[Federal Register Volume 62, Number 28 (Tuesday, February 11, 1997)]
[Rules and Regulations]
[Pages 6114-6121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3205]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 404

RIN 0960-AE31


Cycling Payment of Social Security Benefits

AGENCY: Social Security Administration (SSA).

ACTION: Final rules.

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SUMMARY: Historically, Social Security benefits generally have been 
paid on the 3rd of each month. As a result of our ongoing efforts to 
improve service to our customers, we are establishing additional days 
throughout the month on which Social Security benefits will be paid. 
Current beneficiaries are not affected.

EFFECTIVE DATE: These final rules are effective May 1, 1997.

FOR FURTHER INFORMATION CONTACT: Lois Berg, Legal Assistant, Division 
of Regulations and Rulings, Social Security Administration, 6401 
Security Boulevard, Baltimore, MD 21235, (410) 965-1713. For 
information on eligibility, claiming benefits, or coverage of earnings, 
call our national toll-free number, 1-800-772-1213.

SUPPLEMENTARY INFORMATION:

Background

    The second phase of the National Performance Review (NPR), the 
Federal Reinventing Government effort, was announced by the President 
and Vice President on December 19, 1994. It was designed to focus 
attention on what each agency does, examining its mission and looking 
at its programs and functions to see if there are ways to provide 
better service to the public and, at the same time, do business in a 
more cost-effective manner, i.e., ``make government work better and 
cost less.'' Each agency was asked to assemble a team to review its own 
programs and functions. SSA's team worked closely with a team of 
representatives from NPR and the Office of Management and Budget (OMB) 
to develop recommendations for the Vice President's consideration.
    On April 11, 1995, the White House formally approved SSA's 
reinvention proposals and officially announced them the next day. One 
of these proposals was to cycle the payment of benefits.
    Recipients of Old-Age, Survivors and Disability Insurance (OASDI) 
benefits and Supplemental Security Income (SSI) payments currently are 
paid in the first few days of each month. While these specific payment 
days have never been required by the Social Security Act (the Act), 
which in Secs. 205(i) and 1631(a)(1) commits the time for making 
benefit payments to the discretion of the Commissioner of Social 
Security, it has been our longstanding administrative practice to make 
payment on these days. Monthly benefits are paid to all OASDI 
beneficiaries on the same day (generally the 3rd day of each month for 
the preceding month) and to all SSI beneficiaries on the same day 
(generally the 1st day of each month for which the payment is due).
    Over the years, a trend has developed that has resulted in 
deterioration of services we provide face-to-face or over the telephone 
on and around our payment days. This phenomenon is described fully 
below and is of particular concern to us in light of the Agency's 
commitment to provide ``world class'' service to our beneficiaries and 
customers.
    Executive Order 12862, issued on September 11, 1993, mandates that 
the standard of quality for services provided to the public for all 
government agencies shall be ``customer service equal to the best in 
the business.'' This standard has been incorporated into SSA's goal of 
providing ``world class'' public service. For example, when you conduct 
business with us, we have set as goals that:
     When you make an appointment to talk with someone at one 
of our field offices, we will serve you within 10 minutes to the 
scheduled time.
     When you call our toll-free 800 number, you will get 
through to it within 5 minutes of your first try.
    SSA's current practice of paying 47 million beneficiaries within 
the first 3 days of each month results in a large surge of work during 
the first week of each month. This surge includes a large number of 
visitors to field offices and calls to our toll-free 800 number to 
report nonreceipt of a check, question the amount paid, or ask about 
other payment-related issues. Approximately

[[Page 6115]]

9 percent of all calls during check week concern nonreceipt, compared 
to 3 percent during the rest of the month. As an example of the surge 
that occurs around the current payment days, on April 3, 1995, 
1,091,282 calls were placed to SSA's 800 number. On April 14, 1995, the 
number of calls placed to our 800 number decreased to 229,022.
    It is important to beneficiaries and customers to be able to reach 
SSA with fewer busy signals, and we have pledged to enable callers to 
get through to the 800 number within 5 minutes of their original 
attempt. However, in fiscal year (FY) 1994, during peak periods, 
customers encountered busy signals on SSA's 800 number 40-63 percent of 
the time and had to wait more than 5 minutes to get through about 30 
percent of the time. This delay often occurs at a time when it may be 
the most critical for the individual to reach us, to report a lost 
check, for example. Anyone who experiences a delay in reaching us to 
report a lost check also faces a delay in receiving a replacement 
check. Since many beneficiaries rely solely on their Social Security 
benefits, this can be a real hardship for them.
    Our goal is for our customers to have minimal waits for service 
when visiting a Social Security field office. Today, SSA does not 
always meet this goal. In FY 1994 there were 24 million visitors to our 
field offices. While the average wait during check week for individuals 
with an appointment was 8 minutes, some individuals with appointments 
had to wait over 2 hours. Thirty-two percent of the visitors to our 
offices without appointments in FY 1994 (typically people who have 
questions related to their payments or who want to report payment 
delivery problems) had to wait more than 30 minutes after arriving to 
be served. The average wait during check week for individuals without 
appointments was 16 minutes, although some individuals without 
appointments had to wait over 3 hours. This can be a particular 
hardship to those who are elderly or disabled, as well as to people who 
might take off from work to come to our offices.
    The demographic and resource challenges we will face over the next 
25 years will make it even more difficult for us to meet our service-
delivery objectives. Currently, we pay 47 million OASDI and SSI 
beneficiaries within the first three days of each month. Due to the 
aging of the ``baby boomer'' generation, by the year 2020, we will be 
paying about 75 million beneficiaries, a 60 percent increase over 
today's beneficiary population. This will place an unprecedented demand 
on our benefit delivery system.
    We are concerned that, in the next 25 years, with the prospect of 
about 75 million beneficiaries all receiving their payments on single 
days, there will be a serious deterioration in our service to the 
public, and we will not be able to provide the kind of service to which 
we are committed. The growth in beneficiary population is expected to 
place an even greater strain on SSA's resources at the beginning of the 
month. At the same time that the number of SSA customers is growing, 
SSA's resources are being reduced. Public Law 103-226 mandates an 
overall 12 percent reduction of Federal staffing levels by 1999, and 
this will impact SSA's resources. As a result, we are particularly 
concerned that we will not be able to cope with the monthly workload 
peaks and still maintain our goal of being readily accessible to the 
public unless we make significant changes in the way in which we 
deliver service.
    In the future, the increased number of beneficiaries and customers 
plus the mandated reduction of Federal staffing levels will have a real 
impact on the public's ability to contact us. This will be especially 
hard on individuals during check week (currently the first week in each 
month that benefits are paid) when the system will be overloaded. Check 
week is the time that beneficiaries often have the most urgent need to 
reach us to report nonreceipt or other problems related to their 
payment, and to request a replacement check.
    Each attempted phone contact by an SSA beneficiary, whether over or 
under age 65, may represent a personal crisis due, for example, to 
nonreceipt of benefits. Social Security benefits affect, in particular, 
nearly all individuals age 65 and over in the United States (U.S.). For 
a significant proportion of individuals over age 65, the benefits 
represent 90 percent or more of their total income. For these 
beneficiaries, nonreceipt is not an abstract concept or statistic. It 
may represent the difference between paying rent or mortgage payments 
on time or late. It may mean the ability to purchase food. It may 
represent lack of gasoline or busfare to get to a medical appointment. 
A phone contact or visit may be by a recent widow(er) who is reporting 
the death of her/his spouse. One successful telephone call may be all 
that is necessary to enable SSA to convert retirement benefits as a 
spouse into higher widow(er)'s benefits. An unsuccessful phone contact 
could prevent us from holding back payments to the deceased individual 
and scheduling benefits to the newly widowed beneficiary. When 
individuals are unsuccessful at reaching us by telephone, either they, 
or a friend or family member, may take time off from work to come into 
a field office. Any additional delay waiting in the field office causes 
them to lose even more time from work.
    Today, we are attempting to cope with the uneven workload pattern 
in order to maintain our level of service through a series of 
administrative and management initiatives. For example, at the 
beginning of the month, we redeploy staff from other work to handle the 
increase in telephone inquiries which sometimes exceeds two million 
calls a day. While this practice has been generally successful so far, 
it will not continue to be as effective in the future when the number 
of beneficiaries increases substantially and our staffing decreases.
    We are considering all our options in preparing for this increase 
in SSA's workloads and staff reductions and, accordingly, are looking 
for ways to reengineer our various processes to allow us to achieve our 
world class customer service goals and, at the same time, increase 
efficiency and productivity to the maximum extent possible. It is 
clear, though, that SSA's goal to achieve a level of world class 
customer service cannot be realized unless our workloads are evened 
out. This is critical to providing better access to SSA's services for 
our beneficiaries and customers.
    The release of all OASDI and SSI payments on single days also has 
an adverse effect on certain sectors of the economy. Based on meetings 
we held with representatives of the banking and business community, the 
Department of the Treasury (DT), the Federal Reserve System (FRS) and 
the U.S. Postal Service (USPS), it is clear that the large, once-a-
month OASDI and SSI payment files are creating many problems. The 
banking and business community, the DT, FRS and the USPS all have to 
bear the expense of providing sufficient resources and processing 
capacity to deal with OASDI and SSI payments as they flow through the 
national payment system at the beginning of the month. This capacity is 
not needed throughout the remainder of the month.
    Equally significant is the growing operational risk that is 
associated with SSA's current payment pattern. Representatives from 
several large financial institutions made it clear that when the Social 
Security direct deposit payment file becomes available for processing 
from FRS, they stop all other business and devote their entire 
operation to ensuring the file is processed quickly and accurately.

[[Page 6116]]

Because of the inordinately large number of payments involved, these 
institutions must ensure that nothing goes wrong as the file passes 
through the national payment system and is deposited into individual 
customers' accounts. Any event that adversely affects the operational 
capacity of DT, FRS or a large financial institution in the 1 to 4 day 
window prior to the 3rd of the month may result in the delay or 
nonreceipt of literally millions of Social Security benefit payments 
which could create hardship for SSA beneficiaries. Leveling the Social 
Security payment files through cycling will help prevent this 
operational risk and resulting hardship.
    In order to improve our service to the public, both now and in the 
future, we will spread the payment of OASDI benefits throughout the 
month, rather than continue to make all benefit payments on single days 
at the beginning of the month. That is, we will establish several 
additional payment days for each month, and pay the full monthly 
benefit to some beneficiaries on the first of those payment days, to 
other beneficiaries on the second of those payment days, and so forth. 
The payment day, or cycle, on which a beneficiary is paid generally 
will not be changed, so that if you are paid on the second payment day 
in one month you will be paid on the second payment day in each 
succeeding month as well. This approach, which we call ``cycling of 
payments,'' will level the workload peaks associated with our current 
practice of paying all benefits on the same day. Since calls and visits 
associated with receipt of the monthly benefit payment will be 
distributed throughout the month, rather than concentrated in a few 
days, there will be shorter waiting times for assistance and we will be 
able to achieve or sustain our world class service to the public.
    It is important to note that payment cycling will not change the 
way benefits are computed. We will continue to follow the same rules in 
determining month of entitlement and the payment amount. People whose 
benefits are cycled will receive the same amount they would receive if 
they were paid on the 3rd of the month.
    The benefits to society of implementing payment cycling are 
potentially significant but extremely difficult to estimate. Cycling 
will benefit members of the public in that they will have better access 
to SSA services, including shorter waiting times in field offices and 
when calling the 800 number, as SSA's workloads increase in the future. 
Cycling will benefit the business and banking communities in that they 
will be better able to utilize their resources throughout the month, 
processing Social Security payments on a weekly basis. Cycling will 
also reduce the risk involved in processing large once-a-month files. 
If we continue to pay all beneficiaries on single days once-a-month, 
SSA's service to the public will deteriorate, and the adverse impact 
that the once-a-month payments have on the business and financial 
community will continue, as will the growing operational risk that goes 
along with processing all benefit payments at one time.
    After considering how best to implement the reinvention proposal to 
cycle the timing of benefit payments, we have decided the following:
    1. We will establish three additional payment days throughout the 
month (i.e., the second, third and fourth Wednesdays of the month) on 
which individuals may be paid. This schedule will alleviate to the 
maximum extent possible the current Monday workload peak which is also 
now being experienced by SSA's toll-free 800 number and field offices 
when the payment day falls on Friday, Saturday, Sunday or Monday, which 
occurs more than half of the time.
    2. We will implement payment cycling prospectively only for new 
OASDI beneficiaries whose claims are filed on or after May 1, 1997. 
Payments to current beneficiaries will not be cycled, as they are 
already in the established pattern of receiving their benefits on the 
third of the month.
    In the notice of proposed rulemaking (NPRM) we indicated that we 
proposed to implement payment cycling by January 1997. However, we are 
delaying implementation because we anticipate heavy workloads between 
December 1996 and March 1997 due to recently enacted legislation, and 
we believe it would be unwise to begin payment cycling during that 
time. The May 1, 1997 implementation date was also selected to allow 
SSA, DT and FRS, who share responsibility for delivery of SSA's 
payments, sufficient time to complete the essential modifications 
required before cycling can begin. Moreover, publishing the final 
regulation several months in advance of the implementation date allows 
the business and financial community lead time to prepare for cycling.
    3. We will assign one of the newly established payment days to each 
new OASDI beneficiary based on the date of birth of the person on whose 
record entitlement is established (the insured individual). Generally, 
new OASDI beneficiaries who receive auxiliary or survivors benefits on 
an insured individual's record will be assigned to the payment day 
based on the insured individual's date of birth. Insured individuals 
born on the 1st through the 10th of the month will be paid on the 
second Wednesday of each month. Insured individuals born on the 11th 
through the 20th of the month will be paid on the third Wednesday of 
each month. Insured individuals born after the 20th of the month will 
be paid on the fourth Wednesday of each month. With the few exceptions 
described below, no new OASDI beneficiaries will receive payments on 
the 3rd of the month.
    Individuals who are being paid benefits on one record on the 3rd of 
the month, and who become entitled on another record after April 30, 
1997 without a break in entitlement, will continue to receive all 
benefits on the 3rd of the month.
    After April 30, 1997, individuals who become entitled on one record 
and later entitled on another record, without a break in entitlement, 
will be paid all benefits to which they are entitled no later than 
their current payment day. They will not be assigned a later payment 
day as long as they remain continuously entitled. We believe this 
change from our proposed rule is desirable to ensure that those 
individuals who have become accustomed to receiving their payments on a 
certain day are not required to wait an additional 1 to 2 weeks for 
payment when the second entitlement begins. We have had to establish an 
interim process to implement this change until such time as systems 
enhancements can fully support a permanent process. Under the interim 
process, these individuals will be assigned a payment day based on the 
new entitlement situation or, if that is later than the current payment 
day, they will be paid on the 3rd of the month. Under the permanent 
process, individuals will be assigned whichever payment day is earlier: 
the current payment day or the payment day which would be assigned 
based on the new entitlement situation.
    4. We may accommodate some beneficiaries currently being paid on 
the 3rd of the month who voluntarily wish to change to the payment day 
that would be selected by the date of birth criteria described above, 
in order to accelerate the workload leveling effect of cycling. For 
example, we plan to allow them to volunteer to switch if only one 
person is being paid on the record or, if there are other beneficiaries 
being paid on the same record, all others agree, in writing, to the 
change. However, once a volunteer is assigned to a new payment day, 
that day will be

[[Page 6117]]

permanent and the person will not be allowed to change back to the 3rd 
of the month. We will not allow beneficiaries being paid on one of the 
three new days to switch to a different payment day.
    5. We will not include persons receiving SSI payments, and persons 
concurrently entitled to both OASDI and SSI benefits, in payment 
cycling. Since SSI is a needs-based program, we believe we should 
continue to pay these individuals as early in the month as possible. 
Concurrently entitled individuals who lose eligibility for SSI will 
continue to be paid on the 3rd.
    6. We will not apply payment cycling to OASDI beneficiaries whose 
income is deemed to SSI beneficiaries. The reason is that most deeming 
cases involve family members who receive Federal income maintenance 
benefits. Those family units should continue to receive payments as 
early in the month as possible. Likewise, payment cycling will not 
apply to OASDI beneficiaries who, due to their income and/or resources, 
are not entitled to SSI but the State in which they live covers their 
Medicare premium. The Health Care Financing Administration requested 
that these OASDI beneficiaries be paid early in the month.
    7. Payment cycling will not apply to beneficiaries living in a 
foreign country. For those beneficiaries who will be paid by check 
because SSA does not have direct deposit arrangements with the country 
in which they reside, foreign check delivery is often unreliable. 
However, with one delivery day on the 3rd of the month it is easier to 
target when checks should be received than if they were sent four times 
throughout the month. Also, since foreign beneficiaries do not have 
access to the 800 number or to SSA's field offices in the country where 
they reside, these facilities will not be adversely affected if we 
continue to pay foreign beneficiaries on the 3rd of the month. The 
presence of a foreign address for any beneficiary on a Social Security 
record will mean that all beneficiaries on that record will be paid on 
the 3rd of the month. The reason is that, for operational purposes, we 
are assigning a single payment day for all individuals who receive 
benefits on the earnings record of a particular individual. Once a 
beneficiary has reported a foreign address and all individuals 
receiving benefits on that account are changed to the 3rd of the month, 
the payment day for all of them will remain the 3rd of the month even 
if the person with the foreign address returns to the U.S. This is to 
prevent potential confusion caused by beneficiaries frequently leaving 
and entering the U.S.
    8. We will notify affected beneficiaries in writing of the 
particular monthly payment day that is assigned to them. However, the 
assignment of a payment day is not an initial determination and is not 
appealable. Beneficiaries have never been able to choose their payment 
day and will not be able to choose a payment day under payment cycling 
except under very specific and limited circumstances.

Early Consultations

    Prior to publishing the NPRM, we conducted 10 focus group meetings 
at 5 locations around the country to solicit comments and obtain 
reaction from the public to cycling payments throughout the month. Two 
meetings were held in each location: one with current beneficiaries age 
21 and over and one with future beneficiaries age 21 and over. After we 
described our future workload projections and resultant service 
delivery deterioration, the vast majority of future beneficiaries with 
whom we met said they would not mind being paid later in the month.
    We also conducted a series of separate meetings with stakeholders 
including representatives from the business community, financial 
community, other government agencies and advocacy groups. The 
overwhelming consensus of opinion among all stakeholders who 
participated was that SSA should implement some form of payment 
cycling.

Comments on NPRM

    On January 26, 1996, we published proposed regulations in the 
Federal Register at 61 FR 2654 and provided a 60-day period for 
interested individuals to comment. On February 15, 1996 we held an 
informational briefing for representatives of groups and organizations, 
and any others, who were interested in attending, to provide details 
and to answer questions on how SSA proposed to implement payment 
cycling.
    In response to the NPRM, we received comments from 17 commenters. 
Most of the comments came from financial institutions, financial trade 
associations, and State and local human services agencies, as well as 
DT. Several comments came from individuals who did not identify 
themselves as representing any particular organization or advocacy 
group.
    The comments on the proposed rules were overwhelmingly favorable. 
Fifteen commenters, including both organizations and individuals, fully 
supported payment cycling. Only two individuals expressed opinions 
against the proposed change. The majority of commenters also agreed 
with SSA's decision not to cycle current beneficiaries.
    Most of the financial institutions who commented indicated that 
payment cycling would help them to provide better customer service on 
or around payment days. One also mentioned payment cycling easing 
concerns they currently have for the safety of bank employees and 
customers on payment days due to the large amount of cash they have on 
hand on those days.
    One commenter who identified herself as a future beneficiary who 
would be covered by payment cycling said she supported it because she 
wants SSA to be able to provide the best possible service for current 
beneficiaries and for her when she is eligible to file for benefits. A 
human services agency that supported payment cycling said it is aware 
of the problems clients currently encounter getting through to SSA on 
or around payment days. The agency also mentioned cycling as being a 
crime deterrent, since it is well known that checks arrive on the 3rd.
    Only two commenters from the financial community responded to SSA's 
request for information from the business and financial community about 
the incremental cost or savings to them. One of these two commenters, 
who fully supported payment cycling, said ``* * * gradual enrollment of 
beneficiaries and anticipated increase in the number of beneficiaries 
make it difficult to determine the costs the banking industry will be 
able to avoid as a result of the adoption of this policy.'' This 
commenter said, ``In addition to eventual long-term cost savings, there 
are also payment system risk reduction effects flowing from this 
proposal.'' The other commenter who responded to this request from SSA, 
and who also fully supported payment cycling, said since it applies 
prospectively to new beneficiaries, it will not reduce their current 
expenses and that it is difficult to quantify future savings at this 
time.
    Some of those who supported payment cycling suggested changes in 
some of the specific details about cycling. One of the two individuals 
who were not in favor of payment cycling also submitted comments. 
Following are summaries of those suggested changes and comments and our 
responses to them:
    Comment: One commenter said that instead of SSA's toll free 800 
number being busy at the beginning of the month (and SSA having the 
rest of the month to get caught up with its other work), the toll free 
800 number will be consistently busy throughout the month.

[[Page 6118]]

This will make it more difficult for SSA to get caught up with its 
work.
    Response: In cycling benefit payments, SSA's objective is to 
improve public service by reducing the inordinate workload peak that 
now occurs when all payments are delivered at the beginning of the 
month. By leveling SSA's workload, the public will be able to get a 
consistent level of quality service at any time of the month.
    It is true that eventually payment cycling will have an effect upon 
SSA's workforce. Employees may receive more telephone inquiries and 
field office contacts in the last 2 weeks of the month than occur 
today. Again, this is the purpose of payment cycling. By leveling 
workloads, the public is better served because it consistently has 
better access to SSA services. At the same time, SSA is in a position 
to make better use of its available resources.
    Comment: The same commenter was concerned that there will be 
additional work and expense for SSA because someone who now receives 
two types of benefits (one on his/her own record and one on a spouse's 
record) will now receive two checks. Receiving one check later in the 
month will cause more people to call with inquiries about receipt of 
the second check. This will also cost SSA more (i.e., the costs 
associated with disbursing two checks).
    Response: SSA's intent is to pay each entitled beneficiary all 
monies due on one day regardless of whether they are dually entitled on 
their own work record and that of a spouse. For example, a woman who 
receives benefits on her husband's record, but is also entitled on her 
own work record, would receive benefits on the payment date assigned 
based on her birth date. On that date, she would receive a payment 
reflecting the combined amount of her own benefits and the excess due 
for the ``wife's benefit.''
    Comment: This same commenter was concerned that payment cycling is 
more favorable to someone whose birthday is earlier in the month. Some 
people will not receive their payment until 3 or 4 weeks after the 
month for which they are due, whereas someone whose payment is not 
cycled receives it only 3 days after the month for which it is due.
    Response: There are two issues mentioned. First, it is true that in 
using the method of cycling based on birth dates, individuals born 
early in the month receive their benefits earlier each month. But any 
formula designed to evenly distribute future beneficiaries' payments 
throughout the month (e.g., using the last 2 digits of a person's 
social security number) will produce the same result. The birth date 
formula was unanimously favored by members of the public who 
participated in SSA's focus groups in that it was the easiest for them 
to relate to and understand.
    Second, this raises an issue of perception. Beneficiaries who are 
paid on the second, third and fourth Wednesdays of the month for the 
previous month's entitlement may perceive that they are not receiving 
the same level of service as someone who is paid on the 3rd of the 
month. This was not an issue that concerned participants in SSA's focus 
groups. These individuals indicated that because they had not yet begun 
receiving Social Security benefits, it was not of concern whether their 
future benefits were paid on the 3rd of the month or on the second, 
third or fourth Wednesdays because once their payments start, they 
would be paid consistently at the same monthly interval. Further, these 
same focus group participants recognized that unless SSA did something 
to level workloads that now occur at the beginning of the month, their 
ability to file a claim, have a question answered or otherwise receive 
prompt service was being jeopardized as the Agency's workloads 
increased.
    Comment: The above commenter also believed it is unfair to pay SSI 
recipients and OASDI beneficiaries who qualify for Qualified Medicare 
Beneficiary (QMB) payments early in the month while paying all other 
OASDI beneficiaries later in the month, particularly since some of 
these OASDI beneficiaries miss qualifying for SSI by a small amount. In 
a similar vein, another commenter recommended that two additional 
groups of individuals be excluded from payment cycling: those living 
below 200% of the poverty level and those who would face ``undue 
hardship'' if they received their benefits after the 3rd of the month.
    Response: SSA can readily identify SSI recipients as those 
individuals of limited means. Accordingly, we will exempt anyone who 
receives SSI from having their payment cycled. However, we have no 
information relating to the economic circumstances of anyone receiving 
OASDI benefits to enable us to determine who is of limited means. Even 
if we did, we would have to establish a benchmark at some level. 
Whatever benchmark SSA established, there would be individuals who fall 
just below the mark and those who fall just above the mark. Therefore, 
we continue to believe that the use of the SSI means test is 
appropriate from both a policy and operational perspective.
    We do not believe that creating additional criteria for an ``undue 
hardship'' test is necessary. Indeed, people who otherwise would have 
been paid on the 3rd of the month will now be paid later in the month 
as a result of payment cycling. However, we believe the improved access 
to SSA's services for all beneficiaries and customers, as well as the 
benefits to the banking and business community which will enable them 
to provide better customer service, and the reduction of the risk 
involved in processing large once-a-month files outweigh the effects of 
being paid later in the month. Moreover, as mentioned by many of the 
focus group participants, individuals paid consistently on the second 
Wednesday of the month from the inception of their entitlement are 
receiving the same level of service as individuals paid on the 3rd of 
the month from the inception of their entitlement. In addition, already 
limited SSA staff and resources would have to be assigned to administer 
an ``undue hardship'' test.
    Comment: One commenter thought SSA should assign the payment day 
for cycled payments based on something other than the date of birth. 
The commenter believed using the date of birth means banks would need 
to know the customer's date of birth in order to process customer 
inquiries. The commenter also indicated the banking industry does not 
know a customer's date of birth and some customers will not give out 
that information or do not know it. A suggestion was to use the first 
initial of the customer's last name to assign the payment day. However, 
another commenter said that using birthdays to determine distribution 
``makes a great deal of sense in evening out the workload.'' And still 
another commenter suggested giving beneficiaries a sticker showing the 
payment day which they could place in a prominent place in their house 
so the date would be easily available.
    Response: SSA considered a number of options in developing a means 
of evenly distributing payments throughout the month. In addition to 
the alpha formula suggested in this comment, SSA considered using the 
last 2 digits of the individual's Social Security number. Any of these 
methods would result in a random distribution of payments. However, the 
fact that people's surnames often change makes using the alpha formula 
more complex.
    SSA selected the birth date formula based on the unanimous 
endorsement of this method by those members of the public who 
participated in the Agency's focus groups. All participants expressed 
their belief that the public would relate best to a formula based on a 
person's date of birth.

[[Page 6119]]

    To do all it can to minimize potential problems like those cited in 
this comment, SSA plans to provide all new beneficiaries with a written 
notice informing the individual of his or her assigned payment date. 
Included with the written notice will be a pamphlet explaining payment 
cycling and a calendar providing the individual with the scheduled 
payment dates.
    Comment: Several commenters urged SSA to consider requiring all 
benefits to be paid by direct deposit.
    Response: Since these comments were made, Public Law 104-134, the 
Omnibus Consolidated Rescissions and Appropriations Act of 1996, has 
been signed. This law requires, with limited exceptions, anyone who 
files for government benefits after July 25, 1996, to be paid by direct 
deposit. In addition, with certain limited exceptions, the legislation 
requires that by 1999, all government benefits be paid by direct 
deposit, even for those who began receiving payments before July 26, 
1996. However, without payment cycling, SSA and the financial community 
will still experience workload surges the first 10 days of the month in 
terms of direct deposits all occurring at the same time, calls to SSA 
and to the financial institutions concerning crediting of the direct 
deposit, the amount of the deposit, or many other issues related to the 
benefit, as well as bank customers wanting to make withdrawals as soon 
as the direct deposit is made.
    Comment: Several commenters thought SSA should schedule the 
delivery of cycled benefits on assigned payment dates rather than the 
planned Wednesday schedule. They believed this would be less confusing 
for customers than having to remember which Wednesday is their payment 
day. However, another commenter, a non-profit electronic banking trade 
association, said its members supported paying on Wednesdays. The 
commenter said many beneficiaries currently become confused about when 
they will receive their payments if the 3rd is on a holiday or weekend. 
The commenter believed Wednesday payments will clear up this confusion.
    Response: SSA gave the payment schedule under cycling a great deal 
of consideration. We decided on the Wednesday schedule for the 
following reasons:
     If the objective of payment cycling is to improve service 
by providing the public with better access to SSA through a leveling of 
workloads, then Wednesday payments offer the best opportunity to 
achieve this. Any fixed date schedule (e.g., the 10th, 17th and 24th of 
the month) will fall on a Friday, Saturday, Sunday or Monday 57 percent 
of the time. This is likely to exacerbate the workload peaks now 
experienced by SSA every Monday;
     A Wednesday schedule avoids the problem of having to 
adjust payment dates because the date coincides with a Saturday or 
Sunday; and
     A Wednesday schedule avoids the problem of having to 
adjust payment dates because the date coincides with a Federal holiday 
to the maximum extent possible.
    Again, SSA plans to provide payment schedules to both the financial 
community and the public to minimize questions or confusion regarding 
the date on which beneficiaries will be paid.
    Comment: One commenter said that SSA should clarify how these 
payments should be counted for means-tested programs, such as AFDC, 
food stamps and AFDC-related Medicaid.
    Response: We do not issue rules governing these other programs and 
have no authority to decide how our payments should be counted for 
those programs. It is not clear, however, that any changes are 
necessary. Certainly, SSA will provide any additional guidance to State 
and local governments that may be needed about our procedures. As it 
has done for the past 56 years, Social Security will continue to pay 
future OASDI beneficiaries in the month following the month of 
entitlement.
    Comment: Two commenters wanted an appeals process available for 
those beneficiaries for whom receiving their benefit payment later in 
the month creates a hardship.
    Response: The payment date has never been appealable and SSA does 
not plan to make it appealable or establish a new appeals process. This 
decision is based on a number of considerations. First, all individuals 
of limited means (i.e., those identified at or below the poverty level 
through their entitlement to SSI) will not be affected by payment 
cycling. Accordingly, they will receive both their SSI and Social 
Security benefits at the beginning of the month.
    It is true that people who otherwise would have been paid on the 
3rd of the month will now be paid later in the month as a result of 
payment cycling. However, we believe the improved access to SSA's 
services for all beneficiaries and customers, as well as the benefits 
to the banking and business community which will enable them to provide 
better customer service, and the reduction of the risk involved in 
processing large once-a-month files outweigh the effects of being paid 
later in the month. Moreover, SSA's decision reflects the advice given 
by members of the public who participated in the Agency's focus groups. 
These individuals expressed a strong belief that someone who has not 
yet begun to receive Social Security benefits is not disadvantaged if 
they receive their payment on any of the assigned Wednesdays from the 
outset of their entitlement.
    Establishing an appeals process would place an undue administrative 
burden on SSA and could defeat the purpose of payment cycling.
    Comment: One commenter indicated disapproval of payment cycling but 
gave no reasons. Therefore, we cannot respond.
    Comment: One commenter said that in some States, individuals can be 
eligible for State payment of their Medicare premium under the QMB and 
Specified Low Income Medicare Beneficiary programs but not eligible for 
Medicaid. Therefore, the commenter said the regulations should be 
clarified to make certain that all individuals whose Medicare premium 
is paid by the State are excluded from payment cycling.
    Response: We are adopting this comment and revising 
Sec. 404.1807(c)(4) to clarify that all OASDI beneficiaries whose 
Medicare premiums are paid by the State in which they live are excluded 
from payment cycling.
    Comment: One commenter urged SSA to include current beneficiaries 
in payment cycling by splitting current recipients into two groups that 
would be processed as two primary cycles and to add new beneficiaries 
to two secondary cycles on alternate weeks.
    Response: Prior to publishing the NPRM, SSA considered including 
current beneficiaries in payment cycling. We rejected this option 
because shifting the payment date of one half of current beneficiaries 
one week later would disrupt monthly payment arrangements for 22 
million current OASDI recipients. Further, without a one-time ``bridge 
payment'' (a one-time additional payment which would cover the period 
of time from the 3rd of the month to their first payment day) of up to 
$3.3 billion, affected beneficiaries would be required to wait more 
than 5 weeks between benefit payments during the month of transition. 
Without legislation, SSA does not have authority to issue this type of 
special adjustment payment. Current beneficiaries who participated in 
focus groups were unanimous in their opinion that SSA should not change 
the monthly payment patterns of beneficiaries currently on the rolls. 
Finally, the majority of

[[Page 6120]]

commenters agreed with SSA's decision not to cycle current 
beneficiaries.
    Comment: One commenter recommended that SSA launch a comprehensive 
educational program to advise all stakeholders of the new payment dates 
once adopted.
    Response: Individual beneficiaries whose benefits are cycled will 
receive an informational pamphlet explaining payment cycling and a 
calendar providing them with the scheduled payment dates. Also, SSA is 
putting together informational material about payment cycling which 
will be made available to financial institutions and businesses to help 
them respond to any concerns raised by their customers.
    After considering the comments on the proposed regulations, we have 
changed Sec. 404.1807(c)(4), as discussed above in the response to the 
public comment. Also, upon further consideration, we have decided to 
revise Sec. 404.1807(c)(5) to show that individuals who become entitled 
on one record and later entitled on another record, without a break in 
entitlement, will be paid all benefits to which they are entitled no 
later than their current payment day. In addition, we have made several 
nonsubstantive changes to the proposed regulations. We are, therefore, 
publishing these regulations as final regulations.

Regulatory Procedures

Executive Order 12866

    We have determined that these final regulations meet the criteria 
for a significant regulatory action under Executive Order 12866. 
Therefore, we prepared and submitted to OMB an assessment of the 
potential benefits and costs of this regulatory action. This assessment 
also contains an analysis of alternative policies we considered and 
chose not to adopt. It is available for review by members of the public 
by contacting SSA.

Regulatory Flexibility Act

    These final regulations affect when Social Security recipients 
receive their payments. Recipients are not small entities within the 
definition of the Regulatory Flexibility Act. Therefore, these final 
regulations will not have a significant impact on a substantial number 
of small entities.

Paperwork Reduction Act

    These final regulations impose no reporting/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; 96.003 Social Security-Special Benefits for Persons Aged 
72 and Over; 96.004 Social Security-Survivors Insurance)

List of Subjects in 20 CFR Part 404

    Administrative Practice and Procedure, Blind benefits, Old-Age, 
Survivors and Disability Benefits; Reporting and recordkeeping 
requirements; Social Security.

    Dated: January 28, 1997.
Shirley S. Chater,
Commissioner of Social Security.
    For the reasons set forth in the preamble, subparts J and S of part 
404 of chapter III of title 20 of the Code of Federal Regulations are 
amended as set forth below.

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

Subpart J--[Amended]

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

    Authority: Secs. 201(j), 205(a), (b), (d)-(h), and (j), 221, 
225, and 702(a)(5) of the Social Security Act (42 U.S.C. 401(j), 405 
(a), (b), (d)-(h), and (j), 421, 425 and 902(a)(5)); 31 U.S.C. 
3720A; sec. 5, Pub. L. 97-455, 96 Stat. 2500 (42 U.S.C. 405 note); 
secs. 5, 6 (c)-(e), and 15, Pub. L. 98-460, 98 Stat. 1802 (42 U.S.C. 
421 note).

    2. Section 404.903 is amended by removing the word ``and'' at the 
end of paragraph (q), and by removing the period at the end of 
paragraph (r) and adding a semicolon and the word ``and'' in its place, 
and adding paragraph (s) to read as follows:


Sec. 404.903  Administrative actions that are not initial 
determinations.

* * * * *
    (s) The assignment of a monthly payment day (see Sec. 404.1807).

Subpart S--[Amended]

    3. The authority citation for subpart S of part 404 is revised to 
read as follows:

    Authority: Secs. 205 (a) and (n), 207, 702(a)(5), and 708(a) of 
the Social Security Act (42 U.S.C. 405 (a) and (n), 407, 902(a)(5) 
and 909(a)).

    4. Section 404.1805 is amended by revising paragraph (a)(3) to read 
as follows:


Sec. 404.1805  Paying benefits.

    (a) * * *
    (3) The time at which the payment or payments should be made in 
accordance with Sec. 404.1807.
* * * * *
    5. Section 404.1807 is added to read as follows:


Sec. 404.1807  Monthly payment day.

    (a) General. Once we have made a determination or decision that you 
are entitled to recurring monthly benefits, you will be assigned a 
monthly payment day. Thereafter, any recurring monthly benefits which 
are payable to you will be certified to the Managing Trustee for 
delivery on or before that day of the month as part of our 
certification under Sec. 404.1805(a)(3). Except as provided in 
paragraphs (c)(2) through (c)(6) of this section, once you have been 
assigned a monthly payment day, that day will not be changed.
    (b) Assignment of payment day. (1) We will assign the same payment 
day for all individuals who receive benefits on the earnings record of 
a particular insured individual.
    (2) The payment day will be selected based on the day of the month 
on which the insured individual was born. Insured individuals born on 
the 1st through the 10th of the month will be paid on the second 
Wednesday of each month. Insured individuals born on the 11th through 
the 20th of the month will be paid on the third Wednesday of each 
month. Insured individuals born after the 20th of the month will be 
paid on the fourth Wednesday of each month. See paragraph (c) of this 
section for exceptions.
    (3) We will notify you in writing of the particular monthly payment 
day that is assigned to you.
    (c) Exceptions. (1) If you or any other person became entitled to 
benefits on the earnings record of the insured individual based on an 
application filed before May 1, 1997, you will continue to receive your 
benefits on the 3rd day of the month (but see paragraph (c)(6) of this 
section). All persons who subsequently become entitled to benefits on 
that earnings record will be assigned to the 3rd day of the month as 
the monthly payment day.
    (2) If you or any other person become entitled to benefits on the 
earnings record of the insured individual based on an application filed 
after April 30, 1997, and also become entitled to Supplemental Security 
Income (SSI) benefits or have income which is deemed to an SSI 
beneficiary (per Sec. 416.1160), all persons who are or become entitled 
to benefits on that earnings record will be assigned to the 3rd day of 
the month as the monthly payment day. We will notify you in writing if 
your monthly payment day is being changed to the 3rd of the month due 
to this provision.
    (3) If you or any other person become entitled to benefits on the 
earnings record of the insured individual based on an application filed 
after April 30,

[[Page 6121]]

1997, and also reside in a foreign country, all persons who are or 
become entitled to benefits on that earnings record will be assigned to 
the 3rd day of the month as the monthly payment day. We will notify you 
in writing if your monthly payment day is being changed to the 3rd of 
the month due to this provision.
    (4) If you or any other person become entitled on the earnings 
record of the insured individual based on an application filed after 
April 30, 1997, and are not entitled to SSI but are or become eligible 
for the State where you live to pay your Medicare premium under the 
provisions of Sec. 1843 of the Act, all persons who are or become 
entitled to benefits on that earnings record will be assigned to the 
3rd day of the month as the monthly payment day. We will notify you in 
writing if your monthly payment day is being changed to the 3rd of the 
month due to this provision.
    (5) After April 30, 1997, all individuals who become entitled on 
one record and later entitled on another record, without a break in 
entitlement, will be paid all benefits to which they are entitled no 
later than their current payment day. Individuals who are being paid 
benefits on one record on the 3rd of the month, and who become entitled 
on another record without a break in entitlement, will continue to 
receive all benefits on the 3rd of the month.
    (6) If the day regularly scheduled for the delivery of your benefit 
payment falls on a Saturday, Sunday, or Federal legal holiday, you will 
be paid on the first preceding day that is not a Saturday, Sunday, or 
Federal legal holiday.

[FR Doc. 97-3205 Filed 2-10-97; 8:45 am]
BILLING CODE 4190-29-P