[Federal Register Volume 64, Number 72 (Thursday, April 15, 1999)]
[Rules and Regulations]
[Pages 18566-18571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9427]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

[Regulations No. 4 and 16]
RIN 0960-AE98


Old-Age, Survivors, and Disability Insurance and Supplemental 
Security Income for the Aged, Blind, and Disabled; Substantial Gainful 
Activity Amounts

AGENCY: Social Security Administration.

[[Page 18567]]

ACTION: Final rules.

-----------------------------------------------------------------------

SUMMARY: We are revising the rules for determining when earnings 
demonstrate the ability to engage in substantial gainful activity 
(SGA). This rule change applies to Social Security disability benefits 
provided under title II of the Social Security Act (the Act) and 
Supplemental Security Income (SSI) benefits based on disability under 
title XVI of the Act. (Eligibility for benefits under titles II and XVI 
also confers eligibility for related Medicare and Medicaid benefits 
under titles XVIII and XIX of the Act.) Specifically, we are raising 
from $500 to $700 the average monthly earnings guidelines used to 
determine whether work done by persons with impairments other than 
blindness is SGA. We are raising this level as part of efforts to 
encourage individuals with disabilities to attempt to work, and to 
provide an updated indicator of when earnings demonstrate the ability 
to engage in SGA. This increase reflects our assessment of the amount 
that roughly corresponds to wage growth since the last increase in 
1990.

EFFECTIVE DATE: These rules are effective July 1, 1999.

FOR FURTHER INFORMATION CONTACT: Jack Baumel, Office of Employment 
Support Programs, Social Security Administration, 6401 Security 
Boulevard, Baltimore, Maryland 21235-6401, (410) 965-9834 or TTY (410) 
966-6210. For information about eligibility or filing for benefits, 
call our national toll-free number, 1-800-772-1213 or TTY 1-800-325-
0778, or visit our Internet web site, SSA Online, www.ssa.gov.

SUPPLEMENTARY INFORMATION:

Background

    Under 20 CFR 404.1572 and 416.972, the term ``substantial gainful 
activity'' means work activity that involves significant physical or 
mental effort and that is done for pay or profit. Work activity is 
gainful if it is the kind of work usually performed for pay or profit, 
whether or not a profit is realized. Sections 223(d)(4)(A) and 
1614(a)(3)(E) of the Act require the Commissioner to prescribe by 
regulations the criteria for determining when earnings demonstrate 
ability to engage in SGA for a person with an impairment other than 
blindness.
    The amount of average monthly earnings that ordinarily demonstrates 
SGA for people with an impairment other than blindness has not been 
increased since January 1, 1990. We are revising this level now after 
reassessing the current guidelines as part of our effort to improve 
incentives to encourage individuals with disabilities to attempt to 
work. We believe that the increase in the amount of earnings that 
constitutes SGA provides an updated indicator of when earnings 
demonstrate the ability to engage in SGA and is a significant 
improvement to the existing work incentive provisions.

Proposed Rules

    We published a notice of proposed rulemaking (NPRM) in the Federal 
Register on February 16, 1999 (64 FR 7559). In the NPRM, we proposed 
rules to increase the amount in the monthly earnings guidelines used in 
determining whether the work activities of a person with an impairment 
other than blindness demonstrate that he or she is able to perform SGA. 
These guidelines in Secs. 404.1574 and 416.974 deal with persons 
claiming title II or title XVI benefits or receiving title II benefits 
based on disability. Under our prior rules, if such a person had 
earnings from work activities as an employee (including as an employee 
of a sheltered workshop or comparable facility) that averaged more than 
$500 a month, we would ordinarily consider that the person had engaged 
in SGA. Under these new rules, the $500 amount is raised to $700 per 
month.
    While these rules make specific increases to the amount of earnings 
that will ordinarily show that a person has engaged in SGA, we will, at 
a future point, consider making other changes in the work incentive 
rules. Therefore, the NPRM invited the public to provide us with 
general suggestions for changes which might be desirable in related 
provisions (such as the trial work period services amount, and the 
earnings level that ordinarily demonstrates that an individual has not 
engaged in SGA) and the SGA guidelines in the future. We will consider 
those general suggestions not addressed below regarding possible future 
changes.

Public Comments

    We received over 3000 sets of comments in response to the proposal. 
Commenters included many advocates for people with disabilities, State 
and local government entities, attorneys, employees from one SSA field 
office, one Administrative Law Judge, one member of Congress, and a 
large number of private citizens. With few exceptions, the comments we 
received were substantive assessments of the proposal and/or related 
suggestions. We have summarized these substantive comments, grouped 
them by subject, and discuss them below.
    Comment: All but five of the comments received expressing an 
opinion about the proposed increase in the SGA guidelines were in 
favor. One was opposed and four expressed doubt that the increase in 
the SGA guidelines would achieve improvement. Many of the commenters in 
favor also believed that we should make further changes.
    Response: We appreciate that all but a few commenters agreed with 
our assessment that an increase in the SGA guidelines is warranted. We 
have addressed the additional comments below.
    Comment: Many of the comments expressing support for an increase 
also stated the general opinion that the proposed increase to $700 was 
not enough. Several commenters suggested that geographic differences in 
the cost-of-living or poverty level be taken into account in setting 
the SGA amount. Many expressed the view that the $700 amount is below 
the amount SGA would have attained had its growth kept pace with 
increases in average wages since its inception. Many also noted that 
the new $700 amount is significantly lower than a month's full-time 
earnings at the minimum wage level. Many also criticized us regarding 
the nine years lapse since the last increase.
    Response: The historical relationship between the SGA amount and 
average wage growth was roughly consistent between 1961 (when the SGA 
guideline was first issued by regulation) and 1980. Since 1980, 
however, the SGA level has been kept constant for two long periods of 
time during which wages were experiencing growth. By 1989, the actual 
SGA level for the non-blind lagged behind average wage growth since the 
amount had stayed at $300 for a decade. In 1990, we raised the SGA 
amount to $500.
    The Act does not spell out the definition of SGA for people with 
impairments other than blindness and the legislative record neither 
expresses nor implies a connection with average wages or prices. The 
Act provides that the Commissioner is to prescribe by regulation the 
criteria for determining when earnings demonstrate the ability to 
engage in SGA. We designed the SGA guidelines as a way of measuring an 
individual's ability to work and not as a measure of an individual's 
need for income. We decided on the amounts being implemented based on 
our experience with the disability programs and beneficiaries' work 
efforts and the need to maintain fiscal responsibility. In any event, 
the increase we are implementing now approximately corresponds to wage 
growth since 1990.

[[Page 18568]]

    Comment: Many comments noted that the SGA amount for people who are 
blind is $1110 for calendar year 1999. These comments expressed 
dissatisfaction with the discrepancy and generally considered it 
unjustified discrimination. Most of these commenters recommended that 
we increase the SGA amount for people with impairments other than 
blindness in a similar manner or to the same level as for people who 
are blind.
    Response: Before 1977, Section 223(d) of the Act authorized the 
Commissioner to prescribe the level of earnings that demonstrate SGA 
for all title II applicants and recipients and all title XVI 
applicants. In 1977, Congress amended that section of the Act to 
provide a different criterion for setting the SGA level for people who 
are blind (i.e., annual adjustment based on the national average wage 
index). Congress consciously made this distinction between people who 
are blind and those with impairments other than blindness. The House 
and Senate conference report accompanying the Social Security 
Amendments of 1977 clearly stated that a different SGA amount was being 
established for blind persons, and that the conferees did not intend 
that the amount be applied to people with impairments other than 
blindness.
    Comment: Many comments suggested either annual review of the SGA 
amount or that future increases be linked to increases in a generally 
recognized economic benchmark, e.g., average wage, cost-of-living, 
poverty level. They contend that annual review or indexing the SGA 
level would provide a consistent relationship with wages and/or prices, 
and prevent erosion of the work component of the definition of 
disability over time as these factors increase.
    Response: As stated in a previous response, we designed the SGA 
guidelines as a way of measuring an individual's ability to work and 
not as a measure of an individual's need for income. We decided on the 
amounts we are implementing based on our experience with the disability 
programs and beneficiaries' work efforts and the need to maintain 
fiscal responsibility. The increase we are implementing now 
approximately corresponds to wage growth since 1990. However, we 
recognize that increasing program factors on a regular and predictable 
basis allows us to avoid making adjustments on an ad hoc basis. We may 
consider, in the future, if the SGA amounts should be indexed.
    Comment: Several comments suggested that we stop using SGA to 
evaluate the work component of disability. They recommended that, in 
its place, we use an earnings offset formula to reduce cash benefits 
gradually as earnings rise (similar to the earned income exclusion 
currently under title XVI). One suggested that there should be no 
earnings limits placed on eligibility for people with disabilities.
    Response: These suggested changes require new legislation and we 
can not implement them by regulation alone. Several legislative 
proposals to test the earnings offset approach under title II are 
pending before the current session of Congress.
    Comment: Many commenters suggested that we also increase the 
monthly earnings amount that we consider being services for purposes of 
the Trial Work Period (TWP). Many of these also suggested that the TWP 
and SGA amounts should be the same. Many of these also suggested that 
we index TWP increases to an economic benchmark. One suggested that we 
apply the TWP earnings amount on an annual basis rather than monthly.
    Response: The TWP is a work incentive. During the TWP, a title II 
beneficiary may test his or her ability to work and still be considered 
disabled. We will not consider services performed during the TWP as 
showing that disability has ended until services have been performed in 
at least 9 months (not necessarily consecutive). Services means any 
activity, even though it is not SGA, which is done by a person in 
employment or self-employment for pay or profit, or is the kind 
normally done for pay or profit. As established in Sec. 404.1592(b), if 
you are an employee, we currently consider your work to be services if 
you earn more than $200 a month. As a result of public comments, we 
will consider whether, in the future, to propose raising the monthly 
earnings guideline for services under the trial work period and related 
changes.
    Comment: One commenter recommended raising the average monthly 
earnings amount that will ordinarily show that an employee did NOT 
engage in SGA (currently, earnings of less than $300).
    Response: The effect of this provision is to create a range where 
monthly earnings are neither high enough nor low enough to show whether 
an employee engaged in SGA. If an employee's earnings fall into this 
range, we generally consider other information in addition to the 
employee's earnings to reach a determination. In practice, this 
provision affects a relatively small number of people. As a result of 
public comments, we will consider whether, in the future, to propose 
raising the amount and/or make other modification(s) to this provision.
    Comment: Many comments expressed general support for the 
recognition of the special medical needs and medical insurance needs of 
people with disabilities. Several comments expressed support for 
recognition of the special needs of young people with disabilities who 
are in transition from education to work. Several comments advocated 
liberalization of other existing work incentive provisions and included 
suggestions for changes to these provisions.
    Response: The issues addressed by these comments are outside the 
scope of this specific rules change. However, as we stated in the 
February 16, 1999 NPRM, we will consider these comments regarding 
possible future changes.
    Comment: A few commenters suggested that a January 1, 1999 
effective date for the SGA increase would be easier for us to 
administer and seem less arbitrary to the public.
    Response: This rules change increases the number of people eligible 
for disability benefits under Old-Age, Survivors and Disability 
Insurance and the SSI program, as well as for related Medicare and 
Medicaid benefits. We believe it is in the public interest to proceed 
quickly with its implementation. However, we believe that an effective 
date of July 1, 1999 represents the earliest date practicable for these 
final rules to be effective.

Final Regulations

    We are revising Secs. 404.1574(b)(2) and (4), and 416.974(b)(2) and 
(4) to increase from $500 to $700 the earnings guidelines that we use 
to determine whether a non-blind employee is engaging in SGA. (This 
standard also applies to the self-employed in certain circumstances by 
cross-references that have been and continue to be present in 
Secs. 404.1575 and 416.975.) We have not raised the SGA earnings amount 
for approximately nine years. We are raising the SGA level now to $700, 
which roughly corresponds to wage growth since the last increase in 
1990.
    In order to comply with the President's June 1, 1998 memorandum 
directing the use of plain language for all proposed and final 
rulemaking, we are rewriting the regulatory paragraphs affected by the 
above rule changes and the intervening paragraph ((b)(3)) into plain 
language. We intend this rewrite to have no substantive effect other 
than those substantive changes described in this preamble to these 
final rules.

[[Page 18569]]

Electronic Version

    The electronic file of this document is available on the Internet 
at www.access.gpo.gov/nara. This document is also available on our 
Internet web site, SSA Online, www.ssa.gov.

Regulatory Procedures

Paperwork Reduction Act

    These regulations impose no new reporting/record-keeping 
requirements necessitating clearance by the Office of Management and 
Budget (OMB).

Executive Order 12866

Regulatory Impact Analysis
    Introduction--Based on the costs associated with these final rules, 
the Social Security Administration has determined that they require an 
assessment of costs and benefits to society per Executive Order 12866 
because they meet the definition of a ``significant regulatory 
action.'' These final rules also meet the definition of a ``major 
rule'' under 5 U.S.C. 801ff., and this assessment also fulfills the 
requirements of those provisions as well. In addition, SSA has 
determined, as required under the aforementioned statute, that these 
final rules do not create any unfunded mandates for State or local 
entities pursuant to sections 202-205 of the Unfunded Mandates Act of 
1995. OMB has reviewed these final rules.
    Executive Order 12866 includes in its definition of a ``significant 
regulatory action'' one which generates a major increase in costs for 
the Federal government. Accordingly, a discussion follows of the effect 
of the regulations and general information on estimated costs and 
benefits to society.
    Nature of the Program--Benefits to disabled and blind individuals 
are provided under title II and title XVI of the Act. Disability is 
defined under both programs as, ``* * * inability to engage in any 
substantial gainful activity by reason of any medically determinable 
physical or mental impairment * * *.'' Related medical benefits to 
disabled and blind individuals are provided under title XVIII and title 
XIX of the Act.
    We use earnings guidelines to evaluate a person's work activity to 
determine whether the work activity is SGA and therefore whether that 
person may be considered disabled under the law. While this is only one 
of the tests used to determine disability, it is a critical threshold 
in disability evaluation. We evaluate the work activity of persons 
claiming or receiving disability benefits under title II of the Act and 
that of persons claiming benefits because of a disability under title 
XVI of the Act. These new regulations increase the amounts of those 
earnings guidelines. We have not raised the SGA earnings amount for 
approximately nine years. We are raising it now to approximate wage 
growth during that time.
    Intended Effect--We expect that the increase in the amount of 
earnings that constitute SGA will provide a greater incentive for many 
people with disabilities to attempt to work or, if already working, to 
continue to work or increase their work effort. Hundreds of thousands 
of people with disabilities already work and the new revisions will be 
of advantage to many. For these individuals, as well as those not now 
working, the new revisions will enhance their potential to participate 
in the workforce, and, consequently, improve their economic well being 
by increasing their income through earnings.
    In addition, the increase will permit some individuals with 
disabilities who have earnings in excess of the prior regulatory limit 
($500) but less than the amount in these new rules ($700), to receive 
benefits. We estimate that by Fiscal Year (FY) 2004, an additional 
27,000 individuals will receive benefits because of these changes. This 
estimate is based on analyses of the earnings distributions of a 
representative sample of disabled individuals.
    The following chart provides the estimated increases in Old-age, 
Survivors and Disability Insurance payments, Federal SSI payments, 
Medicare benefits, and Federal share of Medicaid benefits due to the 
increase in the SGA amount to $700 in 1999, for fiscal years 1999-2004. 
(Amounts are in millions.)

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Fiscal year
                                                              ------------------------------------------------------------------------------ Total  1999-
                                                                   1999         2000         2001         2002         2003         2004         2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
OASDI........................................................           10           30           55           75          100          120          390
SSI..........................................................           15           20           25           25           30           30          145
Medicare.....................................................           10           20           30           50           60           80          250
Medicaid.....................................................           40           60           70           75           90          100          435
                                                              ------------------------------------------------------------------------------------------
    Subtotal, all programs...................................           75          130          180          225          280          330         1220
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Notes:
\1\ Totals may not equal sum of rounded components.
\2\ Above estimates based on the assumptions underlying the President's FY 2000 Budget, including the SSA Office of the Actuary's normal assumption of
  an SGA amount increasing with average wages.
\3\ Estimates for Medicare and Medicaid provided by the Office of the Actuary in the Health Care Financing Administration (HCFA).

In addition, since States share in the costs of financing Medicaid, 
States will have some costs associated with the increase in the SGA 
amount as well. These costs are estimated by HCFA to be (in millions):

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Fiscal year
                       Medicaid                        ------------------------------------------------------------------------------------ Total  1999-
                                                            1999          2000          2001          2002          2003          2004          2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
State Share...........................................           30            45            55            55            70            75           330
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Although the costs are significant, we consider these changes as 
necessary improvements to the work incentives. The costs of these 
regulations will be paid through programmatic and regulatory changes.

Regulatory Flexibility Act

    We certify that these regulations do not have a significant 
economic impact

[[Page 18570]]

on a substantial number of small entities because they primarily affect 
individuals who are applying for or receiving title II, or applying for 
title XVI, benefits because of disability, and States which administer 
the Medicaid program.

(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)

List of Subjects

20 CFR Part 404

    Administrative practice and procedure, Death benefits, Disability 
benefits, Old-Age, Survivors and Disability Insurance, Reporting and 
record keeping requirements, Social Security.

20 CFR Part 416

    Administrative practice and procedure, Aged, Blind, Disability 
benefits, Public assistance programs, Reporting and record keeping 
requirements, Supplemental Security Income (SSI).

    Dated: April 7, 1999.
Kenneth S. Apfel,
Commissioner of Social Security.

    For the reasons stated in the preamble, the Social Security 
Administration is amending parts 404 and 416 of chapter III of title 20 
of the Code of Federal Regulations as follows:

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

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

    Authority: Secs. 202, 205 (a), (b), and (d)-(h), 216(i), 221 (a) 
and (i), 222(c), 223, 225, and 702(a)(5) of the Social Security Act 
(42 U.S.C. 402, 405 (a), (b), and (d)-(h), 416(i), 421 (a) and (i), 
422(c), 423, 425, and 902(a)(5)); sec. 211(b), Pub. L. 104-193, 110 
Stat. 2105, 2189.

    2. Section 404.1574 is amended by revising paragraphs (b)(2), 
(b)(3), and (b)(4) to read as follows:


Sec. 404.1574  Evaluation guides if you are an employee.

* * * * *
    (b) * * *
    (2) Earnings that will ordinarily show that you have engaged in 
substantial gainful activity. We will consider that your earnings from 
your work activity as an employee show that you have engaged in 
substantial gainful activity if--

------------------------------------------------------------------------
                                                                 Your
                                                               monthly
                         For months                            earnings
                                                               averaged
                                                              more than
------------------------------------------------------------------------
In calendar years before 1976..............................         $200
In calendar year 1976......................................          230
In calendar year 1977......................................          240
In calendar year 1978......................................          260
In calendar year 1979......................................          280
In calendar years 1980-1989................................          300
In January 1990-June 1999..................................          500
After June 1999............................................          700
------------------------------------------------------------------------

    (3) Earnings that will ordinarily show that you have not engaged in 
substantial gainful activity. We will generally consider that the 
earnings from your work as an employee will show that you have not 
engaged in substantial gainful activity if--

------------------------------------------------------------------------
                                                                 Your
                                                               monthly
                         For months                            earnings
                                                               averaged
                                                              more than
------------------------------------------------------------------------
In calendar years before 1976..............................         $130
In calendar year 1976......................................          150
In calendar year 1977......................................          160
In calendar year 1978......................................          170
In calendar year 1979......................................          180
In calendar years 1980-1989................................          190
After December 1989........................................          300
------------------------------------------------------------------------

    (4) If you work in a sheltered workshop. If you are working in a 
sheltered workshop or a comparable facility especially set up for 
severely impaired persons, your earnings and activities will ordinarily 
establish that you have not done substantial gainful activity if--

------------------------------------------------------------------------
                                                                 Your
                                                               average
                                                               monthly
                         For months                            earnings
                                                               are not
                                                               greater
                                                                 than
------------------------------------------------------------------------
In calendar years before 1976..............................         $200
In calendar year 1976......................................          230
In calendar year 1977......................................          240
In calendar year 1978......................................          260
In calendar year 1979......................................          280
In calendar years 1980-1989................................          300
In January 1990-June 1999..................................          500
After June 1999............................................          700
------------------------------------------------------------------------

* * * * *

PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND AND 
DISABLED

    1. The authority citation for subpart I of part 416 continues to 
read as follows:

    Authority: Secs. 702(a)(5), 1611, 1614, 1619, 1631(a), (c) and 
(d)(1), and 1633 of the Social Security Act (42 U.S.C. 902(a)(5), 
1382, 1382c, 1382h, 1383(a), (c) and (d)(1), and 1383b); secs. 4(c) 
and 5, 6(c)-(e), 14(a) and 15, Pub. L. 98-460, 98 Stat. 1794, 1801, 
1802, and 1808 (42 U.S.C. 421 note, 423 note, 1382h note).

    2. Section 416.974 is amended by revising paragraphs (b)(2), 
(b)(3), and (b)(4) to read as follows:


Sec. 416.974  Evaluation guides if you are an employee.

* * * * *
    (b) * * *
    (2) Earnings that will ordinarily show that you have engaged in 
substantial gainful activity. We will consider that your earnings from 
your work activity as an employee show that you have engaged in 
substantial gainful activity if--

------------------------------------------------------------------------
                                                                 Your
                                                               monthly
                         For months                            earnings
                                                               averaged
                                                              more than
------------------------------------------------------------------------
In calendar years before 1976..............................         $200
In calendar year 1976......................................          230
In calendar year 1977......................................          240
In calendar year 1978......................................          260
In calendar year 1979......................................          280
In calendar years 1980--1989...............................          300
In January 1990--June 1999.................................          500
After June 1999............................................          700
------------------------------------------------------------------------

    (3) Earnings that will ordinarily show that you have not engaged in 
substantial gainful activity. We will generally consider that the 
earnings from your work as an employee will show that you have not 
engaged in substantial gainful activity if--

------------------------------------------------------------------------
                                                                 Your
                                                               monthly
                         For months                            earnings
                                                               averaged
                                                              less than
------------------------------------------------------------------------
In calendar years before 1976..............................         $130
In calendar year 1976......................................          150
In calendar year 1977......................................          160
In calendar year 1978......................................          170
In calendar year 1979......................................          180
In calendar years 1980--1989...............................          190
After December 1989........................................          300
------------------------------------------------------------------------

    (4) If you work in a sheltered workshop. If you are working in a 
sheltered workshop or a comparable facility especially set up for 
severely impaired persons, your earnings and activities will ordinarily 
establish that you have not done substantial gainful activity if--

------------------------------------------------------------------------
                                                                 Your
                                                               monthly
                         For months                            earnings
                                                               averaged
                                                              more than
------------------------------------------------------------------------
In calendar years before 1976..............................         $200
In calendar year 1976......................................          230
In calendar year 1977......................................          240
In calendar year 1978......................................          260
In calendar year 1979......................................          280
In calendar years 1980-1989................................          300
In January 1990-June 1999..................................          500
After June 1999............................................          700
------------------------------------------------------------------------


[[Page 18571]]

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[FR Doc. 99-9427 Filed 4-14-99; 8:45 am]
BILLING CODE 4190-29-P