[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Rules and Regulations]
[Pages 76256-76259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30868]



20 CFR Part 404

[Docket No. SSA 2009-0073]
RIN 0960-AH07

Amendments to Regulations Regarding Withdrawal of Applications 
and Voluntary Suspension of Benefits

AGENCY: Social Security Administration.

ACTION: Final rule with request for comments.


SUMMARY: We are modifying our regulations to establish a 12-month time 
limit for the withdrawal of old-age benefits applications, allow one 
withdrawal per lifetime, and limit the voluntary suspension of benefits 
for purposes of receiving delayed retirement credits to months for 
which you have not received a payment. We are making these changes to 
revise current policies that have the potential for misuse.

DATES: This final rule will be effective December 8, 2010. To ensure 
that your comments are considered, we must receive them no later than 
February 7, 2011.

ADDRESSES: You may submit comments by any one of three methods--
Internet, fax, or mail. Do not submit the same comments multiple times 
or by more than one method. Regardless of which method you choose, 
please state that your comments refer to Docket No. SSA-2009-0073 so 
that we may associate your comments with the correct regulation.
    Caution: You should be careful to include in your comments only 
information that you wish to make publicly available. We strongly urge 
you not to include in your comments any personal information, such as 
Social Security numbers or medical information.
    1. Internet: We strongly recommend that you submit your comments 
via the Internet. Please visit the Federal eRulemaking portal at http://www.regulations.gov. Use the Search function to find docket number 
SSA-2009-0073. The system will issue a tracking number to confirm your 
submission. You will not be able to view your comment immediately 
because we must post each comment manually. It may take up to a week 
for your comment to be viewable.
    2. Fax: Fax comments to (410) 966-2830.
    3. Mail: Mail your comments to the Office of Regulations, Social 
Security Administration, 107 Altmeyer Building, 6401 Security 
Boulevard, Baltimore, Maryland 21235-6401.
    Comments are available for public viewing on the Federal 
eRulemaking portal at http://www.regulations.gov or in person, during 
regular business hours, by arranging with the contact person identified 

FOR FURTHER INFORMATION CONTACT: Deidre Bemister, Social Insurance 
Specialist, Social Security Administration, Office of Income Security 
Programs, Office of Applications and Electronic Services Support 
Policy, 2500 Operations Building, 6401 Security Boulevard, Baltimore, 
Maryland 21235, 410-966-6223. 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 site, Social Security Online, at 


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.


    In 1935, Congress passed the Social Security Act (Act), which 
established and funded the Social Security program. In his Presidential 
signing statement, President Franklin D. Roosevelt affirmed that the 
lawmakers intended the Act to ``give some measure of protection to the 
average citizen and to his family against the loss of a job and against 
poverty-ridden old age.'' \1\ Due to concerns about the solvency of the 
Social Security program, in 1977 Congress passed amendments to the Act 
designed to restore the long-term balance of the program. Among the 
changes enacted was a delayed retirement credit (DRC) that increased 
benefits for those who delay retirement past full retirement age 

    \1\ Presidential Statement Signing the Social Security Act, 
August 14, 1935. Available at: http://www.ssa.gov/history/fdrstmts.html#signing.
    \2\ Section 216(l) of the Act provides for a gradual increase in 
the full retirement age from age 65 to age 67. The change first 
affected those workers born in 1938. By 2027, the incremental 
increases will be complete and a full retirement age of 67 will be 
applicable to all workers born in 1960 or later. These provisions do 
not change the age at which a worker can take early retirement at a 
reduced benefit amount, which remains age 62.

    Workers choose when to apply for old-age benefits. Workers who 
apply for old-age benefits at FRA will receive full benefit rates. 
Workers may also choose to apply before or after FRA. Workers who apply 
between age 62 and FRA will receive benefit amounts reduced by a 
certain percentage for each month they collect benefits before FRA. 
Workers who apply between FRA and age 70 will receive amounts increased 
by a certain percentage for each month they forego benefit payments 
after FRA. Workers who live to their average life expectancies will 
receive about the same amount in lifetime benefits, regardless if they 
began receiving benefits at age 62, FRA, age 70, or any age in between.

Benefit Application Withdrawal

    Workers occasionally reconsider their having applied for old-age 
benefits. Continued work is a common reason for such reconsideration. 
The income from continued work may bring workers earnings over the 
annual earnings limit and require us to withhold benefits. Although the 
Act does not include a specific provision concerning

[[Page 76257]]

withdrawal of an application, we have a longstanding policy that allows 
workers to withdraw benefit applications.
    Our current regulations permit living applicants or beneficiaries 
to withdraw benefit applications for any reason. Applicants or 
beneficiaries need simply submit written requests for withdrawal, and 
beneficiaries must repay benefits received. Our program experience has 
shown that most workers withdraw their applications within one year of 
    Recent media articles have promoted the use of our application 
withdrawal process as a means for retired beneficiaries to increase 
their benefits or acquire an ``interest-free loan.'' \3\ Our current 
policy permits retirement beneficiaries to apply for old-age benefits 
prior to FRA, begin receiving reduced benefits, withdraw their 
applications, repay benefits, and reapply for full or increased 
benefits later. Under this policy, the payment of monthly benefits 
ceases until the beneficiary reapplies, at which time the beneficiary 
receives a higher monthly benefit amount than before.

    \3\ Janet Novack, Trade in Your Social Security Check,'' Forbes, 
7 February 2008. Available at: http://www.forbes.com/2008/02/07/retirement-roth-taxes-pf-guru-in_jn_0207retirement_inl.html.

    Reacting to this media attention, the Center for Retirement 
Research at Boston College published an article titled, Strange but 
True: Free Loan from Social Security that discussed this 
``unconventional claiming strateg[y].'' \4\ The authors very astutely 
observed that our current withdrawal policy has the potential to ``pay 
higher lifetime benefits to some individuals and increase system 
costs.'' \5\

    \4\ Munnell, Alicia H., Alex Golub-Sass, and Nadia Karamcheva, 
Strange but True: Free Loan From Social Security, Trustees of Boston 
College, Center for Retirement Research. March 2009, Number 9-6. 
Available at: http://crr.bc.edu/images/stories/Briefs/ib_9-6.pdf.
    \5\ Id.

    This ``free loan'' is not free. It denies the Trust Fund and the 
Federal Government the use of these monies and the potential returns on 
the use of those funds. Moreover, the processing of withdrawal 
applications uses resources that we could use to serve others. Our 
Nation faces significant challenges resulting from the potential number 
of future retirees. Current market and economic conditions have 
exacerbated these challenges.
    Additionally, our current withdrawal policy has the potential to 
benefit those with the least need. Because a worker must repay 
previously awarded benefits in one lump sum, without interest, it is 
unlikely that the average retired beneficiary is in a position to 
reverse this earlier decision. Those who have the means to take 
advantage of our current policy do so at the expense of the Trust Fund.
    Our field offices have noticed an increase in the number of 
application withdrawals. We anticipate that the number of withdrawals 
will continue to rise if this policy is not changed. The current 
economic climate may lead many current retirees to return to work in 
order to obtain a higher future benefit. Current retirees with the 
means to repay benefits received could decide to do so in order to 
start collecting higher benefits immediately.

Benefit Suspension

    We currently allow beneficiaries to suspend past, current, and 
future old-age benefit payments. Beneficiaries who suspend past 
payments must repay benefits received during the period of suspension. 
This policy also has the potential for misuse. Our current policy 
allows workers to apply for old-age benefits prior to FRA, begin 
receiving reduced benefits, suspend the benefits retroactively, repay 
benefits, and earn DRCs for the period of suspension. Workers earn DRCs 
for each month retirement is delayed past FRA up to age 70. As a 
result, workers who retroactively suspend old-age benefits to earn DRCs 
receive a higher monthly benefit amount. Because beneficiaries could 
use retroactive voluntary suspension as a vehicle to repay benefits and 
then reapply for higher benefits at a later age, we are revising this 

Regulatory Changes

    We are under a clear congressional mandate to protect the Trust 
Funds. It is crucial that we change our current policies that have the 
effect of allowing beneficiaries to withdraw applications or suspend 
benefits and use benefits from the Trust Funds as something akin to an 
interest-free loan. At the same time, we also need to ensure that 
beneficiaries who experience an unforeseen change of circumstances and 
who may need to withdraw an application or suspend benefits are able to 
do so. Establishing limitations on the number and scope of application 
withdrawals and on the period for which you can voluntarily suspend 
your benefits for purposes of receiving delayed retirement credits will 
help prevent abuse and maintain flexibility for beneficiaries.
    In our experience, we have not found that survivor and disability 
beneficiaries withdraw their applications and repay the benefits they 
have received. Applications for old-age benefits are most prone to 
manipulation for personal financial gain by our current policies. For 
these reasons, these changes will be limited solely to applications for 
old-age benefits.
    We are modifying section 404.640 to limit the withdrawal of old-age 
applications. Under this final rule, application withdrawals will be 
limited to one withdrawal per lifetime. The withdrawal must occur 
within 12 months of the first month of entitlement. This 12-month 
limitation will allow flexibility for beneficiaries who experience an 
unexpected change in circumstances during that time. In addition, 
limiting the period for application withdrawals to within 12 months of 
the first month of entitlement will minimize the likelihood of abuse 
and the potential harm to the Trust Funds.
    We decided to limit the withdrawal of old-age benefits to 12 
months. We chose 12 months as an appropriate period because it balances 
giving claimant's flexibility in reconsidering their claiming benefit 
decisions with eliminating the ``interest-free loan'' loophole. First, 
a longer period would not appreciably increase the universe of 
claimants who reconsider their claiming decisions, because our data 
show that in recent years 85-90 percent of applicants who withdrew 
their applications did so in the first twelve months.
    Second, the 12-month limitation period is a financial 
disincentive--there is little to be gained by investing benefits for 
only 12 months. Finally, for those cases where claimants request 
withdrawal after 12 months, we have other ways to address their 
concerns if they wish to change their date of entitlement to benefits. 
For example, we can revise a month of election determination using 
existing policies:
     Evaluating conditional month of election determinations--
if individuals who are subject to the annual earnings test are due no 
payment for the year of entitlement, they might believe that they need 
to withdraw their application and re-file. However, withdrawing the 
application is unnecessary because we may reopen and revise the month 
of election. Because these claimants have earnings above the annual 
earnings limit, we consider their month of election as ``conditional'' 
and would automatically revise it to a later date based on the annual 
earnings report;
     Adjusting benefits to consider the effect of work and 
earnings on benefit amounts--if individuals decide to return to work, 
it is unnecessary for them to withdraw their application. Beneficiaries 
will receive credit for all months in which they do not receive a

[[Page 76258]]

full monthly benefit. When individuals reach full retirement age, SSA 
will increase their monthly benefits under a process called the 
adjustment of the reduction factor. This process removes from the 
calculation of the ongoing benefit at full retirement age, the 
actuarial reduction associated with each month for which beneficiaries 
do not receive a full monthly benefit; and,
     Reopening determinations under our rules of administrative 
finality--SSA might discover that duplicate postings result in an 
incorrect payment amount, causing a claimant to elect retirement 
benefits instead of widow's benefits. The claimant does not need to 
withdraw the retirement application. Instead, we can use our rules of 
administrative finality to reopen the prior entitlement decision.
    The 12-month limitations period should have no effect on 
beneficiaries who wish to change their month of election because of a 
change in their circumstances or because of an error in the calculation 
of their benefits. It would, however, effectively eliminate ``interest-
free loans.''
    We are also modifying section 404.313 to limit the voluntary 
suspension of benefits. Under these final rules, if we have determined 
that you are entitled to benefits, you may voluntarily suspend benefits 
for any month beginning the month after the month in which you request 
that we voluntarily suspend your benefits. If you apply for benefits, 
and we have not made a determination that you are entitled to benefits, 
you may voluntarily suspend benefits for any month for which you have 
not received a payment.
    Under the Act, if the beneficiary is entitled to retirement 
benefits, delayed retirement credits may be available if the 
beneficiary ``did not receive benefits pursuant to a request by such 
individual that benefits not be paid.'' \6\ In these rules, we are 
interpreting the statutory phrase ``did not receive benefits pursuant 
to a request by such individual that benefits not be paid'' to mean 
that the beneficiary may voluntarily suspend benefits for purposes of 
the DRC only on a prospective basis.

    \6\ 42 U.S.C. 402(w)(2)(B)(ii).

    Applicants for whom we have not made an initial determination may 
voluntarily suspend benefits for purposes of the DRC, for any 
months.\7\ We recognize that this is a change from our current policy. 
However, because the statute refers to benefits that the ``individual 
did not receive,'' rather than ``received and repaid,'' we believe that 
the policy we are adopting in these rules is consistent with the 
language of the statute and congressional intent.

    \7\ Id.

    The following illustrates the change in policy:
    1. Example--Beneficiary currently receiving benefits:
    A beneficiary is currently receiving old-age benefits and requests 
to voluntarily suspend retroactive, current, and future benefits and 
repay all benefits received during the retroactive period.
    The beneficiary can suspend benefits beginning with the month after 
the month in which the beneficiary requests that we voluntarily suspend 
benefits, provided the beneficiary has not received a monthly benefit 
amount for those months. The beneficiary may not suspend retroactive 
monthly benefits for which we have made a determination or suspend 
retroactive monthly benefits that we have already paid.
    2. Example--Applicant filing a new application:
    An applicant files for old-age benefits one or more months after 
the month the applicant attains FRA. The applicant could potentially be 
due retroactive benefits. We have not yet made an initial determination 
about monthly benefits or entitlement. In order to earn DRCs, the 
applicant voluntarily requests to suspend retroactive, current, and 
future benefits.
    The applicant can suspend past, current, and future benefits for 
months to which the applicant is entitled because we have not made any 
monthly benefit determinations or payments.
    We believe these changes will not penalize applicants who require 
the suspension of unpaid benefits for reasons not related to misuse.

When will we start to use these rules?

    We will start to use these rules on the date shown under DATES 
earlier in this preamble. However, we are also inviting public comments 
on the changes made by these rules. We will consider any relevant 
comments we receive. We plan to publish another final rule document to 
respond to any such comments we receive and to make any changes to the 
rules as appropriate based on the comments.

Regulatory Procedures

    We follow the Administrative Procedure Act (APA) rulemaking 
procedures specified in 5 U.S.C. 553 when we develop regulations. 
Section 702(a)(5) of the Social Security Act, 42 U.S.C. 902(a)(5). 
Generally, the APA requires that an agency provide prior notice and 
opportunity for public comment before issuing a final rule. The APA 
provides exceptions to its notice and public comment procedures when an 
agency finds good cause for dispensing with such procedures because 
they are impracticable, unnecessary, or contrary to the public 

    \8\ 5 U.S.C. 553(b)(B).

    We find that good cause exists for proceeding without prior public 
notice and comment in this instance. This final rule addresses our 
policies on benefit application withdrawal and retroactive benefit 
suspension that beneficiaries could take advantage of to obtain 
increased benefits. Because these policies have the potential for 
abuse, any delay in their modification through the revision of our 
regulations could result in the harm that we are trying to prevent. 
Providing prior public notice may act as a catalyst for more applicants 
and beneficiaries to request withdrawal of their applications. 
Accordingly, we find that prior public comment would be contrary to the 
public interest. However, we are inviting public comment on the final 
rule and will consider any substantive comments we receive within 60 
days of the publication of this final rule.
    In addition, for the reasons cited above, we also find good cause 
for dispensing with the 30-day delay in the effective date of this 
final rule.\9\ We find that it is contrary to the public interest to 
delay the effective date of our rule changes because any delay in their 
modification could result in the harm that we are trying to prevent. 
Accordingly, we are making this final rule effective upon publication.

    \9\ 5 U.S.C. 553(d)(3).

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these final rules meet the criteria for a 
significant regulatory action under Executive Order 12866 and were 
subject to OMB review.

Regulatory Flexibility Act

    We certify that this final rule will not have a significant 
economic impact on a substantial number of small entities as it affects 
individuals only. Accordingly, a regulatory flexibility analysis is not 
required under the Regulatory Flexibility Act, as amended.

Paperwork Reduction Act

    This final rule does not create any new or affect any existing 
collections and does not require Office of Management and Budget 
approval under the Paperwork Reduction Act.

[[Page 76259]]

(Catalog of Federal Domestic Assistance Program No. 96.002 Social 
Security--Retirement Insurance.)

List of Subjects in 20 CFR Part 404

    Aged, Old-age, Survivors and disability insurance; Social Security.

Michael J. Astrue,
Commissioner of Social Security.

For the reasons set out in the preamble, we are amending 20 CFR chapter 
III, part 404, subparts D and G as follows:


Subpart D--Old-Age, Disability, Dependents' and Survivors' 
Insurance Benefits; Period of Disability

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. Amend Sec.  404.313(a) to add fifth and sixth sentences to the end 
of the paragraph to read as follows:

Sec.  404.313  What are delayed retirement credits and how do they 
increase my old-age benefit amount?

    (a) * * * If we have determined that you are entitled to benefits, 
you may voluntarily suspend benefits for any month beginning with the 
month after the month in which you voluntarily request that we suspend 
your benefits. If you apply for benefits, and we have not made a 
determination that you are entitled to benefits, you may voluntarily 
have your benefits suspended for any month for which you have not 
received a payment.
* * * * *

Subpart G--Filing of Applications and Other Forms

3. The authority citation for subpart G of part 404 continues to read 
as follows:

    Authority: Secs. 202(i), (j), (o), (p), and (r), 205(a), 
216(i)(2), 223(b), 228(a), and 702(a)(5) of the Social Security Act 
(42 U.S.C. 402(i), (j), (o), (p), and (r), 405(a), 416(i)(2), 
423(b), 428(a), and 902(a)(5)).

4. Amend Sec.  404.640 to add new paragraph (b)(4) to read as follows:

Sec.  404.640  Withdrawal of an application.

* * * * *
    (b) * * *
    (4) Old age benefits. An old age benefit application may be 
withdrawn if, in addition to the requirements of this section--
    (i) The request for withdrawal is filed within 12 months of the 
first month of entitlement; and
    (ii) The claimant has not previously withdrawn an application for 
old age benefits.
* * * * *
[FR Doc. 2010-30868 Filed 12-7-10; 8:45 am]