[Federal Register Volume 76, Number 3 (Wednesday, January 5, 2011)]
[Rules and Regulations]
[Pages 446-454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-33272]


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

SOCIAL SECURITY ADMINISTRATION

20 CFR Part 416

[Docket No. SSA-2008-0050]
RIN 0960-AE59


Supplemental Security Income (SSI) for the Aged, Blind, and 
Disabled; Dedicated Accounts and Installment Payments for Certain Past-
Due SSI Benefits

AGENCY: Social Security Administration (SSA).

ACTION: Final rules.

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

SUMMARY: These final rules adopt, with some minor changes, the interim 
final rules with request for comment we published in the Federal 
Register on December 20, 1996. 61 FR 67203. The interim final rules 
concerned dedicated accounts and installment payments for certain past-
due SSI benefits and reflected amendments to the Social Security Act 
(Act) made by sections 213 and 221 of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (PRWORA). These final rules 
reflect these provisions, as well as subsequent changes to these 
provisions made by the Balanced Budget Act of 1997 (BBA), the Social 
Security Protection Act of 2004 (SSPA), and the Deficit Reduction Act 
of 2005 (DRA). The changes we are making in these final rules will 
ensure that our rules accurately reflect the statutory provisions on 
which they are based.

DATES: These final rules are effective February 4, 2011.

FOR FURTHER INFORMATION CONTACT: Brian Rudick, Office of Regulations, 
Social Security Administration, 6401 Security Boulevard, Baltimore, MD 
21235-6401, (410) 965-7102. 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 
http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION: 

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.

Background

    The interim final rules reflected the dedicated account 
requirements that were added by section 213 of the PRWORA. Public Law 
104-193. Congress enacted the PRWORA on August 22, 1996. Section 213 of 
the PRWORA added a new section 1631(a)(2)(F) of the Act for payments 
made after August 22, 1996. Under section 1631(a)(2)(F) of the Act, the 
representative payee of an eligible person under age 18 must establish 
in certain situations ``an account in a financial institution,'' which 
we refer to as a ``dedicated account.'' Specifically, the 
representative payee must establish a dedicated account if the person 
is eligible for past-due monthly SSI benefits, including any federally 
administered State supplementary payments, that exceed 6 times the 
maximum ``monthly benefit payable'' under title XVI, which we call the 
Federal benefit rate (FBR), after any withholding for interim 
assistance reimbursement (IAR) to a State(s) and after payment of 
attorney fees. Under section 1631(a)(2)(F) of the Act, the past-due 
benefits in a dedicated account may only be used for certain allowable 
expenses.
    Sections 213(b) and (c) of the PRWORA also amended sections 1613(a) 
and 1612(b) of the Act, respectively, to provide that funds in a 
dedicated account, established and maintained in accordance with 
section 1631(a)(2)(F) of the Act, including accrued interest or other 
earnings, are excluded from resources and from income.
    Since we published the interim final rules, Congress has enacted 
three other laws that made additional changes to the dedicated account 
requirements. We are including these statutory changes in the final 
rules without requesting public comment because the changes are 
required by statute and we are making no discretionary policy changes.
    The BBA made one clarification and one revision to section 
1631(a)(2)(F) of the Act. Public Law 105-33. Section 5522(b)(2) of the 
BBA amended section 1631(a)(2)(F)(iii) of the Act by clarifying which 
subsequent past-due benefits a representative payee may deposit in an 
established dedicated account. Congress made this technical change to 
the statute because the PRWORA used the two different terms 
``underpayment'' and ``past-due benefits'' to describe funds that could 
be deposited in these accounts. This terminology caused confusion. 
Section 5522(b)(2) of the BBA corrected this technical issue, and we 
are including this change in these final rules. As amended by section 
5522(b)(2) of the BBA, section 1631(a)(2)(F)(iii) of the Act states 
that the representative payee may deposit into an established dedicated 
account any other funds representing past-due benefits under title XVI 
of the Act which equal or exceed the maximum monthly FBR, including any 
federally

[[Page 447]]

administered State supplementary payments. While not required, the 
representative payee may deposit these past-due benefits into the 
dedicated account.
    Section 5522(b)(1) of the BBA revised section 
1631(a)(2)(F)(ii)(III)(bb) of the Act and required us to reduce 
``future benefits payable'' to a recipient (or to a recipient and his 
or her spouse), who is his or her own payee and who knowingly 
misapplies benefits from a dedicated account. We must reduce the 
``future benefits payable'' by an amount equal to the amount of 
benefits that were misapplied.
    The interim final rules also reflected the installment payment 
requirements that were added to section 1631(a) of the Act by section 
221 of the PRWORA. Under section 1631(a)(10) of the Act, past-due 
benefits paid on or after December 1, 1996, had to be paid in 
installments if the amount due equaled or exceeded 12 times the maximum 
FBR, after any withholding for IAR to a State(s). Section 1631(a)(10) 
of the Act provides limitations on the size of the installment 
payments, as well as exceptions to those limitations and exceptions to 
the installment payment requirement.
    In 2004, Congress enacted the SSPA. Public Law 108-203. Section 
302(b)(1) of the SSPA amended section 1631(a)(2)(F)(i)(II) of the Act 
to specify that the past-due monthly benefits for dedicated account 
purposes are those that remain after any withholding for payment of 
attorney fees.
    Section 302(b)(2) of the SSPA amended section 1631(a)(10)(A) of the 
Act to specify that the past-due monthly benefits for installment 
payment purposes are those remaining after any withholding for payment 
of attorney fees. Also, section 7502 of the DRA amended section 
1631(a)(10)(A)(i) of the Act to change the threshold amount for 
determining whether past-due payments will be made in installments. 
Public Law 109-171. Under section 1631(a)(10) of the Act, as amended by 
section 7502 of the DRA, effective May 8, 2006, past-due benefits must 
be paid in installments if the amount due equals or exceeds 3 times the 
maximum FBR after any withholding for IAR to a State(s) and payment of 
attorney fees.
    These final rules reflect the statutory requirement that past-due 
benefits, including any federally administered State supplementary 
payments, generally be made in installments if the amount due, after 
any reimbursement for IAR and any withholding of attorney fees, equals 
or exceeds 3 times the maximum FBR. We pay these past-due benefits in 
not more than 3 installments, with the first and second installments 
not to exceed 3 times the FBR plus any federally administered State 
supplementation. We make the installment payments at 6-month intervals.
    These final rules also reflect the statutory exceptions to the 
installment payment requirements and the exception to the limit on the 
amount of the first and second installment payments, when the recipient 
has certain outstanding debts or current or anticipated expenses.
    In these final rules, we have clarified our rules on dedicated 
accounts and installment payments as a result of the public comments we 
received. We also have clarified the rules governing receipt of 
installment payments when a recipient subsequently becomes eligible for 
additional benefit amounts while the recipient is already receiving 
installment payments.

Public Comments

    On December 20, 1996, we published an interim final rule with 
request for comments in the Federal Register and provided a 60-day 
comment period. 61 FR 67203. We received 29 letters, most of which were 
from attorneys and advocacy groups. We carefully considered all of the 
comments in publishing these final rules, and we have adopted several 
recommendations made by the commenters.
    We have summarized the commenters' views and have responded to the 
significant issues raised by the commenters that are within the scope 
of the interim final rules. For ease of reference, we have organized 
the comments and responses as follows: First, we address general 
comments, i.e., comments that are either about the interim final rules 
as a whole or apply to more than one section of the rules; then, we 
address the remaining comments about specific sections of the rules.

General Comments

    Comment: Most commenters objected to section 213 of the PRWORA, 
section 221 of the PRWORA, or both. These commenters stated that they 
did not believe these statutory provisions would improve the 
administration of the SSI program and that this legislation should not 
have been enacted. Attorneys commented that these statutory changes 
were a disservice to their SSI clients and that these changes would 
deny SSI recipients access to competent legal representation because 
they did not allow for increased installment payments to cover attorney 
fees or for attorney fees to be recognized as allowable dedicated 
account expenses. The commenters also were concerned that paying SSI in 
installments could distress SSI recipients. These commenters requested 
that we not implement the enacted requirements.
    Response: We have not adopted these comments because we must 
implement statutes that affect the programs we administer. Further, as 
we explained above, when we decide whether the representative payee 
must establish a dedicated account, we consider the amount of the past-
due benefits after payment of attorney fees. Public Law 104-193 affects 
many aspects of the SSI program, and we are not authorized to ignore 
any of the legislative provisions or to reconsider implementing these 
changes. While sections 213 and 221 of the PRWORA restrict the use and 
payment of certain SSI payments, Congress has also provided some 
flexibility in determining appropriate uses and for increasing the 
installment payment amounts when the SSI recipient's circumstances 
involve certain debts and expenses, which we enumerate in Sec.  
416.545. Also, we do not count an installment payment as a resource for 
nine months after the month in which the payment is made. This 
exclusion from resources allows an eligible person to spend down the 
installment payment before it affects his or her eligibility for SSI. 
The funds in a dedicated account are excluded entirely from income and 
resources for determining SSI eligibility and payment amounts.
    Comment: Two commenters questioned whether due process would be 
afforded in misapplication situations.
    Response: Misapplication of benefits occurs when a representative 
payee knowingly uses dedicated account funds for expenditures that are 
not permitted. A determination that a representative payee misapplied 
funds and therefore is liable to us for such misapplication is an 
initial determination with appeal rights under Sec.  416.1402.
    Comment: One commenter stated that a regulatory flexibility 
analysis is needed. The commenter expressed concern that banks would 
profit from the establishment of dedicated accounts while landlords, 
grocers, and public utilities would not. The commenter's concern is 
that there could be significant economic impact because persons would 
not have access to their entire lump sum amount.
    Response: We do not agree with the commenter. A regulatory 
flexibility analysis under the Regulatory Flexibility Act, 5 U.S.C. 
601-612, is only required if a proposed or final

[[Page 448]]

regulation would have a significant economic impact on a substantial 
number of small entities. It is not required if the head of the agency 
certifies that the proposed or final rule would not have a significant 
economic impact on a substantial number of small entities. In such a 
case, the agency will publish the certification in the Federal Register 
at the time it publishes a proposed or final rule and provide a 
statement providing the factual basis for the certification. 5 U.S.C. 
605.
    Commissioner Chater certified that the interim final rule did not 
require a regulatory flexibility analysis, and we provided an 
appropriate factual basis for the certification in the preamble to the 
interim final rule. 61 FR 67203, 67205 (1996). We have also certified 
that these final rules do not require a regulatory flexibility 
analysis, and we have included that certification, along with the 
appropriate factual basis for the certification, in the preamble below. 
The commenter's concern about the possible effect of the rule on 
landlords, grocers, and public utilities does not require us to do a 
Regulatory Flexibility Act analysis. Neither the interim final nor the 
final rules would directly regulate any small entities, including any 
landlords, grocers or public utilities. An agency is not required to 
perform a regulatory flexibility analysis in order to assess the 
indirect effects of a regulation on small entities that are not subject 
to the regulation.

Comments About Specific Regulatory Sections

Section 416.538(d) Amount of Underpayment or Overpayment--Limited Delay 
in Payment of Underpaid Amount to Eligible Persons Under Age 18 Who Has 
a Representative Payee
    Comment: One commenter stated that we should not require a 
representative payee to establish a dedicated account prior to our 
paying past-due benefits. The commenter suggested that we issue the 
past-due payments to the payee and the payee will, at a later date, 
tell us that he or she established the account.
    Response: Section 1631(a)(2)(F)(i)(I) of the Act explicitly 
requires that a representative payee must ``establish * * * an account 
in a financial institution into which such benefits shall be paid * * 
*.'' The intent of the legislation is to ensure that the funds are 
placed in a separate dedicated account to be used only for certain 
specified expenses primarily related to the child's impairment. 
Accordingly, we must deposit these past-due benefits directly into the 
dedicated account as directed by Congress. We have made no changes to 
Sec.  416.538(d) as previously published.
    Comment: One commenter believed that directly depositing title XVI 
past-due benefits into the dedicated account would make these funds 
subject to attachment, garnishment, or levy by creditors, which usually 
they are not. They no longer would be ``benefit checks'' but simply 
funds in an account. This would leave the door open to creditors to 
attach the funds because the funds no longer would be protected by 
section 207 of the Act.
    Response: Section 207 of the Act, 42 U.S.C. 407, generally prevents 
benefit payments from being subject to execution, levy, attachment, 
garnishment, or other legal process or to the operation of any 
bankruptcy or insolvency law. The protections afforded by section 207 
apply to SSI payments pursuant to section 1613(d)(1) of the Act, 42 
U.S.C. 1382(d). We have operated a successful direct deposit program 
for more than two decades. Courts have generally ruled that title II 
and title XVI benefits do not lose their identity as benefits protected 
under section 207 of the Act when they are directly deposited into a 
bank account. Further, the funds clearly retain such protection in the 
dedicated account because they are not commingled with other funds.
    In addition, we are currently pursuing another rulemaking that we 
expect will address the commenter's concerns. On April 19, 2010, we 
published a joint notice of proposed rulemaking, along with the 
Department of the Treasury, the Department of Veterans Affairs, the 
Office of Personnel Management, and the Railroad Retirement Board. 75 
FR 20299 (2010). The joint proposed rule would implement statutory 
restrictions on the garnishment of Federal benefit payments. The 
agencies took this action in response to recent developments in 
technology and debt collection practices that have led to an increase 
in the freezing of accounts containing Federal benefit payments.
    The proposed rule would establish procedures that financial 
institutions must follow when a garnishment order is received for an 
account into which Federal benefit payments have been directly 
deposited. The proposed rule would require financial institutions that 
receive a garnishment order to determine whether any Federal benefit 
payments were deposited to the account within 60 calendar days prior to 
receiving the order. If so, the financial institutions must ensure that 
the account holder has access to an amount equal to the sum of such 
payments in the account or to the current balance of the account, 
whichever is lower.
Section 416.542 Underpayments--To Whom Underpaid Amount Is Payable
    Comment: One commenter objected to our following Sec.  416.542(b) 
if the eligible person dies before all installment payments have been 
paid.
    Response: The installment payment requirement in section 
1631(a)(10) of the Act did not amend the law regarding the payment of 
past-due benefits after a person's death. We believe that provision 
applies to installment payments of past-due benefits the same way it 
applies to regular payments of past-due benefits. Thus, we did not 
modify Sec.  416.542.
Section 416.545 Paying Large Past-Due Benefits in Installments
    Comment: One commenter suggested that we clarify the reference to 
the 6-month resource exclusion rule, which applies to benefits received 
before March 2, 2004.
    Response: We did add Sec.  416.1247, which explains the exclusion 
from resources of dedicated accounts and interest or other earnings on 
the account. Section 431 of the SSPA changed the 6-month resource 
exclusion for title XVI underpayments in effect at the time we 
published the interim final rules to a 9-month resource exclusion. Our 
rules at Sec.  416.1233 specifically state that we exclude from 
countable resources the unspent portion of any title II or title XVI 
retroactive payment for 9 months ``following the month of receipt'' (6 
months for retroactive payments received before March 2, 2004). Also, 
the notice that we send with the installment payment explains how the 
resource exclusion period is applied.
    Comment: One commenter asked whether the unpaid past-due benefits 
would accrue interest until the installment payments are paid in full 
to the SSI recipient.
    Response: We have no statutory authority to pay interest on unpaid 
benefits, including those being held for future installments.
    Comment: One commenter stated that a recipient who is awarded SSI 
benefits 11 months after filing should not be subject to the 
installment payment provisions, since the provision only was applicable 
because it had taken us an additional 6 weeks to complete the award and 
payment process.
    Response: Since section 1631(a)(10) of the Act requires us to 
compute the amount of past-due SSI benefits before determining if 
installment payments are required, we determine whether the

[[Page 449]]

installment payment provisions apply at the time the claim is paid. The 
number of months from the date of filing an application until a 
determination or decision is made and the reason for the amount of 
past-due benefits are not factors in the computation.
Section 416.545(b) Paying Large Past-Due Benefits in Installments--
Installment Formula
    Comment: One commenter stated that we should change the formula for 
determining when benefits must be paid in installments to eliminate the 
reference for including any State supplementary payments a recipient 
may receive since a recipient who receives a State supplementary 
payment would automatically have that amount factored into the formula 
used in determining whether installments apply.
    Response: We did not adopt this comment. Section 1631(a)(10)(D) of 
the Act specifies that the benefits subject to installment payments 
``includes supplementary payments pursuant to an agreement for Federal 
administration under section 1616(a)'' of the Act, and ``under section 
212(b) of Public Law 93-66.'' Accordingly, any federally administered 
State supplementary payments payable to the recipient must be included 
in the amount of past-due benefits when we determine if the amount is 
large enough to require installment payments. We believe the interim 
final rules accurately reflected the statutory formula and avoided 
potential confusion about whether State supplementation payments are 
included in applying the formula. Further, not all States provide a 
supplementary payment to the SSI benefit, so it is important to include 
references to the State supplement when providing the formula for 
dedicated account requirements, as well as the formula for the 
installment payment requirement.
    Comment: Another commenter asked that we make the formula clearer 
by adding language to indicate that the amount of past-due benefits 
used in determining whether installment payments are required is based 
upon the amount of past-due benefits remaining after any reimbursement 
has been made to a State for interim assistance.
    Response: We adopted this comment and are adding the parenthetical 
phrase ``reimbursement to States for interim assistance'' to Sec.  
416.545(b). We are also adding this phrase in Sec.  416.546(a), which 
sets forth a similar formula used to determine whether a dedicated 
account is required.
    Comment: One commenter suggested that we clarify the formula to 
indicate the amount of past-due benefits subject to installments that 
is determined after interim assistance is paid to States.
    Response: We added the phrase ``reimbursement to States for interim 
assistance'' to both Sec. Sec.  416.545(b) and 416.546(a) after the 
phrase ``Sec.  416.525,'' which is the section that explains 
reimbursement to States for interim assistance.
Section 416.545(c) Paying Large Past-Due Benefits in Installments--
Exception--When Installment Payments Are Not Required
    Comment: Another commenter asked that we clarify when the 
exceptions to the installment payment process apply. The commenter 
stated that the interim final rules did not make clear when the 12-
month period starts for determining whether death is likely to result 
from a medically determinable impairment within 12 months or when a 
recipient is likely to remain ineligible for 12 months.
    Response: We did not adopt this comment. Section 1631(a)(10)(C) of 
the Act states and Sec.  416.545(c) reflects that the installment 
requirement does not apply to a recipient who, at the time we determine 
that past-due benefits are payable, meets either of these two 
exceptions. We believe the language is clear that we consider the 12-
month period beginning after we determine the recipient's eligibility 
for payment of past-due SSI benefits.
Section 416.545(d) Paying Large Past-Due Benefits in Installments--
Exception--Increased First and Second Installment Payments
    Comment: We received several comments objecting to the interim 
final rules because they did not include attorney fees as an expense 
for which we may increase the first or second installment payment.
    Response: Section 1631(a)(10)(B)(iii) of the Act lists six kinds of 
debt or expenses for which we may increase an installment payment. 
Congress itemized certain outstanding debts relating to food, clothing, 
shelter, and medical treatment, or current or anticipated expenses 
relating to medical treatment, and the purchase of a home. The statute 
provides that we may increase the first and second installment payments 
by the amount of such debt or expenses beyond the normal statutory 
limit. Congress did not include attorney fees as one of the items that 
we could consider to increase the installment payments.
    In addition, to the extent that the comment related to attorney 
fees payable under section 206 of the Act, after we published the 
interim final rules, Congress changed the law to provide that past-due 
benefits for purposes of dedicated accounts and installment payments 
include only those benefits remaining after the withholding of attorney 
fees. We have revised final Sec.  415.545(b) to reflect that change in 
the Act. Our longstanding policy also has considered attorney fees 
incurred in the pursuit of a child's disability claim as an example of 
an expense that could properly be considered payable from a dedicated 
account. We are revising Sec.  416.640(e)(2)(iii) to add that provision 
to our rules. Together, these two provisions greatly reduce, if not 
eliminate, the need to increase installment payments based on attorney 
fees payable.
    Comment: A commenter believed that we should broaden the exceptions 
for increasing the installment payments and include various expenses, 
such as transportation, child support, or education.
    Response: The statute is very explicit as to what expenses we may 
consider to find an exception to the limit on the first and second 
installment payments. The statute affords us no discretion to add to 
these exceptions to the basic rule.
    Comment: Another commenter asked what criteria we use to determine 
whether we will make an increased installment payment due to certain 
debts or expenses.
    Response: Since the statute refers to ``outstanding debt'' and 
``current or anticipated expenses,'' we require evidence from an SSI 
recipient that shows that payment is due for a particular item or that 
an obligation is being or will be incurred. The evidence could include, 
but is not limited to, outstanding bills from electric or utility 
companies, overdue rent bills, or letters of intent for purchasing a 
home. Under certain circumstances, we may not approve an increase to 
the installment payment based on documented debts that we consider 
excessive. The recipient may appeal that determination.
Section 416.546 Payment Into Dedicated Accounts of Past-Due Benefits 
for Eligible Persons Under Age 18 Who Have a Representative Payee
    Comment: One commenter suggested eliminating the reference to 
including any federally administered State supplementation in the 
formula for determining whether a dedicated account must be 
established.
    Response: We are not adopting this comment because section 
1631(a)(2)(F)(i)(II) of the Act defines

[[Page 450]]

benefits for purposes of that provision to ``include State 
supplementary payments'' that we make.
    Comment: Another commenter questioned our interpretation of the 
dedicated account formula. The commenter felt the statute required only 
the deposit of the amount of past-due benefits, which exceeded the 
formula, not the entire amount.
    Response: We did not adopt this comment because we believe the 
statutory language requires deposit of the entire amount of past-due 
benefits if the entire amount exceeds 6 times the FBR. Section 
1631(a)(2)(F) of the Act requires the representative payee to establish 
a dedicated account ``into which such benefits shall be paid'' if the 
amount of the past-due benefits exceeds 6 times the maximum FBR. The 
language does not say that the representative payee must establish a 
dedicated account into which the amount that exceeds 6 times the 
maximum FBR shall be paid.
    Comment: Three commenters expressed concern that if an institution 
required a minimum deposit to open an account, many recipients (or 
representative payees) would not have funds available to open a 
dedicated account in a financial institution as a prerequisite to 
payment of past-due benefits, as required by the interim final rules.
    Response: Our experience with the dedicated account provision is 
that recipients and representative payees have not generally had 
difficulty opening dedicated accounts due to the lack of funds. If we 
receive reports that SSI recipients are unable to establish the 
required accounts, we will enter into a dialogue with national banking 
organizations concerning the requirements of the law. We will encourage 
their member banks to accept our notice of past-due benefits to 
recipients as a guarantee of the deposit of a Federal payment in excess 
of $3,000 into their institution and to waive any minimum deposit 
amounts or fees to establish an account for such recipients.
Section 416.570 Adjustment--General Rule
    Comment: One commenter suggested that the rule state that an 
underpayment cannot be used to recover an overpayment that occurred 
prior to the computation of the underpayment.
    Response: We did not adopt the comment. Section 1631(b)(1) of the 
Act and Sec.  416.543 of our rules allow the use of an underpayment to 
recover an overpayment that occurred in a different period. Congress 
did not change this authority when it enacted the dedicated account 
provision. Accordingly, the rule applies to situations where past-due 
amounts must be deposited into a dedicated account.
    We may recover an overpayment before we determine whether the past-
due benefits must be deposited into the dedicated account. If recovery 
of the overpayment reduces past-due benefits below the formula, a 
dedicated account is not required. However, once these funds are 
deposited into the dedicated account, they may not be used to repay an 
overpayment to us.
Section 416.640(e) Dedicated Accounts for Eligible Persons Under Age 18
    Comment: One commenter stated we must clarify ``misapplication'' in 
the dedicated account rules and how it relates to the misuse rules.
    Response: We did not adopt this comment because we believe the 
regulatory definition of misapplication is sufficiently clear. Section 
416.640(e)(4) of our rules defines misapplication of benefits as the 
use of funds from a dedicated account in any manner not authorized by 
our rules. It provides that when a representative payee knowingly uses 
dedicated account funds for the recipient for expenditures that are not 
permitted, that representative payee will be liable in an amount equal 
to the total amount of the misapplied funds.
    Section 1631(a)(2)(A)(iv) of the Act defines misuse as occurring 
when a representative payee receives payment under title XVI for the 
use and benefit of another person and converts the payment, or any part 
of it, to a use other than for the use and benefit of the recipient. As 
reflected in these definitions, misapplication of benefits is different 
than misuse of benefits because misapplied benefits might benefit the 
recipient, but were not used for allowable expenses.
    Comment: One commenter questioned the absence of any provision in 
Sec.  416.640(e) dealing with the penalty for misapplication of funds 
from a dedicated account by a recipient who is his or her own payee, as 
provided in section 1631(a)(2)(F)(ii)(III)(bb) of the Act, as added by 
section 213 of the PRWORA.
    Response: The version of the PRWORA passed by the House of 
Representatives contained a provision to reinstate the penalty for the 
transfer of resources for less than fair market value at section 
1613(c) of the Act. The dedicated account provision cross-referenced 
section 1631(c) as the penalty applicable when a recipient who is his 
or her own payee misapplies funds from a dedicated account (i.e., 
misapplied funds were to be considered transfers of resources resulting 
in a period of ineligibility, the length of which is related to the 
amount of funds misapplied). When the provision to reinstate the 
penalty for transfer of resources was dropped from the Conference 
Committee version, the cross-reference in section 
1631(a)(2)(F)(ii)(III)(bb) to section 1613(c) was not deleted, nor was 
an alternative penalty provision substituted. As a result of this 
drafting error, there was no penalty for a recipient who is his or her 
own payee and misapplies funds from a dedicated account because there 
was no penalty for transfers of resources for less than fair market 
value in the SSI program.
    Subsequently, in 1997, Congress passed the BBA, which provided that 
if a recipient becomes his or her own payee and misapplies funds from a 
dedicated account, future benefits will be withheld in the amount of 
the misapplied funds. Although Congress passed this amendment after the 
publication of the interim final rules, we are not requesting public 
comment on that provision in these final rules because we are merely 
conforming the regulations to the statutory change and not making any 
discretionary policy changes.
    Comment: One commenter questioned why this provision applies 
primarily to children, and why children's cases should be treated 
differently.
    Response: In section 213 of the PRWORA, Congress specifically 
addressed eligible persons under the age of 18 with representative 
payees. This was a legislative choice. Public Law 104-193.
    Comment: One commenter expressed the opinion that ``requiring the 
beneficiaries to have a bank account seems like an impermissible tying 
arrangement since it has nothing to do with disability.''
    Response: The commenter's specific objection is not clear. However, 
as we stated above, the statutory provisions regarding dedicated 
accounts are not discretionary. We must implement this mandatory 
provision in the statute.
    Comment: One commenter expressed the opinion that because we 
require a representative payee to maintain two separate accounts, we 
should pay the bank service charges at least on the dedicated account.
    Response: This provision is required by statute. The statute does 
not authorize us to pay bank service charges.
    Comment: Two commenters requested that we revise Sec.  
416.640(e)(1) to allow a

[[Page 451]]

dedicated account to be in the form of a trust.
    Response: We did not adopt this comment. These accounts are 
intended to ensure ready access to the funds and to facilitate the 
monitoring of representative payee accountability. Furthermore, Sec.  
1613(e), except in limited circumstances defines trust assets as 
resources; whereas, funds in dedicated accounts are excluded from 
resources for the nine-month period.
    By law, trusts are administered by trustees according to the terms 
of the trust. In many cases, a trustee would not be the representative 
payee. Thus, if a dedicated account were established in the form of a 
trust, the representative payee might have no authority over the use of 
benefits in the trust. In that situation, we would be unable to fulfill 
the requirement that we monitor and hold the representative payee 
liable for the misapplication of funds.
    Comment: One commenter requested that we revise this section of the 
interim final rules to provide an exception for situations in which 
dedicated account funds will not be able to be used in a manner 
authorized by this provision, e.g., when a child is healthy but 
mentally challenged, with virtually no medical expenses and no plans 
for education or job training.
    Response: This section implements section 1631(a)(2)(F)(i) of the 
Act, which neither provides nor gives us authority to make exceptions 
of this type. We can only approve impairment-related expenses.
    Comment: Several commenters requested that we revise or clarify 
this section to allow the use of dedicated account funds for basic 
living expenses such as food, rent, utilities, and replacing lost 
family income if a parent cannot work full time because of a child's 
impairments.
    Generally, these commenters suggested that disabled children's 
impairments are exacerbated by living in impoverished conditions and, 
therefore, we should consider using these funds to provide for basic 
needs as an authorized impairment-related expenditure. One commenter 
opined that the requested revision would make Sec.  416.640(e)(2) 
consistent with existing Sec.  416.640(a).
    Response: We did not adopt the comment to revise Sec.  
416.640(e)(2) in the manner requested. Section 1631(a)(2)(F)(ii)(II) of 
the Act allows expenditures from dedicated accounts for specific items 
or services and for other items or services that we consider to be 
appropriate, provided that they benefit the eligible recipient and are 
related to his or her impairment(s). However, based on these public 
comments, we revised Sec.  416.640(e)(2)(iii) specifically to include 
the use of funds to prevent malnourishment or homelessness and to pay 
attorney fees incurred in pursuit of the child's disability claim as 
types of items and services that could be considered appropriate 
expenditures.
    We did not make a complete list of ``other items and services'' 
because we believe each situation must be considered on a case-by-case 
basis. The procedural instructions we issued to our field offices 
contain examples of a broad range of items and services that could be 
allowable as impairment-related. Some examples are special foods for 
children with special dietary needs, increased electrical bills 
resulting from needed mechanical devices that must run constantly, 
attorney fees in pursuit of the child's disability claim, and emergency 
situations in which the unavailability of dedicated account funds for 
basic living expenses may result in the child's becoming homeless or 
malnourished.
    We do not believe that it is consistent with the statutory 
restrictions placed on the use of dedicated account funds for basic 
living expenses to be considered impairment-related except in limited 
circumstances and situations. In most situations, ongoing monthly 
payments can and should be used to pay for the recipient's basic needs, 
as provided in Sec.  416.640(a).
    Comment: One commenter requested that we revise Sec.  416.640(e)(2) 
to make it consistent with Sec.  416.545(d), which allows for 
accelerated installment payments if the recipient has outstanding debts 
for food, clothing, or shelter, or current or anticipated expenses for 
the purchase of a home.
    Response: We did not make the suggested change. Section 416.545(d) 
of our rules implements a statutory exception to the defined amount of 
installment payments. We may increase the amount of the first and 
second installments when a recipient has outstanding debts or 
anticipated expenses. Section 1631(a)(10)(B)(iii) of the Act. Among the 
specified items are outstanding debts for food, clothing, or shelter, 
and current or anticipated expenses for the purchase of a home. 
However, there is no similar statutory exception in section 
1631(a)(2)(F) or authority for us to consider the payment of 
outstanding debts for food, clothing, or shelter, or the purchase of a 
home in the recipient's name as allowable expenditures, unless those 
items are related to the recipient's impairment. The general 
installment payment rule of section 1631(a)(10) applies to all SSI 
recipients. The specific dedicated account rule of section 
1631(a)(2)(F) applies only to payments to representative payees of 
recipients under the age of 18. That Congress enacted these two 
provisions in the same legislation and did not make them uniform gives 
rise to the logical inference that the more restrictive dedicated 
account language takes precedence with respect to recipients under the 
age of 18 with representative payees even when the past-due benefits 
are being paid into the dedicated account in installments. In cases 
where a recipient under age 18 has a representative payee and is 
eligible for past-due benefits in an amount prescribed in section 
1631(a)(10)(A) of the Act, both the installment payment and the 
dedicated account provisions will apply, and past-due benefits will be 
paid in installments into a dedicated account established by the 
representative payee. Public Law 104-193.
    Comment: Two commenters requested that we revise Sec.  
416.640(e)(2)(iii) to include a comprehensive list of expenses that we 
determine to be allowable. The commenters believed that the list should 
include the basic necessities of life such as food, clothing, and 
shelter, as well as child care, respite care, items related to 
education, and participating in community and family activities such as 
summer camp. Generally, the commenters were concerned that our field 
office employees had too much discretion and might make arbitrary or 
conflicting decisions.
    Response: We disagree with the premise of these comments. We 
decided not to exclusively itemize specific items or services that we 
could consider allowable expenditures because, except for education, 
job skills training, and medical treatment, section 
1631(a)(2)(F)(ii)(II) of the Act requires that the item or service 
benefit the disabled SSI recipient and be related to that recipient's 
impairment. Since disabled recipients do not have universally 
applicable impairment-related needs or might not benefit universally 
from certain items or services, we conclude that we should review these 
expenditures on a case-by-case basis. Further, Congress specified in 
section 1631(a)(10) of the Act that we could increase installment 
expenses in view of debts for basic living expenses while it chose not 
to include similar language in section 1631(a)(2)(F) of the Act. We 
interpret this as indicating Congress' intent not to allow basic living 
expenses generally to be paid from dedicated account funds.

[[Page 452]]

    Thus, rather than include an extensive list of specific examples in 
the interim final rules, we provided general procedural instructions 
for the field personnel. We issued instructions to our field offices to 
make case-by-case determinations based on the payee's explanation about 
how an item or service would benefit the recipient and how it is 
related to the recipient's impairment(s). We included a broad non-
inclusive list of examples of how some items or services could be 
related to certain impairments.
    Some of the items that the commenters wanted included in Sec.  
416.640(e)(2)(iii), such as child care, respite care, items related to 
education, and participating in community and family activities could 
readily be considered beneficial to the recipient as explained in our 
procedural guidelines. However, as stated in previous responses, they 
are not presumptively impairment-related. Therefore, general expenses 
for food, clothing, and shelter cannot necessarily be paid from 
dedicated account funds. Ongoing monthly payments can and should be 
used to pay for the recipient's basic needs, as provided in Sec.  
416.640(a). Nevertheless, we expanded the list of allowable expenses in 
Sec.  416.640(e)(2)(iii) to include attorney fees incurred in the 
pursuit of the child's disability claim, and basic living expenses 
where emergency situations may result in the child becoming homeless or 
malnourished without these funds being made available.
    Comment: Two commenters wanted written instructions for 
representative payees, as well as our employees, about the proper use 
of dedicated account funds.
    Response: We did not adopt the comment. We do not believe such 
written instructions would be appropriate in our regulations, but we 
have developed notices and information in ``A Guide for Representative 
Payees'' (http://www.socialsecurity.gov/pubs/10076.pdf) regarding the 
proper use of dedicated account funds.
    Comment: Two commenters requested that we establish a time frame 
for pre-approval of expenses from dedicated account funds.
    Response: We did not adopt this comment. Payees are not required to 
obtain prior approval for dedicated account expenditures. However, if a 
payee is uncertain whether an expenditure is allowed, the payee should 
seek our approval before making the expenditure. We explain this issue 
further in our publication ``A Guide for Representative Payees.'' For 
instance, the Guide notes that payees ``should first get approval from 
us for these kind of expenses'' (i.e., expenses related to the child's 
disability that we determine are appropriate).
    Comment: One commenter stated that the potential for second-
guessing the expenditures of thousands of parents, aside from the undue 
administrative burdens this could place on us, is quite real and 
suggested we make a presumptive rule that any expenditure of less than 
$1,000 should be presumed valid and not subject to review.
    Response: The statutory language does not authorize us to establish 
such a presumption that would exempt expenditures from the 
misapplication rules. Accordingly, we did not adopt this comment.
    Comment: Many commenters were concerned that attorney fees were not 
listed as a permitted expenditure from dedicated account funds. They 
urged that many SSI recipients are found disabled only through the 
efforts of an attorney.
    Response: As noted above, attorney fees incurred in pursuit of the 
child's disability claim may be considered ``impairment-related'' and a 
permitted expenditure of dedicated account funds. We have long included 
this provision in our operating instructions. However, based on the 
public comments, we included attorney fees related to the pursuit of 
the child's disability claim in Sec.  416.640(e)(2)(iii) as an 
expenditure that could be considered as appropriate. As noted 
previously, section 1631(a)(2)(F)(i)(II) of the Act provides for paying 
attorney fees from past-due benefits and for determining whether a 
dedicated account is required, only after deducting such fees.
Section 416.1247 Exclusion of a Dedicated Account in a Financial 
Institution
    Comment: Two commenters opined that the resource exclusion for 
dedicated accounts in Sec.  416.1247 should continue to apply after a 
recipient's eligibility has terminated. Not allowing continuation of 
the exclusion could become a bar to re-eligibility.
    Response: Section 1613(a)(12) of the Act provides an exclusion from 
resources of ``any account, including accrued interest or other 
earnings thereon, established and maintained in accordance with section 
1631(a)(2)(F).'' The maintenance requirements in section 1631(a)(2)(F) 
deal with restrictions on the use of funds in the dedicated account and 
requirements of the payee to report on and account for activity 
respecting funds in the dedicated account. These restrictions and 
accounting requirements continue during periods of suspension from SSI 
eligibility and, accordingly, the resource exclusion continues during 
periods of suspension due to ineligibility, as long as the recipient's 
eligibility has not been terminated.
    When a recipient's eligibility terminates, the restrictions on the 
use of funds in a dedicated account and the payee's responsibility to 
account for and report on activity in such an account also terminate, 
and the resource exclusion ends. Once eligibility terminates, any 
special status given to funds in a dedicated account and the dedicated 
account designation itself end.
    Comment: One commenter was concerned that, although dedicated 
accounts are excluded from resources for SSI purposes, they could be a 
resource for Medicaid purposes, causing ineligibility.
    Response: Dedicated accounts will be excluded for most States for 
which we make Medicaid eligibility determinations or that use SSI rules 
to make their own Medicaid eligibility determinations. For the 11 
States that make their own Medicaid eligibility determinations using 
their own rules, dedicated accounts may be excluded from resources at 
the option of each State.

Explanation of Revisions

    These final rules reflect the following minor changes to the 
interim final rules:
     We added a new second sentence to Sec.  416.545(a) to 
clarify current policy. The interim final rule was silent on our policy 
and procedures for issuing additional past-due benefits that become 
payable while a recipient is receiving installment payments so we are 
including language in Sec.  416.545(a) to explain this process more 
fully.
     We amended the first sentence of Sec. Sec.  416.545(b) and 
416.546(a) to include additional language as a result of the public 
comments.
     We amended Sec.  416.640(e)(2)(iii) by adding an 
additional sentence to the end of the section to include attorney fees 
and expenditures to prevent malnourishment and homelessness as 
dedicated account expenditures that could be considered appropriate.
    These final rules make the following changes based on statutes 
enacted subsequent to the interim final rules:
     We amended Sec. Sec.  416.545(b) and 416.546(a) to reflect 
the SSPA provision to specify that past-due benefits for dedicated 
account purposes and installment payment purposes are those benefits 
remaining after any withholding for payment of attorney fees.

[[Page 453]]

     We amended Sec.  416.545(b) to reflect changes based on 
the nondiscretionary provision of section 7502 of the DRA to specify 
the formula for past-due benefits for payment of installments will be 
an amount which equals or exceeds 3 times the maximum monthly benefit 
payable plus any federally administered State supplementation.
     We amended Sec.  416.546(b) to reflect the technical 
amendments in section 5522(b) of the BBA to clarify what subsequent 
past-due benefits may be deposited into a dedicated account by the 
representative payee.
     We amended Sec.  416.546(e)(4) to reflect the technical 
amendments in section 5522(b) of the BBA to clarify how we treat 
misapplication of benefits in a dedicated account by a recipient who is 
his or her own payee.
    Except for the changes discussed above and set out below, the 
interim final rules remain unchanged and are adopted as final.

Regulatory Procedures

    Pursuant to sections 205(a), 702(a)(5) and 1631(d)(1) of the Social 
Security Act, 42 U.S.C. 405(a), 902(a)(5) and 1383(d)(1), we follow the 
Administrative Procedure Act (APA) rulemaking procedures specified in 5 
U.S.C. 553 in the development of our regulations. The APA provides 
exceptions to its prior 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 this rule, we have determined that, under 5 U.S.C. 
553(b)(B), good cause exists for dispensing with the notice and public 
comment procedures for the three changes we are making based on 
legislation enacted after we published the interim final rule because 
these changes all are required by the statutes. The statutes do not 
give us any discretion in implementing the provisions. Therefore, 
opportunity for prior comment is unnecessary, and we are including 
these changes in this final rule.

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. Thus, they 
were reviewed by OMB.

Regulatory Flexibility Act

    We certify that these final rules will not have a significant 
economic impact on a substantial number of small entities, because they 
affect persons or States only. Therefore, a regulatory flexibility 
analysis is not required under the Regulatory Flexibility Act, as 
amended.

Paperwork Reduction Act

    These final rules do not create any new, or affect any existing, 
collections, and therefore, do not require OMB approval under the 
Paperwork Reduction Act.

(Catalog of Federal Domestic Assistance Program No. 96.006, 
Supplemental Security Income)

List of Subjects in 20 CFR Part 416

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

    Dated: September 28, 2010.
Michael J. Astrue,
Commissioner of Social Security.

0
For the reasons set forth in the preamble, we are amending subparts E 
and F of part 416 of chapter III of title 20 of the Code of Federal 
Regulations as follows:

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

Subpart E--[Amended]

0
1. The authority citation for subpart E of part 416 continues to read 
as follows:

    Authority: Secs. 702(a)(5), 1147, 1601, 1602, 1611(c) and (e), 
and 1631(a)-(d) and (g) of the Social Security Act (42 U.S.C. 
902(a)(5), 1320b-17, 1381, 1381a, 1382(c) and (e), and 1383(a)-(d) 
and (g)); 31 U.S.C. 3720A.

0
2. Amend Sec.  416.545 by adding a new second sentence following the 
first sentence in paragraph (a) and by revising the first sentence of 
paragraph (b) to read as follows:


Sec.  416.545  Paying large past-due benefits in installments.

    (a) * * * If an individual becomes eligible for past-due benefits 
for a different period while installments are being made, we will 
notify the individual of the amount due and issue these benefits in the 
last installment payment. * * *
* * * * *
    (b) * * * Installment payments must be made if the amount of the 
past-due benefits, including any federally administered State 
supplementation, after applying Sec.  416.525 (reimbursement to States 
for interim assistance) and applying Sec.  416.1520 (payment of 
attorney fees), equals or exceeds 3 times the Federal Benefit Rate plus 
any federally administered State supplementation payable in a month to 
an eligible individual (or eligible individual and eligible spouse). * 
* *
* * * * *


0
3. Amend Sec.  416.546 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  416.546  Payment into dedicated accounts of past-due benefits for 
eligible individuals under age 18 who have a representative payee.

* * * * *
    (a) For an eligible individual under age 18 who has a 
representative payee and who is determined to be eligible for past-due 
benefits (including any federally administered State supplementation) 
in an amount which, after applying Sec.  416.525 (reimbursement to 
States for interim assistance) and Sec.  416.1520 (payment of attorney 
fee), exceeds six times the Federal Benefit Rate plus any federally 
administered State supplementation payable in a month, this unpaid 
amount must be paid into the dedicated account established and 
maintained as described in Sec.  416.640(e).
    (b) After the account is established, the representative payee may 
(but is not required to) deposit into the account any subsequent funds 
representing past-due benefits under this title to the individual which 
are equal to or exceed the maximum Federal Benefit Rate (including any 
federally administered State supplementation).
* * * * *

Subpart F--[Amended]

0
4. The authority citation for subpart F of part 416 continues to read 
as follows:

    Authority:  Secs. 702(a)(5), 1631(a)(2) and (d)(1) of the Social 
Security Act (42 U.S.C. 902(a)(5) and 1383(a)(2) and (d)(1)).


0
5. Amend Sec.  416.640 by adding an additional sentence to the end of 
paragraph (e)(2)(iii) and an additional sentence to the end of 
paragraph (e)(4) to read as follows:


Sec.  416.640  Use of benefit payments.

* * * * *
    (e) * * *
    (2) * * *
    (iii) * * * Attorney fees related to the pursuit of the child's 
disability claim and use of funds to prevent malnourishment or 
homelessness could be considered appropriate expenditures.
* * * * *
    (4) * * * In addition, if a recipient who is his or her own payee 
knowingly

[[Page 454]]

misapplies benefits in a dedicated account, we will reduce future 
benefits payable to that recipient (or to that recipient and his or her 
spouse) by an amount equal to the total amount of the misapplied funds.
* * * * *
[FR Doc. 2010-33272 Filed 1-4-11; 8:45 am]
BILLING CODE 4191-02-P