to a payment 
based wholly on service as a member of a uniformed service as a basis 
for our modifying your basic benefit amount under the windfall 
elimination provision or reducing your social security benefits as a 
spouse under the government pension offset provision. Thus, inactive 
duty military service, which was not covered before 1988 and was used 
to determine your noncovered pension payment based wholly on service as 
a member of a uniformed service, is no longer a basis for our modifying 
your basic benefit amount or reducing your social security benefits as 
a spouse. We are, therefore, amending Secs. 404.213 and 404.408a to 
reflect these amendments to the Act.

Section 314--Annual Earnings Report

    Section 203(h)(1)(A) of the Act requires certain individuals who 
are entitled to social security benefits to submit to us a report of 
their earnings. The report must be submitted to us on or before a 
specified date, usually April 15 of the year following the year of 
earnings, which conforms to the due date for filing Federal income tax 
returns. Before the effective date of section 314 of Public Law 103-
296, section 203(h)(1)(A) of the Act further provided that the date for 
submitting the report may be extended for no more than three months. We 
are amending Sec. 404.452(f)(1) to change the maximum extended filing 
period from 3 months to 4 for tax years ending after December 31, 1994, 
as provided in section 314 of Public Law 103-296.

Regulatory Procedures

Justification for Final Rules Without Proposed Rules

    The Social Security Administration follows the notice of proposed 
rulemaking and public comment procedures specified in the 
Administrative Procedure Act (APA), 5 U.S.C. 553, in the development of 
its regulations. The APA provides exceptions to its notice and public 
comment procedures when an agency finds there is good cause for 
dispensing with such procedures on the basis that they are 
impracticable, unnecessary, or contrary to the public interest. We have 
determined that, under 5 U.S.C. 553(b)(B), good cause exists for waiver 
of notice of proposed rulemaking and prior public comment procedures 
because such procedures are unnecessary in this case, as explained 
below.
    Sections 307, 308, and 314 of Public Law 103-296 are explicit in 
their amendments to the Act and allow for no discretionary policy which 
would require publication of proposed rules with an opportunity for 
public comments. Since we are merely amending our current regulations 
to reflect legislatively mandated provisions, we believe it is not 
necessary to publish proposed rules.

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 Public Law 96-354, the Regulatory Flexibility 
Act, is not required.

Paperwork Reduction Act

    These final rules impose no additional reporting or recordkeeping 
requirements subject to OMB clearance.

(Catalog of Federal Domestic Assistance Program Nos. 96.001 Social 
Security--Disability Insurance; 96.002 Social Security--Retirement 
Insurance; 96.004 Social Security--Survivors Insurance)

List of Subjects in 20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-Age, Survivors, and Disability 

[[Page 56513]]
Insurance, Reporting and recordkeeping requirements, Social Security.

    Dated: October 30, 1995.
Shirley S. Chater,
Commissioner of Social Security.

    For the reasons set out in the preamble, we are amending subparts C 
and E 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 revising the last sentence of 
paragraph (a)(3); by adding paragraphs (e) (7), (8), and (9); and by 
revising paragraph (f) introductory text to read as follows:


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

    (a) * * *
    (3) * * * However, for benefits payable for months prior to January 
1995, we will not modify the computation of a totalization benefit (see 
Secs. 404.1908 and 404.1918) as a result of your entitlement to another 
pension based on employment covered by a totalization agreement. 
Beginning January 1995, we will not modify the computation of a 
totalization benefit in any case (see Sec. 404.213(e)(8)).
* * * * *
    (e) Exceptions.
* * * * * * *
    (7) For benefits payable for months after December 1994, payments 
by the social security system of a foreign country which are based on a 
totalization agreement between the United States and that country are 
not considered to be a pension from noncovered employment for purposes 
of this section. See subpart T of this part for a discussion of 
totalization agreements.
    (8) For benefits payable for months after December 1994, the 
computations in paragraph (c) do not apply in the case of an individual 
whose entitlement to U.S. social security benefits results from a 
totalization agreement between the United States and a foreign country.
    (9) For benefits payable for months after December 1994, you are 
eligible after 1985 for monthly periodic benefits based wholly on 
service as a member of a uniformed service, including inactive duty 
training.
    (f) Entitlement to a totalization benefit and a pension based on 
noncovered employment. If, before January 1995, you are entitled to a 
totalization benefit and to a pension based on noncovered employment 
that is not covered by a totalization agreement, we count your coverage 
from a foreign country with which the United States (U.S.) has a 
totalization agreement and your U.S. coverage to determine if you meet 
the requirements for the modified computation in paragraph (d) of this 
section or the exception in paragraph (e)(5) of this section.

* * * * *

    3. The authority citation for subpart E 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 404.408a is amended by adding paragraph (b)(5) to read 
as follows:

Sec. 404.408a  Reduction where spouse is receiving a Government 
pension.

* * * * *

    (b) Exceptions.

* * * * *

    (5) If, with respect to monthly benefits payable for months after 
December 1994, you are receiving a Government pension based wholly upon 
service as a member of a uniformed service, regardless of whether on 
active or inactive duty and whether covered by social security. 
However, if the earnings on the last day of employment as a military 
reservist were not covered, January 1995 is the earliest month for 
which the reduction will not affect your benefits.

* * * * *

Sec. 404.452  [Amended]

    5. Section 404.452 is amended in paragraph (f)(1) by revising ``3'' 
to read ``4''.


[FR Doc. 95-27621 Filed 11-8-95; 8:45 am]

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