Federal Register, Volume 64 Issue 72 (Thursday, April 15, 1999)

[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]

=======================================================================
-----------------------------------------------------------------------

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
--------------------------------------------------------------------------------------------------------------------------------------------------------
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):

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.

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

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

[[Page 18571]]

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