[Federal Register Volume 60, Number 227 (Monday, November 27, 1995)]
[Rules and Regulations]
[Pages 58225-58228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28308]



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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 498

RIN 0960-AE33


Social Security Programs: Fraud and Abuse; Establishment of New 
Part 498 to Address Civil Monetary Penalties, Assessments and 
Exclusions

AGENCY: Office of the Inspector General (OTG), SSA.

ACTION: Final rule.

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SUMMARY: This final rule establishes a new part 498, which will serve 
as a repository for the Social Security Administration's existing civil 
monetary penalty authorities and which will reflect and implement new 
civil monetary penalty authorities provided under the Social Security 
Independence and Program Improvements Act of 1994. In the first phase 
of this process, the Social Security Administration in this final rule 
will relocate its existing regulations for misuse of Social Security 
program words, letters, symbols, and emblems to part 498. In addition, 
the existing regulations will be updated in this final rule to reflect 
nondiscretionary changes made by the Social Security Independence and 
Program Improvements Act of 1994.

EFFECTIVE DATE: November 27, 1995.

FOR FURTHER INFORMATION CONTACT: Judith A. Kidwell, Office of the 
Inspector General, (410) 965-9750 or Glenn Sklar, Office of the General 
Counsel, (410) 965-6247.

SUPPLEMENTARY INFORMATION:

Background

    Section 101 of Public Law (Pub. L.) 103-296, the Social Security 
Independence and Program Improvements Act of 1994 (SSIPIA), established 
the Social Security Administration (SSA) as an independent agency in 
the Executive Branch effective March 31, 1995. Previously, SSA had been 
a component of the Department of Health and Human Services (HHS).
    In creating an independent SSA, the SSIPIA also established an 
independent Office of the Inspector General (OIG) within SSA, and 
authorized the Commissioner of Social Security (Commissioner) to 
delegate authority to impose certain civil monetary penalties (CMPs). 
In order to properly reflect its delegated authority with respect to 
CMPs, the OIG is establishing 20 CFR part 498. This part will: (1) 
Incorporate existing CMP authorities for misuse of Social Security 
program words, letters, symbols, and emblems which had previously been 
located in 42 CFR part 1003; (2) establish a new location for newly 
designated and future CMP provisions; (3) set forth the basis for any 
OIG penalty authorities and the factors to be considered in determining 
penalty amounts; and (4) detail the hearing process to be utilized in 
the imposition of these CMP provisions.

New Authorities for SSA Inspector General

Section 1129 of the Social Security Act

    Section 206(b) of the SSIPIA provided expanded authority for SSA to 
impose CMPs and assessments against persons who make false statements 
or representations for use in determining any initial or continuing 
right to or amount of benefit payments under title II or title XVI of 
the Social Security Act (the Act), if such person knew or should have 
known that the statement was false, misleading or omitted a material 
fact. Section 206(b) of the SSIPIA added section 1129 to the Act, 
effective October 1, 1994, and section 108 of the SSIPIA made 
additional conforming amendments effective March 31, 1995. This section 
1129 authority to impose CMPs, including the authority to issue 
implementing rules, was delegated to 

[[Page 58226]]
the Inspector General (IG) of Social Security by the Commissioner on 
June 28, 1995. Because the regulations implementing section 1129 will 
involve discretionary issues they will be developed in a separate 
notice of proposed rulemaking. We have reserved certain sections in 
this final rule to accommodate the regulations reflecting and 
implementing section 1129 and will finalize them after we have received 
and considered public comments.

Section 1140 of the Social Security Act

    The SSIPIA also includes several changes to section 1140 of the Act 
that require us to alter the scope and content of the existing misuse 
of program words, letters, symbols, and emblems penalty regulations 
currently located at 42 CFR 1003. Specifically, section 312 of the 
SSIPIA amended section 1140 of the Act by adding several provisions 
which broaden existing deterrents against misleading mailings and 
advertisements directly involving the SSA. Section 312 of the SSIPIA: 
(1) Broadened the list of prohibited words, symbols and acronyms 
subject to a violation; (2) revised the standard of conduct for 
determining a violation; (3) exempted any State agency (or any 
instrumentality or political subdivision of the State) from the 
prohibited use of these program words, letters, symbols, or emblems 
where such use serves to identify these entities; (4) specifically 
defined a violation in regard to mailings; (5) eliminated the annual 
penalty cap of $100,000; (6) eliminated the use of a disclaimer as a 
defense to a violation under this provision; and (7) repealed the 
provision that required a formal declination to be obtained from the 
Department of Justice before pursuing a CMP case under section 1140 of 
the Act.
    Section 312 of the SSIPIA also includes a prohibition against 
reproducing, reprinting, or distributing forms, applications, or other 
publications of the SSA for a fee, unless the person has obtained 
written authorization in accordance with regulations prescribed by the 
Commissioner. These regulations will involve discretionary issues and 
will be published in a separate notice of proposed rulemaking.

Hearing Process

    The Act mandates that all individuals subject to the imposition of 
a CMP be provided with the opportunity for a hearing. We are reserving 
20 CFR 498.200 et seq. to address the CMP hearing process which will be 
developed at a future date.

The Handling of Dual Violations

    The SSA/OIG and the HHS/OIG may make separate and independent 
determinations in regard to violations of section 1140 of the Act and 
impose separate CMPs against individuals, entities or organizations who 
make prohibited use of both the SSA and HHS program words, letters, 
symbols, or emblems in the same advertisement or solicitation.

Regulatory Procedures

Waiver of Proposed Rulemaking

    When developing our regulations, we follow the notice of proposed 
rulemaking and public comment procedures specified in the 
Administrative Procedure Act (APA), 5 U.S.C. 553. The APA provides an 
exception to its notice and 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)(3)(B), good 
cause exists for dispensing with the notice of proposed rulemaking and 
public comment procedures in this case. Good cause exists because this 
rulemaking reflects the statutory amendments to section 1140 of the 
Act, with no issues of policy discretion. Therefore, opportunity for 
prior comment is unnecessary and we are issuing these changes to our 
regulations as a final rule.

Waiver of 30-Day Delay in Effective Date

    We find good cause for dispensing with the 30-day delay in the 
effective date of a substantive rule, provided for by 5 U.S.C. 553(d). 
As explained above, the only substantive changes we are making merely 
reflect legislation and involve no discretionary policy. Thus, we find 
that it is in the public interest to make this rule effective upon 
publication.

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that this rule does not meet the criteria for a 
significant regulatory action under Executive Order 12866. Thus, it was 
not subject to OMB review.

Regulatory Flexibility Act

    We generally prepare a regulatory flexibility analysis consistent 
with Pub. L. 96-354, the Regulatory Flexibility Act, unless the IG 
certifies that a regulation will not have a significant economic impact 
on a substantial number of small business entities. While some 
sanctions and penalties provided for under the Act may have an impact 
on small entities, it is the nature of the violation and not the size 
of the entity that will result in an action by the OIG. In either case, 
we do not anticipate that a substantial number of small entities will 
be significantly affected by this revised rulemaking. Therefore, we 
have concluded, and the IG certifies, that a regulatory flexibility 
analysis is not required for this final rule.

Paperwork Reduction Act

    This rule imposes no new reporting or recordkeeping requirements 
necessitating clearance by OMB.

(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; 96.006, 
Supplemental Security Income Program)

List of Subjects in 20 CFR Part 498

    Administrative practice and procedure, Fraud, Penalties.

    Approved: October 10, 1995.
June Gibbs Brown,
Inspector General.

    20 CFR chapter III is amended by adding part 498 to read as 
follows:

PART 498--CIVIL MONETARY PENALTIES, ASSESSMENTS AND RECOMMENDED 
EXCLUSIONS

Sec.
498.100  Basis and purpose.
498.101  Definitions.
498.102  Basis for civil monetary penalties.
498.103  Amount of penalty.
498.104  [Reserved]
498.105  [Reserved]
498.106  Determinations regarding the amount or scope of penalties.
498.107  [Reserved]
498.108  Penalty not exclusive.
498.109  Notice of proposed determination.
498.110  Failure to request a hearing.
498.114-498.125  [Reserved]
498.126  Settlement.
498.127  Judicial review.
498.128  Collection of penalty.
498.129  [Reserved]
498.132  Limitations.
498.200  [Reserved]

    Authority: Secs. 702(a)(5) and 1140 of the Social Security Act 
(42 U.S.C. 902(a)(5) and 1320b-10).


Sec. 498.100  Basis and purpose.

    (a) Basis. This part implements section 1140 of the Social Security 
Act (42 U.S.C. 1320b-10).
    (b) Purpose. This part provides for the imposition of civil 
monetary penalties against persons who--
    (1) [Reserved]
    (2) Misuse certain Social Security program words, letters, symbols, 
and emblems. 

[[Page 58227]]



Sec. 498.101  Definitions.

    As used in this part:
    Agency means the Social Security Administration.
    Commissioner means the Commissioner of Social Security or his or 
her designees.
    Department means the U.S. Department of Health and Human Services.
    General Counsel means the General Counsel of the Social Security 
Administration or his or her designees.
    Inspector General means the Inspector General of the Social 
Security Administration or his or her designees.
    Penalty means the amount described in Sec. 498.103 and includes the 
plural of that term.
    Person means an individual, organization, agency, or other entity.
    Respondent means the person upon whom the Commissioner or the 
Inspector General has imposed, or intends to impose, a penalty.
    Secretary means the Secretary of the U.S. Department of Health and 
Human Services or his or her designees.
    SSA means the Social Security Administration.
    SSI means Supplemental Security Income.


Sec. 498.102  Basis for civil monetary penalties.

    (a) [Reserved]
    (b) The Office of the Inspector General may impose a penalty 
against any person whom it determines in accordance with this part has 
made use of certain Social Security program words, letters, symbols, or 
emblems in such a manner that they knew or should have known would 
convey, or in a manner which reasonably could be interpreted or 
construed as conveying, the false impression that an advertisement or 
other item was authorized, approved, or endorsed by the Social Security 
Administration, or that such person has some connection with, or 
authorization from, the Social Security Administration.
    (1) Civil monetary penalties may be imposed for misuse, as set 
forth in Sec. 498.102(b), of--
    (i) The words ``Social Security,'' ``Social Security Account,'' 
``Social Security Administration,'' ``Social Security System,'' 
``Supplemental Security Income Program,'' or any combination or 
variation of such words; or
    (ii) The letters ``SSA,'' or ``SSI,'' or any other combination or 
variation of such letters; or
    (iii) A symbol or emblem of the Social Security Administration 
(including the design of, or a reasonable facsimile of the design of, 
the Social Security card, the check used for payment of benefits under 
title II, or envelopes or other stationery used by the Social Security 
Administration), or any other combination or variation of such symbols 
or emblems.
    (2) Civil monetary penalties will not be imposed against any agency 
or instrumentality of a State, or political subdivision of a State, 
that makes use of any symbol or emblem, or any words or letters which 
identify that agency or instrumentality of the State or political 
subdivision.
    (c) The use of a disclaimer of affiliation with the United States 
Government, the Social Security Administration or its programs, or any 
other agency or instrumentality of the United States Government, will 
not be considered as a defense in determining a violation of section 
1140 of the Social Security Act.


Sec. 498.103  Amount of penalty.

    (a) [Reserved]
    (b) Under section Sec. 498.102(b), the Office of the Inspector 
General may impose a penalty of not more than $5,000 for each violation 
resulting from the misuse of Social Security Administration program 
words, letters, symbols, or emblems relating to printed media, and a 
penalty of not more than $25,000 in the case of such misuse related to 
a broadcast or telecast.
    (c) For purposes of paragraph (b) of this section, a violation is 
defined as--
    (1) In the case of a direct mailing solicitation or advertisement, 
each separate piece of mail which contains one or more program words, 
letters, symbols, or emblems related to a determination under 
Sec. 498.102(b); and
    (2) In the case of a broadcast or telecast, each airing of a single 
commercial or solicitation related to a determination under 
Sec. 498.102(b).


Sec. 498.104  [Reserved]


Sec. 498.105  [Reserved]


Sec. 498.106  Determinations regarding the amount or scope of 
penalties.

    (a) [Reserved]
    (b) In determining the amount of any penalty in accordance with 
Sec. 498.103(b), the Office of the Inspector General will take into 
account--
    (1) The nature and objective of the advertisement, solicitation, or 
other communication, and the circumstances under which they were 
presented;
    (2) The frequency and scope of the violation, and whether a 
specific segment of the population was targeted;
    (3) The prior history of the individual, organization, or entity in 
their willingness or refusal to comply with informal requests to 
correct violations;
    (4) The history of prior offenses of the individual, organization, 
or entity in their misuse of program words, letters, symbols, and 
emblems;
    (5) The financial condition of the individual or entity; and
    (6) Such other matters as justice may require.
    (c) In cases brought under section 1140 of the Social Security Act, 
the use of a disclaimer of affiliation with the United States 
Government, the Social Security Administration or its programs will not 
be considered as a mitigating factor in determining the amount of a 
penalty in accordance with Sec. 498.106.


Sec. 498.107  [Reserved]


Sec. 498.108  Penalties not exclusive.

    Penalties imposed under this part are in addition to any other 
penalties prescribed by law.


Sec. 498.109  Notice of proposed determination.

    (a) If the Office of the Inspector General seeks to impose a 
penalty, it will serve written notice of the intent to take such 
action. The notice will include:
    (1) Reference to the statutory basis for the penalty;
    (2) A description of the incident(s) with respect to which the 
penalty is proposed;
    (3) The amount of the proposed penalty;
    (4) Any circumstances described in Sec. 498.106 that were 
considered when determining the amount of the proposed penalty; and
    (5) Instructions for responding to the notice, including--
    (i) A specific statement of respondent's right to a hearing, and
    (ii) A statement that failure to request a hearing within 60 days 
permits the imposition of the proposed penalty without right of appeal.
    (b) Any person upon whom the Office of the Inspector General 
intends the imposition of a penalty may request a hearing on such 
proposed penalty.
    (c) If the respondent fails to exercise the respondent's right to a 
hearing, within the time permitted under this section, any penalty 
becomes final.


Sec. 498.110  Failure to request a hearing.

    If the respondent does not request a hearing within the time 
prescribed by Sec. 498.109, the Office of the Inspector General may 
seek the proposed penalty, or any less severe penalty. The Office of 
the Inspector General will notify the respondent by certified mail, 
return receipt requested, of any penalty that 

[[Page 58228]]
has been imposed and of the means by which the respondent may satisfy 
the amount owed.


Secs. 498.114-498.125  [Reserved]


Sec. 498.126  Settlement.

    The Inspector General has exclusive authority to settle any issues 
or case, without the consent of the administrative law judge or the 
Commissioner, at any time prior to a final determination. Thereafter, 
the Commissioner or his or her designee has such exclusive authority.


Sec. 498.127  Judicial review.

    Section 1140 of the Social Security Act authorizes judicial review 
of a penalty that has become final. Judicial review may be sought by a 
respondent only in regard to a penalty with respect to which the 
respondent requested a hearing under Sec. 498.200ff of this part, 
unless the failure or neglect to urge such objection is excused by the 
court because of extraordinary circumstances.


Sec. 498.128  Collection of penalty.

    (a) Once a determination has become final, collection of any 
penalty will be the responsibility of the Commissioner or his or her 
designee.
    (b) [Reserved]
    (c) In cases brought under section 1140 of the Social Security Act, 
a penalty imposed under this part may be compromised by the 
Commissioner or his or her designee and may be recovered in a civil 
action brought in the United States district court for the district 
where, as determined by the Commissioner, the:
    (1) Violation referred to in Sec. 498.102(b) occurred; or
    (2) Respondent resides; or
    (3) Respondent has its principal office; or
    (4) Respondent may be found.


Sec. 498.129  [Reserved]


Sec. 498.132  Limitations.

    The Office of the Inspector General may initiate a proceeding in 
accordance with Sec. 498.109 of this part to determine whether to 
impose a penalty within 6 years from the date on which the violation 
was committed.


Sec. 498.200    [Reserved]

[FR Doc. 95-28308 Filed 11-24-95; 8:45 am]
BILLING CODE 4190-29-P