[Federal Register Volume 69, Number 73 (Thursday, April 15, 2004)]
[Rules and Regulations]
[Pages 19924-19925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-8573]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 404

RIN 0960-AF14


Title II Cost of Living Increases in Primary Insurance Amounts

AGENCY: Social Security Administration.

ACTION: Final rules.

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SUMMARY: We are revising our rules dealing with automatic cost-of-
living increases to primary insurance amounts under title II of the 
Social Security Act (the Act). The revisions remove the restriction in 
our previous rules that allowed cost-of-living increases based on rises 
in the Consumer Price Index (CPI) or the Average Wage Index (AWI) only 
if either the CPI or AWI increased by 3 percent or more during the 
prescribed measuring period. The 3-percent restriction was eliminated 
by legislation enacted in 1986. We are also adding clarifying language 
that, when rounding an increase in the CPI or AWI, we round five one-
hundredths and above to the next higher tenth of a percent.

EFFECTIVE DATES: These regulations are effective April 15, 2004.

ADDRESSES: Electronic Version: The electronic file of this document is 
available on the date of publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html. It is also available on the Internet 
site for SSA (i.e., Social Security Online) at http://policy.ssa.gov/pnpublic.nsf/LawsRegs.

FOR FURTHER INFORMATION CONTACT: Regarding this Federal Register 
document--Robert J. Augustine, Social Insurance Specialist, Office of 
Regulations, Social Security Administration, Room 100, Altmeyer 
Building, 6401 Security Boulevard, Baltimore, MD 21235-6401, (410) 965-
0020 or TTY (410) 966-5609. For information on eligibility or filing 
for benefits: Call our national toll-free number, 1-800-772-1213 or TTY 
1-800-325-0778 or visit our Internet Web site, Social Security Online, 
at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Background

    The primary insurance amount is the basic figure we use to find the 
monthly Social Security benefit amount we pay to workers and their 
family members. Under section 215(i) of the Act, primary insurance 
amounts are automatically increased each year if there has been an 
increase in the CPI or AWI over the specified measuring period. Under 
the law in effect prior to the enactment of Public Law 99-509 on 
October 21, 1986, we could increase primary insurance amounts only if 
either the CPI or AWI rose by 3.0 percent or more over the specified 
measuring period. Section 9001 of Public Law 99-509 removed the 3-
percent restriction from the law. However, we have not previously 
revised our regulations to reflect this legislative change. This 
revision conforms our rules on cost-of-living increases to current law. 
This rule also provides clarification on how we round increases in the 
CPI or AWI to the nearest tenth when the calculated increase is exactly 
halfway between tenths of one percent.

Explanation of Changes

    We have revised Sec. Sec.  404.273 through 404.275 and Sec.  
404.278 by removing all references to the 3-percent restriction on 
cost-of-living increases.
    We have also added a new paragraph (c) to Sec.  404.275 to clarify 
that, when rounding the percentage increase in the cost of living to 
the nearest tenth of a percent, we round five one-hundredths and above 
to the next higher tenth of a percent and otherwise round down to the 
next lower tenth of a percent. For example, we round an increase of 
3.15 percent up to a 3.2 percent increase. We have redesignated current 
paragraph (c) as paragraph (d).

Regulatory Procedures

    Pursuant to section 702(a)(5) of the Social Security Act, 42 U.S.C. 
902(a)(5), as amended by section 102 of Public Law 103-296, SSA 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 notice and public comment procedures when an agency 
finds there is good cause for dispensing with such procedures on the 
basis that they are impracticable, unnecessary, or contrary to the 
public interest.
    In the case of these final rules, we have determined that, under 5 
U.S.C. 553(b)(B), good cause exists for dispensing with the notice and 
public comment procedures in this case. Good cause exists because these 
regulations merely conform our rules on cost-of-living increases to 
current law and reflect our current interpretation on rounding. These 
regulations contain no substantive changes of interpretation. 
Therefore, opportunity for prior comment is unnecessary, and we are 
issuing these regulations as final rules.
    In addition, we find good cause for dispensing with the 30-day 
delay in the effective date of a substantive rule, provided for by 5 
U.S.C. 553(d). As explained above, we are not making any substantive 
changes in the cost-of-living increase provisions. However, without 
these changes, our rules will conflict with current law and may mislead 
the public. In addition, we are codifying our current interpretation on 
rounding into our regulations. Therefore, we find that it is in the 
public interest to make these rules effective upon publication.

Executive Order 12866, as Amended by Executive Order 13258

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these final rules do not meet the criteria for a 
significant regulatory action under Executive Order 12866, as amended 
by Executive Order 13258. Thus, they were not subject to OMB review. We 
have also determined that these final rules meet the plain language 
requirement of Executive Order 12866, as amended by Executive Order 
13258.

Regulatory Flexibility Act

    We certify that these final rules will not have a significant 
economic impact on a substantial number of small entities. Therefore, a 
regulatory flexibility analysis as provided in the

[[Page 19925]]

Regulatory Flexibility Act, as amended, is not required.

Paperwork Reduction Act

    These final rules impose no additional reporting or recordkeeping 
requirements requiring OMB clearance.

(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)

List of Subjects in 20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-age, Survivors and disability insurance, Reporting and 
recordkeeping requirements, Social Security.

    Dated: March 30, 2004.
Jo Anne B. Barnhart,
Commissioner of Social Security.

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For the reasons set forth in the preamble, we are amending subpart C of 
part 404 of Title 20 of the Code of Federal Regulations as follows:

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

Subpart C--[Amended]

0
1. The authority citation for subpart C of part 404 continues to read 
as follows:

    Authority: Secs. 202(a), 205(a), 215, and 702(a)(5) of the 
Social Security Act (42 U.S.C. 402(a), 405(a), 415, and 902(a)(5)).

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2. Sections 404.273, 404.274 and 404.275 are revised to read as 
follows:


Sec.  404.273  When are automatic cost-of-living increases effective?

    We make automatic cost-of-living increases if the applicable index, 
either the CPI or the AWI, rises over a specified measuring period (see 
the rules on measuring periods in Sec.  404.274). If the cost-of-living 
increase is to be based on an increase in the CPI, the increase is 
effective in December of the year in which the measuring period ends. 
If the increase is to be based on an increase in the AWI, the increase 
is effective in December of the year after the year in which the 
measuring period ends.


Sec.  404.274  What are the measuring periods we use to calculate cost-
of-living increases?

    (a) General. Depending on the OASDI fund ratio, we measure the rise 
in one index or in both indexes during the applicable measuring period 
(described in paragraphs (b) and (c) of this section) to determine 
whether there will be an automatic cost-of-living increase and if so, 
its amount.
    (b) Measuring period based on the CPI--(1) When the period begins. 
The measuring period we use for finding the amount of the CPI increase 
begins with the later of--
    (i) Any calendar quarter in which an ad hoc benefit increase is 
effective; or
    (ii) The third calendar quarter of any year in which the last 
automatic increase became effective.
    (2) When the period ends. The measuring period ends with the third 
calendar quarter of the following year. If this measuring period ends 
in a year after the year in which an ad hoc increase was enacted or 
took effect, there can be no cost-of-living increase at that time. We 
will extend the measuring period to the third calendar quarter of the 
next year.
    (c) Measuring period based on the AWI--(1) When the period begins. 
The measuring period we use for finding the amount of the AWI increase 
begins with the later of--
    (i) The calendar year before the year in which an ad hoc benefit 
increase is effective; or
    (ii) The calendar year before the year in which the last automatic 
increase became effective.
    (2) When the period ends. The measuring period ends with the 
following year. If this measuring period ends in a year in which an ad 
hoc increase was enacted or took effect, there can be no cost-of-living 
increase at that time. We will extend the measuring period to the next 
calendar year.


Sec.  404.275  How is an automatic cost-of-living increase calculated?

    (a) Increase based on the CPI. We compute the average of the CPI 
for the quarters that begin and end the measuring period by adding the 
three monthly CPI figures (which are published to one decimal place), 
dividing the total by 3, and rounding the result to the nearest 0.1. If 
the average for the ending quarter is higher than the average for the 
beginning quarter, we divide the average for the ending quarter by the 
average for the beginning quarter to determine the percentage increase 
in the CPI over the measuring period.
    (b) Increase based on the AWI. If the AWI for the year that ends 
the measuring period is higher than the AWI for the year which begins 
the measuring period and all the other conditions for an AWI-based 
increase are met, we divide the higher AWI by the lower AWI to 
determine the percentage increase in the AWI.
    (c) Rounding rules. We round the increase from the applicable 
paragraph (a) or (b) of this section to the nearest 0.1 percent by 
rounding 0.05 percent and above to the next higher 0.1 percent and 
otherwise rounding to the next lower 0.1 percent. For example, if the 
applicable index is the CPI and the increase in the CPI is 3.15 
percent, we round the increase to 3.2 percent. We then apply this 
percentage increase to the amounts described in Sec.  404.271 and round 
the resulting dollar amounts to the next lower multiple of $0.10 (if 
not already a multiple of $0.10).
    (d) Additional increase. See Sec.  404.278 for the additional 
increase that is possible.


Sec.  404.278  [Amended]

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3. In Sec.  404.278, remove the parenthetical phrase at the end of 
paragraph (a)(2).

[FR Doc. 04-8573 Filed 4-14-04; 8:45 am]
BILLING CODE 4191-02-P