[Federal Register Volume 65, Number 133 (Tuesday, July 11, 2000)]
[Rules and Regulations]
[Pages 42772-42792]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17138]



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Part II





Social Security Administration





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20 CFR Parts 404 and 416



Determining Disability and Blindness; Substantial Gainful Activity 
Guides; Final Rule



Social Security Acquiescence Rulings; Notices

  Federal Register / Vol. 65, No. 133 / Tuesday, July 11, 2000 / Rules 
and Regulations  

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SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

[Regulations No. 4 and 16]
RIN 0960-AB73


Determining Disability and Blindness; Substantial Gainful 
Activity Guides

AGENCY: Social Security Administration.

ACTION: Final rules.

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SUMMARY: We are revising our rules to reflect amendments to the Social 
Security Act (the Act) concerning the trial work period and the 
disability insurance reentitlement period. We are also clarifying 
certain standards we use to determine whether work is substantial 
gainful activity and whether an individual is entitled to a trial work 
period, thereby further explaining how we determine disability under 
titles II and XVI of the Act.

EFFECTIVE DATE: These regulations are effective August 10, 2000.

FOR FURTHER INFORMATION CONTACT: Georgia E. Myers, SSA Regulations 
Officer, Office of Process and Innovation Management, L2109 West Low 
Rise Building, Social Security Administration, 6401 Security Boulevard, 
Baltimore, Maryland 21235-6401, (410) 965-3632 or TTY 1-800-988-5906. 
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 Internal web site, SSAOnline, at www.SSA.gov.

SUPPLEMENTARY INFORMATION: These regulations explain how we determine 
whether a person is entitled to a period of trial work under title II 
of the Act and whether a person is engaging in substantial gainful 
activity under titles II and XVI of the Act. The term ``substantial 
gainful activity'' combines two concepts, substantial work activity and 
gainful work activity. Substantial work activity means work activity 
that involves doing significant physical or mental activities, even if 
the work is done on a part-time basis or with less activities, pay, or 
responsibilities than in past work. Gainful work activity means work 
activity done for pay or profit. Work activity is gainful if it is the 
kind of work that is usually performed for pay or profit, whether or 
not a profit is realized.
    We published a notice of proposed rulemaking (NPRM) in the Federal 
Register on March 6, 1995 (60 FR 12166). In the NPRM, we proposed to 
make revisions to a number of sections that address our rules for 
determining whether an individual is engaging in substantial gainful 
activity. The NPRM included certain changes in proposed 
Sec. Sec. 404.1574(a)(3)-(6) and 416.974(a)(3)-(6) to clarify our 
policies on ``subsidy.'' In part because of public comments we received 
on the NPRM and because we want to consider further issues with regard 
to our policies concerning on-the-job subsidies provided by employers 
and on-the-job assistance provided by others, we have decided not to 
publish final rules with regard to the proposals on ``subsidy'' in 
proposed Sec. Sec. 404.1574(a)(3)-(6) and 416.974(a)(3)-(6). However, 
we are publishing final rules for the remaining proposals in the NPRM, 
some of which have been modified in response to public comments. We 
discuss in detail the comments we received on the NPRM later in this 
preamble under ``Public Comments on Notice of Proposed Rulemaking.'' In 
addition, in these final rules, we have made certain changes from the 
proposed rules for technical accuracy and, consistent with the 
government's ``plain language'' initiative, to make our rules easier to 
read and understand. We have also included in these final rules several 
additional amendments to our regulations that, although not a part of 
the proposals in the NPRM, are necessary to reflect amendments to the 
Act relating to determinations of substantial gainful activity or the 
counting of trial work period months. These additional amendments 
affect Sec. Sec. 404.15771 and 416.971, discussed below, and 
Sec. Sec. 404.1584(d) and 404.1592(b), discussed later in this 
preamble.
    In these final rules, we have made changes to Sec. Sec. 404.1571 
and 416.971 to reflect the provisions in sections 223(d)(4) and 
1614(a)(3)(E) of the Act that were added by section 201 of Public Law 
(Pub. L.) 103-296, the Social Security Independence and Program 
Improvements Act of 1994. Under sections 223(d)(4) and 1614(a)(3)(E) of 
the Act, the Commissioner of Social Security (the Commissioner) is 
required to establish by regulations the criteria for determining when 
services performed by an individual or earnings derived from services 
demonstrate an individual's ability to engage in substantial gainful 
activity. In general, these sections of the Act provide that an 
individual whose services or earnings meet the criteria established by 
the Commissioner shall be found to be not disabled. The provisions 
added to the Act by Pub. L. 103-296 provide, in general, that the 
Commissioner shall make determinations of substantial gainful activity 
under these sections ``without regard to the legality'' of the work 
activity of the individual. We have included in these final rules 
changes to Sec. Sec. 404.1571 and 416.971 to reflect these provisions 
of the Act. We have revised the first sentence of each of these 
sections to indicate that the work, without regard to legality, that an 
individual has done during any period in which the individual believes 
that he or she is disabled may show that he or she is able to work at 
the substantial gainful activity level. We explain our reasons for 
publishing these changes as final rules without notice-and-comment 
rulemaking at the end of this preamble.
    We have revised Secs. 404.1573(c) and 416.973(c) to explain in 
greater detail what we mean by work under special conditions that take 
into account an individual's impairments. We added information found in 
Social Security Ruling (SSR) 84-25, ``Titles II and XVI: Determination 
of Substantial Gainful Activity If Substantial Work Activity Is 
Discontinued or Reduced--Unsuccessful Work Attempt'' (Social Security 
Rulings, Cumulative Edition, 1984, p. 92), to clarify these regulatory 
provisions. As discussed later in this preamble, we also revised the 
paragraph in response to public comments.
    We have amended Secs. 404.1574(a) and 416.974(a) to add an expanded 
description of how we determine whether work performed by an employee 
is substantial gainful activity, what we mean by subsidized work, and 
how we determine the value of a subsidy. The changes reflect the 
interpretations in SSR 83-33, ``Titles II and XVI: Determining Whether 
Work Is Substantial Gainful Activity--Employees'' (Social Security 
Rulings, Cumulative Edition, 1983, p. 209).
    These final rules also make changes to Secs. 404.1574(b)(2), 
(b)(3), (b)(4), and (b)(6) and Secs. 416.974(b)(2), (b)(3), (b)(4), and 
(b)(6) to clarify how we evaluate earnings from work in sheltered 
workshops. In paragraphs (b)(2), (b)(3), and (b)(6) of these sections, 
we provide thresholds that demonstrate earnings that ordinarily show 
that a person has engaged in substantial gainful activity (paragraph 
(b)(2)), that a person has not engaged in substantial gainful activity 
(paragraph (b)(3)), or that are not high or low enough to show whether 
a person has engaged in substantial gainful activity. Our intent is, 
and always has been, that paragraphs (b)(3) and (b)(6) apply only to 
workers who are not in sheltered workshops. This is because we 
ordinarily consider that individuals in sheltered workshops are not 
engaging in substantial gainful activity when they do not earn more 
than the threshold

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amounts in paragraph (b)(2). In other words, we do not provide a 
``middle ground'' category for workers in sheltered workshops, as we do 
for other workers under paragraph (b)(6), in recognition of the special 
circumstances of sheltered employment. We believe that the final rules 
now state this longstanding policy more clearly. The final rules also 
state more clearly our policy of evaluating sheltered workshop earnings 
that exceed the amount specified in paragraph (b)(2) in the same way we 
evaluate non-sheltered workshop earnings.
    As a result of these clarifications in our final regulations, we 
are rescinding Acquiescence Ruling (AR) 87-4(8), Iamarino v. Heckler 
(Social Security Rulings, Cumulative Edition, 1987, p. 136; 55 FR 
28302, August 31, 1987). We issued this acquiescence ruling in response 
to a decision of the U.S. Court of Appeals for the Eighth Circuit in 
Iamarino v. Heckler, 795 F.2d 59 (8th Cir. 1986). In the absence of 
regulations explicitly addressing the issue, the court in Iamarino held 
that, because our regulations provided a middle ground for evaluating 
earnings from competitive (i.e., non-workshop) employment between 
specified upper and lower limits, we must also provide a middle ground 
for evaluating sheltered workshop earnings and not presume that an 
individual has engaged in substantial gainful activity when sheltered 
workshop earnings exceed the upper substantial gainful activity 
threshold amount. The revisions in these final rules make clear in our 
regulations that, ordinarily, we will find any individual, whether in 
competitive or sheltered work, to be engaging in substantial gainful 
activity when his or her earnings exceed the threshold for such 
earnings set out in Secs. 404.1574(b)(2) and 416.974(b)(2). We clarify 
that the middle ground of earnings for individuals in competitive 
employment (i.e., the middle ground where we do not consider the 
earnings to be high or low enough to show whether a person has engaged 
in substantial gainful activity) lies below the upper threshold for 
substantial gainful activity in paragraph (b)(2) and above a lower 
threshold in paragraph (b)(3). Finally, we clarify that for individuals 
who are employed in sheltered workshops and whose earnings do not 
exceed the upper threshold above which we ordinarily find substantial 
gainful activity for all individuals, we will ordinarily find that 
there is not substantial gainful activity even when their earnings fall 
in the range that would constitute the middle ground of earnings for 
individuals in competitive employment.
    We have also added new Secs. 404.1574(d) and 416.974(d) and revised 
Sec. 404.1592(b) to provide that we will not consider volunteer work 
done under programs mentioned in the Domestic Volunteer Service Act of 
1973, 42 U.S.C. 5044, or the Small Business Act, 15 U.S.C. 637, in 
determining whether an individual has performed substantial gainful 
activity or, for individuals receiving benefits under title II of the 
Act, services in the trial work period. This exclusion is currently 
stated in SSR 84-24, ``Titles II and XVI: Determination of Substantial 
Gainful Activity For Persons Working In Special Circumstances--Work 
Therapy Programs in Military Service--Work Activity in Certain 
Government-Sponsored Programs'' (Social Security Rulings, Cumulative 
Edition, 1984, p. 87), and as required by the laws cited above.
    We have also added new Secs. 404.1574a and 416.974a to explain how 
we average earnings to determine if a person has been performing 
substantial gainful activity and the periods used for averaging. These 
amendments are based on SSR 83-35, ``Titles II and XVI: Averaging of 
Earnings in Determining Whether Work Is Substantial Gainful Activity'' 
(Social Security Rulings, Cumulative Edition, 1983, p. 237), and do not 
represent a change in practice.
    We have revised Sec. Sec. 404.1575(a) and 416.975(a) to explain the 
order in which we will apply the three tests used to determine whether 
self-employed persons have engaged in substantial gainful activity. We 
also expanded the discussion in Secs. 404.1575(c) and 416.975(c) of 
what we mean by substantial income for purposes of determining whether 
a self-employed person has engaged in substantial gainful activity. 
These revisions are based on SSR 83-34, ``Titles II and XVI: 
Determining Whether Work Is Substantial Gainful Activity--Self-Employed 
Persons'' (Social Security Rulings, Cumulative Edition, 1983, p. 222), 
and do not represent a change in practice.
    We also made a nonsubstantive, technical correction to final 
Secs. 404.1575(c)(2) and 416.975(c)(2) for consistency of language 
within our regulations. Both the former rules and the NPRM stated that 
we would consider self-employment income to be ``substantial'' if it 
averaged less than the amounts described in Secs. 404.1574(b)(2) and 
416.974(b)(2) but was either comparable to what the individual earned 
before he or she became ``severely impaired'' or was comparable to that 
of unimpaired self-employed persons in the community who were in the 
same or a similar business as their means of livelihood. However, the 
word ``severe'' in our regulations is a term of art under 
Secs. 404.1520 and 416.920 and other regulations throughout subpart P 
of part 404 and subpart I of part 416, and it does not have the same 
meaning that we intended in Secs. 404.1575(c)(2) and 416.975(c)(2). 
Therefore, we have revised the final rules to make our intent clear by 
changing the phrase ``severely impaired'' to ``seriously impaired.'' 
(For similar reasons, we are making the same changes in 
Secs. 404.1574(b)(4) and 416.974(b)(4).)
    We added to Secs. 404.1574, 404.1575, 416.974, and 416.975 an 
explanation, now found in SSR 84-25, of how we evaluate brief periods 
of work activity to determine if they should be considered 
``unsuccessful work attempts.'' The rules provide, consistent with SSR 
84-25, that, ordinarily, work an individual has done will not show the 
ability to do substantial gainful activity if, after working for a 
period of 6 months or less, the individual was forced by his or her 
impairment to stop working or to reduce the amount of work so that 
earnings from such work fall below the substantial gainful activity 
earnings level. The work must also satisfy certain other conditions 
described in the regulations. The final rules also provide that we will 
not consider work performed at the substantial gainful activity level 
for more than 6 months to be an unsuccessful work attempt regardless of 
why it ended or why earnings were reduced to below the substantial 
gainful activity earnings level.
    The criteria for an unsuccessful work attempt differ depending on 
whether the work effort is for a duration of 3 months or less or for a 
duration of between 3 and 6 months. These amendments reflect the 
interpretation in SSR 84-25.
    In addition, we have added to Sec. 404.1584(d) the substantial 
gainful activity earnings guidelines for evaluating the work activity 
of blind persons under title II for the years 1983 through 2000. We 
also explain, consistent with section 223(d)(4)(A) of the Act, that 
effective with 1996, the substantial gainful activity amount for blind 
individuals is no longer linked to the monthly exempt amount under the 
retirement earnings test for individuals aged 65 to 69. Beginning 1996, 
increases in the substantial gainful activity level for blind 
individuals depend only on the increases in the national average wage 
index. We are including this provision in Sec. 404.1584(d) of the final 
rules to reflect this statutory change,

[[Page 42774]]

which resulted from amendments to the Act made by section 102 of Pub. 
L. 104-121. We explain our reasons for publishing final rules to 
reflect this statutory change without notice-and-comment rulemaking at 
the end of this preamble.
    We have also included in these final rules an amendment to 
Sec. 404.1592(b) to reflect an amendment to the definition of 
``services'' in section 222(c)(2) of the Act which applies in 
determining when the trial work period has ended. Section 222(c)(2) of 
the Act, as amended, provides that, for purposes of the trial work 
period, ``the term `services' means activity (whether legal or illegal) 
which is performed for remuneration or gain or is determined by the 
Commissioner of Social Security to be of a type normally performed for 
remuneration or gain.'' The parenthetical phrase ``(whether legal or 
illegal)'' was added to this provision of the Act by section 201 of 
Pub. L. 103-296. In these final rules, we are adding the same 
parenthetical phrase to the definition of ``services'' in 
Sec. 404.1592(b). We explain our reasons for publishing final rules to 
reflect this change without notice-and-comment rulemaking at the end of 
this preamble.
    We also have revised the fourth sentence of Sec. 404.1592(b) to 
explain in clearer and more precise terms the type of activity that 
generally does not constitute ``services'' as that term is defined in 
section 222(c)(2) of the Act, quoted above. This revision clarifies 
that we generally do not consider work that is done without 
remuneration to be ``services'' for purposes of determining when the 
trial work period has ended if it is done merely as therapy or training 
or if it is work usually done in a daily routine around the house or in 
self-care. We have also added a new sentence at the end of 
Sec. 404.1592(b) to state that we do not consider work as a volunteer 
in the Federal programs described in Sec. 404.1574(d) in determining 
whether an individual has performed services in the trial work period.
    We have revised Sec. 404.1592(d) to explain, consistent with SSR 
82-52, ``Titles II and XVI: Duration of Impairment'' (Social Security 
Rulings, Cumulative Edition, 1982, p. 106), that a claimant is not 
entitled to a trial work period when he or she performs work 
demonstrating the ability to engage in substantial gainful activity 
within 12 months after the onset of an impairment that otherwise could 
be the basis for a finding of disability and before the date of any 
notice of determination or decision making a finding of disability. 
These revisions, which do not represent a change in practice, are based 
on our interpretation of the duration requirement of section 
223(d)(1)(A) of the Act and clarify the issues raised by the courts in 
McDonald v. Bowen, 800 F.2d 153 (7th Cir. 1986), amended on rehearing, 
818 F.2d 559 (7th Cir. 1987), Walker v. Secretary of Health and Human 
Services, 943 F.2d 1257 (10th Cir. 1991), and Newton v. Chater, 92 F.3d 
688 (8th Cir. 1996). We have issued acquiescence rulings for each of 
these cases, and do not currently plan to rescind the acquiescence 
rulings. (See AR 88-3(7), McDonald v. Bowen, Social Security Rulings, 
Cumulative Edition, 1988, p. 115, and 55 FR 28302, March 31, 1988; AR 
92-6(10), Walker v. Secretary of Health and Human Services, Social 
Security Rulings, Cumulative Edition, 1992, p. 91, and 57 FR 43007, 
September 17, 1992; and AR 98-1(8), Newton v. Chater, 63 FR 9037, 
February 23, 1998.)
    The trial work period is a period during which a person who becomes 
entitled to title II disability benefits may test his or her ability to 
work and still be considered disabled. Under section 222(c)(3) of the 
Act, the trial work period begins with the month an individual 
``becomes entitled'' to title II disability benefits and generally ends 
after 9 months of work within a 60-consecutive-month period whether or 
not the 9 months are consecutive. Section 222(c) provides that any 
services rendered during the trial work period may not be considered in 
determining whether ``disability has ceased'' during that period.
    In order to be found disabled under section 223(d)(1)(A), an 
individual must be unable to engage in any substantial gainful activity 
by reason of a medically determinable physical or mental impairment 
which can be expected to result in death or ``which has lasted or can 
be expected to last for a continuous period of not less than 12 
months.'' Under our longstanding interpretation of this provision, as 
reflected in SSR 82-52, the duration requirement to establish 
disability will not be met and a disability claim will be denied based 
on evidence that, within 12 months after the onset of an impairment 
which prevented substantial gainful activity and before we have issued 
any notice of determination or decision finding disability, the 
impairment no longer prevents substantial gainful activity. Under these 
circumstances, it is not necessary to determine whether earlier in the 
12-month period the impairment was expected to prevent the performance 
of SGA for 12 months. We determine whether an impairment is expected to 
prevent substantial gainful activity for 12 months only when the claim 
is being adjudicated within 12 months after the onset of the person's 
inability to work and the evidence shows that the impairment currently 
prevents substantial gainful activity. We believe that Congress 
provided that disability can be found based on an impairment which 
``can be expected to last'' 12 months simply to provide a means for us 
to adjudicate disability claims without having to wait 12 months from 
onset, rather than to permit claims to be allowed in the face of 
specific evidence that the claimant's impairment did not, in fact, 
prevent him or her from engaging in substantial gainful activity for 12 
continuous months.
    Because section 222(c) provides that a trial work period shall 
begin with the month in which a person becomes entitled to title II 
disability benefits, a claimant who does not become entitled to 
disability benefits cannot receive a trial work period. Under our 
interpretation of the duration requirement, a person cannot be found to 
be under a disability if he or she performs work demonstrating the 
ability to perform substantial gainful activity within 12 months after 
onset and before we have issued any notice of determination or decision 
finding disability. Because the person cannot become entitled to 
disability benefits in this situation, there can be no trial work 
period. On the other hand, if a claimant returns to work before we have 
made a determination or decision finding disability, but more than 12 
months from onset, the duration requirement may be satisfied (unless it 
is not satisfied for some other reason, such as medical improvement 
less than 12 months after onset), the claimant may become entitled to 
benefits, and the work may be protected by the trial work period even 
though the work began prior to a finding of disability.
    We have made several changes in Sec. 404.1592(d)(1) and (2), which 
describe situations in which an individual is and is not entitled to a 
trial work period. We revised paragraph (d)(1) from the proposed rule 
by replacing ``receiving'' with ``entitled to.'' We made this change in 
order to clarify, consistent with our discussion in the preambles to 
both the proposed rules and these final rules, that a person may be 
awarded a trial work period as part of the adjudication of an initial 
application when he or she returns to work more than 12 months from 
onset, but prior to the adjudication and prior to the receipt of any 
disability benefits. We also made nonsubstantive changes to paragraphs 
(d)(1) and (d)(2)(i) for greater consistency between these two 
paragraphs and made other slight technical changes to paragraph

[[Page 42775]]

(d)(2) from the proposed rule for additional clarity. None of these 
revisions is intended as a change in practice. As in the NPRM, we 
deleted the rule in prior paragraph (d)(2)(ii) which stated that an 
individual is not entitled to a trial work period if he or she is 
receiving disability insurance benefits in a second period of 
disability for which a waiting period was not required. This deletion 
reflects section 5112 of Pub. L. 101-508.
    As in the NPRM, we added new paragraphs (d)(2)(ii), and 
(d)(2)(iii), and (d)(2)(iv) to Sec. 404.1592 specifying additional 
circumstances in which an individual will not be entitled to a trial 
work period. Final paragraph (d)(2)(ii) provides that an individual who 
performs work demonstrating the ability to engage in substantial 
gainful activity during any required waiting period will not be 
entitled to a trial work period. Paragraph (d)(2)(iii) incorporates the 
provision, discussed above in this preamble, that explains that an 
individual who performs work demonstrating the ability to engage in 
substantial gainful activity within 12 months after onset and before 
the date of any notice of determination or decision finding disability 
will also not be entitled to a trial work period. Both of these 
provisions were in the NPRM, although we did make several minor 
clarifications to the language we proposed for paragraph (d)(2)(iii): 
We changed the word ``which'' to ``that'' and we expanded the word 
``decision'' to the phrase ``determination or decision.'' The latter 
was a technical change made for consistency with Sec. 404.901, which 
provides that the words ``determination'' and ``decision'' are terms of 
art in our program applicable to initial and reconsideration 
determinations and administrative law judge or Appeals Council 
decisions, respectively. The revision merely rectifies an unintentional 
omission in the NPRM and will make clear that these rules apply at all 
levels of the administrative review process. Finally, we made a 
revision to clarify that a person may be entitled to a trial work 
period if he or she returns to substantial gainful activity within 12 
months of onset and after receiving a notice of a determination or 
decision finding that he or she is disabled even in the relatively 
unusual situation in which that notice precedes the notice of a 
determination or decision awarding him or her title II disability 
benefits.
    Final Sec. 404.1592(d)(2)(iv) clarifies our rules, consistent with 
current Sec. 404.1592(e), that an individual cannot be entitled to a 
trial work period for any month prior to the month he or she files an 
application for disability benefits. We revised final 
Sec. 404.1592(d)(2)(iv) from the language we proposed in the NPRM to 
avoid a possible interpretation we had not intended that might have 
precluded trial work periods for some individuals who should be 
entitled to trial work periods. We explain our reasons for this 
revision in more detail in the public comments section of this 
preamble.
    We revised Sec. 404.1592(e) to reflect a provision of section 5112 
of Pub. L. 101-508, the Omnibus Budget Reconciliation Act of 1990, 
which provides that one of the conditions under which the trial work 
period will end is the 9th month within a period of 60 consecutive 
months if that 9th month is after December 1991. Prior to this 
statutory change, the trial work period would end after 9 service 
months no matter when they were completed.
    We amended Sec. 404.1592a to clarify that the earnings averaging 
and unsuccessful work attempt criteria do not apply in determining 
whether to pay benefits for any month during or after the reentitlement 
period after disability has been determined to have ceased because of 
the performance of substantial gainful activity. Those criteria do 
apply during and after the reentitlement period in determining whether 
disability has ceased due to the performance of substantial gainful 
activity.
    Based on several public comments, we revised the proposed rules to 
clarify our intent, especially in the provisions of Sec. 404.1592a(a). 
These amendments reflect and clarify our interpretations in SSR 83-35 
and SSR 84-25. They also clarify the averaging methodology issue 
addressed in Conley v. Bowen, 859 F.2d 261 (2d Cir. 1988). As a result 
of these clarifications to our regulations, we are rescinding the 
Conley v. Bowen Acquiescence Ruling, AR 93-2(2). Other final rules also 
provide cross-references to Sec. 404.1592a in the explanations of the 
averaging and unsuccessful work attempt policies contained in 
Sec. Sec. 404.1574(c), 404.1574a, and 404.1575(d).
    These regulations also reflect section 9010 of Pub. L. 100-203, the 
Omnibus Budget Reconciliation Act of 1987, which extended, as of 
January 1, 1988, the reentitlement period from 15 months to 36 months. 
During this period, the title II disability benefits of an individual 
whose benefits are stopped because of substantial gainful activity may 
be reinstated without the need to file a new application if his or her 
work falls below the substantial gainful activity level as long as the 
individual continues to have a ``disabling impairment'' as defined in 
Sec. 404.1511 of our regulations. This statutory change is reflected in 
amendments to Sec. Sec. 404.321, 404.325 and 404.1592a.
    Pub. L. 99-643, the Employment Opportunities for Disabled Americans 
Act, required a number of changes in the way we handle supplemental 
security income (SSI) cases under title XVI when a disabled person 
eligible for SSI benefits works. Certain SSI recipients who work 
despite otherwise disabling impairments and begin to earn amounts that 
would ordinarily represent substantial gainful activity will not have 
their earnings considered when determining whether they continue to be 
disabled. Pursuant to section 4 of Pub. L. 99-643, the trial work 
period and the reentitlement period no longer apply in SSI disability 
cases. Accordingly, we have deleted Sec. Sec. 416.973(f), 
416.976(f)(2), 416.992, 416.992a, and 416.994(b)(3)(v), (b)(5)(i), the 
first paragraph of (b)(6)(i), (b)(6)(i)(D), and (b)(6)(ii). We have 
revised Sec. Sec. 416.901(m), 416.991, and 416.1331(a) by removing 
references to the trial work period and reentitlement period. (The 
rules for continuing disability in Sec. 416.994a for children under SSI 
did not need modification because we took these changes in the law into 
account when we first promulgated that regulation. See 56 FR 5534 
(February 11, 1991).) A substantial gainful activity test is still 
necessary to establish an individual's initial eligibility for SSI 
benefits based on disability.
    Finally, we made a number of minor changes to conform the text of 
the regulations in part 404 and part 416, for consistency, technical 
accuracy, and to comply with Executive Order 12866 and the President's 
memorandum dated June 1, 1998, which requires us to write all rules in 
``plain language.'' None of these changes is intended to be a change in 
practice.

Public Comments on Notice of Proposed Rulemaking

    When we published the NPRM in the Federal Register on March 6, 1995 
(60 FR 12166), we provided interested parties 60 days to submit 
comments. We received comments from 10 individuals and organizations, 
including attorneys and organizations representing the interests of 
individuals with mental impairments. We considered carefully the 
comments we received on the proposed rules in publishing these final 
regulations.
    As noted at the beginning of this preamble, we decided not to 
include in these final regulations the changes

[[Page 42776]]

reflected in proposed Sec. Sec. 404.1574(a)(3)-(6) and 416.974(a)(3)-
(6). We have retained, without change, existing 
Sec. Sec. 404.1574(a)(3) and 416.974(a)(3). For these reasons, we have 
not responded to the comments we received on the proposed revisions 
that we have withdrawn.
    Also, there were a few comments that were outside the scope of the 
NPRM and these final rules. Some commenters provided recommendations 
for revising our overall work incentive provisions or changing the 
substantial gainful activity amounts or revising a number of other 
specific provisions in our rules that were not the subject of the 
proposed rules. Although we did not summarize or address these comments 
below because they are outside the scope of these final rules, we have 
forwarded them to the appropriate SSA components for consideration.
    Also, in a separate regulatory action, we published final rules in 
the Federal Register on April 15, 1999 (64 FR 18566 and 64 FR 22903 
April 28, 1999) to increase from $500 to $700 the average monthly 
earnings guidelines used to determine whether work done by a non-blind 
individual is substantial gainful activity. The change was effective 
July 1, 1999.
    The rest of the comments, which we received on the NPRM and our 
responses to the comments, are set forth below. Although we condensed, 
summarized, or paraphrased the comments, we believe we have expressed 
the views accurately and have responded to all of the relevant issues 
raised.

General Comments

    Comment: One commenter was concerned about what appeared to be a 
``negative tone'' and ``clear efforts to 'tighten up' the benefits of 
work incentives'' throughout the proposed rules. Another commenter, who 
identified herself as a disability beneficiary who has been attempting 
to work, commented that the proposed rules reflected, though perhaps 
not sufficiently, her experiences, and praised the proposal to 
recognize some factors that ``truly detract from'' substantial gainful 
activity.
    Response: It was certainly not our intent to give the impression 
that we discourage the attempts of our beneficiaries who want to work 
to gain employment or that we were ``tightening up'' on beneficiaries'' 
efforts to try to work. To the contrary, we are supporting on several 
fronts the efforts of our beneficiaries who want to work to gain 
employment. Our only intent was to update and clarify our existing 
rules. Therefore, as we made further changes in the final rules in 
response to the comments, we were mindful of these overall comments and 
tried to avoid giving the impression that the first commenter received.

Specific Comments

Section 404.321  When a Period of Disability Begins and Ends

    Comment: One commenter recommended that we revise 
Sec. 404.321(c)(3) more substantively than in the proposed rules, in 
which we proposed only to update the language to delete the reference 
to the ``15-month'' reentitlement period. The commenter suggested that 
the regulation should be revised to clarify that payment status may end 
during the reentitlement period, but that a period of disability cannot 
end due to substantial gainful activity before the end of the 
reentitlement period, and to make Sec. 404.321 consistent with proposed 
Sec. 404.325.
    Response: We did not adopt the comment. The ``clarification'' 
suggested by the commenter would have changed the meaning of the 
regulation and our intent, which is to provide that a ``period of 
disability'' under section 216 of the Act may end during the 
reentitlement period, as required by the Act. Section 216(i)(2)(D) of 
the Act provides that a period of disability will end with the close of 
whichever of several months is the earliest. One such month listed in 
section 216(i)(2)(D) is ``the month preceding * * * the first month for 
which no benefit is payable by reason of section 223(e), where no 
benefit is payable for any of the succeeding months during the 36-month 
period referred to in such section [i.e., the reentitlement period].'' 
Thus, Sec. 404.321(c)(3) reflects section 216(I)(2)(D) of the Act. 
Section 404.325 reflects the provision of section 223(a)(1) of the Act, 
which defines the ``termination month'' for purposes of determining 
when entitlement to disability insurance benefits terminates. In some 
cases, entitlement to a period of disability and entitlement to 
disability insurance benefits may end simultaneously with the month 
preceding the termination month. However, under the Act, entitlement to 
a period of disability will end with an earlier month if the above-
quoted provision of section 216(I)(2)(D) applies.

Section 404.325  The Termination Month

    Comment: One commenter noted that the examples in the proposed 
rules used dates in the past, thereby showing only ``retroactive'' 
cessations well in the past.
    Response: We adopted the comment. We changed the dates in 
Sec. 404.325 and throughout the final rules to be more current. 
However, it should be understood that with the passage of time, these 
dates will also fall farther and farther in the past.
    Comment: The same commenter, and several others, suggested that we 
revise Sec. 404.325 to eliminate the possibility of retroactive 
cessations of disability and disability benefit payments under title II 
based on substantial gainful activity. One suggested that we not cease 
the payment of benefits under these circumstances earlier than the 
month we send the beneficiary a notice stating that cash benefits are 
being stopped. Another suggested that we not retroactively cease 
disability or cash benefits based on work and earnings at the 
substantial gainful activity level unless the person fails to report 
work and earnings to us timely.
    Response: We did not adopt the comments. Section 404.325 does not 
deal specifically with the determination as to when a title II 
beneficiary's disability ceases due to the performance of substantial 
gainful activity. That determination is made under the provisions of 
Sec. Sec. 404.1594(d)(5), (g)(3) and (g)(4) of the regulations. As 
pertinent here, these provisions of the regulations, which are based on 
section 223(d)(4) and (f) of the Act, provide that we will find that an 
individual's disability ceased in the month in which the individual 
demonstrated the ability to engage in substantial gainful activity 
following completion of a trial work period, or if the individual is 
not entitled to a trial work period, in the month in which the 
individual does substantial gainful activity.
    Section 404.325 reflects the provisions of section 223(a)(1) of the 
Act, as well as the parallel provision of section 202(d), (e) and (f) 
of the Act, which define the ``termination month'' for the purpose of 
prescribing when entitlement to title II benefits based on disability 
ends. In the absence of the occurrence of another event specified in 
the Act that requires the termination of entitlement to benefits, the 
aforementioned provisions of the Act provide that, subject to section 
223(e) of the Act (discussed below), entitlement to title II benefits 
based on disability shall end with the month preceding the termination 
month. (See Sec. Sec. 404.316, 404.337 and 404.352.) Consistent with 
the provisions of 202(d), (e) and (f) and 223(a)(1) of the Act, 
Sec. 404.325 provides that for an individual who completes a trial work 
period and continues to have

[[Page 42777]]

a disabling impairment, the termination month will be the third month 
following the earliest month in which the individual performs 
substantial gainful activity or is determined able to perform 
substantial gainful activity, but that in no event will the termination 
month under these circumstances be earlier than the first month after 
the end of the reentitlement period described in Sec. 404.1592a. 
Because entitlement to disability benefits ends with the month 
preceding the termination month, we cannot pay benefits for months 
after the month preceding the termination month. This is so even if the 
termination month occurred in the past. In addition, section 223(e)(1) 
states: ``No benefit shall be payable * * * for any month, after the 
third month, in which [the individual] engages in substantial gainful 
activity during the 36-month period following the end of (the 
individual's) trial work period * * *.'' Because the law specifies the 
month(s) for which benefits are not payable during the reentitlement 
period (i. e., any month, after the third month, in which the 
beneficiary engages in substantial gainful activity), an individual 
cannot be paid benefits for any such nonpayment month(s), even if it 
occurred in the past.
    Comment: One commenter did not understand the language of the first 
example in proposed Sec. 404.325 and suggested revisions to clarify it.
    Response: We adopted the comment. However, the language recommended 
by the commenter was inaccurate, so we did not use the exact language 
the commenter suggested.
    Comment: One commenter recommended that we delete or clarify the 
proposed second example under Sec. 404.325. The commenter suggested 
that we should not make a finding of substantial gainful activity 
unless the work activity is sustained for 6 months; that is, that we 
should always consider whether the activity is an unsuccessful work 
attempt and average earnings, and never consider a month of work in 
isolation.
    Response: We clarified the example in response to the comment, but 
we did not adopt the other suggestions to clarify the rule in the 
comment. The example in the proposed rule only updated the example in 
the prior rule to reflect the change in duration of the reentitlement 
period from 15 months to 36 months and to use more recent dates. The 
example was correct in that it provided that, under the Act, the 
termination month must be the third month after the earliest month that 
we determine an individual performs substantial gainful activity or 
does work showing the ability to perform substantial gainful activity.
    However, in considering the comment, we believe that the example 
may not have been as clear as it could have been. Our policy, set out 
in final Sec. 404.1592a(a) and explained in more detail below in our 
responses to comments about that section, is that when a person with a 
``disabling impairment'' works, we will first determine whether the 
work activity shows that his or her disability has ceased; i.e., by the 
individual's actual engagement in substantial gainful activity or by 
demonstrating the individual's ability to engage in substantial gainful 
activity. When we consider whether the individual's disability has 
ceased because of work, we do apply our rules regarding unsuccessful 
work attempts and averaging of earnings when they are relevant to the 
determination. This does not mean that we will wait 6 months to see 
whether an individual who has returned to work will be successful; we 
may decide that the earnings in a single month show that the individual 
is engaging in substantial gainful activity or has the ability to do 
so. However, if we have information showing that work was an 
unsuccessful work attempt, we will not decide that the individual's 
disability has ceased because of the work activity.
    Once we have determined that an individual's disability has ceased 
because of work activity, we believe that the Act requires us to 
consider months of work in isolation for purposes of establishing the 
termination month; that is, we consider only what the earnings show for 
the relevant month in which the individual works without regard to 
whether the work could have been an unsuccessful work attempt and 
without averaging the earnings with earnings from other months. 
Therefore, we are not revising the rules as the commenter suggested.
    The second example in proposed and prior Sec. 404.325 presumed that 
we had already determined that the individual engaged in substantial 
gainful activity in the month in which he or she returned to work and 
that disability had ceased. However, based on the comment, we realize 
that it could have been difficult to understand, and we have clarified 
it accordingly. We have also clarified the rules in final 
Sec. 404.1592a(a) in response to this comment and others, as well as 
other provisions throughout these final rules, to make clear when we 
will apply the provisions regarding unsuccessful work attempts and 
averaging of earnings.

Sections 404.1573(c) and 416.973(c)  If Your Work is Done Under Special 
Conditions

    Comment: Two commenters, while agreeing with the policy in the 
proposed rules, suggested that the rules could discourage some 
individuals from trying to work. The commenters suggested a 
reorganization of the paragraph and additional language to be more 
positive and send a more balanced message about work.
    Response: We revised our regulations based on these comments, 
although we did not use all of the specific language proposed by the 
commenters.
    Comment: Several commenters suggested that we expand the list of 
examples of special conditions in Sec. Sec. 404.1573(c) and 416.973(c). 
The suggestions included special assistance from a job coach, 
counselor, or case manager in performing the work, and when the work is 
primarily rehabilitative, the individual obtained the job non-
competitively, or the duration of work was limited because of 
therapeutic considerations. However, one commenter viewed the list of 
examples as exhaustive.
    Response: We did not add examples, but we revised the text of the 
regulations in response to these comments to make clear that the list 
comprises only examples and ``is not limited to'' those examples. We 
decided not to add to the examples because they are fairly general and 
the more specific we make our examples, the more likely our examples 
would be misinterpreted as being exhaustive in nature.
    Comment: One commenter stated that there should be a better, 
clearer distinction made between the examples of special conditions in 
proposed Sec. Sec. 404.1573(c) and 416.973(c) and indicators of 
possible subsidy in proposed Sec. Sec. 404.1574(a) and 416.974(a), or 
that we should indicate how they are related, if they are related.
    Response: As noted above, we decided to withdraw the proposed 
changes reflected in proposed Sec. Sec. 404.1574(a)(3)-(6) and 
416.974(a)(3)-(6), regarding subsidies. We also clarified the 
provisions of Sec. Sec. 404.1573(c) and 416.973(c) in these final 
rules.

Sections 404.1574 and 416.974  Evaluation Guides if You Are an Employee

    Comment: One commenter suggested that in the first sentence under 
proposed Sec. Sec. 404.1574(a)(1) and 416.974(a)(1) we should delete 
the clause ``our primary consideration is the earnings that are derived 
from the work activity'' and that

[[Page 42778]]

we should refocus our consideration away from earnings and onto the 
work activity itself as the clearer indicator of whether substantial 
gainful activity, or the ability to perform substantial gainful 
activity, exists.
    Response: We did not delete the language, but we clarified our 
intent in response to the comment. The final rules now provide that, 
generally, we will first look at the individual's earnings, but we will 
further evaluate the individual's work activity, if appropriate. The 
final rules clarify our longstanding interpretation that substantial 
gainful activity is shown primarily by earnings from work, irrespective 
of the severity of an individual's impairment. However, these rules 
also recognize that there are some circumstances in which we should not 
count all of an individual's earnings. For this reason, a new second 
sentence in paragraph (a)(1) of the final rules provides that we will 
use an individual's earnings to determine whether there is substantial 
gainful activity unless we have information from the individual, his or 
her employer, or others that shows that we should not count all of the 
earnings.
    Comment: One commenter thought that we should not determine that 
work is at the substantial gainful activity level until and unless a 
person earns over the substantial gainful level for a period of at 
least 6 consecutive months.
    Response: We did not adopt the comment. It is reasonable to expect 
that in many instances an individual will demonstrate the ability to 
work at the substantial gainful activity level in fewer than 6 months.

Sections 404.1574(c), 404.1575(d), 416.974(c), and 416.975(d)  The 
Unsuccessful Work Attempt

    Comment: Two commenters thought that it was not clear whether we 
would consider if work was an unsuccessful work attempt at the time of 
an initial application. One commenter noted that it was unclear whether 
we would consider these rules at each point in the appeals process if 
the claimant began to work after he or she filed an application but 
before he or she received a determination or decision on his or her 
appeal.
    Response: We adopted the comments. We revised Secs. 404.1574(c) and 
404.1575(d) to clarify that we will apply the unsuccessful work attempt 
concept when we make an initial determination on an application for 
title II disability benefits and throughout any appeal the individual 
may request and to provide a cross-reference to the provisions of 
Sec. 404.1592a(a). We have revised Sec. 404.1592a(a) to explain when we 
will and will not consider the unsuccessful work attempt concept and 
the provisions for averaging earnings during and after a reentitlement 
period. We did not make similar revisions to Secs. 416.974(c) and 
416.975(d) because we apply the rules in Secs. 416.974 and 416.975 only 
in determining whether an individual is initially eligible for SSI. 
However, we did add sentences to Secs. 404.1574(a), 404.1575(a), 
416.974(a), and 416.975(a) to state expressly that all of the 
provisions of these sections (including the provisions on unsuccessful 
work attempts) apply at the time of the initial determination and 
throughout any appeals in connection with the application.
    Comment: Two commenters suggested that the existing limit on a 
period of substantial gainful activity that may be considered an 
unsuccessful work attempt (i.e., 6 months or less) is too short. They 
suggested that the number of months be increased to at least 9 months 
to be consistent with the 9-month trial work period.
    Response: We did not adopt the comments. The final rules reflect 
our longstanding interpretation in SSR 84-25, and our experience which 
has been that 6 months is a sufficient time period to determine whether 
a work attempt will be unsuccessful. We do not believe that our 
interpretation on unsuccessful work attempts is analogous to the 9-
month trial work period that is provided under a specific provision of 
the Act. For example, the ``6-months or less'' for the unsuccessful 
work attempt refers to a consecutive period of months. The trial work 
period does not require work to be in 9 consecutive months.
    Comment: One commenter requested that we include inappropriate work 
behavior as a basis for an unsuccessful work attempt in 
Secs. 404.1574(c)(4), 404.1575(d)(4), 416.974(c)(4), and 416.975(d)(4). 
The commenter noted that although a person's work product or services 
may be acceptable to an employer or in a business, the behavior may be 
so inappropriate that the individual may lose his or her job or 
business.
    Response: We decided not to add this example because we believe 
that the examples given in our rules are general enough to cover a 
multitude of situations, including inappropriate work behavior due to 
an impairment. Work may be considered unsatisfactory for a number of 
reasons; one such reason is that a person exhibits inappropriate 
behavior with work peers, supervisors or the public to such a degree 
that it is harmful to the business. Unsatisfactory work due to an 
impairment already is included as a situation that may result in an 
unsuccessful work attempt. If an individual's inappropriate behavior at 
work causes him or her to lose the job in 6 months or less, we may 
consider this an unsuccessful work attempt. If the employer tolerates 
the behavior or accommodates the individual by providing special 
circumstances or work conditions, we would evaluate the value of the 
services and earnings to determine whether the services are substantial 
gainful activity.

Sections 404.1574a and 416.974a  When and How we Will Average Your 
Earnings

    Comment: One commenter suggested that we should average earnings 
whenever we decide whether an individual is doing substantial gainful 
activity, including during and after the 36-month reentitlement period. 
Another commenter stated that the proposed language for Sec. 404.1574a 
was unclear with respect to whether averaging applies when deciding 
whether an individual's cash benefits should be terminated during and 
after the reentitlement period.
    Response: We did not adopt the first comment. However, we clarified 
the rules in Sec. 404.1592a in response to both comments to make clear 
when we will average earnings during and after a reentitlement period. 
In addition, in response to other comments, in Sec. 404.1574a we 
updated the example and added a second example to better show when we 
will average earnings during and after a reentitlement period. We will 
apply the rules on averaging earnings when we make an initial 
determination on an application for title II disability or title XVI 
blindness or disability benefits and throughout any appeal the 
individual may request.
    As we explain and clarify in the examples in Secs. 404.1574(a) and 
404.1592a, we will apply the rules on averaging earnings when we 
evaluate the work activity of a title II beneficiary to determine if 
his or her disability has ceased during or after the reentitlement 
period due to the performance of substantial gainful activity. We will 
not average earnings after the first month that we determine an 
individual performed substantial gainful activity during or after the 
reentitlement period. Thus, as we explain in Secs. 404.1574a(d) and 
404.1592a, we will not average a title II beneficiary's earnings in 
determining whether benefits should be paid for any month(s) during or 
after the reentitlement period that occurs after the month that we 
determined that disability ceased because of the

[[Page 42779]]

performance of substantial gainful activity.
    Comment: One commenter stated that the example of averaging did not 
show when earnings could be averaged and asked that such an example be 
included.
    Response: We added a second example which illustrates completion of 
the 9-month trial work period in a period of 10 consecutive months, 
when we will average earnings, and when it is not appropriate for us to 
average earnings.
    Comment: One commenter believed that proposed Sec. 416.974a, for 
averaging earnings when determining whether an individual is eligible 
for SSI disability benefits, was inconsistent with section 1619(a) of 
the Act.
    Response: There is no inconsistency. Section 1619 of the Act 
applies to individuals whom we find eligible based on disability to 
receive benefits for at least 1 month and who begin work at the 
substantial gainful activity level in a subsequent month. We average 
earnings only to determine whether an individual is doing substantial 
gainful activity at the time he or she applies for SSI benefits to 
determine if the individual is eligible for SSI benefits. Once an 
individual is receiving SSI benefits, we do not consider whether he or 
she is engaging in substantial gainful activity to determine whether he 
or she continues to be eligible for benefits, consistent with the 
provisions of section 1619(a).

Section 404.1592(b)  What We Mean by Services

    Comment: One commenter stated that subsidy and impairment-related 
work expenses should be considered to reduce countable earnings when 
determining ``services'' for purposes of counting trial work period 
months.
    Response: Subsidy and impairment-related work expenses are concepts 
which we use to reduce an employee's gross earnings in a month(s) in 
determining whether the work he or she has done or is doing is 
substantial gainful activity. Our regulations which provide for 
subtracting the value of any subsidy from an individual's gross 
earnings in determining whether the individual's earnings show that he 
or she has engaged in substantial gainful activity are based on the 
rulemaking authority granted to the Commissioner of Social Security 
under sections 223(d)(4)(A) and 1614(a)(3)(E) of the Act. These 
sections of the Act provide that the Commissioner ``shall by 
regulations prescribe the criteria for determining when services 
performed or earnings derived from services demonstrate an individual's 
ability to engage in substantial gainful activity.'' Our regulations 
which provide for deducting impairment-related work expenses in 
determining whether an individual's earnings show that he or she has 
engaged in substantial gainful activity are based on provisions of 
these same sections of the Act which specifically require that 
impairment-related work expenses be excluded in determining whether an 
individual is able to engage in substantial gainful activity by reason 
of his or her earnings.
    By contrast, the term ``services'' for purposes of counting trial 
work period months is specifically defined by statute. Section 
222(c)(2) of the Act provides that, for purposes of the trial work 
period, ``the term `services' means activity (whether legal or illegal) 
which is performed for remuneration or gain or is determined by the 
Commissioner of Social Security to be of a type normally performed for 
remuneration or gain.'' Under this definition, activity which is 
performed for remuneration or gain (e.g., wages, pay or profit) 
constitutes ``services'' for purposes of counting trial work period 
months whether or not an individual's earnings are subsidized or the 
individual incurs impairment-related work expenses. Consequently, 
consistent with the definition of ``services'' in section 222(c)(2) of 
the Act, we do not consider subsidies or impairment-related work 
expenses when we determine whether an individual has performed 
``services'' for purposes of counting trial work period months.
    Comment: Another commenter questioned the basis for the proposed 
revision of the fourth sentence of Sec. 404.1592(b). The commenter 
interpreted the existing sentence to mean that we generally do not 
consider certain work, such as work done as therapy or training, to be 
``services'' even if the work is done for remuneration. The commenter 
expressed the view that the proposed revision appeared to represent a 
change in policy in that it would exclude such work from being 
considered ``services'' only if the work is done ``without 
remuneration.''
    Response: The revision of the fourth sentence of Sec. 404.1592(b) 
in these final rules is not a change in interpretation. Rather, it is 
intended to eliminate an ambiguity in the existing language that could 
lead to a misinterpretation of the provision. Because of the ambiguity, 
some, such as the commenter, may have interpreted the existing 
provision in a manner that is inconsistent with the Act and our intent. 
Section 222(c)(2) of the Act provides that work activity is 
``services'' for trial work period purposes if the activity ``is 
performed for remuneration or gain or is determined by the Commissioner 
of Social Security to be of a type normally performed for remuneration 
or gain'' (emphasis added). Consistent with this provision of the Act, 
our longstanding interpretation has been that when an individual 
receives pay or profit in work that is done as therapy or training, we 
count that work as ``services'' for purposes of counting months of a 
trial work period. Conversely, we generally do not consider activity 
that is not performed for pay or profit, and that is done merely as 
therapy or training (or is the kind of activity usually done in a daily 
routine around the house or in self-care), as ``services'' for purposes 
of counting trial work period months. The purpose of the revision in 
these final rules is to clarify this intent.
    Comment: One commenter stated that work activity performed in 
sheltered workshops or other similar environments is ``pre-vocational 
and/or training'' in nature and should not be considered ``services'' 
in determining trial work period months. Other commenters thought that 
Sec. 404.1592(b) should be revised to exclude any activity that is 
``transitional employment'' from being considered ``services'' for 
purposes of counting trial work period months.
    Response: We did not adopt the comments. Whether activity performed 
by an individual constitutes ``services'' for purposes of the trial 
work period is determined on a case-by-case basis in accordance with 
the criteria specified in Sec. 404.1592(b). Consistent with section 
222(c)(2) of the Act, discussed above, Sec. 404.1592(b) defines 
``services'' to mean any activity, whether or not it is substantial 
gainful activity, ``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.'' We use this standard to determine whether work activity 
performed by an individual, including work performed in a sheltered 
workshop or in ``transitional employment,'' constitutes ``services'' 
for purposes of determining when the trial work period has ended. The 
criteria in Sec. 404.1592(b) apply whether the activity is performed in 
competitive employment, in a sheltered workshop, in ``transitional 
employment,'' in some other type of supported or subsidized employment, 
or in any other circumstance.

Section 404.1592(d)  Who Is and Is Not Entitled to a Trial Work Period

    Comment: Several commenters were critical of our proposed revisions 
to clarify that a claimant is not entitled to

[[Page 42780]]

a trial work period when he or she performs work demonstrating the 
ability to perform substantial gainful activity within 12 months after 
the alleged onset of disability and before we have issued any notice of 
determination or decision finding disability. It was contended that 
this policy is based on an ``overly technical'' statutory 
interpretation by SSA and is ``completely arbitrary in its 
application'' because entitlement to a trial work period for similarly 
situated individuals can depend on whether SSA makes a determination on 
their claims before or after they return to work.
    Response: We did not adopt the comments. As noted in the NPRM, the 
revisions we are making clarify, but do not change, our interpretation 
set forth in SSR 82-52. Both the preambles to the NPRM and to these 
final regulations provide a more detailed explanation and justification 
for that longstanding interpretation than does SSR 82-52. As those 
preambles explain, our interpretation is based on the statutory 12-
month duration requirement for establishing disability. We believe that 
our interpretation is a reasonable one that reflects congressional 
intent that disability claims should not be allowed in the face of 
evidence that a claimant's impairment(s) did not prevent substantial 
gainful activity for 12 consecutive months.
    The legislative history of the duration requirement indicates the 
intent of Congress that the disability program not ``result in the 
payment of disability benefits in cases of short-term, temporary 
disability.'' S. Rep. No. 404, 89th Cong. 1st Sess. 98-99, reprinted in 
1965 U.S. Code Cong. & Ad. News 1943, 2038-39. The requirement in the 
statutory definition of disability of an inability to engage in any 
substantial gainful activity by reason of an impairment ``which has 
lasted or can be expected to last for a continuous period of not less 
than 12 months'' can most reasonably be interpreted to mean that the 
time of adjudication is the relevant point of reference. If Congress 
had intended benefits to be awarded based on evidence that a claimant's 
impairment(s) did not in fact prevent substantial gainful activity for 
12 continuous months, but only had been expected to do so at some 
earlier point in the 12-month period, we believe that Congress would 
have provided for a finding of disability based on an impairment(s) 
which was expected to last 12 months, in addition to one which can be 
expected to last 12 months.
    Furthermore, at the time the trial work period provision was 
enacted in 1960, the Act defined disability as the inability to engage 
in substantial gainful activity by reason of an impairment which can be 
expected to result in death or ``to be of long-continued and indefinite 
duration.'' It was not until 1965 that the Act was amended to broaden 
the protection provided by the disability program by replacing the 
quoted language with the current 12-month duration requirement. Given 
the definition of disability in effect in 1960, it appears doubtful 
that Congress intended for the trial work period to be available when a 
claimant had already demonstrated the ability to perform substantial 
gainful activity by returning to work before we issue a determination 
or decision making a finding of disability.
    With respect to the contention that our policy is arbitrary because 
a claimant's entitlement to a trial work period can be affected by the 
amount of time which passes before SSA adjudicates the claim or by when 
the application is filed, we recognize that it is possible for 
different outcomes to occur because of the amount of time needed to 
carefully and correctly adjudicate a particular claim. However, we 
believe that such outcomes on the relatively infrequent, but 
regrettable, occasions in which they occur, are a reasonable 
consequence of a program that was established by Congress in a way that 
would implement and accommodate two separate goals: (1) The disability 
program should not result in the payment of disability benefits in 
cases of short-term, temporary disability, and (2) claimants whose 
impairments will prevent them from being able to engage in substantial 
gainful activity for at least a year should not be required to meet 
this duration requirement by waiting the full year before they can be 
awarded and receive benefits. As the program was established, both 
these goals are accomplished except in the situation in which SSA 
awards benefits based on a finding that a claimant's inability to 
engage in substantial gainful activity can be expected to last for at 
least 12 months, and that prediction later turns out to be incorrect. 
While an award of benefits in this situation could be viewed as 
inconsistent with the first goal, such award is necessary in order to 
permit SSA to adjudicate disability claims and award benefits without 
having to wait 12 months from onset.
    Finally, some claimants can seek relief under the unsuccessful work 
attempt policy, which permits benefits to be awarded to a claimant who 
attempts to return to work if that work attempt turns out to be 
``unsuccessful'' under the provisions of final Sec. Sec. 404.1574(c) 
and 404.1575(d) which are discussed in greater detail earlier in this 
preamble. We will disregard work attempts lasting 6 months or less that 
do not demonstrate the ability to perform sustained substantial gainful 
activity even if the unsuccessful work attempt occurs prior to 
adjudication of the claim for benefits.
    Comment: One commenter was critical of our proposed revisions to 
Sec. 404.1592(d) that were intended to clarify and be consistent with 
the provisions of Sec. 404.1592(e). The commenter expressed the opinion 
that ``(t)he proposed regulation is arbitrary because it treats persons 
differently, for trial work period purposes, based on the fortuity of 
when they apply for benefits.''
    Response: The proposed revisions and the final rules are consistent 
with our longstanding regulations which, since 1968, have provided that 
a trial work period may not begin prior to the month in which the 
application for benefits is filed. See Sec. 404.1592(e). These 
regulations are based on section 222(c) of the Act, which provides that 
a trial work period begins with the month in which a person becomes 
entitled to disability benefits, and section 223(a)(1)(C) of the Act, 
which provides that, in order for a person to become entitled to 
disability benefits, he or she must have filed an application for 
benefits.
    However, in reviewing Sec. 404.1592(d)(2)(iv) of the proposed 
regulations in connection with these comments, we realized that the 
language we proposed could be misinterpreted to be more restrictive 
than we had intended. The proposed rule provided that an individual 
would not be entitled to a trial work period if he or she performed 
work demonstrating the ability to engage in substantial gainful 
activity at any time after the onset of the impairment(s) which 
prevented the individual from engaging in substantial gainful activity 
but before the month the individual filed his or her application for 
disability benefits. Taken literally, this could have prevented us from 
establishing trial work periods for some individuals we did not mean to 
exclude. For example, taken literally, the language could have been 
misinterpreted to exclude individuals whose impairments were not 
disabling at the time of their ``onset'' even though they were the 
impairments ``which'' ultimately prevented the individuals from 
working. It might have also been misinterpreted to exclude individuals 
with episodic impairments, such as mental disorders, that permit them 
to work intermittently, who might have worked in the past, and who 
might be

[[Page 42781]]

entitled to a trial work period for months after they have filed 
applications. Therefore, we revised the final rules to state more 
clearly our policy that we will not grant a trial work period for any 
month prior to the month of application.

Section 404.1592(e)  When the Trial Work Period Begins and Ends

    Comment: One commenter recommended that individuals who completed 
the trial work periods before January 1992 should be ``grandfathered 
in.'' The commenter stated that individuals who completed their trial 
work period prior to January 1992 are not covered under the provisions 
of the law which state that the trial work period must be completed 
within a consecutive 60-month period. Under provisions effective 
January 1992, trial work months for the period prior to the 60-month 
period are not counted in the current 60-month period. Another 
commenter suggested that we should allow multiple trial work periods 
within the same period of disability. Another commenter suggested that 
we consider a trial work period completed only when 9 consecutive 
months of trial work are performed.
    Response: Our longstanding interpretation has been that the 
statutory requirement for counting the 9 trial work period months in a 
consecutive 60-month period, which took effect January 1, 1992, does 
not apply to beneficiaries who complete their trial work period before 
that date. We believe this policy is consistent with and supported by 
the statutory language.

Section 404.1592a  The Reentitlement Period

    Comment: One commenter recommended that we clarify Sec. 404.1592a 
to indicate when we would apply the policies regarding the unsuccessful 
work attempt in the reentitlement period. The commenter also asked that 
we include an example.
    Response: As already noted in response to this and other comments, 
we have revised Sec. 404.1592a(a) in these final rules to explain when 
we will and will not consider the unsuccessful work attempt and 
averaging policies during and after the reentitlement period. We did 
not provide an example because we believe the revised provisions are 
sufficiently clear.
    Beginning with the month following the 9th trial work period month, 
if an individual continues to have a disabling impairment, he or she is 
entitled to a 36-month reentitlement period. During the reentitlement 
period, an individual may continue to test his or her ability to work. 
At any time after the trial work period ends and during and after the 
reentitlement period, we will evaluate any work and earnings to 
determine if it is substantial gainful activity and requires a 
cessation of disability status. To make this decision, we will, if 
applicable, average the work and earnings over the actual period of 
time that the individual worked. This may include work performed during 
the trial work period or during or after the reentitlement period. We 
will also consider whether the work was an unsuccessful work attempt 
and if there were any impairment-related work expenses, subsidy, 
special conditions or for self-employed individuals, unincurred 
business expenses. In no event will the cessation of disability based 
on substantial gainful activity be earlier than the first month after 
the end of the 9-month trial work period.
    If we determine that disability ceased based on substantial gainful 
activity, then entitlement to disability benefits will terminate as of 
the third month following the month we find that the individual began 
substantial gainful activity, but in no event earlier than the first 
month after the end of the 36-month reentitlement period. We will 
evaluate all work activity that occurs in or after the third month 
following the month that we determine disability ceased based on 
substantial gainful activity on a month-by-month basis. This is because 
an individual is due payment for the month we find his or her 
disability ceased based on substantial gainful activity and the two 
succeeding months, whether or not the individual performs substantial 
gainful activity during those succeeding months. After those three 
months, an individual is not due benefits for any month he or she 
performs substantial gainful activity. However, he or she is due 
benefits for any month during the reentitlement period in which he or 
she does not engage in substantial gainful activity. We do not apply 
the provisions regarding an unsuccessful work attempt in determining 
whether to pay benefits for any month after the month disability ceased 
based on substantial gainful activity. Also, we do not average 
earnings. If we did, this could result in paying an individual less 
than what he or she is due. Likewise, after the reentitlement period 
ends, if we have previously determined that disability ceased based on 
substantial gainful activity during the reentitlement period, we must 
determine substantial gainful activity based on work and earnings on a 
month-by-month basis. When we calculate substantial gainful earnings on 
a month-by-month basis, we continue to consider any impairment-related 
work expenses, subsidy, and special conditions and for self-employed 
individuals, unincurred business expenses. If an individual's 
disability benefits were reinstated during the reentitlement period, 
they will terminate effective with the first month he or she does 
substantial gainful activity after the reentitlement period. This is 
because the individual has already demonstrated the ability to perform 
substantial gainful activity. We believe this longstanding 
interpretation is consistent with sections 223(a)(1) and 223(e)(1) of 
the Act. The intent of the 36-month reentitlement period is to 
encourage disability beneficiaries to continue working after the 9-
month trial work period and after demonstrating the ability to do 
substantial gainful activity.
    Comment: One commenter suggested eliminating the reentitlement 
period time limit (creating an unending reentitlement period) to make 
it easier for title II beneficiaries to receive benefits again after 
their benefits end because they did substantial gainful activity.
    Response: We did not adopt the comment. The law specifically 
provides a 36-month limit to the reentitlement period. To make the 
changes suggested would require a change in the law.

Regulatory Procedures

    Pursuant to section 702(a)(5) of the Act, 42 U.S.C. 902(a)(5), the 
Social Security Administration follows the Administrative Procedure Act 
(APA) rulemaking procedures specified in 5 U.S.C. 553 in the 
development of its regulations. The APA provides exceptions to its NPRM 
procedures when an agency finds that there is good cause for dispensing 
with such procedures on the basis that they are impracticable, 
unnecessary, or contrary to the public interest. For the reasons that 
follow, we have determined that under 5 U.S.C. 553(b)(B), good cause 
exists for waiving the NPRM procedures with respect to the following 
changes made to our regulations: (1) The changes made to 
Sec. Sec. 404.1571 and 416.971 to reflect the provisions of sections 
201(a)(4)(A) and 201(b)(4)(A) of Pub. L. 103-296; (2) the changes made 
to Sec. 404.1592(b) to reflect the provisions of section 201(a)(4)(B) 
of Pub. L. 103-296; and (3) the changes made to Sec. 404.1584(d) to 
reflect the provisions of section 102 of Pub. L. 104-121.
    Sections 201(a)(4)(A) and 201(b)(4)(A) of Pub. L. 103-296 amended 
sections 223(d)(4) and 1614(a)(3) of the Act, respectively, to provide 
that we shall

[[Page 42782]]

make determinations of substantial gainful activity with respect to 
services performed by an individual ``without regard to the legality'' 
of the services. Section 201(a)(4)(B) of Pub. L. 103-296 added the 
parenthetical phrase ``(whether legal or illegal)'' into the definition 
of ``services'' in section 222(c)(2) of the Act to provide that for 
trial work purposes `` `services' means activity (whether legal or 
illegal) which is performed for remuneration or gain or is determined 
by the Commissioner of Social Security to be of a type normally 
performed for remuneration or gain.'' These amendments to the Act 
became effective on August 15, 1994, the date Pub. L. 103-296 was 
enacted. Section 102 of Pub. L. 104-121, enacted March 29, 1996, 
amended section 223(d)(4)(A) of the Act to provide that, for years 
after 1995, an increase in the substantial gainful activity amount for 
blind individuals under title II of the Act depends only on increases 
in the national average wage index.
    Because the language of the statutory provisions added by these 
amendments is clear and does not provide for any discretionary policy, 
we believe that the use of notice-and-comment rulemaking procedures for 
the issuance of rules to reflect these statutory provisions is 
unnecessary. On this basis, good cause exists for dispensing with such 
procedures under the APA. Accordingly, we find that prior notice and 
comment are unnecessary with respect to these specific changes made to 
the rules.

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB), 
and OMB has determined that these rules meet the criteria for a 
significant regulatory action under Executive Order 12866. Thus, OMB 
has reviewed these rules. We believe that changes in the number of 
individuals affected by these rules will be minimal and any associated 
costs will be cost neutral. We believe that based on these 
clarifications in our rules, any increase in the number of individuals 
found performing substantial gainful activity and therefore not 
disabled or no longer disabled under the Act will be offset by 
individuals who are working and found not performing substantial 
gainful activity and disabled because of certain adjustments that we 
make in calculating earnings for substantial gainful activity purposes. 
With these rules, we provide clarifications and better descriptions of 
our interpretations of the Act. We believe this will assist SSA 
personnel in providing our applicants and beneficiaries with more 
accurate information about SSA's work incentives (and thus, better 
service). Also, we believe, that people with disabilities who are 
working or who want to work will be better able to understand the 
employment support provisions and better perform their benefits and 
career planning in attempting to gain and keep employment, join 
America's mainstream and become more independent.

Regulatory Flexibility Act

    We certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
affect only individuals who are applying for or receiving title II or 
title XVI benefits because of disability or blindness. Therefore, a 
regulatory flexibility analysis, as provided in the Regulatory 
Flexibility Act, as amended, is not required.

Paperwork Reduction Act

    These final rules impose no additional reporting or recordkeeping 
requirements subject to Office of Management and Budget clearance. If 
you have any questions on this issue, write to the Social Security 
Administration, ATTN: Reports Clearance Officer, 1-A-21 Operations 
Building, Baltimore, Maryland 21235-6401, and to the Office of 
Management and Budget, Paperwork Reduction Project (0960-0483), 
Washington, DC 20503.

(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 
recordkeeping requirements, Social Security.

20 CFR Part 416

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

    Dated: March 17, 2000.
Kenneth S. Apfel,
Commissioner of Social Security.

    For the reasons set forth in the Preamble, subparts D and P of part 
404 and subparts I and M of part 416 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 D--[Amended]

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

    Authority: Secs. 202, 203 (a) and (b), 205(a), 216, 223, 225, 
228(a)-(e), and 702(a)(5) of the Social Security Act (42 U.S.C. 402, 
403 (a) and (b), 405(a), 416, 423, 425, 428(a)-(e), and 902(a)(5)).


    2. Section 404.321 is amended by revising paragraph (c)(3) to read 
as follows:


Sec. 404.321  When a period of disability begins and ends.

* * * * *
    (c) * * *
* * * * *
    (3) If you perform substantial gainful activity during the 
reentitlement period described in Sec. 404.1592a, the last month for 
which you received benefits.
* * * * *

    3. Section 404.325 is revised to read as follows:


Sec. 404.325  The termination month.

    If you do not have a disabling impairment, your termination month 
is the third month following the month in which your impairment is not 
disabling even if it occurs during the trial work period or the 
reentitlement period. If you continue to have a disabling impairment 
and complete 9 months of trial work, your termination month will be the 
third month following the earliest month you perform substantial 
gainful activity or are determined able to perform substantial gainful 
activity; however, in no event will the termination month under these 
circumstances be earlier than the first month after the end of the 
reentitlement period described in Sec. 404.1592a.

    Example 1: You complete your trial work period in December 1999. 
You then work at the substantial gainful activity level and continue 
to do so throughout the 36 months following completion of your trial 
work period and thereafter. Your termination month will be January 
2003, which is the first month in which you performed substantial 
gainful activity after the end of your 36-month reentitlement 
period. This is because, for individuals who have disabling 
impairments (see Sec. 404.1511) and who work, the termination month 
cannot occur before the first month after the end of the 36-month 
reentitlement period.
    Example 2: You complete your trial work period in December 1999, 
but you do not do work showing your ability to do substantial

[[Page 42783]]

gainful activity during your trial work period or throughout your 
36-month reentitlement period. In April 2003, 4 months after your 
reentitlement period ends, you become employed at work that we 
determine is substantial gainful activity, considering all of our 
rules in Sec. Sec. 404.1574 and 404.1574a. Your termination month 
will be July 2003; that is, the third month after the earliest month 
you performed substantial gainful activity.

Subpart P--[Amended]

    4. 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.

    5. Section 404.1571 is amended by revising the first sentence to 
read as follows:


Sec. 404.1571  General.

    The work, without regard to legality, that you have done during any 
period in which you believe you are disabled may show that you are able 
to work at the substantial gainful activity level. * * *

    6. Section 404.1573 is amended by revising paragraph (c) to read as 
follows:


Sec. 404.1573  General information about work activity.

* * * * *
    (c) If your work is done under special conditions. The work you are 
doing may be done under special conditions that take into account your 
impairment, such as work done in a sheltered workshop or as a patient 
in a hospital. If your work is done under special conditions, we may 
find that it does not show that you have the ability to do substantial 
gainful activity. Also, if you are forced to stop or reduce your work 
because of the removal of special conditions that were related to your 
impairment and essential to your work, we may find that your work does 
not show that you are able to do substantial gainful activity. However, 
work done under special conditions may show that you have the necessary 
skills and ability to work at the substantial gainful activity level. 
Examples of the special conditions that may relate to your impairment 
include, but are not limited to, situations in which--
    (1) You required and received special assistance from other 
employees in performing your work;
    (2) You were allowed to work irregular hours or take frequent rest 
periods;
    (3) You were provided with special equipment or were assigned work 
especially suited to your impairment;
    (4) You were able to work only because of specially arranged 
circumstances, for example, other persons helped you prepare for or get 
to and from your work;
    (5) You were permitted to work at a lower standard of productivity 
or efficiency than other employees; or
    (6) You were given the opportunity to work despite your impairment 
because of family relationship, past association with your employer, or 
your employer's concern for your welfare.
* * * * *

    7. Section 404.1574 is amended by revising paragraphs (a), 
introductory text, (a)(1), (a)(2), (b)(1), (b)(2), introductory text, 
(b)(3), introductory text, (b)(4), and (b)(6), introductory text, and 
by adding new paragraphs (c) and (d) to read as follows:


Sec. 404.1574  Evaluation guides if you are an employee.

    (a) We use several guides to decide whether the work you have done 
shows that you are able to do substantial gainful activity. If you are 
working or have worked as an employee, we will use the provisions in 
paragraphs (a) through (d) of this section that are relevant to your 
work activity. We will use these provisions whenever they are 
appropriate, whether in connection with your application for disability 
benefits (when we make an initial determination on your application and 
throughout any appeals you may request), after you have become entitled 
to a period of disability or to disability benefits, or both.
    (1) Your earnings may show you have done substantial gainful 
activity. Generally, in evaluating your work activity for substantial 
gainful activity purposes, our primary consideration will be the 
earnings you derive from the work activity. We will use your earnings 
to determine whether you have done substantial gainful activity unless 
we have information from you, your employer, or others that shows that 
we should not count all of your earnings. The amount of your earnings 
from work you have done (regardless of whether it is unsheltered or 
sheltered work) may show that you have engaged in substantial gainful 
activity. Generally, if you worked for substantial earnings, we will 
find that you are able to do substantial gainful activity. However, the 
fact that your earnings were not substantial will not necessarily show 
that you are not able to do substantial gainful activity. We generally 
consider work that you are forced to stop or to reduce below the 
substantial gainful activity level after a short time because of your 
impairment to be an unsuccessful work attempt. Your earnings from an 
unsuccessful work attempt will not show that you are able to do 
substantial gainful activity. We will use the criteria in paragraph (c) 
of this section to determine if the work you did was an unsuccessful 
work attempt.
    (2) We consider only the amounts you earn. When we decide whether 
your earnings show that you have done substantial gainful activity, we 
do not consider any income that is not directly related to your 
productivity. When your earnings exceed the reasonable value of the 
work you perform, we consider only that part of your pay which you 
actually earn. If your earnings are being subsidized, we do not 
consider the amount of the subsidy when we determine if your earnings 
show that you have done substantial gainful activity. We consider your 
work to be subsidized if the true value of your work, when compared 
with the same or similar work done by unimpaired persons, is less than 
the actual amount of earnings paid to you for your work. For example, 
when a person with a serious impairment does simple tasks under close 
and continuous supervision, our determination of whether that person 
has done substantial gainful activity will not be based only on the 
amount of the wages paid. We will first determine whether the person 
received a subsidy; that is, we will determine whether the person was 
being paid more than the reasonable value of the actual services 
performed. We will then subtract the value of the subsidy from the 
person's gross earnings to determine the earnings we will use to 
determine if he or she has done substantial gainful activity.
* * * * *
    (b) Earnings guidelines. (1) General. If you are an employee, we 
first consider the criteria in paragraph (a) of this section and 
Sec. 404.1576, and then the guides in paragraphs (b)(2), (3), (4), (5), 
and (6) of this section. When we review your earnings to determine if 
you have been performing substantial gainful activity, we will subtract 
the value of any subsidized earnings (see paragraph (a)(2) of this 
section) and the reasonable cost of any impairment-related work 
expenses from your gross earnings (see Sec. 404.1576). The resulting 
amount is the amount we use to determine if you have done substantial 
gainful activity. We will generally average your earnings for 
comparison with the earnings guidelines in paragraphs (b)(2), (3), (4), 
and (6) of this section. See Sec. 404.1574a for our rules on averaging 
earnings.
    (2) Earnings that will ordinarily show that you have engaged in 
substantial

[[Page 42784]]

gainful activity. We will consider that your earnings from your work 
activity as an employee (including earnings from sheltered work, see 
paragraph (b)(4) of this section) show that you have engaged in 
substantial gainful activity if--* * *
    (3) Earnings that will ordinarily show that you have not engaged in 
substantial gainful activity. Unless you work in a sheltered workshop 
or a comparable facility (see paragraph (b)(4) of this section), 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--* * *
    (4) If you work in a sheltered workshop. If you work in a sheltered 
workshop or a comparable facility especially set up for persons with 
serious impairments, we will ordinarily consider that your earnings 
from this work show that you have engaged in substantial gainful 
activity if your earnings meet the levels in paragraph (b)(2) of this 
section. Earnings from a sheltered workshop or a comparable facility 
that are less than those indicated in paragraph (b)(2) of this section 
will ordinarily show that you have not engaged in substantial gainful 
activity without the need to consider the other information in 
paragraph (b)(6) of this section regardless of whether they are more or 
less than those indicated in paragraph (b)(3) of this section. When 
your earnings from a sheltered workshop or comparable facility are less 
than those indicated in paragraph (b)(2), we will consider the 
provisions of paragraph (b)(6) of this section only if there is 
evidence showing that you may have done substantial gainful activity.
* * * * *
    (6) Earnings that are not high or low enough to show whether you 
engaged in substantial gainful activity. Unless you work in a sheltered 
workshop or a comparable facility (see paragraph (b)(4) of this 
section), if your earnings, on the average, are between the amounts 
shown in paragraphs (b)(2) and (3) of this section, we will generally 
consider other information in addition to your earnings, such as 
whether--
* * * * *
    (c) The unsuccessful work attempt.--(1) General. Ordinarily, work 
you have done will not show that you are able to do substantial gainful 
activity if, after working for a period of 6 months or less, your 
impairment forced you to stop working or to reduce the amount of work 
you do so that your earnings from such work fall below the substantial 
gainful activity earnings level in paragraph (b)(2) of this section, 
and you meet the conditions described in paragraphs (c)(2), (3), (4), 
and (5), of this section. We will use the provisions of this paragraph 
when we make an initial determination on your application for 
disability benefits and throughout any appeal you may request. Except 
as set forth in Sec. 404.1592a(a), we will also apply the provisions of 
this paragraph if you are already entitled to disability benefits, when 
you work and we consider whether the work you are doing is substantial 
gainful activity or demonstrates the ability to do substantial gainful 
activity.
    (2) Event that must precede an unsuccessful work attempt. There 
must be a significant break in the continuity of your work before we 
will consider that you began a work attempt that later proved 
unsuccessful. You must have stopped working or reduced your work and 
earnings below the substantial gainful activity earnings level because 
of your impairment or because of the removal of special conditions that 
were essential to the further performance of your work. We explain what 
we mean by special conditions in Sec. 404.1573(c). We will consider 
your prior work to be ``discontinued'' for a significant period if you 
were out of work at least 30 consecutive days. We will also consider 
your prior work to be ``discontinued'' if, because of your impairment, 
you were forced to change to another type of work or another employer.
    (3) If you worked 3 months or less. We will consider work of 3 
months or less to be an unsuccessful work attempt if you stopped 
working, or you reduced your work and earnings below the substantial 
gainful activity earnings level, because of your impairment or because 
of the removal of special conditions which took into account your 
impairment and permitted you to work.
    (4) If you worked between 3 and 6 months. We will consider work 
that lasted longer than 3 months to be an unsuccessful work attempt if 
it ended, or was reduced below substantial gainful activity earnings 
level, within 6 months because of your impairment or because of the 
removal of special conditions which took into account your impairment 
and permitted you to work and--
    (i) You were frequently absent from work because of your 
impairment;
    (ii) Your work was unsatisfactory because of your impairment;
    (iii) You worked during a period of temporary remission of your 
impairment; or
    (iv) You worked under special conditions that were essential to 
your performance and these conditions were removed.
    (5) If you worked more than 6 months. We will not consider work you 
performed at the substantial gainful activity earnings level for more 
than 6 months to be an unsuccessful work attempt regardless of why it 
ended or was reduced below the substantial gainful activity earnings 
level.
    (d) Work activity in certain volunteer programs. If you work as a 
volunteer in certain programs administered by the Federal government 
under the Domestic Volunteer Service Act of 1973 or the Small Business 
Act, we will not count any payments you receive from these programs as 
earnings when we determine whether you are engaging in substantial 
gainful activity. These payments may include a minimal stipend, 
payments for supportive services such as housing, supplies and 
equipment, an expense allowance, or reimbursement of out-of-pocket 
expenses. We will also disregard the services you perform as a 
volunteer in applying any of the substantial gainful activity tests 
discussed in paragraph (b)(6) of this section. This exclusion from the 
substantial gainful activity provisions will apply only if you are a 
volunteer in a program explicitly mentioned in the Domestic Volunteer 
Service Act of 1973 or the Small Business Act. Programs explicitly 
mentioned in those Acts include Volunteers in Service to America, 
University Year for ACTION, Special Volunteer Programs, Retired Senior 
Volunteer Program, Foster Grandparent Program, Service Corps of Retired 
Executives, and Active Corps of Executives. We will not exclude under 
this paragraph, volunteer work you perform in other programs or any 
nonvolunteer work you may perform, including nonvolunteer work under 
one of the specified programs. For civilians in certain government-
sponsored job training and employment programs, we evaluate the work 
activity on a case-by-case basis under the substantial gainful activity 
earnings test. In programs such as these, subsidies often occur. We 
will subtract the value of any subsidy and use the remainder to 
determine if you have done substantial gainful activity. See paragraphs 
(a)(2)-(3) of this section.
    8. A new Sec. 404.1574a is added to read as follows:


Sec. 404.1574a  When and how we will average your earnings.

    (a) If your work as an employee or as a self-employed person was 
continuous without significant change in work patterns or earnings, and 
there has been no change in the substantial gainful

[[Page 42785]]

activity earnings levels, we will average your earnings over the entire 
period of work requiring evaluation to determine if you have done 
substantial gainful activity. See Sec. 404.1592a for information on the 
reentitlement period.
    (b) If you work over a period of time during which the substantial 
gainful activity earnings levels change, we will average your earnings 
separately for each period in which a different substantial gainful 
activity earnings level applies.
    (c) If there is a significant change in your work pattern or 
earnings during the period of work requiring evaluation, we will 
average your earnings over each separate period of work to determine if 
any of your work efforts were substantial gainful activity.
    (d) We will not average your earnings in determining whether 
benefits should be paid for any month(s) during or after the 
reentitlement period that occurs after the month disability has been 
determined to have ceased because of the performance of substantial 
gainful activity. See Sec. 404.1592a for information on the 
reentitlement period. The following examples illustrate what we mean by 
a significant change in the work pattern of an employee and when we 
will average and will not average earnings.

    Example 1: Mrs. H. began receiving disability insurance benefits 
in March 1993. In January 1995 she began selling magazines by 
telephone solicitation, expending a minimum of time, for which she 
received $225 monthly. As a result, Mrs. H. used up her trial work 
period during the months of January 1995 through September 1995. 
After the trial work period ended, we determined that Mrs. H. had 
not engaged in substantial gainful activity during her trial work 
period. Her reentitlement period began October 1995. In December 
1995, Mrs. H. discontinued her telephone solicitation work to take a 
course in secretarial skills. In January 1997, she began work as a 
part-time temporary secretary in a banking firm. Mrs. H. worked 20 
hours a week, without any subsidy or impairment-related work 
expenses, at beginner rates. She earned $285 per month in January 
1997 and February 1997. In March 1997 she had increased her 
secretarial skills to journeyman level and was assigned as a part-
time private secretary to one of the vice presidents of the banking 
firm. Mrs. H.'s earnings increased to $525 per month effective March 
1997. We determined that Mrs. H. was engaging in substantial gainful 
activity beginning March 1997 and that her disability ceased that 
month, the first month of substantial gainful activity after the end 
of the trial work period. Mrs. H. is due payment for March 1997, the 
month of cessation, and the following 2 months (April 1997 and May 
1997) because disability benefits terminate the third month 
following the earliest month in which she performed substantial 
gainful activity. We did not average earnings for the period January 
1997 and February 1997 with the period beginning March 1997 because 
there was a significant change in earnings and work activity 
beginning March 1997. Thus, the earnings of January 1997 and 
February 1997 could not be averaged with those of March 1997 to 
reduce March 1997 earnings below the substantial gainful activity 
level. After we determine that Mrs. H.'s disability had ceased 
because of her performance of substantial gainful activity, we 
cannot average her earnings to determine whether she is due payment 
for any month during or after the reentitlement period. Beginning 
June 1997, the third month following the cessation month, we would 
evaluate all of Mrs. H.'s work activity on a month-by-month basis 
(see Sec. 404.1592a(a)).
    Example 2: Ms. M. began receiving disability insurance benefits 
in March 1992. In January 1995, she began selling cable television 
subscriptions by telephone solicitation, expending a minimum of 
time, for which she received $275 monthly. Ms. M. did not work in 
June 1995, and she resumed selling cable television subscriptions 
beginning July 1995. In this way, Ms. M. used up her 9-month trial 
work period during the months of January 1995 through May 1995 and 
July 1995 through October 1995. After Ms. M.'s trial work period 
ended, we determined that she had not engaged in substantial gainful 
activity during her trial work period. Ms. M.'s reentitlement period 
began November 1995. In December 1995, Ms. M. discontinued her 
telephone solicitation work to take a course in secretarial skills. 
In January 1997, she began work as a part-time temporary secretary 
in an accounting firm. Ms. M. worked, without any subsidy or 
impairment-related work expenses, at beginner rates. She earned $460 
in January 1997, $420 in February 1997, and $510 in March 1997. In 
April 1997, she had increased her secretarial skills to journeyman 
level, and she was assigned as a part-time private secretary to one 
of the vice presidents of the firm. Ms. M.'s earnings increased to 
$860 per month effective April 1997. We determined that Ms. M. was 
engaging in substantial gainful activity beginning April 1997 and 
that her disability ceased that month, the first month of 
substantial gainful activity after the end of the trial work period. 
She is due payment for April 1997, May 1997 and June 1997, because 
disability benefits terminate the third month following the earliest 
month in which she performs substantial gainful activity (the month 
of cessation). We averaged her earnings for the period January 1997 
through March 1997 and determined them to be about $467 per month 
for that period. We did not average earnings for the period January 
1997 through March 1997 with earnings for the period beginning April 
1997 because there was a significant change in work activity and 
earnings beginning April 1997. Therefore, we found that the earnings 
for January 1997 through March 1997 were under the substantial 
gainful activity level. After we determine that Ms M.'s disability 
has ceased because she performed substantial gainful activity, we 
cannot average her earnings in determining whether she is due 
payment for any month during or after the reentitlement period. In 
this example, beginning July 1997, the third month following the 
month of cessation, we would evaluate all of Ms. M.'s work activity 
on a month-by-month basis (see Sec. 404.1592a(a)).


    9. Section 404.1575 is amended by revising paragraphs (a) and (c) 
and adding a new paragraph (d) to read as follows:


Sec. 404.1575  Evaluation guides if you are self-employed.

    (a) If you are a self-employed person. If you are working or have 
worked as a self-employed person, we will use the provisions in 
paragraphs (a) through (d) of this section that are relevant to your 
work activity. We will use these provisions whenever they are 
appropriate, whether in connection with your application for disability 
benefits (when we make an initial determination on your application and 
throughout any appeals you may request), after you have become entitled 
to a period of disability or to disability benefits, or both. We will 
consider your activities and their value to your business to decide 
whether you have engaged in substantial gainful activity if you are 
self-employed. We will not consider your income alone because the 
amount of income you actually receive may depend on a number of 
different factors, such as capital investment and profit-sharing 
agreements. We will generally consider work that you were forced to 
stop or reduce to below substantial gainful activity after 6 months or 
less because of your impairment as an unsuccessful work attempt. See 
paragraph (d) of this section. We will evaluate your work activity 
based on the value of your services to the business regardless of 
whether you receive an immediate income for your services. We determine 
whether you have engaged in substantial gainful activity by applying 
three tests. If you have not engaged in substantial gainful activity 
under test one, then we will consider tests two and three. The tests 
are as follows:
    (1) Test One: You have engaged in substantial gainful activity if 
you render services that are significant to the operation of the 
business and receive a substantial income from the business. Paragraphs 
(b) and (c) of this section explain what we mean by significant 
services and substantial income for purposes of this test.
    (2) Test Two: You have engaged in substantial gainful activity if 
your work activity, in terms of factors such as hours, skills, energy 
output, efficiency, duties, and responsibilities, is comparable to that 
of unimpaired individuals in your community who are

[[Page 42786]]

in the same or similar businesses as their means of livelihood.
    (3) Test Three: You have engaged in substantial gainful activity if 
your work activity, although not comparable to that of unimpaired 
individuals, is clearly worth the amount shown in Sec. 404.1574(b)(2) 
when considered in terms of its value to the business, or when compared 
to the salary that an owner would pay to an employee to do the work you 
are doing.
* * * * *
    (c) What we mean by substantial income. We deduct your normal 
business expenses from your gross income to determine net income. Once 
we determine your net income, we deduct the reasonable value of any 
significant amount of unpaid help furnished by your spouse, children, 
or others. Miscellaneous duties that ordinarily would not have 
commercial value would not be considered significant. We deduct 
impairment-related work expenses that have not already been deducted in 
determining your net income. Impairment-related work expenses are 
explained in Sec. 404.1576. We deduct unincurred business expenses paid 
for you by another individual or agency. An unincurred business expense 
occurs when a sponsoring agency or another person incurs responsibility 
for the payment of certain business expenses, e.g., rent, utilities, or 
purchases and repair of equipment, or provides you with equipment, 
stock, or other material for the operation of your business. We deduct 
soil bank payments if they were included as farm income. That part of 
your income remaining after we have made all applicable deductions 
represents the actual value of work performed. The resulting amount is 
the amount we use to determine if you have done substantial gainful 
activity. We will generally average your income for comparison with the 
earnings guidelines in Sec. Sec. 404.1574(b)(2) and 404.1574(b)(3). See 
Sec. 404.1574a for our rules on averaging of earnings. We will consider 
this amount to be substantial if--
    (1) It averages more than the amounts described in 
Sec. 404.1574(b)(2); or
    (2) It averages less than the amounts described in 
Sec. 404.1574(b)(2) but it is either comparable to what it was before 
you became seriously impaired if we had not considered your earnings or 
is comparable to that of unimpaired self-employed persons in your 
community who are in the same or a similar business as their means of 
livelihood.
    (d) The unsuccessful work attempt.--(1) General. Ordinarily, work 
you have done will not show that you are able to do substantial gainful 
activity if, after working for a period of 6 months or less, you were 
forced by your impairment to stop working or to reduce the amount of 
work you do so that you are no longer performing substantial gainful 
activity and you meet the conditions described in paragraphs (d)(2), 
(3), (4), and (5) of this section. We will use the provisions of this 
paragraph when we make an initial determination on your application for 
disability benefits and throughout any appeal you may request. Except 
as set forth in Sec. 404.1592a(a), we will also apply the provisions of 
this paragraph if you are already entitled to disability benefits, when 
you work and we consider whether the work you are doing is substantial 
gainful activity or demonstrates the ability to do substantial gainful 
activity.
    (2) Event that must precede an unsuccessful work attempt. There 
must be a significant break in the continuity of your work before we 
will consider you to have begun a work attempt that later proved 
unsuccessful. You must have stopped working or reduced your work and 
earnings below substantial gainful activity because of your impairment 
or because of the removal of special conditions which took into account 
your impairment and permitted you to work. Examples of such special 
conditions may include any significant amount of unpaid help furnished 
by your spouse, children, or others, or unincurred business expenses, 
as described in paragraph (c) of this section, paid for you by another 
individual or agency. We will consider your prior work to be 
``discontinued'' for a significant period if you were out of work at 
least 30 consecutive days. We will also consider your prior work to be 
``discontinued'' if, because of your impairment, you were forced to 
change to another type of work.
    (3) If you worked 3 months or less. We will consider work of 3 
months or less to be an unsuccessful work attempt if it ended, or was 
reduced below substantial gainful activity, because of your impairment 
or because of the removal of special conditions which took into account 
your impairment and permitted you to work.
    (4) If you worked between 3 and 6 months. We will consider work 
that lasted longer than 3 months to be an unsuccessful work attempt if 
it ended, or was reduced below substantial gainful activity, within 6 
months because of your impairment or because of the removal of special 
conditions which took into account your impairment and permitted you to 
work and--
    (i) You were frequently unable to work because of your impairment;
    (ii) Your work was unsatisfactory because of your impairment;
    (iii) You worked during a period of temporary remission of your 
impairment; or
    (iv) You worked under special conditions that were essential to 
your performance and these conditions were removed.
    (5) If you worked more than 6 months. We will not consider work you 
performed at the substantial gainful activity level for more than 6 
months to be an unsuccessful work attempt regardless of why it ended or 
was reduced below the substantial gainful activity earnings level.

    10. Section 404.1584 is amended by revising paragraph (d) to read 
as follows:


Sec. 404.1584  Evaluation of work activity of blind people.

* * * * *
    (d) Evaluation of earnings.--(1) Earnings that will ordinarily show 
that you have engaged in substantial gainful activity. We will 
ordinarily consider that your earnings from your work activities show 
that you have engaged in substantial gainful activity if your monthly 
earnings average more than the amount(s) shown in paragraphs (d)(2) and 
(3) of this section. We will apply Secs. 404.1574(a)(2), 404.1575(c), 
and 404.1576 in determining the amount of your average earnings.
    (2) Substantial gainful activity guidelines for taxable years 
before 1978. For work activity performed in taxable years before 1978, 
the average earnings per month that we ordinarily consider enough to 
show that you have done substantial gainful activity are the same for 
blind people as for others. See Sec. 404.1574(b)(2) for the earnings 
guidelines for other than blind individuals.
    (3) Substantial gainful activity guidelines for taxable years 
beginning 1978. For taxable years beginning 1978, if you are blind, the 
law provides different earnings guidelines for determining if your 
earnings from your work activities are substantial gainful activity. 
Ordinarily, we consider your work to be substantial gainful activity, 
if your average monthly earnings are more than those shown in Table I. 
For years after 1977 and before 1996, increases in the substantial 
gainful activity guideline were linked to increases in the monthly 
exempt amount under the retirement earnings test for individuals aged 
65 to 69. Beginning with 1996, increases in the substantial gainful 
activity amount have

[[Page 42787]]

depended only on increases in the national average wage index.

                                 Table I
------------------------------------------------------------------------
                            Over                              In year(s)
------------------------------------------------------------------------
$334........................................................        1978
$375........................................................        1979
$417........................................................        1980
$459........................................................        1981
$500........................................................        1982
$550........................................................        1983
$580........................................................        1984
$610........................................................        1985
$650........................................................        1986
$680........................................................        1987
$700........................................................        1988
$740........................................................        1989
$780........................................................        1990
$810........................................................        1991
$850........................................................        1992
$880........................................................        1993
$930........................................................        1994
$940........................................................        1995
$960........................................................        1996
$1,000......................................................        1997
$1,050......................................................        1998
$1,110......................................................        1999
$1,170......................................................        2000
------------------------------------------------------------------------


    11. Section 404.1592 is amended as follows:
    a. By revising the first and last sentences of paragraph (b),
    b. Adding a new sentence to the end of paragraph (b), and
    c. Revising paragraphs (d) and (e).
    The revisions and additions to Sec. 404.1592 read as follows:


Sec. 404.1592  The trial work period.

* * * * *
    (b) What we mean by services. When used in this section, services 
means any activity (whether legal or illegal), even though it is not 
substantial gainful activity, 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. * * * We generally do not consider work done without 
remuneration to be ``services'' if it is done merely as therapy or 
training or if it is work usually done in a daily routine around the 
house or in self-care. We will not consider work you have done as a 
volunteer in the Federal programs described in Sec. 404.1574(d) in 
determining whether you have performed services in the trial work 
period.
* * * * *
    (d) Who is and is not entitled to a trial work period. (1) You are 
generally entitled to a trial work period if you are entitled to 
disability insurance benefits, child's benefits based on disability, or 
widow's or widower's or surviving divorced spouse's benefits based on 
disability.
    (2) You are not entitled to a trial work period--
    (i) If you are entitled to a period of disability but not to 
disability insurance benefits, and you are not entitled to any other 
type of disability benefit under title II of the Social Security Act 
(i.e., child's benefits based on disability, or widow's or widower's 
benefits or surviving divorced spouse's benefits based on disability);
    (ii) If you perform work demonstrating the ability to engage in 
substantial gainful activity during any required waiting period for 
benefits;
    (iii) If you perform work demonstrating the ability to engage in 
substantial gainful activity within 12 months of the onset of the 
impairment(s) that prevented you from performing substantial gainful 
activity and before the date of any notice of determination or decision 
finding that you are disabled; or
    (iv) For any month prior to the month of your application for 
disability benefits (see paragraph (e) of this section).
    (e) When the trial work period begins and ends. The trial work 
period begins with the month in which you become entitled to disability 
insurance benefits, to child's benefits based on disability or to 
widow's, widower's, or surviving divorced spouse's benefits based on 
disability. It cannot begin before the month in which you file your 
application for benefits, and for widows, widowers, and surviving 
divorced spouses, it cannot begin before December 1, 1980. It ends with 
the close of whichever of the following calendar months is the 
earliest:
    (1) The 9th month (whether or not the months have been consecutive) 
in which you have performed services if that 9th month is prior to 
January 1992;
    (2) The 9th month (whether or not the months have been consecutive 
and whether or not the previous 8 months of services were prior to 
January 1992) in which you have performed services within a period of 
60 consecutive months if that 9th month is after December 1991; or
    (3) The month in which new evidence, other than evidence relating 
to any work you did during the trial work period, shows that you are 
not disabled, even though you have not worked a full 9 months. We may 
find that your disability has ended at any time during the trial work 
period if the medical or other evidence shows that you are no longer 
disabled. See Sec. 404.1594 for information on how we decide whether 
your disability continues or ends.

    12. Section 404.1592a is amended by revising paragraphs (a) and 
(b)(2) to read as follows:


Sec. 404.1592a  The reentitlement period.

    (a) General. The reentitlement period is an additional period after 
9 months of trial work during which you may continue to test your 
ability to work if you have a disabling impairment, as defined in 
Sec. 404.1511. If you work during the reentitlement period, we may 
decide that your disability has ceased because your work is substantial 
gainful activity and stop your benefits. However, if, after the month 
for which we found that your disability ceased because you performed 
substantial gainful activity, you stop engaging in substantial gainful 
activity, we will start paying you benefits again; you will not have to 
file a new application. The following rules apply if you complete a 
trial work period and continue to have a disabling impairment:
    (1) The first time you work after the end of your trial work period 
and engage in substantial gainful activity, we will find that your 
disability ceased. When we decide whether this work is substantial 
gainful activity, we will apply all of the relevant provisions of 
Sec. Sec. 404.1571-404.1576 including, but not limited to, the 
provisions for averaging earnings, unsuccessful work attempts, and 
deducting impairment-related work expenses. We will find that your 
disability ceased in the first month after the end of your trial work 
period in which you do substantial gainful activity, applying all the 
relevant provisions in Sec. Sec. 404.1571-404.1576.
    (2) (i) If we determine under paragraph (a)(1) of this section that 
your disability ceased during the reentitlement period because you 
perform substantial gainful activity, you will be paid benefits for the 
first month after the trial work period in which you do substantial 
gainful activity (i.e., the month your disability ceased) and the two 
succeeding months, whether or not you do substantial gainful activity 
in those succeeding months. After those three months, we will stop your 
benefits for any month in which you do substantial gainful activity. 
(See Secs. 404.316, 404.337, 404.352 and 404.401a.) If your benefits 
are stopped because you do substantial gainful activity, they may be 
started again without a new application and a new determination of 
disability if you stop doing substantial gainful activity in a month 
during the reentitlement period. In determining whether you do 
substantial gainful activity in a month for purposes of stopping or 
starting benefits during the reentitlement period,

[[Page 42788]]

we will consider only your work in, or earnings for, that month. Once 
we have determined that your disability has ceased during the 
reentitlement period because of the performance of substantial gainful 
activity as explained in paragraph (a)(1) of this section, we will not 
apply the provisions of Secs. 404.1574(c) and 404.1575(d) regarding 
unsuccessful work attempts or the provisions of Sec. 404.1574a 
regarding averaging of earnings to determine whether benefits should be 
paid for any particular month in the reentitlement period that occurs 
after the month your disability ceased.
    (ii) If anyone else is receiving monthly benefits based on your 
earnings record, that individual will not be paid benefits for any 
month for which you cannot be paid benefits during the reentitlement 
period.
    (3) The way we will consider your work activity after your 
reentitlement period ends (see paragraph (b)(2) of this section) will 
depend on whether you worked during the reentitlement period and if you 
did substantial gainful activity. If you worked during the 
reentitlement period and we decided that your disability ceased during 
the reentitlement period because of your work under paragraph (a)(1) of 
this section, we will find that your entitlement to disability benefits 
terminates in the first month in which you engage in substantial 
gainful activity after the end of the reentitlement period (see 
Sec. 404.325). (See Sec. 404.321 for when entitlement to a period of 
disability ends.) When we make this determination, we will consider 
only your work in, or earnings for, that month; we will not apply the 
provisions of Secs. 404.1574(c) and 404.1575(d) regarding unsuccessful 
work attempts or the provisions of Sec. 404.1574a regarding averaging 
of earnings. If we did not find that your disability ceased because of 
work activity during the reentitlement period, we will apply all of the 
relevant provisions of Secs. 404.1571-404.1576 including, but not 
limited to, the provisions for averaging earnings, unsuccessful work 
attempts, and deducting impairment-related work expenses, to determine 
whether your disability ceased because you performed substantial 
gainful activity after the reentitlement period. If we find that your 
disability ceased because you performed substantial gainful activity in 
a month after your reentitlement period ended, you will be paid 
benefits for the month in which your disability ceased and the two 
succeeding months. After those three months, your entitlement to a 
period of disability or to disability benefits terminates (see 
Secs. 404.321 and 404.325).
    (b) * * *
    (2)(i) The last day of the 15th month following the end of your 
trial work period if you were not entitled to benefits after December 
1987; or
    (ii) The last day of the 36th month following the end of your trial 
work period if you were entitled to benefits after December 1987 or if 
the 15-month period described in paragraph (b)(2)(i) of this section 
had not ended as of January 1988. (See Secs. 404.316, 404.337, and 
404.352 for when your benefits end.)

    13. Section 404.1594 is amended by revising the second sentence of 
paragraph (f)(7) and by revising paragraph (g)(9) to read as follows:


Sec. 404.1594  How we will determine whether your disability continues 
or ends.

* * * * *
    (f) Evaluation steps. * * *
    (7) * * * That is, we will assess your residual functional capacity 
based on all your current impairments and consider whether you can 
still do work you have done in the past. * * *
* * * * *
    (g) The month in which we will find you are no longer disabled. * * 
*
    (9) The first month you were told by your physician that you could 
return to work, provided there is no substantial conflict between your 
physician's and your statements regarding your awareness of your 
capacity for work and the earlier date is supported by substantial 
evidence.
* * * * *

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

Subpart I--[Amended]

    14. 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).

    15. Section 416.901 is amended by revising the second sentence of 
paragraph (m) to read as follows:


Sec. 416.901  Scope of subpart.

* * * * *
    (m) * * * We explain what your responsibilities are in telling us 
of any events that may cause a change in your disability or blindness 
status and when we will review to see if you are still disabled. * * *

    16. Section 416.971 is amended by revising the first sentence to 
read as follows:


Sec. 416.971  General.

    The work, without regard to legality, that you have done during any 
period in which you believe you are disabled may show that you are able 
to work at the substantial gainful activity level. * * *

    17. Section 416.973 is amended by revising paragraph (c) and 
removing paragraph (f) to read as follows:


Sec. 416.973  General information about work activity.

* * * * *
    (c) If your work is done under special conditions. The work you are 
doing may be done under special conditions that take into account your 
impairment, such as work done in a sheltered workshop or as a patient 
in a hospital. If your work is done under special conditions, we may 
find that it does not show that you have the ability to do substantial 
gainful activity. Also, if you are forced to stop or reduce your work 
because of the removal of special conditions that were related to your 
impairment and essential to your work, we may find that your work does 
not show that you are able to do substantial gainful activity. However, 
work done under special conditions may show that you have the necessary 
skills and ability to work at the substantial gainful activity level. 
Examples of the special conditions that may relate to your impairment 
include, but are not limited to, situations in which--
    (1) You required and received special assistance from other 
employees in performing your work;
    (2) You were allowed to work irregular hours or take frequent rest 
periods;
    (3) You were provided with special equipment or were assigned work 
especially suited to your impairment;
    (4) You were able to work only because of specially arranged 
circumstances, for example, other persons helped you prepare for or get 
to and from your work;
    (5) You were permitted to work at a lower standard of productivity 
or efficiency than other employees; or
    (6) You were given the opportunity to work, despite your 
impairment, because of family relationship, past association with your 
employer, or your employer's concern for your welfare.
* * * * *

    18. Section 416.974 is amended by revising paragraphs (a), 
introductory text, (a)(1), (a)(2), (b)(1), (b)(2), introductory text, 
(b)(3), introductory text (b)(4) and (b)(6), introductory text,

[[Page 42789]]

and by adding new paragraphs (c) and (d) to read as follows:


Sec. 416.974  Evaluation guides if you are an employee.

    (a) We use several guides to decide whether the work you have done 
shows that you are able to do substantial gainful activity. If you are 
working or have worked as an employee, we will use the provisions in 
paragraphs (a) through (d) of this section that are relevant to your 
work activity. We will use these provisions whenever they are 
appropriate in connection with your application for supplemental 
security income benefits (when we make an initial determination on your 
application and throughout any appeals you may request) to determine if 
you are eligible.
    (1) Your earnings may show you have done substantial gainful 
activity. Generally, in evaluating your work activity for substantial 
gainful activity purposes, our primary consideration will be the 
earnings you derive from the work activity. We will use your earnings 
to determine whether you have done substantial gainful activity unless 
we have information from you, your employer, or others that shows that 
we should not count all of your earnings. The amount of your earnings 
from work you have done (regardless of whether it is unsheltered or 
sheltered work) may show that you have engaged in substantial gainful 
activity. Generally, if you worked for substantial earnings, we will 
find that you are able to do substantial gainful activity. However, the 
fact that your earnings were not substantial will not necessarily show 
that you are not able to do substantial gainful activity. We generally 
consider work that you are forced to stop or to reduce below the 
substantial gainful activity level after a short time because of your 
impairment to be an unsuccessful work attempt. Your earnings from an 
unsuccessful work attempt will not show that you are able to do 
substantial gainful activity. We will use the criteria in paragraph (c) 
of this section to determine if the work you did was an unsuccessful 
work attempt.
    (2) We consider only the amounts you earn. When we decide whether 
your earnings show that you have done substantial gainful activity, we 
do not consider any income that is not directly related to your 
productivity. When your earnings exceed the reasonable value of the 
work you perform, we consider only that part of your pay which you 
actually earn. If your earnings are being subsidized, we do not 
consider the amount of the subsidy when we determine if your earnings 
show that you have done substantial gainful activity. We consider your 
work to be subsidized if the true value of your work, when compared 
with the same or similar work done by unimpaired persons, is less than 
the actual amount of earnings paid to you for your work. For example, 
when a person with a serious impairment does simple tasks under close 
and continuous supervision, our determination of whether that person 
has done substantial gainful activity will not be based only on the 
amount of the wages paid. We will first determine whether the person 
received a subsidy; that is, we will determine whether the person was 
being paid more than the reasonable value of the actual services 
performed. We will then subtract the value of the subsidy from the 
person's gross earnings to determine the earnings we will use to 
determine if he or she has done substantial gainful activity.
* * * * *
    (b) Earnings guidelines.--(1) General. If you are an employee, we 
first consider the criteria in paragraph (a) of this section and 
Sec. 416.976, and then the guides in paragraphs (b)(2), (3), (4), (5), 
and (6) of this section. When we review your earnings to determine if 
you have been performing substantial gainful activity, we will subtract 
the value of any subsidized earnings (see paragraph (a)(2) of this 
section) and the reasonable cost of any impairment-related work 
expenses from your gross earnings (see Sec. 416.976). The resulting 
amount is the amount we use to determine if you have done substantial 
gainful activity. We will generally average your earnings for 
comparison with the earnings guidelines in paragraphs (b)(2), (3), (4), 
and (6) of this section. See Sec. 416.974a for our rules on averaging 
earnings.
    (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 (including earnings from sheltered 
work, see paragraph (b)(4) of this section) show that you have engaged 
in substantial gainful activity if--* * *
    (3) Earnings that will ordinarily show that you have not engaged in 
substantial gainful activity. Unless you work in a sheltered workshop 
or a comparable facility (see paragraph (b)(4) of this section), 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--* * *
    (4) If you work in a sheltered workshop. If you work in a sheltered 
workshop or a comparable facility especially set up for persons with 
serious impairments, we will ordinarily consider that your earnings 
from this work show that you have engaged in substantial gainful 
activity if your earnings meet the levels in paragraph (b)(2) of this 
section. Earnings from a sheltered workshop or a comparable facility 
that are less than those indicated in paragraph (b)(2) of this section 
will ordinarily show that you have not engaged in substantial gainful 
activity without the need to consider the other information in 
paragraph (b)(6) of this section regardless of whether they are more or 
less than those indicated in paragraph (b)(3) of this section. When 
your earnings from a sheltered workshop or comparable facility are less 
than those indicated in paragraph (b)(2) of this section, we will 
consider the provisions of paragraph (b)(6) of this section only if 
there is evidence showing that you may have done substantial gainful 
activity.
* * * * *
    (6) Earnings that are not high or low enough to show whether you 
engaged in substantial gainful activity. Unless you work in a sheltered 
workshop or a comparable facility (see paragraph (b)(4) of this 
section), if your earnings, on the average, are between the amounts 
shown in paragraphs (b)(2) and (3) of this section, we will generally 
consider other information in addition to your earnings, such as 
whether--
* * * * *
    (c) The unsuccessful work attempt--(1) General. Ordinarily, work 
you have done will not show that you are able to do substantial gainful 
activity if, after working for a period of 6 months or less, you were 
forced by your impairment to stop working or to reduce the amount of 
work you do so that your earnings from such work fall below the 
substantial gainful activity earnings level in paragraph (b)(2) of this 
section and you meet the conditions described in paragraphs (c)(2), 
(3), (4), and (5) of this section.
    (2) Event that must precede an unsuccessful work attempt. There 
must be a significant break in the continuity of your work before we 
will consider you to have begun a work attempt that later proved 
unsuccessful. You must have stopped working or reduced your work and 
earnings below the substantial gainful activity earnings level because 
of your impairment or because of the removal of special conditions that 
were essential to the further performance of your work. We explain what 
we mean by special conditions in Sec. 416.973(c). We will consider your 
prior work to be ``discontinued'' for a significant period

[[Page 42790]]

if you were out of work at least 30 consecutive days. We will also 
consider your prior work to be ``discontinued'' if, because of your 
impairment, you were forced to change to another type of work or 
another employer.
    (3) If you worked 3 months or less. We will consider work of 3 
months or less to be an unsuccessful work attempt if you stopped 
working, or you reduced your work and earnings below the substantial 
gainful activity earnings level, because of your impairment or because 
of the removal of special conditions which took into account your 
impairment and permitted you to work.
    (4) If you worked between 3 and 6 months. We will consider work 
that lasted longer than 3 months to be an unsuccessful work attempt if 
it ended, or was reduced below the substantial gainful activity 
earnings level, within 6 months because of your impairment or because 
of the removal of special conditions which took into account your 
impairment and permitted you to work and--
    (i) You were frequently absent from work because of your 
impairment;
    (ii) Your work was unsatisfactory because of your impairment;
    (iii) You worked during a period of temporary remission of your 
impairment; or
    (iv) You worked under special conditions that were essential to 
your performance and these conditions were removed.
    (5) If you worked more than 6 months. We will not consider work you 
performed at the substantial gainful activity earnings level for more 
than 6 months to be an unsuccessful work attempt regardless of why it 
ended or was reduced below the substantial gainful activity earnings 
level.
    (d) Work activity in certain volunteer programs. If you work as a 
volunteer in certain programs administered by the Federal government 
under the Domestic Volunteer Service Act of 1973 or the Small Business 
Act, we will not count any payments you receive from these programs as 
earnings when we determine whether you are engaging in substantial 
gainful activity. These payments may include a minimal stipend, 
payments for supportive services such as housing, supplies and 
equipment, an expense allowance, or reimbursement of out-of-pocket 
expenses. We will also disregard the services you perform as a 
volunteer in applying any of the substantial gainful activity tests 
discussed in paragraph (b)(6) of this section. This exclusion from the 
substantial gainful activity provisions will apply only if you are a 
volunteer in a program explicitly mentioned in the Domestic Volunteer 
Service Act of 1973 or the Small Business Act. Programs explicitly 
mentioned in those Acts include Volunteers in Service to America, 
University Year for ACTION, Special Volunteer Programs, Retired Senior 
Volunteer Program, Foster Grandparent Program, Service Corps of Retired 
Executives, and Active Corps of Executives. We will not exclude under 
this paragraph volunteer work you perform in other programs or any 
nonvolunteer work you may perform, including nonvolunteer work under 
one of the specified programs. For civilians in certain government-
sponsored job training and employment programs, we evaluate the work 
activity on a case-by-case basis under the substantial gainful activity 
earnings test. In programs such as these, subsidies often occur. We 
will subtract the value of any subsidy and use the remainder to 
determine if you have done substantial gainful activity. See paragraphs 
(a)(2)-(3) of this section.

    19. A new Sec. 416.974a is added to read as follows:


Sec. 416.974a  When and how we will average your earnings.

    (a) To determine your initial eligibility for benefits, we will 
average any earnings you make during the month you file for benefits 
and any succeeding months to determine if you are doing substantial 
gainful activity. If your work as an employee or as a self-employed 
person was continuous without significant change in work patterns or 
earnings, and there has been no change in the substantial gainful 
activity earnings levels, your earnings will be averaged over the 
entire period of work requiring evaluation to determine if you have 
done substantial gainful activity.
    (b) If you work over a period of time during which the substantial 
gainful activity earnings levels change, we will average your earnings 
separately for each period in which a different substantial gainful 
activity earnings level applies.
    (c) If there is a significant change in your work pattern or 
earnings during the period of work requiring evaluation, we will 
average your earnings over each separate period of work to determine if 
any of your work efforts were substantial gainful activity.

    20. Section 416.975 is amended by revising paragraphs (a) and (c) 
and adding a new paragraph (d) to read as follows:


Sec. 416.975  Evaluation guides if you are self-employed.

    (a) If you are a self-employed person. If you are working or have 
worked as a self-employed person, we will use the provisions in 
paragraphs (a) through (d) of this section that are relevant to your 
work activity. We will use these provisions whenever they are 
appropriate in connection with your application for supplemental 
security income benefits (when we make an initial determination on your 
application and throughout any appeals you may request). We will 
consider your activities and their value to your business to decide 
whether you have engaged in substantial gainful activity if you are 
self-employed. We will not consider your income alone because the 
amount of income you actually receive may depend on a number of 
different factors, such as capital investment and profit-sharing 
agreements. We will generally consider work that you were forced to 
stop or reduce to below substantial gainful activity after 6 months or 
less because of your impairment as an unsuccessful work attempt. See 
paragraph (d) of this section. We will evaluate your work activity 
based on the value of your services to the business regardless of 
whether you receive an immediate income for your services. We determine 
whether you have engaged in substantial gainful activity by applying 
three tests. If you have not engaged in substantial gainful activity 
under test one, then we will consider tests two and three. The tests 
are as follows:
    (1) Test One: You have engaged in substantial gainful activity if 
you render services that are significant to the operation of the 
business and receive a substantial income from the business. Paragraphs 
(b) and (c) of this section explain what we mean by significant 
services and substantial income for purposes of this test.
    (2) Test Two: You have engaged in substantial gainful activity if 
your work activity, in terms of factors such as hours, skills, energy 
output, efficiency, duties, and responsibilities, is comparable to that 
of unimpaired individuals in your community who are in the same or 
similar businesses as their means of livelihood.
    (3) Test Three: You have engaged in substantial gainful activity if 
your work activity, although not comparable to that of unimpaired 
individuals, is clearly worth the amount shown in Sec. 416.974(b)(2) 
when considered in terms of its value to the business, or when compared 
to the salary that an

[[Page 42791]]

owner would pay to an employee to do the work you are doing.
* * * * *
    (c) What we mean by substantial income. We deduct your normal 
business expenses from your gross income to determine net income. Once 
net income is determined, we deduct the reasonable value of any 
significant amount of unpaid help furnished by your spouse, children, 
or others. Miscellaneous duties that ordinarily would not have 
commercial value would not be considered significant. We deduct 
impairment-related work expenses that have not already been deducted in 
determining your net income. Impairment-related work expenses are 
explained in Sec. 416.976. We deduct unincurred business expenses paid 
for you by another individual or agency. An unincurred business expense 
occurs when a sponsoring agency or another person incurs responsibility 
for the payment of certain business expenses, e.g., rent, utilities, or 
purchases and repair of equipment, or provides you with equipment, 
stock, or other material for the operation of your business. We deduct 
soil bank payments if they were included as farm income. That part of 
your income remaining after we have made all applicable deductions 
represents the actual value of work performed. The resulting amount is 
the amount we use to determine if you have done substantial gainful 
activity. We will generally average your income for comparison with the 
earnings guidelines in Secs. 416.974(b)(2) and 416.974(b)(3). See 
Sec. 416.974a for our rules on averaging of earnings. We will consider 
this amount to be substantial if--
    (1) It averages more than the amounts described in 
Sec. 416.974(b)(2); or
    (2) It averages less than the amounts described in 
Sec. 416.974(b)(2) but it is either comparable to what it was before 
you became seriously impaired if we had not considered your earnings or 
is comparable to that of unimpaired self-employed persons in your 
community who are in the same or a similar business as their means of 
livelihood.
    (d) The unsuccessful work attempt.--(1) General. Ordinarily, work 
you have done will not show that you are able to do substantial gainful 
activity if, after working for a period of 6 months or less, you were 
forced by your impairment to stop working or to reduce the amount of 
work you do so that you are no longer performing substantial gainful 
activity and you meet the conditions described in paragraphs (d)(2), 
(3), (4), and (5) of this section.
    (2) Event that must precede an unsuccessful work attempt. There 
must be a significant break in the continuity of your work before we 
will consider you to have begun a work attempt that later proved 
unsuccessful. You must have stopped working or reduced your work and 
earnings below substantial gainful activity because of your impairment 
or because of the removal of special conditions which took into account 
your impairment and permitted you to work. Examples of such special 
conditions may include any significant amount of unpaid help furnished 
by your spouse, children, or others, or unincurred business expenses, 
as described in paragraph (c) of this section, paid for you by another 
individual or agency. We will consider your prior work to be 
``discontinued'' for a significant period if you were out of work at 
least 30 consecutive days. We will also consider your prior work to be 
``discontinued'' if, because of your impairment, you were forced to 
change to another type of work.
    (3) If you worked 3 months or less. We will consider work of 3 
months or less to be an unsuccessful work attempt if it ended, or was 
reduced below substantial gainful activity, because of your impairment 
or because of the removal of special conditions which took into account 
your impairment and permitted you to work.
    (4) If you work between 3 and 6 months. We will consider work that 
lasted longer than 3 months to be an unsuccessful work attempt if it 
ended, or was reduced below substantial gainful activity, within 6 
months because of your impairment or because of the removal of special 
conditions which took into account your impairment and permitted you to 
work and--
    (i) You were frequently unable to work because of your impairment;
    (ii) Your work was unsatisfactory because of your impairment;
    (iii) You worked during a period of temporary remission of your 
impairment; or
    (iv) You worked under special conditions that were essential to 
your performance and these conditions were removed.
    (5) If you worked more than 6 months. We will not consider work you 
performed at the substantial gainful activity level for more than 6 
months to be an unsuccessful work attempt regardless of why it ended or 
was reduced below the substantial gainful activity level.


Sec. 416.976  [Amended]

    21. Section 416.976 is amended by removing paragraph (f)(2) and by 
redesignating paragraphs (f)(3) through (f)(6) as paragraphs (f)(2) 
through (f)(5), respectively.


Sec. 416.991  [Amended]

    22. Section 416.991 is amended by removing the parenthetical 
sentence.


Sec. 416.992  [Removed and reserved]

    23. Section 416.992 is removed and reserved.


Sec. 416.992a  [Removed and reserved]

    24. Section 416.992a is removed and reserved.

    25. Section 416.994 is amended as follows:
    a. By revising the section heading,
    b. Removing paragraph (b)(3)(v), and
    c. By revising paragraphs (b)(5) and (b)(6).
    The revisions to Sec. 416.994 read as follows:


Sec. 416.994  How we will decide whether your disability continues or 
ends, disabled adults.

* * * * *
    (b) * * *
    (5) Evaluation steps. To assure that disability reviews are carried 
out in a uniform manner, that a decision of continuing disability can 
be made in the most expeditious and administratively efficient way, and 
that any decisions to stop disability benefits are made objectively, 
neutrally, and are fully documented, we will follow specific steps in 
reviewing the question of whether your disability continues. Our review 
may cease and benefits may be continued at any point if we determine 
there is sufficient evidence to find that you are still unable to 
engage in substantial gainful activity. The steps are:
    (i) Step 1. Do you have an impairment or combination of impairments 
which meets or equals the severity of an impairment listed in appendix 
1 of subpart P of part 404 of this chapter? If you do, your disability 
will be found to continue.
    (ii) Step 2. If you do not, has there been medical improvement as 
defined in paragraph (b)(1)(i) of this section? If there has been 
medical improvement as shown by a decrease in medical severity, see 
step 3 in paragraph (b)(5)(iii) of this section. If there has been no 
decrease in medical severity, there has been no medical improvement. 
(See step 4 in paragraph (b)(5)(iv) of this section.)
    (iii) Step 3. If there has been medical improvement, we must 
determine whether it is related to your ability to do work in 
accordance with paragraphs (b)(1)(i) through (b)(1)(iv) of this 
section; i.e., whether or not there has been an

[[Page 42792]]

increase in the residual functional capacity based on the impairment(s) 
that was present at the time of the most recent favorable medical 
determination. If medical improvement is not related to your ability to 
do work, see step 4 in paragraph (b)(5)(iv) of this section. If medical 
improvement is related to your ability to do work, see step 5 in 
paragraph (b)(5)(v) of this section.
    (iv) Step 4. If we found at step 2 in paragraph (b)(5)(ii) of this 
section that there has been no medical improvement or if we found at 
step 3 in paragraph (b)(5)(iii) of this section that the medical 
improvement is not related to your ability to work, we consider whether 
any of the exceptions in paragraphs (b)(3) and (b)(4) of this section 
apply. If none of them apply, your disability will be found to 
continue. If one of the first group of exceptions to medical 
improvement applies, see step 5 in paragraph (b)(5)(v) of this section. 
If an exception from the second group of exceptions to medical 
improvement applies, your disability will be found to have ended. The 
second group of exceptions to medical improvement may be considered at 
any point in this process.
    (v) Step 5. If medical improvement is shown to be related to your 
ability to do work or if one of the first group of exceptions to 
medical improvement applies, we will determine whether all your current 
impairments in combination are severe (see Sec. 416.921). This 
determination will consider all your current impairments and the impact 
of the combination of these impairments on your ability to function. If 
the residual functional capacity assessment in step 3 in paragraph 
(b)(5)(iii) of this section shows significant limitation of your 
ability to do basic work activities, see step 6 in paragraph (b)(5)(vi) 
of this section. When the evidence shows that all your current 
impairments in combination do not significantly limit your physical or 
mental abilities to do basic work activities, these impairments will 
not be considered severe in nature. If so, you will no longer be 
considered to be disabled.
    (vi) Step 6. If your impairment(s) is severe, we will assess your 
current ability to engage in substantial gainful activity in accordance 
with Sec. 416.961. That is, we will assess your residual functional 
capacity based on all your current impairments and consider whether you 
can still do work you have done in the past. If you can do such work, 
disability will be found to have ended.
    (vii) Step 7. If you are not able to do work you have done in the 
past, we will consider one final step. Given the residual functional 
capacity assessment and considering your age, education, and past work 
experience, can you do other work? If you can, disability will be found 
to have ended. If you cannot, disability will be found to continue.
    (6) The month in which we will find you are no longer disabled. If 
the evidence shows that you are no longer disabled, we will find that 
your disability ended in the earliest of the following months.
    (i) The month the evidence shows that you are no longer disabled 
under the rules set out in this section, and you were disabled only for 
a specified period of time in the past;
    (ii) The month the evidence shows that you are no longer disabled 
under the rules set out in this section, but not earlier than the month 
in which we mail you a notice saying that the information we have shows 
that you are not disabled;
    (iii) The month in which you return to full-time work, with no 
significant medical restrictions and acknowledge that medical 
improvement has occurred, and we expected your impairment(s) to improve 
(see Sec. 416.991);
    (iv) The first month in which you fail without good cause to follow 
prescribed treatment, when the rule set out in paragraph (b)(4)(iv) of 
this section applies;
    (v) The first month you were told by your physician that you could 
return to work, provided there is no substantial conflict between your 
physician's and your statements regarding your awareness of your 
capacity for work and the earlier date is supported by substantial 
evidence; or
    (vi) The first month in which you failed without good cause to do 
what we asked, when the rule set out in paragraph (b)(4)(ii) of this 
section applies.
* * * * *

Subpart M--[Amended]

    26. The authority citation for subpart M of part 416 continues to 
read as follows:

    Authority: Secs. 702(a)(5), 1611-1615, 1619 and 1631 of the 
Social Security Act (42 U.S.C. 902(a)(5), 1382-1382d, 1382h, and 
1383).

    27. Section 416.1331 is amended by revising paragraph (a) to read 
as follows:


Sec. 416.1331  Termination of your disability or blindness payments.

    (a) General. The last month for which we can pay you benefits based 
on disability is the second month after the first month in which you 
are determined to no longer have a disabling impairment (described in 
Sec. 416.911). (See Sec. 416.1338 for an exception to this rule if you 
are participating in an appropriate vocational rehabilitation program, 
and Sec. 416.261 for an explanation of special benefits for which you 
may be eligible.) The last month for which we can pay you benefits 
based on blindness is the second month after the month in which your 
blindness ends (see Sec. 416.986 for when blindness ends). You must 
meet the income, resources, and other eligibility requirements to 
receive any of the benefits described in this paragraph. We will also 
stop payment of your benefits if you have not cooperated with us in 
getting information about your disability or blindness.
* * * * *
[FR Doc. 00-17138 Filed 7-10-00; 8:45 am]
BILLING CODE 4191-02-U