[Federal Register Volume 81, Number 161 (Friday, August 19, 2016)]
[Rules and Regulations]
[Pages 55630-55789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15980]



[[Page 55629]]

Vol. 81

Friday,

No. 161

August 19, 2016

Part IV





Department of Education





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34 CFR Parts 361, 363, and 397





State Vocational Rehabilitation Services Program; State Supported 
Employment Services Program; Limitations on Use of Subminimum Wage; 
Final Rule

  Federal Register / Vol. 81 , No. 161 / Friday, August 19, 2016 / 
Rules and Regulations  

[[Page 55630]]


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DEPARTMENT OF EDUCATION

34 CFR Parts 361, 363, and 397

[ED-2015-OSERS-0001]
RIN 1820-AB70


State Vocational Rehabilitation Services Program; State Supported 
Employment Services Program; Limitations on Use of Subminimum Wage

AGENCY: Office of Special Education and Rehabilitative Services, 
Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends the regulations governing the State 
Vocational Rehabilitation Services program and the State Supported 
Employment Services program to implement changes to the Rehabilitation 
Act of 1973, as amended by the Workforce Innovation and Opportunity Act 
(WIOA) signed into law on July 22, 2014. The Secretary also updates, 
clarifies, and improves the prior regulations.
    Finally, the Secretary issues new regulations regarding limitations 
on the use of subminimum wages that are added by WIOA and under the 
purview of the Department.

DATES: These regulations are effective on September 19, 2016, except 
for amendatory instructions 2, 3, and 4 amending 34 CFR 361.10, 361.23, 
and 361.40, which are effective October 18, 2016.

FOR FURTHER INFORMATION CONTACT: Ed Anthony, U.S. Department of 
Education, 400 Maryland Avenue SW., Room 5086, Potomac Center Plaza 
(PCP), Washington, DC 20202-2800. Telephone: (202) 245-7488 or by 
email: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: 

Executive Summary

    Purpose of This Regulatory Action: Individuals with disabilities 
represent a vital and integral part of our society, and we are 
committed to ensuring that individuals with disabilities have 
opportunities to compete for and enjoy high quality employment in the 
21st century global economy. Some individuals with disabilities face 
particular barriers to employment in integrated settings that pays 
competitive wages, provides opportunities for advancement, and leads to 
economic self-sufficiency. Ensuring workers with disabilities have the 
supports and the opportunities to acquire the skills that they need to 
pursue in-demand jobs and careers is critical to growing our economy, 
assuring that everyone who works hard is rewarded, and building a 
strong middle class. To help achieve this priority for individuals with 
disabilities, the Rehabilitation Act of 1973 (Act), as amended by the 
Workforce Innovation and Opportunity Act (WIOA) (P.L. 113-128), signed 
into law on July 22, 2014, seeks to empower individuals with 
disabilities to maximize employment, economic self-sufficiency, 
independence, and inclusion in and integration into society.
    To implement the changes to the Act made by WIOA, the Secretary 
amends the regulations governing the State Vocational Rehabilitation 
Services program (VR program) (34 CFR part 361) and State Supported 
Employment Services program (Supported Employment program) (34 CFR part 
363), administered by the Rehabilitation Services Administration (RSA), 
within the Office of Special Education and Rehabilitative Services. In 
addition, the Secretary updates and clarifies prior regulations to 
improve the operation of the program. Finally, the Secretary 
promulgates regulations in new 34 CFR part 397 that implement the 
limitations on the payment of subminimum wages to individuals with 
disabilities in section 511 of the Act that fall under the purview of 
the Secretary.
    Summary of the Major Provisions of This Regulatory Action: We 
summarize here those regulatory changes needed to implement the 
amendments to the Act made by WIOA for each part in the order it 
appears in the Code of Federal Regulations (CFR).

State Vocational Rehabilitation Services Program

    WIOA makes significant changes to title I of the Act that affect 
the VR program. First, WIOA strengthens the alignment of the VR program 
with other core components of the workforce development system by 
imposing requirements governing unified strategic planning, common 
performance accountability measures, and the one-stop delivery system. 
This alignment brings together entities responsible for administering 
separate workforce and employment, educational, and other human 
resource programs to collaborate in the creation of a seamless 
customer-focused service delivery network that integrates service 
delivery across programs, enhances access to the programs' services, 
and improves long-term employment outcomes for individuals receiving 
assistance. In so doing, WIOA places heightened emphasis on 
coordination and collaboration at the Federal, State, and local levels 
to ensure a streamlined and coordinated service delivery system for 
job-seekers, including those with disabilities, and employers. 
Therefore, the Departments of Education and Labor are issuing joint 
final regulations to implement jointly administered activities under 
title I of WIOA (e.g., those related to Unified or Combined State 
Plans, performance accountability, and the one-stop delivery system), 
applicable to the workforce development system's core programs (Adult, 
Dislocated Worker, and Youth programs; Adult Education and Family 
Literacy Act programs; Wagner-Peyser Employment Services program; and 
the VR program). The joint final regulations, along with the Analysis 
of Comments and Changes to those regulations, are set forth in a 
separate regulatory action published elsewhere in this issue of the 
Federal Register.
    To implement WIOA's corresponding major changes to title I of the 
Act, we:
     Amend Sec.  361.10 to require that all assurances and 
descriptive information previously submitted through the stand-alone VR 
State Plan and supported employment supplement be submitted through the 
VR services portion of the Unified or Combined State Plan under section 
102 or section 103, respectively, of WIOA.
     Clarify in Sec.  361.29 that States report to the 
Secretary updates to the statewide needs assessment and goals and 
priorities, estimates of the numbers of individuals with disabilities 
served through the VR program and the costs of serving them, and 
reports of progress on goals and priorities at such time and in such 
manner determined by the Secretary to align the reporting of this 
information with the submission of the Unified or Combined State Plans 
and their modifications.
     Clarify in Sec.  361.20 when designated State agencies 
must conduct public hearings to obtain comment on substantive changes 
to policies and procedures governing the VR program.
     Remove Sec.  361.80 through Sec.  361.89 and replace with 
Sec.  361.40 to cross-reference the joint regulations for the common 
performance accountability measures for the core programs of the 
workforce development system.
     Provide a cross-reference in Sec.  361.23, regarding the 
roles and responsibilities of the VR program in the one-stop delivery 
system to the joint regulations implementing requirements for the one-
stop delivery system.

[[Page 55631]]

    Second, the Act, as amended by WIOA, emphasizes the achievement of 
competitive integrated employment. The foundation of the VR program is 
the principle that individuals with disabilities, including those with 
the most significant disabilities, are capable of achieving high 
quality, competitive integrated employment when provided the necessary 
services and supports. To increase the employment of individuals with 
disabilities in the competitive integrated labor market, the workforce 
system must provide individuals with disabilities opportunities to 
participate in job-driven training and to pursue high quality 
employment outcomes. The amendments to the Act--from the stated purpose 
of the Act, to the expansion of services designed to maximize the 
potential of individuals with disabilities, including those with the 
most significant disabilities, to achieve competitive integrated 
employment, and, finally, to the inclusion of limitations on the 
payment of subminimum wages to individuals with disabilities--reinforce 
the congressional intent that individuals with disabilities, with 
appropriate supports and services, are able to achieve the same kinds 
of competitive integrated employment as non-disabled individuals. 
Consequently, we make extensive changes to part 361, including:
     The inclusion of a new definition of ``competitive 
integrated employment'' in Sec.  361.5(c)(9) that combines, clarifies, 
and enhances the two separate definitions of ``competitive employment'' 
and ``integrated setting'' for the purpose of employment under the VR 
program in prior Sec.  361.5(b)(11) and (b)(33)(ii).
     The incorporation of the principle that individuals with 
disabilities, including those with the most significant disabilities, 
are capable of achieving high quality competitive integrated 
employment, when provided the necessary services and support, 
throughout part 361, from the statement of program purpose in Sec.  
361.1 to the requirement in Sec.  361.46(a) that the individualized 
plan for employment include a specific employment goal consistent with 
the general goal of competitive integrated employment.
     The revision of the definition of ``employment outcome'' 
in Sec.  361.5(c)(15) that specifically identifies customized 
employment as an employment outcome under the VR program, and requires 
that all employment outcomes achieved through the VR program be in 
competitive integrated employment or supported employment, thereby 
eliminating uncompensated outcomes, such as homemakers and unpaid 
family workers, from the scope of the definition for purposes of the VR 
program.
    To assist designated State units (DSUs) to implement the change in 
the definition of ``employment outcome'' and to ensure that individuals 
with disabilities did not experience a disruption in services, the 
Department proposed in the Notice of Proposed Rulemaking (NPRM) 
published on April 16, 2015 (80 FR 21059), a transition period of six 
months following the effective date of the final regulations, during 
which period DSUs would complete the provision of vocational 
rehabilitation services to, and close the service records of, 
individuals pursuing uncompensated outcomes, such as homemakers and 
unpaid family workers, in accordance with individualized plans for 
employment that were approved prior to the effective date of these 
final regulations. In consideration of the comments received, the 
Secretary has extended the transition period in these final 
regulations. DSUs may continue to provide services to individuals with 
uncompensated employment goals on their individualized plans for 
employment, approved prior to the effective date of these final 
regulations, until June 30, 2017, unless a longer period of time is 
required based on the needs of the individual with the disability as 
determined by the vocational rehabilitation counselor and the 
individual with a disability, as documented in the individual's service 
record.
    We also amend numerous other provisions throughout part 361 to 
address the expansion of available services, requirements related to 
the development of the individualized plan for employment, and order of 
selection for services, all of which are intended to maximize the 
potential for individuals with disabilities to prepare for, obtain, 
retain, and advance in the same high quality jobs and high-demand 
careers as persons without disabilities.
    Third, WIOA emphasizes the provision of services to students and 
youth with disabilities to ensure that they have meaningful 
opportunities to receive the services, including training and other 
supports, they need to achieve employment outcomes in competitive 
integrated employment. The Act, as amended by WIOA, expands not only 
the population of students with disabilities who may receive vocational 
rehabilitation services but also the breadth of services that the VR 
agencies may provide to youth and students with disabilities who are 
transitioning from school to postsecondary education and employment. We 
implement the emphasis on serving students and youth with disabilities 
contained in the amendments to the Act made by WIOA in many regulatory 
changes to part 361 by:
     Including in Sec.  361.5(c)(51) and (c)(58), respectively, 
new definitions of ``student with a disability'' and ``youth with a 
disability.'' After further analysis of the comments received, the 
Department has determined that the definition of ``student with a 
disability'' applies to all students enrolled in educational programs, 
including postsecondary education programs, so long as they satisfy the 
age requirements set forth in final Sec.  361.5(c)(51). The definition 
is also inclusive of secondary students who are homeschooled, as well 
as students in other non-traditional secondary educational programs. We 
have incorporated this broader interpretation of the definition in 
final Sec.  361.5(c)(51), which we believe will increase the potential 
for DSUs to maximize the use of funds reserved for the provision of 
pre-employment transition services by increasing the number of students 
who may receive these services.
     Implementing in Sec.  361.48(a) the requirements of new 
sections 110(d) and 113 of the Act requiring States to reserve at least 
15 percent of their Federal allotment to provide and arrange for, in 
coordination with local educational agencies, the provision of pre-
employment transition services to students with disabilities. We have 
maintained our interpretation of ``potentially eligible,'' for purposes 
of pre-employment transition services, as meaning all students with 
disabilities, regardless of whether they have applied for or been 
determined eligible for the VR program. The Department believes this is 
the broadest legally supportable interpretation and is consistent with 
the congressional intent.
     Amending Sec.  361.29(a) to require that the comprehensive 
statewide needs assessment include an assessment of the needs of 
students and youth with disabilities for vocational rehabilitation 
services, including the needs of students with disabilities for pre-
employment transition services.
     Clarifying in Sec.  361.49 the technical assistance DSUs 
may provide to educational agencies and permitting the provision of 
transition services for the benefit of groups of students and youth 
with disabilities.
     Clarifying in Sec.  361.22(c) that nothing in this part is 
to be construed as reducing the responsibility of the local educational 
agencies or any other

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agencies under the Individuals with Disabilities Education Act (IDEA) 
to provide or pay for transition services that are also considered to 
be special education or related services under the IDEA necessary for 
the provision of a free appropriate public education to students with 
disabilities.
    In addition to the preceding changes implementing the three major 
goals of the Act, as amended by WIOA, we have made changes to the 
regulations governing the comprehensive system of personnel development 
and the fiscal administration of the VR program. In order for DSUs to 
recruit qualified personnel to provide services to individuals with 
disabilities, including students and youth with disabilities, and carry 
out their responsibilities under the Act, we have made changes by:
     Amending Sec.  361.18 governing the comprehensive system 
of personnel development by establishing minimum educational and 
experience requirements and eliminating the requirement to retrain 
staff not meeting the DSU's personnel standard for qualified staff.
     Revising proposed Sec.  361.18(c)(2)(ii) in these final 
regulations to provide a more complete list of the skills and knowledge 
needed to meet the needs of employers and individuals with disabilities 
in the 21st century evolving labor market.
    Finally, we make changes to part 361 to improve the fiscal 
administration of the VR program by:
     Clarifying in Sec.  361.5(b) the applicability to the VR 
program of the definitions contained in 2 CFR part 200, Uniform 
Administrative Requirements, Cost Principles, and Audit Requirements 
and making numerous other conforming changes to align this part with 2 
CFR part 200 to ensure consistency.
     Adding a new paragraph (a)(3) to Sec.  361.65 requiring 
the State to reserve not less than 15 percent of its allotment for the 
provision of pre-employment transition services.
     Amending Sec.  361.65(b)(2) to clarify that reallotment 
occurs in the fiscal year the funds were appropriated and the funds may 
be obligated or expended during the period of performance, provided 
that matching requirements are met.
     Adding a new paragraph (b)(3) to Sec.  361.65 establishing 
the Secretary's authority to determine the criteria to be used to 
reallot funds when the amount requested exceeds the amount of funds 
available for reallotment.
    Since publication of the NPRM, as a result of further Departmental 
review, we clarify in Sec.  361.63 the requirements for the use of 
program income.

State Supported Employment Services Program

    Under the State Supported Employment Services program (Supported 
Employment program) authorized under title VI of the Act (29 U.S.C. 
795g et seq.), the Secretary provides grants to assist States in 
developing and implementing collaborative programs with appropriate 
entities to provide supported employment services for individuals with 
the most significant disabilities, including youth with the most 
significant disabilities, to enable them to achieve supported 
employment outcomes in competitive integrated employment. Grants made 
under the Supported Employment program supplement grants issued to 
States under the VR program (34 CFR part 361).
    WIOA makes several significant changes to title VI of the Act, 
which governs the Supported Employment program. All of the amendments 
to title VI are consistent with those made throughout the Act, namely 
to maximize the potential of individuals with disabilities, especially 
those with the most significant disabilities, to achieve competitive 
integrated employment and to expand services for youth with the most 
significant disabilities. We implement the changes made to the 
Supported Employment program by WIOA in these final regulations by:
     Requiring in Sec.  363.1 that supported employment be in 
competitive integrated employment or, if not, in an integrated setting 
in which the individual is working toward competitive integrated 
employment on a short-term basis. As a result of comments received, we 
revised the proposed short-term basis period to allow for an extension 
of the six-month period for up to a total of 12 months based on the 
needs of the individual, and the individual has demonstrated progress 
toward competitive earnings based on information contained in the 
service record.
     Extending in Sec.  363.50(b)(1) the time from 18 months to 
24 months for the provision of supported employment services.
     Requiring in Sec.  363.22 a reservation of 50 percent of a 
State's allotment under this part for the provision of supported 
employment services, including extended services, to youth with the 
most significant disabilities.
     Requiring in Sec.  363.23 not less than a 10 percent match 
for the amount of funds reserved to serve youth with the most 
significant disabilities.
     Reducing in Sec.  363.51 the amount of funds that may be 
spent on administrative costs.
    In response to comments received, we revised Sec. Sec.  363.53, 
363.54, and 363.55 to clarify the requirements for the transition of 
individuals with the most significant disabilities from supported 
employment services to extended services, the achievement of a 
supported employment outcome, and the closure of service records. We 
have redesignated proposed Sec.  363.55 as final Sec.  363.56.

Limitations on the Use of Subminimum Wage

    Section 511 of the Act, as added by WIOA, imposes requirements on 
employers who hold special wage certificates under the Fair Labor 
Standards Act (FLSA) that must be satisfied before the employers may 
hire youth with disabilities at subminimum wages or continue to employ 
individuals with disabilities of any age at the subminimum wage level. 
Section 511 also establishes the roles and responsibilities of the DSUs 
for the VR program and State and local educational agencies in 
assisting individuals with disabilities, including youth with 
disabilities, to maximize opportunities to achieve competitive 
integrated employment through services provided by VR and local 
educational agencies.
    The addition of section 511 to the Act is consistent with all other 
amendments to the Act made by WIOA. Throughout the Act, Congress 
emphasizes that individuals with disabilities, including those with the 
most significant disabilities, can achieve competitive integrated 
employment if provided the necessary supports and services. The 
limitations imposed by section 511 reinforce this belief by requiring 
individuals with disabilities, including youth with disabilities, to 
satisfy certain service-related requirements in order to start or 
maintain, as applicable, subminimum wage employment. To implement the 
requirements of section 511 that fall under the purview of the 
Department, we are issuing new regulations in part 397, including:
     Section 397.1, describing the purpose of this part and 
Sec.  397.2 setting forth the Department's jurisdiction.
     Section 397.10, requiring the DSU, in consultation with 
the State educational agency, to develop a process that ensures 
students and youth with disabilities receive documentation 
demonstrating completion of the various activities required by section 
511 of the Act, such as, to name a few, the receipt of transition 
services under the IDEA

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and pre-employment transition services under section 113 of the Act, as 
appropriate.
     Sections 397.20 and 397.30, establishing the activities 
that must be completed by youth with disabilities prior to obtaining 
employment at subminimum wage and the documentation that the DSUs and 
local educational agencies, as appropriate, must provide to demonstrate 
completion of those activities, required by section 511(a)(2) of the 
Act. These include completing pre-employment transition services in 
final Sec.  361.48(a) and the determination of eligibility or 
ineligibility for vocational rehabilitation services in final 
Sec. Sec.  361.42 and 361.43.
     Section 397.40, establishing the documentation that DSUs 
must provide to individuals with disabilities of any age who are 
employed at a subminimum wage upon the completion of certain 
information and career counseling-related services, as required by 
section 511(c) of the Act.
     Section 397.31, prohibiting a local educational agency or 
a State educational agency from entering into a contract with an entity 
that employs individuals at subminimum wages for the purpose of 
operating a program under which a youth with a disability is engaged in 
work compensated at a subminimum wage.
     Section 397.50 authorizing a DSU to review individual 
documentation, required by this part, for all individuals with 
disabilities who are employed at the subminimum wage level, that is 
maintained by employers who hold special wage certificates under the 
FLSA.
    In response to comments received, we made revisions to the final 
regulations to specify that intervals for providing career counseling 
and information and referral services to individuals of any age 
employed by section 14(c) entities will be calculated based upon the 
date the individual becomes known to the DSU starting July 22, 2016. 
Additionally, we included a time frame in the final regulations of 45 
days but, in the case of extenuating circumstances, no later than 90 
days, for the DSU to provide documentation of completed activities to 
individuals with disabilities. We also added provisions that establish 
minimal information that must be contained in the documentation 
required by part 397, as well as other administrative requirements 
related to the documentation process. Finally, we determined that 
section 14(c) entities have a potential financial interest in providing 
some of the services and activities required in the final regulations. 
Consequently, we inserted language prohibiting the use of these 
entities in providing these required services or activities, stating 
that a contractor may not be an entity holding a special wage 
certificate under section 14(c) of the FLSA and that a DSU's 
contractor, for the purpose of conducting the review of documentation 
authorized under the final regulations, may not be an entity holding a 
special wage certificate under section 14(c) of the FLSA.
    We fully explain the regulations described in this Executive 
Summary, along with all other significant changes to parts 361, 363, 
and 397 following the publication of the NPRM, in the Analysis of 
Comments and Changes section of this preamble.
    Costs and Benefits: The potential costs associated with this 
regulatory action are those resulting from statutory requirements and 
those we have determined as necessary for administering the 
Department's programs and activities. Further information related to 
costs and benefits may be found in the Regulatory Impact Analysis 
section later in this preamble.
    Public Comment: In response to our invitation in the NPRM, more 
than 1,100 parties submitted comments on the proposed regulations 
amending the VR program (part 361), amending the Supported Employment 
program (part 363), and adding part 397 implementing the new provisions 
in section 511 of the Act, as amended by WIOA. We discuss substantive 
issues within each part, by section or subject. Generally, we do not 
address technical and other minor changes.

Analysis of Comments and Changes:

Part 361 State Vocational Rehabilitation Services Program

    Following a description of the organizational changes to part 361 
in these final regulations, we present the Analysis of Comments and 
Changes in three sections. In section A, we discuss provisions in part 
361 that apply generally to the administration of the VR program and to 
the provision of vocational rehabilitation services to individuals with 
disabilities. In section B, we discuss provisions related to the 
transition of students and youth with disabilities from school to 
postsecondary education and employment. Finally, in section C, we 
discuss the fiscal administration of the VR program.
    Due to extensive changes, we published the entire part 361 in the 
NPRM, which included conforming and technical changes. We did not 
propose substantive changes to all sections of this part. Thus, we did 
not intend to make all regulations within this part available for 
public comment. Consequently, we do not address the comments we 
received on the following sections: Sec. Sec.  361.5(c)(18), 
361.5(c)(24), 361.5(c)(27), 361.5(c)(28), 361.5(c)(29), 361.5(c)(30), 
361.5(c)(34), 361.5(c)(40), 361.5(c)(43), 361.5(c)(57), 361.47, 361.52, 
361.56, and 361.57. Finally, we generally do not discuss differences 
between the NPRM and these final regulations that are technical or 
conforming in nature.

Organizational Changes

    Although the regulations maintain subparts A, B, and C of part 361, 
we make organizational changes to other subparts within this part. 
First, we incorporate new subparts D, E, and F, where we place the 
three subparts discussed in a separate, but related, regulatory action 
(the joint regulations issued by the Departments of Education and Labor 
implementing jointly administered requirements governing all six core 
programs of the workforce development system, including the VR program, 
contained in title I of WIOA) published elsewhere in this issue of the 
Federal Register. Please see that regulatory action for more 
information about how these subparts are incorporated into part 361. 
Second, we remove prior Sec. Sec.  361.80 through 361.89, since the VR 
program-specific standards and indicators are no longer applicable. 
Finally, we eliminate Appendix A to prior part 361--Questions and 
Responses. The Department intends to issue guidance on various areas 
covered in the final regulations, including some that had been covered 
by prior Appendix A, in the near future.
A. Provisions of General Applicability
    Section A includes the Analysis of Comments and Changes to the 
regulations in subparts A and B of part 361 that pertain to the 
administration of the VR program generally and to the provision of 
vocational rehabilitation services to individuals with disabilities of 
any age. The analysis is presented by topical headings relevant to 
sections of the regulations in the order they appear in part 361 as 
listed. We discuss some of these same regulations in section B of the 
Analysis of Comments and Changes as they relate specifically to the 
transition of students and youth with disabilities from school to post-
school activities, including final Sec. Sec.  361.24, 361.46, 
361.48(b), and 361.49.

Topical Headings

Purpose (Sec.  361.1)
Authorized Activities (Sec.  361.3)

[[Page 55634]]

Applicable Regulations (Sec.  361.4)
    Training on 2 CFR part 200 Requirements
    Third-Party In-Kind Contributions
Applicable Definitions (Sec.  361.5)
Administrative Cost (Sec.  361.5(c)(2))
    Supervisory Personnel
    Travel Costs
    Depreciation
    Infrastructure Costs for the Workforce Development System and 
Capital Expenditures
Assessment for Determining Eligibility and Vocational Rehabilitation 
Needs (Sec.  361.5(c)(5))
Competitive Integrated Employment (Sec.  361.5(c)(9))
    Competitive Integrated Employment
    Subminimum Wage and Sheltered Employment
    Public Benefits
    Full- and Part-Time Employment
    Minimum Wage Rates
    Customary Wages
    Comparable Training, Skills, and Experience
    Self-Employment
    Documentation of Competitive Earnings
    Subsistence Occupations
    Integrated Location--General
    Typically Found in the Community
    Level of Interaction Among Individuals With and Without 
Disabilities
    Work Unit
    Interaction During Performance of Job Duties
    Opportunities for Advancement
Construction of a Facility for a Public or Nonprofit Community 
Rehabilitation Program (Sec.  361.5(c)(10))
Customized Employment (Sec.  361.5(c)(11))
Employment Outcome (Sec.  361.5(c)(15))
    Statutory Basis
    Informed Choice
    Legitimacy of Homemaker Outcomes
    Availability of Services
    Disproportionate Impact
    Resources for Service Provision
    Feasibility Studies
    Transition Period
Indian; American Indian; Indian American; Indian Tribe (Sec.  
361.5(c)(25))
    Informed Choice
    Supported Employment Definitions
    Transition-Related Definitions
Submission, Approval, and Disapproval of the State Plan (Sec.  
361.10)
    Content and Submission of the VR Services Portion of the Unified 
or Combined State Plan
    Time Estimated for Submission
    Alignment of Program and Fiscal Years
    Other Comments
Requirements for a State Rehabilitation Council (Sec.  361.17)
    Establishment of a State Rehabilitation Council
    Additional Members
    Terms of Appointment
    Coordination With One-Stop Centers
Comprehensive System of Personnel Development (Sec.  361.18)
Data Report for Comprehensive System of Personnel Development (Sec.  
361.18(a))
Applicability of Educational and Experiential Requirements to 
Vocational Rehabilitation Counselors (Sec.  361.18(c)(1))
    Applicability of Standards to Other Personnel
    De-Professionalization and Diminution of Vocational 
Rehabilitation Counseling
    State Job Classification Minimum Qualifications
    Additional or Substitute Qualifications
    Interplay Between National or State-Approved Certification or 
Licensure Standards and Minimal Educational and Experiential 
Requirements
    Succession Planning
    Re-Training of Staff Not Meeting Personnel Standards
Standards of Personnel Development--Other Comparable Requirements 
(Sec.  361.18(c)(1))
    Meaning of ``A 21st Century Understanding of the Evolving Labor 
Force and the Needs of Individuals with Disabilities''
Staff Development (Sec.  361.18(d))
    Training Areas for Staff Development
Public Participation Requirements (Sec.  361.20)
    Public Hearings for Changes in an Order of Selection
    Public Meetings of the State Rehabilitation Council
    Substantive and Administrative Changes
    Public Comment Through Electronic Means
Requirements Related to the Statewide Workforce Development System 
(Sec.  361.23)
Cooperation and Coordination With Other Entities (Sec.  361.24)
    General
    Cooperation and Collaboration With Other Agencies and Entities
    Non-Educational Agencies
    Federal Agreements
    Guidance on the Braiding of Funds
    Requirements for Training
    Notification of the Client Assistance Program
Requirements for Third-Party Cooperative Arrangements (Sec.  361.28)
    In-Kind Contributions
    Students Who Are Eligible or Potentially Eligible for Services
Statewide Assessment; Annual Estimates; Annual State Goals and 
Priorities; Strategies; and Reports of Progress (Sec.  361.29)
    Comprehensive Statewide Needs Assessment
    Annual Estimates and Reports of Progress
Provision of Training and Services for Employers (Sec.  361.32)
    Innovation and Expansion Activities (Sec.  361.35)
    Resource Plans for Statewide Independent Living Councils
    Innovative Approaches With Components of the Workforce 
Development System
Ability To Serve All Eligible Individuals; Order of Selection for 
Services (Sec.  361.36)
    Individuals Who Require Specific Services and Equipment To 
Maintain Employment
    Information and Referral
    Monitoring by the State Rehabilitation Council
    Order of Selection Criteria
    Prohibited Factors
    Pre-Employment Transition Services
Information and Referral Programs (Sec.  361.37)
    Benefits Planning
    Referral Options
    Follow-Up
    Independent Living Services
Protection, Use, and Release of Personal Information (Sec.  361.38)
Reports; Evaluation Standards and Performance Indicators (Sec.  
361.40)
    Pre-Employment Transition Services
    Standards and Indicators
    Program Year
    Performance Accountability Regulations
    Cumulative Caseload Report (RSA-113)
    States With Two VR Agencies
    Reporting Burden
    RSA-911 Case Service Report
Assessment for Determining Eligibility and Priority for Services 
(Sec.  361.42)
    Advancing in Employment and Other Eligibility Criteria
    Substantial Impediment to Employment
    Prohibited Factors
    Residency
    Compliance Threshold
    Entities Holding Special Wage Certificates
    Extended Evaluation and Trial Work Experiences
Development of the Individualized Plan for Employment (Sec.  361.45)
    Time Frame for Developing the Individualized Plan for Employment
    Options for Developing the Individualized Plan for Employment
    Data for Preparing the Individualized Plan for Employment
Content of the Individualized Plan for Employment (Sec.  361.46)
    Scope of Vocational Rehabilitation Services for Individuals With 
Disabilities
    Services for Individuals Who Have Applied or Been Determined 
Eligible for Vocational Rehabilitation Services (Sec.  361.48(b))
    Advanced Training
    Other Services
Scope of Vocational Rehabilitation Services for Groups of 
Individuals With Disabilities (Sec.  361.49(a))
    Establishment, Development, or Improvement of Community 
Rehabilitation Programs
    Technical Assistance to Businesses
    Establishment, Development, or Improvement of Assistive 
Technology Programs
    Advanced Training
Comparable Services and Benefits (Sec.  361.53)
    Accommodations and Auxiliary Aids and Services
    Pre-Employment Transition Services and Personally Prescribed 
Devices
    Interagency Agreements
Semi-Annual and Annual Review of Individuals in Extended Employment 
and Other Employment Under Special Certificate Provisions of the 
Fair Labor Standards Act (Sec.  361.55)
    Effective Date
    Who is subject to the requirements?
    Documentation
    Costs of Conducting the Reviews
    Informed Choice
    Retroactive Reviews
Cross-Reference With 34 CFR 397.40
    Individuals With a Record of Service

[[Page 55635]]

Purpose (Sec.  361.1)

    Comments: A few commenters supported the replacement of the term 
``gainful employment'' with the term ``competitive integrated 
employment'' and the inclusion of the term ``economic self-
sufficiency'' in proposed Sec.  361.1. In addition, many commenters 
sought clarification of the term ``economic self-sufficiency'' as used 
in this regulation and requested that we define it in Sec.  361.5(c). 
Of these commenters, most suggested that the term ``economic self-
sufficiency'' may deter individuals with disabilities who are receiving 
public benefits from applying for vocational rehabilitation services. 
Additionally, some commenters suggested that DSUs may use economic 
self-sufficiency to determine that individuals with disabilities who 
wish to maintain their public benefits are ineligible for vocational 
rehabilitation services. Some commenters indicated that individuals 
with intellectual or developmental disabilities may never achieve 
earnings, through competitive integrated employment, sufficient to 
cease receiving public benefits. Two commenters viewed ``economic self-
sufficiency'' as a criterion within both the definitions of 
``employment outcome'' and ``competitive integrated employment,'' and 
requested that we identify criteria that DSUs may use to determine when 
individuals achieve this level of employment and are rehabilitated 
enough to no longer need vocational rehabilitation services.
    Discussion: We appreciate comments supporting inclusion of the 
terms ``competitive integrated employment'' and ``economic self-
sufficiency'' in final Sec.  361.1. We agree that inclusion of these 
terms in the regulation reflects the spirit of the Act in general, and 
is consistent with specific amendments to section 100(a) of the Act 
made by WIOA. While we understand commenters' requests for a definition 
of ``economic self-sufficiency,'' the Act, as amended by WIOA, does not 
define the term. We believe that the use of the term in final Sec.  
361.1(b) is consistent with its common understanding and refers to the 
situation in which an individual can support him- or herself 
financially with minimal or no reliance on public benefits or 
assistance from other persons. Therefore, we do not define the term 
``economic self-sufficiency.'' In addition, use of the term ``economic 
self-sufficiency'' in section 100(a)(2)(B) of the Act, as amended by 
WIOA, and in final Sec.  361.1(b) does not require the individual to 
achieve economic self-sufficiency--either as a prerequisite for receipt 
of services or as an outcome resulting from vocational rehabilitation 
services provided. Rather, the term as used in the Act, as amended by 
WIOA, and in these final regulations merely requires that the 
vocational rehabilitation services provided to an individual be 
consistent with the individual's strengths, resources, priorities, 
concerns, abilities, capabilities, interests, informed choice, and 
economic self-sufficiency. Vocational rehabilitation services ideally 
should assist an individual to achieve a competitive integrated 
employment outcome that will enable the individual to become 
economically self-sufficient, but there is no requirement in either the 
Act or these final regulations that an individual achieve economic 
self-sufficiency or a specific level of financial independence.
    Section 102(a) of the Act, as amended by WIOA, does not include 
economic self-sufficiency among the eligibility criteria. Inclusion of 
the term in final Sec.  361.1(b) does not alter the eligibility 
criteria for the program in final Sec.  361.42(a)(1). We encourage DSUs 
to conduct outreach to individuals with disabilities and service 
providers to clarify any misperception that the use of this term 
implies that individuals with disabilities may no longer receive 
vocational rehabilitation services for the purpose of achieving an 
employment outcome in competitive integrated employment or supported 
employment if they wish to maintain their public benefits. We also 
encourage DSUs to provide vocational counseling and guidance and 
benefits planning services to these individuals to assist them in 
better understanding the impact of participation in the VR program and 
employment on their public benefits.
    Economic self-sufficiency is not a component of the definitions of 
``competitive integrated employment'' and ``employment outcome'' in 
sections 7(5) and 7(11), respectively, of the Act, as amended by WIOA. 
We disagree that the implementing regulations for the definitions of 
these terms in final Sec. Sec.  361.5(c)(9) and 361.5(c)(15) should be 
revised to incorporate criteria related to the achievement of economic 
self-sufficiency as suggested by the commenter. We believe the wages 
and benefits criteria, especially as contained in the definition for 
``competitive integrated employment'' in final Sec.  361.5(c)(9), are 
consistent with those set forth in the statutory definition in section 
7(5) of the Act.
    Changes: None.

Authorized Activities (Sec.  361.3)

    Comments: None.
    Discussion: Upon further review of Sec.  361.3, we have determined 
a change is needed to clarify that the use of VR program funds to pay 
for the infrastructure costs of the one-stop delivery system 
established by title I of WIOA is an authorized activity under the VR 
program. Section 121(h) of title I of WIOA requires one-stop partners, 
including the VR program, to pay a proportional share of the one-stop 
system's infrastructure costs. These costs satisfy the definition of 
``administrative costs'' in final Sec.  361.5(c)(2) because such 
expenditures constitute operating and maintenance costs, which are 
permissible administrative costs under the VR program. We have revised 
final Sec.  361.3(b) to specify that one-stop infrastructure costs are 
considered administrative costs under the VR services portion of the 
Unified or Combined State Plan and, therefore, are authorized 
activities under the VR program. In making this change, we ensure 
consistency with final Sec.  361.5(c)(2)(viii), as well as jointly 
administered requirements governing the one-stop delivery system 
contained in joint regulations published elsewhere in this issue of the 
Federal Register.
    Changes: We have revised final Sec.  361.3(b) to specify that the 
use of VR program funds to pay for one-stop system infrastructure costs 
is an authorized activity of the program as an administrative cost.

Applicable Regulations (Sec.  361.4)

Training on 2 CFR Part 200 Requirements

    Comments: Two commenters requested the Department provide training 
on 2 CFR part 200 requirements, focusing on definitions and general 
applicability.
    Discussion: The Department has conducted a number of Webinars and 
developed technical assistance materials to assist grantees in 
implementing 2 CFR part 200 requirements and will continue to do so as 
needed. The Department maintains a technical assistance Web page for 
grantees regarding the requirements set forth in 2 CFR part 200, which 
may be accessed at www.ed.gov. The Department will consider future 
Webinars, as appropriate.
    Changes: None.

Third-Party In-Kind Contributions

    Comments: None.
    Discussion: As specified under final Sec.  361.60(b)(2), third-
party in-kind contributions may not be used to meet the non-Federal 
share for match

[[Page 55636]]

purposes under the VR program. This prohibition against the use of 
third-party in-kind contributions under the VR program has been in 
place since 1997. Upon further Departmental review regarding this long-
standing prohibition, we have determined it necessary to revise final 
Sec.  361.4(d). In so doing, the Secretary clarifies that 2 CFR 
200.306(b), which allows third party in-kind contributions to be used 
as part of a non-Federal entity's cost sharing or matching when such 
contributions meet certain criteria, does not apply to the VR program. 
The Secretary believes this technical change will eliminate any 
confusion expressed by commenters in relation to final Sec.  
361.60(b)(2).
    Changes: We have amended the applicable regulations in final Sec.  
361.4(d) to specify that 2 CFR 200.306(b), as it pertains to the 
acceptance of third-party in-kind contributions, is not applicable to 
the VR program.

Applicable Definitions (Sec.  361.5)

Administrative Cost (Sec.  361.5(c)(2))

Supervisory Personnel

    Comments: One commenter recommended that we consider costs for 
local level supervisors who do not perform counseling duties, but who 
directly supervise counselors, to be direct service costs rather than 
administrative costs.
    Discussion: We disagree with the recommendation to consider the 
costs for local level supervisors who do not perform counseling duties, 
but who directly supervise counselors, to be direct service costs, 
rather than ``administrative costs.'' Final Sec.  361.5(c)(2)(xi) 
specifies that administrative salaries constitute ``administrative 
costs.'' Administrative salaries are those personnel costs paid to 
individuals who are not providing direct services to VR program 
applicants and consumers, and may include clerical and managerial 
salaries. Therefore, we consider costs for supervisors who do not 
provide direct services to be administrative costs in support of 
vocational rehabilitation services, rather than costs for the actual 
provision of such services.
    Changes: None.

Travel Costs

    Comments: Two commenters indicated that the instructions for 
completing the Annual Vocational Rehabilitation Program/Cost Report 
(RSA-2) in Policy Directive (PD) 14-02 requiring DSUs to report staff 
travel costs as ``administrative costs'' appear to conflict with 
proposed Sec.  361.5(c)(2)(xii), which specifically excludes travel 
costs related to the provision of services from ``administrative 
costs.''
    One commenter recommended we clarify that grantees may consider 
travel costs incurred in the provision of vocational rehabilitation 
services as a service-related cost, rather than an administrative cost. 
Specifically, the commenter requested that the final regulations 
clarify that travel costs incurred in the provision of pre-employment 
transition services may be paid from the funds reserved for that 
purpose. This commenter also suggested that the Department update 
reporting instructions accordingly.
    Discussion: We appreciate the commenters' observation that the 
definition of ``administrative costs'' in proposed Sec.  
361.5(c)(2)(xii) appears to conflict with the instructions for 
completing the RSA-2 with regard to staff travel costs. The Department 
will review and update previously issued guidance as necessary to 
ensure consistency with these final regulations.
    We agree that travel costs incurred directly as a result of 
providing vocational rehabilitation services constitute service-related 
costs, not ``administrative costs'' for purposes of the VR program. 
Therefore, DSUs may pay for travel costs incurred as a direct result of 
providing pre-employment transition services to students with 
disabilities, including travel to individualized education program 
meetings, from the funds reserved for the provision of those services. 
Travel costs incurred as a result of providing other vocational 
rehabilitation services to students with disabilities may not be paid 
from the funds reserved for the provision of pre-employment transition 
services because such travel would be beyond the scope of section 113 
of the Act, as amended by WIOA, and final Sec.  361.48(a). While travel 
costs incurred as a result of providing other vocational rehabilitation 
services to students with disabilities who have been determined 
eligible for vocational rehabilitation services may not be paid from 
the funds reserved for the provision of pre-employment transition 
services, they still would be service-related, not administrative, 
costs. Staff travel costs incurred for other purposes, such as 
attending regional meetings or trainings, satisfy the definition of 
``administrative costs'' and must be reported as such on the RSA-2. 
DSUs must have an established system of internal controls sufficient to 
record and track administrative expenditures associated with authorized 
activities so they can be distinguished from authorized service-related 
costs. In this way, DSUs are able to satisfy accounting and reporting 
requirements set forth in final Sec.  361.12 and Uniform Guidance on 
financial management in 2 CFR 200.302.
    Changes: None.

Depreciation

    Comments: One commenter requested that we clarify whether DSUs must 
classify depreciation for administrative facilities as administrative 
costs.
    Discussion: Final Sec.  361.5(c)(2) provides several examples of 
administrative costs; however, the examples provided are not 
exhaustive. DSUs must treat depreciation in accordance with the Uniform 
Guidance requirements, as set forth in 2 CFR 200.436, and report it 
accordingly. Therefore, DSUs must report depreciation for facilities 
used for the administration of the VR program as administrative costs.
    Changes: None.

Infrastructure Costs for the Workforce Development System and Capital 
Expenditures

    Comments: None.
    Discussion: After further analysis of proposed Sec.  361.5(c)(2), 
we made a technical change in final Sec.  361.5(c)(2)(viii) to specify 
that costs to support the infrastructure of the one-stop delivery 
system established under title I of WIOA are ``administrative costs'' 
for purposes of the VR program. Section 121(h) of WIOA requires one-
stop partners, including the VR program, to pay a proportional share of 
the one-stop system's infrastructure costs. We believe these costs 
satisfy the definition of ``administrative costs'' in final Sec.  
361.5(c)(2)(viii) because these expenditures constitute operational and 
maintenance costs. We have revised final Sec.  361.5(c)(2)(viii) to 
specify operational and maintenance costs, for purposes of the 
definition of ``administrative costs'' under the VR program, include 
one-stop system infrastructure costs. This technical change ensures 
consistency with final Sec.  361.3(b) and the jointly administered 
requirements governing the one-stop system, as set forth in the joint 
regulations published elsewhere in this issue of the Federal Register.
    Additionally, we made a change to final Sec.  361.5(c)(2)(viii) to 
conform to the Uniform Guidance in 2 CFR part 200. In accordance with 2 
CFR 200.439(b)(3), capital expenditures for improvements to land, 
buildings, or equipment which materially increase their value or useful 
life are unallowable as a direct cost, except with the prior written 
approval of the Department. Therefore, we have revised final Sec.  
361.5(c)(2)(viii) to delete a clause that had excluded capital

[[Page 55637]]

expenditures from the definition of ``administrative costs'' for 
purposes of the VR program. Pursuant to this change, DSUs must treat 
capital expenditures as ``administrative costs'' for purposes of the VR 
program. This technical change enables grantees to report these costs 
more accurately as an administrative cost on the RSA-2 VR Program Cost 
Report.
    Changes: We have revised final Sec.  361.5(c)(2)(viii) to specify 
that the definition of ``administrative costs'' includes those costs 
associated with operating and maintaining the infrastructure of the 
one-stop system.
    In addition, we have deleted the reference to ``not including 
capital expenditures as defined in 2 CFR 200.13'' from final Sec.  
361.5(c)(2)(viii).

Assessment for Determining Eligibility and Vocational Rehabilitation 
Needs (Sec.  361.5(c)(5))

    Comments: A few commenters supported the definition of ``assessment 
for determining eligibility and vocational rehabilitation needs'' in 
proposed Sec.  361.5(c)(5). Some commenters disagreed with the 
requirement in the definition that, if additional data are needed to 
determine the employment outcome and the vocational rehabilitation 
services to be included in the individualized plan for employment, the 
DSU can conduct a comprehensive assessment that, in part, relies to the 
maximum extent possible on information obtained from experiences in 
integrated employment and other settings in the community. Another 
commenter requested clarification as to whether the use of information 
obtained from prior experiences within integrated employment settings 
or other integrated community settings could include internships or 
other unpaid work experiences.
    Discussion: We appreciate the support for proposed Sec.  
361.5(c)(5), as well as the concerns and requests for clarification. 
Section 7(2)(B)(v) of the Act, as amended by WIOA, and final Sec.  
361.5(c)(5)(ii)(E) allow a DSU, when conducting the comprehensive 
assessment to determine the vocational rehabilitation needs and 
employment outcome for inclusion in the individualized plan for 
employment, to rely, in part, on the applicant's participation in 
integrated employment settings to the maximum extent possible. However, 
neither the Act nor the final regulations require that the individual 
be paid during these experiences. Therefore, section 7(2) of the Act 
and final Sec.  361.5(c)(5)(ii) do not prohibit DSUs from using unpaid 
internships or work experiences during the assessment process. We 
received other comments concerning a perceived conflict between this 
definition and proposed Sec.  361.42(c)(2), which prohibits a DSU from 
considering an individual's work history when determining an 
applicant's eligibility for vocational rehabilitation services, and 
contracting with community rehabilitation programs that hold subminimum 
wage certificates issued by the Department of Labor under section 14(c) 
of the FLSA when conducting assessments. We address these comments in 
the Analysis of Comments and Changes of the Assessment for Determining 
Eligibility and Priority for Services section.
    Changes: None.

Competitive Integrated Employment (Sec.  361.5(c)(9))

Competitive Integrated Employment

    The overarching principle of the Act, as amended by WIOA, that 
individuals with disabilities are capable of achieving full integration 
into all aspects of life, including employment, is most evident in the 
definition of ``competitive integrated employment'' in section 7(5) of 
the Act and the interweaving of the term throughout the many provisions 
of the statute. Because of its central importance to the purpose of the 
VR program, we received extensive comments on the definition in 
proposed Sec.  361.5(c)(9), expressing both strong support for, and 
opposition to, the proposed definition. The vast majority of public 
comment on the definition focused on the criteria that an employment 
location must satisfy if it is to be considered integrated. Some 
commenters expressed support for the definition in general, and the 
criteria for an integrated location specifically, for several reasons, 
including the definition's specificity that the commenters believe will 
ensure individuals with disabilities are working in integrated 
employment settings, and the impact the definition can have in 
curtailing the low expectations for individuals with disabilities who 
are relegated to segregated employment with little opportunity for 
advancement. However, many commenters opposed the definition, 
expressing concern that it would restrict or eliminate subminimum wage 
and sheltered employment for individuals with disabilities, or limit 
the ability of these individuals to choose among these options. We 
appreciate the support for the definition, and discuss the detailed 
comments in opposition to, and requests for clarification of, the 
proposed definition under the topical headings that follow.

Subminimum Wage and Sheltered Employment

    Comments: Many commenters urged us to protect or not to eliminate 
the payment of subminimum wages to individuals with disabilities and 
sheltered employment. One of these commenters stated that not all 
individuals can be paid minimum wages, and that the employment must be 
profitable for both parties. Similarly, another commenter stated that 
if entities holding subminimum wage certificates were forced to pay 
less productive individuals with disabilities minimum wages, they would 
lose business to companies overseas. Likewise, some commenters stated 
that sheltered employment is needed to protect individuals with 
intellectual disabilities and other significant disabilities from 
abuse. A few commenters expressed their concern that the integrated 
location criteria of the definition devalue the employment of 
individuals with disabilities who cannot work in these settings.
    Many commenters opposed the definition because it would limit an 
individual's choice of subminimum wage and sheltered employment 
options. Some of these commenters asked that we create an exception 
from the criteria for individuals who choose to work in a segregated or 
sheltered setting if all other criteria regarding competitive earnings 
and opportunities for advancement are satisfied.
    Discussion: We acknowledge that many commenters on part 361 in 
general, and the definition of ``competitive integrated employment'' 
specifically, are concerned that these final regulations will eliminate 
or restrict the ability of individuals with disabilities, particularly 
those with the most significant disabilities, to be paid subminimum 
wages by entities holding certificates issued by the Department of 
Labor under section 14(c) of the FLSA, as well as sheltered employment. 
Although we recognize the concerns expressed by these commenters, we 
emphasize that the definition of ``competitive integrated employment'' 
and its use throughout final part 361 are intended to ensure that all 
individuals with disabilities served through the VR program are 
provided every opportunity to achieve employment with earnings 
comparable to those paid to individuals without disabilities in a 
setting that allows them to interact with individuals who do not have 
disabilities. Nonetheless, nothing in title I of the Act, as amended by 
WIOA, or the

[[Page 55638]]

regulations in final part 361 affects the FLSA in any manner. Later in 
this Analysis of Comments and Changes, we address limitations on the 
use of subminimum wage in section 511 of the Act and final 34 CFR part 
397. In addition, the definition ``competitive integrated employment'' 
in final Sec.  361.5(c)(9) does not prohibit or eliminate sheltered 
employment. As explained in final regulations published on January 21, 
2001, we agree that extended employment programs have traditionally 
served as a safety net for individuals with significant disabilities 
who cannot perform work in an integrated setting in the community or 
who choose to work only among their disabled peers (66 FR 7250). The 
Secretary does not devalue the dignity or the worth of extended 
employment programs or the individuals who work in those settings. 
Rather, the definition of ``competitive integrated employment'' 
reflects the heightened emphasis throughout the Act, as amended by 
WIOA, that individuals with disabilities, including those with the most 
significant disabilities, can achieve employment in the community and 
economic self-sufficiency if provided appropriate services and 
supports. Because DSUs have been unable to assist individuals with 
disabilities to obtain sheltered employment through the VR program 
since October 2001, the vast majority of individuals have accessed 
sheltered employment through other sources or on their own initiative. 
Therefore, the Secretary believes the definition in final Sec.  
361.5(c)(9) will not affect the availability of sheltered employment 
for individuals who choose this form of employment, or for whom it is a 
legitimate and necessary option.
    Furthermore, while the Act, as amended by WIOA, places a premium on 
the ability of individuals with disabilities to exercise informed 
choice throughout the vocational rehabilitation process, we do not 
agree that the final regulations in part 361 generally and the 
definition specifically are inconsistent with that emphasis. In fact, 
an individual with a disability may pursue any form of employment he or 
she chooses. However, if the individual wishes to receive vocational 
rehabilitation services, he or she must intend to achieve an 
``employment outcome,'' which is defined in final Sec.  361.5(c)(15) 
for purposes of the VR program as employment in competitive integrated 
employment or supported employment. If the individual chooses to pursue 
work that does not satisfy the definition of ``employment outcome'' for 
purposes of the VR program, such as sheltered employment, the 
individual must seek services from another agency or provider. In such 
circumstances, these final regulations require the DSU to refer that 
individual to local extended employment providers or other Federal, 
State, or local programs (e.g., community rehabilitation programs, 
State Use programs, and centers for independent living) that can meet 
the individual's needs. The referral requirements in final Sec.  361.37 
also ensure that individuals receive sufficient information concerning 
the scope of the VR program and opportunities for individuals with 
disabilities to pursue competitive integrated employment. This 
information enables individuals to make a fully informed choice 
regarding whether to pursue competitive integrated employment through 
the VR program or subminimum wage and extended employment through other 
sources.
    The Secretary believes these final regulations ensure that the VR 
program promotes to the maximum extent possible opportunities for 
individuals with disabilities, particularly those with significant 
disabilities, to pursue competitive integrated employment options. 
Moreover, final Sec.  361.52 requires each DSU to preserve individual 
choice in the manner in which the Act intends for individuals who 
choose to pursue employment outcomes within the scope of the VR 
program.
    Finally, section 7(5) of the Act, as amended by WIOA, does not 
permit an exception to the definition's requirements for individuals 
who choose subminimum wage and or sheltered employment. In fact, such 
an exception would be inconsistent with the plain meaning of the 
criteria contained in the statutory definition in section 7(5) of the 
Act. Therefore, we lack the statutory authority to create such an 
exception in final Sec.  361.5(c)(9).
    Changes: None.

Public Benefits

    Comments: One commenter requested that we clarify the effect of the 
definition of ``competitive integrated employment'' on the eligibility 
of individuals with disabilities for Social Security benefits. One 
commenter expressed concern that the criteria would cause individuals 
to lose needed benefits provided through Medicaid and other sources.
    Discussion: We recognize that some individuals are reluctant to 
pursue employment through the VR program due to their perceptions of 
the negative impact employment may have on the public benefits, 
including Medicaid and other sources, on which they rely for financial 
and medical support. To enable individuals with disabilities to better 
understand the effects of employment on Social Security and other 
benefits and make well-informed decisions about the employment goals 
that best suit their needs, section 102(b)(2) of the Act, as amended by 
WIOA, and final Sec.  361.45(c)(2) require DSUs to provide benefits 
planning information, including information about work incentives 
provided through the Social Security Administration (SSA), to these 
individuals during the process for developing the individualized plan 
for employment. For further information, see the Development of the 
Individualized Plan for Employment section later in this Analysis of 
Comments and Changes.
    Changes: None.

Full- and Part-Time Employment

    Comments: A few commenters requested that we define or clarify the 
terms ``full-time'' and ``part-time'' employment as they are used in 
the definition of ``competitive integrated employment.'' These 
commenters asked whether there is a minimum number of hours that an 
individual must work for the employment to satisfy the requirements of 
the definition, as well as the definition of an ``employment outcome.'' 
A few commenters expressed concern that on-call or temporary employment 
is not within the scope of the definition because it is not considered 
full- or part-time scheduled employment. They stated that many entry-
level individuals are employed in on-call positions and that permitting 
this form of employment could enable individuals with intellectual 
disabilities to maintain employment.
    Discussion: The reference to full- and part-time work in the 
definitions for the terms ``employment outcome'' and ``competitive 
integrated employment,'' for purposes of the VR program, is not new. 
The definition for ``employment outcome'' has remained consistent since 
the 1992 Amendments to the Act and the 1997 VR program regulations (62 
FR 6334 (Feb. 11, 1997)). Although ``competitive integrated 
employment'' is a new term in the Act, as amended by WIOA, and these 
final regulations, the term and its definition are consistent with that 
for ``competitive employment'' in prior Sec.  361.5(b)(11), which dates 
back to the 1997 VR program regulations. Because these definitions have 
existed for approximately 20 years without substantial change, we do 
not believe it necessary to define ``full-time'' or ``part-time'' in 
final part 361. ``Full-time'' and

[[Page 55639]]

``part-time'' have their common meanings and may vary across sectors of 
the economy. Generally, individuals are considered to be employed full-
time if they work 40 hours per week. However, it is not uncommon for 
full-time employees to work fewer hours, such as 35 hours per week, 
depending on the terms of employment established by the employer. 
``Part-time'' employment is employment for any number of hours less 
than that of full-time employment for the particular work performed. 
Nowhere in the statutory definitions of ``competitive integrated 
employment'' or ``employment outcome,'' or any other provision of the 
Act, as amended by WIOA, is a minimum number of hours that an 
individual must work for the employment to be considered full- or part-
time specified, and we decline to do so in these final regulations, 
relying on the terms' common understanding. Finally, we clarify in this 
discussion that the definitions of ``competitive integrated 
employment'' and ``employment outcome,'' as set forth in the Act and 
these final regulations, do not require that the individual's 
employment be regularly scheduled, as suggested by the commenter. Thus, 
DSUs may assist individuals to obtain temporary or on-call employment 
so long as all the criteria of the definitions are satisfied.
    Changes: None.

Minimum Wage Rates

    Comments: Some commenters expressed strong support for the 
competitive earnings criteria in proposed Sec.  361.5(c)(9)(i). We also 
received comments recommending changes to the criteria or requesting 
clarification. One commenter stated that the requirement that the 
individual's wages equal or exceed the higher of the Federal, or 
applicable State or local minimum wage rates adds unnecessary 
complexity to the vocational rehabilitation process. This commenter 
recommended that we apply a single standard of the Federal minimum wage 
rate to all employment outcomes achieved through the VR program, or 
that we apply the minimum wage rate in effect in the place of the 
individual's employment, and not the individual's place of residence.
    Discussion: We appreciate the strong support for the competitive 
earnings criteria and respond here to the requests for clarification. 
We disagree with the request to avoid complexity by using only the 
Federal minimum wage as the measure of competitive earnings. Section 
7(5)(A)(i)(I)(aa) of the Act, as amended by WIOA, requires that the 
individual's earnings equal or exceed the Federal, State, or applicable 
local minimum wage rate, whichever is higher, for the employment to 
satisfy the definition of ``competitive integrated employment.'' Final 
Sec.  361.5(c)(9)(i)(A) mirrors the statutory definition in this 
respect. Given the specific statutory requirement, we lack the 
statutory authority to restrict this requirement in the final 
regulation. In addition, the definition focuses on the wages paid by 
the employer, who is subject to the minimum wage laws applicable to the 
place of employment. Consequently, we agree with the commenter that the 
determination of whether the individual's earnings satisfy the 
definition's criteria should be based on the minimum wage rate 
applicable to the individual's place of employment, and not his or her 
place of residence.
    Changes: We have revised final Sec.  361.5(c)(9)(i)(A) to clarify 
that the applicable State and local minimum wage laws are those that 
apply to the place of employment.

Customary Wages

    Comments: One commenter recommended that we revise the definition 
to emphasize that the intent of the law and the regulations is to 
ensure that wages and benefits paid to individuals with disabilities 
are comparable to the prevailing wage and benefits of individuals 
without disabilities.
    Discussion: Section 7(5)(A)(i)(I)(bb) of the Act, as amended by 
WIOA, and final Sec.  361.5(c)(9)(i)(B) require that the individual 
with the disability be compensated at a rate comparable to the 
customary rate paid by the employer for the same or similar work 
performed by individuals without disabilities for the employment to be 
considered competitive integrated employment. The Secretary emphasizes 
that this provision in both the Act and the final regulations mirrors 
the definition of ``competitive employment'' in prior Sec.  
361.5(b)(11)(ii) (see 66 FR 4379 (Jan. 17, 2001)), which formed the 
basis for the definition in the Act. We also note that the commenter's 
recommendation would not limit the criterion to the wages paid by the 
employer, as do the statutory and final regulatory definition, but 
would appear to extend the criterion to the prevailing wages paid to 
individuals without disabilities in similar positions generally. For 
these reasons the recommendation is not consistent with the criterion 
in the statutory definition and, thus, we do not have the authority to 
expand the regulatory definition in final Sec.  361.5(c)(9)(i)(B) as 
the commenter suggests.
    Changes: None.

Comparable Training, Skills, and Experience

    Comments: Two commenters requested that we clarify the meaning of 
``comparable training, skills, and experience'' as used in the 
definition, and how this concept could be quantified.
    Discussion: Section 7(5)(A)(i)(I)(bb) of the Act, as amended by 
WIOA, and final Sec.  361.5(c)(9)(i)(B) require the DSU to take into 
account the training, experience, and level of skills possessed by 
employees without disabilities in similar positions when determining 
whether the earnings of the individual with a disability are 
comparable. We do not believe that it is possible to quantify this 
comparison. Instead, the determination is based on the vocational 
rehabilitation counselor's knowledge of the training, skills, and 
experience needed to perform the job generally and required by the 
employer specifically. In this way, the DSU can ensure that the 
individual with the disability is compensated in a manner comparable to 
that of employees without disabilities in all critical respects, and is 
not paid at a lower rate simply on the basis of his or her disability.
    Changes: None.

Self-Employment

    Comments: One commenter noted the proposed definition recognizes 
that individuals, with or without disabilities, in self-employment may 
not receive an income from the business equal to or exceeding 
applicable minimum wage rates, particularly in the early stages of 
operation. The commenter requested clarification regarding the reason 
the definition proscribes an individual with a disability in self-
employment from what other successful entrepreneurs have the option to 
practice. Another commenter asked if individuals who achieve self-
employment are included in the calculations of the performance 
accountability measures assessing employment in the second and fourth 
quarters after exit from the VR program, since their employment and 
wages are not captured in Unemployment Insurance wage systems.
    Discussion: We want to clarify that section 7(5)(A)(i)(II) of the 
Act, as amended by WIOA, and final Sec.  361.5(c)(9)(i)(C) do not 
prevent, as the commenter indicates, an individual with a disability 
who is self-employed from receiving earnings comparable to those 
achieved by individuals without disabilities in similar occupations. As 
explained in the preamble to the NPRM, the statutory and regulatory 
definitions

[[Page 55640]]

recognize that individuals with disabilities, as well as individuals 
without disabilities, may experience difficulty in generating 
sufficient income from their self-employment ventures, that will enable 
them to achieve earnings equal to or exceeding the applicable minimum 
wage rate, especially in the early stages of the business operations. 
Thus, final Sec.  361.5(c)(9)(i)(C) provides that a self-employed 
individual with a disability in the start-up phase of a business 
venture who is making less than the applicable minimum wage can meet 
the definition of ``competitive integrated employment.''
    Furthermore, individuals who receive services through the VR 
program to assist with the achievement of self-employment outcomes are 
considered ``participants'' as that term is defined under the joint 
final regulations implementing the jointly administered performance 
accountability system requirements of section 116 of title I of WIOA, 
published elsewhere in this issue of the Federal Register, and must be 
taken into account when calculating a DSU's performance on those 
measures. Since the employment status and earnings of self-employed 
individuals are not captured through the unemployment insurance wage 
system, a DSU may use supplemental wage information to obtain the data 
necessary for the calculation of its performance. For further 
information concerning the definition of ``participant'' for purposes 
of the performance accountability measures under section 116 of WIOA 
and the data needed to calculate these measures, particularly data 
related to supplemental information when quarterly wage records are not 
available, see the analysis of comments on the joint performance final 
regulations published elsewhere in this issue of the Federal Register.
    Changes: None.

Documentation of Competitive Earnings

    Comments: One commenter asked what documentation a DSU is required 
to use when verifying the criteria for competitive earnings, including 
that the wages are equal to, or exceed, the applicable wage rate for 
the locality; that the individual's wages and benefits are comparable 
to those earned by individuals without disabilities in similar 
positions and who possess the same level of training, skills, and 
experience; that the individual has the same opportunities for 
advancement as do persons without disabilities in similar positions; 
and the income level of an individual who has achieved self-employment.
    Discussion: Final Sec.  361.47(a)(9) requires the DSU to maintain a 
record of services for each individual served through the VR program 
that includes documentation verifying if the individual has achieved 
competitive integrated employment, including whether the individual has 
obtained employment with competitive earnings. Final Sec.  361.47(b) 
does not prescribe the necessary documentation, but directs the DSU, in 
consultation with the State Rehabilitation Council, to determine the 
type of documentation needed to meet the requirements of Sec.  
361.47(a). However, examples of documentation that a DSU may use 
include, as appropriate for the type of employment, unemployment 
insurance wage records, tax returns, earnings statements from the 
employer, and self-reported information.
    Changes: None.

Subsistence Occupations

    Comments: Some commenters responded to the statement in the NPRM's 
preamble indicating that we interpret subsistence employment as a form 
of self-employment common to cultures of many American Indian tribes, 
or to the definition of ``subsistence'' under 34 CFR part 371 governing 
the American Indian Vocational Rehabilitation Services (AIVRS) program 
(see NPRM, Workforce Innovation and Opportunity Act, Miscellaneous 
Program Changes, 80 FR 20988, 20994-20998 (April 16, 2015)). Several 
commenters asked whether the interpretation of the self-employment 
criteria within the definition of ``competitive integrated employment'' 
in proposed Sec.  361.5(c)(9) that includes subsistence activities is 
limited to individuals served through the AIVRS program under 34 CFR 
part 371 or to American Indians and Alaska Natives. Of these, one 
commenter noted that subsistence activities are not only culturally 
relevant for American Indians and Alaska Natives, but that they are 
also vital to many individuals who live in rural areas with limited 
competitive employment options. One commenter requested that we clarify 
the meaning of ``culturally appropriate'' as used in the definition of 
``subsistence'' and the preamble to the NPRM by providing examples. 
Another commenter asked what limits would be placed on hobbies as self-
employment outcomes if subsistence outcomes were available to all 
individuals served through the VR program. In addition, several 
commenters requested that we revise the definition of ``employment 
outcome'' for purposes of the VR program to include within its scope 
subsistence activities.
    Discussion: In the NPRM covering amendments made by WIOA to the 
miscellaneous programs authorized by the Act, the Secretary proposed a 
definition of ``subsistence'' in 34 CFR 371.6 for purposes of the AIVRS 
program (80 FR 20988, 20995). Under that definition, ``subsistence'' 
means a form of self-employment in which individuals use culturally 
relevant or traditional methods to produce goods or services for 
household consumption or non-commercial barter and trade that 
constitute an important basis for the individual's livelihood. To 
ensure consistency in the interpretation of the definition of 
``competitive integrated employment'' for the purposes of the VR 
program and the AIVRS program, and in light of the definition of 
``subsistence'' in final 34 CFR 371.6, the Secretary stated in the 
preamble to the NPRM to the VR regulations that the Department 
interprets subsistence employment as a form of self-employment common 
to cultures of many American Indian tribes. The Secretary believes that 
consistency in interpretation and implementation of the regulations 
governing the VR and AIVRS programs is essential given the large number 
of American Indians and Alaska Natives with disabilities who are 
eligible for services from both programs, some of whom may be served by 
the programs sequentially or even simultaneously.
    The Secretary does not intend the statement in the NPRM covering 
the proposed regulations in part 361, or the inclusion of the 
definition of ``subsistence'' only in 34 CFR 371.6, to limit the 
provision of services designed to assist individuals to achieve 
subsistence occupations to those served through the AIVRS program. DSUs 
may assist American Indians and Alaska Natives served through the VR 
program to achieve subsistence occupations as a form of self-employment 
under the limited circumstances set forth in the definition in 34 CFR 
371.6, which the Department applies in the same manner to the VR 
program.
    While the Secretary believes that, as the statement in the NPRM 
indicates, subsistence occupations are most culturally relevant to 
American Indian and Alaska Native tribes, the Secretary recognizes that 
they may also be culturally relevant to other small groups of 
individuals who may traditionally engage in these occupations, such as 
those in the outlying areas. Thus, DSUs may find it appropriate to 
assist individuals from cultures other than American Indian and Alaska 
Native tribes to achieve self-employment in

[[Page 55641]]

subsistence occupations that meet the definition of 34 CFR 371.6. 
However, because the definition of ``subsistence'' in 34 CFR 371.6 
requires that the subsistence occupation be culturally relevant to the 
individual, the Secretary declines to extend the applicability of 
subsistence occupations to other individuals with disabilities served 
through the VR and AIVRS programs solely on the basis of their location 
in rural areas.
    Examples of subsistence occupations that are culturally relevant to 
American Indians or Alaska Natives include the exchange of fish caught, 
or grain raised, by the individual with the disability for other goods 
produced by other members of the tribe that are needed by the 
individual to live and maintain his or her home. Given, however, the 
large number of American Indian tribes, including Alaska Native 
villages and regional corporations, and their widely varying cultural 
practices, any list of further examples of culturally relevant 
practices would also be incomplete and may exclude cultural practices 
that are unique to some tribes. Since the definition of ``subsistence'' 
in final 34 CFR 371.6 requires that the activity constitute an 
important basis of the individual's livelihood, DSUs cannot provide 
vocational rehabilitation services to individuals to enable them to 
engage in mere hobbies that do not serve this same purpose.
    Finally, the definition of ``employment outcome'' in final Sec.  
361.5(c)(15) encompasses all forms of competitive integrated 
employment, including self-employment. Because we consider subsistence 
occupations to be a form of self-employment, these occupations are 
already within the scope of the definition of ``employment outcome'' 
and it is not necessary to revise the definition to include a specific 
reference to subsistence.
    Changes: None.

Integrated Location--General

    Comments: As stated in the introduction to this section, the 
majority of commenters who commented on the definition of ``competitive 
integrated employment'' focused on the integrated location component of 
the definition in proposed Sec.  361.5(c)(9)(ii), which requires that 
the individual perform work in a location that meets two distinct 
criteria. The location must be a setting: (1) Typically found in the 
community; and (2) where the employee with a disability interacts for 
the purpose of performing the duties of the position with other 
employees within the particular work unit and the entire work site, 
and, as appropriate to the work performed, other persons (e.g., 
customers and vendors), who are not individuals with disabilities (not 
including supervisory personnel or individuals who are providing 
services to the employee) to the same extent that employees who are not 
individuals with disabilities and who are in comparable positions 
interact with these persons.
    Of the commenters who strongly supported the criteria, several 
requested that we make additional changes to this particular component 
of the definition by: (1) Adding language that the criteria should not 
be used to exclude individuals from the VR program due to concerns 
about their ability to meet the standard, and emphasizing that 
individuals with disabilities, including those with the most 
significant disabilities, are capable of achieving high quality 
competitive integrated employment when provided the necessary skills 
and supports; (2) specifically excluding from the scope of the 
definition employment in businesses owned by community rehabilitation 
providers, group or enclave settings, affirmative industries, social 
enterprises, or any other form of non-traditional work unit; and (3) 
changing the term ``competitive integrated employment'' to 
``competitive integrated individualized employment'' to be clear that 
employment through the VR program is individualized.
    Many of the commenters who opposed the integrated location criteria 
in proposed Sec.  361.5(c)(9)(ii) requested that we replace them with 
those in the statutory definition because they believe that: (1) Some 
of the proposed criteria are not mandated by WIOA; (2) some of the 
proposed criteria are too strict and would result in the loss of 
employment opportunities that pay good wages and benefits; and (3) the 
statutory language would maintain work options and choice for 
consumers.
    Some commenters inquired about the impact of the definition on the 
employment, by community rehabilitation programs, of individuals with 
disabilities, particularly those who are blind and visually impaired, 
in managerial and other positions. These commenters stated that 
employment in these positions was in an integrated location under prior 
guidance issued by the Department, specifically technical assistance 
circular 06-01 entitled ``Factors State Vocational Rehabilitation 
Agencies Should Consider When Determining Whether a Job Position Within 
a Community Rehabilitation Program is Deemed to be in an Integrated 
Setting for Purposes of the Vocational Rehabilitation Program'' and 
dated November 21, 2005. One commenter requested that we clarify 
whether the employment of individuals with disabilities in call centers 
operated by community rehabilitation providers occurs in an integrated 
location.
    Another commenter requested that we clarify the impact of the 
criteria on employment in the business enterprise (vending) program for 
individuals who are blind under the Randolph-Sheppard Act, as well as 
State industries programs for the blind.
    Discussion: We appreciate the strong support for Sec.  
361.5(c)(9)(ii). We also recognize those comments opposing, and 
requesting clarification of, the criteria. Before addressing the 
specific comments, the Secretary believes, as stated in the NPRM, that 
the definition of ``competitive integrated employment'' in section 7(5) 
of the Act, as amended by WIOA, for the most part incorporates the 
definition of ``integrated setting'' in prior Sec.  361.5(b)(33)(ii). 
Therefore, the substance of the definitions of ``competitive integrated 
employment'' in final Sec.  361.5(c)(9)(ii) and ``integrated setting'' 
in final Sec.  361.5(c)(32)(ii), for purposes of the VR program, with 
respect to the integrated nature of the employment location is familiar 
to DSUs and does not diverge from prior regulations, long-standing 
Department policy, practice, and the heightened emphasis on competitive 
integrated employment throughout the Act, as amended by WIOA.
    The Secretary believes that final Sec.  361.5(c)(9)(ii) and the 
explanation in the following paragraphs provide sufficient guidance to 
enable DSUs to determine whether a particular work location satisfies 
the definition of ``competitive integrated employment.'' The Secretary 
does not believe it necessary to revise the definition by adding 
language emphasizing that individuals with disabilities, including 
those with the most significant disabilities, are capable of achieving 
high quality competitive integrated employment when provided the 
necessary services and supports. This principle is clearly expressed in 
final Sec.  361.1 describing the purpose of the VR program, thereby 
forming the foundation for all provisions of final part 361, including 
the definition of ``competitive integrated employment.'' Therefore, 
there is no need to restate the principle in the definition.
    We do not believe that it is possible to identify all types of non-
integrated employment settings in the definition, as the specific 
exclusion of one type of non-integrated employment setting from the 
definition could result in a misperception that settings not mentioned 
are within the scope of the

[[Page 55642]]

definition. Instead, we explain in the following paragraphs the 
application of the integrated location criteria to these types of work 
settings. When the criteria are properly applied by DSUs, group and 
enclave employment settings operated by businesses formed for the 
purpose of employing individuals with disabilities will not satisfy the 
definition of ``competitive integrated employment.'' Therefore, the 
Secretary disagrees with the recommendation to add language to the 
definition expressly excluding from the scope of the definition 
employment in businesses owned by community rehabilitation providers, 
group and enclave settings, affirmative industries, social enterprises, 
and other forms of non-traditional work settings.
    In addition, we disagree with the recommendation to change the term 
``competitive integrated employment'' to ``competitive integrated 
individualized employment.'' Section 7(5) of the Act, as amended by 
WIOA, defines ``competitive integrated employment,'' and that 
definition forms the basis for the definition in final Sec.  
361.5(c)(9). Moreover, the many provisions of the Act and the final 
regulations in final part 361, including those governing the selection 
of an employment outcome, the vocational rehabilitation services 
provided, the exercise of informed choice, and the closure of an 
individual's service record, underscore the individualized nature of 
the VR program, thereby making it unnecessary to add the word 
``individualized'' to the term ``competitive integrated employment'' in 
these final regulations.
    Furthermore, the Secretary disagrees with the commenters' 
recommendation that we replace the regulatory criteria in proposed 
Sec.  361.5(c)(9)(ii) with the statutory criteria, verbatim, in section 
7(5)(B) of the Act, as amended by WIOA. As stated in the NPRM, the 
integrated setting criteria in proposed Sec.  361.5(c)(9)(ii), although 
not verbatim, are nevertheless consistent with the statutory definition 
in section 7(5)(B) of the Act, as amended by WIOA, with respect to the 
integrated nature of the employment setting, and, in turn, are 
consistent with the definition of ``integrated setting'' in prior Sec.  
361.5(b)(33)(ii). Also in light of the consistency of section 7(5)(B) 
of the Act with the prior regulatory definition of ``integrated 
setting,'' as well as the Department's long-standing interpretation of 
that definition, the Secretary does not believe that the criteria in 
the statutory definition of ``competitive integrated employment'' would 
permit within its scope work options that would not have satisfied the 
criteria in prior Sec.  361.5(b)(32)(ii). There is no indication in the 
Act, as amended by WIOA, or the limited legislative history, that 
Congress intended to narrow the scope of the integrated setting 
criterion of the definition of ``competitive integrated employment.'' 
Therefore, the Secretary believes the definition of ``competitive 
integrated employment'' in final Sec.  361.5(c)(9)(ii), while not 
verbatim, is nonetheless consistent with the Act, prior regulations, 
and long-standing Department policy. This means employment that would 
have satisfied the definition of ``integrated settings'' in prior 
regulations and Department guidance would satisfy the definition of 
``competitive integrated employment'' in these final regulations.
    We emphasize that it is the DSU's responsibility to apply final 
Sec.  361.5(c)(9)(ii) in a manner consistent with long-standing 
Departmental policy. The DSU must apply the criteria equally to any 
position, whether it involves the management or administration of, or 
the production and delivery of goods and services by, the organization, 
and without regard to the type of business operation, such as, but not 
limited to, a call center within a community rehabilitation program, 
the manufacture of office supplies by a State industries program for 
individuals who are blind, or a contract for landscaping services. The 
criteria contained in final Sec. Sec.  361.5(c)(9)(ii) and 
361.5(c)(32)(ii) provide important clarifications that are necessary to 
better enable a DSU to determine, on a case-by-case basis, whether a 
particular position in an organization's specific work unit is in an 
integrated location.
    The Randolph-Sheppard Act provides opportunities for self-
employment and entrepreneurship in the community to individuals who are 
blind. As a form of self-employment and business ownership, the 
outcomes of individuals in the vending facilities established under the 
Randolph-Sheppard Act are deemed to be in integrated settings and 
specifically within the definition of ``employment outcome'' in final 
Sec.  361.5(c)(15).
    Changes: None.

Typically Found in the Community

    Comments: One commenter stated that work opportunities established 
by community rehabilitation programs specifically for the purpose of 
employing individuals with disabilities in the community constitute an 
integrated setting, and that these jobs enable people to become more 
self-sufficient and live a more rewarding life.
    A few commenters asked whether the criteria would prohibit the 
employment of individuals with disabilities in work settings operated 
by community rehabilitation providers that exclusively serve other 
persons with disabilities (e.g., group homes, inclusive child care 
centers, adult day programs, or peer support programs), because these 
locations are not typically found in the community or do not afford the 
level of interaction among individuals with and without disabilities 
required by the definition.
    One commenter specifically addressed the criterion requiring the 
work location to be a setting typically found in the community, stating 
that the criterion does not exist in the statutory definition and it 
would limit opportunities for individuals with disabilities to 
participate in new and innovative employment models and businesses that 
are not yet typical. The commenter recommended that we remove this 
requirement.
    Discussion: The Secretary has incorporated language contained in 
the prior regulatory definition of ``integrated setting'' requiring 
that the work location be in ``a setting typically found in the 
community,'' meaning that an integrated setting must be one that is 
typically found in the competitive labor market. This long-standing 
Departmental interpretation is consistent with the Act, as amended by 
WIOA, as well as with express congressional intent as set forth in 
prior legislative history. Specifically, integrated setting ``is 
intended to mean a work setting in a typical labor market site where 
people with disabilities engage in typical daily work patterns with co-
workers who do not have disabilities; and where workers with 
disabilities are not congregated . . .'' (Senate Report 105-166, page 
10, March 2, 1998). Nothing in the Act suggests that Congress intended 
a different interpretation of the integrated setting criterion in the 
amendments made by WIOA. Rather, Congress demonstrated a continuation 
of this interpretation by incorporating into the statute, almost 
verbatim, a criterion from prior Sec.  361.5(b)(33)(ii) into the 
definition of ``competitive integrated employment'' in section 7(5)(B) 
of the Act. Therefore, the Secretary maintains the long-standing 
Departmental policy that settings established by community 
rehabilitation programs specifically for the purpose of employing 
individuals with disabilities (e.g., sheltered workshops) do not 
constitute integrated settings because these settings are not typically 
found in the competitive labor market--the first of two criteria that 
must be satisfied if a DSU is to

[[Page 55643]]

determine that a work setting is an integrated location under final 
Sec.  361.5(c)(9).
    As we made clear in the discussion of Integrated Location--General 
previously and have stated in long-standing Departmental policy, DSUs 
must apply the integrated location criteria in a consistent manner and 
on a case-by-case basis to any work setting, including settings 
operated by community rehabilitation providers that exclusively serve 
other persons with disabilities (e.g., group homes, inclusive child 
care centers, adult day programs, or peer support programs). 
Nonetheless, we note that the settings described in the comments, 
though formed for the unique purpose of serving individuals with 
disabilities, have not been established for the purpose of employing 
them. Thus, the settings in question in the comments would appear to 
satisfy the first criterion that the setting is typically found in the 
community. If this is the case, it would remain for the DSU to 
determine if the setting is one in which the employee with the 
disability interacts with employees without disabilities in the work 
unit and across the work site to the degree that employees without 
disabilities in similar positions interact with these same persons.
    With respect to the comment specifically about proposed Sec.  
361.5(c)(9)(ii)(A), which requires that the location be a setting 
typically found in the community, the Secretary disagrees with the 
commenter's request to remove the criterion from the definition. The 
criterion does not exclude from competitive integrated employment any 
innovative or unique business models that otherwise satisfy the 
definition's criteria. Instead, the Secretary interprets the criterion 
to be more narrowly focused on the purpose for which the business is 
formed. As explained earlier, businesses established by community 
rehabilitation programs or any other entity for the primary purpose of 
employing individuals with disabilities do not satisfy this criterion, 
and, therefore, are not considered integrated settings, because these 
settings are not within the competitive labor market. The Department 
has long considered several factors to typically distinguish positions 
in these types of businesses from those that satisfy the criterion. The 
factors that generally would result in a business being considered 
``not typically found in the community,'' include: (1) The funding of 
positions through Javits-Wagner-O'Day Act (JWOD) contracts; (2) 
allowances under the FLSA for compensatory subminimum wages; and (3) 
compliance with a mandated direct labor-hour ratio of persons with 
disabilities. It is the responsibility of the DSU to take these factors 
into account when determining if a position in a particular work 
location is an integrated setting.
    Changes: None.

Level of Interaction Among Individuals With and Without Disabilities

    Comments: Of those commenters who commented specifically on the 
level of interaction among individuals with and without disabilities, 
one commenter asked that we include language to require individuals 
with disabilities to interact with other employees and individuals 
without disabilities to the same extent that employees without 
disabilities paid directly by the employer interact with these persons. 
The commenter stated that the additional language would help to 
emphasize that individuals can exercise informed choice in the 
selection of service providers under the VR program.
    One commenter suggested that we define ``integrated location'' as a 
ratio of individuals with disabilities and individuals without 
disabilities, stating that true integrated employment consists of a mix 
of workers with and without disabilities.
    Another commenter recommended that we adopt the prior Departmental 
guidance in technical assistance circular 06-01 mentioned in the 
Integrated Location--General discussion. The commenter believed that 
the guidance required DSUs to give equal weight to the interaction of 
individuals with disabilities with other individuals without 
disabilities, including employees in the work unit and across the work 
site, and customers as well as vendors.
    Discussion: In response to those comments addressing proposed Sec.  
361.5(c)(9)(ii)(B), the second criterion of integrated location, 
section 102(d) of the Act and final Sec.  361.52 require that 
individuals be able to exercise informed choice in the selection of 
service providers. Therefore, it is not necessary to amend the 
definition to require that individuals with disabilities interact with 
employees and other persons without disabilities to the same extent 
that employees without disabilities paid directly by the employer 
interact with these persons. We do not believe that including the 
additional language in final Sec.  361.5(c)(9)(ii)(B) would further 
protect the ability of individuals to choose among service providers.
    The Secretary appreciates the commenter's recommendation that we 
revise this criterion and define an integrated setting as being 
comprised of a ratio (not specified by the commenter) of employees with 
disabilities in comparison to individuals without disabilities. Since 
``integrated setting'' was first defined in VR program regulations, we 
have considered how best to capture the intent of Congress and long-
standing Department policy in its criteria. In doing so, we considered 
whether to establish a numerical ratio and have rejected this as 
impractical and unworkable. Given the many and varied types of 
employment settings in today's economy, we cannot determine a single 
ratio that could be used to satisfactorily determine the level of 
interaction required to meet the intent underlying the definition. 
Rather than using a numerical standard, we believe that an ``integrated 
setting'' is best viewed in light of the quality of the interaction 
among employees with disabilities and persons without disabilities when 
compared to that of employees without disabilities in similar 
positions, and have not added a numerical ratio to final Sec.  
361.5(c)(9).
    The Secretary disagrees with the commenter's interpretation of the 
prior guidance provided in technical assistance circular 06-01 and the 
assertion that factors such as the level of interaction of employees 
with disabilities with other employees in the work unit and across the 
work site, as well as with customers and vendors, should be weighted 
equally. As stated in the NPRM, the Secretary believes the focus of 
whether the setting is integrated should be on the interaction between 
employees with and without disabilities, and not solely on the 
interaction of employees with disabilities with people outside of the 
work unit. For example, the interaction of individuals with 
disabilities employed in a customer service center with other persons 
over the telephone, regardless of whether these persons have 
disabilities, would be insufficient by itself to satisfy the 
definition. Instead, the interaction of primary consideration should be 
that between the employee with the disability and his or her colleagues 
without disabilities in similar positions.
    Changes: None.

Work Unit

    Comments: Commenters supporting and opposing the integrated 
location criteria commented specifically on the use of ``work unit'' in 
final Sec.  361.5(c)(9)(ii)(B). Some in support requested that we 
clarify the meaning of the term with respect to the numbers of 
individuals with disabilities as compared to those without disabilities

[[Page 55644]]

to ensure that the standard is consistently applied to work units of 
different sizes, and the effect of the term on the ability of 
individuals to choose to work alone. One commenter suggested that we 
clarify that the employment of individuals with disabilities in non-
traditional work units who perform their duties of the position in 
isolation or separate from other employees in the work unit satisfies 
the definition of ``competitive integrated employment'' as long as all 
other criteria are met.
    A few commenters asked whether ``work unit'' refers to all 
employees in a certain job category or program, or to groups of 
employees working together to accomplish tasks. These commenters stated 
that certain categories of employees (such as temporary office workers 
and certain kinds of contract workers) regularly interact with others 
within the work site (including other employees, customers, or 
vendors), but do not work side by side or in collaboration with others 
within the same job category. Similarly, a few commenters requested 
that we clarify the effect of the criteria on employment in scattered 
work sites.
    Of those in opposition, some requested that we remove ``work unit'' 
from the definition because they were concerned that its use prohibits 
mobile work crews and enclaves unless very restrictive criteria are 
met, and that if Congress had intended to eliminate group work 
opportunities, it would have done so in the law. Other commenters 
requested clarification of the effect of the term on group employment 
under the JWOD Act commonly used in Ability One and long-term 
commercial contracts, stating that these settings provide well-paying 
jobs for persons with the most significant disabilities.
    Discussion: In response to those comments that address the use of 
the term ``work unit,'' the Secretary disagrees with the recommendation 
to remove the term from the definition because it properly focuses the 
consideration of the interaction of the individual with the disability 
with employees without disabilities within the environment in which the 
work is performed. As used in the definition, ``work unit'' may refer 
to all employees in a particular job category or to a group of 
employees working together to accomplish tasks, depending on the 
employer's organizational structure. In addition, its use is consistent 
with prior guidance issued by the Department. The Secretary emphasizes 
that the Department has long maintained that the interaction required 
between employees with disabilities and employees without disabilities 
is not dependent on the number of individuals in the work unit and that 
the criterion must be applied consistently to work units of any size. 
The Department also has long-held that the interaction between 
employees with and without disabilities need not be face to face. Nor 
do we interpret the criterion as necessarily excluding employment 
settings in which individuals work alone, such as telecommuting, 
temporary employment, and work in mobile or scattered locations, from 
the scope of the definition of ``competitive integrated employment,'' 
so long as the employee with the disability interacts with employees of 
the employer in similar positions and interacts with other persons 
without disabilities to the same extent that employees without 
disabilities interact with others.
    As stated earlier in this section, the Department has long 
considered the funding of positions through JWOD contracts to be a 
distinguishing characteristic when determining if a business is 
typically found in the community. Likewise, the use of the term ``work 
unit'' in the definition does not change its application with respect 
to the required interaction among employees with and without 
disabilities in the work setting. Entities that are set up specifically 
for the purpose of providing employment to individuals with 
disabilities will likely not satisfy the definition's criteria. The 
high percentage of individuals with disabilities employed with these 
entities most likely would result in little to no opportunities for 
interaction between individuals with disabilities and non-disabled 
individuals. These entities, therefore, likely would be considered 
sheltered or non-integrated employment sites. Nonetheless, DSUs must 
apply these criteria on a case-by-case basis when determining if an 
individual's employment is in an integrated location and satisfies the 
definition of ``competitive integrated employment.''
    Changes: None.

Interaction During Performance of Job Duties

    Comments: One commenter stated that to define ``integrated 
location'' as only ``the interaction between employees with 
disabilities and those without disabilities that is specific to the 
performance of the employee's job duties, and not the casual, 
conversational, and social interaction that takes place in the 
workplace'' is too narrow and may not reflect many workers' interaction 
patterns in typical work settings.
    Discussion: Under the definition of ``competitive integrated 
employment'' and consistent with the general principles contained in 
the prior definition of ``integrated setting,'' the DSU is to consider 
the interaction between employees with disabilities and those without 
disabilities that is specific to the performance of the employee's job 
duties, and not the casual, conversational, and social interaction that 
takes place in the workplace. As a result, it would not be pertinent to 
its determination of an integrated setting for a DSU to consider 
interactions in the lunchrooms and other common areas of the work site 
in which employees with disabilities and those without disabilities are 
not engaged in performing work responsibilities.
    The Secretary recognizes that the application of the integrated 
location criteria in the manner explained in the preceding paragraphs 
will restrict the types of employment options available to individuals 
with disabilities through the VR program. However, these restrictions 
have been in effect since the definition of ``employment outcome'' was 
last revised in 2001 and, therefore, do not reflect new Departmental 
policy. Specifically, through application of the criteria, individuals 
with disabilities hired by community rehabilitation programs to perform 
work under service contracts, either alone, in mobile work crews, or in 
other group settings (e.g., landscaping or janitorial crews), whose 
interaction with persons without disabilities (other than their 
supervisors and service providers), while performing job 
responsibilities, is with persons working in or visiting the work 
locations (and not with employees of the community rehabilitation 
programs without disabilities in similar positions) would not be 
performing work in an integrated setting. The Secretary believes that, 
even if such group employment in a community rehabilitation program 
provides for competitively paid wages, this fact does not change the 
non-integrated nature of the employment and may result in a less 
desirable level of integration (e.g., interaction with non-disabled co-
workers) than individual employment, which supports the autonomy and 
self-sufficiency of individuals with disabilities.
    In summary, the DSU must determine, on a case-by-case basis, that a 
work location is in an integrated setting, meaning it is typically 
found in the community, and it is one in which the employee with the 
disability interacts with employees and other persons, as appropriate 
to the position, who do not

[[Page 55645]]

have disabilities to the same extent that employees without 
disabilities interact with these persons. Finally, the DSU is to 
consider the interaction between the employee with the disabilities and 
these other persons that takes place for the purpose of performing his 
or her job duties, not mere casual and social interaction. We firmly 
believe that the integrated location criteria within final Sec.  
361.5(c)(9)(ii), when properly applied, ensure that participants in the 
VR program, including individuals with the most significant 
disabilities, are afforded a full opportunity to integrate in their 
communities and to achieve employment available to the general public.
    Changes: None.

Opportunities for Advancement

    Comments: One commenter asked whether employment in which 
individuals with disabilities truly do not have the opportunity to 
advance in their jobs satisfies the definition of ``competitive 
integrated employment,'' if the criteria regarding competitive earnings 
and integrated locations are met. This commenter gave the example of a 
small business.
    Discussion: To ensure that the employment of persons with 
disabilities is equivalent in all respects to that of persons without 
disabilities, section 7(5)(C) of the Act, as amended by WIOA, and final 
Sec.  361.5(c)(9)(iii) require that the employee with the disability 
have the same opportunities for advancement as employees without 
disabilities in similar positions, regardless of the size of the 
business. This new criterion is consistent with the prior definitions 
of ``competitive employment'' and ``integrated settings.'' If employees 
in positions similar to that of the employee with the disability have 
the opportunity to advance in their employment, the individual with the 
disability must be afforded the same opportunity for this criterion of 
the definition to be satisfied.
    Changes: None.

Construction of a Facility for a Public or Nonprofit Community 
Rehabilitation Program (Sec.  361.5(c)(10))

    Comment: One commenter requested that ``construction'' and 
``ongoing maintenance'' be clearly defined in the regulations.
    Discussion: The term ``construction of a facility for a public or 
nonprofit community rehabilitation program'' remains unchanged in 
section 7(6) of the Act, as amended by WIOA, and final Sec.  
361.5(c)(10).
    We disagree with the recommendation that we define ``ongoing 
maintenance'' in part 361. Final Sec.  361.5(c)(2)(viii) specifies such 
costs, when incurred for operating and maintaining DSU facilities, may 
be allowable administrative costs under the VR program. However, 
ongoing costs of any kind, including ongoing maintenance costs, are not 
allowable expenditures when establishing, developing, or improving a 
community rehabilitation program (see final Sec.  361.5(c)(16)(iii)).
    Changes: None.

Customized Employment (Sec.  361.5(c)(11))

    Comments: Most commenters supported the new definition of 
``customized employment'' in proposed Sec.  361.5(c)(11). A few 
commenters requested that the definition include the ``discovery 
phase'' of the customized employment model. A few commenters suggested 
that the definition address when it is appropriate for the DSU to 
consider customized employment for individuals with disabilities. 
Further, these commenters stated that DSUs should use customized 
employment as the last option in assisting an individual with a 
disability to achieve competitive integrated employment. Another 
commenter questioned whether customized employment means ``job 
carving.'' Furthermore, one commenter requested that we clarify how 
individuals with disabilities, who are working in customized 
employment, could advance in their careers. One commenter questioned 
whether an employer would want to support an individual with a 
significant disability in customized employment. Another commenter 
stated that customized employment should not be an unfunded mandate. 
Finally, one commenter asked that we clarify the impact customized 
employment might have on the performance accountability measure for the 
core programs, including the VR program, in the workforce development 
system under section 116 of WIOA that measures the median wage of 
participants during the second quarter after they exit from these 
programs. This commenter suggested that earnings from customized 
employment would deflate this measure.
    Discussion: We appreciate the comments supporting the new 
definition of ``customized employment'' in final Sec.  361.5(c)(11). 
However, we disagree with commenters who recommended that the 
definition be modified to include additional requirements, such as the 
inclusion of the discovery phase of the model or when a DSU must 
consider customized employment for an individual. Section 7(7) of the 
Act, as amended by WIOA, which defines the term ``customized 
employment,'' does not include this information. Therefore, we believe 
final Sec.  361.5(c)(11) is consistent with the statute and further 
regulatory change is not necessary.
    We disagree with the commenter that DSUs should use customized 
employment as a last resort when assisting an individual with a 
disability to achieve an employment outcome. We believe that customized 
employment may be an option for some individuals with significant 
disabilities, while, for other individuals, it may not be a viable path 
to competitive integrated employment. We strongly encourage DSUs to 
tailor customized employment services, like all of the services in 
final Sec.  361.48(b) provided to eligible individuals under an 
individualized plan for employment, to meet the unique strengths, 
needs, interests, and informed choice of the individual, so that he or 
she can achieve an employment outcome in competitive integrated 
employment. We understand that some may have referred to customized 
employment in the past as ``job carving;'' however, the Act, as amended 
by WIOA, does not use that term. Therefore, we have not incorporated 
the term ``job carving'' into these final regulations.
    We believe it is possible for individuals with disabilities in 
customized employment to advance in their careers. Individuals who 
achieve competitive integrated employment through customized employment 
could advance in their career with their original employers or by 
seeking advancement with other employers. The definition of 
``customized employment'' in section 7(7) of the Act, as amended by 
WIOA, and final Sec.  361.5(c)(11) do not include any criteria 
requiring an individual with a significant disability to remain in 
customized employment; rather, these individuals may seek additional 
vocational rehabilitation services for the purpose of advancing in 
their careers through other forms of competitive integrated employment. 
Customized employment is an alternative that enables individuals with 
disabilities and employers the opportunity to negotiate job tasks and/
or reassign basic job duties to improve overall production in the 
workplace. For employers, customized employment allows an employer to 
examine its specific workforce needs and fulfill those needs with a 
well-matched employee. We encourage DSUs to work with employers, 
particularly those employers that have not been open to employing 
individuals with significant

[[Page 55646]]

disabilities, to enable them to hire these individuals through 
customized employment when appropriate.
    We disagree with the commenter that customized employment is an 
unfunded mandate. Customized employment services are included in the 
list of allowable vocational rehabilitation services in final Sec.  
361.48(b). DSUs may expend their resources, including program funds, on 
supporting individuals in customized employment when appropriate.
    Customized employment, as we have discussed, must lead to 
competitive integrated employment. Section 116(b)(2)(A)(i)(III) of 
title I of WIOA establishes a primary performance accountability 
indicator for all core programs of the workforce development system, 
including the VR program, that measures the median earnings of all 
participants who have exited the program in the second quarter after 
exit. As such, earnings from customized employment will affect the VR 
program's performance, in the same manner that other earnings will do 
so. We cannot assume, as the commenter suggests, that individuals in 
customized employment will earn low wages.
    Changes: None.

Employment Outcome (Sec.  361.5(c)(15))

    Some commenters supported the definition of ``employment outcome'' 
in proposed Sec.  361.5(c)(15) because it is consistent with the 
overall purpose of the Act, as amended by WIOA, to promote the 
achievement of competitive integrated employment and self-sufficiency 
by individuals with disabilities. As proposed, an ``employment 
outcome'' would mean full- or part-time employment in competitive 
integrated employment, or supported employment. As such, uncompensated 
employment outcomes (e.g., homemakers and unpaid family workers) would 
be removed from the scope of the definition for purposes of the VR 
program. However, most commenters strongly opposed removing 
``uncompensated employment outcomes,'' and recommended revisions or 
clarifications to the proposed definition.

Statutory Basis

    Comments: Most of the commenters on the proposed definition of 
``employment outcome'' in Sec.  361.5(c)(15) stated that the proposed 
change is contrary to congressional intent and not mandated by the Act, 
as amended by WIOA. Many of these commenters requested that the 
Secretary use the discretion permitted under section 7(11)(C) of the 
Act to not limit the definition to compensated employment, thereby 
permitting uncompensated outcomes of homemaker and unpaid family worker 
to continue to count as an employment outcome under the VR program.
    In addition, recognizing that WIOA amends section 102(b)(4) of the 
Act to require that the individualized plan for employment contain a 
specific employment goal consistent with competitive integrated 
employment, a few commenters presented two arguments to support the 
retention of uncompensated outcomes as an employment outcome. First, 
the commenters argued that the phrase ``consistent with the Act,'' as 
used in the statutory definition, does not require that all components 
of the term ``competitive integrated employment'' be satisfied. In the 
alternative, these commenters suggested that homemaker and unpaid 
family worker outcomes satisfy the criteria for competitive integrated 
employment because they are typically found in the community and the 
earnings of individuals with disabilities who obtain these outcomes are 
commensurate with those of non-disabled persons in similar positions.
    Discussion: We appreciate the commenters' concerns and recognize 
that the definition of ``employment outcome'' in proposed and final 
Sec.  361.5(c)(15) will end a long-standing Department policy. We gave 
considerable thought to all aspects of the issue and seriously 
considered the definition in light of the comments received.
    We agree with commenters that the change eliminating uncompensated 
outcomes was not explicitly required on the basis of an amendment to 
the statutory definition in section 7(11) of the Act, which remained 
unchanged, in pertinent part, by WIOA. Nonetheless, we believe that the 
Act as amended by WIOA, when read in its entirety, provides a strong 
justification for the change.
    We agree with the commenters that section 7(11)(C) of the Act 
permits the Secretary to use his discretion to include other vocational 
outcomes within the scope of the definition of ``employment outcome.'' 
This provision is purely discretionary, and there is no requirement 
that the Secretary exercise this discretion, either to incorporate new 
outcomes or to retain previously permitted outcomes. However, if the 
Secretary chooses to exercise this discretion, the Secretary must do so 
in a manner that is consistent with the Act.
    As noted throughout the preambles to the NPRM and these final 
regulations, WIOA amended the Act by emphasizing the achievement of 
competitive integrated employment by individuals with disabilities, 
including individuals with the most significant disabilities. The Act, 
as amended by WIOA, refers extensively to competitive integrated 
employment, including in the statement of the purpose for the VR 
program, requirements for developing individualized plans for 
employment and providing services to students and youth with 
disabilities, and the limitations on the payment of subminimum wages in 
new section 511. In particular, section 102(b)(4) of the Act, as 
amended by WIOA, and final Sec.  361.46(a) require that the specific 
employment goal identified in the individualized plan for employment be 
consistent with the general goal of competitive integrated employment.
    The changes made by WIOA provide a marked contrast to the Act, as 
amended by the Workforce Investment Act of 1998 (WIA). Under WIA, the 
emphasis in the Act was on achieving integrated employment. 
Consequently, in 2001, the Secretary amended the definition of 
``employment outcome'' and required that all employment outcomes in the 
VR program be in integrated settings, under prior Sec.  361.5(b)(16). 
In so doing, the Secretary eliminated sheltered employment as an 
employment outcome. At that time, because we considered homemaker and 
unpaid family worker outcomes to occur in integrated settings, these 
outcomes continued to constitute an ``employment outcome,'' for 
purposes of the VR program.
    By contrast, given the pervasive emphasis on achieving competitive 
integrated employment--not just integrated employment--throughout the 
Act, as amended by WIOA, the Secretary has determined that 
uncompensated employment outcomes, including homemaker and unpaid 
family worker outcomes, are no longer consistent with the Act. For this 
reason, the Secretary believes it is no longer an appropriate exercise 
of the Secretary's discretion under section 7(11)(C) of the Act to 
include uncompensated outcomes within employment outcomes in final 
Sec.  361.5(c)(15).
    We disagree with the commenters' argument that an ``employment 
outcome'' need not satisfy all criteria of the definition of 
``competitive integrated employment,'' with one narrow exception. 
Section 7(11)(B) of the Act and final Sec.  361.5(c)(15) include 
supported employment within the employment outcomes available to 
individuals with disabilities through the VR program. Under section 
7(38) of the Act, as amended by WIOA, and final

[[Page 55647]]

Sec.  361.5(c)(53), supported employment requires that the individual 
be employed in competitive integrated employment or in an integrated 
setting in which the individual is working on a short-term basis toward 
competitive integrated employment. Thus, in limited circumstances, 
individuals in supported employment may not have achieved employment 
that satisfies all the criteria of ``competitive integrated 
employment'' initially since they will be earning non-competitive wages 
on a short-term basis. This very narrow exception is the only instance 
in which the statute permits that all criteria of ``competitive 
integrated employment'' need not be satisfied for an individual to 
achieve an employment outcome. However, even under this narrow 
exception, the expectation is that, after a short period of time, the 
individual will achieve competitive integrated employment in supported 
employment. It is understood, and the commenters do not argue 
otherwise, that uncompensated employment, such as homemaker and unpaid 
family worker outcomes, does not satisfy the definition of ``supported 
employment.'' There is no expectation that the individuals will ever be 
compensated in such employment.
    We disagree with the first of the commenters' arguments that all 
criteria of ``competitive integrated employment'' need not be satisfied 
for employment to be considered competitive integrated employment. To 
interpret the Act's definition of ``employment outcome'' this way would 
ignore one of the three major components of the definition of 
``competitive integrated employment''--competitive wages.
    While we agree with the assertion that individuals with 
disabilities who achieve homemaker or unpaid family worker outcomes 
perform their work in settings typically found in the community and 
receive no wages, as would a non-disabled homemaker or unpaid family 
worker, these similarities are not sufficient to satisfy the definition 
of ``competitive integrated employment.'' ``Competitive integrated 
employment'' requires the payment of wages at or above the applicable 
Federal, State, or local minimum wage. Neither homemakers nor unpaid 
family workers earn a wage. Therefore, individuals achieving 
uncompensated outcomes, such as homemakers and unpaid family workers 
cannot have achieved an employment outcome in competitive integrated 
employment.
    Changes: None.

Informed Choice

    Comments: Many commenters asserted that the definition of 
``employment outcome'' in proposed Sec.  361.5(c)(15) is contrary to 
the principle of informed choice and that individuals with disabilities 
should have the right to choose homemaker and other uncompensated 
outcomes just as do persons without disabilities.
    Discussion: While we agree that section 102(d) and many other 
provisions of the Act place a premium on the ability of individuals 
with disabilities to exercise informed choice throughout the vocational 
rehabilitation process, including the choice of an employment outcome, 
we do not agree that the definition of ``employment outcome'' in final 
Sec.  361.5(c)(15) is inconsistent with the individual's ability to 
exercise informed choice. We have historically interpreted the statute 
as allowing individuals who are participating in the VR program to 
exercise informed choice among those outcomes that satisfy the 
definition of ``employment outcome.'' Under these final regulations, 
such outcomes must be in competitive integrated employment or supported 
employment.
    If an individual makes an informed choice to pursue uncompensated 
employment (e.g., homemaker or unpaid family worker outcomes) or any 
other outcome that does not meet the definition of ``employment 
outcome'' under final Sec.  361.5(c)(15), he or she may still do so, 
but not with the assistance of the VR program. In final Sec.  361.37, 
the DSU is required to refer that individual to other Federal, State, 
or local programs and providers that can meet the individual's needs 
for related services (e.g., the State Independent Living Services 
(SILS) program, Independent Living Services for Older Individuals Who 
Are Blind program (OIB), Centers for Independent Living program (CIL), 
and programs for the aging). In addition, final Sec.  361.37 requires 
that individuals receive sufficient information concerning the scope of 
the VR program and competitive integrated employment opportunities. 
This information enables individuals to make a fully informed choice 
regarding whether to pursue an employment outcome through the VR 
program or homemaker and other uncompensated outcomes through other 
sources.
    We believe the definition of ``employment outcome'' in final Sec.  
361.5(c)(15) ensures that the VR program promotes maximum opportunities 
for individuals with disabilities, particularly those with significant 
disabilities, to pursue competitive integrated employment or supported 
employment options. Individuals with disabilities can achieve 
competitive integrated employment or supported employment if given 
appropriate services and supports and, therefore, should be informed 
that they are not limited to pursuing uncompensated outcomes no matter 
how significant their disabilities. Nevertheless, we recognize that 
some individuals will choose to pursue such outcomes. These final 
regulations require each DSU to preserve individual choice by referring 
any individual who decides to pursue uncompensated outcomes, or any 
other outcome that does not meet the definition of an ``employment 
outcome'' in final Sec.  361.5(c)(15), to other appropriate resources 
for assistance.
    Changes: None.

Legitimacy of Homemaker Outcomes

    Comments: Some commenters stated that the definition of 
``employment outcome'' in proposed Sec.  361.5(c)(15) does not 
recognize the legitimacy of homemaker occupations and devalues the work 
performed by homemakers. Some commenters stated that homemaker outcomes 
provide economic value for the individual or family, though the 
individual does not receive direct wages. Others suggested that 
homemaker outcomes allow the individual to care for other family 
members who are disabled and who would otherwise be institutionalized.
    Discussion: We agree with the commenters that homemakers perform 
work that has an economic value for themselves and others in the home. 
For example, by caring for themselves and the home, homemakers can 
enable other members of the household to work outside the home and earn 
an income. In addition, homemakers may care for persons with 
disabilities in the household, thus helping them to remain in their 
homes, rather than to reside in institutional settings. Therefore, we 
emphasize that nothing in these final regulations is intended to alter 
the fact that homemaker outcomes serve as a legitimate and valued 
option for people with disabilities. The Secretary does not devalue the 
dignity or the worth of the individuals who perform this work through 
this regulatory action. Rather, the definition of ``employment 
outcome'' in final Sec.  361.5(c)(15), focuses the VR program on its 
statutory purpose, as set forth in section 100(a)(2)(B)--giving persons 
with disabilities, including those with significant or the most 
significant disabilities, the opportunity to work in competitive 
integrated employment and to achieve economic self-sufficiency.
    Changes: None.

[[Page 55648]]

Availability of Services

    Comments: Several commenters who opposed the definition of 
``employment outcome'' in proposed Sec.  361.5(c)(15) stated that the 
services provided to individuals pursuing homemaker outcomes through 
the VR program provide a bridge, gateway, or stepping stone to 
competitive integrated employment. Many of those commenters stated that 
services such as Braille training, assistive technology, mobility 
training, and other home management services are essential to the 
ability of individuals who are blind and visually impaired to prepare 
for employment. Many commenters expressed the concern that without 
homemaker services, many individuals, especially those who are blind 
and visually impaired, will be unable to function, and either be shut 
in their homes or forced to live in a care facility. Finally, some 
commenters stated that the loss of homemaker services could result in 
low self-esteem, the loss of independence, physical disease, and 
depression among individuals who are blind and visually impaired.
    Discussion: We strongly agree that Braille training, assistive 
technology, and mobility training are critical to the independence of 
individuals who are blind and visually impaired, and help to build the 
foundation on which they can successfully pursue gainful employment. In 
addition, we recognize that these services can enable individuals who 
are blind and visually impaired to increase their confidence, as well 
as their physical and psychological well-being. Most importantly, these 
services always have been, and continue to be, available to individuals 
with disabilities under an individualized plan for employment pursuant 
to section 103(a) of the Act and final Sec.  361.48(b), so long as the 
individuals are pursuing an employment outcome under final Sec.  
361.5(c)(15), specifically competitive integrated employment or 
supported employment. To the extent such individuals do not wish to do 
so, these same services are, and always have been, available under the 
independent living programs authorized by title VII of the Act.
    We understand, from anecdotal evidence, that it has been the 
practice of some DSUs to provide individuals who are newly blind or 
experiencing significant vision loss with services designed to help 
them attain homemaker outcomes, with the expectation that the 
individuals will return to the VR program when they are ready to pursue 
additional training and the achievement of an employment outcome. 
However, DSUs must provide the vocational counseling and guidance to 
help individuals pursue an employment outcome consistent with 
competitive integrated employment, as required by section 102(b)(4) of 
the Act, as amended by WIOA, and final Sec.  361.46(a)(1) at the outset 
or refer individuals to the independent living programs under final 
Sec.  361.37 depending on their individual goals. DSUs are encouraged 
to deliver services such as Braille and mobility training throughout 
the vocational rehabilitation process, in combination with the other 
education, training, and equipment needed to achieve the identified 
employment goal. In this way, DSUs can more effectively engage 
individuals in the VR program and better assist them to achieve the 
ultimate goal of competitive integrated employment or supported 
employment.
    Changes: None.

Disproportionate Impact

    Comments: Many commenters stated that the change in the definition 
of ``employment outcome'' in proposed Sec.  361.5(c)(15) will have a 
disproportionate impact on individuals served through the VR program 
who are blind and visually impaired. A few commenters requested that we 
create an exception for agencies that serve individuals who are blind 
if we maintain the definition as proposed.
    Discussion: As stated in the preamble to the NPRM, we believe the 
definition of ``employment outcome'' in final Sec.  361.5(c)(15) will 
have minimal impact on most DSUs in their administration of the VR 
program because, nationally, a steadily decreasing and relatively small 
number of individuals exit the program as homemakers or unpaid family 
workers. The data reported by DSUs demonstrate that the majority of 
DSUs have been placing increased importance and emphasis in their 
policies and procedures on competitive integrated employment and 
supported employment outcomes, thereby deemphasizing uncompensated 
outcomes. This shift in practice has been the product of the DSUs' 
responding to the changes to the Act since the enactment of WIA in 1998 
and reflecting that changing emphasis in their administration of the VR 
program.
    Nonetheless, we recognize that some DSUs, particularly those 
serving individuals who are blind and visually impaired, report a 
greater percentage of homemaker outcomes than others. For example, VR 
agencies serving individuals who are blind and visually impaired 
reported that 618 individuals obtained homemaker outcomes in FY 2014, 
representing 9.8 percent of all employment outcomes for these agencies. 
In comparison, all other VR agencies reported that 2,436 individuals 
obtained homemaker outcomes in FY 2014, representing 1.4 percent of all 
employment outcomes for these agencies. Consequently, we proposed in 
the NPRM a transition period of six months following the effective date 
of these final regulations to allow DSUs to complete the VR process for 
individuals already pursuing homemaker outcomes under individualized 
plans for employment. See the discussion on ``Transition Period'' later 
in this section regarding the comments received on the proposed 
transition period.
    Neither section 7(11) nor any other provision of the Act, as 
amended by WIOA, permits the Secretary to make an exception when 
implementing the definition of ``employment outcome'' to allow DSUs 
serving individuals who are blind and visually impaired to continue 
assisting individuals to achieve uncompensated outcomes, such as 
homemaker outcomes, when that employment is not consistent with the 
Act. Therefore, there is no statutory authority to make the exception 
recommended by commenters.
    Changes: None.

Resources for Service Provision

    Comments: Several commenters stated that services such as training 
in Braille, orientation and mobility training, and the provision of 
assistive technology and training in its use are not available to 
individuals who are blind and visually impaired through any other 
resources, such as medical insurance and one-stop delivery centers. In 
particular, many commenters stated that the OIB program lacks 
sufficient resources to serve the individuals who would no longer be 
eligible to receive vocational rehabilitation services as a result of 
the change in the definition of ``employment outcome'' in proposed 
Sec.  361.5(c)(15), because, to be eligible for the VR program, an 
individual must intend to achieve an employment outcome. A few 
commenters asked that we request additional funds for this program. One 
commenter suggested that we lower the age of eligibility for services 
from the OIB program to allow younger individuals to receive these 
services. Additionally, many commenters stated that other independent 
living programs and providers lack the funds and qualified staff needed 
to provide individuals who are blind and visually impaired with the 
complex skills of Braille literacy and orientation and mobility. 
Several commenters stated that the change in

[[Page 55649]]

the definition of ``employment outcome'' will result in loss of funding 
needed by community rehabilitation programs to provide these vital 
services.
    One commenter asked if the Department would create a separate 
homemaker program not directly connected to the VR program. One 
commenter stated that many DSUs have entered into long-term contractual 
arrangements for providing services to individuals pursuing homemaker 
outcomes and requested that we exempt these arrangements from the 
application of the new rule. Another commenter requested that the 
Client Assistance Program (CAP) and other advocacy groups conduct 
outreach to the community of individuals who are blind and visually 
impaired who otherwise would have chosen homemaker outcomes.
    Discussion: We recognize that medical insurance and other one-stop 
delivery system programs under WIOA typically do not support training 
in Braille and mobility or the provision of assistive technology for 
individuals who are blind and visually impaired.
    Under final Sec.  361.37(b), the circumstances when the DSU must 
provide referrals to other programs and service providers for 
individuals who choose not to pursue an employment outcome under the VR 
program has been expanded. Similarly, final Sec.  361.43(d) expands the 
requirement for the referral of individuals found ineligible for 
vocational rehabilitation services, or determined ineligible subsequent 
to the receipt of such services, to include appropriate State, Federal, 
and local programs, and community service providers (e.g., the SILS 
program, OIB program, CILs, and programs for the aging) better suited 
to meet their needs.
    Those programs designed to meet the needs of individuals who choose 
to pursue homemaker outcomes include the OIB program, the only program 
authorized under title VII of the Act, as amended by WIOA, which 
remains under the administration of the Department. There is no 
authority, in either title I or VII, to permit DSUs to use VR program 
funds to provide OIB program services in order to alleviate any 
deficiencies in OIB funding, which may result from an increase in the 
number of individuals seeking services from the OIB program following 
the change in the employment outcome definition for purposes of the VR 
program. However, the Administration has requested a $2.0 million 
increase over the 2016 level for the OIB program in the fiscal year 
2017 President's Budget to assist States in meeting an anticipated 
increase in the demand for OIB services. The Department will consider 
increases in the demand for OIB program services resulting from this 
rule change in future budget requests.
    We recognize that some CIL staff may not possess the skills 
necessary to provide individuals who are blind and visually impaired 
the specialized training and services that will enable them to remain 
in their homes and care for themselves, such as training in Braille and 
orientation and mobility. Therefore, we strongly encourage DSUs to 
strengthen their relationships with the CILs in their States by 
providing training and technical assistance necessary to build the 
capacity of the staff that will afford them the option to deliver these 
services in accordance with the State Plan for Independent Living 
developed in the State. The Department will support these efforts 
through technical assistance in collaboration with the Department of 
Health and Human Services, which is now responsible for the 
administration of the Centers for Independent Living program under 
title VII of the Act, as amended by WIOA.
    We disagree that the change in the definition necessarily will 
result in a loss of funding for community rehabilitation programs to 
provide homemaker services. Although DSUs may no longer use VR program 
funds to purchase these services from community providers, they may use 
other program funds to do so, such as those for the OIB programs.
    In response to the comment requesting an exemption for existing 
contractual relationships between the DSUs and other entities to assist 
individuals with disabilities to achieve outcomes in uncompensated 
employment, once final Sec.  361.5(c)(15) takes effect a DSU cannot 
contract with another entity to assist an individual with a disability 
to achieve an uncompensated outcome, such as homemaker or unpaid family 
worker. There is no statutory authority that would permit an exemption 
to the prohibition. However, as discussed in more detail in the 
Transition Period section, DSUs are able to use VR program funds to 
continue to engage in contractual arrangements for providing services 
to individuals with disabilities who are already in the process of 
pursuing homemaker and other uncompensated employment outcomes under 
individualized plans for employment approved prior to the effective 
date of these final regulations.
    While we understand the concern raised by the commenter who 
requested a lower eligibility age for the OIB program, title VII of the 
Act, as amended by WIOA, retains the eligible age of 55 for OIB program 
services in the statute; therefore, the Department is not authorized to 
change the age of eligibility. Nor does the Act, as amended by WIOA, 
authorize the creation of a homemaker program separate from the VR 
program.
    While we appreciate the commenter's recommendation that the CAP 
should provide outreach services to individuals affected by the 
implementation of the revised definition of ``employment outcome,'' 
section 112 of the Act requires, as it always has, the CAP to provide 
information and advocacy services to individuals who are applicants or 
consumers of the VR program or any other program under the Act. The CAP 
may provide information and advocacy services for those individuals 
pursuing uncompensated outcomes who are served by the VR program during 
the transition period or served by the OIB or independent living 
programs after the transition period. However, no authority exists in 
section 112 of the Act to permit the CAP to conduct outreach to, or to 
serve, individuals pursuing uncompensated outcomes under programs not 
authorized by the Act. Although the Department is no longer responsible 
for the administration of the CIL and SILS programs, these programs 
continue to be authorized under title VII of the Act, and therefore the 
CAP can provide assistance to individuals receiving independent living 
services.
    Changes: None.

Feasibility Studies

    Comments: Some commenters recommended that we conduct a study of 
homemaker closures to address problems of overuse and that the 
definition of ``employment outcome'' include strict criteria to prevent 
overuse.
    One commenter asked whether the Department had conducted a 
feasibility study to determine if the referral of individuals from VR 
to other service providers would reasonably result in the provision of 
services.
    Discussion: We have not conducted, nor do we intend to conduct, a 
study of homemaker closures to address problems of overuse. A study to 
ensure DSUs do not overuse uncompensated outcomes is not necessary 
because such outcomes will no longer be permitted under the VR program 
once these final regulations take effect and the transition period 
ends. For the same reason, we do not believe it necessary to change 
Sec.  361.5(c)(15) to prevent the overuse of

[[Page 55650]]

homemaker and unpaid family worker outcomes.
    However, we intend to monitor State implementation of the final 
regulations during our annual review and periodic on-site monitoring of 
State VR agencies to ensure that persons with significant disabilities, 
including those who are blind and visually impaired, receive vocational 
rehabilitation services in pursuit of competitive integrated employment 
or supported employment. Additionally, we will review the steps DSUs 
are taking to ensure that individuals are appropriately referred under 
final Sec. Sec.  361.37(b) and 361.43(d), to other Federal, State, and 
local programs and providers (e.g., the SILS program, OIB program, 
CILs, and programs for the aging) that are better able to meet the 
needs of individuals with disabilities who desire to receive homemaker 
services. If needed, the Department will consider providing technical 
assistance to DSUs to enable them to build better relationships with 
these other entities to increase the potential for successful 
referrals.
    Changes: None.

Transition Period

    Comments: A few commenters supported the Department's proposed 
transition period of six months following the effective date of the 
final regulations, during which DSUs would finish providing vocational 
rehabilitation services to, and close the service records of, 
individuals pursuing uncompensated outcomes, such as homemakers and 
unpaid family workers, through individualized plans for employment that 
were approved prior to the effective date.
    Some commenters stated that six months would not be long enough to 
finish providing services and close these service records or to develop 
relationships with providers of independent living services to which 
the DSUs could refer these individuals. Of these commenters, some 
recommended that the Department extend the proposed transition period 
to 12 months following the effective date of the final regulations, 
while some others recommended 18 or 24 months.
    However, most commenters who commented on the proposed transition 
period recommended that we adopt a flexible period that DSUs would 
determine case by case, taking into account the needs of the 
individual. Finally, one commenter recommended that we permit DSUs to 
provide vocational rehabilitation services to individuals with the goal 
of homemaker on their individualized plans for employment without 
regard to the duration of the services, but that we not allow DSUs to 
implement new individualized plans for employment with the goal of 
homemaker following the effective date of the final regulations.
    Discussion: To permit DSUs to develop individualized plans for 
employment that include uncompensated employment goals, such as those 
of homemakers and unpaid family workers, after the effective date of 
these final regulations would be inconsistent with the Act, as amended 
by WIOA. Section 102(b)(4) of the Act, as amended by WIOA, and final 
Sec.  361.46(a), require all individualized plans for employment 
developed under the Act to include employment goals consistent with the 
general goal of competitive integrated employment.
    However, we do agree with commenters that DSUs may need longer than 
six months following the effective date to finish providing services to 
some individuals who are already pursuing homemaker or other 
uncompensated outcomes on individualized plans for employment that were 
developed and executed prior to the effective date. Data obtained 
through the RSA-911 case service report show that, on average, 
individuals with disabilities take approximately 24 months to complete 
the vocational rehabilitation process from the time they apply for 
services until their service records are closed. These data also 
demonstrate that individuals who are 55 years and older and blind take 
approximately 21.5 months to complete the vocational rehabilitation 
process from the time that they apply for services.
    Therefore, the Secretary has concluded that DSUs may continue to 
provide services to individuals with uncompensated employment goals on 
their individualized plans for employment that were approved prior to 
the effective date of the final regulations through June 30, 2017, 
unless a longer period of time is required based on the needs of the 
individual, as documented in the individual's service record.
    The Secretary believes that DSUs can finish providing services to, 
and close the service records of, most individuals pursuing homemaker 
and other uncompensated outcomes during this transition period. 
However, a DSU can determine on a case-by-case basis, taking into 
consideration the unique needs of each individual, that the DSU cannot 
complete the provision of services within that time frame and, 
therefore, may continue the services until the individual no longer 
needs them. For example, services may be interrupted and, consequently, 
the DSU cannot complete the services prior to June 30, 2017. For this 
and other reasons, the DSU may extend the provision of services beyond 
June 30, 2017, until they are completed and the individual's service 
record is closed.
    By extending the transition period, DSUs will have sufficient time 
to develop and strengthen their relationships with other governmental 
and nonprofit providers of independent living services so that DSUs may 
make appropriate referrals to these providers and individuals with 
disabilities can receive the services they need to maintain their homes 
and independence. The Department plans to provide guidance and 
technical assistance to: (1) Facilitate the transition to the new 
definition of employment outcome; and (2) minimize the potential 
disruption of services to VR program consumers currently receiving 
services and who do not have a competitive integrated employment or 
supported employment goal reflected in their individualized plan for 
employment.
    Finally, all participants who exit the VR program after July 1, 
2016, including those exiting in uncompensated employment, such as 
homemakers and unpaid family workers, must be included in the 
calculations of the performance accountability measures established in 
section 116(b)(2)(A)(i) of title I of WIOA and explained more fully in 
the joint performance information collection request. The performance 
accountability requirements of section 116 of WIOA take effect July 1, 
2016.
    Changes: We have included a note in final Sec.  361.5(c)(15) 
allowing for a transition period to permit a DSU to continue services 
to individuals with uncompensated employment goals on their approved 
individualized plans for employment prior to the effective date of the 
final regulations until June 30, 2017, unless a longer period of time 
is required based on the needs of the individual with the disability.

Extended Services (Sec.  361.5(c)(19))

    Comments: A few commenters were concerned that the provision of 
extended services to youth with the most significant disabilities will 
cause an undue hardship for some DSUs. A few other commenters 
understood the proposed changes to mean that the DSUs were responsible 
for funding all individuals in extended services even after the 
individual transitions from the DSU for support.
    Discussion: Final Sec.  361.5(c)(19)(iv) specifies that ``extended 
services'' are those services provided to individuals with the most 
significant disabilities, which may include youth with the most

[[Page 55651]]

significant disabilities, by a State agency, a private nonprofit 
organization, employer, or any other appropriate resource once an 
individual has concluded support services from the DSU. The definition 
of ``extended services'' in final Sec.  361.5(c)(19)(v) specifies that 
the DSU provides extended services only to ``youth with the most 
significant disabilities'' for a period not to exceed four years or 
until such time as a youth reaches the age of 25 and no longer meets 
the definition of a ``youth with a disability'' under final Sec.  
361.5(c)(58). For further information on the provision of extended 
services in accordance with final Sec. Sec.  363.4 and 363.22, see the 
Analysis of Comments and Changes section for the Supported Employment 
Program in 34 CFR part 363.
    Changes: None.

Indian; American Indian; Indian American; Indian Tribe (Sec.  
361.5(c)(25))

    Comments: Many commenters disagreed with expanding the definition 
of ``Indian tribe'' to make tribal organizations eligible for AIVRS 
grants. Most of these commenters requested that we establish policies 
that give tribal governments the authority to designate those tribal 
organizations or entities acting on their behalf as applicants or 
recipients of AIVRS funding.
    Discussion: We provide a detailed analysis of these comments in a 
separate regulatory action implementing the amendments made by WIOA to 
miscellaneous programs under the Act, including the AIVRS program, 
published elsewhere in this issue of the Federal Register.
    Changes: None.

Informed Choice

    Comments: Some commenters requested that we define ``informed 
choice.''
    Discussion: We disagree with the recommendation to define 
``informed choice'' in final Sec.  361.5(c). Section 102(d) of the Act 
and final Sec.  361.52 fully describe the critical aspects of informed 
choice in the context of the VR program and reflect the statutory 
emphasis that individuals participating in the VR program must be able 
to exercise informed choice throughout the entire rehabilitation 
process.
    Changes: None.

Supported Employment Definitions

    Comments: We received comments on the definitions of ``supported 
employment'' and ``supported employment services'' in proposed 
Sec. Sec.  361.5(c)(53) and 361.5(c)(54), respectively, concerning the 
short-term basis period, transitional employment, and the duration of 
supported employment services.
    Discussion: We discuss these comments later in the Analysis of 
Comments and Changes section for the Supported Employment Program in 
final 34 CFR part 363.

Transition-Related Definitions

    Comments: We received comments on definitions pertaining to the 
transition of students and youth with disabilities from school to 
postsecondary education and employment, including ``pre-employment 
transition services,'' ``student with a disability,'' ``transition 
services,'' and ``youth with a disability.''
    Discussion: We discuss these comments in section B later in this 
Analysis of Comments and Changes section of the preamble.

Submission, Approval, and Disapproval of the State Plan (Sec.  361.10)

Content and Submission of the VR Services Portion of the Unified and 
Combined State Plan

    Comments: Apart from public comments received on the joint 
regulations proposed by the U.S. Departments of Labor and Education 
implementing jointly administered requirements for the Unified or 
Combined State Plan, we received comments on proposed Sec.  361.10 
pertaining to the VR services portion of the Unified or Combined State 
Plan. Many commenters expressed support for the revised State Plan 
requirements and process as described in the proposed joint 
regulations, noting the regulations promote an opportunity for 
collaboration across the workforce development system. Additionally, 
these commenters requested technical assistance and guidance to clarify 
the State Plan process.
    One commenter requested that we clarify the meaning of ``The VR 
services portion of the State Plan'' and asked whether this is in fact 
a separate program-specific component of the Unified or Combined State 
Plan. This commenter previously submitted a Unified State Plan in which 
the vocational rehabilitation components of the plan were interspersed 
throughout the overall plan. One commenter asked whether the proposed 
joint regulation in 34 CFR 676.130(f), which requires the RSA 
Commissioner to approve the VR services portion of the Unified or 
Combined State Plan before the Secretaries of Labor and Education 
approve the Unified or Combined State Plans, means that DSUs will have 
separate timelines for the submission of the VR program-specific 
components of the plan.
    Discussion: We appreciate the commenters' support, as well as the 
requests for clarifications. Final Sec.  361.10 implements section 
101(a)(1) of the Act, as amended by WIOA, which requires a State to 
submit a Unified or Combined State Plan under section 102 or section 
103, respectively, of title I of WIOA, in order to receive funding 
under the VR program. The Unified or Combined State Plan must contain a 
VR services portion. Section 101(a)(1) of the Act, as amended by WIOA, 
and final Sec.  361.10(a) require the VR services portion of the 
Unified or Combined State Plan to contain all State Plan requirements 
under section 101(a) of the Act. Prior to the enactment of WIOA, DSUs 
submitted a stand-alone State Plan directly to the Department. Under 
WIOA, the VR services portion will be submitted as part of the Unified 
or Combined State Plans by the State to the Secretary of the U.S. 
Department of Labor, who will distribute the plans to the other Federal 
agencies responsible for their review and approval, including the 
Department of Education with respect to the review and approval of the 
VR services portion of the plans.
    The ``Required Elements for Submission of the Unified or Combined 
State Plan and Plan Modifications Under the Workforce Innovation and 
Opportunity Act,'' recently approved by the Office of Management and 
Budget under control number 1205-0522, presents the VR services portion 
of the Unified or Combined State Plan as a distinct component of the 
plan. The timelines for submission of the Unified or Combined State 
Plan, and, hence, the VR services portion of that plan, are governed by 
sections 102 and 103 of title I of WIOA, and the joint final 
regulations published elsewhere in this issue of the Federal Register. 
Thus, there is no statutory authority to establish a separate timeline 
or date for the submission of the VR services portion of the plan, 
despite the fact that the Commissioner must approve the VR services 
portion before the Secretaries of Labor and Education approve the 
remainder of the plans.
    Changes: None.

Alignment of Program and Fiscal Years

    Comments: Many commenters were interested in how the new timelines 
for the submission and modification of the Unified and Combined State 
Plans will be aligned with the specific requirements of the VR services 
portion of the Unified or Combined State Plan, including reporting 
requirements, performance levels, and the difference

[[Page 55652]]

between the start of the program year on July 1 for the purposes of 
requirements under title I of WIOA versus the start of the Federal 
fiscal year on October 1 when the VR program formula grants are issued 
in accordance with the Act. A few commenters supported the alignment of 
the program years under the Unified and Combined State Plans among all 
core programs in the workforce development system, including the VR 
program.
    Discussion: While we understand the concern expressed by commenters 
regarding the potential confusion caused by differences between the VR 
program's fiscal year and the other core programs' program year, 
section 110(a)(2)(A) of the Act, which specifies the manner in which VR 
program allotments are to be made, was not amended by WIOA. Moreover, 
section 111(a)(1) of the Act, which also remained unchanged by WIOA, 
requires that payments are made to States on a Federal fiscal year 
basis. This provision is consistent with section 101(a)(1), which 
requires States to submit a VR services portion of a Unified or 
Combined State Plan to receive funding ``for a fiscal year.'' Finally, 
section 101(a)(10) of the Act, as amended by WIOA, requires the DSU to 
submit certain data to demonstrate the annual performance of the VR 
program, within the same fiscal year in which the VR program operates. 
For these reasons, there is no statutory authority to change the period 
for making allotments to the States from the fiscal year beginning on 
October 1 to the program year used under title I of WIOA, which is July 
1 of each year for most core programs.
    In order to align the VR program with the other core programs to 
the extent practicable, DSUs must submit the VR services portion of the 
Unified or Combined State Plan and report the data required under final 
Sec.  361.40 in a manner consistent with the jointly administered 
requirements set forth in the joint regulations governing Unified or 
Combined State Plan requirements published elsewhere in this issue of 
the Federal Register. However, States will continue to receive VR 
program allotments and report fiscal data through the Financial Status 
Report (SF-425) in accordance with the Federal fiscal year.
    Changes: None.

Other Comments

    Comments: Several commenters were uncertain about the application 
of common performance measures and asked whether combined partners 
under a Combined State Plan would be held to the new performance 
standards as well. One commenter asked whether, when there is more than 
one DSU in the State, DSUs serving individuals who are blind will have 
separate performance levels from DSUs serving individuals with all 
other disabilities. Another commenter suggested that Unified or 
Combined State Plans be posted electronically to a Web site that the 
public could easily access.
    We also received comments regarding the determination of 
eligibility for individuals with autism and on the significance of 
disability.
    Discussion: The Departments of Education and Labor address these 
comments in the Analysis of Comments and Changes section of the joint 
final regulations implementing the jointly administered requirements 
for the submission of a Unified or Combined State Plan under sections 
102, and 103 of title I of WIOA and the performance accountability 
system under section 116 of title I of WIOA, published elsewhere in 
this issue of the Federal Register, because they apply to all core 
programs in the workforce development system, not just the VR program.
    We address the comments regarding the determination of eligibility 
for individuals with autism and the significance of disability in the 
Assessment for Determining Eligibility and Priority for Services (Sec.  
361.42) section of this preamble.
    Changes: None.

Requirements for a State Rehabilitation Council (Sec.  361.17)

Establishment of a State Rehabilitation Council

    Comments: One commenter suggested the word ``if'' be removed from 
the introductory paragraph in Sec.  361.17. This commenter suggested 
that all States are required to have a State Rehabilitation Council 
(SRC or Council).
    Discussion: Section 101(a)(21) of the Act, which remained unchanged 
by WIOA, and final Sec.  361.16 permit States to establish either an 
independent State commission or an SRC. Therefore, there is no 
statutory authority to mandate that States establish a Council, rather 
than an independent commission. For this reason, we have not revised 
the introductory paragraph in final Sec.  361.17 as the commenter 
recommended, because it is consistent with the statute. However, the 
Act does not prohibit a State from establishing both an independent 
commission and a SRC if it chooses to do so.
    Changes: None.

Additional Members

    Comments: Some commenters requested that we require in Sec.  
361.17(b) that the SRC include additional members, such as a 
representative of the State's Council on Developmental Disabilities, 
entities carrying out programs under the Assistive Technology Act of 
1998 in the State, and groups of, or representing, individuals with 
intellectual and developmental disabilities.
    Discussion: Section 105(b)(1) of the Act, as amended by WIOA, made 
only one amendment to the composition requirements of the SRC related 
to the representation of the AIVRS projects in the State on the SRC. 
The Act, as amended by WIOA, did not alter the composition requirements 
in any other way. As a result, there is no statutory basis to require 
additional representatives from other State entities. However, the Act, 
as amended by WIOA, does not prohibit a State from electing to add more 
members to its SRC if it determines this is appropriate.
    Changes: None.

Terms of Appointment

    Comments: One commenter suggested that we amend the requirements 
related to terms of appointment in Sec.  361.17(e) to allow SRC members 
who were appointed to fill a vacancy and serve the remainder of their 
predecessor's term to be appointed to two additional consecutive full 
terms.
    Discussion: WIOA did not amend section 105(b)(6) of the Act or 
change the requirements governing terms of appointment; therefore, 
there is no statutory authority to amend these requirements in final 
Sec.  361.17(e). The Department has interpreted these requirements to 
permit an SRC member who completed the term of a vacating member to be 
appointed for only one additional consecutive full term of three years.
    This long-standing Department interpretation is consistent with 
section 105(b)(6) of the Act, which limits a term to no more than three 
years; however, there is no requirement that each member be appointed 
for a three-year term. Under section 105(b)(6)(A)(i) of the Act, an 
individual who is appointed to complete a predecessor's unfinished term 
is appointed for the remainder of that term. This appointment 
constitutes one full term for that individual. Section 105(b)(6)(B) of 
the Act prohibits an individual from serving more than two consecutive 
full terms. Therefore, if an individual is appointed to complete one 
year remaining of a predecessor's term and is then reappointed for a 
second full three-year term, this individual has served two full terms 
even though the total number of years served is four.
    Changes: None.

[[Page 55653]]

Coordination With One-Stop Centers

    Comments: None.
    Discussion: Section 105(c)(8) of the Act and final Sec.  
361.17(h))(8) permit the SRC to perform functions in addition to those 
specifically authorized in the Act and final regulations so long as 
they are comparable to the specified functions. To support the 
alignment of the VR program with the workforce development system as 
emphasized throughout the Act and these final regulations, we clarify 
that SRCs may coordinate and establish working relationships with one-
stop centers. This coordination is comparable to the coordination with 
SILCs and CILs required under section 105(c)(7) of the Act and final 
Sec.  361.17(h)(7).
    Changes: None.

Comprehensive System of Personnel Development (Sec.  361.18)

Data Report for Comprehensive System of Personnel Development (Sec.  
361.18(a))

    Comments: One commenter recommended revisions to proposed Sec.  
361.18(a) regarding the submission of data on the comprehensive system 
of personnel development (CSPD) in the vocational rehabilitation 
services portion of the Unified or Combined State Plan to reduce burden 
on DSUs. Specifically, the commenter recommended that DSUs be required 
to submit information about the vocational rehabilitation personnel via 
pre-print assurances, rather than descriptions, and be required to 
submit aggregated data, rather than disaggregated data.
    Discussion: WIOA made only technical changes to section 
101(a)(7)(A) of the Act, none of which increased the reporting that had 
been required of DSUs for nearly 20 years. While we are sensitive to 
the burden imposed by reporting requirements, there is no statutory 
basis for the Department to make the changes suggested by the 
commenter. Section 101(a)(7)(A) of the Act, as amended by WIOA, 
explicitly mandates that DSUs provide the requisite information in a 
descriptive format and the data in a disaggregated format.
    Changes: None.

Applicability of Education, and Experiential Requirements to 
Rehabilitation Counselors (Sec.  361.18(c)(1))

    Comments: We received many comments regarding proposed Sec.  
361.18(c)(1)(ii), which requires DSUs to establish, as part of a CSPD, 
personnel standards for rehabilitation professionals and 
paraprofessionals that include educational and experiential 
requirements. Most of these commenters opposed applying this provision 
to vocational rehabilitation counselors, and many of these commenters 
stressed the importance of maintaining the education and experience 
requirement under prior Sec.  361.18(c)(1)(i) for vocational 
rehabilitation counselors. Specifically, these commenters stated that 
vocational rehabilitation counselors should be required to meet a 
national or State-approved or recognized certification, licensing, 
registration, or other comparable requirements for the area in which 
such personnel are providing vocational rehabilitation services. These 
commenters strongly urged the Department to require that vocational 
rehabilitation counselors meet that higher standard.
    Similarly, many commenters urged that the training and education 
received in a master's degree program in rehabilitation counseling 
relate in a necessary, direct, and practical way to the work vocational 
rehabilitation counselors do each day. These commenters asserted that 
rehabilitation counseling is a professional career that requires 
extensive knowledge in a very broad arena. In addition, several 
commenters stressed that the educational requirements applied to 
vocational rehabilitation counselors must be sufficient to ensure that 
they have the following knowledge: medical and psychological aspects of 
disability, counseling and guidance strategies, vocational assessment, 
person-centered planning, cultural competency, career services, and 
building relationships with businesses who would like to hire or retain 
individuals with disabilities. These commenters maintained that all of 
these skills are available to individuals pursuing a master's degree in 
a program accredited by the Council on Rehabilitation Education.
    Several commenters maintained that section 101(a)(7)(B)(ii) of the 
Act, as amended by WIOA, and proposed Sec.  361.18(c)(1)(ii), which set 
education and experience requirements of a baccalaureate degree in an 
additional field of study such as business administration, human 
resources, and economics, do not apply to vocational rehabilitation 
counselors. These commenters strongly believe that since a national 
certification exists for certified rehabilitation counselors this 
provision is inapplicable for vocational rehabilitation counselors. 
Some commenters stated that because there was no legislative report 
accompanying WIOA, the Department cannot be certain that Congress 
intended that the lower education and experience requirements in 
section 101(a)(7)(B)(ii) of the Act, as amended by WIOA, apply to 
vocational rehabilitation counselors. One commenter stated that 
including a business degree in the credentials required for vocational 
rehabilitation personnel, with respect to qualified vocational 
rehabilitation counselors, was intended to be supplemental to a 
Master's degree in rehabilitation counseling and does not supplant the 
highest standard in the State, which in many States is the master's 
degree in rehabilitation counseling. Another commenter stated that 
since individuals with less experience could be paid less, they 
potentially could make up a larger portion of the DSU staff. If done 
correctly, the commenter stated that this could be a great opportunity 
to add individuals with business and marketing backgrounds to the DSU 
staff. This could also potentially help reduce caseloads, since 
recipients who need assistance only with placement could go straight to 
the marketing/business staff. Some commenters observed that the new 
requirements appear to be based on an assumption that a counselor 
should be able to work with both consumers and employers, as opposed to 
a team approach where experts in counseling work with consumers and 
business experts work with employers.
    One commenter supported the education and experience requirements 
in proposed Sec.  361.18(c)(1)(ii) because of the heightened emphasis 
on employer engagement and competitive integrated employment outcomes. 
This commenter stated that the proposed changes will provide an 
opportunity for DSUs to adjust the level of expertise and commitment of 
its personnel. The commenter also stated that establishing these 
educational requirements and work experiences will ensure that program 
participants are receiving quality services.
    Discussion: We appreciate the many comments we received regarding 
CSPD and the changes proposed in Sec.  361.18(c)(1)(ii). We appreciate 
the fact that CSPD is an important issue for DSUs and their personnel 
and that it represents a cornerstone of the VR program, ensuring that 
individuals with disabilities receive services from staff who are 
qualified to meet their individual needs.
    As stated in the NPRM, proposed Sec.  361.18(c)(1)(ii) mirrors 
section 101(a)(7)(B)(ii) of the Act, as amended by WIOA, with regard to 
minimum education and experience requirements for vocational 
rehabilitation personnel. In so doing, Sec.  361.18(c)(1)(i), both 
proposed and final: (1) Retains language in prior Sec.  361.18(c)(1)(i) 
regarding national and State-approved

[[Page 55654]]

certification and licensure requirements since this requirement 
remained unchanged by WIOA; (2) incorporates new educational and 
experiential requirements in proposed Sec.  361.18(c)(1)(ii) that range 
from a baccalaureate degree with at least one year of relevant 
experience to a master's or doctoral degree; and (3) deletes the 
requirement in prior Sec.  361.18(c)(1)(ii) that DSUs must re-train 
staff who do not meet their established personnel standards.
    We agree with commenters that the higher standard in section 
101(a)(7)(B)(i) of the Act and final Sec.  361.18(c)(1)(i), which had 
been the only personnel standard for vocational rehabilitation 
personnel prior to the enactment of WIOA, has served a critical role in 
ensuring that well-qualified staff are available to provide vocational 
rehabilitation services to individuals with disabilities. We understand 
other lower education or experience requirements may not prepare DSU 
staff in the same manner as a national or State-approved certification 
or licensure for vocational rehabilitation counseling could. As 
commenters indicated, programs leading to such national or State-
approved certification or licensure in vocational rehabilitation 
provide vocational rehabilitation counselors with critical knowledge 
and understanding of medical and psychological aspects of disability, 
counseling and guidance strategies, vocational assessment, person-
centered planning, cultural competency, career services, and building 
relationships with businesses who would like to hire or retain 
individuals with disabilities. However, section 101(a)(7)(B) of the 
Act, as amended by WIOA, requires that States establish and maintain 
personnel standards, which apply to all vocational rehabilitation 
professionals and paraprofessionals employed by the DSU, including both 
national or State-approved certification and licensure requirements in 
section 101(a)(7)(B)(i) and the education and experience requirements 
in section 101(a)(7)(B)(ii). This means that the personnel standards 
apply to vocational rehabilitation counselors and all other vocational 
rehabilitation professionals and paraprofessionals. There is nothing in 
the statute that limits the higher standard to vocational 
rehabilitation counselors. Nor is there any statutory basis to preclude 
a DSU from hiring a vocational rehabilitation counselor who meets the 
education and experience requirements of section 101(a)(7)(B)(ii) but 
not a national or State-approved certification or licensure 
requirement. Final Sec.  361.18(c)(1) is consistent with the Act as 
amended by WIOA.
    We also agree with the commenters who supported the proposal, and 
believe that the new education and experience requirements set forth in 
section 101(a)(7)(B)(ii) of the Act, as amended by WIOA, and final 
Sec.  361.18(c)(1)(ii) are beneficial to the VR program and the 
individuals they serve.
    Changes: None.

Applicability of Standards to Other Personnel

    Comments: Some commenters stated that the lower educational 
standards might better be applied to other vocational rehabilitation 
personnel (e.g., business relations specialists, placement specialists, 
etc.). One commenter said other positions (such as financial officers, 
legal counsel, DSU program/division directors, and policy/regulatory 
compliance officers) should be subject to requirements regarding the 
development of skills and knowledge and should be required to complete 
and maintain a certain amount of training regarding the provision of 
rehabilitation services.
    Discussion: Consistent with our interpretation of the CSPD 
requirements in a NPRM published pursuant to the 1998 Amendments to the 
Act, we interpret the Act to require the DSU establish and implement 
appropriate, certification-based standards for all categories of 
professionals and paraprofessionals needed to conduct the VR program. 
However, in light of the difficulty States may experience in developing 
numerous standards at the same time, we would expect DSUs to give 
priority to those professions that are generally considered most 
critical to the success of the VR program (65 FR 10619, 10622-10623 
(Feb. 28, 2000)). This requirement under the Act, as amended by WIOA, 
applies to all personnel positions listed under the State's vocational 
rehabilitation classification as it had under WIA. The specific 
positions covered under such a classification will vary from State to 
State. With respect to financial officers and legal counsel, States 
have the discretion to determine whether they are classified as 
vocational rehabilitation professionals or paraprofessionals since 
their classification varies between States. In many States, these 
positions are not dedicated solely to the DSU and its VR program, but 
rather are more general State personnel positions. We would agree that 
program and division administrators and policy and regulatory 
compliance officers for the DSU's VR program must be covered by the 
requirement in final Sec.  361.18(c)(1).
    Similarly, we would agree that the VR program director or 
administrator would be covered by the CSPD requirements of section 
101(a)(7)(B) because that position would be considered a vocational 
rehabilitation professional or paraprofessional. The Secretary believes 
that the individual who oversees vocational rehabilitation 
professionals and paraprofessionals should satisfy at least the minimum 
education and experience requirements applicable to all vocational 
rehabilitation professionals and paraprofessionals.
    We appreciate the comment regarding the personnel standards and 
their applicability to vocational rehabilitation paraprofessionals. 
Neither the Act nor these final regulations distinguish between 
vocational rehabilitation professionals and paraprofessionals. By the 
same token, neither the Act nor these final regulations define what 
constitutes a vocational rehabilitation professional or 
paraprofessional as opposed to an administrative staff position 
providing clerical or other support to rehabilitation personnel.
    The distinction among vocational rehabilitation professionals, 
paraprofessionals, and administrative (e.g., clerical and other 
support) staff are made at the State level in accordance with State 
hiring policies and procedures. Neither section 101(a)(7)(B) of the 
Act, as amended by WIOA, nor final Sec.  361.18(c)(1) require the DSU 
to develop personnel standards for the hiring of staff who are not 
classified as vocational rehabilitation professionals or 
paraprofessionals. However, both the Act and these final regulations 
require a DSU to develop personnel standards for the hiring of 
vocational rehabilitation professionals and paraprofessionals that are 
consistent with the standards set forth in section 101(a)(7)(B) of the 
Act, as amended by WIOA, and final Sec.  361.18(c)(1).
    As such, if a national or State-approved standard--or, in the 
absence of such standards, other comparable requirements (e.g., State 
personnel standards)--exists for such paraprofessional this should be 
the standard for such personnel. However, if no such standard exists or 
the DSU is unable to hire staff that meet such standard, then the DSU 
must, under final Sec.  361.18(c)(1)(ii), hire vocational 
rehabilitation paraprofessionals who meet standards consistent with the 
education and experience levels established in the Act and these final 
regulations.
    Changes: None.

[[Page 55655]]

De-Professionalization and Diminution of Vocational Rehabilitation 
Personnel

    Comments: Several commenters stated that the proposed education and 
experience requirements seemingly discount the role and impact of the 
professional rehabilitation counselor working with eligible consumers 
to obtain competitive integrated employment. Many stated that proposed 
Sec.  361.18(c)(1)(ii)(A)(1), which permits a baccalaureate degree plus 
one year of relevant experience, serves as a guideline to promote the 
de-professionalization of the expertise level associated with 
rehabilitation counseling and the professional provision of qualified 
services for individuals with disabilities. The commenters asserted 
that an individual with a baccalaureate degree, some related work 
experience, or volunteer work, is not equivalent to a master's degree 
level graduate who is a qualified counselor licensed to practice 
counseling.
    Further, at least one commenter expressed concern that the 
flexibility offered by the new education and experience requirements 
could lead to the unintended diminution of a vocational rehabilitation 
workforce able to meet the needs of a consumer population with 
significant disabilities, which is its major focus, especially as 
public resources diminish. The commenter encouraged the Department to 
work with DSUs and academic institutions to ensure this diminution does 
not occur. The commenter stated that some of the degrees listed under 
these personnel standards would be appropriate for specialized titles 
such as ``business relations specialists'' but may not be appropriate 
for vocational rehabilitation counselors.
    Discussion: Prior Sec.  361.18(c)(1)(ii) permitted DSUs to hire 
individuals who did not meet the national or State-approved standard so 
long as the agency provided training to enable the individual to reach 
that higher standard. While WIOA deleted the provision that allowed 
DSUs to hire individuals at a lower standard so long as additional 
training was provided so that the staff person could eventually satisfy 
the national or State-approved standard, DSUs under final Sec.  
361.18(c)(1)(ii) must ensure that individuals who do not meet the 
higher standard satisfy certain statutorily-required minimum standards. 
Looking at the new requirements in this way, the new educational and 
experiential requirements merely set minimum hiring standards, which 
previously had been left at the DSU's discretion. In this manner, we 
disagree with commenters that the new provisions of section 
101(a)(7)(B)(ii) of the Act, as amended by WIOA, and final Sec.  
361.18(c)(1)(ii) promote the de-professionalization of the vocational 
rehabilitation counselor or the diminution of the knowledge and skills 
needed to meet the vocational rehabilitation needs of individuals with 
disabilities.
    We believe the education and experience requirements set forth in 
section 101(a)(7)(B)(ii) of the Act, as amended by WIOA, and final 
Sec.  361.18(c)(1)(ii) enable DSUs to hire personnel in such a manner 
that results in an expansion of qualifications of staff available to 
provide vocational rehabilitation services. For example, the new 
education and experience requirements could enable DSUs to expand the 
number of staff trained to provide certain services critical to meeting 
the employment needs of individuals with disabilities and employers, 
such as employment specialists or job placement specialists, thereby 
increasing opportunities for employer engagement and the achievement of 
competitive integrated employment outcomes by individuals with 
disabilities. This broader range of acceptable education and experience 
could lead to a more diverse workforce in VR agencies.
    Looking at the new personnel standard requirements in this way, 
they could be viewed as a means of enabling DSUs to expand the range of 
qualified personnel available to provide certain services in-house 
rather than having to contract for those services. DSUs could employ 
sufficient qualified personnel to work in teams to meet the holistic 
needs of the individuals served by the VR program, ranging from 
specific disability-related services to employment-related services. We 
believe this interpretation is consistent with the plain meaning of the 
statutory requirements in section 101(a)(7)(B) of the Act, and the 
heightened emphasis throughout WIOA on employer engagement and the 
achievement of competitive integrated employment outcomes.
    Changes: None.

State Job Classification Minimum Qualifications

    Comments: One commenter noted the various degrees listed (e.g., 
psychology and business) in section 101(a)(7)(B)(ii) of the Act, as 
amended by WIOA, and proposed Sec.  361.18(c)(1)(ii) are not typically 
seen for the same position when State governments are developing 
classification minimum qualifications because each of the degrees 
provide individuals with different skill sets. The commenter added 
that, while a DSU would need personnel with skill sets from many of the 
degrees listed, it would be unreasonable to expect that a single 
individual would have expertise in two or more specialized skill sets.
    Some commenters stated that the standards in proposed Sec.  
361.18(c)(1) should be sufficient for recruitment of vocational 
rehabilitation counselors, but that the use of ``and'' between proposed 
Sec. Sec.  361.18(c)(1)(i) and 361.18(c)(1)(ii) seems to imply that 
additional standards must be used. They expressed concern that 
requiring at least one year's paid or unpaid work in the field would 
make it challenging for DSUs to recruit qualified counselors directly 
from long-term training programs.
    Discussion: We disagree with commenters that the degrees listed in 
section 101(a)(7)(B)(ii) of the Act, as amended by WIOA, and proposed 
Sec.  361.18(c)(1)(ii) necessarily will pose problems for the 
development of minimum qualifications within State job classification. 
While we agree that it would be unreasonable for a single job position 
to list each of those degrees as a minimum qualification, it is 
reasonable to post various job positions within the classification for 
vocational rehabilitation counselors. As stated previously, we believe 
the amendments to WIOA provide DSUs with an opportunity to employ other 
personnel, such as business specialists or job placement specialists, 
who could complement the critical work performed by vocational 
rehabilitation counselors. In so doing, DSUs could minimize the need to 
contract for these services. While final Sec.  361.18(c)(1)(ii) permits 
DSUs to hire individuals with a variety of degrees, there is no 
requirement or expectation that a vocational rehabilitation counselor 
or any other vocational rehabilitation professional or paraprofessional 
employed by the DSU be an expert in more than one area.
    The education and experience requirements of section 
101(a)(7)(B)(ii) of the Act apply only in those circumstances when the 
DSU is not able to hire vocational rehabilitation professionals and 
paraprofessionals who satisfy a national- or State-approved 
certification or licensure standard. Vocational rehabilitation 
counselors graduating from long-term training programs would meet a 
national or State-approved standard and could be hired in accordance 
with personnel standards established under section 101(a)(7)(B)(i) of 
the Act, which does not require that the individual satisfy minimum 
experience requirements.
    Changes: None.

[[Page 55656]]

Additional or Substitute Qualifications

    Comments: Two commenters recommended revising proposed Sec.  
361.18(c)(1)(ii)(B) by inserting a work experience requirement similar 
to that required for individuals with a baccalaureate degree as set 
forth in proposed Sec.  361.18(c)(1)(ii)(A)(1).
    Many commenters requested the proposed regulations be revised to 
include a new provision in Sec.  361.18(c)(1)(ii) to allow a complement 
of work experience, in addition to specialized training or 
certification through either advanced higher education or through a 
legitimately recognized association that provides specialized training 
when working specifically with individuals who possess unique barriers 
to independence and require unique training, such as individuals who 
are blind.
    Another commenter recommended that proposed Sec.  361.18(c)(1)(ii) 
be revised to allow years of experience to substitute for the 
identified degree(s) for paraprofessionals, which could create 
reasonable flexibility. A requirement of years of experience, coupled 
with staff development required by the regulations, would assure that 
paraprofessionals are highly qualified to provide appropriate services 
to individuals with disabilities.
    Discussion: We appreciate the suggestion made by two commenters 
adding minimum paid or unpaid work experience requirements for DSU 
personnel hired at the master's or doctoral level. We also appreciate 
the many comments recommending that, in addition to satisfying a 
national or State-approved standard, work experience be required for 
those personnel who work with individuals with significant barriers to 
employment, such as individuals who are blind or visually-impaired.
    While we agree work experience can be valuable, section 
101(a)(7)(B) sets forth explicit requirements for a DSU's personnel 
standards, including requirements related to minimum educational and 
experiential requirements. Given the explicit nature of these 
requirements, there is no statutory basis to require different or 
additional personnel standards in final Sec.  361.18(c)(1).
    Changes: None.

Interplay Between National or State-approved Certification or Licensure 
Standards and Minimal Educational and Experiential Requirements

    Comments: Many commenters requested clarification regarding the 
interplay between the requirement that a State's CSPD be consistent 
with a national or State-approved certification or licensure standard 
in proposed Sec.  361.18(c)(1)(i) and the minimal educational and 
experiential requirements in proposed Sec.  361.18(c)(1)(ii). Most of 
these commenters did not support the proposed regulatory language, 
stating that it is confusing to have two sets of standards for 
vocational rehabilitation personnel. A few commenters questioned 
whether a DSU may choose between the two standards, i.e. choose to 
maintain the higher standard of Sec.  361.18(c)(1)(i) or the lower 
standard of Sec.  361.18(c)(1)(ii). Similarly, some commenters 
requested clarification about whether the DSUs can maintain their 
current personnel standards consistent with applicable national or 
State-approved or recognized certification, licensing, or registration 
requirements. These commenters were concerned that including lower 
standards in the regulations would force DSUs to lower their standards. 
Further, some commenters stated that most States have a minimum 
personnel standard that is greater than what is being proposed and 
asked whether the DSUs will have to hire vocational rehabilitation 
personnel at the lower educational standard.
    Discussion: Contrary to the suggestions made by several commenters, 
the personnel standards in section 101(a)(7)(B)(i) and (ii) are 
separate and distinct requirements. Therefore, DSUs may not choose to 
implement one and not the other but, rather, must develop both 
standards. Under section 101(a)(7)(B)(i), States must continue to 
develop personnel standards that are consistent with applicable 
national or State-approved certification or licensure requirements, as 
well as develop personnel standards that satisfy minimum education and 
experience requirements. As has always been the case, CSPD standards do 
not dictate whom a State may or may not hire. Hiring is solely a State 
matter. Instead, the CSPD standards simply set parameters for the 
standards a State must use in establishing its hiring procedures. There 
is nothing in the Act or these final regulations to preclude a DSU from 
continuing to hire vocational rehabilitation professionals and 
paraprofessionals that satisfy the higher standard. However, in hiring 
individuals who do not meet a national or State-approved certification 
or licensure standard, DSUs must hire individuals who meet the 
educational and experiential requirements set forth in section 
101(a)(7)(B)(ii). These individuals must have at least a baccalaureate 
degree in a specified field of study plus one year of relevant 
experience, or a master's or doctoral degree in one of the fields 
specified.
    Further, if a vocational rehabilitation counselor is hired under 
the standard set forth in final Sec.  361.18(c)(1)(i) (e.g., a standard 
consistent with a national or State-approved standard), that vocational 
rehabilitation counselor is not required to meet the education or 
experience requirements set forth in final Sec.  361.18(c)(1)(ii) as 
well. There is no requirement that an individual meet both personnel 
standards set forth in final Sec.  361.18(c)(1).
    Changes: None.

Succession Planning

    Comments: One commenter suggested that the CSPD requirements should 
address succession planning at the administrative level. The commenter 
recommended that the final regulations be revised to incorporate CSPD 
requirements to address the void in administrative skill and knowledge 
created in DSUs by retirements.
    Discussion: We agree with the commenter's concern that DSUs face a 
significant loss of knowledge and skills as key personnel retire. We 
note that DSUs are required, under final Sec.  361.18(d)(2)(iii), to 
include succession planning in their staff development plans when 
developing personnel standards and providing on-going training.
    Changes: None.

Re-Training of Staff Not Meeting Personnel Standards

    Comments: Several commenters expressed serious concerns about the 
elimination of the requirement to re-train staff who are not meeting 
the DSU's personnel standards for qualified staff, in prior Sec.  
361.18(c)(1)(ii).
    Discussion: While we appreciate the concern expressed by commenters 
regarding the deletion of the regulatory requirement for the DSU to 
provide re-training to personnel who do not meet the DSU's personnel 
standards, the statutory requirement for re-training, which had been 
contained in section 101(a)(7)(B)(ii) of the Act, as amended by WIA, 
has been deleted by the amendments made by WIOA. Despite the deletion 
of the regulatory requirement, there is nothing in the Act or these 
final regulations that prohibits a DSU from making the decision to re-
train staff as the agency deems appropriate. However, there is no 
statutory basis for the Department to require such re-training in these 
final

[[Page 55657]]

regulations given the specific deletion of that statutory requirement.
    Changes: None.

Standards of Personnel Development--Other Comparable Requirements 
(Sec.  361.18(c)(1))

    Comments: Several commenters recommended that the Department define 
``other comparable requirements,'' which is included in the personnel 
standard in section 101(a)(7)(B)(i) of the Act and proposed Sec.  
361.18(c)(1)(i) and applies if there are no applicable national, State-
approved, or recognized certification, licensing, or registration 
requirements. The commenters recommended that ``other comparable 
requirements'' should include competence in counseling and guidance, 
knowledge and application of the medical and psychological aspects of 
disability, knowledge and implementation of vocational testing, working 
knowledge and integration of labor market data and disability 
employment policy, and providing the services required to develop and 
implement individualized career plans that assist persons with 
disabilities in successful employment in a competitive integrated work 
environment.
    Discussion: Section 101(a)(7)(B)(i) of the Act and final Sec.  
361.18(c)(1)(i) require a DSU to develop personnel standards that are 
consistent with any national or State-approved or recognized 
certification, licensing, or registration requirements, or, in the 
absence of these requirements, other comparable requirements (including 
State personnel requirements) that apply to the profession or 
discipline in which that category of personnel is providing vocational 
rehabilitation services. While we agree with commenters that ``other 
comparable requirements'' could include any of the areas suggested, we 
disagree that the final regulations should define the phrase. This 
phrase provides DSUs with maximum flexibility when developing personnel 
standards by enabling DSUs to modify personnel standards as relevant 
credentials evolve.
    Changes: None.

Meaning of ``A 21st Century Understanding of the Evolving Labor Force 
and the Needs of Individuals With Disabilities''

    Comments: Many commenters asked for clarification of what is meant 
by a 21st century understanding of the evolving labor force and the 
needs of individuals with disabilities, as used in section 
101(a)(7)(B)(ii) of the Act, as amended by WIOA, and in proposed Sec.  
361.18(c)(2)(ii). Many commenters stated that the list of examples of 
relevant personnel skills in proposed Sec.  361.18(c)(2)(ii) either did 
not help clarify the meaning or was incomplete. Some commenters stated 
that the list represented skills more oriented to the medical models of 
the past rather than the employer focus required today. One commenter 
asserted that the congressional intent behind the requirements for a 
21st century understanding included a focus on employment; an 
understanding of economic and job market trends, business management, 
and operations; and meeting the needs of local and regional employers.
    Many commenters who thought the list of examples was incomplete 
suggested additions. Some were suggested because the commenters stated 
that customary, but critical, skills for vocational rehabilitation 
counselors had been left out of the list. Some brought a more modern 
focus to the traditional topic, refining knowledge of medical and 
psychological aspects of disability to include more employment-focused 
use of such knowledge to determine functional limitations and the 
vocational implications of these functional limitations on employment 
planning and workplace accommodations.
    Other commenters provided lists of skills that represented areas in 
which the focus is on greater knowledge of the world of work, including 
labor market trends and various sources of labor market information and 
its use in selecting vocational goals and developing individualized 
plans for employment. Some commenters suggested that using information 
about job requirements, labor market trends, and other labor market 
information would help build relationships with employers through 
greater knowledge of their businesses and their employment requirements 
and would also help in job development and job placement efforts.
    One group of commenters suggested that a recent U.S. Government 
Accountability Office (GAO) study, which identified gaps in the 
knowledge of vocational counselors employed by the U.S. Department of 
Veterans Affairs, could serve as a starting point for developing a list 
of skills needed for the 21st century vocational rehabilitation 
counselor employed by the DSU. Some skills included familiarity with 
Bureau of Labor Statistics data, the Dictionary of Occupational Titles, 
and the Department of Labor's O*NET occupational system; vocational 
testing and assessment; job accommodations; training in the Americans 
with Disabilities Act (ADA) and other employment discrimination laws; 
vocational implications of various disabilities, including traumatic 
brain injury, post-traumatic stress syndrome, mental illnesses, and 
autism; employment plan development; Social Security work incentives, 
and the Ticket to Work and Self-Sufficiency program; and knowledge of 
disability programs in the State and local area, including independent 
living programs.
    One commenter suggested that the six areas of knowledge and skills 
in proposed Sec.  361.18(c)(2)(ii) could be used to ensure vocational 
rehabilitation personnel have a 21st century understanding. The 
commenter stated the examples focused on critical knowledge domains and 
closely mirror the knowledge domains required for accreditation by a 
vocational rehabilitation counseling program. However, the commenter 
expressed concern that the process of evaluating whether candidates 
have the necessary knowledge and skills would be insufficient without 
the assurance that the candidate graduates from an accredited 
vocational rehabilitation counseling program. The commenter recommended 
that the Department recognize graduates from accredited programs as 
having the knowledge, skill, and experience requirements that are 
necessary to provide high quality services to individuals with 
disabilities.
    Discussion: We appreciate the many comments and suggestions we 
received about the skills and knowledge essential to ensuring a 21st 
century understanding of the evolving labor force and the needs of 
individuals with disabilities under section 101(a)(7)(B)(ii) of the 
Act, as amended by WIOA, and in proposed Sec.  361.18(c)(2)(ii). 
Lacking a widely-accepted definition of the term, we proposed several 
examples in the regulations to help clarify its meaning. Most 
commenters, however, stated that the examples in proposed Sec.  
361.18(c)(2)(ii) were not sufficient because they did not include a 
clear focus on employment or emphasize the use of the most up-to-date 
techniques.
    In considering what changes to make in the examples, we first 
recognized that the requirements for a 21st century understanding apply 
to knowledge and skills relevant to working with both employers and 
individuals with disabilities. We also believe that ``21st century'' 
refers to maintaining a cutting edge, state-of-the-art approach to 
whatever topic is included in the list, not merely maintaining 
activities at traditional, established levels. These underlying 
principles governed the review, selection, and wording of the examples.

[[Page 55658]]

    We looked at traditional topic areas that are still necessary for 
working with individuals with disabilities and employers, with the 
intent to add language that suggests use of contemporary practices or 
that adds emphasis on an employment focus. For example, we replaced the 
previous language about knowledge of medical and psychological aspects 
of disability with language about knowledge of the functional 
limitations of various disabilities and the vocational implications of 
these functional limitations for employment.
    We considered new approaches to learn about the world of work, 
large-scale employer needs (e.g., labor market trends and occupational 
shortages), small-scale employer needs (e.g., specific job 
requirements, soft skill requirements), and ways to use information 
differently to inform traditional vocational rehabilitation practices 
(such as using labor market information to assist in developing 
vocational goals and employment plans, while providing informed 
choice). We also took into consideration the GAO report titled ``VA 
Vocational Rehabilitation and Employment: Further Performance and 
Workload Management Improvements Are Needed'' (GAO-14-61) published 
January 14, 2014, as well as various lists of suggested examples 
provided by national organizations and endorsed by other commenters. 
After considering all of the comments and suggestions received, we have 
amended the examples in final Sec.  361.18(c)(2)(ii). We clarify that 
the term ``apprenticeships'' as used in 361.18(c)(2)(ii)(D) does not 
include Registered Apprenticeships.
    In response to commenters asking whether the ``21st century 
understanding'' requirement applies only to vocational rehabilitation 
counselors, section 101(a)(7)(B) of the Act, as amended by WIOA, and 
final Sec.  361.18(c) require the DSU to develop personnel standards 
that apply to all vocational rehabilitation professionals and 
paraprofessionals, not just vocational rehabilitation counselors. The 
revised list of examples set forth in final Sec.  361.18(c)(2)(ii) 
provides a comprehensive, but not exhaustive, list of skills necessary 
for achieving employment outcomes in the 21st century. Because we 
realize that States may choose to employ staff in a variety of 
positions, the skills listed may be applicable to various positions in 
differing ways.
    Finally, as we described earlier in the Applicability of Education, 
and Experiential Requirements to Rehabilitation Counselors (Sec.  
361.18(c)(1)) section, we agree with the comment that accredited 
programs provide vocational rehabilitation counselors with knowledge 
and skills critical to providing vocational rehabilitation services to 
individuals with disabilities. However, section 101(a)(7) of the Act 
does not specify that individuals pursuing employment as vocational 
rehabilitation counselors must obtain an undergraduate or a graduate-
level degree in rehabilitation counseling from accredited programs and 
final Sec.  361.18(c) mirrors the Act in this respect. In addition, we 
recognize that other DSU personnel, such as employment specialists and 
job placement specialists, serve a critical role in working with 
employers and individuals with disabilities. The Secretary believes all 
vocational rehabilitation professionals and paraprofessionals must have 
the knowledge and skills necessary to satisfy the ``21st century 
understanding'' requirement.
    Changes: We have substantially revised the examples in final Sec.  
361.18(c)(2)(ii) to provide a more robust list of the skills and 
knowledge needed to meet the needs of employers and individuals with 
disabilities in the evolving 21st century labor market.

Staff Development (Sec.  361.18(d))

    Comments: Several commenters requested clarification regarding 
proposed Sec.  361.18(d)(1)(i), which requires, as part of the DSU's 
system of personnel development, training implemented in coordination 
with entities carrying out State programs under section 4 of the 
Assistive Technology Act of 1998 (29 U.S.C. 3003). Some of these 
commenters asked whether the purpose of this provision is to require 
those entities to provide the training to the DSUs. If so, the 
commenters requested that the Department revise proposed Sec.  
361.18(d)(1)(i) to make that intent clear. These commenters also sought 
clarification on how the training is to be coordinated with the State's 
assistive technology program. Other commenters thought a Federal 
``training fund'' source should be made available for the training, 
regardless of who provides it. Still other commenters stated that 
proposed Sec.  361.18(d)(1)(i) should be revised to require that the 
DSUs fund the entities carrying out the State's assistive technology 
program to provide this training.
    Many commenters expressed concerns about insufficient training 
funds to meet the training needs of vocational rehabilitation personnel 
and requested that the Department require DSUs to allocate training 
funds for any required CSPD training. The commenters were further 
concerned that the potential hiring of staff at the baccalaureate or 
higher degree in a discipline other than vocational rehabilitation 
counseling would increase the need for training in order to ensure 
these personnel have solid knowledge of the VR program. Despite this 
expected increased need for training, DSUs will face reduced financial 
resources because of the elimination of the In-Service Training Grant 
program by WIOA. Therefore, these commenters were concerned that DSUs 
would allocate less funding for staff development training, 
certification fees, and other related expenses. One commenter requested 
that the Department provide training funds to each DSU to assist in 
providing staff development and personnel training in the areas 
mandated by WIOA. Still another commenter recommended that the 
Department offer regional training rather than onsite training through 
its monitoring or technical assistance process. The commenter said the 
regional trainings could benefit a larger group of personnel.
    A few commenters recommended that proposed Sec.  361.18(d) be 
revised to require specific training areas for staff development. For 
example, one commenter stated that many vocational rehabilitation 
counselors struggle to identify appropriate service providers for 
individuals with autism. The commenter requested further guidance from 
the Department on providing vocational rehabilitation services to this 
population in order to increase opportunities for competitive 
integrated employment.
    Another commenter asked the Department to require DSUs to include 
in their agency planning and oversight the substantial involvement of 
mental health advocates, including individuals who have personally 
experienced mental illness, treatment, and recovery. Similarly, another 
commenter recommended that DSUs be required to hire and train peer 
service providers experienced in working with individuals with mental 
illness who are seeking vocational rehabilitation services, thereby 
increasing the DSU's effectiveness in serving this population. Still 
another commenter recommended that staff development include caseload 
management training, including implementation standards, measures, 
techniques, and strategies.
    Another commenter stressed the importance of coordinating personnel 
development activities under the Act and the IDEA. The commenter

[[Page 55659]]

recommended that State and local education agencies and DSUs establish 
memoranda of understanding on coordinating personnel development 
activities. Yet another commenter recommended that proposed Sec.  
361.18(d) require staff development to emphasize the need for evolving 
skills, including understanding the evolving labor market, 
nondiscrimination laws, the medical and psychosocial aspects of various 
disabilities, and how this understanding evolves over time.
    Discussion: We appreciate the comments seeking clarification of the 
requirement that the DSU's CSPD must include assistive technology 
training for vocational rehabilitation professionals and 
paraprofessionals. Section 101(a)(7)(A)(v)(I) of the Act was amended 
slightly by WIOA, but not in a manner that imposed additional 
requirements for this particular training. Therefore, final Sec.  
361.18(d)(1)(i) contains only technical changes from the prior 
regulation, and there is no statutory basis for the Department to add 
new requirements regarding how the training should be financed. Section 
101(a)(7)(A)(v)(I) of the Act, as amended by WIOA, and final Sec.  
361.18(d)(1)(i) simply require DSUs to ensure their vocational 
rehabilitation professionals and paraprofessionals are adequately 
trained. This must include a system for the continuing education of 
personnel in rehabilitation technology, and it must include training 
implemented in coordination with the entity carrying out the State's 
assistive technology program. It is within the DSU's discretion to 
determine how and by whom such training will be provided, so long as 
the training is adequate.
    Further, it is beyond the scope of the Act and these regulations to 
mandate that an entity, authorized under a separate Federal law, such 
as the Assistive Technology Act of 1998, perform any action, including 
providing the training described here. There is also no separate 
Federal program from which money may be given to DSUs to pay for this 
training, as in-service training funds were eliminated from the Act by 
WIOA. However, the Act does not prohibit DSUs from using title I VR 
program funds to provide the training directly or through a contract 
with the entity providing assistive technology services in the State.
    There are many possible sources of training on assistive technology 
and several ways in which the DSUs may coordinate with the State 
assistive technology program entity. For example, the DSU may select a 
trainer with input from the State's assistive technology program 
entity, or the DSU and the State assistive technology program entity 
may jointly train DSU staff. Final Sec.  361.18(d)(1)(i) provides the 
DSU with maximum flexibility to coordinate with the assistive 
technology program entity in the manner it deems appropriate.
    While we understand the limited financial resources available to 
DSUs, there is no authority under the Act to provide funding to DSUs 
for any of the trainings required by section 101(a)(7) of the Act and 
final Sec.  361.18(d)(1)(i). As the commenters noted, WIOA eliminated 
the In-Service Training Grant program, which had been used by many DSUs 
to provide staff development training. Nonetheless, the Act has, and 
continues to, permit DSUs to use title I VR program funds to provide 
staff development and training. Given the availability of VR program 
funds for this purpose, we disagree that DSUs necessarily will allocate 
fewer resources for this effort.
    Finally, the Department will explore options for providing staff 
development trainings on a broader scale, including regional training.
    As section 101(a)(7) of the Act is specific about the training 
areas that may be included for staff development, there is no statutory 
basis for imposing additional training requirements. However, final 
Sec.  361.18(d)(2) is consistent with the Act in that it gives DSUs 
maximum flexibility to use staff development trainings that are 
specific to each DSU's needs. Nevertheless, we understand the concerns 
raised by commenters requesting training on specific topics. We agree 
that serving individuals with autism may raise many complex issues, 
some of which are addressed in an Institute on Rehabilitation Issues 
Monograph on rehabilitation of individuals with autism spectrum 
disorders, which may be found at: http://www.iriforum.org//books.aspx.
    While there is statutory authority under section 
101(a)(21)(A)(i)(III) to require DSUs to involve mental health 
advocates in the agency's planning and oversight activities when the 
DSU has an independent commission or council, there is no specific 
statutory requirement under section 101(a)(7) that DSUs hire mental 
health peer service providers. Moreover, there is no statutory basis 
under section 101(a)(7)(A)(v) of the Act to require caseload management 
be included in staff development training. However, there is nothing to 
preclude a DSU from doing these things under Sec.  361.18(d)(2) if a 
need is identified by the DSU.
    Finally, we agree with the commenter regarding the need for 
coordinating staff development between DSUs and State and local 
education agencies. The Act, as amended by WIOA, places heightened 
emphasis on providing vocational rehabilitation services to students 
and youth with disabilities. Although section 101(a)(7) of the Act does 
not require DSUs to enter into memoranda of understanding with 
educational agencies, final Sec.  361.18(f) continues to mandate this 
coordination as it has for many years in prior regulations. We also 
agree that staff development should emphasize the evolving skills 
needed to provide vocational rehabilitation services so that 
individuals with disabilities may achieve competitive integrated 
employment in the evolving 21st century labor market. Only with these 
evolving skills will vocational rehabilitation personnel be able to 
engage effectively with employers in the evolving labor market of the 
21st century. We believe the staff development requirement set forth in 
final Sec.  361.18(d)(1) and (2) covers these skills needed in the 21st 
century evolving labor market.
    Changes: None.

Training Based on the Needs of the DSU

    Comment: None.
    Discussion: After further Departmental review, we have determined 
proposed Sec.  361.18(d)(2) contained a drafting error by inadvertently 
using the word ``should'' rather than ``must.'' The regulation has used 
the term ``must'' since final regulations were published in 1997, with 
regard to the specific training areas for staff development. The 
specific training areas ``must'' be based on the needs of the DSU. 
Final Sec.  361.18(d)(2) reflects the correct wording, and this change 
in these final regulations represents no change in the requirement for 
DSUs because the provision now reads as it has since 1997.
    Changes: Final Sec.  361.18(d)(2) has been changed to require 
training areas for staff development be based on the needs of the DSU, 
as is true in prior regulations.

Public Participation Requirements (Sec.  361.20)

Public Hearings for Changes in an Order of Selection

    Comments: Several commenters supported the changes to the prior 
regulations in proposed Sec.  361.20 that outline the requirements for 
public notice and participation prior to the adoption of any 
substantive policies or procedures governing the provision of 
vocational rehabilitation services under the State plan, including 
substantive

[[Page 55660]]

amendments. Proposed Sec.  361.20 clarifies through descriptive 
examples the distinction between substantive and administrative changes 
to VR program rules, policies, and procedures. While ``substantive 
changes'' trigger the requirement that the designated State agency 
provide notice and conduct a public meeting, ``administrative changes'' 
typically do not. These commenters stated that the proposed regulation 
clarifies and supports a more rigorous and open channel of 
communication between the designated State agency, the SRC, and 
community stakeholders.
    Nonetheless, several commenters requested further clarification. 
One commenter asked if a DSU must conduct a public meeting every time 
it opens or closes a priority category under an order of selection.
    Discussion: We appreciate the support for, as well as the requests 
for further clarification of, proposed Sec.  361.20, which 
distinguishes between those substantive changes requiring public 
meetings and those administrative changes that do not.
    Final Sec.  361.20(a)(2)(v) states that adopting or amending 
policies implementing an order of selection constitutes a substantive 
change that requires public input. However, it is the Department's 
long-standing policy that a DSU need not conduct a public meeting each 
time it opens or closes a priority category if doing so is consistent 
with the information describing the implementation of the order of 
selection in that agency's currently approved State Plan (now the VR 
services portion of the Unified or Combined State Plan).
    By contrast, we believe that closing one or more priority 
categories would be a substantive change in the administration of the 
VR program, and would consequently trigger the requirement to conduct a 
public meeting if such change represents a departure from the manner in 
which the DSU has implemented the order of selection under the approved 
State Plan. For example, if a DSU implements an order of selection and 
closes one or more priority categories after one or more years without 
closing priority categories, we believe this action would constitute a 
substantive change in the administration of the VR program and would 
require a public meeting.
    Changes: None.

Public Meetings of the State Rehabilitation Council

    Comments: One commenter asserted that meetings of the SRC should 
fulfill the requirements of proposed Sec.  361.20, since these are 
public meetings, and the Council is charged with the responsibility to 
review vocational rehabilitation policies and other substantive changes 
to the VR program. The commenter stated that holding public meetings in 
addition to the Council's meetings takes time away from the central 
work of the DSU.
    Discussion: Under section 101(a)(16)(A) of the Act and final Sec.  
361.20, it is the responsibility of the designated State agency, not 
the SRC, to conduct public meetings. Therefore, the Council's meetings 
cannot satisfy, on their own, the requirement of final Sec.  361.20. 
Likewise, it is the responsibility of the Council, and not the 
designated State agency, to conduct its meetings as required by section 
105 of the Act and final Sec.  361.17. We recognize that the designated 
State agency works closely with the Council, as it is required to do, 
with regard to substantive changes made to policies and procedures 
affecting the VR program. Therefore, if the designated State agency and 
the Council determine it would be expedient and effective to do so, 
they may use the regular or special meetings of the Council as a forum 
for obtaining input from the Council and the public on substantive 
changes in VR program rules, policies, and procedures. If the 
designated State agency chooses to conduct joint meetings in this 
manner, they must ensure that all requirements concerning the conduct 
of public meetings in final Sec.  361.20 are satisfied. We emphasize 
that neither the designated State agency nor the Council are required 
to conduct joint meetings for the purpose of gathering public input on 
substantive changes to the administration of the VR program under 
either final Sec. Sec.  361.17 or 361.20, though both entities may find 
it efficient to do so.
    Changes: None.

Substantive and Administrative Changes

    Comments: A few commenters stated that the distinction between 
those changes in DSU rules, policies, and procedures that require 
public comment and those that do not was not clear in the proposed 
regulation, and requested further clarification.
    Discussion: With respect to the comments seeking further 
clarification and examples of what constitutes a substantive versus 
administrative change, the commenters did not specify what additional 
clarification was needed, and so we can provide no further examples. 
However, the lists of examples in final Sec.  361.20(a)(2) and (a)(3) 
are not exhaustive; rather, they illustrate some of the most common 
substantive and administrative changes contemplated by DSUs. We 
recognize that States may contemplate many more changes to their rules, 
policies, and procedures implementing the VR program than those 
identified in these final regulations.
    In addition, the Act, as amended by WIOA, and these final 
regulations provide significant flexibility to the States in the manner 
in which they administer the VR program and deliver vocational 
rehabilitation services, and States may adopt rules, policies, and 
procedures governing the administration of the program that best suit 
their particular circumstances. As a result, States may adopt rules, 
policies, and procedures that vary widely from one another, and we do 
not believe that it is practicable to further clarify, or add to, the 
examples listed in final Sec.  361.20(a)(2) and (a)(3). While we 
believe that final Sec.  361.20 provides States with the guidance 
necessary to determine if a potential change in rules, policies, and 
procedures constitutes a substantive change requiring a public meeting, 
we encourage States to seek guidance from the Department about State 
specific changes.
    Changes: None.

Public Comment Through Electronic Means

    Comments: One commenter asked if publishing policy changes on a 
State agency's Web site and receiving public comment and input at the 
Web site constitutes a public meeting.
    Discussion: The publication by the DSU of a proposed change in 
rules, policies, or procedures governing its administration of the VR 
program on a Web site does not constitute a public meeting under 
section 101(a)(16)(A) of the Act or final Sec.  361.20. As used in 
final Sec.  361.20(a), which requires public meetings to be held 
throughout the State, ``public meeting'' means a gathering of people in 
a physical or virtual (as in the case of videoconferences or 
teleconferences) location. Nonetheless, designated State agencies can 
use postings on a Web site and other innovative strategies to gather 
valuable input from individuals with disabilities, community 
rehabilitation programs, and other stakeholders affected by proposed 
changes in rules, policies, or procedures.
    Changes: None.

Requirements Related to the Statewide Workforce Development System 
(Sec.  361.23)

    Comments: Apart from comments on the joint regulations proposed by 
the Departments of Education and Labor

[[Page 55661]]

implementing jointly administered requirements for the one-stop 
delivery system, one commenter requested that we retitle Sec.  361.23 
to improve the reference to the joint regulations governing the one-
stop delivery system. A second commenter expressed concern that one-
stop centers cannot meet the needs of individuals who are blind or 
visually impaired. The commenter did not provide an explanation or 
recommendation on how the regulations could be revised to address this 
concern.
    Discussion: Final Sec.  361.23 provides a cross-reference to the 
joint regulations governing the one-stop delivery system in subpart F 
of part 361. Therefore, we believe there is no need to retitle or amend 
the section further as suggested by the commenter.
    We appreciate the concern regarding the availability of services at 
the one-stop centers for individuals who are blind or visually-
impaired. While we understand that there have been some issues with 
respect to accessibility and availability of services for individuals 
with significant disabilities in the past, section 121(b)(1)(B)(iv) of 
WIOA identifies the VR program as a core partner of the workforce 
development system. As such, DSUs and other core partners of the 
workforce development system are required to ensure the programmatic 
and physical accessibility of the services provided through the one-
stop centers. For further information, see the joint regulations 
governing the one-stop delivery system published elsewhere in this 
issue of the Federal Register. Furthermore, we strongly encourage DSUs 
that serve individuals who are blind or visually impaired to ensure the 
needs of these individuals are met through the one-stop delivery 
system, as appropriate, by strengthening their relationships with other 
core programs through the memoranda of understanding required under 
section 121 of WIOA and the joint regulations in subpart F. The 
Secretary believes the strengthened relationships between the VR 
program and other core programs, as well as the delivery of vocational 
rehabilitation services directly at the one-stop centers, will ensure 
the needs of individuals who are blind or visually impaired are met.
    Changes: None.

Cooperation and Coordination With Other Entities (Sec.  361.24)

General

    Comments: Some commenters expressed concerns about the difficulty 
in establishing new collaborative relationships, the lack of or limited 
fiscal resources necessary to develop and support collaboration, and 
mechanisms for accountability and transparency. One commenter indicated 
that collaborative relationships do not currently exist in their State 
and that establishing them will require additional money and will alter 
the methodology for developing the State Plan and the statewide needs 
assessment.
    A few commenters expressed concern that proposed Sec.  361.24 
contained limited language regarding the contents of agreements and the 
delineation of issues that should be addressed. For example, a few 
commenters remarked that there was no requirement for an agreement 
between the DSU and Medicaid, and mental health agencies, for people 
with psychiatric disabilities needing long-term employment supports 
funded by Medicaid. The commenters suggested that cooperative 
agreements include identification of individuals needing extended 
supports, referral mechanisms, the use of Medicaid funds in providing 
extended supports, how funds will be braided between the DSU and 
agencies with primary responsibilities to serve individuals with 
specific disabilities, and sources and criteria for providers of 
extended supports. A similar comment about waivers for home and 
community based settings stressed that all parties must work 
cooperatively at both the policy and individual levels; however, the 
commenter noted that the proposed regulations merely require there to 
be an agreement, without specifying minimum contents of those 
agreements.
    Discussion: We appreciate and understand the concerns about the 
difficulty in establishing new collaborative relationships required 
under the Act, the lack of or limited fiscal resources necessary to do 
so, and mechanisms for accountability and transparency. However, DSUs 
have extensive experience in meeting the requirements under prior Sec.  
361.24 for cooperating and coordinating with other entities, and we 
believe that this will enable DSUs to implement the collaboration 
requirements in the Act as amended by WIOA.
    We also appreciate the concerns that proposed Sec.  361.24 
contained limited language regarding the contents of agreements and the 
delineation of issues that should be addressed. While section 
101(a)(11) specifies the content requirements for only some of the 
cooperative agreements, nothing in the Act or final Sec.  361.24 
precludes DSUs from including specific content to clarify the 
responsibility of collaborating entities through these agreements, and 
we strongly encourage DSUs to do so. For example, DSUs may enter into 
cooperative agreements with Medicaid and mental health agencies for 
people with psychiatric disabilities needing long-term employment 
support funded by Medicaid. Cooperative agreements may include 
identification of individuals needing extended supports, referral 
mechanisms, the use of Medicaid funds in providing extended support, 
how funds will be braided between DSUs and agencies with primary 
responsibilities to serve individuals with specific disabilities, and 
sources and criteria for providers of extended services.
    Changes: None.

Cooperation and Collaboration With Other Agencies and Entities

    Comments: Many commenters supported proposed Sec.  361.24, which 
expanded the entities with whom the DSU must collaborate and coordinate 
its activities under the VR program and several offered additional 
recommendations.
    One commenter especially supported the coordination with employers. 
Other commenters supported the requirement for cooperative agreements 
with the State Medicaid agency and the State agency primarily serving 
people with intellectual and developmental disabilities; however, 
several commenters noted that the State agency responsible for 
providing mental health services was not included in this requirement 
and recommended its inclusion.
    Many commenters strongly recommended that DSUs be required to enter 
into formal interagency agreements with AIVRS grant recipients and with 
Tribal Education Agencies (TEAs) located in the State.
    One commenter recommended that the assurance in the VR portion of 
the Unified or Combined State Plan specify that the DSU coordinate 
activities with other State agencies functioning as an employer network 
under the Ticket to Work and Self-Sufficiency Program established under 
section 1148 of the Social Security Act (42 U.S.C. 1320b-19), and that 
the network be expanded to include other agencies acting as employer 
networks. A related comment inquired whether there should be a Federal 
Partnership Plus agreement instead of individual State agreements.
    A few commenters suggested that in the development of the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan, the Department require the DSU to collaborate with the lead 
entity

[[Page 55662]]

implementing programs under the Assistive Technology Act of 1998.
    Discussion: We appreciate the commenters' review, support, and 
recommendations. Although some commenters recommended adding the State 
agencies responsible for providing mental health services to the 
required cooperative agreement with the State Medicaid agency and the 
State agency serving individuals with intellectual and developmental 
disabilities, section 101(a)(11)(G) of the Act does not require such an 
agreement and, in fact, is very specific about the entities with which 
the DSU must develop interagency agreements. For this reason, there is 
no statutory basis for us to require the DSUs to enter into formal 
cooperative agreements with the State agencies responsible for 
providing mental health services.
    However, we agree with commenters that it could be beneficial to 
individuals with disabilities to formalize coordination of services 
between the DSUs and the State agencies providing mental health 
services. While final Sec.  361.24(f) does not require a formal 
cooperative agreement, as the commenters suggest, there is nothing in 
the Act or in this section that prohibits a DSU from entering into a 
formal cooperative agreement with the State agencies providing mental 
health services. Furthermore, section 101(a)(11)(K) of the Act, as 
amended by WIOA, and final Sec.  361.24(g) stress the importance of the 
relationship between the DSU and the State agencies providing mental 
health services and requires collaboration between them.
    Similarly, while we agree with commenters that coordination and 
collaboration between DSUs and entities holding section 14(c) 
certificates under the FLSA and Tribal Education Agencies could be 
beneficial for different reasons and we encourage such coordination and 
collaboration, there is no basis under section 101(a)(11) of the Act to 
require this. However, Section 101(a)(11)(H) of the Act and final Sec.  
361.24(d) do require the VR services portion of the Unified or Combined 
State Plan to include an assurance that the State has entered into a 
formal cooperative agreement with each AIVRS grant recipient in the 
State.
    Additionally, the Department does not have the authority under 
section 101(a)(11)(J) of the Act to expand the requirement in final 
Sec.  361.24(i) to include non-State agencies acting as employer 
networks. The Act only requires the DSU to coordinate with State 
agencies serving as employment networks under the Ticket to Work 
program. While final Sec.  361.24(i) does not impose the requirement on 
the DSUs for non-State agencies serving this function, there is nothing 
in the Act or these final regulations that would prohibit a DSU from 
doing so. Similarly, the statute does not provide the authority to 
develop a Federal Partnership Plus agreement in lieu of individual 
State agreements.
    Section 101(a)(11)(I) of the Act and final Sec.  361.24(h) require 
an assurance in the VR portion of the Unified or Combined State Plan 
that the DSU and the lead agency and the entity, if any, implementing 
programs under section 4 of the Assistive Technology Act of 1998 have 
developed working relationships and will enter into agreements for the 
coordination of their activities, including the referral of individuals 
with disabilities to programs and activities described in that section. 
However, the Act does not require that the DSU collaborate with the 
Assistive Technology Act program in developing the VR portion of the 
Unified or Combined State Plan. Therefore, to add this requirement in 
final Sec.  361.24(h), as recommended, is not supported by the Act. 
Also, nothing in the Act precludes a DSU from seeking input from the 
Assistive Technology Act program in the development of the VR portion 
of the Unified or Combined State Plan.
    Changes: None.

Non-Educational Agencies

    Comments: One commenter asked for clarification of non-educational 
agencies and requested examples.
    Discussion: Section 101(a)(11)(C) of the Act, as amended by WIOA, 
and final Sec.  361.24(a) require the DSU to describe in the VR 
services portion of the Unified or Combined State Plan its cooperation 
with, and use of, a variety of entities, including non-educational 
agencies serving out-of-school youth. In response to the commenter, the 
Act does not define non-educational agencies. Therefore, the Act and 
these final regulations maximize flexibility because the DSU is not 
limited to a list that may or may not be applicable in any given State. 
However, we believe that non-educational agencies could include public 
systems such as welfare services, foster care, and the juvenile or 
criminal justice systems serving out-of-school youth. Non-educational 
agencies also could include those State or local agencies that 
administer the youth formula grant program authorized under title I of 
WIOA.
    Changes: None.

Federal Agreements

    Comments: A few commenters asked whether we intend to establish 
working arrangements or agreements with agencies at the Federal level 
to assist States in their efforts to implement proposed Sec.  361.24, 
and one suggestion was made to establish an interagency coordinating 
workgroup to review any working arrangements or agreements with these 
agencies.
    Discussion: The Department already cooperates and works 
collaboratively with its Federal partners. The Act does not provide for 
formal arrangements at the Federal level for the coordination, 
collaboration, and cooperation required by section 101(a)(11) of the 
Act; however, we believe that guidance and technical assistance in the 
development of agreements and cooperative arrangements may be 
beneficial. Where appropriate, the Department will work collaboratively 
with Federal partners to assist States.
    Changes: None.

Guidance on the Braiding of Funds

    Comments: Two commenters suggested that Federal agencies coordinate 
guidance regarding the ways in which various funding streams may be 
braided to help States implement agreements to fully support 
individuals with disabilities. One commenter requested that the 
Department emphasize transparency of coordination efforts to track 
resources to ensure accountability and sustainability.
    Discussion: Each Federal program has its own requirements for the 
expenditure of funds, and States must adhere to those requirements when 
collaborating. Moreover, while the Uniform Guidance, as set forth in 2 
CFR part 200, provides for the braiding and blending of funds, it also 
requires that funds must be spent solely on allowable costs, namely 
those costs permitted under and allocable to that program. A cost is 
allocable to the extent that the program receives a benefit relative to 
the expenditure of those funds (in other words, a proportionate share 
of those expenditures). While the Department exercises oversight of the 
expenditure of funds by DSUs under the Act, we do not have the 
authority to provide guidance related to the expenditure of funds 
provided by other Federal agencies or programs. However, we support 
transparency of coordination efforts to track resources to ensure 
accountability and sustainability.
    Changes: None.

Requirements for Training

    Comments: One commenter suggested including joint training among 
the activities in which the DSU must coordinate with other entities.

[[Page 55663]]

    Discussion: There is no authority under section 101(a)(11) of the 
Act to require the DSUs to add joint training to the activities that 
the DSU must coordinate with other entities, with one exception. Joint 
training is required in section 101(a)(11)(H) with grant recipients 
under the AIVRS program, but not with the other entities in section 
101(a)(11) of the Act.
    Changes: None.

Notification of the Client Assistance Program

    Comments: One commenter suggested that proposed Sec.  361.24 
require that all cooperating agencies notify program participants about 
the CAP in each State.
    Discussion: The suggestion is inconsistent with the Act. Section 20 
of the Act requires only programs and projects providing services under 
the Act, not cooperating agencies, be mandated to notify program 
participants of the CAP. Moreover, section 112 of the Act authorizes 
the CAP to serve only individuals who are applicants or consumers of 
programs funded under the Act. To the extent that a cooperative entity 
is serving an individual who is also an applicant or consumer of a 
program funded under the Act, that individual would already receive 
information about the CAP under section 20 of the Act.
    Changes: None.

Requirements for Third-Party Cooperative Arrangements (Sec.  361.28)

In-Kind Contributions

    Comments: Two commenters agreed with the changes to the prior 
regulation in proposed Sec.  361.28. Many commenters, primarily from 
one State, noted that excluding costs for administrative time and other 
indirect costs paid by third parties as an allowable source of match 
would negatively impact cooperative arrangements between VR agencies 
and their partners.
    One commenter requested that the regulations maintain flexibility 
for States to use in-kind funding contributions from partners to 
augment a State's match and leverage State funding. Another commenter 
expressed concern that as a result of the proposed changes, services 
for students and clients in one program would cease, and that school 
district employees would lose their jobs.
    Discussion: We appreciate the commenters' concerns, and agree that 
eliminating the ability of third-party cooperative agencies from using 
certified personnel time would indeed pose a hardship, but such 
prohibition is not contained in Sec.  361.28, either proposed or final. 
Section 361.28(c), both proposed and final, explicitly permits public 
third-party cooperative agencies to provide match via certified 
personnel time for staff directly providing the vocational 
rehabilitation services under the third-party cooperative arrangement, 
as they have been permitted to do for many years. For example, for a 
school that is the cooperating agency, the cooperating agency may use 
the certified time for the teacher responsible for teaching the 
students under the third-party cooperative arrangement program as a 
permissible source of match since the teacher is directly providing the 
service under the third-party cooperative arrangement. Final Sec.  
361.28(c) does not change the long-standing arrangements that many DSUs 
have with third-party cooperative agencies, such as the schools, with 
regard to certified personnel time. However, not all certified 
personnel time is permissible as a source of match under a third-party 
cooperative arrangement. As stated above, the teacher's time is 
permissible for match purposes under the VR program because he or she 
is directly providing the service, but certified time for other school 
staff such as principals, vice principals, secretaries, and 
supervisors, is not permissible for match purposes under the VR program 
because these individuals do not directly provide vocational 
rehabilitation services. The certified time for these individuals is a 
third-party in-kind contribution as defined in 2 CFR 200.96 and, as 
such, is not permissible source of match for the VR program. While 
final Sec.  361.28(c) is a new provision, the content merely clarifies 
the matching requirements that existed in accordance with Sec.  
361.60(b), which remains virtually unchanged by these final 
regulations. The changes made to this section further clarify the 
allowable sources of match under third-party cooperative arrangements. 
Consequently, we believe that final Sec.  361.28(c) should have little 
or no effect on the services for students and other individuals with 
disabilities served through third-party cooperative arrangements or the 
cooperative agencies and their employees.
    Contrary to what some commenters appear to believe, third-party in-
kind contributions have never been an allowable source of match under 
the VR program, including for purposes of third-party cooperative 
arrangements. Final Sec.  361.60(b)(2), which remains unchanged, 
prohibits the use of third-party in-kind contributions as a source of 
match for the VR program and this prohibition would apply to third-
party cooperative arrangements under the VR program as well. However, 
during monitoring of the VR program, the Department has found that many 
DSUs seem to be unaware of this prohibition, especially in the context 
of third-party cooperative arrangements. For this reason, the 
Department proposed revisions to Sec.  361.28(c), which are maintained 
in these final regulations, to remind DSUs of the allowable sources of 
match for third-party cooperative arrangements. Specifically, these 
sources include cash transfers from the cooperating agency to the DSU 
and certified personnel expenditures of cooperating agency staff who 
directly provide vocational rehabilitation services under the third-
party cooperative arrangement, both of which were proposed in the NPRM. 
In final Sec.  361.28, we have added a new paragraph (c)(3) to specify 
that other direct expenditures incurred under the contract with the 
cooperating agency only for the direct provision of services under the 
third-party cooperative arrangement may be an allowable source of 
match. These expenditures are distinguished from in-kind contributions 
because the expenditures were incurred specifically for the purpose of 
the third-party cooperative arrangement and in accordance with the 
terms and conditions of the contract and within the contract period, 
all of which can be verified by supporting documentation from the 
cooperating agency. For example, if it was necessary for a cooperating 
agency to purchase instructional materials to provide new or expanded 
services authorized under the third-party cooperative arrangement 
contract, and if those materials were not already available to the 
cooperating agency, the expenditures for those materials may be an 
allowable source of match. On the other hand, expenditures for costs 
incurred by the third-party cooperating agency not directly for the 
provision of vocational rehabilitation services, such as, indirect 
costs, depreciation, existing utilities, space and supplies are not an 
allowable source of match because they are third-party in-kind 
contributions as defined in 2 CFR 200.96.
    Changes: We have revised final Sec.  361.28 by adding new paragraph 
(c)(3) to permit other direct expenditures incurred by the cooperating 
agency to be used as a source of match so long as those expenditures 
were incurred specifically for the purpose of the third-party 
cooperative arrangement.

[[Page 55664]]

Students Who Are Eligible or Potentially Eligible for Services

    Comments: One commenter requested that proposed Sec.  361.28(a)(2) 
include services provided by the cooperating agency for students with 
disabilities who are eligible or potentially eligible for services from 
the DSU.
    Discussion: Under final Sec.  361.28(a)(2), which remains unchanged 
from prior regulations, vocational rehabilitation services provided 
under a third-party cooperative arrangement are only available to 
applicants for, or recipients of, services from the VR program. Given 
amendments to the Act made by WIOA, particularly new provisions in 
section 103(b)(7) regarding transition services to groups of students 
and youth with disabilities and section 113 regarding the provision of 
pre-employment transition services to students with disabilities, it is 
possible that some of these services will be provided to youth or 
students with disabilities who have not yet applied or been determined 
eligible for vocational rehabilitation services. This means that these 
students and youth with disabilities would be considered a 
``recipient'' of vocational rehabilitation services for purposes of 
final Sec.  361.28. As such, DSUs could enter into third-party 
cooperative arrangements for the provision of these group transition 
services or pre-employment transition services so long as all 
requirements of final Sec.  361.28 are satisfied.
    Changes: None.

Statewide Assessment; Annual Estimates; Annual State Goals and 
Priorities; Strategies; and Reports of Progress (Sec.  361.29)

Comprehensive Statewide Needs Assessment

    Comments: We received many comments on proposed Sec.  361.29 
pertaining to statewide assessment, annual estimates, goals and 
priorities, strategies, and reports of progress. One commenter 
requested clarification of the role of SRCs in the conduct of a 
comprehensive statewide needs assessment under WIOA.
    Several commenters suggested that we revise Sec.  361.29(a) to 
require that the comprehensive statewide needs assessment be conducted 
independently, thereby helping to ensure that the needs assessment is 
more objective and comprehensive.
    Another commenter requested that we add a requirement to proposed 
Sec. Sec.  361.29(a)(1)(i) and 361.29(b) that the statewide assessment 
include individuals who are working in subminimum wage and sheltered 
employment for employers using section 14(c) certificates issued by the 
Department of Labor under the FLSA. The commenter recommended that 
because States are required to conduct annual reviews of individuals in 
subminimum wage and sheltered employment, the needs of these 
individuals should be added to the assessment requirements under Sec.  
361.29(a).
    Additionally, the commenter stated that States should be required 
to review the quality of supported employment services provided to 
individuals with the most significant disabilities and ensure that any 
employer holding subminimum wage certificates under section 14(c) of 
the FLSA should be able to provide supported employment services. 
Lastly, the same commenter asserted that States should include data on 
individuals working in segregated employment in any reports to RSA.
    Discussion: In response to the comment requesting clarification of 
the role of the SRC, there is no authority under section 101(a)(15) or 
105 of the Act or under title I of WIOA for the SRC to participate in 
the conduct of any needs assessments required by title I of WIOA. The 
activities of the Council are limited to those listed in section 105(c) 
of the Act and final Sec.  361.17(h), both of which remain unchanged by 
WIOA or these final regulations. In general, the SRC's responsibilities 
encompass only functions associated with the conduct of the VR program 
under title I of the Act, not those functions of the VR program as a 
core partner in the workforce development system under title I of WIOA.
    Specifically, section 105(c)(3) and final Sec.  361.17(h)(3) 
authorize the Council to advise the DSU on activities carried out under 
title I of the Act and part 361 and to assist with the preparation of 
the VR services portion of the Unified or Combined State Plan, 
applications, reports, needs assessments, and evaluations required to 
be carried out under title I and part 361.
    We disagree with the recommendation to require that the 
comprehensive statewide needs assessment be conducted independently. 
Final Sec.  361.29(a) mirrors section 101(a)(15)(A) of the Act, which 
does not require that the assessment be carried out independently. On 
the contrary, that provision requires that the DSU and Council jointly 
conduct the assessment every three years. Therefore, there is no 
authority to revise Sec.  361.29(a) as the commenters recommend.
    The contents of the comprehensive statewide needs assessment are 
outlined in section 101(a)(15)(A) of the Act and final Sec.  361.29(a) 
is consistent with the statute. However, nothing in the Act and these 
final regulations prohibits a DSU and Council from conducting a needs 
assessment that includes additional elements, such as the needs of 
individuals in subminimum wage and sheltered employment.
    Changes: None.

Annual Estimates and Reports of Progress

    Comments: One commenter supported the change in proposed Sec.  
361.29 that requires DSUs that have implemented orders of selection to 
estimate and report how many individuals with disabilities are not 
receiving services, asserting this will provide indirect data regarding 
the appropriateness of not implementing an order of selection. One 
commenter requested clarification as to what the Department means by 
the submission of annual estimates ``at such time and in such manner to 
be determined by the Commissioner'' and expressed concern that this was 
not consistent with the continued requirements to submit various annual 
reports and updates. The same commenter suggested that the phrase 
``standards and indicators authorized by Section 106 of the Act'' be 
removed as no longer relevant and that only performance measures 
authorized under WIOA be included.
    Another commenter stated that the requirement under WIOA for the 
increased collection of data would offer evidence of successes and 
challenges across the Nation but would also impose some additional 
costs on the DSUs, which are already struggling under budget 
constraints.
    Additionally, one commenter expressed concerns about the apparent 
lack of annual reporting of progress toward achieving goals and 
priorities, and that once the WIOA system is fully implemented, annual 
reporting should not be such a burden. The commenter requested guidance 
on how best to use data collected under the newly aligned systems to 
maximize fiscal and staff resources.
    One commenter expressed concern that the lack of annual reporting 
to the Department regarding flaws in the delivery system for persons 
with significant disabilities, including those receiving supported 
employment services, could preclude making timely adjustments to 
maximize the opportunity for successful, integrated employment in 
accordance with Section 109 of the Act, as amended by WIOA,

[[Page 55665]]

which allows for ``expanded types of trainings, technical assistance 
and other services DSUs may provide under the VR program, to employers 
who have hired or are interested in hiring individuals with 
disabilities.''
    Discussion: We appreciate the support for the requirement to report 
the numbers of individuals with disabilities who may not be served in 
the event that an order of selection is implemented, as well as the 
other comments expressing concerns and suggestions. In response to the 
comment requesting clarification pertaining to submission of annual 
estimates, ``at such time and in such manner to be determined by the 
Commissioner'' allows the Department to solve a practical problem 
caused by a statutory inconsistency. Section 101(a)(10) requires that 
DSUs collect key data to more effectively manage the VR program and 
ensure that the needs of the program's consumers, including those with 
the most significant disabilities, are met. Many of these data must be 
collected annually, and historically have been submitted as part of 
annual State plan updates. However, under sections 102 and 103 of title 
I of WIOA, the Unified or Combined State Plan is submitted every four 
years, with modifications made at least every two years, as 
appropriate. Therefore, the Secretary may determine it appropriate to 
require the data, which are collected annually by DSUs, to be reported 
only when the State submits a Unified or Combined State Plan or a 
modification to that Plan.
    Although collected data are to be submitted at a time and in a 
manner to be determined by the Secretary, DSUs still must gather and 
analyze required data annually as required by the Act and these final 
regulations. This will allow the agency to respond in a timely manner 
to the needs of all consumers, including those with the most 
significant disabilities who may need supported employment services in 
order to achieve their vocational goals.
    Section 106 of the Act requires that the standards and indicators 
for the VR program must be consistent with the performance 
accountability measures required by section 116 of title I of WIOA for 
all core programs, including the VR program. Therefore, all references 
to standards and indicators throughout the Act and these final 
regulations refer to the performance accountability measures under WIOA 
and the phrase cannot be removed from final Sec.  361.29.
    We address comments associated with any burden resulting from the 
data reporting requirements under section 101(a)(10) of the Act, as 
amended by WIOA, in the Regulatory Impact Analysis section of these 
final regulations. The Departments of Education and Labor will jointly 
issue guidance regarding the alignment of data reporting requirements 
pursuant to the joint regulations governing the performance 
accountability system established under WIOA and published in subpart E 
of part 361.
    Changes: None.

Provision of Training and Services for Employers (Sec.  361.32)

    Comments: While commenters generally appreciated the increased 
emphasis on engagement with employers, some suggested that the 
regulations clarify the types of services and activities in which the 
DSU may engage, and differentiate the roles and responsibilities of the 
DSU and the employer, especially with regard to providing 
accommodations.
    Some commenters acknowledged the importance and need for training 
employers about their obligations under the ADA and about vocational 
rehabilitation services provided through the VR program, such as work-
based learning experiences, pre-employment transition services, 
disability awareness and the needs of individuals with disabilities in 
the workplace.
    A few commenters suggested that the Department recommend some 
actions to engage employers, such as encouraging States to establish 
employer advisory councils at the State, regional, or local level.
    One commenter suggested that proposed Sec.  361.32 was not strong 
enough to prioritize the activities under this section because it 
authorizes, but does not require, an allocation of funding for 
services. The commenter recommended that the Department more heavily 
emphasize the importance of activities under this section.
    Finally, one commenter recommended aligning allowable activities 
under this section with WIOA performance measures regarding 
effectiveness in serving employers and requested guidance on tracking 
data related to services provided to employers and the effectiveness of 
such services.
    Discussion: We appreciate the supportive comments and the 
additional recommendations for implementing the requirements for 
activities DSUs may engage in with employers. Section 109 of the Act, 
as amended by WIOA, describes the activities for which States may pay 
to educate and provide services to employers who have hired, or are 
interested in hiring, individuals with disabilities under programs 
carried out under title I of the Act. However, section 109 of the Act 
does not address prohibited activities or the differentiation of the 
roles and responsibilities of the DSU and the employer, particularly in 
providing accommodations. Section 109(1) only allows the DSU to provide 
training and technical assistance to employers regarding the employment 
of individuals with disabilities, including disability awareness, and 
the requirements of the ADA and other employment-related laws. The 
recommended inclusion of language to describe accommodations that are 
incumbent upon employers to provide does not fall under the purview of 
the Department or within the scope and authority of these regulations. 
Instead, the responsibility of employers for work place accommodations 
is within the jurisdiction of the Equal Employment Opportunity 
Commission, which is charged with the enforcement of title I of the 
ADA.
    Section 109 of the Act, as amended by WIOA, and final Sec.  361.32 
clearly recognize the important role that DSUs can play in increasing 
opportunities for competitive integrated employment for individuals 
with disabilities through the provision of technical assistance and 
training to employers and specify a wide variety of these activities. 
For example, the statute and regulation describe the areas in which 
DSUs may work with employers to provide opportunities for work-based 
learning experiences and pre-employment transition services to recruit 
qualified applicants who are individuals with disabilities, to train 
employees who are individuals with disabilities, and to promote 
awareness of disability-related obstacles to continued employment. 
Furthermore, the Act and final regulation provide that the DSU may 
assist employers through consultation, technical assistance, and 
support related to workplace accommodations, assistive technology, 
facilities and workplace access, and using available financial support 
for hiring or accommodating individuals with disabilities. Given these 
and other examples, we do not believe that it is necessary to include 
additional language in final Sec.  361.32 to further emphasize the 
importance of this technical assistance and training. However, we 
clarify here that the use of the term ``apprenticeships'' in final 
Sec.  361.32 does not include Registered Apprenticeships.
    Although we recognize the value of the DSUs engaging employers 
through activities such as establishing Statewide or regional/local 
level employer advisory councils, section 109 of the Act

[[Page 55666]]

does not require this activity and therefore, we have no statutory 
authority to require this activity in these regulations. However, final 
Sec.  361.24(c) requires States to describe in the VR services portion 
of the Unified or Combined State Plan how the DSU will work with 
employers to identify opportunities for competitive integrated 
employment and career exploration, and to facilitate the provision of 
vocational rehabilitation services.
    We agree that the provision of training and services for employers 
by DSUs is important in accomplishing the purposes of the Act, as 
amended by WIOA; however, final Sec.  361.32 mirrors section 109 of the 
Act, as amended by WIOA, which authorizes, but does not require, the 
expenditure of funds for activities under this section. Therefore, we 
have no authority to require DSUs to incur expenditures under this 
section.
    The Departments of Education and Labor appreciate the comment 
regarding the potential interplay between the activities authorized 
under section 109 of the Act and final Sec.  361.32, and the 
performance indicator for the effectiveness of serving employers 
required by 116(b)(2)(A)(i)(VI) of title I of WIOA. Because the 
measures apply to all core programs in the workforce development 
system, not just the VR program, we have addressed this comment in the 
joint final regulations implementing the performance accountability 
measures under section 116 of WIOA, and published elsewhere in this 
issue of the Federal Register.
    Changes: None.

Innovation and Expansion Activities (Sec.  361.35)

Resource Plans for Statewide Independent Living Councils

    Comments: Many of the commenters opposed the changes in proposed 
Sec.  361.35(a)(3) which requires the State to assure that it will 
reserve and use a portion of its VR program funds to support the 
funding of the Statewide Independent Living Council (SILC), consistent 
with the plan prepared jointly by the Council and the State under 
section 705(e)(1). The commenters contend that WIOA did not amend 
section 101(a)(18)(A)(ii)(I) of the Act and therefore, the Department 
should not change its regulation and allow the State and the SILC to 
determine not to use I&E funds. The commenters further stated that any 
change to Sec.  361.35 would harm CILs by diverting funds from the SILS 
program under Part B of title VII if I&E funds are not used. Some other 
commenters opposed proposed Sec.  361.35 allowing innovation and 
expansion funds to be used at all to support SILC resource plans to the 
extent needed, arguing that other funding sources are available.
    A few commenters requested clarification as to when the DSU uses 
I&E funds to support the SILC. Of these, one commenter indicated that 
the DSU, in the commenter's State, has supported the SILC with 
innovation and expansion funds and would likely continue to do so 
unless there is a change in the designated State entity (DSE), the 
State agency responsible for the administration of the independent 
living programs authorized under title VII of the Act, as amended by 
WIOA.
    Discussion: We appreciate the concerns expressed by commenters. In 
proposed Sec.  361.35, we attempted to set forth our long-standing 
interpretation of the statutory language in section 
101(a)(18)(A)(ii)(II) that a State's contribution of innovation and 
expansion funds to the SILC resource plan is governed by the resource 
plan's description of support for the SILC. We consistently have 
interpreted the statutory requirement in section 101(a)(18)(A)(ii)(II) 
that the funding of the SILC be consistent with the SILC resource plan 
to mean that the State and the SILC may decide to use innovation and 
expansion funds to support the SILC resource plan, or not to do so as 
they determine how they will use the sources of funding available under 
section 705(e) to support the SILC.
    Our data shows that States and SILCs have been using innovation and 
expansion funds to support SILC resource plans in this way for many 
years. Based upon an analysis of the data from all of the State Plans 
for Independent Living for the period FY 2014 through FY 2016, we found 
that innovation and expansion funds account for 38 percent of the 
roughly $8.7 million contributed by States to SILC resource plans. We 
found that only 32 States contributed innovation and expansion funds to 
the SILC resource plan. Of these 32 States, 13 States used only 
innovation and expansion funds to support the SILC.
    However, because the innovation and expansion section of the Act 
remained unchanged by WIOA and our proposed regulation sparked 
confusion among many commenters, we have decided to return to the 
current regulation which mirrors the statutory language requiring that 
the reservation and use of the innovation and expansion funds to 
support the funding of the SILC be consistent with the SILC resource 
plan. We continue to interpret the current regulation, as we always 
have, that the State and the SILC determine in the SILC resource plan 
which sources and amounts of available funding, including innovation 
and expansion funding, will be used in the SILC resource plan, and then 
the State reserves and uses the innovation and expansion funding to 
support funding of the SILC, consistent with the SILC resource plan.
    Changes: We have revised final Sec.  361.35(a)(3) to substitute the 
language of the current regulation, with conforming edits, for the 
language in the proposed regulation.

Innovative Approaches With Components of the Workforce Development 
System

    Comments: None.
    Discussion: Section 101(a)(18)(A)(i) of the Act and final 
361.35(a)(1) require the designated State unit to develop and implement 
innovative approaches to improve vocational rehabilitation services to 
individuals with disabilities that are consistent with the 
comprehensive statewide needs assessment and the State's goals and 
priorities. To support the alignment of the VR program with the 
workforce development system as emphasized throughout the Act and these 
final regulations, we clarify that these innovative approaches may 
include activities and partnerships with components of the workforce 
development system.
    Changes: None.

Ability To Serve All Eligible Individuals; Order of Selection for 
Services (Sec.  361.36)

Individuals Who Require Specific Services and Equipment To Maintain 
Employment

    Comments: Most commenters supported proposed Sec.  361.36(a)(3)(v), 
which permits the DSU to elect to serve eligible individuals who 
require specific services or equipment to maintain that employment, 
whether or not those individuals are receiving vocational 
rehabilitation services under the order of selection. The commenters 
stated that this proposed change from the prior regulations will better 
serve the needs of individuals with disabilities who are at risk of 
losing their jobs by allowing the DSU an opportunity to serve them 
outside an order of selection, as appropriate.
    A few commenters expressed concern that proposed Sec.  
361.36(a)(3)(v) would allow individuals with less significant 
disabilities to be served before individuals with significant or the 
most significant disabilities. A few commenters also questioned whether 
this new provision applies only to

[[Page 55667]]

individuals with the most significant disabilities. In addition, a few 
commenters stated that providing specific services or equipment to 
eligible individuals who do not meet the order of selection should be 
mandatory to ensure that they are able to maintain their employment.
    Conversely, a few commenters suggested that the DSU should not be 
required to use this authority at all. One commenter suggested that a 
DSU should not be required to state its intent to use the authority in 
the vocational rehabilitation services portion of the Unified or 
Combined State Plan. One commenter requested clarification of the term 
``immediate need,'' which the Department used in explaining the 
proposed provision in the preamble of the NPRM.
    Discussion: We appreciate the comments supporting the flexibility 
afforded to DSUs in Sec.  361.36(a)(3)(v). We also recognize the need, 
as expressed by some commenters, for clarification of this exemption 
from the order of selection.
    Final Sec.  361.36(a)(3)(v), which implements section 101(a)(5)(D) 
of the Act, applies to those specific services or equipment that an 
individual needs to maintain current employment. The regulation does 
not apply to other services an individual may need for other purposes. 
In other words, if an individual is receiving services and equipment 
from a DSU under this exemption, the individual is within the order of 
selection for the purpose of receiving any other vocational 
rehabilitation services not covered by the exemption. This means that 
if the individual needs services that are not directly tied to 
maintaining current employment, the individual's ability to receive 
those services from the VR program depends on the individual's 
placement in the State's order of selection.
    As to whether and how the DSU may exercise its authority under 
final Sec.  361.36(a)(3)(v), that section applies to all eligible 
individuals, not just those with the most significant disabilities. It 
is possible that individuals with less significant disabilities would 
receive vocational rehabilitation services before individuals with 
significant or the most significant disabilities. The Act, as amended 
by WIOA, gives the DSU the option to provide services and equipment to 
individuals at immediate risk of losing employment outside the 
established order, and the DSU should consider doing so if financial 
and staff resources are sufficient. If the DSU elects to do so--again, 
the exercise of the authority is not mandatory--section 101(a)(5)(D) of 
the Act requires that it indicate this in the VR services portion of 
the Unified or Combined State Plan.
    The term ``immediate need'' in the Summary of Proposed Changes 
section of the NPRM has its common meaning, and it remains the same. 
The phrase means that the eligible individual would almost certainly 
lose his or her current job if not provided specific services or 
equipment in the very near future that would enable him or her to 
retain that employment.
    Changes: None.

Information and Referral

    Comments: One commenter sought clarification about referring 
individuals to other programs under proposed Sec.  361.37 for specific 
services or equipment necessary to help them retain employment, as well 
as other services that cannot be provided under proposed Sec.  
361.36(a)(3)(v). This commenter further suggested that if an individual 
is referred elsewhere for specific services or equipment necessary to 
maintain employment, the DSU should follow up to ensure the necessary 
services were delivered.
    Discussion: If the individual is placed into a closed category of 
that order, under sections 101(a)(5)(E) and 101(a)(20) of the Act, and 
final Sec. Sec.  361.36(a)(3)(iv)(B) and 361.37(a)(2), the DSU must 
refer the individual to other programs and providers for those services 
not covered by the exemption. These provisions require a DSU to assure 
in the VR services portion of the Unified or Combined State Plan that 
individuals who do not meet the order of selection criteria will have 
access to an information and referral system through which the DSU will 
refer them to other appropriate Federal and State programs, including 
other components of the statewide workforce development system.
    However, neither section 101(a)(5)(E) nor 101(a)(20) requires the 
DSU to follow up with the programs to which the individuals are 
referred, and we have no authority to do so either. While we agree this 
is a best practice, we also recognize the administrative burden the 
requirement would impose on the DSU.
    Changes: None.

Monitoring by the State Rehabilitation Council

    Comments: A few commenters proposed that Sec.  361.36(f)(4) allow 
the SRC to monitor the use of this authority by the DSU and ensure that 
individuals with the most significant disabilities are still 
prioritized for vocational rehabilitation services. A few other 
commenters also suggested that the SRC be involved in monitoring the 
use of the new provision but did not propose any additional regulatory 
language.
    Discussion: Section 105(c) of the Act, which sets forth the 
functions of the SRC, does not authorize it to monitor the DSU's 
exercise of the order of selection exemption. Rather, section 107(a)(1) 
of the Act requires the Department to monitor the DSUs.
    However, under section 105(c)(1)(A) of the Act and final Sec.  
361.17(h)(1)(i), the SRC is tasked with reviewing, analyzing, and 
advising the DSU about the order of selection and the discretion to 
exercise the authority set forth in section 101(a)(5)(D) of the Act and 
final Sec.  361.36(a)(3)(v). In addition, the SRC has the opportunity 
to review and comment on the DSU's intent to use the authority under 
Sec.  361.36(a)(3)(v) when the SRC reviews the DSU's order of selection 
policies under final Sec.  361.36(f) and when the SRC advises and 
assists the DSU in the preparation of the VR services portion of the 
Unified or Combined State Plan under final Sec.  361.17(h)(3).
    Changes: None.

Order of Selection Criteria

    Comments: A few commenters suggested that the DSU develop a 
``meaningful'' order of selection to ensure that individuals with the 
most significant disabilities receive vocational rehabilitation 
services. One commenter suggested that the order of selection be based 
on something other than the refinement of the three criteria in the 
definition of ``individual with a significant disability'' in Sec.  
361.5(c)(30).
    Discussion: Section 101(a)(5) of the Act remained unchanged by 
WIOA, except for the addition of section 101(a)(5)(D) permitting the 
DSU to exercise its discretion to provide specific services and 
equipment to individuals, who are at risk of immediate job loss, 
outside the order of selection. Therefore, there is no authority to 
further amend final Sec.  361.36 to require the DSU to establish a 
``meaningful'' order of selection or to permit the order of selection 
to be based on criteria other than those included in the definition of 
an ``individual with a significant disability'' in final Sec.  
361.5(c)(30).
    Changes: None.

Prohibited Factors

    Comments: Some commenters questioned whether the proposed Sec.  
361.36 is consistent with the requirement in Sec.  361.42(c)(2)(ii)(D), 
which prohibits the DSU from considering an applicant's particular 
service needs, the anticipated cost of

[[Page 55668]]

services required by an applicant, or the income level of an applicant 
and applicant's family. Other commenters indicated that the proposed 
Sec.  361.36 aligns with Sec.  361.42(a)(1)(iii), which permits the DSU 
to provide vocational rehabilitation services to eligible individuals 
who require services in order to retain their employment.
    Discussion: For States operating under an order of selection, the 
DSU must determine eligibility under final Sec.  361.42 prior to 
assigning eligible individuals to any priority category. WIOA did not 
change this requirement. Therefore, under final Sec.  
361.42(c)(2)(ii)(D) an applicant's particular service needs (including 
those services necessary to maintain current employment) are not 
considered in determining eligibility. The order of selection exemption 
in final Sec.  361.36(a)(3)(v) applies only after an individual has 
been determined eligible. Consequently, the eligible individual would 
be exempt from the order of selection for the purpose of receiving 
services necessary to maintain employment.
    Changes: We have made a technical amendment to Sec.  
361.36(d)(2)(vi) to reflect the exemption set forth in Sec.  
361.36(a)(3)(v).

Pre-Employment Transition Services

    Comments: Some commenters raised various concerns, posed questions, 
or sought clarification about pre-employment transition services, 
including serving students with disabilities who may not have applied 
or been determined eligible for vocational rehabilitation services.
    Discussion: We address these comments in the Pre-Employment 
Transition Services (Sec.  361.48(a)) section elsewhere in this 
Analysis of Comments and Changes.
    Changes: None.

Information and Referral Programs (Sec.  361.37)

Benefits Planning

    Comments: Most of the comments received on this regulation were in 
support of the changes to the prior regulation in proposed Sec.  
361.37, while some suggested further revisions. A few of these 
commenters suggested that Sec.  361.37 specify to whom referrals are 
made for benefits planning for individuals with disabilities receiving 
Social Security benefits under title II or title XVI of the Social 
Security Act.
    Discussion: We appreciate the comments supporting the changes to 
Sec.  361.37 and the comments suggesting further revisions. Section 
361.37(b)(5), both proposed and final, which requires the DSU to refer 
individuals who do not choose to seek an employment outcome under the 
VR program to the SSA for information about receiving benefits while 
employed, has remained unchanged from the VR program regulations that 
were published in 2001. While section 102(b)(2) of the Act, as amended 
by WIOA, requires the DSU to provide information about benefits 
planning to individuals with disabilities receiving Social Security 
benefits, it does not mandate the DSUs to make related referrals to any 
one agency or organization for this service. Some DSUs have the 
capacity to provide this information in-house, whereas others may need 
to refer individuals to other programs or entities. As such, and 
because the needs of the individuals requiring these services also 
vary, we believe it best serves DSUs and individuals with disabilities 
not to require a specific referral program in final Sec.  361.37. For 
the same reason, we have not specified other entities to which DSUs may 
refer individuals with disabilities for any other type of service.
    Changes: None.

Referral Options

    Comments: One commenter suggested that a list of all options for 
referrals be included in proposed Sec.  361.37. Another commenter 
suggested that referral options may not be available in certain 
geographical areas of the State. The commenter also noted the dilemma 
facing DSU personnel if it is known, before a referral is made, that 
individuals with disabilities are unlikely to receive services from 
other programs in the State.
    Discussion: We do not believe it is possible or practicable to 
include a list of all referral options in final Sec.  361.37 because 
the Federal, State, and local agencies, as well as non-profit 
organizations that serve individuals with disabilities vary widely from 
State to State. In addition, DSUs are most familiar with the referral 
option in their State and we would not want them to believe these 
options were limited by the inclusion of a list in final Sec.  361.37. 
However, we clarify that these referral options include one-stop 
centers as components of the workforce development system.
    If referral options are not available in a geographic location or 
if a referral will not result in the individual with a disability 
receiving services, we encourage DSUs to continue to build partnerships 
with a broader set of appropriate Federal and State programs, including 
other components of the statewide workforce development system, to 
ensure effective referral options are available in the State. DSUs 
should not make referrals to other programs unless there is an 
expectation that the individual with a disability will benefit from the 
referral.
    Changes: None.

Follow-Up

    Comments: One commenter suggested that DSUs be required to follow-
up on referrals made to other programs to verify that individuals with 
disabilities are receiving the services for which they were referred.
    Discussion: The Act, as amended by WIOA, does not require a DSU to 
follow-up on the referrals it makes to other programs. Therefore, we 
have not made the suggested revision. While we agree with commenters 
that this is a best practice, we also recognize the administrative 
burden the requirement would impose. However, the criteria for 
appropriate referrals in final Sec.  361.37(c) is designed to ensure 
effective referrals for individuals with disabilities.
    Changes: None.

Independent Living Services

    Comments: A few commenters suggested that there may be difficulty 
in referring individuals with disabilities for independent living 
services if the DSU is not the same entity administering the 
independent living programs authorized under title VII of the Act, as 
amended by WIOA. One commenter stated that the Department would need to 
partner with the Department of Health and Human Services when referrals 
are made for independent living services.
    Discussion: We acknowledge that some States may establish a 
designated State entity (DSE) responsible for administering the 
independent living programs, which is separate from the DSU for the VR 
program. However, this should not inhibit referrals between the VR and 
independent living programs as required in final Sec.  361.37(b). In 
these circumstances, we encourage the DSU to partner with the DSE to 
develop effective referral policies and procedures to enable 
individuals with disabilities to access both programs. The Department 
intends to support these partnerships in the State through technical 
assistance developed and delivered jointly with the Department of 
Health and Human Services, which now administers the SILS program and 
the CIL program.
    Changes: None.

Protection, Use, and Release of Personal Information (Sec.  361.38)

    Comments: None.

[[Page 55669]]

    Discussion: We anticipate that other Federal and State agencies, 
and researchers will have an increased interest in using the data 
required to be collected by core programs in the workforce development 
system, including the VR program, under section 116(b) of title I of 
WIOA. Section 116(b) of WIOA requires DSUs to collect significantly 
more personal information than was required previously under section 
101(a)(10) of the Act and prior Sec.  361.40. Therefore, after further 
Departmental review, we have strengthened the protection of the 
confidentiality of this information by requiring in final Sec.  361.38 
that DSUs enter into written agreements with any entity seeking access 
to personal information collected under the VR program for the purpose 
of audits, evaluations, research, or for other program purposes. We 
understand that DSUs already enter into such written agreements and the 
revisions to final Sec.  361.38 will not represent a change in 
practices under the VR program.
    Changes: We have revised final Sec.  361.38(a), (d), and (e) by 
requiring that DSUs enter into written agreements with other 
organizations and entities receiving personal VR program information 
during the conduct of audits, evaluations, research, and for other 
program purposes.

Reports; Evaluation Standards and Performance Indicators (Sec.  361.40)

    We received numerous comments on proposed reporting requirements 
under Sec.  361.40, including the collection and reporting of data on 
students with disabilities receiving pre-employment transition 
services, evaluation standards and performance indicators under section 
106 of the Act, common performance accountability measures under 
section 116 of WIOA, and the timeframe for implementation of reporting 
requirements. We also received comments on burden estimates that were 
included in the Regulatory Impact Analysis of the NPRM. While one 
commenter supported the collection of new data elements required under 
section 101(a)(10) of the Act and implemented in Sec.  361.40(a) of 
these final regulations, in general, commenters expressed concerns or 
requested additional clarification concerning the collection and 
reporting of data. We address these comments under the subheadings 
below.

Pre-Employment Transition Services

    Comments: We received several comments on the reporting of data on 
students with disabilities receiving pre-employment transition services 
under proposed Sec.  361.40(a)(1)(ii). One commenter noted that States 
may opt to track funding and services for students receiving pre-
employment transition services in different ways, depending on factors 
such as staffing patterns, order of selection wait list considerations, 
and counselor caseload sizes. One commenter expressed the opinion that 
there are more effective ways to track the expenditures from the 15 
percent of the VR program allotment reserved for the provision of pre-
employment transition services than collecting individual case 
information for each student receiving these services.
    A few commenters requested guidance about the specific data 
elements that will be required for students who are receiving pre-
employment transition services and are applicants, or potentially 
eligible, for vocational rehabilitation services. Another commenter 
asked what additional data will be needed for purposes of performance 
accountability reporting pursuant to section 116 of WIOA once the 
student becomes a participant under the VR program.
    Finally, one commenter requested clarification and guidance about 
the interplay between the data required to be reported under Sec.  
361.40(a), collected through the Case Service Report (RSA-911), and the 
content of the VR services portion of the Unified or Combined State 
Plan regarding the number of students who are receiving pre-employment 
transition services.
    Discussion: We appreciate the concerns expressed regarding the new 
data reporting requirements in final Sec.  361.40(a) related to the 
provision of pre-employment transition services to students with 
disabilities. We agree with commenters that it is reasonable to 
anticipate an increase in the number of individuals that will need to 
be reported through the RSA-911. Prior to the enactment of WIOA, DSUs 
could only serve, and thus report, individuals who were applicants or 
eligible individuals under the VR program. However, section 113 of the 
Act, as added by WIOA, requires DSUs to provide pre-employment 
transition services to all students potentially eligible for vocational 
rehabilitation services who need such services, regardless of whether 
they have applied and been determined eligible for vocational 
rehabilitation services. This change is likely to result in a 
significant increase in the number of individuals reported under the 
RSA-911.
    Students with disabilities who are not yet served under an 
individualized plan for employment and who receive pre-employment 
transition services are not considered ``participants'' as that term is 
defined under the joint final regulations for performance 
accountability purposes published elsewhere in this issue of the 
Federal Register. However, students with disabilities receiving pre-
employment transition services are considered ``reportable 
individuals'' for RSA-911 reporting and WIOA performance purposes, 
regardless of whether they have applied for vocational rehabilitation 
services or are receiving these services under an individualized plan 
for employment. This does not, however, preclude a DSU from serving an 
eligible student with a disability under an individualized plan for 
employment. Once the student has begun receiving services under a 
signed individualized plan for employment, he or she will be counted as 
a participant and included in the applicable performance indicator 
calculations. At the point the student with a disability becomes a 
participant, all the applicable RSA-911 data elements will be collected 
and reported in the individual's RSA-911 case record.
    We have identified and defined the specific data elements needed 
for all students with disabilities receiving pre-employment transition 
services in the RSA-911 instructions. We believe this will reduce 
collection and reporting burden to the maximum extent possible, and 
prevent a requirement for collecting specific information that would 
otherwise result in an application for services for students with 
disabilities who have not intended to apply for these services.
    In addition to the tracking necessary to demonstrate compliance 
with the requirement to reserve at least 15 percent of the State's VR 
allotment for providing pre-employment transition services, under 
section 110(d) of the Act, as amended by WIOA, and final Sec.  
361.65(a)(3), section 101(a)(10) of the Act requires DSUs to have a 
mechanism to report the number of students with disabilities receiving 
these services. We recognize the burden this will place on DSUs and we 
have included a specific, but limited, set of data elements in the RSA-
911 to enable DSUs to report the number of students with disabilities 
receiving these services, including both those who have been determined 
eligible for vocational rehabilitation services and those who have not 
applied for vocational rehabilitation services. For further information 
regarding the specific data elements DSUs are required to report 
regarding students receiving pre-employment transition services, see 
the RSA-911 data collection instrument published elsewhere in this 
issue of the Federal

[[Page 55670]]

Register. We believe DSUs should use these data, along with other 
information (such as that obtained through the comprehensive statewide 
needs assessment required under section 101(a)(15)(A) of the Act, as 
amended by WIOA, and final Sec.  361.29(a)), when developing the VR 
services portion of the Unified or Combined State Plan, including the 
goals and strategies related to the provision of pre-employment 
transition services under sections 101(a)(15)(C) and (D) of the Act, as 
amended by WIOA, and final Sec.  361.29(c) and (d).
    Changes: None.

Standards and Indicators

    Comments: With respect to proposed Sec.  361.40(b), a few 
commenters requested that we add indicators to the evaluation standards 
and performance indicators. Of these, a few requested that separate 
indicators be added for transition services to students and youth with 
disabilities and for services to youth with disabilities. One commenter 
expressed the concern that students with disabilities will not be 
counted as participants or included in the performance indicators, 
thereby eliminating a large number of vocational rehabilitation 
consumers from the performance measures. This commenter recommended 
that we establish new performance indicators for students with 
disabilities receiving pre-employment transition services. Another 
commenter requested we add performance indicators aligned with 
evidence-based practices that promote individuals with disabilities 
entering the labor force. One commenter requested that we include 
additional performance indicators in these final regulations rather 
than add them later through an information collection request. Another 
commenter asked if the Department would continue using the evaluation 
standards and performance indicators in prior Sec. Sec.  361.80 through 
361.89 as Federal reporting requirements under the VR program. Finally, 
one commenter requested that we limit the data selected to only that 
required to determine the performance accountability measures under 
section 116 of WIOA.
    Discussion: Section 106 of the Act, as amended by WIOA, makes the 
VR program subject to the common performance accountability measures, 
established in section 116 of title I of WIOA, which are applicable to 
all core programs of the workforce development system. Therefore, we 
have removed prior Sec.  361.80 through Sec.  361.89, which established 
the evaluation standards and indicators in use by the VR program prior 
to the enactment of WIOA. Final Sec.  361.40(b) includes a cross 
reference to the joint performance accountability regulations developed 
by the Departments of Labor and Education in subpart E of final part 
361.
    Section 106 of the Act, as amended by WIOA, does not provide 
additional VR program-specific performance accountability measures. 
However, consistent with section 116(b)(1)(A)(ii) of title I of WIOA, 
section 106(a)(2) permits States, but not the Department, to establish 
and provide information on additional performance accountability 
indicators. States must identify any additional performance indicators 
in the Unified or Combined State Plan. Under this section, States could 
opt to include additional performance indicators, including any or all 
of the additional performance measures recommended by commenters or the 
evaluation standards and performance indicators set forth in prior 
Sec. Sec.  361.80 through 361.89.
    In addition, section 101(a)(10)(A) of the Act requires that, in the 
VR services portion of the Unified or Combined State Plan, the State 
assures that it will submit certain reports in the form and level of 
detail and at the time required by the Secretary. Regarding applicants 
for, and eligible individuals receiving, services, these reports must 
provide the wide variety of data specified in section 101(a)(10)(C), as 
well as data related to the evaluation standards and indicators in 
section 106 of the Act, which are the performance accountability 
indicators in section 116(b) of title I of WIOA. Therefore, there is no 
statutory authority to limit the data reported by DSUs through the RSA-
911 to those data needed for the performance accountability indicators 
applicable to the core programs under WIOA, as recommended.
    Changes: None.

Program Year

    Comments: One commenter requested that the Department use the 
program year under title I of WIOA, instead of the fiscal year, for the 
operation of the VR program in order to better align the program with 
the performance data required under section 116 of WIOA.
    Discussion: We understand the concern expressed by commenters and 
the potential confusion that may result because the annual award and 
financial reporting cycle for the VR program is no longer aligned with 
the State planning and performance reporting cycle required under title 
I of WIOA. The VR program is a current-funded program for which 
Congress appropriates annual funds to be obligated consistent with the 
Federal fiscal year and section 110(a)(2)(A) of the Act, which 
specifies the manner in which allotments are to be made. As noted in 
the Submission, Approval, and Disapproval of the State Plan (Sec.  
361.10) section earlier in this preamble, section 110(a)(2)(A) of the 
Act, which was not amended by WIOA, requires that allotments be made 
for each fiscal year beginning on or after October 1, 1978. We 
interpret section 110(a)(2)(A) of the Act to require that VR program 
allotments coincide with the Federal fiscal year. Thus, we cannot 
change the year under which the VR program operates in order to align 
it with the July 1 through June 30 program year for submission of the 
VR services portion of the Unified or Combined State Plan and the 
reporting of performance data required under final Sec.  361.40. States 
will continue to receive VR program allotments and report fiscal data 
through the Financial Status Report (SF-425) and the VR program Cost 
Report (RSA-2) in accordance with the Federal fiscal year.
    Changes: None.

Performance Accountability Regulations

    Comments: One commenter recommended that we include the joint 
performance regulations in proposed Sec.  361.40.
    Discussion: We disagree with the recommendation. The extent and 
detail of the joint regulations governing the performance 
accountability system under section 116 of title I of WIOA makes it 
necessary to include them in a separate subpart of these final 
regulations. For the convenience of the reader, we grouped this subpart 
E with subparts D and F, which set forth the joint final regulations 
implementing requirements for unified and combined planning and the 
one-stop delivery system, respectively, of WIOA. We believe it is 
sufficient to include a cross reference to subpart E in final Sec.  
361.40(b).
    Changes: None.

Cumulative Caseload Report (RSA-113)

    Comments: We received two comments regarding the VR program's 
Cumulative Caseload Report (RSA-113). One commenter asked whether we 
intend to make changes to this data collection instrument and requested 
that we provide guidance on these changes. Another commenter suggested 
that the Department discontinue use of the RSA-113 because it is 
redundant with data reported through the revised RSA-911.
    Discussion: We do not intend to make changes to the currently 
approved RSA-113 or the instructions for its submission. At this time, 
we use the

[[Page 55671]]

data reported through the RSA-113, the only source of quarterly VR 
program data, for program management purposes and to support budget 
requests for the VR program. However, we intend to reduce the reporting 
burden on the States by discontinuing use of the RSA-113 when DSUs are 
able to report similar data through the RSA-911 on a quarterly basis. 
When appropriate, the Department will provide guidance to DSUs 
regarding reporting changes.
    Changes: None.

States With Two VR Agencies

    Comments: One commenter asked whether, in States with two VR 
agencies, those agencies that serve individuals who are blind and 
visually impaired would establish levels of performance for purposes of 
the performance accountability indicators under section 116 of title I 
of WIOA separate from those established by agencies serving individuals 
with all other disabilities. Another commenter expressed concern that 
VR agencies serving individuals who are blind and visually impaired 
would be required to establish separate levels of performance due to 
the relatively low number of individuals served by these agencies and 
the high variance in outcomes.
    Discussion: Section 116(b)(3)(A)(iii) of title I of WIOA requires 
States to identify, in their Unified or Combined State Plans, expected 
levels of performance for the performance indicators for the first two 
years covered by their plans. Because this section, as well as all 
other provisions of section 116 of WIOA pertinent to the establishment 
of levels of performance for the performance accountability indicators, 
refers to the ``State,'' States must establish the expected levels of 
performance using State-level, not VR agency-level, data. Therefore, in 
States with more than one VR agency, the agencies must work together to 
identify expected levels of performance that take into account their 
individual performance. We will monitor each agency's performance on 
the performance accountability indicators and their contributions 
toward achieving the adjusted levels of performance through a review of 
the data reported on the RSA-911 and during periodic reviews in 
accordance with section 107 of the Act. See the Analysis of Comments 
and Changes section of the joint performance regulations published 
elsewhere in this issue of the Federal Register for a more detailed 
discussion about setting expected levels of performance and adjusted 
levels of performance.
    Changes: None.

Reporting Burden

    Comments: We received numerous comments on the Department's burden 
estimates, all of which stated that we underestimated the costs 
associated with the reporting of data under proposed Sec.  361.40 
described in the Regulatory Impact Analysis section of the NPRM. In 
particular, commenters raised concerns about estimates of the amount of 
time needed for the collection of new data and the quarterly reporting 
of individual data on all open service records, as well as the cost of 
changes to State management information systems. Some of these 
commenters stated that the proposed new reporting requirements will 
create a burden on the financial and personnel resources of the agency. 
One commenter noted that documenting and tracking the number of 
potentially eligible students with disabilities would be burdensome and 
costly considering the number of potentially eligible students is 
staggering when compared to the number of transition-age consumers 
previously served by the DSUs.
    Discussion: We recognize that proposed new data collection and 
reporting requirements, including data on students with disabilities 
receiving pre-employment transition services, will have an impact on 
the financial and personnel resources of the agency. However, the 
collection and reporting of such data are required by the amendments 
made by WIOA to section 101(a)(10) of the Act. In addition, the 
collection and reporting of data regarding the number of students with 
disabilities receiving pre-employment transition services and the costs 
of these services will enable the Department and the States to better 
track the use of VR program funds that must be reserved for the 
provision of these services.
    In response to the comments regarding the burden associated with 
the reporting of data under final Sec.  361.40 and as a result of 
further Departmental review, we have adjusted the burden estimates as 
described in the Regulatory Impact Analysis section of the preamble of 
these final regulations. Comments pertaining to specific estimates of 
reporting burden included in the Regulatory Impact Analysis of the NPRM 
are addressed in the Regulatory Impact Analysis of these final 
regulations. No changes are needed to the regulatory text of final 
Sec.  361.40.
    Changes: None.

RSA-911 Case Service Report

    Comments: We received comments related to the definitions of data 
elements, the reporting of Social Security numbers, the reliability of 
data, the data elements used to report services to employers, the 
reporting of barriers to employment as required by section 116 of title 
I of WIOA, and the timelines by which States must report data required 
for the performance accountability indicators.
    Discussion: We discuss comments related to the manner in which the 
data are required to be reported under final Sec.  361.40(a) and (b) 
through the RSA-911 in the supporting statement for this data 
collection instrument published elsewhere in this issue of the Federal 
Register, and under the joint performance accountability system final 
regulations, also published elsewhere in this issue of the Federal 
Register, as appropriate.

Assessment for Determining Eligibility and Priority for Services (Sec.  
361.42)

Advancing in Employment and Other Eligibility Criteria

    Comments: Many commenters expressed strong support for proposed 
Sec.  361.42(a)(1)(iii) permitting an applicant to be eligible if he or 
she requires vocational rehabilitation services to advance in 
employment and meets all other eligibility criteria. However, some of 
these commenters requested clarification regarding the effect of the 
regulation when an individual is unable to advance in employment due to 
his or her disability. These commenters also asked whether advancing in 
employment refers only to the individual's current employment, or if it 
extends to preparations, including graduate education services, for 
advancing in future employment. A few commenters requested 
clarification about whether a DSU would be required to support the 
pursuit of a graduate degree by an individual already employed 
successfully in a competitive integrated environment and about how 
financial need shall be assessed.
    Some commenters expressed concern that the term ``advance in 
employment'' was too vague and that it would be difficult to know when 
an individual has achieved his or her goal since one can always advance 
in employment to some degree. These commenters also expressed concerns 
that serving more individuals who want to advance in employment could 
force a DSU to implement an order of selection. Some commenters 
suggested that the regulations should clarify that advancement in 
employment should be explicitly linked to the individual's impairment, 
rather than broader developmental needs.

[[Page 55672]]

    A few commenters inquired whether the proposed changes in Sec.  
361.1, which establishes the purpose of the VR program, affect the 
determination of eligibility under Sec.  361.42. These commenters 
expressed concern that the deletion of the term ``gainful employment'' 
in proposed Sec.  361.1 could be misconstrued as disallowing entry 
level employment as a vocational goal. A few commenters asked whether 
the new emphasis on self-sufficiency and competitive integrated 
employment means that those who apply for vocational rehabilitation 
services intending only to work part-time will be a lower priority for 
the purpose of determining eligibility.
    Discussion: We appreciate the strong support for the changes in 
final Sec.  361.42. We also understand the need for clarification.
    Section 102(a)(1)(B) of the Act, as amended by WIOA, allows for an 
individual with a disability, whose physical or mental impairment 
constitutes a substantial impediment to employment, to be determined 
eligible for vocational rehabilitation services if he or she requires 
services to prepare for, secure, retain, advance in, or regain 
employment. By adding the phrase ``advance in,'' section 102(a)(1)(B) 
of the Act, as amended by WIOA, reinforces the Department's long-
standing commitment that the VR program must provide comprehensive 
services to assist individuals with disabilities to achieve their 
maximum vocational potential. The VR program is not intended solely to 
place individuals with disabilities in entry-level jobs but rather to 
assist them to obtain appropriate employment, given their unique 
strengths, resources, priorities, concerns, abilities, capabilities, 
and informed choice. The VR program's purpose is the same regardless of 
whether an individual wants to advance in employment or obtain 
employment. We disagree with the commenter that the provision of 
vocational rehabilitation services to assist an individual to advance 
in employment should be limited to disability needs rather than other 
needs or desires. The extent to which DSUs should assist eligible 
individuals to advance in their careers by providing vocational 
rehabilitation services depends upon whether the individual has 
achieved employment that is consistent with this standard. The DSU's 
assistance could include, as appropriate for the individual, graduate-
level postsecondary education, if necessary to achieve the advancement 
in employment specified in the vocational goal on the individual's 
approved individualized plan for employment. All other eligibility 
criteria still apply to applicants seeking to advance in employment.
    Consistent with long-standing Department policy, we interpret the 
phrase ``advance in employment,'' as used in section 102(a)(1)(B) of 
the Act and final Sec.  361.42(a)(1)(iii), broadly to include 
advancement within an individual's current employment or advancement 
into new employment. In this way, the VR program ensures that 
individuals with disabilities obtain the services necessary so they can 
pursue and engage in high-demand jobs available in today's economy.
    The addition of the phrase ``advance in'' in Sec.  
361.42(a)(1)(iii), both proposed and final, underscores long-standing 
policy. Because DSUs have been assisting individuals to advance in 
employment prior to this statutory and regulatory revision, we do not 
anticipate that the change will result in a DSU implementing an order 
of selection due to an increased number of individuals seeking to 
advance in employment. As stated, although the phrase ``advance in'' 
employment is new in both the statute and these final regulations, its 
inclusion merely mirrors long-standing Departmental policy as set forth 
in RSA-PD-97-04, dated August 19, 1997.
    As discussed in more detail in the Purpose (Sec.  361.1) section 
earlier in this preamble, inclusion of the term ``economic self-
sufficiency,'' rather than ``gainful employment'' as contained in prior 
Sec.  361.1, does not alter the eligibility criteria set forth in final 
Sec.  361.42(a)(1) or establish a priority of services for individuals 
seeking any particular form of employment. Therefore, the changes 
contained in final Sec. Sec.  361.1 and 361.42(a)(1)(iii) do not 
require DSUs to treat individuals seeking part-time or self-employment 
differently (e.g., given lower priority) than individuals seeking full-
time employment. Neither the Act, as amended by WIOA, nor these final 
regulations, supports such an interpretation. Section 361.42(c)(2), for 
example, prohibits the DSU from considering the nature of an 
applicant's vocational goal when determining eligibility and priority 
for services. Therefore, a DSU may not prioritize the determination of 
eligibility for individuals who choose to pursue full-time employment 
over those who elect to seek part-time employment or self-employment. 
In addition, economic self-sufficiency is intended to serve as a goal 
to maximize employment, which may be achieved through a variety of 
employment options, including entry-level employment for individuals 
for whom it is consistent with their skills, interests, and informed 
choice. However, the achievement of economic self-sufficiency is not 
among the criteria used to determine eligibility for the VR program 
under section 102(a) of the Act.
    Changes: None.

Substantial Impediment to Employment

    Comments: One State VR agency asked whether a substantial 
impediment to employment for the purpose of determining eligibility 
meant an impediment to any employment, or just to the employment the 
individual wished to pursue.
    Discussion: Although this particular eligibility criterion was not 
changed in the Act, as amended by WIOA, or Sec.  361.42, either 
proposed or final, we clarify in this Discussion that the term 
``substantial impediment to employment'' should be interpreted in its 
broadest context, not just considered with respect to the applicant's 
specific vocational goal when determining eligibility. Final Sec.  
361.42(c)(2)(ii)(B), as it did in prior regulations, prohibits the DSU 
from considering the individual's desired employment objective, even if 
known, during this stage of the vocational rehabilitation process.
    Changes: None.

Prohibited Factors

    Comments: A number of commenters expressed concerns about the 
inability to consider an applicant's employment history when 
determining eligibility, particularly for those who are currently 
employed and apply for vocational rehabilitation services to advance in 
employment. One commenter stated that not being able to evaluate 
disability barriers from previous or current employment experiences, or 
not being able to assess abilities and capabilities by examining past 
and current educational credentials, could prevent the qualified 
rehabilitation counselor from determining whether an individual has a 
substantial impediment to employment and whether the individual 
requires services to achieve an employment outcome.
    Other commenters expressed concern that proposed Sec.  
361.42(c)(2), which precludes the consideration of an applicant's 
employment history, current employment status, level of education, or 
educational credentials when determining eligibility for services, 
contradicts the definition of ``assessment'' in Sec.  
361.5(c)(5)(ii)(E), which states that the vocational rehabilitation 
counselor must rely on information obtained from the eligible 
individual's experience in integrated

[[Page 55673]]

employment settings in the community and other integrated settings.
    Some of these commenters requested that we remove the requirement 
that a DSU must not consider an applicant's employment history, current 
employment status, level of education, or educational credentials when 
determining eligibility for services. A commenter requested that 
criminal records be added to the list of prohibited factors when 
determining eligibility for vocational rehabilitation services, except 
when the criminal background is related to the employment outcome.
    Discussion: The additional factors, set forth in both proposed and 
final Sec.  361.42(c)(2)(ii)(E) and (F), that a DSU must not consider 
when determining an applicant's eligibility for vocational 
rehabilitation services are consistent with long-standing policy. A DSU 
must examine a variety of factors when developing an individualized 
plan for employment, including the individual's past and current 
employment and education credentials, to ensure that the appropriate 
vocational rehabilitation services are identified to assist the 
individual to achieve his or her chosen vocational goal specified in 
the approved individualized plan for employment. However, a DSU may not 
use an applicant's employment or education to determine his or her 
eligibility for vocational rehabilitation services. The change from the 
prior regulation in proposed and final Sec.  361.42(c)(2)(ii)(E) and 
(F) clarifies existing eligibility criteria and the list of prohibited 
factors in order to ensure consistency with the phrase ``advance in 
employment'' in the Act, as amended by WIOA, and these final 
regulations. Because an individual may be eligible for the VR program 
if he or she requires vocational rehabilitation services to advance in 
employment, the Act seems to take into account that the individual 
could have more than minimal educational or employment history. 
Regardless of his or her education or employment history, the applicant 
still must demonstrate that he or she has a disability and that the 
disability constitutes a substantial impediment to employment as 
required in Sec.  361.42(a)(1)(ii) and requires vocational 
rehabilitation services to prepare for, secure, retain, advance in, or 
regain employment in accordance with final Sec.  361.42(a)(1)(iii). In 
making these determinations, the qualified vocational rehabilitation 
counselor would review all known information about the applicant in 
order to assess the individual's impediments and service needs, but the 
eligibility determination itself must not be based on the fact that the 
individual has an extensive employment or educational history.
    Although final Sec.  361.42(c)(2) does not specifically prohibit a 
DSU from considering an applicant's criminal background when 
determining an individual's eligibility for vocational rehabilitation 
services, the Act and these final regulations require that a DSU base 
the determination of eligibility only on those factors identified in 
section 102(a)(1) of the Act and final Sec.  361.42(a)(1). However, the 
DSU may develop policy and issue guidance to its vocational 
rehabilitation counselors about managing an individual's criminal 
background when developing the individualized plan for employment to 
ensure that the vocational goal is appropriate and that any necessary 
vocational rehabilitation services to address this background are 
provided in a manner that is consistent with limitations that might be 
imposed by Federal, State, and local law and regulations due to that 
criminal history. For further information regarding Federal law and 
guidance in this area, see: http://wdr.doleta.gov/directives/ and 
http://www.eeoc.gov/laws/guidance/.
    Changes: None.

Residency

    Comments: A number of commenters requested clarification about the 
definition of ``residency'' for the purpose of determining eligibility 
and providing vocational rehabilitation services. Several commenters 
noted that individuals may apply for services when living just across 
the border in a neighboring State, while other individuals receive 
services from one State but intend to work in another State and 
continue working with the VR agency with which they began their 
rehabilitation program.
    Discussion: We proposed only one change from the prior regulation 
in Sec.  361.42(c)(1) to clarify that a DSU is prohibited from 
establishing de facto duration of residency requirements by requiring 
the applicant to produce documentation that would, under State or local 
law, result in a duration of residence requirement. Although the 
clarification regarding documentation did not exist in prior Sec.  
361.42(c)(1), the provision as contained in final Sec.  361.42(c)(1) is 
consistent with long-standing Department policy. The explicit 
prohibition against a duration of residency requirement existed in 
prior Sec.  361.42(c)(1) and remains unchanged in all other respects in 
these final regulations and is consistent with section 101(a)(12) of 
the Act.
    Nonetheless in response to the requests for clarification, as 
stated in Technical Assistance Circular 12-04, titled ``Provision of 
Vocational Rehabilitation Services to An Individual by More Than One 
Agency'' and dated June 11, 2012, we clarify here in this Discussion 
that an individual may receive vocational rehabilitation services from 
more than one DSU simultaneously, including those in different States, 
when appropriate, and in accordance with the implementation of an order 
of selection, as applicable, in each State. In this way, the individual 
can receive the services that best support his or her vocational needs 
and the achievement of an employment outcome.
    Changes: None.

Compliance Threshold

    Comments: A few commenters recommended that we establish a 
compliance threshold of 90 percent with the requirement to determine 
eligibility within 60 days of the receipt of the application. These 
commenters stated this would provide a national benchmark by which DSUs 
would be held accountable by community stakeholders as well as State 
and Federal auditors.
    Discussion: Section 102(a)(6) of the Act and final Sec.  
361.41(b)(1) require DSUs to determine the eligibility of an applicant 
within 60 days from the receipt of an application for vocational 
rehabilitation services, unless exceptional circumstances preclude the 
determination and the individual agrees to a specific extension of 
time. This requirement remains unchanged in the Act, as amended by WIOA 
and these final regulations; therefore, it is not a new requirement 
imposed on DSUs.
    We appreciate the recommendations made by commenters for a 
mechanism to ensure compliance. Section 106(a)(1) of the Act requires 
States to comply with the common performance accountability system 
requirements imposed on all core programs of the workforce development 
system, including the VR program, established by section 116 of title I 
of WIOA. Section 116(b)(1)(A) requires a State to comply with the six 
primary performance indicators set forth in section 116(b)(2)(A)(i), as 
well as any other additional performance indicators developed by the 
State. While there is no statutory authority for the Department to 
impose a performance accountability measure, such as that recommended 
by commenters, there is nothing to preclude a State from developing 
such a measure for itself. We will continue to assess the compliance

[[Page 55674]]

of DSUs with the 60-day eligibility determination requirement in 
accordance with section 107 of the Act using all available data and 
information.
    Changes: None.

Entities Holding Special Wage Certificates

    Comments: Many commenters requested clarification about whether a 
DSU may contract with a community rehabilitation program to provide 
assessments used in the determination of eligibility, if the community 
rehabilitation program holds a subminimum wage certificate under 
section 14(c) of the FLSA.
    Discussion: Neither the Act, as amended by WIOA, nor these final 
regulations prohibit a DSU from contracting with a community 
rehabilitation program for assessment services regardless of whether 
that provider also holds a subminimum wage certificate under section 
14(c) of the FLSA. Nevertheless, we strongly encourage DSUs to contract 
with providers that can conduct assessments in competitive integrated 
settings. It is through these assessments that DSUs may best determine 
the individual's eligibility for the VR program and the vocational 
rehabilitation services needed to achieve competitive integrated 
employment.
    Changes: None.

Extended Evaluation and Trial Work Experiences

    Comments: Many commenters supported eliminating extended evaluation 
as a tool for determining eligibility for some individuals with the 
most significant disabilities. However, many other commenters also 
requested clarification of the circumstances under which it might be 
appropriate to use extended evaluation for the determination of 
eligibility for vocational rehabilitation services. Some commenters 
expressed concern that individuals for whom a trial work opportunity 
may not be available may inappropriately be determined ineligible for 
services and requested an evidentiary standard in the absence of the 
term ``clear and convincing evidence'' in Sec.  361.42. Some commenters 
explicitly requested that extended evaluation be reinserted into the 
regulations.
    Some commenters asked whether the term ``clear and convincing 
evidence'' was removed from proposed Sec.  361.42(e)(2)(iii) by mistake 
and recommended retaining this standard. The proposed language required 
that ``sufficient evidence'' be obtained through trial work experiences 
to determine if an individual cannot benefit from vocational 
rehabilitation services to achieve a vocational goal. These commenters 
believed sufficient evidence is not a strong enough standard and that 
individuals with significant disabilities may be inappropriately 
determined ineligible as a result.
    One commenter recommended that we revise Sec.  361.42(e)(2)(i) to 
require that all trial work experiences take place in integrated 
settings by deleting the phrase ``to the maximum extent possible.'' One 
commenter requested that we add examples of supports for individuals 
with serious mental illness to Sec.  361.42(e)(2)(iv), such as 
individual placement and supported employment services.
    Discussion: We appreciate the support by many commenters for the 
elimination of the use of extended evaluations for the purpose of 
determining that an individual is unable to benefit from vocational 
rehabilitation services due to the severity of the individual's 
disability and, thus, is ineligible for vocational rehabilitation 
services under section 102(a)(2)(B) of the Act, as amended by WIOA, and 
Sec.  361.42. The Act's amendment and these final regulations help to 
ensure that before a DSU makes an ineligibility determination, it must 
conduct a full assessment of the capacity of the applicant to perform 
in realistic work settings, without the use of lengthy extended 
evaluations.
    We appreciate the comment recommending that all trial work 
experiences be conducted in competitive integrated employment settings. 
While we agree that these experiences should be provided in competitive 
integrated employment settings, to the maximum extent possible, as 
stated in both proposed and final Sec.  361.42(e)(2)(i), there is no 
statutory authority to do as the commenter recommends. Section 
102(a)(2)(B) of the Act, as amended by WIOA, requires a DSU to explore 
an individual with a disability's ability to work through trial work 
experiences prior to determining that the individual is not eligible 
for the VR program due to the severity of his or her disability. The 
trial work experiences must be of ``sufficient variety'' and must 
provide the individual with the opportunity to ``try different 
employment experiences'' and ``become employed in competitive 
integrated employment.'' There is no mandate in section 102(a)(2) that 
all trial work experiences be in competitive integrated employment. In 
fact, the use of the phrases ``sufficient variety'' and ``different 
employment opportunities'' suggest the congressional understanding that 
some trial work experiences may need to be provided in a setting other 
than competitive integrated employment. However, given the Act's 
heightened emphasis on the achievement of employment outcomes in 
competitive integrated employment, as well as the fact that section 
102(a)(2)(B) of the Act, as amended by WIOA, specifically mandates that 
trial work experiences provide individuals with the opportunity to 
become employed in competitive integrated employment, we believe that 
final Sec.  361.42(e)(2)(i) is consistent with the statute. Proposed 
and final Sec.  361.42(e)(2)(i), are both consistent with prior Sec.  
361.42(e)(2)(i), with only minor wording changes to conform to terms 
used in the Act, as amended by WIOA. The Department also believes that 
trial work experiences in integrated settings, rather than simulated or 
mock experiences in sheltered environments, provide the DSU with the 
best and most comprehensive evidence of an individual's capacity to 
achieve competitive integrated employment. Therefore, consistent with 
the intent of the Act to provide individuals with disabilities the 
opportunity to achieve competitive integrated employment, we strongly 
recommend that DSUs exhaust all opportunities to provide trial work 
experiences through actual work experiences in integrated community 
environments to obtain the evidence necessary for making the 
determination of an individual's eligibility for vocational 
rehabilitation services.
    We do not expect that individuals with significant disabilities 
will be determined ineligible in greater numbers as a result of this 
change. Rather, we expect that more individuals, including those with 
the most significant disabilities, and those who may require supported 
employment services, will achieve competitive integrated employment 
outcomes.
    We appreciate the comments regarding the inadvertent deletion of 
prior regulatory provisions regarding clear and convincing evidence 
from proposed Sec.  361.42(e)(2)(iii) and appreciate the strong support 
that this provision be retained in these final regulations. We agree 
with commenters that ``sufficient evidence'' is insufficient for a 
determination of ineligibility and that some individuals with 
significant disabilities may be inappropriately determined ineligible 
as a result. The deletion of the provision related to clear and 
convincing evidence was indeed an error and we have revised final Sec.  
361.42(e)(2)(iii) to read exactly as it had in prior regulations, thus 
resulting

[[Page 55675]]

in no regulatory change from prior regulations to these final 
regulations.
    We believe retaining prior regulatory text in these final 
regulations is consistent with the statutory requirements of section 
102 of the Act, as amended by WIOA. Specifically, section 102(a) of the 
Act, read in its entirety, establishes the information that is 
sufficient to make a determination of eligibility for an individual 
with a disability for purposes of the VR program. There is no, and 
never has been, a statutory requirement that clear and convincing 
evidence be used to make an eligibility determination. This long-
standing statutory interpretation is consistent with use of the phrase 
``sufficient evidence'' in Sec.  361.42(e)(2)(iii)(A), both prior and 
final, with respect to eligibility determinations. However, when making 
a determination of ineligibility due to the severity of an individual's 
disability, section 102(a)(5)(C)(i) of the Act, which remained 
unchanged by WIOA, requires the DSU to inform the individual in writing 
of the reason for the ineligibility determination, including the clear 
and convincing evidence that formed the basis for that determination. 
This long-standing statutory requirement is consistent with use of the 
phrase ``clear and convincing evidence'' in Sec.  361.42(e)(2)(iii)(B), 
both prior and final, with respect to determinations of ineligibility. 
Therefore, given the error noted by commenters, the Department has 
retained prior Sec.  361.42(e)(2)(iii) in these final regulations.
    In addition, prior to WIOA, section 102(a)(2)(B) of the Act 
required that trial work experiences be of sufficient variety and 
provided over a sufficient period of time to enable the DSU to 
determine the eligibility of the individual, or to obtain clear and 
convincing evidence of the individual's inability to achieve an 
employment outcome due to the severity of his or her disability.
    Section 102(a)(2)(A) and section 102(a)(2)(B) now state only that 
the trial work experiences must be of sufficient variety and over a 
sufficient period of time to determine the eligibility of the 
individual. Section 102 of the Act, as amended by WIOA, no longer makes 
reference to the need for clear and convincing evidence for the purpose 
of determining an individual's ineligibility for vocational 
rehabilitation services. Consistent with these amendments, we proposed 
to revise Sec. Sec.  361.42(e)(1) and 361.42(e)(2)(iii) to require that 
trial work experiences be of sufficient variety and over a sufficient 
period of time for the DSU to obtain sufficient evidence that the 
individual cannot benefit from participation in the VR program.
    In proposing this change, we believe that the Act, as amended by 
WIOA, did not intend, to weaken the evidentiary standard required for 
this determination. It remains our long-standing policy that 
individuals with disabilities, including those with the most 
significant disabilities, must be afforded every opportunity to obtain 
the vocational rehabilitation services needed to achieve high quality 
employment and that a DSU should only deny an individual this 
opportunity in limited circumstances, and based on the highest level of 
proof.
    Therefore, we have revised final Sec.  361.42(e)(2)(iii) to clarify 
that the trial work experiences must yield clear and convincing 
evidence before a DSU may determine an individual is incapable of 
benefiting from the provision of vocational rehabilitation services, 
and, thus, is ineligible for the program.
    We agree with the commenter that individuals with serious mental 
illness should be afforded the necessary supports, such as--but not 
limited to--individual placement or supported employment services, to 
ensure trial work experiences are beneficial. The same is true for any 
individual with significant disabilities participating in trial work 
experiences. Proposed Sec.  361.42(e)(2)(iv) remained unchanged from 
prior regulations. While we disagree with the commenter that specific 
examples pertinent to mental illness should be included in final Sec.  
361.42(e)(2)(iv) because to do so could cause more confusion as to why 
other examples were not added. However, assistive technology services 
and personal assistance services are not the only support that should 
be provided during a trial work experience. Although we believe the 
provision was clear that the two examples given were just two examples 
of many given the use of the word ``including,'' we have nonetheless 
made a small change to Sec.  361.42(e)(2)(iv) to add further clarity.
    Changes: We have revised final Sec.  361.42(e)(2)(iii) to retain 
prior Sec.  361.42(e)(2)(iii), thereby specifying that a DSU must base 
eligibility determinations on sufficient evidence, but that 
determinations of ineligibility due to the severity of an individual's 
disability must be based on clear and convincing evidence. We have also 
revised final Sec.  361.42(e)(2)(iv) to add the phrase ``including, but 
not limited to'' when providing examples of the types of support 
services that may be provided to an individual participating in a trial 
work experience. This change clarifies that DSUs should ensure an 
individual with a disability receives the supports he or she needs so 
that the trial work experience is beneficial.

Development of the Individualized Plan for Employment (Sec.  361.45)

Time Frame for Developing the Individualized Plan for Employment

    Comments: Many commenters supported the change from the prior 
regulations in proposed Sec.  361.45(e) which required that the DSU 
develop the individualized plan for employment for each eligible 
individual as soon as possible, but no later than 90 days following 
determination of eligibility, unless the DSU and the individual agree 
to a specific extension of that time frame. Some commenters supported 
the 90-day standard but were concerned that the quality of plans be 
maintained and that plans continue to be individualized based on 
interests, abilities and informed choice and not be made uniform out of 
expediency. These commenters stated that DSUs may not take the time 
needed to develop a comprehensive individualized plan for employment 
within the 90-day time limit, and may settle for a more generalized 
plan rather than seeking an extension of time. Some commenters, though 
they supported a specific time limit, stated that the limit should be 
shorter than 90 days and recommended that we strengthen the regulation 
to promote the more timely development of the individualized plan for 
employment. One commenter recommended the adoption of a 90 percent 
compliance standard for this regulation to strengthen the adherence to 
the time limit. Another commenter asked how long the extended period 
should be to ensure that there are no additional delays in the 
development of the individualized plan for employment. Finally, one 
commenter requested guidance concerning how to proceed in situations 
where the individual does not agree to an extension.
    Discussion: We appreciate the comments supporting the proposed 
regulatory changes, as well as the concerns expressed by commenters 
about those same changes. As explained in the NPRM, the change to Sec.  
361.45(e), which mirrors section 102(b)(3)(F) of the Act, as amended by 
WIOA, is intended to efficiently and effectively serve eligible 
individuals, move them through the VR process with minimal delay, and 
achieve employment outcomes in competitive integrated employment. We 
believe that DSUs can implement the regulation in a manner that does 
not negatively affect the quality and individualized nature of the plan 
for

[[Page 55676]]

employment for each eligible individual and that this requirement will 
have a minimal impact on the majority of DSUs that have already adopted 
the 90-day time frame. Despite the 90-day time frame, these plans must 
be of sufficient quality to incorporate mandatory components in section 
102(b)(4) of the Act, and meet requirements under Sec.  361.46(a)(1), 
which requires the individualized plan for employment to be consistent 
with the individual's unique strengths, resources, priorities, 
concerns, abilities, capabilities, career interest, and informed choice 
consistent with the general goal of competitive integrated employment 
(except that in the case of an eligible individual who is a student or 
a youth with a disability, the description may be a description of the 
individual's projected post-school employment outcome).
    In addition, the change to Sec.  361.45(e) is necessary to 
implement the statutory requirement in section 102(b)(3)(F) of the Act, 
as amended by WIOA, that specifically mandates DSUs to develop the 
individualized plan for employment for each individual within 90 days 
following the determination of eligibility, unless the DSU and the 
individual agree to an extension of that time frame. Therefore, we do 
not have the statutory authority to shorten the time frame because to 
do so would be inconsistent with the statute.
    DSUs must comply with the requirements of section 102(b)(3)(F) of 
the Act and final Sec.  361.45(e) when developing the individualized 
plans for employment for each eligible individual. We will assess the 
DSUs' compliance with the requirement during the monitoring and review 
we conduct under section 107 of the Act. We do not believe that it is 
necessary, therefore, to include a 90 percent compliance standard in 
this regulation to strengthen the adherence to the time frame.
    Section 102(b)(3)(F) of the Act and final Sec.  361.45(e) permit 
the DSU and individual to agree to a specific extension of the 90-day 
time limit without imposing a limitation on the length of that 
extension. DSUs should ensure that the extension is warranted based on 
the particular circumstances and needs of the individual and that the 
extensions are not so long as to cause unnecessary delays in providing 
services.
    The individualized plan for employment is an evolving document and 
may be amended to effect changes of goal, services, providers, and time 
frames. If the individual disagrees with the vocational rehabilitation 
counselor's request to extend the time for developing the plan, the 
counselor should determine whether the plan, as written at that time, 
addresses the mandatory components of section 102(b) of the Act and 
final Sec.  361.46, and whether the information in the plan is 
sufficient to allow the DSU and individual to proceed with the delivery 
of services, with the understanding that the plan may be amended. If 
the counselor determines that the plan does not contain sufficient 
information on which to base the provision of services and the 
individual still disagrees with the request to extend the development 
of the plan beyond 90 days after further vocational guidance and 
counseling, the counselor should refer the individual to the CAP for 
help in resolving the disagreement, and must, in accordance with 
section 102(c)(2)(B)(ii), inform the individual of the due process 
rights set forth in section 102(c) of the Act and final Sec.  361.57.
    Changes: None.

Options for Developing the Individualized Plan for Employment

    Comments: All comments received on proposed Sec.  361.45(c)(1) 
supported the requirement that a DSU provide eligible individuals 
information about the option of requesting assistance from a disability 
advocacy organization when developing the individualized plan for 
employment. Many of the commenters recommended that we include in the 
regulation examples of disability advocacy organizations, such as 
agencies funded under the Act, entities providing services under the 
Ticket to Work and Work Incentive Act of 1998, and agencies assisting 
individuals with disabilities under the Developmental Disabilities 
Assistance and Bill of Rights Act of 2000 and the IDEA.
    All commenters supported our inclusion of benefits planning in 
proposed Sec.  361.45(c)(3). A few commenters requested that we define 
that term. One commenter asked whether we would support the development 
of additional benefit planning resources and what documentation would 
be required to verify the individual's completion of benefits planning.
    Discussion: We appreciate the comments supporting the proposed 
regulations. Section 102(b)(1)(A) of the Act, as amended by WIOA, and 
final Sec.  361.45(c)(1)(ii)(C) are intended to empower eligible 
individuals by clarifying that they can choose to seek assistance from 
disability advocacy organizations when developing their individualized 
plans for employment. Section 102(b)(1)(A) of the Act does not specify 
examples of these disability advocacy organizations, and we do not 
believe it necessary to include examples in final Sec.  
361.45(c)(1)(ii)(C) because to do so could have an unintended limiting 
effect. However, we encourage DSUs to provide eligible individuals with 
a list of the advocacy organizations in the State so that they may 
identify those organizations with expertise in disability-related 
needs, responsibilities, and services that are required to achieve the 
individuals' employment goals.
    Consistent with section 102(b)(2) of the Act, as amended by WIOA, 
final Sec.  361.45(c) requires DSUs to provide certain information in 
writing to eligible individuals when developing the individualized plan 
for employment. Specifically, final Sec.  361.45(c)(2) and (3) require 
DSUs to provide general information on additional supports and 
assistance for individuals with disabilities desiring to enter the 
workforce, including assistance with benefits planning, to individuals 
receiving Supplemental Security Income or Social Security Disability 
Insurance benefits. We recommend that DSUs retain a copy of this 
written information and guidance in the individual's service record, as 
they would be documents pertinent to the development of the 
individualized plan for employment.
    In addition, we understand that benefits planning may take many 
different forms over a course of time. Furthermore, benefits planning 
and the individuals certified to provide these types of support 
services are determined by the SSA's work incentive program. We believe 
it is important that States retain sufficient flexibility to work with 
providers appropriately certified or defined by SSA. Therefore, we 
disagree with the recommendation to define ``benefits planning'' in 
these final VR program regulations.
    Furthermore, although DSUs must provide information about benefits 
planning and available resources, they are not required to document the 
completion of these services. However, if benefits planning is included 
and the services in the individualized plan for employment, it should 
be documented upon completion.
    Changes: None.

Data for Preparing the Individualized Plan for Employment

    Comments: One commenter stated that the determination of 
eligibility only requires that an individual have impediments to 
employment but not necessarily impediments to the specific employment 
outcome the individual desires, and questioned why only this data would 
be used.

[[Page 55677]]

    Discussion: While we appreciate the concerns expressed by the 
commenter, this section of the Act was not changed by WIOA and, 
therefore, no changes were proposed in the NPRM. We address other 
comments we received on this section regarding the use of sheltered 
employment settings for the conduct of assessments in the Assessment 
for Determining Eligibility and Vocational Rehabilitation Needs section 
under the Applicable Definitions section previously in this preamble.
    Changes: None.

Content of the Individualized Plan for Employment (Sec.  361.46)

    Comments: The majority of commenters supported proposed Sec.  
361.46(a)(1), requiring that the individualized plan for employment 
specify an employment goal consistent with the general goal of 
competitive integrated employment under section 102(b)(4) of the Act, 
as amended by WIOA. However, a few commenters expressed concern that 
the proposed regulation does not satisfactorily address the needs of 
all individuals with disabilities because it limits options for 
employment goals to competitive integrated employment, and stated that 
the regulation is in conflict with congressional intent regarding the 
full range of employment options.
    A few commenters recommended adding to or clarifying the 
requirement in proposed Sec.  361.46(a)(7)(iii) that the individualized 
plan for employment contain a description of how the responsibilities 
for service delivery will be divided between the employment network and 
the DSU under section 102(b)(4)(H) of the Act.
    Discussion: We appreciate the support for the proposed regulation. 
WIOA did not amend section 102(b)(4)(H) of the Act, which requires that 
the individualized plan for employment for an individual receiving 
assistance from an employment network through the Ticket to Work and 
Self-Sufficiency program established under the Social Security Act 
include a description of how the responsibility for providing services 
will be divided between the employment network and the DSU. Therefore, 
we do not believe that further clarification of this long-standing 
requirement is necessary.
    We received comments about eliminating uncompensated employment 
outcomes through the individualized plan for employment, and we address 
them in the discussion on the definition of ``employment outcome'' in 
final Sec.  361.5(c)(15) under the Applicable Definitions section 
elsewhere in this Analysis of Comments and Changes section.
    Changes: None.

Scope of Vocational Rehabilitation Services for Individuals With 
Disabilities

Services for Individuals Who Have Applied or Been Determined Eligible 
for Vocational Rehabilitation Services (Sec.  361.48(b))

Advanced Training

    Comments: A few commenters supported including advanced training in 
STEM fields (science, technology, engineering, or mathematics, 
including computer science), medicine, law, or business as a vocational 
or other training service in proposed Sec.  361.48(b)(6) so that 
individuals with disabilities can be prepared for the high-demand 
careers available in today's economy. One commenter recommended that 
advanced training be provided, as appropriate, not only for those 
specific careers mentioned in proposed Sec.  361.48(b)(6), but for all 
careers. Another commenter suggested that Sec.  361.48(b)(6) explicitly 
state that advanced training must be provided under an individualized 
plan for employment. Still another commenter requested that proposed 
Sec.  361.5(c) include a definition of ``advanced training.''
    By contrast, a few commenters expressed concern about the potential 
cost burden upon VR agencies that would result from individuals 
pursuing advanced training under proposed Sec.  361.48(b)(6). These 
commenters suggested that comparable benefits are typically limited for 
graduate students; as a result, DSUs would need to cover all or a 
substantial portion of the cost of advanced degrees.
    Additionally, one commenter requested that we clarify in Sec.  
361.48(b) that vocational rehabilitation services are not intended to 
assist individuals to obtain employment in only entry-level careers.
    Discussion: We appreciate the support for including advanced 
training among the individualized services available. The Department 
has a long history of encouraging DSUs to provide advanced training, 
when appropriate, to assist eligible individuals in achieving their 
employment goals. Section 103(a)(18) of the Act, as amended by WIOA, 
specifically permits DSUs to provide vocational rehabilitation services 
that encourage qualified eligible individuals to pursue advanced 
training in the STEM fields, medicine, law, or business. Section 
103(a)(5) of the Act and our prior regulation in Sec.  361.48(f) (now 
final Sec.  361.48(b)(6)) have historically permitted DSUs to provide 
training at institutions of higher education, including in advanced 
degree programs, to qualified eligible individuals.
    While section 103(a)(18) of the Act specifically mentions advanced 
education in certain fields, that does not exclude advanced training in 
other fields under section 103(a)(5) of the Act. In reviewing proposed 
Sec.  361.48(b)(6), the Department recognizes that it could be 
interpreted as allowing advanced training in only certain fields. This 
was not our intent, and that restriction would not be consistent with 
section 103(a) of the Act or long-standing Department policy. 
Therefore, we have revised final Sec.  361.48(b)(6) to clarify that 
DSUs may provide advanced training in any field, not just the specific 
fields listed in section 103(a)(18) of the Act.
    We do not believe that a definition of ``advanced training'' is 
necessary. Neither section 7, nor section 103(a), of the Act, as 
amended by WIOA, defines ``advanced training.'' We understand that 
``advanced training'' may have multiple meanings, such as degrees 
conferred by institutions of higher education and advanced 
certifications in certain fields, all of which may be permissible under 
the VR program. Therefore, we will not define this term in final Sec.  
361.48(b)(6) or elsewhere in final part 361 to avoid limiting the 
meaning of ``advanced training.''
    As stated earlier, final Sec.  361.48(b)(6) continues the long-
standing availability of financial support for advanced training 
through the VR program. Therefore, though comparable benefits for 
graduate-level education may be limited, we anticipate that DSUs will 
experience little, if any, increase in the costs of providing this 
existing service.
    The Secretary agrees that providing vocational rehabilitation 
services is not limited only to helping an individual with a disability 
obtain entry-level employment. Under section 102(a)(1) of the Act, as 
amended by WIOA, and final Sec.  361.48(b), DSUs are to provide 
vocational rehabilitation services to help eligible individuals advance 
in employment, consistent with each individual's approved 
individualized plan for employment and his or her unique strengths, 
resources, priorities, concerns, abilities, capabilities, interests, 
and informed choice.
    Changes: We have revised Sec.  361.48(b)(6) to clarify that DSUs 
may provide advanced training in any field.

Other Services

    Comments: Some commenters recommended that proposed Sec.  361.48(b)

[[Page 55678]]

include other services not already specifically mentioned. Of these 
commenters, a few suggested that Sec.  361.48(b)(6) allow DSUs to 
provide tuition and other services for students with intellectual or 
developmental disabilities in a Comprehensive Transition and 
Postsecondary Program for Students with Intellectual Disabilities, as 
defined by the Higher Education Act of 2008. One commenter asked that 
assistive technology be included among the individualized services 
listed in this section. Another commenter suggested that Sec.  
361.48(b) require that DSUs recruit, train, and hire peer service 
providers and mental health advocates to offer individualized support 
services to individuals experiencing mental illness.
    Finally, one commenter requested that we clarify the difference 
between job retention services and follow-along services in Sec.  
361.48(b)(12).
    Discussion: We disagree with the commenters' recommendations to 
identify in final Sec.  361.48(b) other services not specifically 
listed. The list of services in section 103(a) of the Act and final 
Sec.  361.48(b) is not exhaustive. Therefore, DSUs may provide other 
services, not specifically listed, if necessary for the individual to 
achieve an employment outcome. Similarly, we clarify here that the 
vocational and other training services specified in final Sec.  
361.48(b)(6) encompass tuition and other services for students with 
intellectual or developmental disabilities in a Comprehensive 
Transition and Postsecondary Program for Students with Intellectual 
Disabilities, as defined by the Higher Education Act of 2008. In 
addition, assistive technology is encompassed in the definition of 
``rehabilitation technology'' in final Sec.  361.5(c)(45), which is 
included among the individualized services in final Sec.  
361.48(b)(17). Also, section 103(a) of the Act, as amended by WIOA, 
does not specifically require a DSU to provide mental health advocacy 
services or peer-counseling services for individuals with mental health 
diagnoses. However, a DSU may provide peer-counseling services, on an 
individualized basis, under final Sec.  361.48(b)(3), (12), and (21).
    Finally, job-retention services and follow-along services are both 
types of job-related services. Job-retention services may include any 
vocational rehabilitation service (i.e., vocational rehabilitation 
counseling and guidance, maintenance, or tools) necessary to help an 
individual maintain employment. Follow-along services typically mean 
direct contact with an employed individual to provide support with 
issues arising from employment, such as on-the-job performance, or with 
addressing employment barriers, such as absenteeism or tardiness, that 
could jeopardize employment.
    Changes: None.

Scope of Vocational Rehabilitation Services for Groups of Individuals 
With Disabilities (Sec.  361.49(a))

Establishment, Development, or Improvement of Community Rehabilitation 
Programs

    Comments: One commenter suggested that vocational rehabilitation 
services provided under Sec.  361.49(a)(1) for establishing, 
developing, or improving a public or other nonprofit community 
rehabilitation program should be allowable only if these services 
result in competitive integrated employment for the individuals 
receiving services from the program.
    Discussion: We agree with the comment that services for groups 
provided under Sec.  361.49(a)(1) must be provided for the purpose of 
achieving competitive integrated employment. Section 103(b)(2) of the 
Act remained unchanged by the amendments in WIOA, except for a 
technical amendment. As such, services provided under this authority 
have always been for the purpose of promoting integration in the 
community through employment, and final Sec.  361.49(a)(1), like the 
Act, as amended by WIOA, emphasizes employment outcomes in competitive 
integrated employment, including supported employment and customized 
employment.
    Changes: None.

Technical Assistance to Businesses

    Comments: Another commenter sought clarification about the 
difference between technical assistance to businesses seeking to employ 
individuals with disabilities in proposed Sec.  361.49(a)(4) and 
training and services for employers in proposed Sec.  361.32. This 
commenter inquired whether both authorities may be used to fund these 
similar services.
    Discussion: In answer to the request for clarification, DSUs are 
permitted to partner with employers and businesses under both final 
Sec. Sec.  361.49(a)(4) and 361.32, as authorized by sections 103(b) 
and 109, respectively, of the Act, as amended by WIOA. Under final 
Sec.  361.49(a)(4), DSUs may use VR program funds to provide technical 
assistance to businesses seeking to hire individuals with disabilities, 
and this authority must be exercised in a manner consistent with the 
ultimate purpose of the program--achieving competitive integrated 
employment. Final Sec.  361.32 is similar, and it identifies specific 
activities DSUs may engage in when providing training and technical 
assistance to businesses. These activities may include, but are not 
limited to, general training and technical assistance for employers 
about employing individuals with disabilities, disability awareness, 
and employment law; recruitment, training, retention of, and workplace 
accommodations for, employees with disabilities; and improving 
opportunities for work-based learning experiences for individuals with 
disabilities. The specific activities in final Sec.  361.32 are 
encompassed within the more general authority of final Sec.  
361.49(a)(4). Thus, there is little distinction between the two 
authorities, and DSUs may rely on both when providing training and 
technical assistance to businesses seeking to employ individuals with 
disabilities in competitive integrated employment.
    Changes: None.

Establishment, Development, or Improvement of Assistive Technology 
Programs

    Comments: A few commenters opposed proposed Sec.  361.49(a)(8), 
because it requires that individuals with disabilities be applicants of 
or be determined eligible for vocational rehabilitation services to 
access assistive technology services through the establishment, 
development, or improvement of assistive technology demonstration, 
loan, reutilization, or financing programs established under the 
Assistive Technology Act of 1998.
    Discussion: We agree with commenters that section 103(b)(8) of the 
Act, as amended by WIOA, is not explicitly limited to individuals with 
disabilities who have applied or been determined eligible for the VR 
program. We also agree that individuals with disabilities who are not 
applicants or eligible individuals of the VR program may benefit from 
the coordination of programming with activities authorized under the 
Assistive Technology Act of 1998.
    After further review, we recognize that limiting these generalized 
assistive technology services to applicants and eligible individuals of 
the VR program, as we did in proposed Sec.  361.49(a)(8), may have 
created an unintended barrier for these individuals in accessing 
generalized assistive technology services. Our intention of limiting 
this service to applicants and eligible individuals of the VR program 
in proposed Sec.  361.49(a)(8) was to be consistent with the 
establishment authority in section 103(b)(2) of the Act

[[Page 55679]]

and proposed Sec.  361.49(a)(1), which remained substantially unchanged 
by WIOA.
    However, we acknowledge that the nature of the services provided 
under the new establishment authority of section 103(b)(8) of the Act 
and proposed Sec.  361.49(a)(8) is quite different. We also acknowledge 
that neither section 103(b) of the Act, as amended by WIOA, nor 
proposed Sec.  361.49 mandates the DSU to provide any one of these 
services, including the assistive technology related services in 
section 103(b)(8) of the Act and proposed Sec.  361.49(a)(8). 
Furthermore, consistent with section 103(b) of the Act, under final 
Sec.  361.49(a), some of the services to groups are available to 
individuals who may not have applied or been determined eligible for 
vocational rehabilitation services.
    We acknowledge that some individuals with disabilities may require 
generalized assistive technology services before they are able to apply 
for vocational rehabilitation services, or that, through the receipt of 
generalized assistive technology services, individuals with 
disabilities may realize their potential to achieve competitive 
integrated employment and subsequently apply for vocational 
rehabilitation services. Therefore, the final regulations do not limit 
assistive technology services to applicants and eligible individuals of 
the VR program.
    Finally, the assistive technology services provided under this 
authority are more generalized in nature and for the benefit of a group 
of individuals; they are not tied to the individualized plan for 
employment of any one individual. Individualized assistive technology 
services and devices may only be provided, under section 103(a)(14) of 
the Act and final Sec.  361.48(b)(17) and in accordance with an agreed 
upon individualized plan for employment.
    Changes: We have revised final Sec.  361.49(a)(8) so that DSUs are 
permitted to provide any individual with a disability generalized 
assistive technology services provided under programs established, 
developed, or improved by the DSU in coordination with activities 
authorized under the Assistive Technology Act of 1998.

Advanced Training

    Comments: One commenter sought clarification of the authority of 
the DSU to provide support to eligible individuals (including, as 
appropriate, tuition) for advanced training in specific fields under 
proposed Sec.  361.49(a)(9).
    Discussion: As stated in the NPRM, because Sec.  361.49(a)(9) 
addresses services to groups, we believe there are only limited 
circumstances in which it would be appropriate for the DSU to provide 
support for advanced training under that section. Examples include 
supporting an advanced degree program for multiple eligible individuals 
at the same institution of higher education or developing and 
implementing specific programming to benefit a group of eligible 
individuals working toward advanced degrees at institutions of higher 
education.
    Final Sec.  361.49(a)(9), which mirrors section 103(b)(9) of the 
Act, as amended by WIOA, is not intended, and must not be used, to 
replace the authority of the DSU to provide advanced training to 
eligible individuals on their individualized plans for employment under 
section 103(a)(5) and (18) of the Act and final Sec.  361.48(b).
    Changes: None.

Comparable Services and Benefits (Sec.  361.53)

Accommodations and Auxiliary Aids and Services

    Comments: Although a few commenters supported the proposed 
regulation, many commenters recommended that accommodations and 
auxiliary aids and services be exempt from a search for comparable 
services and benefits when they are needed to help an individual 
participate in services that are exempt from such a search. Two 
commenters recommended removing the requirement to search for 
comparable benefits for auxiliary aids and devices altogether. Some 
commenters indicated that, prior to WIOA, providing accommodations or 
auxiliary aids and services was typically done in support of another 
service and rarely a stand-alone service.
    A few commenters noted a technical error in proposed Sec.  
361.53(b), which cross-referenced the vocational rehabilitation 
services exempt from a determination of the availability of comparable 
services and benefits in proposed Sec.  361.48(a) instead of proposed 
Sec.  361.48(b), the correct citation. These commenters also 
recommended revising the regulation to specify that a comparable 
service review is not required prior to providing an accommodation or 
auxiliary aid or service if it is necessary for an individual to 
receive one of the exempt services listed in proposed Sec.  361.48(b).
    Discussion: We appreciate the comments and recommendations about 
comparable services and benefits. Although many commenters suggested 
that we exempt accommodations and auxiliary aids and services from a 
search for comparable services and benefits, especially when they are 
needed to enable an individual to participate in services that are 
exempt from such a search, doing so would be contrary to the statute. 
Whereas some commenters noted that prior to WIOA, providing 
accommodations for auxiliary aids and services was typically done in 
support of another service and rarely as a stand-alone service, section 
101(a)(8)(A)(i) of the Act, as amended by WIOA, specifically added 
accommodations or auxiliary aids and services to those services that 
require a determination of available comparable services and benefits 
before the DSU may provide them. Moreover, section 101(a)(8)(A)(i) 
specifically exempts certain services from this search, but 
accommodations or auxiliary aids and services are not among those that 
are exempt.
    We agree that there was an error in the cross-reference to proposed 
Sec.  361.48(a), as noted by several commenters. We have made the 
correction.
    Changes: We have revised final Sec.  361.53(b), which cross-
references Sec.  361.48, to correct a typographical error that appeared 
in the NPRM. The correct cross-reference is Sec.  361.48(b).

Pre-Employment Transition Services and Personally Prescribed Devices

    Comments: A few commenters suggested that pre-employment transition 
services be added to the list of services exempt from a search for 
comparable services and benefits because the vocational rehabilitation 
agency must ensure that these services are provided or provide them 
directly.
    One commenter suggested that personally-prescribed devices, such as 
eyeglasses, hearing aids, and wheelchairs, be added as an exempt 
service under proposed Sec.  361.53(b). The commenter based this 
recommendation on a statement in the preamble of the NPRM about 
identifying agency financial responsibilities in interagency agreements 
under proposed Sec.  361.53(d) that personally prescribed devices are 
not included in accommodations or auxiliary aids and services for the 
purposes of these regulations.
    Discussion: While we agree with commenters that DSUs must provide, 
or arrange for the provision of, pre-employment transition services, 
section 101(a)(8)(A)(i) of the Act, as amended by WIOA, does not exempt 
these services from the search for comparable services and benefits as 
it does for other specific services. A DSU may satisfy its mandate 
under section 113 of the Act by arranging for pre-employment transition 
services provided by another public

[[Page 55680]]

entity after conducting a search for comparable services and benefits. 
Similarly, section 101(a)(8)(A)(i) of the Act does not exempt 
personally-prescribed devices, such as eyeglasses, hearing aids, and 
wheelchairs. Given that the Act specifically exempts some services, 
there is no statutory basis to exempt other services or devices from 
the search for comparable services and benefits; therefore, personally 
prescribed devices may not be added as an exempt service under final 
Sec.  361.53(b) as referenced in final Sec.  361.53(d).
    Changes: None.

Interagency Agreements

    Comments: Several commenters addressed interagency agreements 
between DSUs and public institutions of higher education for providing 
accommodations and auxiliary aids and services. A few commenters shared 
their concern that students may not receive services they need because 
the DSU and an institution of higher education cannot agree on 
financial responsibilities. One commenter suggested that DSUs be 
required to provide the services and then pursue reimbursement from the 
universities if no interagency agreement exists. Other commenters 
supported interagency agreements so long as they did not result in 
denial or delays in providing needed aids or accommodations. Some 
commenters stated that interagency agreements should not require 
negotiation of the financial responsibilities for providing 
accommodations or auxiliary aids and services, which should be the 
responsibility of the agency that is providing the service, aid, or 
accommodation. Other commenters stated that these financial 
responsibilities should be defined at a national level. One commenter 
suggested that interagency agreements should be explicit in specifying 
who is responsible for accommodations, services, and auxiliary aids, 
and that the regulations should include a required time frame of six 
months from the publication of the final regulations for completing 
interagency agreements.
    A few commenters objected to one example in the NPRM describing 
agency financial responsibilities in interagency agreements with public 
institutions of higher education. Specifically, the commenters thought 
the example of a DSU providing interpreters or readers both in and out 
of a classroom in a State where tuition is free for deaf or blind 
students could be misinterpreted as guidance or direction from the 
Department about how to assign financial responsibilities rather than 
as an example of negotiating financial responsibilities.
    Discussion: We appreciate the concerns expressed by commenters 
regarding negotiation of financial responsibilities in interagency 
agreements and the potential delay in students receiving services. 
Pursuant to section 101(a)(8)(A)(i) of the Act and final Sec.  
361.53(c)(2), DSUs must provide a service if that service is not 
available as a comparable service at the time it is needed. This 
provision should not be interpreted as precluding the required 
negotiation of financial responsibilities under an interagency 
agreement required by section 101(a)(8)(B) of the Act and final Sec.  
361.53(d).
    Although some commenters suggested that accommodations and 
auxiliary aids and services should be the responsibility of the agency 
providing the service requiring the accommodations, section 
101(a)(8)(B) of the Act, as amended by WIOA, mandates that State-level 
interagency agreements identify who is financially responsible for 
providing vocational rehabilitation services, including accommodations 
or auxiliary aids and services.
    There is no statutory authority for the Department to define these 
financial responsibilities at the national level. While the statute and 
these final regulations establish some parameters, both permit States 
to develop interagency agreements appropriate to their unique needs, 
thereby ensuring maximum flexibility. For example, States may choose to 
explicitly identify the financial responsibilities of each party to the 
interagency agreement as suggested by the commenter.
    Additionally, there is no statutory authority for the Department to 
impose a deadline of six months from the publication of the final 
regulations to complete interagency agreements. Moreover, we do not 
believe such a deadline is necessary because the requirement to enter 
into interagency agreements, set forth in section 101(a)(8)(B) of the 
Act and final Sec.  361.53, existed prior to the enactment of WIOA. The 
requirement to enter into an interagency agreement is long-standing, 
with the only change being the explicit inclusion of accommodations or 
auxiliary aids and services. However, as noted in the preamble to the 
NPRM, we believe that these services were always included in the search 
for comparable services and benefits, as is any vocational 
rehabilitation service that is not explicitly exempt. For this reason, 
the changes made to the interagency agreements pursuant to the 
amendments made by WIOA are technical--not substantive--in nature, and 
additional time to implement the requirement is not necessary.
    Finally, in response to comments expressing concern about one of 
the examples provided in the preamble to the NPRM, that example is one 
of several in a non-exhaustive list. Determination of agency financial 
responsibilities in interagency agreements is a State matter and should 
be developed appropriately to meet each State's unique circumstances. 
We provided the examples only to demonstrate how some States have 
resolved financial responsibilities in interagency agreements. However, 
these examples do not necessarily represent best practices or the 
complete universe of how such issues may be resolved.
    Changes: None.

Semi-Annual and Annual Review of Individuals in Extended Employment and 
Other Employment Under Special Certificate Provisions of the Fair Labor 
Standards Act (Sec.  361.55)

Effective Date

    Comments: Many commenters strongly supported or endorsed proposed 
Sec.  361.55, which was viewed as helpful in increasing the potential 
of as many people with disabilities as possible moving into competitive 
integrated employment. A few commenters requested clarification about 
the effective date.
    Discussion: We appreciate the many comments supporting this 
regulation, which is consistent with section 101(a)(14) of the Act, as 
amended by WIOA. The additional review requirement in Sec.  361.55 is 
one of many new requirements by which WIOA places heightened emphasis 
on ensuring that individuals with disabilities, including those with 
the most significant disabilities, can achieve competitive integrated 
employment if given the necessary services and supports.
    In response to the comments seeking clarification of the effective 
date of the requirements in final Sec.  361.55, most provisions of the 
Act, as amended by WIOA (with only a few exceptions not applicable 
here), took effect on July 22, 2014, the date WIOA was signed into law. 
This includes section 101(a)(14), which requires the semi-annual review 
and reevaluation for the first two years following the beginning of 
employment, and annually thereafter, for individuals with a disability 
who have received services under the VR program and who are employed in 
an extended employment setting in a community

[[Page 55681]]

rehabilitation program or any other employment under section 14(c) of 
the FLSA. The purpose of these reviews is to determine each 
individual's interest, priorities, and needs with respect to 
competitive integrated employment or training for such employment.
    Changes: None.

Who is subject to the requirements?

    Comments: A few commenters requested that we clarify who is subject 
to these requirements (e.g., all individuals, only youth, or 
individuals in day habilitation programs).
    Discussion: Final Sec.  361.55 applies to all individuals with 
disabilities, regardless of age, who have been served by the VR program 
and are employed in extended employment or in any employment setting at 
subminimum wage. This includes any individual who has received services 
under an individualized plan for employment but has been determined by 
the DSU to be no longer eligible for services under final Sec.  361.43.
    Changes: None.

Documentation

    Comments: A few commenters asked that we clarify the documentation 
required for the semi-annual and annual reviews.
    Discussion: The documentation required in final Sec.  361.55(b)(2) 
for the semi-annual or annual reviews must be consistent with final 
Sec.  361.47(a)(10). We believe that the DSU could satisfy the 
requirement by: (1) Documenting the results of the semi-annual or 
annual review; (2) obtaining a signed acknowledgment that the 
individual with a disability, or if appropriate, the individual's 
representative, has provided input to the review; and (3) obtaining a 
signed acknowledgment by the individual, or the individual's 
representative as appropriate, that the review was done.
    Final Sec.  361.47(b) requires the DSU, in consultation with the 
SRC, if the State has a Council, to determine the type of documentation 
that the DSU will maintain in order to meet service record 
requirements, including those in final Sec.  361.55(b)(2). We encourage 
the DSU to document the interests, priorities, and needs discussed in 
final Sec.  361.55(b)(1) and the maximum efforts made under final Sec.  
361.55(b)(3) to assist the individual in achieving competitive, 
integrated employment.
    Changes: None.

Costs of Conducting the Reviews

    Comments: One commenter noted the unknown costs to the DSU 
associated with conducting semi-annual and annual reviews.
    Discussion: We agree with the commenter that the costs associated 
with conducting semi-annual and annual reviews may not be readily 
known; however, prior to the amendments made by WIOA, DSUs were 
required to conduct annual reviews for up to two years and annually 
thereafter at the request of the individual with a disability or his or 
her representative. Therefore, the DSU should have a historical cost 
basis for estimating the current costs of conducting these reviews.
    Changes: None.

Informed Choice

    Comments: Other commenters suggested allowing an individual, 
directly or indirectly through his or her representative, to exercise 
informed choice to opt out of future reviews after any review has taken 
place.
    Discussion: While we appreciate the commenter's suggestion to allow 
an individual to opt out of future reviews after any given review has 
taken place, section 101(a)(14) of the Act, as amended by WIOA, does 
not permit this. WIOA removed the previous statutory provision that 
required the reviews to be conducted annually only for the first two 
years of employment. Under the prior requirement, the reviews would 
continue past the mandatory two years only if requested by the 
individual or, if appropriate, the individual's representative. By 
removing this language, WIOA requires the reviews and provides no 
ability for an individual to opt out.
    Changes: None.

Retroactive Reviews

    Comments: One commenter was concerned that the semi-annual and 
annual reviews would not be conducted by the DSU in that State. The 
commenter observed that the DSU had not been tracking individuals or 
conducting reviews, despite beginning tracking efforts in 2014. The 
commenter suggested that we require DSUs to conduct, within a specified 
time, retroactive semi-annual and annual reviews for all individuals 
with disabilities in subminimum wage or extended employment that have 
been found ineligible to benefit from vocational rehabilitation 
services.
    Discussion: We appreciate both the concern about the DSU not 
tracking and conducting reviews, as well as the recommendation to 
require DSUs to conduct retroactive semi-annual and annual reviews 
within a specified time. Since the enactment of WIOA, DSUs have been 
required to conduct semi-annual reviews on individuals with 
disabilities in extended employment, or any other employment under 
section 14(c) of the FLSA, for two years following the beginning of 
such employment and annually thereafter. To require a set period of 
time for retroactive reviews is inconsistent with the Act; however, the 
conduct of reviews, albeit with differing time frames, has been a 
requirement prior to the passage of WIOA and a responsibility of the 
DSU. Therefore, a DSU that historically has not, and is not conducting 
reviews currently, would be out of compliance with the requirement 
under the Act.
    Changes: None.

Cross-Reference With 34 CFR 397.40

    Comments: A few commenters suggested that the language in proposed 
Sec.  361.55 and proposed 34 CFR 397.40, regarding semi-annual and 
annual reviews, be cross-referenced and reconciled to ensure 
consistency and avoid confusion about which requirements apply and the 
respective responsibilities of the DSU under each provision. One 
commenter suggested we add a new Sec.  361.55(c) to indicate that: (1) 
The requirements in part 361 supersede any requirements that may apply 
in 34 CFR 397.40 regarding the responsibilities of a DSU for 
individuals with disabilities, regardless of age, who are employed at a 
subminimum wage; and (2) reviews conducted under Sec.  361.55 are 
subject to the requirements under 34 CFR 397.40, regarding informing 
the individual of self-advocacy, self-determination, and peer mentoring 
training opportunities available in the community.
    Discussion: Although a few commenters suggested that the language 
in proposed Sec.  361.55 and proposed Sec.  397.40 regarding semi-
annual and annual reviews be cross-referenced and reconciled to ensure 
consistency and avoid confusion about applicable requirements and 
responsibilities of the DSU, the sections are under separate titles in 
the Act and have differing effective implementation dates. Section 
101(a)(14) took effect upon enactment (July 22, 2014); section 511 of 
the Act, as amended by WIOA, will take effect on July 22, 2016. 
Moreover, final part 361 and 34 CFR part 397 apply to different, 
although sometimes intersecting, groups of individuals with 
disabilities. Final Sec.  361.55 applies only to individuals who have 
received or are receiving vocational rehabilitation services, whereas 
final 34 CFR 397.40 covers a much broader population of individuals 
with disabilities because

[[Page 55682]]

many of those individuals may not have ever received vocational 
rehabilitation services. Neither section supersedes the other; 
therefore, the specific responsibilities of the DSU and the 
requirements for reviews must be met under both. While it is 
conceivable that the required reviews under final Sec.  361.55 and 
final 34 CFR 397.40 may be fulfilled concurrently for some individuals 
with disabilities to whom both apply, it cannot be assumed that a 
review required under final Sec.  361.55 sufficiently replaces the 
review required under final 34 CFR 397.40 or vice versa.
    Changes: None.

Individuals With a Record of Service

    Comments: None.
    Discussion: Upon further Departmental review of proposed Sec.  
361.55 in light of the practical implementation of these requirements 
with regard to students with disabilities receiving pre-employment 
transition services under section 113 of the Act, as amended by WIOA 
and final Sec.  361.48(a), we have determined that clarifying technical 
amendments are necessary. Thus, we clarify in final Sec.  361.55(a)(1) 
and (a)(2) that the requirements of final Sec.  361.55 apply to those 
individuals who have a record of service--in other words, individuals 
who have applied for or been determined eligible for, vocational 
rehabilitation services--and achieved employment either at subminimum 
wage or in extended employment. This clarifying change retains the 
long-standing applicability of these requirements to such individuals. 
Without this clarifying change, it may be construed that the 
requirements may also apply to students with disabilities receiving 
pre-employment transition services. As noted in a separate discussion 
related to ``Transition Services,'' there is no requirement that these 
students apply for or be determined eligible for vocational 
rehabilitation services in order to receive pre-employment transition 
services. As such, it is possible that a DSU will have no information 
about the student to form the basis for these semi-annual or annual 
reviews.
    Changes: Final Sec. Sec.  361.55(a)(2)(i) and (ii) now explicitly 
applies these requirements to individuals who have a record of service.
B. Transition of Students and Youth With Disabilities From School to 
Postsecondary Education and Employment
    This section presents the analysis of comments we received on 
proposed regulations regarding the provision of transition and other 
vocational rehabilitation services to students and youth with 
disabilities to ensure that they have meaningful opportunities to move 
from school to post-school activities, including competitive integrated 
employment. The analysis is presented by topical headings relevant to 
sections of the regulations in the order they appear in part 361 as 
listed. We discussed some of these regulatory sections, such as 
Sec. Sec.  361.24, 361.46, 361.48(b), and 361.49, under section A as 
they also pertain to the general administration of the VR program and 
the provision of vocational rehabilitation services to individuals with 
disabilities of any age.

Topical Headings

Transition-Related Definitions (Sec.  361.5(c))
Pre-Employment Transition Services (Sec.  361.5(c)(42))
    The Term ``Pre-Employment Transition Services''
    Scope of Definition
    Definitions for Required Activities
    Acronym for Pre-Employment Transition Services
Student With a Disability (Sec.  361.5(c)(51))
    Scope of Definition
    Educational Programming
    Students Who Have Applied or Been Determined Eligible for 
Vocational Rehabilitation Services
Transition Services (Sec.  361.5(c)(55))
    Scope of ``Pre-Employment Transition Services'' and ``Transition 
Services''
    Outreach and Engagement of Parents or Representatives
Youth With a Disability (Sec.  361.5(c)(58))
    Distinction Between ``Student With a Disability'' and ``Youth 
With a Disability''
    Scope of Definition
Coordination With Education Officials (Sec.  361.22)
    Coordination of Pre-Employment Transition Services
    Financial and Programmatic Responsibilities
    Contracting With Subminimum Wage Programs
    Coordination and Outreach to Parents and Representatives
    Dispute Resolution
Cooperation and Coordination With Other Entities (Sec.  361.24)
Content of the Individualized Plan for Employment (Sec.  361.46)
Scope of Vocational Rehabilitation Services for Individuals With 
Disabilities (Sec.  361.48)
Pre-Employment Transition Services (Sec.  361.48(a))
    Scope of Pre-Employment Transition Services and Use of Reserve
    Potentially Eligible
    Discretion to Provide Pre-Employment Transition Services to All 
Students With Disabilities
    Provision of Required Activities Based on Need
    Continuation of Pre-Employment Transition Services
    Required Activities
    Continuum of Services
    Other Vocational Rehabilitation Services as Pre-Employment 
Transition Services
    Pre-Employment Transition Coordination Activities
    Documentation and Reporting
    Performance Measures
Services for Individuals Who Have Applied for or Been Determined 
Eligible for Vocational Rehabilitation Services (Sec.  361.48(b))
Scope of Vocational Rehabilitation Services for Groups of 
Individuals With Disabilities (Sec.  361.49)

Transition-Related Definitions (Sec.  361.5(c))

Pre-Employment Transition Services (Sec.  361.5(c)(42))

The Term ``Pre-Employment Transition Services''

    Comments: Some commenters suggested revising the term ``pre-
employment transition services'' to ``student career services.''
    Discussion: We appreciate the suggestions raised by the commenters. 
However, we will not change the term ``pre-employment transition 
services'' in final Sec.  361.5(c)(42) to ``student career services'' 
because this term is not used in the Act. Rather, section 7(30) of the 
Act, as amended by WIOA, defines ``pre-employment transition 
services,'' and it is the term used throughout title I of the Act, 
including in sections 101(a)(25), 103(a)(15), 110(d), 112(a), and 113.
    Changes: None.

Scope of Definition

    Comments: A few commenters recommended alternate definitions for 
the term ``pre-employment transition services'' that would include: (1) 
The pre-employment transition coordination responsibilities in proposed 
Sec.  361.48(a)(4); (2) each of the five required activities in 
proposed Sec.  361.48(a)(2); and (3) use of the term ``potentially 
eligible'' and its definition.
    Discussion: While we appreciate the suggestions, we disagree that 
the definition of ``pre-employment transition services'' should be 
expanded to include more specific information regarding the types of 
services that constitute ``pre-employment transition services'' and the 
population to be served. The definition of ``pre-employment transition 
services'' in final Sec.  361.5(c)(42) is consistent with the statutory 
definition in section 7(30) of the Act because it refers to the 
required and authorized activities specified in detail in final Sec.  
361.48(a), which are the only services permitted.
    We also disagree with the recommendation to include pre-

[[Page 55683]]

employment coordination services in the definition of ``pre-employment 
transition services.'' We agree that coordination activities are 
necessary for arranging and providing pre-employment transition 
services. However, coordination activities are more akin to the related 
activities performed by vocational rehabilitation counselors and other 
vocational rehabilitation personnel during the course of providing pre-
employment transition services rather than the services themselves. As 
such, we included pre-employment transition coordination activities 
under the implementation of pre-employment transition services in final 
Sec.  361.48(a), but have not included them as part of the definition 
of ``pre-employment transition services.''
    We also do not believe it is necessary to define the term 
``potentially eligible,'' either within the definition of ``pre-
employment transition services'' or separately in final Sec.  361.5(c). 
Because this term is unique to implementing pre-employment transition 
services and is not applicable to any other vocational rehabilitation 
service, we interpret the phrase ``potentially eligible'' in Sec.  
361.48(a)(1) as meaning all students with disabilities, regardless of 
whether they have applied or been determined eligible for vocational 
rehabilitation services. In so doing, the term is applicable only when 
implementing the requirements governing pre-employment transition 
services in final Sec.  361.48(a).
    Changes: None.

Definitions for Required Activities

    Comments: A few commenters recommended that we define the required 
activities listed in proposed Sec.  361.48(a)(2), including work-based 
learning experiences, and career (or job exploration) counseling. In 
this same vein, many suggested that we define work-based learning 
experiences in a manner consistent with section 103(a) of the School to 
Work Opportunities Act of 1994, and include job training, work 
experiences, workplace mentoring, and instruction in general workplace 
competencies. One commenter requested that we define career counseling, 
expressing concern that many States may provide this service in ways 
that are less effective than one-on-one counseling, such as 
presentations to groups of students. One commenter requested that we 
broadly define the five required pre-employment transition services to 
facilitate maximum use of the VR funds reserved for those services. 
However, a few commenters requested that the required activities not be 
defined so as to maintain the flexibility permitted in the Act, as 
amended by WIOA, to allow States to be innovative in the types of 
activities provided to students with disabilities and to maximize use 
of the VR funds reserved for providing pre-employment transition 
services.
    Discussion: We considered the requests to define the required 
activities listed in Sec.  361.48(a)(2). We reviewed section 103 of the 
School-to-Work Opportunities Act of 1994, which expired on October 1, 
2001, and found that it included mandatory activities under the work-
based learning component that are similar to the five required 
activities identified in section 113(b) of the Act, as amended by WIOA. 
Given the similarities, we do not believe further clarifications are 
needed.
    We agree with the comment that, by not defining the required 
activities, we maintain flexibility for States and enable the use of 
creative and innovative strategies that are State specific and tailored 
to meet the needs of students with disabilities. We also considered the 
comment about defining career counseling. DSUs must provide career 
counseling, or job exploration counseling as the term is used in 
section 113 of the Act, in a manner that most effectively meets the 
needs of the student with a disability in an individual or group 
setting, as they would any other vocational rehabilitation service. By 
providing job exploration counseling in group settings, DSUs can 
prepare students with disabilities for one-on-one counseling.
    Changes: None.

Acronym for Pre-Employment Transition Services

    Comments: A few commenters expressed concerns about the use of an 
acronym for ``pre-employment transition services.''
    Discussion: We agree with the commenters that an acronym should not 
be used as shorthand for ``pre-employment transition services.'' We did 
not use the most obvious acronym for ``pre-employment transition 
services'' in the NPRM or in these final regulations, and we do not 
intend to use it in administering the VR program because of its 
negative connotations.
    Changes: None.

Student With a Disability (Sec.  361.5(c)(51))

Scope of Definition

    Comments: A few commenters supported the proposed definition. 
However, most commenters did not agree, for differing reasons, with the 
Department's proposed definition or its interpretation set forth in the 
preamble of the NPRM. Most of those disagreeing stated the Department 
narrowed the scope of the definition of a ``student with a 
disability.''
    Some commenters disagreed with the regulatory definition because it 
did not mirror the statutory definition. Specifically, they believed 
the addition of the phrase ``a student who is'' to the phrase ``an 
individual with a disability for the purposes of section 504'' in 
proposed Sec.  361.5(c)(51)(i)(C)(2) narrows the scope of the statutory 
definition. In fact, one commenter believed that the interpretation 
effectively eliminated individuals qualifying on the basis of section 
504 of the Act.
    A few commenters recommended that the Department adjust the age 
range of a ``student with a disability,'' while other commenters 
recommended that the definition require a consistent age range across 
the Nation.
    Discussion: We appreciate the comments supporting the definition, 
as well as those expressing concern or disagreement. We anticipated 
many of the same concerns when developing the proposed regulations. 
However, we firmly believe that Sec.  361.5(c)(51), both as proposed 
and final, is consistent with both the plain meaning and intent of the 
definition in section 7(37) of the Act, as amended by WIOA. We agree 
with commenters that Sec.  361.5(c)(51)(i)(C)(2), both as proposed and 
final, limits the definition to students. We adopted almost verbatim 
section 7(37) of the Act, as amended by WIOA, and, in so doing, we 
attempted to eliminate confusion that the term ``student with a 
disability'' could be construed to apply to someone not in an 
educational program. We recognize that the applicability of section 504 
of the Act, in any other context, is much broader. Therefore, in an 
effort to reduce confusion and potential non-compliance, we clarified 
in Sec.  361.5(c)(51)(i)(C)(2), both proposed and final, that this 
particular criterion, as all others, applies only to students with 
disabilities. We believe this clarification is consistent with the 
statute because the term itself--``student with a disability''--
describes a population that encompasses only individuals with 
disabilities who are participating in educational programs. For this 
reason, we also disagree with the recommendations to remove any 
explicit requirement in the definition of a ``student with a 
disability'' that the individual be a participant in an educational 
program because to do so would contradict the plain meaning of

[[Page 55684]]

the term itself and section 7(37) of the Act.
    The definitions of ``student with a disability'' in section 7(37) 
of the Act and final Sec.  361.5(c)(51) allow for a certain degree of 
flexibility in the age range of students with disabilities. States may 
elect to use a lower minimum age for receipt of pre-employment 
transition services than the earliest age for the provision of 
transition services under section 614(d)(1)(A)(i)(VIII) of the IDEA. 
The section applies beginning with the first individualized education 
program (IEP) to be in effect when a child with a disability turns 16, 
or younger if determined appropriate by the IEP Team, and updated 
annually thereafter. Pursuant to 34 CFR 300.320(b) of the the IDEA 
regulations, transition services may be provided for students with 
disabilities younger than age 16, if determined appropriate by the IEP 
Team. Furthermore, a ``student with a disability'' may not be older 
than 21, unless a State law provides for a higher maximum age for the 
receipt of special education and related services under the IDEA. 
Therefore, there is no statutory authority to revise the definition of 
a ``student with a disability,'' for purposes of the VR program, by 
adjusting the specified age range or creating a standard age range to 
be applied across the Nation because to do so would be inconsistent 
with the age criteria contained in the statutory definition.
    Changes: None.

Educational Programming

    Comments: Some commenters stated that the Department's 
interpretation that the definition applies only to students in 
secondary school directly contradicts congressional intent, as 
expressed in section 2(b)(5) of the Act, as amended by WIOA, because 
the narrower interpretation does not ensure, to the greatest extent 
possible, that students and youth with disabilities have opportunities 
for postsecondary success. Most of these commenters stated that 
students in postsecondary education should be included within the 
definition, as should students in GED, ESL, home school, vocational/
technical programs, and juvenile justice or mental health treatment 
facilities, so long as they meet the age requirements in the 
definition. These commenters stated that students in these educational 
programs and settings also need pre-employment transition services, 
which are available only to individuals who meet the definition of a 
``student with a disability.'' One commenter requested that the 
Department share documentation of congressional intent in support of 
the interpretation that the definition does not include individuals in 
postsecondary education. A few commenters were concerned that the 
emphasis on serving only secondary students might decrease emphasis by 
DSUs on services for individuals enrolled in postsecondary education.
    Some commenters expressed concern about the impact of the 
Department's interpretation of the definition of ``student with a 
disability'' on the use of funds reserved for the provision of pre-
employment transition services. These commenters believed the 
definition of a ``student with a disability'' should be broader in 
order for States to maximize use of the funds reserved for pre-
employment transition services.
    Discussion: We appreciate the concerns expressed by the commenters 
and have reconsidered our interpretation, as described in the preamble 
to the NPRM, that the definition of a ``student with a disability'' 
should be limited to students in a secondary education program. Our 
intention in the NPRM was to be consistent with congressional intent 
for the definition, given the requirements governing the availability 
of a free appropriate public education under the IDEA, which is limited 
to services included in the individualized education programs of 
children with disabilities who are enrolled in secondary education 
under State law (20 U.S.C. 1412(a)(1) and 1401(9)). Services provided 
under the IDEA are not affected by our interpretation here, which 
applies only to the VR program.
    Nonetheless, we agree that section 7(37) of the Act, as amended by 
WIOA, is silent on the educational setting for a student with a 
disability. After much consideration of the potential effects for such 
change in interpretation, the Secretary agrees that the definition of a 
``student with a disability'' in final Sec.  361.5(c)(51), for purposes 
of the VR program, should be interpreted as applying to students also 
enrolled in educational programs outside secondary school, including 
postsecondary education programs, so long as the students satisfy the 
age requirements set forth in final Sec.  361.5(c)(51). We believe this 
change will eliminate the concern expressed by commenters regarding the 
potential negative effect a different interpretation would have on a 
DSU providing and maximizing postsecondary education opportunities to 
eligible individuals with disabilities needing such services under an 
approved individualized plan for employment. Furthermore, as was set 
forth in the NPRM, the Secretary believes that the definition applies 
to secondary students who are homeschooled, as well as students in 
other non-traditional secondary educational programs. This 
interpretation is not affected by this discussion, and these 
individuals remain covered by the definition of a ``student with a 
disability'' in final Sec.  361.5(c)(51).
    We also agree with commenters that postsecondary education students 
may benefit from certain pre-employment transition services set forth 
in section 113 of the Act, as amended, and final Sec.  361.48(a), all 
of which are limited to ``students with disabilities.'' We believe this 
broader interpretation of the definition will increase the potential 
for DSUs to maximize the use of funds reserved for the provision of 
pre-employment transition services by increasing the number of students 
who can receive these services. Therefore, we have revised the 
definition of ``student with a disability'' in final Sec.  361.5(c)(51) 
to include students in secondary, postsecondary, and other recognized 
education programs.
    However, this broader interpretation does not expand the list of 
required or authorized activities in section 113 of the Act, as amended 
by WIOA, and final Sec.  361.48(a). A DSU can use the reserved funds to 
provide pre-employment transition services, as set forth in final Sec.  
361.48(a), to students with disabilities in postsecondary education or 
other educational programs who meet the age requirements of the 
definition. For example, a DSU may provide work-based learning 
activities such as internships to an individual with a disability in a 
postsecondary education program who otherwise satisfies the definition 
of a ``student with a disability,'' but may not use the reserved funds 
(dedicated to the provision of pre-employment transition services under 
final Sec.  361.48(a)) to provide services and activities not 
specifically included in section 113 of the Act and final Sec.  
361.48(a). In other words, a DSU may not use the funds reserved for 
pre-employment transition services to pay for tuition and other costs 
of attending postsecondary education, since this is not among those 
activities that are required or authorized under section 113 of the Act 
and final Sec.  361.48(a). These and other necessary services, however, 
may be provided with VR funds not reserved for the provision of pre-
employment transition services so long as they are provided pursuant to 
an approved individualized plan for employment under section 103(a) of 
the Act and final Sec.  361.48(b) of these final regulations.

[[Page 55685]]

    Section 113 of the Act, as amended by WIOA, requires DSUs to 
coordinate pre-employment transition services with local educational 
agencies. This applies to students with disabilities in educational 
programs administered by local educational agencies. DSUs should 
coordinate the pre-employment transition services provided to students 
who are not participating in programs administered by local educational 
agencies with the public entities administering those educational 
programs, as described in section 101(a)(11)(C) of the Act, as amended 
by WIOA, and final Sec.  361.24.
    Changes: We have revised the definition of ``student with a 
disability'' in final Sec.  361.5(c)(51) to includes students in 
secondary, postsecondary, and other recognized education programs.

Students Who Have Applied or Been Determined Eligible for Vocational 
Rehabilitation Services

    Comments: A few commenters recommended that the definition apply 
only to individuals with disabilities who have applied for and been 
determined eligible for vocational rehabilitation services.
    Discussion: We disagree with the comments recommending that a 
``student with a disability'' should be limited to individuals who have 
applied or been determined eligible for vocational rehabilitation 
services. The definition in final Sec.  361.5(c)(51) is consistent with 
section 7(37) of the Act, which does not limit the definition to 
applicants and eligible individuals of the VR program. Furthermore, to 
impose such a limitation would be contrary to the Department's 
interpretation of ``potentially eligible,'' students with disabilities, 
as used in section 113 of the Act, as amended by WIOA, and final Sec.  
361.48(a). We have repeatedly stated in both the NPRM and these final 
regulations that all ``students with disabilities,'' regardless of 
whether they have submitted an application or been determined eligible 
for vocational rehabilitation services, may receive pre-employment 
transition services under final Sec.  361.48(a). See a more detailed 
discussion of ``Potentially Eligible'' later in this section in 
connection with comments received under final Sec.  361.48(a).
    Upon further Departmental review of this issue, the Secretary has 
determined that other conforming changes are needed throughout final 
part 361 to ensure these students, who may not have applied or been 
determined eligible for the VR program, would still be protected by 
fundamental rights under the VR program, namely the protection of their 
personal information under final Sec.  361.38 and the right to exercise 
informed choice under final Sec.  361.52. We have revised these 
provisions to refer to ``recipients of services'' rather than 
``eligible individuals.''
    Changes: We have revised final Sec.  361.38 and final Sec.  361.52 
to refer to ``recipients of services'' rather than ``eligible 
individuals,'' thereby ensuring that students and youth with 
disabilities who may receive pre-employment transition services or 
transition services to groups, as applicable, are still protected by 
requirements governing confidentiality and informed choice even if they 
have not applied or been determined eligible for the VR program.

Transition Services (Sec.  361.5(c)(55))

Scope of ``Pre-Employment Transition Services'' and ``Transition 
Services''

    Comments: A few commenters supported the definition of ``transition 
services'' in proposed Sec.  361.5(c)(55), while a few commenters 
requested clarification regarding the difference between ``transition 
services'' and ``pre-employment transition services,'' and the 
responsibility of DSUs to provide job placement assistance within the 
context of these services.
    Discussion: We appreciate the support from commenters to maintain 
the proposed definition of ``transition services'' in final Sec.  
361.5(c)(55). As to the difference between ``pre-employment transition 
services'' and ``transition services,'' we believe the distinction 
between the two is critical. As stated in the preamble to the NPRM, 
vocational rehabilitation services are provided on a continuum, with 
pre-employment transition services being the earliest set of services 
available to students with disabilities.
    Pre-employment transition services, authorized by section 113 of 
the Act, as amended by WIOA, and implemented by final Sec.  361.48(a), 
are designed to help students with disabilities to begin to identify 
career interests that will be further explored through additional 
vocational rehabilitation services, such as transition services. 
Furthermore, pre-employment transition services are only those services 
and activities listed in section 113 of the Act, as amended by WIOA, 
and final Sec.  361.48(a). Job placement assistance is not included 
among the listed pre-employment transition services, but it could 
constitute a transition service under section 103(a)(15) of the Act and 
final Sec.  361.48(b). Finally, pre-employment transition services are 
available only to students with disabilities, whereas transition 
services may be provided to a broader population--both students and 
youth with disabilities.
    Following the continuum, transition services represent the next set 
of vocational rehabilitation services available to students and youth 
with disabilities. They are outcome-oriented and promote movement from 
school to post-school activities, including postsecondary education, 
vocational training, and competitive integrated employment. As such, 
transition services may include job-related services, such as job 
search and placement assistance, job retention services, follow-up 
services, and follow-along services, based on the needs of the 
individual.
    Individualized transition services under section 103(a)(15) of the 
Act and final Sec.  361.48(b) must be provided to students who have 
been determined eligible for the VR program and in accordance with an 
approved individualized plan for employment. Transition services also 
may be provided in group settings to students and youth with 
disabilities under section 103(b)(7) of the Act, as amended by WIOA, 
and final Sec.  361.49(a)(7). Although these group services are not 
individualized, they can still be beneficial for job exploration, 
including presentations from employers in the community and group 
mentoring activities.
    Changes: None.

Outreach and Engagement of Parents or Representatives

    Comments: A few commenters requested that we revise the definition 
to incorporate parental outreach and engagement.
    Discussion: We agree that engaging and coordinating with parents or 
representatives of students and youth with disabilities is consistent 
with the network of services and activities included in the definition, 
and we have revised the definition accordingly.
    Changes: We have revised final Sec.  361.5(c)(55) by adding 
paragraph (v) to include outreach to and engagement of parents or, as 
appropriate, the representatives of students or youth with disabilities 
in the definition of ``transition services.''

Youth With a Disability (Sec.  361.5(c)(58))

Distinction Between ``Student With a Disability'' and ``Youth With a 
Disability''

    Comments: While a few commenters praised the clarity of the 
proposed definition, most stated that making a

[[Page 55686]]

distinction between a student with a disability and a youth with a 
disability creates unnecessary complexity and burden. These commenters 
recommended that services available to students with disabilities, such 
as pre-employment transition services, also be available to youth with 
disabilities. One commenter recommended that ``youth with a 
disability'' be defined more broadly than ``student with a disability'' 
so that individuals who are homeschooled and others could be covered by 
the definition.
    Discussion: We appreciate all of the comments and concerns about 
the definition of ``youth with a disability'' in Sec.  361.5(c)(58). 
While we understand the commenters' concerns, the Act, as amended by 
WIOA, defines the terms ``student with a disability'' and ``youth with 
a disability'' differently. Moreover, the Act and these final 
regulations use the terms differently, depending on the context. For 
example, only students with disabilities can receive pre-employment 
transition services under section 113 of the Act and final Sec.  
361.48(a), but both students with disabilities and youth with 
disabilities can receive transition services under section 103 of the 
Act and final Sec. Sec.  361.48(b) and 361.49(a). The definitions set 
forth in these final regulations are consistent with the statute, and 
we have no statutory authority to consolidate the two definitions or to 
delete one of them because to do so would be inconsistent with the 
statute.
    The age range in the definition of ``youth with a disability'' in 
final Sec.  361.5(c)(58) is broader than that for ``student with a 
disability'' in final Sec.  361.5(c)(51). Therefore, a student with a 
disability always meets the definition of a ``youth with a disability'' 
because a student with a disability has an age range that fits within 
the age range prescribed by the definition of a ``youth with a 
disability.''
    However, a youth with a disability may not necessarily meet the 
definition of a ``student with a disability.'' A youth with a 
disability could also be a student with a disability if the individual 
meets the age range in the definition of ``student with a disability'' 
and participates in an educational program (see the earlier discussion 
of educational programming under Student with a Disability section 
Sec.  361.5(c)(51)). On the other hand, a youth with a disability who 
is outside the age range for a student with a disability or is not 
participating in an educational program does not meet the definition of 
a ``student with a disability.''
    Changes: None.

Scope of Definition

    Comments: One commenter questioned whether the definition of 
``youth with a disability'' includes criteria related to the IDEA or 
section 504, as is the case with the definition of a ``student with a 
disability.''
    Discussion: As previously discussed, the definition of ``youth with 
a disability'' in final Sec.  361.5(c)(58) not only is broader in age 
range but also is not tied to participation in an educational program 
under the IDEA or section 504 of the Act, as is the definition of 
``student with a disability.''
    Changes: None.

Coordination With Education Officials (Sec.  361.22)

Coordination of Pre-Employment Transition Services

    Comments: A few commenters expressed support for proposed Sec.  
361.22, suggesting minimal to no changes. A few, however, stated that 
DSUs are required to provide pre-employment transition services in 
collaboration with educational agencies, and recommended that we 
include in proposed Sec.  361.22(b) reference to these services 
wherever the interagency coordination of transition services is 
mentioned. One commenter stated that a major challenge in transition is 
determining which entity is responsible for job placement assistance 
and support, and recommended proposed Sec.  361.22(b) be revised to 
incorporate specific mention of these services in the coordination of 
pre-employment transition services.
    A few commenters recommended that we consider including in proposed 
Sec.  361.22 a reference to technical assistance circular 14-03 (RSA-
TAC-14-03), which discusses transition-related principles.
    Discussion: We appreciate the comments supporting proposed Sec.  
361.22, as well as those seeking further clarification or expressing 
concerns. We agree that pre-employment transition services should be 
added to final Sec.  361.22(b) as it is referenced in final Sec.  
361.22(a)(1). However, there is no statutory basis to require job 
placement services in connection with pre-employment transition 
services, as job placement services are not among the required or 
authorized activities under section 113 of the Act, as amended by WIOA. 
Yet, while we cannot require it, nothing in the Act prohibits States 
from including job placement activities as a transition service in the 
formal interagency agreement.
    We disagree with the request to add a reference in final Sec.  
361.22(b) to technical assistance circular 14-03 because the content of 
technical assistance circular 14-03 has been significantly affected by 
the amendments to the Act made by WIOA. As a result, we will be 
revising this particular technical assistance circular accordingly.
    Changes: We have revised Sec.  361.22(b)(1) to state that the 
formal interagency agreement must include collaboration between the DSU 
and the State educational agency for providing pre-employment 
transition services to students with disabilities. We have also revised 
Sec. Sec.  361.22(b)(3) and (b)(4) to similarly cover pre-employment 
transition services when identifying personnel responsible for 
providing services and when developing procedures for outreach to and 
identification of students with disabilities.

Financial and Programmatic Responsibilities

    Comments: One commenter suggested that we revise proposed Sec.  
361.22 by requiring that the formal interagency agreement between the 
DSU and the State educational agency contain more robust minimum 
content provisions, since the agreement is critical to providing 
services to students with disabilities and a successful transition from 
school to post-school activities.
    Many commenters stated that additional guidance is needed to 
determine which entity, the school or the DSU, is financially 
responsible for providing transition services to students with 
disabilities. Many requested that we revise proposed Sec.  361.22 to 
explicitly identify the financial roles and responsibilities of each 
entity, stating that the interagency agreement cannot be effective if 
it is broad, general or abstract. Other commenters recommended that the 
formal interagency agreement provide clear direction about agencies' 
responsibilities for services under particular circumstances, stating 
that specificity is essential to coordinating shared responsibilities 
and funding.
    A few commenters expressed concern that major problems and delays 
in implementing transition planning services occur because neither WIOA 
nor the IDEA state explicitly which entity is responsible for providing 
transition services. These commenters stated that the financial 
responsibilities must be made clear so that neither the local 
educational agency nor the DSU may shift the burden for providing a

[[Page 55687]]

service, for which it otherwise would be responsible, to the other 
entity.
    A few commenters also noted that while many of these decisions can 
be resolved at the State and local level, there are still instances 
where it is difficult to determine the responsible entity, such as in 
the determination of which entity is responsible for job placement 
assistance and related work supports. Conversely, one commenter, 
representing school officials, stated that decisions about providing 
and assuming financial responsibility for transition services must be 
made at the State and local level through interagency collaboration and 
coordination, cannot be wholly dictated by regulation, and must be made 
based on the circumstances of the situation and the eligibility of the 
student.
    One commenter expressed the concern that the budget for the VR 
program is not as significant as the budget for special education, and 
vocational rehabilitation funds may be quickly exhausted if the VR 
program were to provide pre-employment transition services to every 
student with a disability. Another commenter noted that the schools and 
DSUs need to collaborate with other entities that have shared 
responsibilities and funding. Similarly, one commenter stated that the 
IDEA, WIOA, and the Americans with Disabilities Act seem to be in a 
competitive relationship, since the entities covered by these statutes 
are responsible for providing and funding some of the same services.
    Discussion: As discussed in the preamble of the NPRM, over the 
years many individuals have sought clarification and posed questions 
about the financial responsibilities of schools and DSUs when services 
fall under the purview of both entities. For example, pre-employment 
transition services and transition services can be both vocational 
rehabilitation services under the VR program and special education or 
related services under the IDEA. While neither the Act, as amended by 
WIOA, nor the IDEA is explicit as to which entity--the DSU or the State 
educational agency and, as appropriate, the local educational agency--
is financially responsible for providing pre-employment transition 
services and transition services, both final Sec.  361.22(c) and 34 CFR 
300.324(c)(2) provide that neither the DSU nor the local educational 
agency may shift the burden for providing services, for which it 
otherwise should be responsible, to the other entity. It is essential 
that section 101(c) of the Act, as amended by WIOA, and section 
612(a)(12) of the IDEA, along with their implementing regulations in 
Sec.  361.22(c) and 34 CFR 300.154, are read in concert to avoid any 
inconsistency or conflict between the two requirements.
    Section 113(a) of the Act, as amended by WIOA, requires the DSU to 
provide, or arrange for the provision of, pre-employment transition 
services in collaboration with local educational agencies. Therefore, 
decisions as to which entity will be responsible for providing services 
that are both special education services and vocational rehabilitation 
services must be made at the State and, as appropriate, local level as 
part of the collaboration between the DSU, State educational agencies, 
and, as appropriate, the local educational agencies.
    We agree that the formal interagency agreement should facilitate 
the transition of students with disabilities receiving special 
education services to receiving vocational rehabilitation services 
without delay or disruption. Since the decisions about financial 
responsibility for providing pre-employment transition services and 
transition services must be made at the State and local level during 
collaboration and coordination of services, a formal interagency 
agreement or other mechanism for interagency coordination can 
explicitly address all aspects of these issues. As suggested in the 
NPRM, the agreement criteria could address criteria such as:
    1. The purpose of the service. Is it related more to an employment 
outcome or education? That is, is the service usually considered a 
special education or related service, such as transition planning 
necessary for the provision of a free appropriate public education?
    2. Customary Services. Is the service one that the school 
customarily provides under part B of the IDEA? For example, if the 
school ordinarily provides job exploration counseling or work 
experiences to its eligible students with disabilities, the mere fact 
that those services are now authorized under the Act as pre-employment 
transition services does not mean the school should cease providing 
them and refer those students to the VR program. However, if summer 
work experiences are not customarily provided by a local educational 
agency, the DSU and local educational agency may collaborate to 
coordinate and provide summer work-based learning experiences.
    3. Eligibility. Is the student with a disability eligible for 
transition services under the IDEA? The definition of a ``student with 
a disability'' under the Act and these final regulations is broader 
than under the IDEA because the definition in the Act includes those 
students who are individuals with disabilities under section 504 of the 
Act. It is possible that students receiving services under section 504 
do not have individualized education programs under the IDEA because 
they are not eligible to receive special education and related services 
under the IDEA. As a result, DSUs are authorized to provide transition 
services under the VR program to a broader population under WIOA than 
local educational agencies are authorized to provide under the IDEA.
    The Secretary believes that these criteria may assist DSUs, State 
educational agencies, and local educational agencies as they 
collaborate and coordinate the provision of transition services, 
including pre-employment transition services, to students with 
disabilities. We strongly encourage that formal interagency agreements 
have clearly defined parameters for collaborating and coordinating the 
delivery of pre-employment transition services and transition services 
and clearly defined responsibilities for each entity. However, there is 
no statutory basis for the Department to establish service delivery or 
financial responsibilities. Those decisions must be made at the State 
level while developing an interagency agreement and considering the 
population, available resources, and needs of the students and youth. 
Consequently, States have maximum flexibility to develop these 
interagency agreements in a manner that best meets the unique needs and 
capacities of both the DSUs and educational agencies.
    Changes: None.

Contracting With Subminimum Wage Programs

    Comments: Some commenters recommended that proposed Sec.  
361.22(b)(6) be revised to prohibit contracts or arrangements with, or 
referrals to, programs in which youth with disabilities are employed at 
subminimum wage. They stated that the agreements should go beyond 
documentation requirements and make proactive efforts to identify 
individuals being considered for employment at subminimum wage. One 
commenter expressed support for using the existing formal interagency 
agreement as the mechanism to develop and document the process required 
in section 511 of the Act as proposed in Sec.  361.22.
    Discussion: We agree with commenters that the Act emphasizes the 
need to ensure that individuals with disabilities, especially students 
and youth with disabilities, are given the opportunity to receive 
training for and

[[Page 55688]]

obtain work in competitive integrated employment. The commenters 
misunderstood our proposal because Sec.  361.22(b)(6), both proposed 
and final, requires the interagency agreement between the DSU and the 
State educational agency to include an assurance that, in accordance 
with 34 CFR 397.31, neither the State educational agency nor the local 
educational agency will enter into a contract or other arrangement with 
an entity, as defined in 34 CFR 397.5(d), for the purpose of operating 
a program for a youth with a disability under which work is compensated 
at a subminimum wage. Moreover, new requirements in section 511 of the 
Act, as amended by WIOA, and in final 34 CFR part 397 place additional 
limitations on the use of subminimum wages for individuals with 
disabilities, especially youth with disabilities. For example, final 34 
CFR 397.10 requires the DSU, in coordination with the State educational 
agency, to develop a process that ensures youth with disabilities 
receive documentation demonstrating their completion of the various 
required activities.
    Changes: None.

Coordination and Outreach to Parents and Representatives

    Comments: A few commenters urged the Department to ensure that 
coordination efforts include outreach to parents of students who are in 
need of transition services. One such commenter recommended proposed 
Sec.  361.22(b)(4) be revised to include systematic outreach to, and 
engagement of, parents, including through the IEP process for the IDEA 
eligible students. The commenter stated that without this outreach and 
engagement, parents will not have a meaningful understanding of the 
benefits of vocational rehabilitation services for their children.
    Discussion: While there is no statutory basis in section 
101(a)(11)(D) of the Act to require outreach to parents, we agree that 
family members, caregivers, and representatives play a critical role in 
the transition process. We believe that for pre-employment transition 
services and transition services to be meaningful and to lead to 
successful outcomes for students and youth with disabilities, their 
family members, caregivers, and representatives must be aware of the 
services and benefits offered by DSUs and be involved in the transition 
process. Although DSUs may conduct outreach to parents and 
representatives, this activity may be affected by State laws governing 
the age of majority.
    Under section 615(m) of the IDEA and 34 CFR 300.520, a State may 
transfer all rights accorded to parents under Part B of the IDEA to the 
student when he or she reaches the age of majority under State law that 
applies to all children. If rights under the IDEA transfer to the 
student, a student may have the right to make his or her own education, 
employment, and independent living decisions under the IDEA. DSUs may 
conduct outreach directly to these students. Parental consent to 
participate in pre-employment transition services and transition 
services should be obtained pursuant to State law, as well as policies 
of the educational programs and the DSU. We further emphasize here that 
the Department funds programs and projects that advise and assist 
parents and representatives of students and youth with disabilities as 
their children prepare for adult life. The Department awarded grants to 
more than 65 Parent Training and Information Centers funded by the 
Office of Special Education Programs and seven Parent Information and 
Training Programs funded by RSA during FY 2015. Individuals will find 
additional resources regarding age of majority at 
www.parentcenterhub.org/repository/age-of-majority-parentguide/.
    Changes: None.

Dispute Resolution

    Comments: Some commenters expressed the concern that proposed Sec.  
361.22(c) is limited and provides no safeguards for students if an 
agreement is not reached about financial responsibility for a 
particular service, which can lead to delays in services or no services 
at all. Some commenters stated that the formal interagency agreement 
should include a mechanism to resolve disputes between the State 
educational agency and the DSU about providing pre-employment 
transition services and transition services. One commenter also 
suggested that we require language in the formal interagency agreement 
to inform individuals of the availability of the CAP.
    Discussion: We disagree with the recommendations to require that 
the formal interagency agreement include: (1) A mechanism for resolving 
disputes between the DSU and the State educational agency or local 
educational agency; (2) a method for resolving disputes between an 
individual with a disability and these entities; and (3) information 
about the CAP. Section 101(a)(11)(D) of the Act, as amended by WIOA, 
which provides the statutory authority for final Sec.  361.22(b), does 
not require that States create a grievance procedure for disputes under 
the agreements, in general, or, more specifically, about the provision 
of pre-employment transition services or transition services. Likewise, 
section 101(a)(11)(D) of the Act does not require the interagency 
agreement to identify a process for resolving disputes between an 
individual with a disability and the DSU, State educational agency, or 
local educational agency about pre-employment transition services and 
transition services, or to include information about the CAP. We 
believe final Sec.  361.22 is consistent with the Act, and it provides 
States maximum flexibility to develop the interagency agreements in a 
manner that best meets their unique needs and circumstances. However, 
there is nothing in the Act or these final regulations that prohibits 
States from including in the formal interagency agreement a grievance 
procedure (e.g., similar to the one in section 101(a)(8) of the Act) to 
resolve disputes between the DSU and the State educational agency, or 
the local educational agency, as appropriate, as well as procedures to 
resolve disputes between an individual with a disability and the DSU, 
State educational agency or local educational agency, and information 
about the CAP. We encourage States to include these procedures and 
information in their interagency agreements.
    Section 20 of the Act requires all programs providing services 
under the Act, including the VR program, to inform applicants and 
recipients of services of the availability and purpose of the CAP. 
Therefore, regardless of whether the formal interagency agreement 
between the DSU and the State educational agency addresses the CAP, all 
students and youth with disabilities receiving vocational 
rehabilitation services, including pre-employment transition services 
and transition services, will be informed about it. In addition, an 
applicant for, or eligible individual under, the VR program who is 
dissatisfied with a decision made by vocational rehabilitation 
personnel, including those about pre-employment transition services and 
transition services, may request a review of that decision under 
section 102(c) of the Act. Upon further Departmental review, the 
Secretary has realized that the statute has created an unintended 
inconsistency among sections 20, 102(c), 103(b)(7), 12(a), and 113. 
Specifically, section 20 requires programs funded under the Act to 
inform applicants for and recipients of those services about the CAP. 
There is no requirement that the recipients be

[[Page 55689]]

determined eligible for those services in order to receive information 
about the CAP. Section 103(b)(7) of the Act permits the DSU to provide 
transition services to youth and students with disabilities in a group 
setting, regardless of whether those students or youth have applied for 
or been determined eligible for vocational rehabilitation services. 
Section 112(a) specifically authorizes the CAP to assist students with 
disabilities receiving pre-employment transition services. Section 113 
makes clear that students with disabilities are eligible to receive 
pre-employment transition services regardless of whether they have 
applied or been determined eligible for the VR program. All of these 
provisions, read in concert, make clear that due process rights under 
the Act would be available to students and youth with disabilities 
receiving pre-employment transition services and transition services 
even if they have not yet applied for or been determined eligible for 
the VR program. However, section 102(c) refers only to ``applicants and 
eligible individuals,'' thus creating an internal inconsistency within 
the Act. Because it is clear that students and youth with disabilities 
are able to receive certain services without having applied or been 
determined eligible for vocational rehabilitation services and they are 
eligible for advocacy assistance from the CAP, the Secretary has 
determined it is necessary to amend final Sec.  361.57 throughout to 
make clear that ``recipients'' of vocational rehabilitation services 
may exercise due process rights when disagreements arise during the 
receipt of pre-employment transition services and transition services. 
We have also made conforming changes throughout final part 361, such as 
with the definition of ``impartial hearing officer'' in Sec.  
361.5(c)(24) and ``qualified and impartial mediator'' in 361.5(c)(43).
    The student or youth with a disability, or the individual's parent, 
as appropriate, will be informed of the CAP. Disputes or disagreements 
between parents and educational personnel are beyond the scope of the 
Act and these final regulations.
    Changes: We have revised final Sec.  361.57 throughout to replace 
``eligible individuals'' with ``recipients.'' We also made conforming 
changes to the definitions of ``impartial hearing officer'' and 
``qualified and impartial mediator'' in final Sec.  361.5(c).

Cooperation and Coordination With Other Entities (Sec.  361.24)

    Comments: A few commenters disagreed with proposed Sec.  361.24(d), 
stating that the regulations do not ensure that American Indian 
students and youth with disabilities enrolled in, but disconnected 
from, the education system are adequately served. These same commenters 
specifically requested that reference to the American Indian Vocational 
Rehabilitation Services (AIVRS) program funded under Sec.  121 of the 
Act be made throughout the final regulations whenever ``new transition 
services'' are mentioned. A few other commenters addressed transition 
services for American Indian students with disabilities without 
referring to proposed Sec.  361.24.
    Some commenters recommended that we require DSUs to include in 
their formal interagency agreements with AIVRS projects and to address 
in their agreements with Tribal Education Agencies in the State how the 
State VR agency plans to provide equitable pre-employment transition 
services to American Indian students with disabilities, particularly 
those that attend schools on Indian reservations. The commenters also 
recommended that we require State VR agencies to address how services 
to American Indian students with disabilities will be incorporated into 
the budgeting and spending plans for the funds reserved for providing 
pre-employment transition services for students with disabilities.
    One commenter encouraged the Department to consider using Impact 
Aid funds for youth in transition.
    Discussion: While the Department understands the commenters' 
concerns regarding the need to ensure that coordination among the DSU, 
AIVRS program, and educational agencies is taking place and that 
transition services, including pre-employment transition services, are 
provided to American Indian students with disabilities, the Department 
does not believe a revision to the final regulations is necessary to do 
this.
    Final Sec.  361.24, as it did when proposed, addresses the need for 
coordination among these entities and for providing transition services 
to American Indians living on or near a reservation. Section 
361.24(d)(1) requires the VR services portion of the Unified or 
Combined State Plan to assure that DSUs have entered into formal 
cooperative agreements with AIVRS programs in their States. Section 
361.24(d)(2) sets out requirements for cooperative agreements with 
AIVRS programs, and those include strategies for providing transition 
planning under Sec.  361.24(d)(2)(iii). Furthermore, the Federal funds 
reserved in accordance with Sec.  361.65, and any funds made available 
from State, local, or private funding sources, are to be used to 
provide pre-employment transition services to all students with 
disabilities, including American Indian students with disabilities, in 
need of such services, regardless of whether an application for 
services has been submitted. Finally, Sec.  361.30 requires that the 
DSU assure in the VR services portion of the Unified or Combined State 
Plan that it will provide services to American Indians with 
disabilities to the same extent that it provides services to other 
populations with disabilities in the State.
    Final Sec.  361.22 provides for a formal interagency agreement with 
the State Educational Agency that would include educational services, 
including transition services and pre-employment transition services, 
provided by local educational agencies for Indian students with 
disabilities living on reservations. DSUs coordinate with schools on 
reservations that provide services through the Bureau of Indian 
Education or TEAs under the requirement in Sec.  361.24(a) that the DSU 
cooperate with Federal and local agencies and programs. Because the 
final regulations provide appropriate mechanisms for coordination with 
the Federal, State and Tribal agencies that provide educational 
services to Indian students with disabilities on reservations, we do 
not believe a change in the regulations is necessary.
    As for using funds for transition services provided under the 
Impact Aid law (formerly Title VIII of the Elementary and Secondary 
Education Act of 1965 (ESEA) and now in Title VII as a result of the 
Every Student Succeeds Act reauthorization), the comment is beyond the 
scope of these regulations. That said, however, the Impact Aid provides 
assistance to local school districts with concentrations of children 
residing on Indian lands, military bases, low-rent housing properties, 
or other Federal properties and, to a lesser extent, concentrations of 
children who have parents in the uniformed services or employed on 
eligible Federal properties who do not live on Federal property. The 
majority of Impact Aid funds is general aid to the school district 
recipients and may be used in whatever manner the districts choose, as 
long as it is consistent with State and local requirements. The 
Department does not have the statutory authority to direct Impact Aid 
general aid money, including for the use suggested by the commenter.
    Changes: None.

[[Page 55690]]

Content of the Individualized Plan for Employment (Sec.  361.46)

    Comments: A few commenters requested additional guidance regarding 
the use of a ``projected post-school employment outcome'' in an 
individualized plan for employment for a student or youth with a 
disability and asked whether the use of the broad category ``Standard 
Occupational Codes'' would meet this description.
    Discussion: In response to the request for additional guidance, the 
individualized plan for employment with a projected post-school 
employment outcome should outline the services and activities that will 
guide the individual's career exploration. The projected post-school 
employment outcome facilitates the individual's exploration and 
identification of a vocational goal based upon his or her informed 
choice. It may be a specific goal, such as a Web designer, or a broader 
goal, such as medical practitioner. The projected goal may be amended 
during the career development process, and eventually it must be 
revised to a specific vocational goal once this process is completed.
    Changes: None.

Scope of Vocational Rehabilitation Services for Individuals With 
Disabilities (Sec.  361.48)

Pre-Employment Transition Services (Sec.  361.48(a))

Scope of Pre-Employment Transition Services and Use of Reserve

    Comments: Some commenters expressed support for the proposed 
regulation. However, most commenters recommended revisions or sought 
clarification about the scope and provision of pre-employment 
transition services. One commenter suggested that we revise proposed 
Sec.  361.48(a) to include only direct services to individuals, while 
another commenter requested clarification as to whether pre-employment 
transition coordination activities in proposed Sec.  361.48(a)(4) could 
be paid for with funds reserved for providing pre-employment transition 
services.
    Discussion: Section 113(a) of the Act, as amended by WIOA, states 
that the funds reserved under section 110(d) and any funds made 
available from State, local, or private (other) sources shall be used 
to provide, or arrange for the provision of, pre-employment transition 
services. The coordination activities required by section 113(d) of the 
Act, as amended by WIOA, and final Sec.  361.48(a)(4) are essential for 
arranging and providing the ``required'' and ``authorized'' activities 
set forth in section 113(b) and (c) of the Act and final Sec.  
361.48(a)(2) and (3). Therefore, there is no statutory authority to 
limit the scope of final 361.48(a) to only the direct services required 
by section 113(b) of the Act. See a more detailed discussion of the 
definition of ``Pre-Employment Transition Services,'' and the services 
included in that definition, earlier in this section.
    We agree with the commenter that proposed Sec.  361.48(a) should be 
revised to clarify that pre-employment transition coordination services 
provided under Sec.  361.48(a)(4) may be paid with funds reserved for 
providing pre-employment transition services, because coordination 
activities are essential for arranging and providing those services, as 
required by section 113(a) of the Act and Sec.  361.48(a).
    Changes: We have revised final Sec.  361.48(a) to clarify that the 
funds reserved for the provision of pre-employment transition services 
may be used to pay for pre-employment transition coordination 
activities.

Potentially Eligible

    Comments: Through the NPRM, we sought public comments and alternate 
suggestions related to our interpretation of ``potentially eligible'' 
to mean all students with disabilities, regardless of whether they have 
applied for and been determined eligible for the VR program. Of the 
comments received, most agreed with this interpretation. However, some 
commenters provided alternate interpretations.
    Of those commenters, a few suggested that the term should be 
interpreted as meaning students with disabilities who have at least 
applied for vocational rehabilitation services, with one commenter 
suggesting this would both allow for providing individualized services 
and ensure parental consent for students with disabilities to work with 
a vocational rehabilitation counselor. Other commenters stated that 
serving applicants for vocational rehabilitation services would allow 
the counselor not only to gather sufficient information to meet the 
specific needs of the student with a disability but also to track and 
report the provision of services and expenditure of funds. One 
commenter recommended revising proposed Sec.  361.48(a)(1) to limit the 
``potentially eligible'' population to those individuals who have both 
applied for and been determined eligible for vocational rehabilitation 
services.
    Furthermore, some commenters provided alternate interpretations for 
limiting or expanding the population to students or youth based upon 
age-range, or enrollment in secondary, postsecondary, or dual 
enrollment educational programs. One commenter recommended that 
``potentially eligible'' be defined to ensure consistent implementation 
across States. A few commenters expressed concerns that the regulations 
significantly limit the resources for students who have applied for and 
been determined eligible for the full scope of vocational 
rehabilitation services, as well as individuals with most significant 
disabilities. A few commenters expressed concerns that spending funds 
required to be reserved for providing pre-employment transition 
services on students who are potentially eligible for vocational 
rehabilitation services may force DSUs to implement an order of 
selection or close priority categories under an existing order of 
selection. One commenter raised concerns that DSUs may have limited 
fiscal and human resources required to address the needs of potentially 
eligible students. One commenter requested clarification as to how 
students would be identified.
    Another commenter suggested that proposed Sec.  361.48(a) does not 
conform to section 112 of the Act, as amended by WIOA, because the CAP 
is unable to provide assistance or advocacy services to individuals who 
are not vocational rehabilitation clients or client-applicants. A few 
commenters also expressed concerns about students being able to make 
informed choices, as well as obtaining parental consent for potentially 
eligible students who are minors and participating in pre-employment 
transition services, prior to submitting an application for vocational 
rehabilitation services.
    Discussion: We appreciate the comments supporting the proposed 
regulation, as well as comments expressing concerns and suggestions for 
changes. After much consideration of all available options, we have 
decided to maintain our interpretation of ``potentially eligible'' for 
purposes of pre-employment transition services. In so doing, all 
students with disabilities, regardless of whether they have applied for 
or been determined eligible for the VR program, may receive pre-
employment transition services. The Secretary believes this is the 
broadest legally supportable interpretation and the one that is most 
consistent with the apparent congressional intent.
    Most notably, section 113 of the Act is the only statutory section 
that references ``potentially eligible'' students with disabilities. 
All other sections of title I of the Act refer to ``applicants'' or 
individuals determined eligible for services. Given the stark

[[Page 55691]]

contrast in the use of ``potentially eligible'' in section 113 of the 
Act, the Secretary believes it imperative that meaning is given to that 
phrase by not limiting it to individuals who have applied for or been 
determined eligible for the VR program.
    The broader interpretation means all students with disabilities 
will be able to obtain much-needed pre-employment transition services 
and begin the early phase of job exploration without the potential 
delays, and the administrative burden on DSU personnel and resources, 
caused by application processing, eligibility determinations, 
assignment to an order of selection category, and development of an 
individualized plan for employment. However, there is nothing that 
precludes a DSU from taking an application as soon as a student 
expresses an interest in pre-employment transition services or other 
vocational rehabilitation services and making a timely determination of 
eligibility.
    We want to emphasize that the phrase ``potentially eligible'' 
applies only in the context of pre-employment transition services. This 
means that students with disabilities who need individualized services 
beyond the scope of pre-employment transition services (e.g., 
transition and other vocational rehabilitation services) must first 
apply for, and be determined eligible for, the VR program, be assigned 
to the appropriate category if the State is on an order of selection, 
and develop an approved individualized plan for employment. We 
recommend that DSUs request students with disabilities who are 
``potentially eligible'' for vocational rehabilitation services and 
receiving pre-employment transition services submit an application for 
services as soon as possible in the event further vocational 
rehabilitation services are needed.
    This recommendation is especially pertinent for those States that 
have implemented an order of selection. A student's position on the 
wait list for services other than pre-employment transition services, 
in the event the student is placed in a closed category, is based on 
the date of application, not the date of referral or the receipt of 
pre-employment transition services. To provide students with 
disabilities an opportunity to apply for services as early as possible 
in the transition process and ensure a smooth transition into the VR 
program, it is imperative that DSUs collaborate with educational 
programs to identify students who may be eligible or potentially 
eligible for vocational rehabilitation services and engage parents and 
representatives. The earlier a student is placed on a wait list, the 
sooner his or her turn will open in the State's order in the event a 
State is on an order of selection.
    We want to make clear that neither the Act nor these final 
regulations exempt these students with disabilities from the State's 
order of selection, if one has been implemented, or VR program 
requirements once they apply and are determined eligible for services. 
While under the order of selection regulations at Sec.  361.36, the 
student could continue to receive pre-employment transition services if 
such services have begun, a student could not begin to receive pre-
employment transition services if such services had not begun prior to 
applying and being determined eligible. To permit such would create an 
exemption from the order of selection requirements and the statute does 
not provide such authority. However, we recognize the benefit early 
services can have for students. Therefore, we want to make clear that 
these students could receive transition services offered to groups of 
students and youth with disabilities under Sec.  361.49. While not 
identical to pre-employment transition services, many similar services 
could be provided under the services to groups authority.
    A detailed discussion regarding comments related to the 
continuation of pre-employment transition services under an order of 
selection is provided in the Continuation of Pre-Employment Transition 
Services section later in this Analysis of Comments and Changes.
    In response to the concern related to the availability of services 
from the CAP, section 112(a) of the Act, as amended by WIOA, 
specifically authorizes CAP grantees to assist individuals receiving 
services under sections 113 and 511 of the Act. Therefore, these 
individuals are clients and client-applicants for purposes of the CAP.
    Finally, as discussed previously under ``Coordination with 
Education Officials,'' parental consent to participate in pre-
employment transition services is governed by State law, as well as 
policies of the educational programs and the DSU. Furthermore, informed 
choice, as outlined in final Sec.  361.52, applies throughout the 
vocational rehabilitation process; therefore, students with 
disabilities receiving pre-employment transition services under final 
Sec.  361.48(a) must be given the opportunity to exercise their 
informed choice.
    Changes: None.

Discretion To Provide Pre-Employment Transition Services to All 
Students With Disabilities

    Comments: One commenter requested that we clarify whether States 
have the option, under proposed Sec.  361.48(a), to provide pre-
employment transition services to all students with disabilities, 
including those who have not applied for vocational rehabilitation 
services. Another commenter requested that we revise the ``may'' in 
proposed Sec.  361.48(a)(1) to ``shall'' in order to ensure that pre-
employment transition services are provided to all students with 
disabilities, regardless of whether they have applied for services.
    Discussion: We agree that clarification is necessary. Section 
110(d)(1) of the Act, as amended by WIOA, requires States to reserve at 
least 15 percent of their Federal vocational rehabilitation allotment 
for providing pre-employment transition services. Moreover, section 113 
of the Act, as amended by WIOA, requires States to use the reserved 
funds to provide, or arrange for the provision of, pre-employment 
transition services to all students with disabilities in need of such 
services who are eligible or potentially eligible for services. 
Therefore, the requirement to reserve and use funds for providing pre-
employment transition services is mandatory, not discretionary. A State 
must provide pre-employment transition services to all students with 
disabilities needing those services and may not limit or expand those 
services. We used the term ``may'' in proposed Sec.  361.48(a)(1) to 
recognize that, for the first time, the Act permitted the delivery of 
pre-employment transition services to students with disabilities who 
have not applied for or been determined eligible for the VR program. 
However, we acknowledge the confusion caused by the use of the term. We 
therefore clarify that States must provide pre-employment transition 
services not only to students with disabilities who have applied for 
vocational rehabilitation services but also to those students with 
disabilities who have not applied for services.
    Changes: We have revised final Sec.  361.48(a)(1) to clarify that 
DSUs must make pre-employment transition services available statewide 
to all students with disabilities, not just those who have applied for 
or been determined eligible for vocational rehabilitation services.

Provision of Required Activities Based on Need

    Comments: Some commenters requested that we clarify whether a

[[Page 55692]]

student must be provided all five required services or only those 
required services based upon a student's need. Of these comments, many 
recommended the latter, as students with disabilities may not need all 
five activities set forth in section 113(b) of the Act, as amended by 
WIOA.
    A few commenters requested clarification about, or criteria for, 
making a determination of need. One commenter also recommended that the 
regulations promote client choice about participating in pre-employment 
transition services to ensure that students are not coerced into 
participating in these services. Finally, one commenter expressed 
concern that DSUs may require students with disabilities to participate 
in pre-employment transition services as readiness or preparatory 
activities before applying for vocational rehabilitation services, 
thereby delaying the transition from school to post-school activities.
    Discussion: Section 113(a) and (b) of the Act, as amended by WIOA, 
when read in concert with each other, as well as final Sec.  
361.48(a)(2), require the DSU to make certain ``required'' pre-
employment transition services available to all students with 
disabilities who need them. However, none of these provisions mandate 
that all five ``required'' activities be provided to each student with 
a disability if all the activities are not necessary. Pre-employment 
transition services, as is true for any vocational rehabilitation 
service, must be provided solely on the basis of the individual's need 
for that service.
    Under final Sec.  361.50, DSUs are responsible for developing 
policies, in consultation with the SRC, for determining the need for 
pre-employment transition services. These policies must include clear 
and consistent criteria based on the needs of students identified in 
the comprehensive statewide needs assessment. The policies will guide 
the DSU, in consultation with school personnel, family members, and 
students with a disability, in determining which pre-employment 
transition services each student needs, consistent with his or her 
interests and informed choice.
    Finally, pre-employment transition services are designed to be an 
early start at job exploration for students with disabilities and 
should enrich, not delay, transition planning, application to the VR 
program, and the continuum of vocational rehabilitation services 
necessary for movement from school to post-school activities. Neither 
section 113 of the Act, as amended by WIOA, nor final Sec.  361.48(a) 
requires students with disabilities receiving pre-employment transition 
services to apply for, or be determined eligible for, the VR program or 
to receive other vocational rehabilitation services. The Act and these 
final regulations maximize opportunities for achieving competitive 
integrated employment by imposing no requirement that would delay or 
hinder the student's ability to access these crucial early services or 
that would permit a DSU to coerce an individual to participate in any 
of them. However, should the student with a disability need additional 
vocational rehabilitation services, he or she must apply for and be 
determined eligible for those services. See the more detailed 
discussion of comments related to ``Potentially Eligible'' earlier in 
this section.
    Changes: None.

Continuation of Pre-Employment Transition Services

    Comments: Some commenters expressed concerns about the continuation 
of pre-employment transition services and availability of reserved 
funds for those services once a student with a disability applies for 
and is determined eligible for the VR program. Of those commenters, 
many expressed the need for a continuation of services for those 
students who received pre-employment transition services prior to 
applying for the VR program and aging out of or exiting an educational 
program. Some commenters requested that States be permitted to use 
funds reserved under section 110(d) of the Act to continue to provide 
services for any student with a disability who has received pre-
employment transition services and who cannot receive vocational 
rehabilitation services due to a State's implementation of an order of 
selection. One commenter suggested that those students found eligible 
for the VR program while, or after, receiving pre-employment transition 
services should be given an automatic service priority under a State's 
order of selection, while another commenter requested clarification as 
to why students with disabilities have not received a service priority 
under proposed Sec.  361.36. Some commenters expressed concerns that 
serving students who have not applied for services, regardless of the 
severity of their disability, will result in a delay of services to 
other students who have applied and been determined eligible for 
vocational rehabilitation services, including individuals with the most 
significant disabilities. A few commenters expressed the concern that 
the emphasis on serving students would limit the funds available to 
serve adult consumers.
    Discussion: We understand the commenters' concerns about the 
continuation of services for students with disabilities after receiving 
pre-employment transition services, as some students may apply but not 
be determined eligible for the VR program. Others may no longer satisfy 
the definition of a ``student with a disability'' because they are no 
longer within the required age range or are no longer participating in 
an education program. These issues arise only when a student with a 
disability who is receiving, or has received, pre-employment transition 
services also needs other vocational rehabilitation services. All 
students with disabilities who apply for vocational rehabilitation 
services, even if they are still receiving pre-employment transition 
services, will be subject to all relevant requirements for eligibility, 
order of selection, and development of the individualized plan for 
employment (including its development prior to leaving school under 
final Sec.  361.22(a)(2)). Neither the Act nor these final regulations 
exempt students with disabilities from any of these requirements, which 
apply to all VR program applicants.
    Section 101(a)(5) of the Act, as amended by WIOA, does not exempt 
students with disabilities receiving pre-employment transition services 
prior to the determination of eligibility from a State's order of 
selection; therefore, we do not have the statutory authority to include 
such an exemption in final Sec.  361.36. Nonetheless, consistent with 
the policy underlying prior Sec.  361.36(e)(3), which requires a DSU to 
continue providing vocational rehabilitation services to individuals 
who had begun receiving these services under an individualized plan for 
employment prior to the implementation of an order of selection, it is 
imperative that students with disabilities not experience a disruption 
in the pre-employment transition services that they are receiving and 
that are so critical to their transition to postsecondary education and 
employment. Thus, we have revised final Sec.  361.36(e)(3) by requiring 
DSUs implementing an order of selection to continue the provision of 
pre-employment transition services to students with disabilities who 
were receiving these services prior to the determination of eligibility 
and assignment to a priority category. DSUs may use the funds reserved 
under section 110(d) and final Sec.  361.65(a)(3)

[[Page 55693]]

for the continuation of these services. This change does not permit the 
DSU to provide any other transition or vocational rehabilitation 
services for students with disabilities assigned to closed priority 
categories.
    As for ceasing to satisfy the definition of ``student with a 
disability,'' pre-employment transition services under section 113 of 
the Act and final Sec.  361.48(a) are available only to students with 
disabilities. Therefore, if an individual no longer meets the 
definition of a ``student with a disability,'' despite the fact that he 
or she has received or is receiving pre-employment transition services, 
he or she is no longer able to receive these services under section 113 
of the Act and final Sec.  361.48(a). However, if the individual has 
been determined eligible for vocational rehabilitation services and has 
been assigned to an open category in the State's order of selection, if 
the State has implemented one, he or she may continue to receive the 
same types of pre-employment transition services under section 103(a) 
of the Act and final Sec.  361.48(b), in accordance with an approved 
individualized plan for employment. The DSU would pay for these 
services with VR funds, other than those reserved for the provision of 
pre-employment transition services under section 113 of the Act because 
the reserved funds must be used solely for the provision of pre-
employment transition services to individuals who satisfy the 
definition of a ``student with a disability.''
    Changes: We have revised final Sec.  361.36(e)(3) by requiring a 
designated State unit implementing an order of selection to continue to 
provide pre-employment transition services to students with 
disabilities who have begun receiving these services prior to the 
determination of eligibility and assignment to a closed priority 
category.

Required Activities

    Comments: Several commenters provided alternate suggestions for the 
required activities specified in proposed Sec.  361.48(a)(2). One 
commenter recommended that States be permitted to develop their own 
menu of pre-employment transition services, while many other commenters 
recommended a variety of revisions to proposed Sec.  361.48(a)(2). 
Specifically, one commenter requested that job exploration counseling 
include actual work experience in competitive integrated employment 
settings. A few commenters requested that work-based learning 
experiences include paid or unpaid work experiences in school or 
community settings, as well as experiential learning opportunities. 
Some commenters who recommended paid work experiences suggested that 
placement be aligned with the definition of competitive integrated 
employment. Many commenters on work-based learning experiences 
requested that the Department delete ``to the maximum extent possible'' 
from the regulation, prohibit sheltered work in segregated settings, 
and require that the experiences only be provided in integrated 
settings. However, a few commenters requested clarification as to 
whether entities with certificates issued by the Department of Labor 
under section 14(c) of the FLSA could provide pre-employment transition 
services.
    A few commenters suggested that we revise proposed 361.48(a)(2) to 
conform to similar language in the Higher Education Opportunity Act of 
2008 by replacing ``or'' with ``and'' in the language that governs 
counseling on opportunities for enrollment in comprehensive transition 
or postsecondary educational programs at institutions of higher 
education. In addition, these commenters recommended language specific 
to counseling on opportunities for enrollment of students with 
intellectual disabilities in postsecondary educational programs at 
institutions of higher education. A few other commenters proposed 
revising the focus of workplace readiness training to replace the 
development of social skills and independent living with a focus on 
soft skills, financial literacy, mobility skills, and other skills 
necessary for employment. Another few commenters recommended that the 
regulations require instruction in self-advocacy to be provided by a 
recognized self-advocacy group of the individual's choosing and that 
peer mentoring occur during work experiences. A few commenters 
recommended that the required activities include outreach to and 
engagement of parents of students with disabilities in conjunction with 
parent centers and parent training information centers.
    Discussion: We appreciate the commenters' suggestions, concerns, 
and requests for clarification. However, section 113(b) of the Act, as 
amended by WIOA, specifically itemizes the pre-employment transition 
services that must be provided--the ``required'' activities. 
Furthermore, section 113(c) of the Act itemizes the pre-employment 
transition services that may be provided--the ``authorized'' 
activities--in the event funds remain after providing the required 
activities. Given the Act's specificity about the pre-employment 
transition services that must be provided, as well as those that may be 
provided, there is no statutory basis to require additional activities 
or impose additional requirements, such as requiring that instruction 
in self-advocacy be provided by a recognized self-advocacy group of the 
individual's choosing or that peer mentoring occur during work 
experiences.
    We disagree with the commenters' request to revise Sec.  
361.48(a)(2)(iii) to conform to similar language in the Higher 
Education Opportunity Act of 2008 and specifically includes programs 
and services for students with intellectual disabilities. Final Sec.  
361.48(a)(2)(iii) mirrors section 113(b)(3) of the Act, as amended by 
WIOA, and we do not believe the replacement of ``or'' with ``and'' 
helps to better describe the manner in which DSUs are to provide this 
service. In addition, Section 113(b)(3)of the Act and final Sec.  
361.48(a)(2)(iii) encompass counseling on the broad range of 
comprehensive transition or postsecondary education programs available 
to all students with disabilities, including students with intellectual 
disabilities. Therefore, we do not believe it is necessary to revise 
final Sec.  361.48(a)(2)(iii).
    Moreover, there is no statutory basis for States to develop their 
own menu of pre-employment transition services. Rather, under section 
113(b) of the Act and final Sec.  361.48(a)(2), each State must make 
all ``required'' pre-employment transition services available to 
students with disabilities who need such services.
    Similarly, contrary to recommendations made by commenters, we do 
not have the authority to remove, by regulation, statutory 
requirements. Accordingly, Sec.  361.48(a)(2)(ii) must be consistent 
with section 113(b)(2) of the Act, as amended by WIOA, which requires 
that work-based learning experiences occur in integrated settings to 
the maximum extent possible. While we agree with commenters that work-
based learning experiences in integrated settings are optimal, the 
Act's use of the phrase ``to the maximum extent possible'' leaves open 
the possibility for work-based learning experiences in non-integrated 
settings. Consequently, we cannot require that all work-based learning 
experiences occur in integrated settings. However, DSUs should exhaust 
all opportunities for work-based learning experiences in competitive 
integrated employment settings before considering provision of these 
services in non-integrated work settings, as appropriate for the needs, 
and consistent with the informed choice, of the individual student with 
a disability,

[[Page 55694]]

and his or her family or guardian, as applicable.
    Having said this, the Department agrees that actual work 
experiences in integrated settings, rather than simulated or mock 
experiences in sheltered environments, provide students with 
disabilities with the most beneficial opportunities for job 
exploration, work-based learning, work readiness, and peer mentoring. 
The Secretary believes that DSUs, to the maximum extent possible, 
should provide work-based learning experiences, which may be paid or 
unpaid, through actual work experiences in integrated community 
environments to prepare students with disabilities for community-based 
competitive integrated employment, instead of using classrooms and 
educational facilities as settings for work-based learning experiences 
that segregate, replicate the tasks performed in adult sheltered 
employment, and often result in referrals to segregated employment 
settings following exit from school.
    If these are paid work-based learning experiences, students with 
disabilities must be paid competitive wages to the extent competitive 
wages are paid to students without disabilities. Training stipends are 
also permissible for students with disabilities to the same extent that 
they are provided to students without disabilities participating in 
these experiences. Similarly, nothing in the Act prohibits States from 
coordinating the provision of pre-employment transition services with 
entities that hold certificates issued by the Department of Labor under 
section 14(c) of the FLSA. However, the Department strongly encourages 
training in competitive integrated settings to prepare students for 
competitive integrated employment. In addition, there is no statutory 
basis here to require that self-advocacy instruction be provided by a 
specific entity.
    We agree that engaging students' parents or representatives is 
essential to their participation in pre-employment transition services 
and vital to their success. Since DSUs will be delivering pre-
employment transition services to students with disabilities at a much 
younger age, parents must be involved, as required by State law and the 
policies of educational agencies and the DSU. We encourage DSUs to 
provide information regarding the application process and availability 
of services to all students with disabilities, and their parents or 
representatives, early in the transition process. As such, parent 
centers funded through the Rehabilitation Act and the IDEA may serve as 
mechanisms for outreach to, and engagement of, parents.
    Changes: None.

Continuum of Services

    Comments: A few commenters requested clarification about ``required 
activities'' under pre-employment transition services in Sec.  
361.48(a)(2). One commenter stated that pre-employment transition 
services appear to be a continuum of services and requested 
clarification as to whether a student might initially receive a general 
level of pre-employment transition services and then later receive a 
customized level of pre-employment transition services. Another 
commenter requested clarification as to how individualized pre-
employment transition services would be funded for a student or youth 
with a disability who is not a vocational rehabilitation client. One 
commenter suggested that general pre-employment transition services be 
reserved for students who are potentially eligible for the VR program, 
while reserving individualized level pre-employment transition services 
for those students with disabilities determined eligible for vocational 
rehabilitation services. The same commenter suggested that pre-
employment transition services be directed toward determining whether 
further vocational rehabilitation services are required for the 
individual to be successful in securing and maintaining employment. A 
few commenters requested clarification of the difference between 
employment assistance under pre-employment transition services and 
transition services, including the role of the vocational 
rehabilitation counselor.
    Discussion: In response to requests for clarification, DSUs may 
provide, or arrange for the provision of, ``required'' pre-employment 
transition services to students with disabilities in classroom, 
employment, or community (group) settings. These services may be 
general in nature for students with disabilities who have not applied 
and been determined eligible for vocational rehabilitation services. As 
a student progresses through the vocational rehabilitation process by 
applying and being determined eligible for services, the DSU will have 
the information necessary to conduct assessments and provide more 
individualized and customized services to address the student's 
particular needs. But in some instances DSUs may nonetheless have 
sufficient information to provide individualized pre-employment 
transition services to students with disabilities who have not applied 
and been determined eligible for vocational rehabilitation services. 
Thus, we decline to require in final Sec.  361.48(a)(2) that providing 
more individualized pre-employment transition services be limited to 
students with disabilities who have applied and been determined 
eligible for vocational rehabilitation services.
    Finally, section 113 requires that DSUs use the funds reserved 
under section 110(d) of the Act, as amended by WIOA, to provide pre-
employment transition services not only to students with disabilities 
who are eligible for vocational rehabilitation services but also to 
students with disabilities who are potentially eligible for vocational 
rehabilitation services, which includes all students with disabilities 
regardless of whether they have submitted an application for these 
services.
    Examples of the five ``required'' activities and how they may be 
provided in either a group or individualized setting include, but are 
not limited to, the following:
    One, general job exploration counseling may be provided in a 
classroom or community setting and include information regarding in-
demand industry sectors and occupations, as well as non-traditional 
employment, labor market composition, administration of vocational 
interest inventories, and identification of career pathways of interest 
to the students. Job exploration counseling provided on an individual 
basis might be provided in school or the community and include 
discussion of the student's vocational interest inventory results, in-
demand occupations, career pathways, and local labor market information 
that applies to those particular interests.
    Two, work-based learning experiences in a group setting may include 
coordinating a school-based program of job training and informational 
interviews to research employers, work-site tours to learn about 
necessary job skills, job shadowing, or mentoring opportunities in the 
community. Work-based learning experiences on an individual basis could 
include work experiences to explore the student's area of interest 
through paid and unpaid internships, apprenticeships (not including 
pre-apprenticeships and Registered Apprenticeships), short-term 
employment, fellowships, or on-the-job trainings located in the 
community. These services are those that would be most beneficial to an 
individual in the early stages of employment exploration during the 
transition process from school to post-school activities, including 
employment. Should a student need more individualized services (e.g., 
job coaching, orientation and mobility training, travel expenses,

[[Page 55695]]

uniforms or assistive technology), he or she would need to apply and be 
determined eligible for vocational rehabilitation services and develop 
and have an approved individualized plan for employment.
    Three, counseling on opportunities for enrollment in comprehensive 
transition or postsecondary educational programs at institutions of 
higher education in a group setting may include information on course 
offerings, career options, the types of academic and occupational 
training needed to succeed in the workplace, and postsecondary 
opportunities associated with career fields or pathways. This 
information may also be provided on an individual basis and may include 
advising students and parents or representatives on academic curricula, 
college application and admissions processes, completing the Free 
Application for Federal Student Aid (FAFSA), and resources that may be 
used to support individual student success in education and training, 
which could include disability support services.
    Four, workplace readiness training may include programming to 
develop social skills and independent living, such as communication and 
interpersonal skills, financial literacy, orientation and mobility 
skills, job-seeking skills, understanding employer expectations for 
punctuality and performance, as well as other ``soft'' skills necessary 
for employment. These services may include instruction, as well as 
opportunities to acquire and apply knowledge. These services may be 
provided in a generalized manner in a classroom setting or be tailored 
to an individual's needs in a training program provided in an 
educational or community setting.
    Five, instruction in self-advocacy in a group setting may include 
generalized classroom lessons in which students learn about their 
rights, responsibilities, and how to request accommodations or services 
and supports needed during the transition from secondary to 
postsecondary education and employment. During these lessons, students 
may share their thoughts, concerns, and needs, in order to prepare them 
for peer mentoring opportunities with individuals working in their 
area(s) of interest. Further individual opportunities may be arranged 
for students to conduct informational interviews or mentor with 
educational staff such as principals, nurses, teachers, or office 
staff; or they may mentor with individuals employed by or volunteering 
for employers, boards, associations, or organizations in integrated 
community settings. Students may also participate in youth leadership 
activities offered in educational or community settings.
    The wide variety of pre-employment transition services described in 
these examples is designed to be an early start at job exploration for 
students with disabilities. DSUs are not to use these activities as 
assessment services for the purpose of determining whether additional 
vocational rehabilitation services are needed, or if the individual 
will be successful in employment. In response to commenters' requests 
for clarification of the difference between employment assistance under 
pre-employment transition services and transition services, see more 
detailed descriptions of the distinctions between the two types of 
services in the Transition Services (section 361.5(c)(55)) and Scope of 
Pre-Employment Transition Services and Use of the Reserve sections 
earlier in this section B.
    Changes: None.

Other Vocational Rehabilitation Services as Pre-Employment Transition 
Services

    Comments: A few commenters recommended that we interpret the scope 
of required activities under section 113 of the Act, as amended by 
WIOA, to include both support services and individualized vocational 
rehabilitation services necessary to participate in pre-employment 
transition services. The commenters requested that the funds reserved 
for providing pre-employment transition services also be permitted to 
pay for services provided under section 103(a) of the Act, as amended 
by WIOA, and proposed Sec.  361.48(b), including, but not limited to 
job coaching services, maintenance, transportation to and from work-
based learning experiences, travel, uniforms, tools, sign language 
interpreters, reasonable accommodations, assistive technology, 
independent living, and orientation and mobility services for students 
who are blind. One commenter requested that pre-employment transition 
services be expanded to include all transition services for students 
determined eligible for vocational rehabilitation services. Another 
commenter requested that we include all services listed on an 
individualized plan for employment within the scope of pre-employment 
transition services, including postsecondary education and training 
costs.
    Discussion: Section 113 of the Act, as amended by WIOA, and final 
Sec.  361.48(a) set out a list of pre-employment transition services 
that must be made available to all students with disabilities who are 
eligible or potentially eligible for vocational rehabilitation services 
(``required'' activities), as well as those that may be provided 
(``authorized'' activities). Under section 113(a) of the Act, the funds 
required to be reserved for pre-employment transition services must be 
used solely for providing pre-employment transition services. 
Therefore, the Department has no statutory authority to expand or limit 
the pre-employment transition services listed in section 113 of the 
Act, as amended by WIOA. Furthermore, if a student with a disability 
needs any additional individualized vocational rehabilitation services, 
including those necessary for participating in pre-employment 
transition services, such as those provided under final Sec.  
361.48(b), the student must apply and be determined eligible for 
vocational rehabilitation services and develop an individualized plan 
for employment that includes the additional necessary services. These 
additional services must be charged as a vocational rehabilitation 
expenditure separate from the funds reserved for providing pre-
employment transition services.
    Changes: None.

Pre-Employment Transition Coordination Activities

    Comments: A few commenters expressed concerns that proposed Sec.  
361.48(a)(4) did not permit alternate means of participation in the 
meetings required by section 113 of the Act, as amended by WIOA, and 
permitted in section 103(b)(6) of the Act. Many commenters recommended 
we include language to allow for alternate means of participation in 
meetings as vocational rehabilitation counselors may not be available 
to participate in all individualized education program or person-
centered planning meetings across a State.
    A few commenters stated that pre-employment transition coordination 
activities must occur between DSUs and parent training and information 
centers funded by the Office of Special Education Programs and RSA to 
ensure that parental outreach concerning the benefits of pre-employment 
transition services is coordinated among these federally funded 
centers.
    Discussion: We agree that alternate means for participating in pre-
employment transition coordination activities (e.g., video conferences 
and teleconferences) could minimize travel time and costs and maximize 
both the number of individualized education program and person-centered 
planning

[[Page 55696]]

meetings in which a vocational rehabilitation counselor could 
participate, as well as the number of direct services a vocational 
rehabilitation counselor could provide to students with disabilities. 
Although Sec.  361.48(a)(4), both as proposed and final, does not 
explicitly permit DSUs to use alternate means to participate in 
individualized education program or person-centered planning meetings, 
it does not prohibit them. DSUs may therefore use these alternate 
means.
    Decisions on how to conduct meetings is a matter of agency 
administration. Conducting these meetings via alternate means would be 
consistent with the explicit authority to conduct alternate format 
meetings under section 101(a)(11)(D)(i) of the Act and final Sec.  
361.22(b)(1). Additionally, section 614(f) of the IDEA and its 
implementing regulations in 34 CFR 300.328 allow the parent of a child 
with a disability and a public agency to agree to use alternative means 
of meeting participation requirements, such as video conferences and 
conference calls, when conducting individualized education program team 
meetings and placement meetings under the IDEA, as well as carrying out 
administrative matters under section 615 of the IDEA (such as 
scheduling, exchange of witness lists, and status conferences). Since 
the Act and the IDEA provide for alternate means for conducting 
meetings very similar to those required by section 113 of the Act and 
final Sec.  361.48(a), DSUs may use alternate means to conduct these 
meetings as well. We do not believe a regulatory change is necessary to 
accomplish this.
    We agree that coordinating with federally funded parent centers is 
a mechanism that would help parents of students with disabilities 
understand the benefits of pre-employment transition services. Section 
113(d) of the Act, as amended by WIOA, however, does not require this. 
The statute is clear that the funds reserved for providing pre-
employment transition services must only be spent on the activities 
specified in section 113 of the Act, as amended by WIOA, and final 
Sec.  361.48(a). Given the Act's specificity of the activities that 
constitute pre-employment transition services, there is no statutory 
authority for final Sec.  361.48(a)(4) to include any additional 
required coordination responsibilities.
    Changes: None.

Documentation and Reporting

    Comments: Some commenters requested clarification as to how States 
should document the provision and costs of pre-employment transition 
services for students with disabilities who have not yet applied and 
been determined eligible for vocational rehabilitation services and for 
whom limited personal information is available. Additionally, one 
commenter requested additional guidance about the tracking of funds 
expended on groups of students who have not applied or been determined 
eligible for the VR program.
    A few commenters requested flexibility in the reporting of pre-
employment transition services because it is burdensome for DSUs to 
develop and implement tracking systems for a large potentially eligible 
population. These commenters also stated this tracking could be 
difficult because DSUs may not have access to the personal identifying 
information, including Social Security numbers, typically used to 
document and report vocational rehabilitation services provided. A few 
commenters suggested that the Department establish reporting 
requirements for pre-employment transition services that are similar to 
the child count reporting requirements under the IDEA. One commenter 
requested clarification regarding reporting requirements for the funds 
reserved for providing pre-employment transition services and whether 
expenditures are only to be reported during the time period for which 
an individual meets the definition of a student with a disability or 
during the entire fiscal year in which the individual was served.
    Discussion: Because sections 110(d) and 113 of the Act require a 
State to reserve and use at least 15 percent of its total vocational 
rehabilitation allotment for providing, or arranging for the provision 
of, pre-employment transition services to students with disabilities, 
it will be critical that the DSU implement administrative methods and 
procedures that ensure proper data collection and financial 
accountability of these reserved funds, as required by final Sec.  
361.12 and 2 CFR 200.302 of the Uniform Guidance. In addition, section 
101(a)(10)(C) of the Act, as amended by WIOA, expands the VR program-
specific data that DSUs must report, including data elements related to 
students with disabilities who are receiving pre-employment transition 
services. These reporting requirements are included in final Sec.  
361.40(a) to ensure that the Secretary has the information needed to 
assess the performance of the VR program, especially with regard to 
providing pre-employment transition services to students with 
disabilities.
    Although the Department recognizes the burden placed on DSUs to 
develop procedures for tracking pre-employment transition services and 
related expenditures for students who have not yet applied or been 
determined eligible for vocational rehabilitation services, DSUs are 
required by section 101(a)(10)(C) of the Act to do so in order to 
properly account for, and report, the provision of pre-employment 
transition services and the reserved funds spent on those services. 
Moreover, the State's accounting procedures must be such that the DSU 
will be able to complete accurately all required forms, including 
financial reports, that show the reservation and use of these funds for 
this purpose, as required by final Sec.  361.12 and 2 CFR 200.302.
    The Department does not have the authority to grant exceptions 
from, or waivers of, these reporting requirements. Regardless of 
whether students with disabilities are receiving pre-employment 
transition services without having applied or been determined eligible 
for vocational rehabilitation services, i.e. by virtue of the fact they 
are ``potentially eligible'' for the program, if Federal funds are 
being spent, expenditures must be tracked and monitored in accordance 
with final Sec.  361.12 and the Uniform Guidance in 2 CFR 200.302 
(Financial Management) and 200.328 (Monitoring), as well as the Federal 
cost principles in 2 CFR 200.403 (Allowability), 200.404 (Reasonable) 
and 200.405 (Allocable). Furthermore, the Department issued Policy 
Directive (PD) 15-05 on February 5, 2015, which provided technical 
assistance on reporting the total Federal expenditures for providing 
pre-employment transition services. We appreciate the commenters' 
proposed alternate suggestions for reporting. However, the Department 
uses the SF-425 to collect financial data from DSUs so that it can 
monitor the financial status of the VR program and assess grantee 
compliance with Federal fiscal requirements under the VR program, 
including requirements for the reservation and use of funds for 
providing pre-employment transition services.
    As they have been required to do for many years, DSUs must submit 
completed SF-425 reports semi-annually. The end dates for each 
reporting period in a fiscal year are March 31 and September 30. Semi-
annual reports must be submitted no later than 45 days after the end of 
the reporting period. Final reports must be submitted no later than 90 
days after the period of performance. ``Period of performance'' means 
the time during which the non-Federal entity may incur new obligations 
to carry out the work authorized under the Federal award.

[[Page 55697]]

These final regulations do not affect any of these reporting 
requirements. To ensure the proper accounting and reporting of services 
provided and funds expended, especially with regard to pre-employment 
transition services, DSUs must track and report data on students with 
disabilities until they no longer meet the definition of a student with 
a disability. At that point, DSUs must track and report services 
provided to, and funds expended on, these individuals as they would any 
other individual receiving vocational rehabilitation services.
    Changes: None.

Performance Measures

    Comments: A few commenters expressed concern that pre-employment 
transition services and expenditure of funds are not included in the 
proposed common performance accountability measures. These commenters 
recommended that we revise the common performance accountability 
measures to include and evaluate these services. One commenter 
requested clarification regarding how group service expenditures would 
inform statistical adjustment model calculations, as it was unclear how 
the ratio of reportable individuals to participants may reflect on the 
performance of a DSU.
    Discussion: The VR program is no longer subject to its own set of 
performance standards and indicators established by the Department, as 
it had been prior to the enactment of WIOA. Because the common 
performance accountability indicators are mandated by section 116(b) of 
title I of WIOA and apply to all six core programs of the workforce 
development system, including the VR program, the Departments of 
Education and Labor do not have the authority to establish additional 
performance accountability indicators beyond those identified in the 
statute. However, section 106(a)(2) of the Act and section 
116(b)(1)(A)(ii) of title I of WIOA permit States to develop additional 
accountability measures to evaluate the performance of the core 
partners in the workforce development system. We intend to monitor 
State implementation of pre-employment transition services and 
expenditure of funds during our annual review and periodic on-site 
monitoring of State VR agencies to identify areas of concern and the 
need for technical assistance. The Departments of Education and Labor 
address the remaining comments in the joint final regulations 
implementing the performance accountability system under title I of 
WIOA, and published elsewhere in this issue of the Federal Register.
    Changes: None.

Services for Individuals Who Have Applied for or Been Determined 
Eligible for Vocational Rehabilitation Services (Sec.  361.48(b))

    Comments: A few commenters supported proposed Sec.  361.48(b)(18) 
and agreed that youth may be provided transition services that are 
similar to pre-employment transition services under an individualized 
plan for employment. Another commenter requested that proposed Sec.  
361.48(b)(18) require DSUs to provide students and youth with 
disabilities an application for vocational rehabilitation services at 
the beginning of the transition process. A few commenters expressed 
concerns regarding the expansion of services for students and youth 
with disabilities at the expense of other individuals with disabilities 
served by DSUs. One commenter expressed such concerns in terms of 
potential harm to the Randolph-Sheppard program.
    Some commenters requested that we identify the services, including 
transition services, that would be allowable if provided by community 
rehabilitation programs that hold section 14(c) certificates under the 
FLSA. A few commenters recommended that the regulations prohibit DSUs 
from contracting with section 14(c) certificate holders to provide 
transition services. One commenter requested that we clarify if 
entities holding section 14(c) certificates may provide transition 
services and proposed alternatives for providing these services if they 
may not.
    One commenter requested that incentives be added for providing 
transition services or supported employment services.
    Discussion: We appreciate the support for, and consideration given 
by commenters to, proposed Sec.  361.48(b)(18). We agree that students 
and youth with disabilities should receive adequate information and 
applications for vocational rehabilitation services at the beginning of 
the transition from secondary programs to post-secondary activities. A 
DSU may provide the information and application under final Sec. Sec.  
361.41 and 361.52, which require the DSU to establish and implement 
standards for promptly processing referrals, informing individuals of 
application requirements, and facilitating individuals' informed choice 
as they transition. Therefore, we do not believe it is necessary to add 
further requirements to final Sec.  361.48(b)(18).
    We acknowledge that the heightened emphasis on providing services 
to students and youth with disabilities may cause some DSUs concern 
about their ability to serve all individuals. We believe that the 
process for implementing an order of selection established within 
section 101(a)(5) of the Act, as amended by WIOA, is adequate to 
address these concerns in the event that vocational rehabilitation 
services cannot be provided to all eligible individuals.
    We acknowledge the commenters' support and concerns about section 
14(c) certificate holders providing transition and other vocational 
rehabilitation services. While the Act does not prohibit community 
rehabilitation programs that are section 14(c) certificate holders from 
providing transition or other vocational rehabilitation services or 
training in sheltered settings, section 511 of the Act prohibits local 
and State educational agencies from entering into a contract or other 
arrangement with section 14(c) entities for the purpose of operating a 
program for youth with disabilities under which work is compensated at 
a subminimum wage. The Department strongly encourages training in 
competitive integrated settings to prepare students for competitive 
integrated employment, as stated in the discussion of ``required'' 
activities in final Sec.  361.48(a) and discussed in more detail in 
Required Activities earlier in this section B. There is no statutory 
basis for requiring or permitting incentive payments for providing 
vocational rehabilitation services, including transition and supported 
employment services.
    Changes: None.

Scope of Vocational Rehabilitation Services for Groups of Individuals 
With Disabilities (Sec.  361.49)

    Comments: A few commenters sought clarification of, or suggested 
revisions to, proposed Sec.  361.49(a)(7) governing the provision of 
transition services for groups of youth and students with disabilities. 
Of these, one commenter questioned whether transition services may be 
provided under this authority to students and youth with disabilities 
who have not applied or been determined eligible for vocational 
rehabilitation services. Similarly, another commenter suggested that 
DSUs be required to provide an application to all students and youth 
with disabilities receiving transition services under proposed Sec.  
361.49(a)(7). One commenter communicated concerns that allowing 
transition services under this authority will lead to students and 
youth with

[[Page 55698]]

disabilities receiving services in segregated environments. Another 
commenter suggested that pre-employment transition services under 
proposed Sec.  361.49 be limited to group orientations. Yet another 
commenter supported providing transition services for groups of 
students and youth with disabilities and then providing transition 
services to this population under final Sec.  361.48(b) if more 
individualized services are necessary.
    One other commenter suggested that we add the term ``competitive 
integrated employment'' to proposed Sec.  361.49(a)(7) to emphasize 
that transition services for groups of students and youth with 
disabilities are to support the achievement of competitive integrated 
employment. The same commenter recommended that we add outreach to and 
engagement of parents to Sec.  361.49(a)(7) as an allowable service to 
groups. Finally, one commenter requested clarification of how informed 
choice of both the individual and the individual's representative would 
be provided and documented if transition services are provided to 
groups of youth and students with disabilities.
    Discussion: We appreciate all of these comments. A student with a 
disability or a youth with a disability is not required to have applied 
or been determined eligible for vocational rehabilitation services to 
receive general transition services provided to groups under section 
103(b)(7) of the Act, as amended by WIOA, and final Sec.  361.49(a)(7). 
Therefore, a DSU may, but is not required to, provide or collect 
applications from students and youth with disabilities receiving 
transition services under final Sec.  361.49(a)(7). Students with 
disabilities may receive these services in a variety of settings, 
including classroom, employment, and community-based settings. However, 
the Department strongly encourages DSUs to provide these services in 
integrated settings to the maximum extent possible to best prepare 
students and youth with disabilities for competitive integrated 
employment. Furthermore, students and youth with disabilities may 
continue to receive generalized transition services under this 
authority while also receiving individualized vocational rehabilitation 
services under an individualized plan for employment pursuant to 
section 103(a) of the Act and final Sec.  361.48(b).
    Pre-employment transition services may be provided in a group 
setting to students with disabilities who have not applied or been 
determined eligible for vocational rehabilitation services, as 
discussed in the examples in final Sec.  361.48(a). Contrary to the 
assumption in some comments, pre-employment transition services cannot 
be provided to students with disabilities as a service for groups under 
section 103(b)(7) of the Act, as amended by WIOA, or final Sec.  
361.49(a)(7). Pre-employment transition services must only be provided 
under section 113 of the Act and final Sec.  361.48(a).
    The intent of these generalized transition services when provided 
under final Sec.  361.49(a)(7) is to benefit groups of students and 
youth with disabilities. We understand the concern that these services 
are limited to only students and youth with disabilities. Transition 
services provided under final Sec.  361.48(b) under an individualized 
plan for employment are more individualized in nature, and the settings 
in which they are delivered are typically more diverse.
    We agree that the purpose of transition services to groups should 
ultimately be achieving competitive integrated employment for students 
and youth with disabilities consistent with the purpose of the VR 
program set forth in final Sec.  361.1. Nonetheless, the transition 
services provided under final Sec.  361.49(a)(7) are not limited to 
those individuals who have been determined eligible for the VR program 
and who are pursuing an employment outcome in competitive integrated 
employment or supported employment. Therefore, we cannot require that 
the transition services authorized in final section 361.49(a)(7) be 
provided only for the purpose of assisting students and youth with 
disabilities to obtain competitive integrated employment.
    We also agree that the families of students and youth with 
disabilities should be involved in all transition services, even though 
section 103(b) of the Act, as amended by WIOA, does not specifically 
include outreach to and engagement of parents within its requirements. 
Neither the Act nor these final regulations prohibit a DSU from 
providing outreach to, and engaging parents in, the provision of 
transition services under final Sec.  361.49(a)(7).
    Finally, informed choice, as outlined in final Sec.  361.52, 
applies throughout the vocational rehabilitation process; therefore, 
students and youth with disabilities receiving transition services 
under final Sec.  361.49(a)(7) must be given the opportunity to 
exercise their informed choice.
    Changes: None.
C. Fiscal Administration of the VR Program
    Section C includes the Analysis of Comment and Changes to the 
regulations in subpart C of part 361 that pertain to the fiscal 
administration of the VR program and covers requirements for matching 
funds, maintenance of effort, program income, and the allotment and 
payment of funds. The analysis is presented by topical headings 
relevant to sections of the regulations in the order they appear in 
part 361 as listed.

Topical Headings

Matching Requirements (Sec.  361.60)
    Third-Party In-Kind Contributions
    Additional Sources of Match
    Differences Between Prior and Proposed Regulations
Maintenance of Effort Requirements (Sec.  361.62)
Program Income (Sec.  361.63)
    Waiver
    Legal Basis
    Pre-Employment Transition Services
    Amount of Program Income Earned
    Addition Alternative
Allotment and Payment of Federal Funds for Vocational Rehabilitation 
Services (Sec.  361.65)
    Exemption from the Reservation of Funds Requirement for Pre-
Employment Transition Services
    Use of Reserved Funds for Other Vocational Rehabilitation 
Services
    Amount of Funds to Be Reserved
    Application of the Reservation of Funds to the State and to the 
State Allotment
    Effect of Reallotment and Carryover on the Reservation of Funds
    Administrative Costs
    Tracking of the Reserved Funds
    Use of Reserved Funds for Authorized Activities

Matching Requirements (Sec.  361.60)

Third-Party In-Kind Contributions

    Comments: Several commenters requested that the Department either 
include third-party in-kind contributions as an allowable source of 
match under the VR program or clarify whether these contributions are 
an allowable source of match. One commenter questioned whether the 
Department has the authority to exclude third-party in-kind 
contributions as a source of match under the VR program, given that 
these contributions are a permissible source of match in the Uniform 
Guidance contained in 2 CFR part 200.
    Discussion: We have addressed the comments regarding the 
allowability and use of third-party in-kind contributions as match 
under the VR program in the discussion of third-party cooperative 
arrangements in final Sec.  361.28 earlier in section A of this 
Analysis of Comments and Changes section. We received similar comments 
about that regulation, and issues of third-party in-kind contributions 
most

[[Page 55699]]

often arise in the third-party cooperative arrangement context.
    For more than two decades, the Department has excluded third-party 
in-kind contributions from the allowable sources of match for the VR 
program. Neither the NPRM nor these final regulations reflect any 
substantive changes to this prohibition.
    In addition, we do not agree that Sec.  361.60 is inconsistent with 
2 CFR part 200 with regard to third-party in-kind contributions. 
Specifically, 2 CFR 200.306 states that for all Federal awards, any 
shared costs or matching funds and all contributions, including cash 
and third-party in-kind contributions, must be accepted as part of the 
non-Federal entity's cost sharing or matching when specific criteria 
are met. However, 2 CFR 200.102(c) states that ``the Federal awarding 
agency may apply more restrictive requirements to a class of Federal 
awards or non-Federal entities when approved by OMB, or when required 
by Federal statutes or regulations. . . .''
    Section 361.60(b)(2) has prohibited, and continues to prohibit, 
DSUs from considering third-party in-kind contributions as a 
permissible source of match under the VR program. The Department is 
within its authority to continue to exclude third-party in-kind 
contributions as an allowable source of match under the VR program, as 
it has done for more than two decades, and thus the VR program 
regulations are consistent with 2 CFR part 200. Nevertheless, given the 
comments questioning the relationship between the prohibition against 
using third-party in-kind contributions for match purposes under the VR 
program in Sec.  361.60(b)(2) and the permissibility of these 
contributions under 2 CFR 200.306(b), we have revised final Sec.  
361.4(d) to reduce confusion. These revisions are purely technical and 
do not affect the long-standing prohibition against using third-party 
in-kind contributions as a source of match under the VR program.
    Changes: We have revised final Sec.  361.4(d) to exempt 2 CFR 
200.306(b), as it relates to third-party in-kind contributions, from 
the VR program, thereby ensuring consistency with final Sec.  
361.60(b)(2) and the long-standing prohibition against third-party in-
kind contributions as a source of match under the VR program.

Additional Sources of Match

    Comments: Another commenter requested that the Department include 
additional sources of non-Federal share as examples of potential 
matching sources.
    Discussion: We appreciate the commenter's request for additional 
examples of permissible sources of match under the VR program. The 1988 
regulations (53 FR 16978 (May 12, 1988)), which remained in effect 
until 1997, contained a short list of examples of permissible match 
sources, none of which included third-party in-kind contributions.
    Similarly, the 1997 final regulations (62 FR 6307 (Feb. 11, 1997)) 
simplified the requirements by removing the list of permissible sources 
of expenditures to meet the non-Federal share. Instead, it referred to 
former 34 CFR 80.24 for a list of allowable match sources, to the 
extent that provision was not inconsistent with Sec.  361.60(b), which 
prohibited third-party in-kind contributions from being used for match 
purposes under the VR program. We emphasized in the preamble to the 
1995 NPRM (60 FR 64475 (Dec. 15, 1995)) that the proposed regulation 
would not prohibit the use of any funding sources that had been 
allowable for match purposes under the VR program, but third-party in-
kind contributions were not among them. Although we do not believe the 
list of permissible match sources should be re-inserted into final 
Sec.  361.60, we provide here the still-effective permissible match 
sources that had been contained in prior Sec.  361.76, which existed 
until the 1997 regulations took effect and subsequently was replaced by 
prior Sec.  361.60.
    The old regulations in 34 CFR 361.76, which formed the basis for 
both prior and final Sec.  361.60, indicated that the allowable sources 
of match were:
    1. Direct State appropriation to the VR agency,
    2. Transfers or allotments from other public agencies,
    3. Expenditures incurred by other public agencies pursuant to a 
cooperative agreement in accordance with 34 CFR 361.13 (which formed 
the basis for both prior and final Sec.  361.28),
    4. Funds set aside from Business Enterprise Programs, established 
under the Randolph-Sheppard Act, for which the DSU provides supervision 
and management services, and
    5. Private contributions deposited into the VR agency's account.
    Section 361.60 has remained substantively unchanged from 1997 
through these final regulations.
    Changes: None.

Differences Between Prior and Proposed Regulation

    Comments: One commenter requested we clarify the differences 
between the prior and proposed Sec.  361.60(b)(3).
    Discussion: We made only technical changes to proposed Sec.  
361.60(b)(3)(iii) in the NPRM. Specifically, we replaced the phrase 
``grant, subgrant, or contract'' with the word ``subaward'' in order to 
be consistent with the use of this term in the Uniform Guidance, as set 
forth in 2 CFR part 200. We made no further changes to final Sec.  
361.60(b)(3)(iii).
    Changes: None.

Maintenance of Effort Requirements (Sec.  361.62)

    Comments: A few commenters supported proposed Sec.  361.62. One 
commenter stated that section 241(b) of WIOA did not support the 
proposed VR regulations and recommended allowing flexibility for States 
to choose the fiscal year in which maintenance of effort penalties 
would be paid.
    Discussion: We appreciate the comments supporting proposed Sec.  
361.62. Section 241(b) of WIOA, referenced by the commenter, does not 
apply to the VR program but rather to programs authorized under the 
Adult Education and Family Literacy Act in title II of WIOA. Instead, 
section 420 of WIOA amended section 111(a)(2)(B) of the Act, which 
governs the maintenance of effort requirements for the VR program. 
Final Sec.  361.62(a) is consistent with section 111(a)(2)(B) of the 
Act, as amended by WIOA.
    Changes: None.

Program Income (Sec.  361.63)

Waiver

    Comments: Several commenters requested that we waive the 
requirement for States to expend program income prior to drawing down 
Federal grant funds. One commenter stated that the role of the 
Department in placing restrictions on the use of program income should 
be limited since VR program grantees are not required to generate 
program income.
    Discussion: We appreciate the comments submitted regarding proposed 
Sec.  361.63. The Act gives the Secretary the authority to grant 
waivers of only two VR program requirements, specifically those related 
to statewideness (section 101(a)(4)) and maintenance of effort (section 
111(a)(2)(C)). The Act, as amended by WIOA, does not provide a general 
waiver authority or a specific authority to waive program income 
requirements. Therefore, we may not include in final Sec.  361.63 a 
waiver of the requirement to expend program funds prior to drawing down 
Federal VR program funds.
    Changes: None.

[[Page 55700]]

Legal Basis

    Comments: Another commenter noted that following the 1992 
amendments to the Rehabilitation Act, the Department interpreted the 
Act as allowing program income, including transferred program income, 
to be obligated and/or expended on or before September 30th of the 
carryover year of the grant period. According to the commenter, WIOA 
did not amend the Act to require the expenditure of program income 
under the VR program as soon as it was received. The commenter also 
recommended that we review both the 1992 amendments to the 
Rehabilitation Act and WIOA to determine whether there is a sufficient 
legal basis to exempt DSUs from the requirement to expend program 
income before requesting additional Federal grant funds and that we 
include this exemption in the VR program final regulations. One 
commenter noted that the NPRM incorrectly cited 2 CFR 200.305(b)(5) as 
the legal authority requiring that program income be disbursed prior to 
drawing down Federal funds.
    Discussion: While we agree that DSUs are not required to earn 
program income under the VR program, we disagree that the Secretary's 
authority over program income is, therefore, limited. As a recipient of 
Federal VR program funds, DSUs must comply with all applicable Federal 
requirements, including those in the Act, the VR program regulations in 
final part 361, Education Department General Administrative Regulations 
(EDGAR), and government-wide regulations in 2 CFR part 200 (see final 
Sec.  361.4). Requirements governing program income affecting the VR 
program are found in final Sec.  361.63 and 2 CFR 200.305, both of 
which are under the Secretary's purview. Moreover, final Sec.  361.4(b) 
and (d) make final part 361 and 2 CFR part 200, respectively, 
applicable to the VR program. For this reason, DSUs must comply with 
all Federal requirements governing program income to the extent that 
they earn such income under the VR program.
    We agree that section 19(a)(2) of the Act allows program income to 
remain available for obligation and expenditure in the year following 
the year in which the program income was earned. However, we also 
believe that final Sec.  361.63(c)(3) is consistent with both section 
19(a)(2) of the Act and 2 CFR 200.305. In the event that a DSU receives 
program income at the end of a fiscal year and is unable to disburse it 
prior to the end of that year, the DSU may carry over that program 
income for use in the following Federal fiscal year; however, that DSU 
must spend that program income prior to drawing down Federal funds.
    The Department reminded DSUs of this requirement--program income 
must be disbursed prior to drawing down Federal funds--in PD-11-03 
(dated October 26, 2010), as well as in PD-12-06 and PD-15-05 (dated 
February 13, 2012 and February 5, 2015, respectively). The Department 
also reminded DSUs of this requirement in a PowerPoint presentation at 
the FY 2011 Fiscal Conference, held in Washington, DC, in August 2011.
    Prior to developing proposed Sec.  361.63, the Department reviewed 
the legislative and regulatory history about program income. Our review 
found that, while the Act has not addressed this issue specifically, 
EDGAR has long done so. The Federal government has had a long-standing 
requirement under the common rule implementing former OMB Circular A-
102, codified by the Department of Education in former 34 CFR 
80.21(f)(2), that States must expend program income prior to drawing 
down Federal grant funds. The Uniform Guidance, codified in 2 CFR part 
200, was adopted by the Department in 2 CFR 3474 on December 19, 2014, 
in 79 FR 76091. The Uniform Guidance in 2 CFR 200.305(a) specifies the 
payment procedures that States must use to draw down Federal funds; 
however, these procedures appear, on the surface, to apply only to 
funds included in a Treasury-State Agreement (TSA), and not all Federal 
program funds made available to States are subject to TSAs.
    For this reason, the Uniform Guidance in 2 CFR 200.305(a) has 
created an ambiguity about how States should draw Federal funds under 
non-TSA programs. Moreover, TSAs do not cover program income earned by 
State grantees. Thus, in addition to the ambiguity regarding non-TSA 
programs, 2 CFR 200.305(a) does not address whether States must expend 
available program income funds before requesting additional Federal 
cash, as had been the long-standing government-wide requirement in OMB 
Circular A-102 and codified for Department grantees in former 34 CFR 
80.21(f)(2). This silence creates concern because, for all other non-
Federal entities, Sec.  200.305(b)(5) clearly requires those entities 
to expend available program income funds before requesting payments of 
Federal funds.
    While the Sec.  200.305(a) silence creates an ambiguity, we do not 
believe that this ambiguity should be construed to no longer require 
States to expend program income funds before requesting additional 
Federal cash because no such policy change was discussed in the 
preambles to either the final guidance in 2 CFR part 200, which was 
published on December 26, 2013 (78 FR 78589), or in the Interim Final 
Guidance published on December 19, 2014 (79 FR 75867). This issue is 
critical to the Department because DSUs earn more than $100 million in 
program income annually under the VR program--an amount that far 
exceeds amounts earned under any other program administered by the 
Department. For this reason, the Secretary believes it is essential 
that we resolve this ambiguity in these regulations. Therefore, we 
proposed in the NPRM to incorporate the requirement to expend program 
income before requesting payment of funds by referencing 2 CFR 
200.305(a).
    Upon further review of that proposed change, and in consideration 
of one comment, we have determined that the proposed amendment, as 
presented in the NPRM, would not achieve the needed objective because 
it referenced the wrong citation from 2 CFR part 200. We resolved the 
ambiguity by revising final Sec.  361.63(c)(3) to explicitly require 
States to expend available program income funds before requesting 
additional cash payments, maintaining the long-standing requirement 
that applied to VR program grantees under 34 CFR 80.21(f)(2). The 
Secretary believes this change is essential to protect the Federal 
interest by using program income to increase the funds devoted to the 
VR program and keep to a minimum the interest costs to the Federal 
government of making grant funds available to the States. There is no 
legal basis to exempt DSUs from this long-standing government-wide 
requirement.
    Changes: We have revised final Sec.  361.63(c)(3) to explicitly 
require States to disburse available program income funds before 
requesting additional cash payments.

Pre-Employment Transition Services

    Comments: Some commenters expressed concerns that the requirement 
to spend program income first creates an undue barrier to the ability 
of DSUs to reserve 15 percent of their VR program allotments for 
providing pre-employment transition services. According to these 
commenters, grantees cannot predict the arrival of program income to 
the same extent that they can anticipate the arrival of allotted funds. 
As a result, DSUs may have to expend program income for pre-employment 
transition services instead of their State allotments, thereby failing 
to expend the 15 percent reserve required for the provision of pre-
employment transition services.

[[Page 55701]]

    Discussion: We recognize the challenge for States to meet both the 
requirements to disburse program income prior to drawing down Federal 
funds as well as to reserve VR program funds for providing pre-
employment transition services. While final Sec.  361.63(c)(1)(ii) 
requires States to expend available program income funds before 
requesting additional cash payments, it does not preclude States from 
executing allowable accounting adjustments between program income 
disbursed on pre-employment transition services and other Federal funds 
expended on non-pre-employment transition services for the same time 
period. These accounting adjustments must be in accordance with 
Generally Accepted Accounting Principles (GAAP) and the State's 
accounting procedures and must be reflected in the State accounting 
system that is required by final Sec.  361.12 and 2 CFR 200.302.
    Changes: None.

Amount of Program Income Earned

    Comments: One commenter noted that it is unable to determine the 
actual amount of program income earned until after the end of the 
Federal award because the program income must be ``netted out.''
    Discussion: Program income, as defined in 2 CFR 200.80 and used in 
final Sec.  361.63, means the ``gross'' program income earned by the 
grantee. Furthermore, as stated earlier, program income is considered 
earned when received. In other words, if a DSU receives $100,000 in 
program income in November, it should report this amount as received--
or earned--on the SF-425 covering the first quarter of the Federal 
fiscal year. Therefore, DSUs should not wait until the end of a fiscal 
year to determine the amount of program income received, and all 
reports should reflect gross--not net--amounts.
    Changes: None.

Addition Alternative

    Comments: None.
    Discussion: Upon further Department review, we determined it 
necessary to clarify in Sec.  361.63(c)(3) that the deduction method is 
no longer available to DSUs for expending program income. In examining 
the grant formula set forth in the statute more closely, we have 
concluded that the use of the deduction method would, in effect, result 
in a reduction of a VR grant allotment. Absent specific statutory 
authority, these reductions would be inconsistent with the statute and 
general appropriations law principles. In reviewing the grantees' 
financial reports, we have found that very few, if any, DSUs elect to 
use the deduction method. Instead, most, if not all, grantees elect to 
use the addition method, which is still permissible and, in fact, will 
be the only permissible use of program income under the VR program 
final regulations. We do not believe this change will negatively impact 
many, if any, grantees. Therefore, we have revised final Sec.  
361.63(c)(3) to require VR program grantees to use program income only 
to supplement the VR grant through the addition alternative.
    Changes: We have revised final Sec.  361.63(c)(3) to require DSUs 
to use the addition alternative when expending program income.

Allotment and Payment of Federal Funds for Vocational Rehabilitation 
Services (Sec.  361.65)

Exemption From the Reservation of Funds Requirement for Pre-Employment 
Transition Services

    Comments: Some commenters agreed with the changes to proposed Sec.  
361.65. Many commenters recommended that we exempt DSUs from the 
requirement to reserve at least 15 percent of their State allotments 
for providing pre-employment transition services in cases where the 
DSUs lack resources to do so.
    Discussion: We appreciate the commenters who supported proposed 
Sec.  361.65 and those who expressed concern or sought clarification. 
Section 110(d)(1) of the Act, as amended by WIOA, requires States--not 
the Department--to reserve at least 15 percent of their VR program 
allotment for providing pre-employment transition services. Given this 
explicit requirement, the Secretary lacks statutory authority to exempt 
States from the reservation requirement or to modify this requirement 
because to do so would be inconsistent with the statute. While we 
understand the concerns expressed by commenters regarding an inability 
to expend the full amount of reserved funds on pre-employment 
transition services, we encourage DSUs to work closely with the school 
systems and other entities to identify students with disabilities who 
might benefit from pre-employment transition services. Through these 
outreach activities, DSUs may be able to identify students with 
disabilities who could benefit from pre-employment transition services 
and who were not previously known to the agencies.
    Changes: None.

Use of Reserved Funds for Other Vocational Rehabilitation Services

    Comments: A few commenters requested that agencies who may not meet 
the reservation requirement, due to a lack of individuals who qualify 
to receive pre-employment transition services, be allowed to use the 
remaining reserved funds to provide vocational rehabilitation services 
listed under proposed Sec.  361.48(b) to other eligible individuals.
    Discussion: Funds reserved, pursuant to section 110(d)(1) of the 
Act, for providing pre-employment transition services must be used 
solely for the activities set forth in section 113 of the Act, as 
amended by WIOA, and final Sec.  361.48(a). If a student with a 
disability requires other vocational rehabilitation services, the DSU 
must pay for those services with the remainder of the VR program 
allotment.
    Changes: None.

Amount of Funds To Be Reserved

    Comments: A few commenters recommended creating a benchmark for 
pre-employment transition services provided, rather than tying those 
services to actual Federal funds spent. Two commenters recommended 
basing the reservation of funds on the number of individuals in the 
State who would be eligible to receive pre-employment transition 
services. These commenters added that the remaining funds would be used 
for the provision of all other allowable vocational rehabilitation 
services.
    Two commenters stated that the requirement to reserve at least 15 
percent is too high. One commenter recommended that we consider DSUs to 
have satisfied the requirement if they demonstrate progress toward the 
minimum 15 percent requirement in the first 2 years of implementation, 
based upon the amount of funds spent in the previous fiscal year for 
pre-employment transition services. One commenter recommended that we 
allow States to negotiate the reservation requirement based upon 
populations of students with disabilities in the States. One commenter 
expressed concern that requiring at least 15 percent of the VR award to 
be used for pre-employment transition services will reduce the Federal 
VR funds available to support the Randolph-Sheppard program.
    Discussion: Section 110(d)(1) of the Act, as amended by WIOA, 
requires States to reserve ``at least'' 15 percent of their VR program 
allotment for providing pre-employment transition services. Final Sec.  
361.65(c)(3) mirrors the statutory requirement. Although several

[[Page 55702]]

commenters referred to the 15 percent reservation requirement as a 
``limit,'' the Act as amended by WIOA, and final Sec.  361.65(c)(3) do 
not restrict States from spending more than 15 percent of their 
allotments for the provision of these services.
    We appreciate the many recommendations for alternative ways for 
DSUs to meet the pre-employment transition services reservation 
requirement under proposed Sec.  361.65(a)(3)(i). We also appreciate 
the concerns that the reservation of funds for the sole purpose of 
providing pre-employment transition services will reduce the amount of 
funds available for other VR program purposes, including services for 
individuals who are blind or visually impaired who wish to start a 
vending facility under the Randolph-Sheppard program. Nevertheless, the 
Act requires States to reserve at least 15 percent of their VR program 
allotment for providing pre-employment transition services. The Act 
provides no exceptions to this requirement and, therefore, we do not 
have the authority to make the changes suggested by the commenters 
because to do so would be inconsistent with the statute.
    Changes: None.

Application of the Reservation of Funds to the State and to the State 
Allotment

    Comments: Many commenters requested that RSA apply the pre-
employment transition reservation requirement to the State as a whole 
and not to the DSU in States with separate agencies serving individuals 
who are blind and individuals with all other disabilities. One 
commenter requested clarification regarding how pre-employment 
transition services are to be funded. A few commenters requested that 
we clarify whether the reservation requirement applies to the State 
funds, or just the Federal funds.
    Discussion: Section 113(a) of the Act requires pre-employment 
transition services to be paid for with funds reserved from the VR 
program allotment pursuant to section 110(d)(1) of the Act, as amended 
by WIOA. We agree with commenters that the reservation of funds for 
providing pre-employment transition services is a State requirement, 
not a DSU-specific requirement. Section 110(d) of the Act, as amended 
by WIOA, and final Sec.  361.65(a)(3)(i) require the State--not the 
DSU--to reserve the funds, thereby making this a matter that must be 
resolved at the State level when there are two agencies in the State. 
For this reason, the Department encourages DSUs to coordinate to ensure 
State compliance. While the Department recommends that each DSU, when a 
State has two DSUs, reserve at least 15 percent of its allotment to 
facilitate the tracking of State compliance with the reservation 
requirement, the Act does not require that this be done. If one DSU 
(when a State has two DSUs) uses more of its funds than the other, the 
State would be in compliance so long as the State's total of funds 
reserved for providing pre-employment transition services is at least 
15 percent of the State's total allotment, including any additional 
funds received during reallotment by one or both DSUs.
    The State allotment, from which funds must be reserved, refers to 
the Federal funds awarded pursuant to section 110(a) of the Act, not 
State funds appropriated to the DSUs by State legislatures.
    Changes: None.

Effect of Reallotment and Carryover on the Reservation of Funds

    Comments: One commenter requested clarification regarding whether 
funds received during reallotment would count toward the State's 
allotment for purposes of the pre-employment transition services 
reservation requirement. One commenter requested clarification 
regarding whether the reservation requirement applies to the carryover 
period.
    Discussion: Under section 110(b)(3) of the Act, funds received 
during reallotment are an increase to the State's allotment. Similarly, 
funds relinquished during reallotment are a reduction to the State's 
allotment. Therefore, funds received or relinquished by a State during 
reallotment affect the amount of funds that must be reserved for 
providing pre-employment transition services.
    Section 19 of the Act, which governs the carryover of grant funds, 
applies to all VR program funds, including funds reserved for providing 
pre-employment transition services. Section 19(b) of the Act permits 
grantees to carry over Federal funds for obligation and expenditure in 
the subsequent Federal fiscal year only to the extent that the DSU has 
provided sufficient non-Federal expenditures to match those funds. This 
means that grantees may carry over Federal funds reserved for providing 
pre-employment transition services into the subsequent Federal fiscal 
year only to the extent that they have provided the requisite 21.3 
percent non-Federal share by the end of the Federal fiscal year in 
which the funds were awarded. In addition, because they have been 
matched in the fiscal year for which they were appropriated, the funds 
reserved for providing pre-employment transition services that are 
eligible for carryover into the succeeding Federal fiscal year may only 
be obligated in that succeeding Federal fiscal year and expended for 
providing pre-employment transition services.
    Changes: None.

Administrative Costs

    Comments: Some commenters requested clarification regarding fiscal 
reporting requirements, including staff time, counted toward the 
reservation requirement given that DSUs may not expend funds reserved 
for providing pre-employment transition services on administrative 
costs. One commenter requested clarification regarding the apparent 
contradiction of some of the authorized activities listed in proposed 
Sec.  361.48(a)(3), which might appear to be administrative in nature, 
and the prohibition in proposed Sec.  361.65(a)(3)(ii) against using 
reserved funds for administrative costs.
    Discussion: We appreciate the comments requesting clarification 
regarding whether DSUs may pay for staff-related costs from funds 
reserved for the provision of pre-employment transition services. 
Section 110(d)(2) of the Act, as amended by WIOA, prohibits DSUs from 
using the reserved funds for administrative costs. Section 7(1) of the 
Act and final Sec.  361.5(c)(2) define ``administrative costs'' as 
including, among other things, ``administrative salaries, including 
clerical and other support staff salaries, in support of these 
administrative functions.'' It has been the long-standing Department 
policy that staff-related costs, including salaries, fringe benefits, 
and travel, incurred while providing vocational rehabilitation 
services, constitute service costs, not administrative costs. As such, 
costs associated with staff time spent providing pre-employment 
transition services may be paid with the funds reserved for providing 
those services.
    By contrast, supervisory costs, rent, utilities, indirect costs, 
and other similar associated costs are administrative costs--not 
service costs--and, as such, cannot be paid with the reserved funds. In 
considering the various pre-employment transition services specified in 
section 113 of the Act and final Sec.  361.48(a) in this way, we do not 
believe there are actual conflicts between final Sec.  361.48(a) and 
Sec.  361.65.
    However, we have revised final Sec.  361.65(a)(3)(ii)(B) to add a 
cross-reference to the definition of ``administrative costs'' in final 
Sec.  361.5(c)(2), to clarify that these costs are still allowable 
under the VR program and may be paid for with VR program

[[Page 55703]]

funds not reserved for the provision of pre-employment transition 
services under final Sec.  361.65(a)(3).
    Changes: We have revised final Sec.  361.65(a)(3)(ii)(B) to clarify 
that the administrative costs referred to in this provision are those 
that meet the definition of ``administrative costs'' in final Sec.  
361.5(c)(2). This change is technical, not substantive.

Tracking of the Reserved Funds

    Comments: Some commenters requested that we provide flexibility 
regarding the tracking of pre-employment transition service 
expenditures to minimize time-consuming administrative requirements. 
One commenter requested that the Department issue guidance to States 
regarding tracking expenditures, for example, creating a separate 
accounting code to track the reservation requirement. One commenter 
requested that the Department allow agencies with counselors who work 
with schools or support the provision of pre-employment transition 
services to count all of the counselor's time toward the reservation 
requirement, thereby easing the burden on DSUs associated with tracking 
these costs.
    Discussion: When tracking expenditures incurred for the provision 
of pre-employment transition services, DSUs may need to develop a cost 
objective (i.e., a separate accounting code) that is different from the 
one used for other VR program cost allocation purposes, thereby 
enabling DSUs to track pre-employment transition services expenditures 
properly with the reserved funds. Similarly, DSUs should account for 
personnel time to ensure the proper allocation of staff time between 
the provision of pre-employment transition services and other 
vocational rehabilitation services, just as the DSU does when its 
personnel work on multiple programs. DSUs must track pre-employment 
transition services in a manner that ensures the reserved funds are 
used only for the provision of services set forth in section 113 of the 
Act and final Sec.  361.48(a). Although this could increase 
administrative burden slightly, it is only in this manner that a DSU 
can be certain it is expending reserved funds appropriately. The 
Department will issue guidance separately about tracking expenditures 
from the reserved funds and other fiscal matters relevant to the 
reservation of funds for providing pre-employment transition services.
    Changes: None.

Use of Reserved Funds for Authorized Activities

    Comments: Some commenters requested that we clarify when the 
authorized activities (as opposed to the required activities) in 
proposed Sec.  361.48(a)(3) are allowable pre-employment transition 
expenditures in meeting the reservation requirement. Specifically, the 
commenters wanted to know the threshold for determining when funds are 
remaining after providing the required activities under Sec.  
361.48(a)(3).
    Discussion: As stated in final Sec.  361.48(a)(3), a DSU may 
provide ``authorized'' pre-employment transition services only to the 
extent that reserved funds remain after providing the ``required'' 
activities. As part of the Comprehensive Statewide Needs Assessment, 
States should determine the number of potential individuals eligible 
for pre-employment transition services. This data will enable the 
States to target the amount of the reserved funds necessary for 
ensuring the ``required'' pre-employment transition services are 
provided to students with disabilities. To the extent the States 
demonstrate that they have made the required pre-employment transition 
services available to the population identified in the Comprehensive 
Statewide Needs Assessment, the States have met the requirement to 
provide the ``required'' pre-employment transition services prior to 
the ``authorized'' activities. Any reserved funds remaining beyond the 
targeted amount necessary for the ``required'' activities may then be 
used for ``authorized'' activities in final Sec.  361.48(a)(3).
    Changes: We have revised proposed Sec.  361.65(a)(3)(ii)(A) to 
clarify that funds reserved for providing pre-employment transition 
services may be used to pay for the costs of providing all of the 
services ``specified'' in final Sec.  361.48(a). Proposed Sec.  
361.65(a)(3)(ii)(A) referred to services ``authorized'' in final Sec.  
361.48(a). We believe this technical change is necessary to avoid any 
confusion about the general use of the term ``authorized'' and the 
distinction between ``required'' and ``authorized'' services in the 
context of pre-employment transition services.

Part 363--The State Supported Employment Services Program

    The discussion of comments on part 363 is presented by topic in the 
order that the relevant sections appear in this part.

Competitive Integrated Employment and Short-Term Basis (Sec.  363.1)

    Comments: Overall, commenters strongly supported the focus and 
emphasis in part 363 on individuals with the most significant 
disabilities, including youth with the most significant disabilities, 
achieving competitive integrated employment. One commenter suggested, 
however, that supported employment should not be assumed automatically 
as the first option for people with significant, or the most 
significant, disabilities. Another commenter urged that ``States'' 
(presumably designated State agencies) track all individuals working in 
segregated settings and at subminimum wage to help identify the need 
for supported employment.
    Other commenters pointed out discrepancies in the definition of 
``supported employment'' between proposed 34 CFR 361.5(c)(53) and 
proposed Sec. Sec.  363.1(b) and (c) and urged that these be made 
consistent.
    One commenter suggested adding other approaches or evidence-based 
models such as Individual Placement and Support (IPS) to supported 
employment and customized employment. This commenter also asked whether 
funds could be used to train new or existing providers in various 
models of supported employment.
    Many commenters responded to the short-term basis provisions in 
proposed Sec.  363.1(c) and proposed 34 CFR 361.5(c)(53) under which 
individuals with the most significant disabilities working in an 
integrated setting are working toward competitive integrated employment 
and can reasonably anticipate achieving competitive integrated 
employment within six months of entering supported employment. A few 
commenters endorsed the six-month period, indicating that the six-month 
period would not allow individuals to linger for long periods in 
subminimum wage employment.
    A few commenters considered six months to be too long and even 
recommended eliminating the short-term basis period altogether, 
indicating that under no circumstance should any individual with a 
disability be employed at a subminimum wage. However, most commenters 
considered six months to be arbitrary, too restrictive, or not 
sufficient, especially for individuals with the most significant 
disabilities, such as individuals who are blind who, as indicated by 
multiple commenters, might require additional training or specialized 
services in order

[[Page 55704]]

to achieve competitive integrated employment. Others recommended 
extensions of up to 12, 18, or 24 months, or even an unspecified time 
based upon an individual's needs, in order to achieve competitive 
integrated employment consistent with the individual's unique 
strengths, priorities, concerns, abilities, capabilities, interests, 
and informed choice.
    Some commenters suggested adding unpaid internships, 
apprenticeships, and transitional employment as examples of ``working 
on a short term basis.'' These commenters also recommended emphasizing 
that employment in sheltered workshops and enclaves and group 
employment settings does not constitute supported employment. A few 
commenters stated that individuals working on a short-term basis should 
be only in integrated settings as they work toward competitive 
integrated employment. Other commenters, however, referenced 
competitive, but non-integrated, settings when commenting on the short-
term basis provision. One commenter asked for clarification to ensure 
that AbilityOne contracts with non-profit agencies that employ 
individuals with disabilities remain a viable option for individuals 
with the most significant disabilities to achieve employment outcomes 
in supported employment.
    Discussion: We appreciate the many supportive comments regarding 
the goal of competitive integrated employment for all individuals with 
significant disabilities, including youth with significant 
disabilities, and particularly for those with the most significant 
disabilities.
    We also agree with the commenter who suggested that supported 
employment should not be considered automatically as the first choice 
for individuals with significant disabilities or the most significant 
disabilities. The State Supported Employment Services program 
(Supported Employment program) and supported employment services exist 
to support individuals with the most significant disabilities who need 
intensive services and supports to achieve an employment outcome. 
Supported employment should be considered when determining an 
individual's employment goal, consistent with his or her unique 
strengths, priorities, concerns, abilities, capabilities, interests, 
and informed choice.
    The Act, as amended by WIOA, specifically mentions customized 
employment and supported employment. We do not believe that including 
examples of additional approaches or models of supported employment, 
such as Individual Placement and Supports, is necessary. However, we 
support developing and implementing evidence-based models of supported 
employment, so long as they are consistent with the Act, as amended by 
WIOA, and the implementing regulations. Furthermore, administrative 
funds under this part, subject to the 2.5 percent administrative cost 
limitation, and funds under 34 CFR part 361, as appropriate, may be 
used to support training of providers and others on various models of 
supported employment.
    Although the tracking of all individuals working in segregated 
settings and at subminimum wage would be useful to designated State 
units (DSUs) in identifying and assessing the need for supported 
employment, we do not have the authority under the Act to require this 
unless the individuals have been served through the VR program (see 34 
CFR 361.55, which requires the DSU to conduct semi-annual or annual 
reviews, as applicable, of individuals in extended employment and other 
employment under special wage certificate provisions of the Fair Labor 
Standards Act), or the individuals have become known to the DSU through 
the activities required in section 511 of the Act.
    We agree with commenters who noted discrepancies in the definition 
of ``supported employment'' in proposed 34 CFR 361.5(c)(53) and 
proposed Sec.  363.1(b) and (c), and we have made the definitions 
consistent in these final regulations.
    We also appreciate the many comments about ``short-term basis.'' As 
proposed, Sec.  363.1(c) is consistent with the requirement in the Act, 
as amended by WIOA, that supported employment be in competitive 
integrated employment or in an integrated work setting in which the 
individual is working on a short-term basis toward competitive 
integrated employment. Therefore, despite the payment of competitive 
wages, employment in a non-integrated work setting does not meet the 
requirement under the Act, as amended by WIOA, for an employment 
outcome in supported employment.
    The Secretary acknowledges the diverse views, concerns, and 
recommendations of the commenters about the variables that should be 
considered in determining the short-term basis period but believes six 
months is consistent with the intent of the Act. The Secretary agrees 
with the commenters, however, that, in limited circumstances, an 
extended period of time may be appropriate based upon the needs of the 
individual and upon demonstrated progress toward competitive earnings 
documented in his or her service record. Therefore, an individual with 
a most significant disability, including a youth with a most 
significant disability, may, in limited circumstances, have up to 12 
months from achieving a supported employment outcome, as appropriate, 
to address fully his or her individualized needs to secure competitive 
earnings in supported employment.
    In response to the concerns about the availability of sufficient 
time to help individuals achieve an employment outcome, particularly in 
relation to the short-term basis, we want to clarify when the six-month 
short-term basis period, and the additional six months that may be 
available in limited circumstances, begins. This period begins only 
after an individual with a most significant disability, including a 
youth with a most significant disability, has completed up to 24 months 
of supported employment services (unless a longer period of time is 
necessary based upon the individual's needs) and the individual is 
stable in the supported employment placement for a minimum period of 90 
days following the transition to extended services. At this point, the 
individual has achieved a supported employment outcome in accordance 
with the criteria set forth in final Sec.  363.54. We believe that this 
provides sufficient time, considering both the time allowed for 
providing supported employment services and the short-term basis 
period, if needed, to address fully the needs of an individual in 
supported employment and to enable that individual to achieve 
competitive integrated employment. Our data support this belief and 
show that most supported employment outcomes are achieved in less than 
24 months.
    In response to multiple commenters' concerns about individuals with 
the most significant disabilities, such as individuals who are blind 
who may require additional training or specialized services to achieve 
competitive integrated employment, we want to clarify that vocational 
rehabilitation services, as well as supported employment services, are 
available to them. The vocational rehabilitation services generally 
occur prior to placement in supported employment as part of the 
individual's approved individualized plan for employment.
    Again, because the definition of ``employment outcome,'' which 
includes supported employment, requires achieving competitive 
integrated employment as defined in

[[Page 55705]]

final Sec.  361.5(c)(9), all supported employment outcomes must be in 
integrated settings with the expectation that individuals with the most 
significant disabilities can and will achieve competitive wages.
    We appreciate the recommendations regarding activities that 
commenters stated should constitute employment during the short-term 
basis period, including unpaid internships, apprenticeships, and 
transitional employment; however, we want to emphasize that the short-
term basis period begins following the achievement of the supported 
employment outcome. Unpaid internships, pre-apprenticeships, 
apprenticeships (including Registered Apprenticeships), and 
transitional employment are vocational rehabilitation services that 
lead to employment outcomes, but they do not constitute supported 
employment outcomes within the meaning of the definition of ``supported 
employment'' in final 34 CFR 361.5(c)(53) and Sec.  363.1(b) and (c). 
Therefore, they would not be appropriate placements for employment on a 
short-term basis.
    Finally, we agree with commenters that employment in sheltered 
workshops and enclaves and group employment settings does not 
constitute supported employment under this part because an individual 
achieves a supported employment outcome only if, at a minimum, the 
supported employment is in an integrated setting. There is a full 
discussion about why non-integrated employment does not meet the 
definition of ``competitive integrated employment'' in the responses to 
comments on the definition of competitive integrated employment in 34 
CFR 361.5(c)(9). That discussion also addresses whether entities that 
are set up specifically for providing employment to individuals with 
disabilities, such as AbilityOne non-profit agencies, will be able to 
place individuals with the most significant disabilities in competitive 
integrated employment and achieve employment outcomes in supported 
employment.
    Changes: We have revised the definition of ``supported employment'' 
to be consistent in both final Sec.  363.1(b) and (c) and final 34 CFR 
361.5(c)(53). In the NPRM, the definition in proposed 34 CFR 
361.5(c)(53) did not include the phrase ``and customized'' when 
referring to competitive integrated employment, and proposed Sec.  
363.1(b) did not include the phrase ``including a youth with a most 
significant disability'' when referring to individuals with the most 
significant disabilities. Additionally, proposed 34 CFR 361.5(c)(53) 
included ``transitional employment,'' which has been removed in final 
34 CFR 361.5(c)(53). We have corrected other, minor inconsistencies in 
singular and plural references to individuals with the most significant 
disabilities.
    We have also revised final Sec.  363.1(c) by adding a limited 
circumstance in which an individual can extend the short term basis up 
to a 12-month period from the achievement of the supported employment 
outcome to demonstrate progress toward competitive earnings based on 
information contained in the service record.

Definitions (Sec.  363.6(a))

    Comments: We received several comments regarding changes in 
proposed 34 CFR 361.5(c) to definitions relevant to the Supported 
Employment program. A few commenters requested the removal of the 
definition of ``transitional employment'' in proposed 34 CFR 
361.5(c)(56). These commenters also suggested removing the reference to 
transitional employment from the definitions of ``supported 
employment'' in proposed 34 CFR 361.5(c)(53) and ``ongoing support 
services'' in proposed 34 CFR 361.5(c)(37). They noted that WIOA 
eliminated ``transitional employment'' and that the definition of 
``supported employment'' in WIOA supersedes the definition in the 
Workforce Investment Act of 1998, which included ``transitional 
employment'' for individuals with mental illness. The commenters 
suggested that Congress deliberately removed ``transitional 
employment'' to ensure people with the most significant disabilities 
have access to competitive integrated employment.
    Some commenters sought clarification about the definition of 
``extended services'' in proposed 34 CFR 361.5(c)(19)(v) related to 
youth with the most significant disabilities.
    Discussion: We agree with the commenters' assessment of the 
congressional intent behind removing the definition of ``transitional 
employment'' and the reference to transitional employment in both the 
definition of supported employment and the definition of ongoing 
support services. The term is no longer supported by the Act.
    We discuss the commenters' request for clarification about the 
definition of ``extended services'' in proposed 34 CFR 361.5(c)(19)(v) 
for youth with the most significant disabilities in this Analysis of 
Comments and Changes under ``Services to Youth with the Most 
Significant Disabilities'' in Sec.  363.4(a)(2).
    Changes: We have removed the definition of ``transitional 
employment'' in final 34 CFR 361.5(c), as well as the references to it 
in the definition of ``supported employment'' in 34 CFR 361.5(c)(53) 
and ``ongoing support services'' in 34 CFR 361.5(c)(37).
    The definition of ``extended services'' in 34 CFR 361.5(c)(19)(v) 
has been revised as discussed in Sec.  363.4(a)(2) of this Analysis of 
Comments and Changes section under ``Services to Youth with the Most 
Significant Disabilities.''

Extension of Time for the Provision of Supported Employment Services 
(34 CFR 361.5(c)(54)(iii))

    Comment: A few commenters recommended either basing the time frame 
for providing supported employment services on an individual's need 
rather than a prescribed period of time or revising the regulatory 
language to make it easier to extend the 24-month time frame, as 
needed. A few other commenters disagreed with extending the time frame 
beyond 18 months.
    Discussion: We appreciate the concerns regarding the time frame for 
providing supported employment services. WIOA extended the availability 
of supported employment services from 18 months to 24 months, and this 
mandate cannot be changed by the Department. The extension provides 
additional time for individuals with the most significant disabilities 
to receive the services and supports necessary to achieve an employment 
outcome in supported employment, either in competitive integrated 
employment or working on a short-term basis to achieve competitive 
integrated employment. In accordance with section 7(39)(C) of the Act, 
under special circumstances, the eligible individual and the 
rehabilitation counselor or coordinator can jointly agree to extend the 
time to achieve the employment outcome identified in the individualized 
plan for employment.
    Changes: None.

Services to Youth With the Most Significant Disabilities (Sec. Sec.  
363.4(a)(2) and 363.22)

Extended Services (Sec.  363.4(a)(2))

    Comments: Many commenters suggested changing the statutorily 
defined time frame of up to four years during which the DSU may expend 
supported employment program funds for extended services for youth with 
the most significant disabilities, either by establishing a longer or 
shorter period for providing extended services or by basing this period 
upon individual circumstances.

[[Page 55706]]

    Additionally, commenters requested clarification regarding the 
point at which the DSU would be required to terminate its provision of 
extended services for a youth who turns 25 years of age and no longer 
meets the definition of a ``youth with a disability'' in 34 CFR 
361.5(c)(58).
    With respect to the use of funds allotted under the Supported 
Employment program for extended services, a few commenters recommended 
changing the word ``may'' in proposed Sec.  363.4(a) to ``shall'' or 
``will'' to establish that it is mandatory for DSUs to provide extended 
services to youth with the most significant disabilities.
    A few commenters asked for clarification whether providing extended 
services is mandatory or optional, citing discrepancy between the 
language in proposed Sec.  363.22, which appears to indicate that the 
reserve must be used for extended services, and proposed Sec.  
363.4(a)(2), which uses the word ``may'' when referring to the use of 
funds allotted under this part.
    Other commenters also proposed making the DSU either the initial 
payer or the payer of last resort for extended services for youth with 
the most significant disabilities. Still other commenters raised 
questions about providing extended services to youth with the most 
significant disabilities who have not been served by the DSU as an 
applicant or eligible individual.
    Discussion: We appreciate the suggested revisions to proposed Sec.  
363.4(a)(2). While many commenters sought to limit the DSU's 
responsibility for extended services, given limited available 
resources, we cannot do so. Section 604(b)(2) of the Act mandates that 
the DSU make available extended services for youth with the most 
significant disabilities for up to four years. Nothing in the Act 
authorizes the Department to grant a waiver of this requirement or to 
change the time period from four years to any other time period for 
youth with the most significant disabilities.
    While the DSU cannot ``opt out'' of any of the activities 
authorized under Sec.  363.4 by refusing to fund them, DSUs determine 
the need for and fund services on a case-by-case basis dependent upon 
each individual's need for services. Therefore, it is not appropriate 
to change the ``may'' in 34 CFR 363.4(a) to ``shall'' or ``will,'' and 
doing so would not be consistent with the authorizing language in 
section 604 of the Act. In light of the responsibility to make 
available funds for extended services for youth with the most 
significant disabilities, DSUs should continue to explore the 
availability of funding from other sources, as is done for other 
individuals with the most significant disabilities transitioning from 
supported employment services to extended services.
    Regarding the point at which the DSU may no longer provide extended 
services to a youth with the most significant disabilities, in no case 
may a DSU provide more than four years of extended services. Also, once 
a youth with the most significant disabilities reaches 25 years of age, 
he or she no longer meets the definition of ``youth with a disability'' 
in 34 CFR 361.5(c)(58), and the DSU must discontinue funding extended 
services. We appreciate the commenters bringing this last scenario to 
our attention. Final Sec.  363.4(a)(2) now states that at the age of 
25, a youth with a most significant disability is no longer eligible to 
receive extended services, even if he or she has not yet received 
services for four years. Nevertheless, under final Sec.  
363.53(b)(2)(ii), the DSU must identify another source of extended 
services to ensure that there will be no interruption of services.
    As indicated by a few commenters, section 606(b)(7)(D) of the Act 
provides that the State shall use supported employment funds only to 
supplement, and not to supplant, title I VR program funds in providing 
supported employment services. A few commenters suggested that this 
provision means that the Supported Employment program or VR program 
funds should be the payer of last resort (others suggested the payer of 
first resort) for extended services to youth with the most significant 
disabilities. The ``supplement, not supplant clause,'' as it is known, 
addresses only the relationship between the Supported Employment 
program and the VR program when providing supported employment 
services, which now includes extended services. It does not affect at 
all the relationship of the Supported Employment program or VR program 
to sources of funds that have historically been the providers of 
extended services to individuals after they have transitioned from 
supported employment services provided by the DSU. We expect those 
State and other sources of funding to coordinate with the Supported 
Employment and VR programs to provide the extended services needed by 
youth with the most significant disabilities. One of the purposes of 
the Supported Employment program is to assist States in developing 
collaborative programs with appropriate public and private nonprofit 
organizations to provide supported employment services for individuals 
with the most significant disabilities.
    As to whether the DSU can provide extended services to youth with 
the most significant disabilities who have not been served by the DSU 
as an applicant or eligible individual, we emphasize that in order to 
be eligible for supported employment services, including extended 
services, provided by the DSU, youth with the most significant 
disabilities must meet the requirements of Sec.  363.3, which include 
being determined eligible for vocational rehabilitation services. The 
DSU therefore may not provide extended services to a youth with the 
most significant disabilities who has not received services from the 
DSU through an individualized plan for employment simply because he or 
she meets the definition of a youth with a disability and is in need of 
extended services.
    Changes: We have revised Sec.  363.4(a)(2) to clarify that extended 
services to youth with the most significant disabilities provided by 
the DSU may be for a period not to exceed four years, or until such 
time as the youth reaches age 25 and no longer meets the definition of 
``youth with a disability'' under final 34 CFR 361.5(c)(58), whichever 
occurs first.

Reserve of Supported Employment Funds for Services for Youth With the 
Most Significant Disabilities (Sec.  363.22)

    Comments: One commenter agreed with the reserve requirement, 
indicating that the reserve funds should also be targeted to ``school-
to-work'' transition services to place youth in competitive integrated 
employment.
    Of the commenters that expressed concern regarding the requirement 
for reserving 50 percent of supported employment funds for supported 
employment services to youth with the most significant disabilities, 
most requested an exemption to ensure that adults with the most 
significant disabilities, particularly those with adult onset visual 
impairment or blindness, are able to be served.
    Discussion: We appreciate these concerns. However, WIOA mandates 
the 50 percent reservation of funds for supported employment services, 
including extended services, for youth with the most significant 
disabilities. The reserved funds may not be used for ``school-to-work'' 
transition services because the funds must be used for supported 
employment services for youth with the most significant disabilities, 
including extended services, which occur after placing such youth in 
competitive integrated employment. WIOA does not provide

[[Page 55707]]

any exceptions or authorize the Department to grant an exemption or 
waiver.
    Changes: None.

Match Requirements for Funds Reserved for Serving Youth With the Most 
Significant Disabilities (Sec.  363.23)

    Comments: Some commenters preferred that the 50 percent reserve not 
have a match requirement, and others indicated the match tracking and 
monitoring requirements are burdensome. A few commenters sought 
clarification regarding whether the match required new funding by the 
State or whether the State could realign current funding. The 
commenters indicated that it was difficult to comprehend the intent of 
the match without a defined plan for allocating the funds.
    Other commenters requested that in-kind match, such as those used 
and tracked in the Independent Living Services for Older Individuals 
Who Are Blind program, be allowed to meet the match requirements under 
this section. A few commenters requested examples of match and asked 
whether certified personnel expenditures are permitted as a third-party 
contribution.
    Discussion: We appreciate the concerns expressed by the commenters 
regarding the required match for funds reserved for providing supported 
employment services, including extended services, to youth with the 
most significant disabilities. This is a new requirement that will 
require all States to provide a non-Federal share; however, States that 
have historically expended non-Federal funds to supplement the Federal 
supported employment award now may count those expenditures for the 
provision of services to youth with the most significant disabilities 
as match for the reserve requirement.
    WIOA mandates the match requirement for supported employment and 
does not provide any exceptions to it or authorize the Secretary to 
grant a waiver. The activities and internal processes necessary for 
States to track and expend the non-Federal share for the reserve should 
not be burdensome because they may be modeled after those used for the 
part 361 match requirements.
    In addressing what may be used as match, allowable sources of match 
for the supported employment program follow the same guidelines for 
those sources allowable under the VR program. Under final 34 CFR 
361.28(b)(2), which addresses third-party cooperative arrangements for 
providing vocational rehabilitation services, which in turn include 
supported employment services under final 34 CFR 361.48(b)(13), 
certified personnel expenditures for time cooperating agency staff 
spent providing direct vocational rehabilitation services pursuant to a 
third-party cooperative arrangement are allowable. Certified personnel 
expenditures include staff salary and fringe benefits allocable to the 
third-party cooperative arrangement. To ensure consistency with part 
361, third-party in-kind contributions are not permitted as match.
    In reviewing proposed Sec.  363.23 further, we determined that it 
did not effectively describe the calculation of the 10 percent match, 
which must be based upon the total expenditures, made up of the Federal 
funds reserved and the non-Federal share, incurred for providing 
supported employment services to youth with the most significant 
disabilities.
    Changes: We have revised final Sec.  363.23(a)(2)(i) to demonstrate 
that the match calculation is based upon the total expenditures, 
including the Federal funds reserved and the non-Federal share, 
associated with the 50 percent reserve of Federal funds for providing 
supported employment services to youth with the most significant 
disabilities.

Program Income (Sec.  363.24)

    Comments: A commenter disagreed with limiting the use of program 
income and supported eliminating the requirement to disburse program 
income prior to requesting additional cash draws from its Federal 
award.
    Discussion: There has been a long-standing government-wide 
requirement under the common rule implementing former OMB Circular A-
102, as codified by the Department in former 34 CFR 80.21(f)(2), that 
States must expend program income prior to drawing down Federal grant 
funds. The Uniform Administrative Requirements, Cost Principles, and 
Audit Requirements for Federal Awards (Uniform Guidance), codified in 2 
CFR part 200, were adopted by the Department in 2 CFR 3474 on December 
19, 2014 (79 FR 76091). The new 2 CFR 200.305(a) specifies the payment 
procedures that States must use to draw down Federal funds; however, 
these procedures appear, on the surface, to apply only to funds 
included in a Treasury-State Agreement (TSA), but not all Federal 
program funds made available to States are subject to TSAs. For this 
reason, there is an ambiguity in 2 CFR 200.305(a) about how States 
should draw Federal funds under non-TSA programs. Moreover, TSAs do not 
cover program income earned by State grantees, and 2 CFR 200.305(a) 
does not address whether States should expend available program income 
funds before requesting additional Federal cash, as had been the long-
standing government-wide requirement in OMB Circular A-102 and codified 
for Department grantees in 34 CFR 80.21(f)(2).
    This silence creates concern because, for all other non-Federal 
entities, 2 CFR 200.305(b)(5) requires those entities to expend 
available program income funds before requesting payments of Federal 
funds. We do not believe, however, that this ambiguity should be 
construed to lift the requirement that States expend program income 
funds before requesting additional Federal cash because no such policy 
change was discussed in the preambles to either the final guidance in 2 
CFR part 200, which was published on December 26, 2013 (78 FR 78589), 
or in the Interim Final Guidance published on December 19, 2014 (79 FR 
75867).
    Here, 34 CFR 361.63(c)(2) permits the transfer of VR Social 
Security reimbursement program income to carryout programs under title 
VI of the Rehabilitation Act (Supported Employment). Historically, some 
State VR agencies have transferred a portion of VR Social Security 
reimbursement program income to the Supported Employment programs for 
use by those programs. For this reason, we believe it is essential that 
we resolve this ambiguity via these regulations.
    Thus, we proposed in the NPRM to incorporate the requirement to 
expend program income before requesting payment of funds by referencing 
2 CFR 200.305(a), but that provision is ambiguous. These final 
regulations now resolve the ambiguity by revising Sec.  363.24(b)(1) to 
require States to expend available program income funds before 
requesting additional cash payments from their Federal Supported 
Employment grant. We believe this change is essential to protect the 
Federal interest by using program income to increase the funds devoted 
to this program to which VR Social Security reimbursement program 
income may be transferred, keeping to a minimum potential interest 
costs to the Federal government of making grant funds available to the 
States. These final regulations should not negatively impact States 
because this change merely maintains the status quo that existed under 
former 34 CFR 80.21(f)(2).
    In addition, upon further review of the proposed program income 
regulation, we determined that it was necessary to address the 
relationship between program income and match. Just as with program 
income in the VR

[[Page 55708]]

program, program income earned in the Supported Employment program may 
not be used to meet the required non-Federal share under Sec.  363.23.
    Changes: We have revised Sec.  363.24 by removing the inapplicable 
reference to the Uniform Guidance in Sec.  363.24(b)(1), leaving only 
the requirement that program income earned in the Supported Employment 
program must be disbursed prior to requesting additional cash draws 
from its Federal award. We have also added a new Sec.  363.24(b)(3), 
which provides that program income cannot be used to meet the non-
Federal share requirement under Sec.  363.23.

Period of Availability of Funds (Sec.  363.25)

    Comment: None.
    Discussion: In reviewing proposed Sec.  363.25(b), we determined 
that it would be beneficial to clarify the use of Federal funds 
reserved for the provision of supported employment services to youth 
with the most significant disabilities that have been matched in the 
fiscal year for which the funds were appropriated and thus are 
available for obligation in the succeeding fiscal year. The Federal 
supported employment reserve funds eligible for carryover into the 
succeeding Federal fiscal year, because they have been matched in the 
fiscal year for which the funds were appropriated, may only be 
obligated and expended in that succeeding Federal fiscal year for 
supported employment services to youth with the most significant 
disabilities.
    Changes: Final Sec.  363.25(b) states that any reserved funds 
carried over may only be obligated and expended in that succeeding 
Federal fiscal year for providing supported employment services to 
youth with the most significant disabilities.

Limitations on Administrative Costs (Sec.  363.51)

    Comment: One commenter stated that the reduction of the 
administrative cost limit from 5 percent to 2.5 percent would severely 
limit the agency's ability to hire and retain staff.
    Discussion: Despite this mandated reduction in section 603(c) of 
the Act, funds from the VR program remain available for costs related 
to the Supported Employment program, including administrative costs 
under Sec.  363.4(c)(1) and section 608(a) of the Act. The limitation 
of administrative costs under the Supported Employment program expands 
the availability of funds for supported employment services to 
individuals with the most significant disabilities, and the 
availability of VR program funds for administrative costs related to 
the Supported Employment program helps to mitigate the impact of the 
reduction in administrative costs upon the DSU's ability to hire and 
retain staff.
    Changes: None.

Requirements for Transition To Extended Services, the Achievement of an 
Employment Outcome, and Closure of a Service Record (Sec.  363.53, 
Sec.  363.54, and Sec.  363.55)

    Comments: Many commenters requested clarification of requirements 
related to the transition to extended services, especially for youth 
with the most significant disabilities; the interplay of the short-term 
basis with the achievement of an employment outcome; and the 
requirements related to case closure, particularly when youth with the 
most significant disabilities are receiving extended services from the 
DSU.
    Discussion: We acknowledge the questions and confusion that many 
commenters expressed about the transition to extended services, 
employment outcome, and closure of the service record as they pertain 
to individuals receiving supported employment services. The transition 
to extended services continues to take place after an individual has 
completed supported employment services. WIOA makes two changes to the 
transition to extended services.
    First, an individual receiving supported employment services can 
now receive those services for up to 24 months, instead of the previous 
18, and, under special circumstances, may receive an extension based 
upon the individual's need as described in 34 CFR 361.5(c)(54)(iii). 
The transition to extended services begins after all supported 
employment services are complete. Second, the DSU may now provide 
extended services to youth with the most significant disabilities in 
accordance with Sec.  363.4(a) and 34 CFR 361.5(c)(19)(v). The DSU's 
responsibilities necessitated by both of those changes have been 
outlined more comprehensively in a revised section 363.53.
    By including the requirement to achieve competitive integrated 
employment into the definition of ``supported employment'' in Section 
7(38) of WIOA, Congress stated its expectation that all individuals 
with disabilities, even those with the most significant disabilities, 
could achieve competitive integrated employment. Recognizing, however, 
that those individuals with the most significant disabilities may need 
more time and supports to reach that goal, Congress permitted those 
individuals to be employed in an integrated setting with non-
competitive wages on a short-term basis, as long as they were working 
toward competitive integrated employment. The definition of 
``employment outcome'' in 34 CFR 361.5(c)(15) addresses the achievement 
of competitive integrated employment in supported employment. 
Therefore, final Sec.  363.54 explains when an individual with a most 
significant disability is considered to have achieved an employment 
outcome in supported employment, either in competitive integrated 
employment or when he or she is working on a short-term basis toward 
competitive employment in an integrated work setting.
    When the DSU closes the service record of an individual with a most 
significant disability now depends on whether the DSU is providing 
services during the short-term basis period or providing extended 
services for youth. A new final Sec.  361.55 describes how the new 
statutory requirements for employment on a short-term basis working 
toward competitive integrated employment, extended services for youth, 
and achieving an employment outcome relate to closing the service 
record.
    Changes: We have reformatted and revised Sec.  363.53 to better 
identify the steps that the DSU must take prior to transitioning an 
individual with a most significant disability, including a youth with a 
most significant disability, to extended services. Those steps include 
both a joint decision made by the counselor and the individual that the 
individual needs no further supported employment services, as defined 
in Sec.  361.5(c)(54), and identifying providers of extended services, 
including the DSU in the case of a youth with a most significant 
disability, under 34 CFR part 361.5(c)(19).
    We have reformatted and revised final Sec.  363.54 to better 
identify the considerations that the DSU must take into account when 
determining when an individual with a most significant disability, 
including a youth with a most significant disability, who is employed 
in competitive integrated employment or in an integrated setting and is 
working on a short-term basis toward competitive integrated employment, 
will be considered to have achieved an employment outcome in supported 
employment.
    We have removed the cross-reference from proposed Sec.  363.54(b) 
to the closure of the service record requirement in 34

[[Page 55709]]

CFR 361.56 as a criterion for achieving an employment outcome.
    Final Sec.  363.54 sets forth four requirements that must be 
satisfied for an employment outcome. First, the individual must have 
completed supported employment services under this part and 34 CFR part 
361, meaning the individual has received services for up to 24 months, 
or longer if the counselor and the individual have determined that such 
services are needed to support and maintain the individual in supported 
employment. Any other vocational rehabilitation services listed on the 
individualized plan for employment provided to individuals who are 
working on a short-term basis toward the achievement of competitive 
integrated employment in supported employment need not be completed 
prior to satisfying the achievement of an employment outcome.
    Second, the individual has transitioned to extended services 
provided either by the DSU for youth with the most significant 
disabilities, or another provider, consistent with the provisions of 
Sec. Sec.  363.4(a)(2) and 363.22.
    Third, the individual has maintained employment and achieved 
stability in the work setting for a minimum of 90 days after 
transitioning to extended services, and, finally, the employment must 
be individualized and customized consistent with the strengths, 
abilities, interests, and informed choice of the individual.
    New final Sec.  363.55 addresses when the service record of an 
individual who has achieved an employment outcome in supported 
employment may be closed. Separate requirements are specified for 
different scenarios, depending on whether individuals with a most 
significant disability, including youth with a most significant 
disability, achieve competitive integrated employment or work toward 
competitive integrated employment on a short-term basis and whether 
they are receiving extended services and any other vocational 
rehabilitation services from the DSU or from other service providers.

Limitation on Use of Subminimum Wage (34 CFR Part 397)

    The Analysis of Comments and Changes of part 397 is presented in 
the order in which relevant subjects and sections appear in this part.

General Comments (Part 397)

    Comments: More than 550 commenters responded to proposed part 397. 
Some commenters expressed strong support for all or various sections. A 
few commenters suggested that section 511 of the Act, as added by WIOA, 
does not go far enough, and stated that the payment of subminimum wages 
to individuals with disabilities perpetuates the perception that these 
individuals are less valued. The commenters recommended that the 
payment of subminimum wages to individuals with disabilities should be 
entirely eliminated. Others supported Congress' steps to reinforce the 
belief that, with the proper supports and services, individuals with 
all types of disabilities can attain competitive integrated employment. 
A few commended the Department for its efforts in issuing important 
regulations designed to curb subminimum wage employment, especially for 
youth with disabilities, who too often transition from school directly 
into sheltered employment at subminimum wages without ever having the 
opportunity to try competitive integrated work or explore their 
interests and abilities.
    Some commenters remarked that section 511 of the Act and the 
implementing regulations in part 397 will help to eliminate practices 
that have not worked to benefit individuals with disabilities, such as 
the overuse of employment at subminimum wages, years of extended 
evaluation, and cycles of performance evaluations that result in low 
wages based upon an individual's productivity without necessary 
supports and services. In addition, a few commenters suggested that 
supporting subminimum wage employment appeared to be inconsistent with 
the purpose of the VR program and that resources should not be used to 
provide services or activities that result in individuals being 
employed in segregated settings at subminimum wages.
    Generally, however, supporters of proposed part 397 regarded the 
regulations as helping individuals who are considering subminimum wage 
employment, or those already employed at subminimum wage, access 
opportunities for competitive integrated employment.
    Multiple commenters voiced opposition to, or concerns about, 
proposed part 397. These commenters expressed concern that proposed 
part 397 would eliminate or phase out section 14(c) certificates and 
subminimum wages, close sheltered workshops, and cause individuals 
employed at subminimum wages to lose their jobs. Some of these 
commenters stated that individuals employed in sheltered employment 
were mostly incapable of working in competitive integrated employment, 
enjoyed a supportive and safe environment and social network in 
sheltered employment, and would lose income-based financial and medical 
benefits if they were paid minimum wages. Additionally, many of these 
commenters expressed concern that employers in the community would not 
hire individuals with low productivity who are unable to perform at 
expected levels and that it was unrealistic to believe that there are 
enough jobs for them in competitive employment. As a result, these 
individuals with disabilities would remain at home or need increased 
support from day programs.
    Many commenters suggested that there should be a continuum of 
employment opportunities for individuals with disabilities, including 
sheltered workshops, and that the proposed regulations do not consider 
the choices that individuals and families make among these options.
    Discussion: We appreciate the many thoughtful recommendations to 
change, clarify, and improve the regulations. Section 511 of the Act, 
as added by WIOA, and final part 397 set forth the requirements that 
must be satisfied: (1) Before an entity holding a special wage 
certificate issued by the Department of Labor under section 14(c) of 
the Fair Labor Standards Act (FLSA) may hire a youth with a disability 
or continue to employ an individual with a disability of any age at 
subminimum wages; and (2) by DSUs and local educational agencies with 
regard to services and documentation that must be provided to these 
individuals. Neither section 511 of the Act nor final part 397 
eliminates the payment of subminimum wages or section 14(c) 
certificates. Both of these actions are outside the scope of the 
Department's authority and these final regulations. We also understand 
the concerns about the potential loss of needed disability-related and 
income-based benefits and the availability of sufficient jobs in the 
community; however, WIOA embodies the belief that with appropriate 
skills and supports, all individuals with disabilities can participate 
in the competitive workforce and achieve self-sufficiency. The Act, as 
amended by WIOA, and WIOA itself, could result in more job 
opportunities becoming available to individuals with disabilities, 
including those with the most significant disabilities. Two of the core 
purposes of WIOA are to ensure that: (1) Individuals who face barriers 
to employment, such as individuals with disabilities, receive the 
services and supports they need to acquire the skills necessary to 
obtain competitive integrated employment; and (2)

[[Page 55710]]

employers receive the training, technical assistance, and other 
services they need to understand and tap into the full potential of 
individuals with disabilities in the workforce, for example through 
supported employment or customized employment. In addition, the Act, as 
amended by WIOA, and final part 361 require DSUs to work with other 
public agencies to ensure that individuals with disabilities receive 
the benefits planning they need to better understand the interplay of 
income-based benefits and work and to make informed decisions about the 
type of employment to pursue. Through all of these efforts, the 
Secretary hopes that individuals with disabilities, including those 
with the most significant disabilities, have more employment 
opportunities.
    In addition, neither section 511 of the Act nor final part 397 
restricts or eliminates sheltered employment. Individuals with 
disabilities continue to have a continuum of choices and options for 
employment ranging from competitive integrated employment to employment 
in sheltered workshops. Therefore, individuals with disabilities 
choosing to pursue or continue in sheltered employment may do so; 
however, certain requirements must be satisfied before the employer 
hires or continues to employ them at subminimum wages. While we 
recognize that many subminimum wage jobs for individuals with 
disabilities are in sheltered settings, section 511 of the Act and 
final part 397 focus exclusively on the requirements that must be 
satisfied before an entity holding a section 14(c) certificate may hire 
or continue to employ an individual with a disability at subminimum 
wages, not on the setting in which those wages are paid.
    Changes: None.

Purpose (Sec.  397.1)

    Comments: One commenter recommended that Sec.  397.1(b)(1) require 
the DSU to ensure that youth with disabilities actually have completed 
certain services, not just provide documentation about the completion 
of those services to the youth. The commenter further suggested we 
revise this section to maximally limit the use of subminimum wage 
employment by requiring the DSU to: (1) Track youth with disabilities 
receiving pre-employment transition services and transition services 
from the DSU who are considering subminimum wage employment; (2) 
identify all individuals currently receiving services from the DSU 
considering subminimum wage employment; (3) identify all individuals 
over the past three years who applied for and were found ineligible for 
the VR program and may be currently working in, or considering, 
subminimum wage employment; (4) track referral agreements with, and 
conduct outreach to, State and local educational agencies to identify 
youth with disabilities considering subminimum wage employment; and (5) 
track referral agreements with, and conduct outreach to, the State 
agency with primary responsibility for providing services and supports 
for individuals with intellectual and developmental disabilities, and 
any other State agency providing services to a significant number of 
individuals in subminimum wage employment. The commenter also 
recommended that we revise Sec.  397.1 by clarifying that nothing in 
this part supersedes the requirements of 34 CFR 361.55 regarding semi-
annual and annual review of individuals in extended employment or other 
employment under special certificates issued under section 14(c) of the 
FLSA.
    Discussion: We appreciate the commenter's time and consideration in 
reviewing this section and making substantive suggestions that would 
assist DSUs in carrying out the intent of section 511. In particular, 
the Secretary believes the proactive steps recommended by the commenter 
offer potential ways in which DSUs could increase the number of youth 
and other individuals with disabilities considering subminimum wage 
employment who become known to the DSUs, thereby significantly 
impacting the DSU's ability to assist in limiting the use of subminimum 
wages. That said, the Act does not require DSUs to seek out or solicit 
youth and others with disabilities considering, or already employed at, 
subminimum wages. Similarly, the Act does not require DSUs to track 
youth with disabilities or others with disabilities, except for those 
individuals who have become known to the DSU through the vocational 
rehabilitation process or through activities required in Sec. Sec.  
397.20, 397.30, 397.40 and 397.50. However, there is nothing in the Act 
or these final regulations that would prohibit a DSU from working with 
local educational agencies or other public agencies that may be able to 
identify individuals seeking or working in subminimum wage employment, 
for example, when implementing the requirements in section 101(a)(11) 
of the Act, as amended by WIOA, and the final regulations in 34 CFR 
361.22 related to coordination with education officials, 34 CFR 361.24 
regarding cooperation and coordination with other entities, and the 
documentation process requirements in final part 397. This could 
increase the number of individuals known to the DSU and allow the DSU 
to provide services, especially employment-related counselling and 
guidance, earlier than it otherwise would.
    While we encourage the DSUs and State and local educational 
agencies to work together to identify these students and youth with 
disabilities as early as possible, any referrals by educational 
agencies that are subject to the confidentiality requirements of the 
Family Education Rights and Privacy Act (FERPA) (20 U.S.C. 1232g(b) and 
34 CFR 99.30 and 99.31) and/or the IDEA (20 U.S.C. 1417(c) and 34 CFR 
300.622) would need to comply with the applicable confidentiality 
standards. Although we are not revising the final regulations as 
recommended, the Department will consider ways to incorporate some of 
the suggestions into technical assistance to the DSUs.
    The Secretary understands the recommendation to require the DSU to 
ensure that youth with disabilities actually complete certain services, 
in addition to providing documentation. However, the Secretary 
disagrees that this is necessary. Under section 511(c)(1)(A) of the Act 
and final Sec.  397.40(a), DSUs must provide certain information and 
career counselling services to all individuals with disabilities, known 
by the DSUs, who want to continue employment at subminimum wage. Upon 
the completion of those services, the DSU must provide the individual 
with documentation that the services were provided. As such, the 
documentation ``ensures,'' as the commenter desired, that the services 
were actually completed. Similarly, a youth with a disability must 
complete certain services, such as transition and, as appropriate, pre-
employment transition services, prior to beginning work in subminimum 
wage employment. Again, the DSUs and local educational agencies must 
provide documentation that the youth has completed these services, thus 
ensuring that the services were completed.
    Finally, the Secretary agrees that nothing in this part supersedes 
the requirements of final 34 CFR 361.55 regarding semi-annual and 
annual review of individuals in extended employment or other employment 
under special wage certificate provisions in section 14(c) of the FLSA. 
We received similar suggestions to cross-reference and reconcile the 
requirements under final 34 CFR 361.55 and final Sec.  397.40 to ensure 
consistency

[[Page 55711]]

and avoid confusion about which requirements apply and the respective 
responsibilities of the DSU under each provision. While the Secretary 
understands the concerns, such revisions are not necessary or 
appropriate. The DSUs must satisfy their responsibilities under both 
final 34 CFR 361.55 and final Sec.  397.40. These sections implement 
requirements under separate titles in the Act and apply to different--
although sometimes intersecting--populations. We discuss these 
requirements of final 34 CFR 361.55 more fully in the Analysis of 
Comments and Changes section earlier in this preamble and those in 
final Sec.  397.40 in a following section.
    Changes: None.

Jurisdiction (Sec.  397.2)

Jurisdiction of the Departments of Education and Labor

    Comments: One commenter agreed that proposed Sec.  397.2 is 
consistent with the statutory authority granted to the Department. The 
commenter noted that the Department has the authority to regulate the 
actions of State educational agencies and collect data, citing 
Executive Order 11761 (To Facilitate Coordination of Federal Education 
Programs), and, therefore, has the authority to impose documentation 
requirements; to impose requirements for educational agencies, as 
detailed in proposed Sec. Sec.  397.2(a)(1) and (2); and to regulate 
the actions of State and local educational agencies with regard to 
subminimum wage placements as detailed in proposed Sec.  397.2(a)(3).
    The same commenter agreed with proposed Sec.  397.2(b), which 
states that nothing in this part will be construed to grant the 
Department or its grantees jurisdiction over requirements set forth in 
the FLSA. The commenter added that, although the Department of Labor 
has the authority to grant entities section 14(c) certificates allowing 
subminimum wage employment to individuals with disabilities, the 
Department has the authority to regulate, and thus restrict, the 
placement of individuals with disabilities in subminimum wage 
employment as it relates to public schools.
    Another commenter stated that the Department has express legal 
authority to administer funding for the VR program under the Act and to 
oversee services by local school districts under the Individuals with 
Disabilities Education Act (IDEA). The commenter urged the Department 
to assume a central enforcement role over programs that facilitate 
employment outcomes for youth with disabilities, something which, 
according to the commenter, was lacking in the proposed regulations.
    Other commenters stated that the Department should take a more 
proactive and vigorous role in enforcement, working collaboratively 
with the Department of Labor's Wage and Hour Division to enforce fully 
and meaningfully the requirements of section 511 of the Act, including 
provisions under which both Departments have overlapping jurisdiction. 
Similarly, several commenters viewed the enforcement of section 511 of 
the Act as a shared responsibility between the Departments of Education 
and Labor.
    Several commenters expressed concerns about the enforcement of 
section 511, including the concern that entities holding section 14(c) 
certificates would continue their current practices and not comply with 
requirements under the Act. Some commenters suggested the Department 
require entities holding special wage certificates to refer youth and 
other individuals with disabilities to the DSU or educational agency. 
Many commenters recognized that these entities are subject to 
enforcement action from the Department of Labor and may have their 
certificates revoked under 29 CFR 525.17.
    Similarly, since section 511 of the Act is entitled ``limitations 
on the use of subminimum wage,'' one commenter suggested that there is 
a legal basis under WIOA for the Department of Labor to revoke section 
14(c) certificates for violations of section 511 of the Act, which 
these final regulations should require. The same commenter stated that 
after the effective date of section 511 on July 22, 2016, when an 
entity holding a section 14(c) certificate hires a person with a 
disability who is age 24 or younger without completing the required 
steps in section 511(a)(2)(B) of the Act, the entity should face 
enforcement action from the Departments of Labor and Education under 
both the FLSA and the Act, as amended by WIOA. Without vigorous 
enforcement by both Departments, particularly the Department of 
Education, the commenter suggested that entities holding section 14(c) 
certificates would view the responsibility for meeting the requirements 
under section 511 of the Act as resting with the DSUs.
    Discussion: The Secretary appreciates the many comments and 
recommendations about jurisdiction and enforcement. In response to the 
many comments received, the Department consulted further on the matter 
with the Department of Labor's Wage and Hour Division. Although the 
Secretary understands the various concerns expressed, both the 
Departments of Education and Labor agree that under FLSA and WIOA, the 
authority to administer and enforce Federal requirements governing the 
payment of subminimum wages by entities holding special wage 
certificates under section 14(c) of the FLSA resides with the Secretary 
of Labor. The Secretary of Labor administers and enforces the minimum 
wage and overtime requirements of the FLSA, issues and revokes 
subminimum wage certificates, and remedies unauthorized payment of 
subminimum wages. See 29 U.S.C. 206, 207, and 214(c); 29 CFR part 525. 
Section 511 states that its provisions ``shall be construed in a manner 
consistent with the provisions of the Fair Labor Standards Act of 1938 
(29 U.S.C. 201 et seq.), as amended before or after the effective date 
of this Act.'' Accordingly, if an employer fails to comply with the 
section 511 criteria for payment of a subminimum wage, the Secretary of 
Labor would take enforcement action pursuant to the FLSA in the same 
manner as he would against any other employer who failed to satisfy the 
requirements of the FLSA. The Secretary of Labor has delegated his 
authority to administer the FLSA to the Department of Labor's Wage and 
Hour Division.
    The Secretary agrees with commenters who called for greater 
collaboration between the Department and the Department of Labor's Wage 
and Hour Division to ensure that the requirements of section 511 of the 
Act are enforced fully and meaningfully. Additionally, the Secretary 
agrees that the provisions of section 511 are dependent on the DSUs and 
educational agencies knowing the identities of individuals seeking 
employment or who are already employed at subminimum wage. However, 
despite the recommendations made by commenters, there is no statutory 
authority for the Department to require entities holding special wage 
certificates to refer youth and other individuals with disabilities to 
the DSU or educational agency. Section 511 of the Act does not grant 
the Department the authority to impose this or any other requirement on 
entities holding special wage certificates under the FLSA. Recognizing 
the importance of these requirements, the Secretary proposed part 397, 
taking the initiative to regulate on those provisions for which the 
Department is solely responsible. Under section 511 of the Act, the 
Department has the authority to

[[Page 55712]]

regulate the activities and services that must be provided to an 
individual before the individual is eligible for, or may continue work 
compensated at a subminimum wage. Additionally, the Department has the 
authority to regulate how documentation of these actions is provided by 
the DSU to the individual with a disability, including the 
documentation process developed by the DSU in consultation with the 
State educational agency. We have revised final Sec.  397.2(a)(1) to 
specify the Department's jurisdiction over the documentation process. 
Lastly, while States, not the Department, have oversight of services by 
local school districts under the IDEA, the Department has the authority 
under section 511 of the Act to prohibit State and local educational 
agencies from entering into a contract or other arrangement with 
certain entities for the purpose of operating a program under which a 
youth with a disability is engaged in work compensated at a subminimum 
wage. The Department has enforcement authority over State and local 
educational agencies that violate this prohibition.
    Contrary to the opinion of some commenters, the Department of Labor 
rather than the Department has enforcement authority and jurisdiction 
over entities holding special wage certificates, including the 
suspension or revocation of these certificates. Despite recommendations 
that we require the Department of Labor to revoke violators' section 
14(c) certificates if entities are found to be in violation of section 
511, the statute does not authorize the Department of Education to do 
so; any suspension or revocation and any related regulations must be 
undertaken and promulgated by the Department of Labor.
    Changes: We have revised final Sec.  397.2(a)(1) to state that the 
Department has jurisdiction over the documentation process developed by 
the DSU in consultation with the State educational agency.

Interplay of the Other WIOA Rulemakings

    Comments: One commenter noted that the Department of Labor's NPRM 
covering programs authorized under titles I and III of WIOA, as well as 
the joint NPRM issued by the Departments of Education and Labor for the 
workforce development system, did not address section 511 or the 
Department of Labor's enforcement of the documentation requirements for 
hiring or retaining individuals with disabilities in subminimum wage 
employment.
    Discussion: In response to the comment regarding the lack of 
mention of section 511's requirements or the Department of Labor's 
enforcement responsibilities either in its program-specific NPRM (80 FR 
20690 (April 16, 2015)) or in the joint NPRM issued by the Departments 
of Education and Labor (80 FR 20574 (April 16, 2015)), the Secretary 
believes it would not have been appropriate to do so for two reasons. 
First, the joint NPRM focuses solely on jointly administered 
requirements imposed by title I of WIOA on the Department of Education 
and the Department of Labor's Employment and Training Administration. 
The explicit requirements set forth in title I make both the Department 
and the Department of Labor's Employment and Training Administration 
equally responsible for administering and monitoring all jointly 
administered requirements governing the workforce development system.
    Section 511, on the other hand, imposes requirements on State and 
local educational agencies and DSUs administered by the Department, 
that are separate and distinct from the restrictions imposed on 
entities holding section 14(c) certificates that fall under the 
exclusive purview of the Department of Labor's Wage and Hour Division. 
There is nothing in section 511 of the Act that shifts the 
responsibility for enforcement under the FLSA either to the Department 
exclusively or to the Department jointly with the Department of Labor. 
In fact, section 511(b)(3) of the Act requires that section 511 be 
construed in a manner that is consistent with the FLSA. Therefore, the 
Department of Labor retains the authority to enforce all minimum wage 
and subminimum wage requirements for entities holding special wage 
certificates.
    Second, the Department of Labor's program-specific NPRM focuses 
solely on program-specific requirements imposed by titles I and III of 
WIOA. Section 511, on the other hand, is contained in title V of the 
Act, which is contained in title IV of WIOA. As such, the provisions of 
section 511 would not have been appropriate for the Department of 
Labor's program-specific NPRM. Moreover, the enforcement authority in 
section 511 that belongs to the Department of Labor resides with a 
different division, specifically the Wage and Hour Division, than that 
covered by the Department of Labor's program-specific NPRM. Rules 
required under the FLSA related to the provisions of section 511 are 
the responsibility of the Department of Labor.
    Changes: None.

Reviewing Documentation

    Comments: Many commenters suggested that the final regulations 
specify timelines for reviewing documentation. One commenter stated 
that proposed Sec.  397.2 does not address enforcement, either by DSUs 
or the Department of Labor, for the failure of section 14(c) 
certificate holders to maintain required documentation. The commenter 
also stated that it is unclear whether the Department of Labor has the 
ability to revoke a license for a workshop that fails to keep the 
required documentation under final Sec. Sec.  397.20, 397.30, and 
397.40.
    Several commenters emphasized the importance of enforcing the 
document review process. They suggested that the DSU or its contractor 
authorized to review individual documentation maintained by entities 
holding section 14(c) certificates have an enforcement mechanism to 
address deficiencies and violations. These commenters urged the 
Department to take a stronger stand to ensure that corrective actions 
can be taken by the DSU or its contractor. Another commenter requested 
that the final regulations define the consequences for non-compliance. 
One commenter suggested that the DSU should be required to report 
deficiencies to the Department of Labor or the Client Assistance 
Program (CAP).
    Some commenters stated that DSUs are not enforcement or compliance 
agencies and requested clarification regarding enforcement authority in 
the documentation review process. One commenter agreed that while it 
was clear in the proposed regulations that the Department of Labor 
oversees entities holding section 14(c) certificates and the payment of 
subminimum wages to individuals with disabilities, further 
clarification of the DSU's role and scope was required. Without it, the 
DSU might become the ``de facto'' organization responsible for policing 
subminimum wage certificates rather than providing guidance and 
technical assistance.
    One commenter urged that the final regulations task the Department 
of Labor with enforcing provisions related to the review of 
documentation since it already monitors entities holding special wage 
certificates and reviews employee documentation, unlike DSUs. If the 
final regulations also include the remedy of revoking an entity's 14(c) 
certificate for failure to maintain the required documentation for 
individuals employed at subminimum wage, the Department of Labor has 
the capacity to implement that remedy. In the view of the commenter, 
imposing an

[[Page 55713]]

enforcement obligation on the DSUs would be burdensome and likely 
result in no enforcement at all.
    Discussion: Many commenters suggested final part 397 include 
timelines for the review of documentation. Section 511(e)(2)(B) of the 
Act imposes no specific requirements on when, how often, or how reviews 
must be done. Rather, the statute states that the reviews will be 
conducted at a time and in a manner as necessary, consistent with 
regulations established by the DSU or the Secretary of Labor. 
Therefore, under section 511(e)(2)(B) of the Act, requirements 
governing the reviews, including whether or when they must be done, are 
beyond the scope of these final regulations.
    Although some commenters requested that we provide the DSU or its 
contractor an enforcement mechanism for addressing documentation 
deficiencies and violations by entities holding section 14(c) 
certificates, the Secretary lacks the statutory authority to do as the 
commenters suggest. Likewise, the Secretary lacks the statutory 
authority to define the consequences for non-compliance by entities 
holding special wage certificates under the FLSA, which rests with the 
Department of Labor, or to require the DSU to report non-compliance by 
these entities to the Department of Labor or to the CAP. Having said 
this, nothing in section 511 prohibits a DSU from informing the 
Department of Labor's Wage and Hour Division of non-compliance it finds 
during any documentation review and doing so may assist in supporting 
the Department of Labor's efforts in monitoring compliance. A more 
detailed discussion of this issue is presented in the Review of 
Documentation (Sec.  397.50) section later in this preamble. As 
discussed under the CAP and PAIR (Protection and Advocacy of Individual 
Rights) section, the reporting of non-compliance to the CAP is not 
authorized.
    We acknowledge that reviewing individual documentation held by the 
entities holding special wage certificates, as authorized by section 
511(e)(2)(B) of the Act, may be regarded as burdensome to DSUs. Section 
511 does not require that DSUs conduct these reviews. Rather section 
511(e)(2)(B) merely subjects entities holding section 14(c) 
certificates to these reviews in an effort to ensure that the intent of 
section 511 is being fulfilled. These reviews may be conducted in a 
manner and at such time as is deemed necessary, consistent with a DSU's 
or the Department of Labor's regulations. While the Secretary agrees 
with the comment that the Department of Labor is experienced with 
conducting these reviews, the Secretary does not have the statutory 
authority to require that the Department of Labor be solely responsible 
for the documentation reviews. Section 511(e)(2)(B) of the Act clearly 
grants authority to the DSUs to conduct these reviews as well.
    Changes: None.

CAP and PAIR

    Comments: Many commenters suggested that CAPs and PAIR programs 
have jurisdiction for reviewing compliance with section 511. To ensure 
that required activities are completed and are meaningful (i.e., not 
just checklist actions), some commenters recommended that the CAP or 
the PAIR agency be empowered to represent students and others with 
disabilities employed at subminimum wages under section 511. Commenters 
emphasized that, given the role of CAPs in the new requirements in 
sections 113 and 511 of the Act, the regulations should define this 
role and provide the CAPs the authority and ability to monitor and 
effectively advocate for individuals with disabilities. The commenters 
noted that the CAPs have access to workers in sheltered workshops and 
their records, regardless of whether they are VR program consumers. The 
commenters endorsed the need for independent advocates to ensure that 
DSUs and entities adhere to the requirements of section 511 to make the 
most of the opportunity presented in the Act to improve the employment 
of individuals with disabilities.
    One commenter requested that we require that the protection and 
advocacy systems have access to any entity covered under sections 113 
and 511 of the Act to monitor for rights and safety compliance, which 
includes the ability to speak with individuals with disabilities 
privately and to access records with the consent of an individual 
service recipient, parent, or guardian. Additionally, the commenter 
suggested that we require CAP staff with similar access to advise 
individuals employed by an entity holding a section 14(c) certificate 
of their rights and, with consent, to access their records.
    Discussion: With respect to the comments regarding the CAPs, 
section 112(a) of the Act, as amended by WIOA, specifically requires 
CAPs to inform and advise clients and client-applicants of all 
available benefits under the Act, including under section 511. Clients 
or client-applicants, as defined in final 34 CFR 370.6(b) for purposes 
of the CAP, are individuals seeking or receiving services under the 
Act, including individuals seeking or receiving services under section 
511. Upon the request of clients or client-applicants, CAPs may assist 
and advocate for them, including by pursuing legal, administrative, or 
other appropriate remedies to protect their rights and ensure access to 
the services under the Act.
    Although several commenters expressed concerns that the proposed 
regulations did not provide CAP and PAIR programs with the authority to 
access records and conduct monitoring, the Secretary does not agree 
that CAP or PAIR programs have the authority to access records in the 
manner the commenter suggests. The advocacy provided by CAPs, whether 
individual or systemic, must be at the request of clients or client-
applicants and must be solely for the purpose of protecting their 
rights or to facilitate their access to services under the Act. In 
representing the client or client-applicant upon that individual's 
request, CAPs could access relevant records of individuals with 
disabilities under section 511 of the Act, so long as they follow the 
requirements of the holder of those records, which typically require 
the informed written consent of the client or client-applicant.
    PAIR programs have limited monitoring authority. PAIR programs 
provide advocacy and legal services to protect the rights of 
individuals with disabilities who are not eligible for services from 
other components of the protection and advocacy system and whose 
concerns are beyond the scope of the CAP. Since section 112 of the Act 
specifically authorizes the CAP to assist individuals with disabilities 
receiving services under section 511, such activities would fall 
outside the scope of the PAIR programs.
    Despite the suggestion that independent advocates ensure that DSUs 
and entities adhere to the requirements of section 511 to make the most 
of the opportunity presented in the Act to improve the employment of 
individuals with disabilities, there is no statutory basis to require 
independent advocates to take on this role. There is no mention of 
independent advocates in section 511 of the Act, and these entities are 
not within the purview of the Department. Having said this, there is 
nothing in section 511 to preclude a DSU or the Department of Labor 
from contracting with an independent advocate to conduct reviews of 
documentation.
    On the other hand, section 112 of the Act, as amended by WIOA, does 
not authorize CAPs to engage in advocacy for the sole purpose of 
gaining general access to records or conducting monitoring. Since 
section 112 of the

[[Page 55714]]

Act, as amended by WIOA, references the applicability of the 
requirements of the CAP to section 511 already, we do not believe that 
additional language is needed in final part 397. The Department has, 
however, made minor revisions to final 34 CFR part 370 to clarify that 
CAPs may advocate on behalf of clients or client-applicants requesting 
assistance with issues arising under section 511. Final 34 CFR part 370 
is published elsewhere in this issue of the Federal Register.
    Changes: None.

Rules of Construction (Sec.  397.3)

    Comments: A few commenters requested that we revise Sec.  397.3 to 
emphasize that nothing in section 511 or final part 397 changes or 
affects a State's obligations under the U.S. Supreme Court's 1999 
Olmstead decision, subsequent U.S. Department of Justice enforcement 
actions, or the rules established for home- and community-based 
services by the U.S. Department of Health and Human Services' Center 
for Medicare and Medicaid Services (CMS).
    Discussion: Section 511 and final part 397 are consistent with the 
Olmstead decision and other requirements for community- and home-based 
services. Under each of the requirements mentioned by the commenters, 
services must be provided in the community to the extent possible.
    Section 511 gives individuals every opportunity possible to obtain 
competitive integrated employment by requiring that youth with 
disabilities receive certain services before beginning employment at 
subminimum wages and that individuals with disabilities of any age 
receive certain services every six months for the first year of 
subminimum wage employment and annually thereafter as long as 
subminimum wage employment continues.
    Moreover, under section 511(b)(1) of the Act, nothing in section 
511 is to be construed as changing the purpose of the Act, which is to 
empower individuals with disabilities to maximize their opportunities 
to achieve competitive integrated employment, nor is section 511 to be 
construed as promoting subminimum wage. Final Sec.  397.3 sets forth 
the ``rules of construction'' consistent with those set forth in 
section 511(b) of the Act. Paragraphs (a) and (b) of final Sec.  397.3 
promote opportunities for competitive integrated employment for 
individuals with disabilities. Therefore, the Secretary declines to 
make the suggested revision.
    Changes: None.

What regulations apply? (Sec.  397.4)

    Comments: None.
    Discussion: Although we received no comments specific to proposed 
Sec.  397.4, we received several comments about various provisions in 
part 397 regarding informed choice and confidentiality. Specifically, 
we received comments asking whether an individual with a disability has 
the right to refuse to participate in activities required by section 
511 of the Act and part 397. As the Secretary has stated throughout 
this preamble, an individual has the right to exercise informed choice 
regarding participation in the activities required by this part. The 
Secretary has revised final Sec.  397.4(b) to highlight 34 CFR 361.52 
as being applicable to final part 397.
    In addition, we received comments asking whether the DSU could 
provide documentation to a family member of an individual with a 
disability. A DSU must protect all personal information regarding an 
individual in its possession, pursuant to final 34 CFR 361.38. To 
highlight this requirement, we have revised final Sec.  397.4(b) to 
specifically mention the confidentiality requirements of final 34 CFR 
361.38.
    In addition to these specific changes in final part 397, we also 
made conforming changes in final 34 CFR part 361 to make clear that 
final 34 CFR 361.38 and 361.52 apply to applicants and recipients of 
services. In so doing, we ensure that individuals receiving services 
required by part 397, regardless of whether they have applied for or 
been determined eligible for vocational rehabilitation services, are 
still protected by the confidentiality and informed choice 
requirements. These changes were discussed in the preamble to final 
part 361 in Part B of the Analysis of Comments.
    Changes: We have revised final Sec.  397.4(b) to highlight final 34 
CFR 361.38 and 34 CFR 361.52 as being applicable to final part 397.

What definitions apply? (Sec.  397.5)

    Comments: A few commenters suggested that the Department provide 
specific definitions for the terms ``self-advocacy,'' ``self-
determination,'' and ``peer mentoring training opportunities'' to 
ensure integrity and reflect the intent of section 511. One commenter 
requested a definition for ``certain information.'' Another commenter 
asked whether the term ``special wage certificate'' in proposed Sec.  
397.5(c)(2) included all types of section 14(c) certificates issued by 
the Department of Labor (e.g., business certificate holders and patient 
workers) among those certificate-holding entities that must comply with 
section 511 of the Act. The commenter also asked that we clarify in 
Sec.  397.5(d) whether ``entity'' includes associated businesses 
affiliated with a section 14(c) certificate holder, such as a non-
profit community rehabilitation program that has a for-profit business 
in the same location.
    Discussion: We appreciate the commenters' recommendations for 
additional definitions; however, we use these terms in part 397 as they 
are commonly understood, just as they are used in section 511 of the 
Act. Attempting to define these terms could cause us to inadvertently 
define the terms too broadly or too narrowly. This is of particular 
concern both because we would be defining these terms after the comment 
period has ended, without the benefit of public input, and because this 
is a new statutory provision, and we do not yet have institutional 
experience with how DSUs may implement them in this context.
    As commonly understood, ``peer mentoring'' generally involves 
individuals with disabilities providing guidance, counseling, and 
advice to other individuals with disabilities based upon their own 
experiences and training and the experiences of others they know. 
``Self-advocacy'' generally involves developing the skills, knowledge, 
and confidence to stand up for oneself and using appropriate means to 
obtain one's goals. Finally, ``self-determination'' generally means 
having the abilities, attitudes, skills, and opportunities to play an 
active and prominent role in living and planning one's life and future. 
Neither final part 397 nor section 511 of the Act includes the phrase 
``certain information.''
    Next, ``special wage certificate'' applies to all entities holding 
section 14(c) certificates, including work centers (also known as 
community rehabilitation programs), hospital/residential care centers 
(facilities that employ patient workers), business establishments that 
are not a work center or an employer of patient workers, and School 
Work Experience Programs (SWEP). All must comply with section 511 of 
the Act, which provides for no exceptions and refers simply to entities 
holding special wage certificates issued under section 14(c) of the 
FLSA.
    Whether ``entity,'' as defined in final Sec.  397.5(d), includes 
associated businesses affiliated with a section 14(c) certificate 
holder depends upon individual circumstances. As defined, ``entity'' 
refers to any employer who holds a special wage certificate issued 
under section 14(c) of the FLSA.

[[Page 55715]]

Therefore, the factors to consider include, but are not limited to, 
whether the associated business is separately incorporated, operates 
under the same or a separate special wage certificate described in 
section 14(c) of the FLSA, employs or jointly employs as defined in the 
FLSA, individuals with disabilities at subminimum wages, shares 
subminimum wage employees with the section 14(c) certificate holder, or 
operates as a contractor or subcontractor for the section 14(c) 
certificate holder. The for-profit nature of an associated business of 
a non-profit is not a determining factor since both may hold a special 
wage certificate under the FLSA.
    Changes: None.

Coordinated Documentation Process (Sec.  397.10)

    Comments: Most commenters on proposed Sec.  397.10 supported the 
requirement that the DSU, in consultation with the State educational 
agency, develop a process, or utilize an existing process to document 
the completion of required activities under section 511 of the Act by 
youth with disabilities prior to seeking or entering subminimum wage 
employment. A few commenters strongly supported using the DSU's formal 
interagency agreement with the State educational agency required by 34 
CFR 361.22(b) as the mechanism to develop a robust documentation 
process, and a few commenters requested that final Sec.  397.10 reflect 
the role of the State Rehabilitation Council in this process. One 
commenter suggested that we require the interagency agreement to 
include a requirement that students and parents or guardians be 
provided training on subminimum wage employment. One commenter 
recommended that we require the interagency agreements to be developed 
with local educational agencies, in addition to State educational 
agencies. In addition, the commenter recommended that interagency 
agreements that specify data sharing requirements be developed with 
State agencies serving individuals with intellectual and developmental 
disabilities as well. The commenter suggested that the interagency 
agreements indicate how each agency will ensure compliance with the 
requirements in this section.
    Several commenters recommended that the Department provide guidance 
detailing the documentation and collaboration requirements of DSUs, 
educational agencies, and other entities under section 511. Similarly, 
one commenter requested that we include more specific language in the 
regulations regarding the types of documentation that would be 
acceptable, emphasizing that guidance should be sufficient to ensure 
that documentation is complete and meets the intent of section 511 of 
the Act. Some stated that proposed Sec.  397.10 focused heavily on 
compliance with the documentation requirements, and not the 
congressional intent of limiting the use of subminimum wages.
    Many commenters expressed concerns about the 90-day time frame for 
providing documentation to youth with disabilities in proposed Sec.  
397.10(c)(2) and recommended shorter time frames, such as 30 or 45 
days. They noted that allowing the DSU up to 90 days to provide 
documentation to youth with disabilities after completing each of the 
required activities, which may or may not take place concurrently, 
could result in prolonged delays for such youth seeking to enter 
subminimum wage employment since there are several steps and multiple 
activities in the process that the youth must complete.
    One commenter asked the Department to define ``completed'' in 
proposed Sec.  397.10(b)(2)(i), stating that transition services are 
typically ongoing and may continue until a student graduates from high 
school. The same commenter posed a series of additional questions about 
proposed Sec.  397.10(b)(2)(ii). The commenter asked about what 
constitutes documentation; the level of detail required; requirements 
for the rigor and quality of the activities; the need for signatures, 
dates, descriptions and settings of activities; information about the 
location or setting of activities; and the DSU's obligations if the 
educational agency fails to provide documentation of transition 
activities or such activities are deemed substandard.
    One commenter urged the Department to include a new paragraph in 
Sec.  397.10 or, alternatively, in Sec.  397.50, to require the DSU to 
retain copies of documentation required by this part and to provide 
this documentation for review by the CAP or a protection and advocacy 
agency.
    One commenter remarked that documentation of required activities 
denotes completion of these activities without regard to consumer 
choice to participate, whereas other commenters requested clarification 
of what documentation would be required if an individual, exercising 
informed choice, refuses vocational rehabilitation services.
    Finally, one commenter asked for clarification regarding whether a 
documentation process between the DSU and the State educational agency 
must be developed and what documentation is required in those States 
that prohibit subminimum wages for individuals with disabilities. 
Alternatively, the commenter suggested that emphasis should be placed 
upon tracking services in the regulations regardless of whether a 
subminimum wage prohibition exists.
    Discussion: We appreciate the many comments we received regarding 
the documentation process. Compliance with the documentation process 
requirements is intended to result in limiting the use of subminimum 
wages. The Secretary agrees that the formal interagency agreement 
between the DSU and the State educational agency provides an optimal 
mechanism to develop and describe the documentation process required in 
final Sec.  397.10, and the Department appreciates the strong support 
we received from commenters on this point. As noted by the commenters, 
final 34 CFR 361.22(b)(5) requires the DSU and State educational agency 
to develop a formal interagency agreement that, at a minimum, provides 
for coordination necessary to satisfy documentation requirements set 
forth in final Sec.  397.10. Under final 34 CFR 361.20(c) and (d), the 
State Rehabilitation Council (SRC) must provide input into the VR 
services portion of the Unified or Combined State Plan, and the DSU 
must actively consult with the SRC, if it has a Council, on its 
policies and procedures governing the provision of vocational 
rehabilitation services. The functions of the SRC in final 34 CFR 
361.17(h) support Council involvement in developing the coordinated 
documentation process. Therefore, the Secretary does not believe it 
necessary to specifically state the role of the SRC in the 
documentation process in final Sec.  397.10.
    While the Secretary agrees that students and parents or guardians 
can benefit from training about subminimum wage employment, the Act 
does not require the formal interagency agreement to include such a 
requirement. To add it would be inconsistent with the statutorily 
required actions that must be taken by either the DSU or the State 
educational agency with regard to the documentation process. 
Nonetheless, nothing in the Act precludes the DSU and State educational 
agency from including a training requirement in the formal interagency 
agreement.
    Similarly, we do not believe it necessary to require, in final part 
397, the DSU to enter into interagency agreements with local 
educational

[[Page 55716]]

agencies and State agencies serving individuals with intellectual and 
developmental disabilities, because final 34 CFR 361.24(f) and (g) 
provide for the DSU to enter into cooperative agreements and engage in 
interagency collaboration with these State agencies. These cooperative 
agreements could provide a mechanism for addressing, as appropriate, 
the requirements in final Sec.  397.10 and promote data sharing. The 
Secretary encourages the DSUs, local educational agencies, and State 
agencies serving individuals with developmental and intellectual 
disabilities to work collaboratively to identify individuals with 
disabilities, particularly youth with disabilities, who are considering 
or who are already engaged in subminimum wage employment.
    The Secretary agrees that further operational guidance regarding 
the requirements for collaboration, development, and implementation of 
the documentation process is warranted. Therefore, the Department's 
Office of Special Education and Rehabilitative Services intends to 
collaborate with the Department of Labor's Wage and Hour Division in 
issuing guidance about implementing the requirements in final part 397, 
particularly the documentation process. This guidance will help to 
ensure that the documentation process works smoothly within already-
established procedures for the DSUs and State and local educational 
agencies, especially with regard to the protection of personally 
identifiable information, while also enabling efficient and effective 
reviews of any such documentation by the Department of Labor.
    Final Sec. Sec.  397.10 and 397.30 specify the documentation 
requirements. Final Sec.  397.20 describes the activities for which 
documentation must be provided, all of which are familiar to DSUs and 
local educational agencies and should pose no additional administrative 
burden. Each DSU has case management practices for documenting various 
steps in the vocational rehabilitation process, such as eligibility and 
ineligibility determinations, the individualized plan for employment, 
the provision of vocational rehabilitation services (including pre-
employment transition services), and case closure. State educational 
agencies also have methods for documenting transition services provided 
to students under the IDEA. In developing the documentation process, 
each DSU, in coordination with the State educational agency, has 
flexibility to determine the most appropriate procedures for 
documenting required activities and for timely provision of the 
documentation to youth with disabilities upon their completion of the 
required activities.
    As proposed, Sec.  397.10(c)(2) required the DSU to provide the 
documentation of the completion of each of the required actions in 
Sec. Sec.  397.20 and 397.30 to a youth as soon as possible, but no 
later than 90 days, following the completion of each of the actions. We 
understand the concerns raised by commenters, and we want to emphasize 
that we anticipate DSUs and State educational agencies will develop a 
process whereby the documentation in most instances will be provided 
either concurrently with the completion of the activity or very shortly 
thereafter, and we encourage them to do so.
    For example, DSUs typically provide documentation of eligibility or 
ineligibility determinations to the individual within a very short time 
after the decision is made. Similarly, DSUs typically provide a copy of 
the individualized plan for employment to the individual at the time 
both parties sign the document. With regard to providing services, such 
as pre-employment transition services or transition services, we 
anticipate that the DSUs and schools will develop a streamlined 
approach for transmittal of the documentation by the DSU to the youth.
    We proposed a period of up to 90 days to be consistent with other 
time frames in the vocational rehabilitation process and to enable DSUs 
to obtain documentation from local educational agency personnel who may 
not be available due to extenuating circumstances. It was never the 
Department's intent to delay the provision of the required 
documentation to any individual seeking subminimum wage employment. 
After considerable deliberation and balancing competing interests while 
not imposing undue burden on the DSUs or schools, the Secretary has 
modified the time frame in these final regulations. Final Sec.  
397.10(c)(2) requires the DSU to provide the requisite documentation, 
including documentation received from the local educational agency, to 
the youth within 45 calendar days of completion of the activity.
    For example, if a student completes a required activity provided by 
the local educational agency, the documentation must be transmitted to 
the DSU and provided to the youth all within 45 calendar days. However, 
if, due to extenuating circumstances additional time is needed, 
documentation must be provided to the youth within 90 calendar days 
after completion of the activity. As provided in final Sec.  
397.10(c)(2)(i)(B), this exception for extenuating circumstances is a 
limited exception that would cover circumstances such as, the 
unexpected absence of the individual necessary to provide the 
documentation, or a natural disaster. That said, DSUs and State 
educational agencies could establish a shorter time frame in their 
documentation processes.
    We recognize that providing transition services, as well as pre-
employment transition services, may be ongoing for students with 
disabilities. For example, under the IDEA, a student with a disability 
may receive transition services until the student graduates from high 
school with a regular diploma or exceeds the age of eligibility for a 
free appropriate public education. Similarly, students with 
disabilities may receive pre-employment transition services under the 
Act for as long as the student remains in an educational program and 
meets the definition of a ``student with a disability'' under final 34 
CFR 361.5(c)(51). For purposes of final Sec.  397.10(b)(2)(i), the 
local educational agency must, consistent with confidentiality 
requirements of FERPA and/or the IDEA, provide the DSU documentation of 
transition services when a student has completed all transition 
services in the individualized education program. The final regulations 
do not contain a definition of ``completion,'' as suggested by 
commenters, because the definition would vary widely depending on the 
activity. The Secretary will provide more guidance in the general 
operational guidance for the documentation process required by section 
511 and final part 397.
    Section 511 of the Act does not address what constitutes 
documentation, the level of detail required, requirements related to 
the rigor and quality of the activities, the need for signatures, 
dates, descriptions and settings of activities, information about the 
location or setting of activities, and the DSU's obligations if the 
education agency fails to provide documentation of transition 
activities or such activities are deemed substandard. Some of these 
issues are best left to the DSU and State educational agency to 
negotiate when developing the interagency agreement or the 
documentation process to maximize State flexibility and accommodate the 
unique needs within a State. However, the Secretary agrees that some 
guidance would be helpful. Therefore, the Secretary has revised final 
Sec.  397.10(a) to state that the documentation process must address 
both the actual production and transmittal of documentation.

[[Page 55717]]

Again, the transmittal of all documentation by the educational agency 
to the DSU must comply with the confidentiality requirements of FERPA 
and the IDEA.
    In addition, the Secretary has revised final Sec.  397.10(a) by 
adding three new paragraphs. Final Sec.  397.10(a)(1) establishes 
minimum requirements for information to be contained in the 
documentation of determinations made or the completion of an activity. 
Final Sec.  397.10(a)(2) establishes minimum requirements for 
information that must be contained in documentation in the event that a 
youth, or his or her parent or guardian, exercises informed choice and 
refuses to participate in an activity required by section 511 of the 
Act or final part 397. Final Sec.  397.10(a)(3) requires the DSU to 
retain a copy of all required documentation provided to the youth. The 
DSU must retain this documentation just as it would any other 
documentation in its case management system, and the documentation must 
be retained in accordance with the requirements of 2 CFR 200.333, which 
governs record retention for all Federal grantees.
    In using an existing process or developing a new documentation 
process, the DSU and the State educational agency may wish to consider 
questions such as those posed by the commenter but not addressed in 
these final regulations. In addition, the Secretary has revised final 
Sec.  397.10(b)(2)(i) to require the educational agency to provide the 
documentation to the DSU. The Secretary has also added a new 
requirement in final Sec.  397.10(c)(3) that the DSU provide, when 
transmitting documentation of the last determination made or activity 
completed, a cover sheet that itemizes all documentation provided to 
the youth. The Secretary hopes that these additions will assist DSUs 
and State educational agencies in developing a streamlined 
documentation process that will enable the expedient completion and 
transmittal of the documentation to the youth, and allow for the 
expedient review of the documentation, if a review is conducted by the 
DSU or the Wage and Hour Division of the Department of Labor.
    Additionally, for the reasons discussed in the section titled 
Jurisdiction (Sec.  397.2), any access to these records by CAPs or 
protection and advocacy systems is subject to the requirements of 
sections 112 and 509 of the Act, respectively, and implementing final 
regulations in 34 CFR part 370 and 34 CFR part 381.
    Although section 511 of the Act and final part 397 establish 
prerequisites for a youth with a disability to work in subminimum wage 
employment, as with any vocational rehabilitation service, the youth 
with a disability, or his or her parent or guardian, as applicable, may 
exercise informed choice and refuse to participate. If a youth chooses 
not to participate in the activities required by section 511 of the Act 
and final part 397, or chooses to opt out of the vocational 
rehabilitation process entirely, such a choice will impact the 
permissibility of the youth to work at subminimum wage and preclude him 
or her from obtaining subminimum wage employment given the limitations 
imposed by section 511 of the Act and final part 397. Accordingly, DSUs 
should inform youth with disabilities and/or their guardians of the 
youth's ineligibility for subminimum wage employment if he or she 
refuses to participate in the required activities. As discussed 
previously, final Sec.  397.10(a)(2) establishes documentation 
requirements for when a youth refuses to participate in the required 
activities. Meeting these requirements demonstrates the DSU's 
compliance under section 511 and final part 397. The Secretary believes 
it is appropriate to establish an even shorter time frame for the 
transmittal of documentation demonstrating the youth's refusal to 
participate in required activities under final part 397 because there 
should be few administrative reasons for delay. Thus, in this 
circumstance, final Sec.  397.10(b)(2)(ii) requires that the 
documentation be provided to the youth, within 10 calendar days of the 
youth's refusal.
    In a State that prohibits the payment of subminimum wages to 
individuals with disabilities, the DSU and the State educational agency 
still must develop a documentation process in accordance with final 
Sec.  397.10, although it may be used infrequently. This documentation 
would be necessary if a youth with a disability seeks subminimum wage 
employment in another State that does not prohibit subminimum wages.
    Finally, the Department, upon further review, notes that the 
documentation of pre-employment transition services in final Sec.  
397.10(b)(1) refers to a ``student with a disability'' rather than a 
``youth with a disability'' because only a student with a disability 
may receive pre-employment transition services. Further, the section 
states more directly that the appropriate school official responsible 
for providing transition services will provide the DSU documentation of 
completion of appropriate transition services under the IDEA.
    Changes: We made several changes to final Sec.  397.10. First, we 
revised final Sec.  397.10(a) to state that the documentation process 
must cover both the production and transmittal of the documentation. 
The process must ensure all confidentiality requirements of FERPA and 
the IDEA are satisfied.
    Second, we revised final Sec.  397.10(a) by adding three 
paragraphs. Final Sec.  397.10(a)(1) establishes minimum information 
that must be contained in documentation of a youth's completion of 
required activities. Final Sec.  397.10(a)(2) establishes the minimum 
information that must be contained in documentation when a youth 
refuses to participate in the required activities. Final Sec.  
397.10(a)(3) requires the DSU to retain copies of all documentation 
required by final part 397.
    We revised final Sec.  397.10(b)(1) to clarify that we are 
referring to a ``student with a disability'' with regard to the 
documentation of the completion of appropriate pre-employment 
transition services. We also revised Sec.  397.10(b)(2)(i) to clarify 
that the appropriate school official responsible for the provision of 
transition services must provide the DSU documentation of completion of 
appropriate transition services under the IDEA. We revised final Sec.  
397.10(c)(2) by adding two new paragraphs. Final Sec.  397.10(c)(2)(i) 
requires the DSU to provide all requisite documentation to the youth 
within 45 calendar days of the determination or the completion of the 
required activities, unless extenuating circumstances make additional 
time necessary. In that case, the documentation must be provided to the 
youth within 90 calendar days of the determination or completion of the 
activity or service. The final regulations also provide examples of 
what could constitute extenuating circumstances necessitating the 
additional time. Final Sec.  397.10(c)(2)(ii) requires the DSU to 
provide documentation of the youth's refusal to participate in required 
activities within 10 calendar days of the refusal. Lastly, final Sec.  
397.10(c)(3) was added to require the DSU to provide a coversheet that 
itemizes all documentation provided to the youth when transmitting 
documentation of the last determination made or activity completed.

[[Page 55718]]

Responsibilities of a DSU to Youth With Disabilities Who Are Known To 
Be Seeking Subminimum Wage Employment (Sec.  397.20)

Reasonable Period of Time

    Comments: Most commenters on this section recommended changes in 
proposed Sec.  397.20(a)(2)(ii)(B) and proposed Sec.  397.20(b)(3)(i) 
related to the determination that a youth with a disability is not able 
to achieve the employment goal specified in his or her individualized 
plan for employment, other than supported employment, after working 
toward the goal for a reasonable period of time with appropriate 
supports and vocational rehabilitation services. The commenters 
recommended that, for these youth, the reasonable period of time be 
consistent with, or no less than, the time period provided in proposed 
Sec.  397.20(b)(3)(ii) for individuals with disabilities whose 
specified employment goal is in supported employment. A few commenters 
recommended defining the time frame for ``reasonable period of time'' 
for all youth, regardless of whether they were seeking supported 
employment outcomes or other outcomes, as 36 months or up to four years 
since the DSU is being allowed to provide up to four years of extended 
services for youth in supported employment. The commenters stated that 
limiting the length of time the DSU can devote to helping youth with 
disabilities achieve competitive integrated employment creates barriers 
to the policy of maximizing steps to facilitate attaining competitive 
integrated employment and requested that the Department amend the 
proposed rule to designate a minimum, not maximum, period of time 
during which DSUs must assist youth with disabilities to attain 
integrated employment outcomes, including supported employment. Citing 
the low participation rate of individuals with disabilities in the 
labor force, coupled with the significant barriers to employment faced 
by these individuals, one commenter recommended a minimum of three 
years as the appropriate amount of time for youth with disabilities to 
work toward competitive integrated employment before considering 
segregated work and subminimum wage employment. This commenter stated 
that, without a minimum time frame, the proposed regulations offer 
little to prevent youth from continuing to settle for subminimum wage 
employment. Some premised their suggestion of extending the time frame 
to four years based upon the DSU being allowed to provide up to four 
years of extended services for youth in supported employment. On the 
other hand, one commenter suggested that, consistent with the provision 
of supported employment services, in no case should the reasonable 
period of time exceed two years.
    Suggesting that the distinctions in ``reasonable period of time'' 
between those youth with supported employment goals and those with 
other employment goals prove more confusing than helpful, a few 
commenters supported language that reflects an individualized approach 
for defining ``reasonable period of time'' for all youth, including 
those individuals in supported employment. One commenter stated that, 
without uniform time frames for both youth with disabilities seeking 
supported employment outcomes and youth seeking other competitive 
integrated employment outcomes, DSUs may circumvent the necessary level 
of effort needed in working with individuals by simply writing an 
individualized plan for employment that does not include the goal of 
supported employment.
    Discussion: We appreciate the many comments we received about 
defining ``reasonable period of time'' before closing a service record 
as unsuccessful when a youth has been pursuing, through an 
individualized plan for employment, an employment outcome (as defined 
under final 34 CFR 361.5(c)(15)), other than in supported employment.
    Although many commenters requested a specified time frame--of 
anywhere from 24 months, to coincide with that for the provision of 
supported employment services, to up to four years to coincide with the 
amount of time allowed for the provision of extended services for a 
youth with a disability--we believe that a ``reasonable period of 
time'' must take into account the disability-related and vocational 
needs of the individual, as well as the anticipated length of time 
required to complete the services identified in the individualized plan 
for employment to achieve an employment outcome. The time frame for 
providing supported employment services is prescribed in section 7(39) 
of the Act, as amended by WIOA, and final 34 CFR 361.5(c)(54), but the 
Act does not limit the amount of time for providing any other 
vocational rehabilitation service. Therefore, we believe that it is not 
in the best interest of individuals with disabilities to limit the time 
for providing vocational rehabilitation services other than supported 
employment services. To do so might unnecessarily restrict the amount 
of time an individual may need to complete the services necessary to 
achieve an employment outcome in competitive integrated employment.
    We understand the concerns expressed by many of the commenters 
about limitations on the amount of time the DSU may devote to assisting 
youth with disabilities to achieve competitive integrated employment, 
especially if someone is not seeking supported employment. We also 
understand the desire to provide a minimum time, rather than a maximum 
time, during which the DSU may help youth with disabilities attain 
employment outcomes, including supported employment. However, we 
believe that with allowable extensions, and based upon the needs of the 
individual and the individual's disability, DSUs have the flexibility 
to provide all services and supports necessary for an individual to 
achieve competitive integrated employment in a reasonable time prior to 
closing the individual's service record as unsuccessful.
    Changes: None.

Requirements for Closure

    Comments: A few commenters recommended that we revise proposed 
Sec.  397.20(a)(2)(ii)(C) to reference 34 CFR 361.47(10) rather than 
the more general 34 CFR 361.47 when addressing the requirements for 
closure of the service record of a youth with a disability. The 
commenters stated that under 34 CFR 361.47(10), the vocational 
rehabilitation counselor will not accidentally classify the youth with 
a disability as having achieved competitive integrated employment, 
when, in fact, the youth has obtained subminimum wage employment. One 
commenter also suggested that this change would serve as a reminder to 
vocational rehabilitation counselors that a placement of a youth with a 
disability in a subminimum wage environment is less desirable than a 
placement into competitive integrated employment.
    Discussion: We do not agree with the recommendation that we revise 
proposed Sec.  397.20(a)(2)(ii)(C) to reference final 34 CFR 
361.47(10), rather than the more general final 34 CFR 361.47, when 
addressing the requirements for closure of a service record for a youth 
with a disability. Final 34 CFR 361.47 contains other requirements, and 
limiting the reference to final 34 CFR 361.47(10) could provide the 
impression that other requirements do not apply. We anticipate that the 
discussion in part 361 of these regulations found elsewhere in this 
issue of the Federal Register regarding ``competitive

[[Page 55719]]

integrated employment'' and ``employment outcome'' will serve to 
clarify that employment at subminimum wages is not a successful outcome 
for purposes of the VR program.
    Changes: None.

Pre-employment Transition Services

    Comments: Several commenters provided comments about the DSU's 
responsibility to document completed pre-employment transition 
services. One commenter asked that the final regulations specifically 
prohibit the use of segregated settings such as sheltered workshops for 
providing pre-employment transition services, regardless of whether 
these settings pay subminimum wages. Given that this section applies to 
youth with disabilities, a commenter requested clarification regarding 
how youth with disabilities who are age 24 or younger, who are not 
students with disabilities, may be provided pre-employment transition 
services that are, by definition, provided to students with 
disabilities. The commenter stated that although a youth with a 
disability who is no longer a student may have received pre-employment 
transition services, or transition services under the IDEA, a DSU would 
find it challenging to document the services after the youth has left 
the education system. As an alternative, the commenter suggested that 
we make an exception to the definition of ``pre-employment transition 
services'' for the purpose of proposed Sec.  397.20 to include all 
youth in the provision and documentation of pre-employment transition 
services. Another commenter stated that it would be overly burdensome 
to track all individuals receiving pre-employment transition services 
and their activities in order to provide documentation to those few 
considering subminimum wage employment. The commenter recommended 
removing the requirement for documentation of pre-employment transition 
services from proposed Sec.  397.20(a)(1).
    One commenter was concerned that proposed Sec.  397.20 served as a 
loophole for the education system to continue to view subminimum wage 
employment as a viable alternative and suggested that the final 
regulations be strengthened by specifying that youth must be provided 
exposure to, and opportunities for, experiences such as integrated 
work-based learning programs, summer jobs, summer volunteering, and 
summer internships to enable them to make an informed choice to pursue 
subminimum wage employment.
    Discussion: As discussed in the Analysis of Comments and Changes 
section for part 361 earlier in this preamble, we do not have the 
authority to prohibit the use of segregated settings, such as sheltered 
workshops, for providing pre-employment transition services. That being 
said, assessment services and pre-employment transition services are to 
be carried out in an integrated setting to the maximum extent possible 
in accordance with final 34 CFR 361.5(c)(5) and final 34 CFR 
361.48(a)(2), respectively.
    We understand the confusion created by proposed Sec.  397.20(a)(1), 
which covered the documentation of completed pre-employment transition 
services that must be provided to youth by the DSU, when, in fact, pre-
employment transition services are provided to students with 
disabilities, not to all youth with disabilities. We have revised this 
paragraph to clarify that documentation for the completion of pre-
employment transition services applies to students with disabilities. 
We have made further revisions for the documentation of the completion 
of transition services under the IDEA, which the DSU is also 
responsible for providing to youth once the local educational agency 
has provided such documentation to the DSU.
    We disagree with the commenter's alternative suggestion of making 
an exception to the definition of ``pre-employment transition 
services'' in final 34 CFR 361.5(c)(42) to include all youth for 
purposes of this part, as that would be inconsistent with section 113 
of the Act.
    We understand that a DSU would find it challenging to obtain 
documentation of services after a youth has left the education system; 
however, educational systems must maintain records of the provision of 
transition services to students provided through an individualized 
education program.
    We appreciate the commenter's concern about the burden of tracking 
individuals receiving pre-employment transition services and their 
activities in order to provide documentation to a few individuals that 
might seek subminimum wage employment. The commenter recommended 
removing the requirement from final Sec.  397.20(a)(1). However, this 
would be inconsistent with section 511(d)(2)(a) of the Act.
    We agree that youth with disabilities may find integrated work 
based learning programs, summer jobs, summer volunteering, and summer 
internships valuable and these experiences could better enable them to 
make an informed choice of whether to pursue subminimum wage 
employment. However, we do not believe that embedding this language in 
the regulations in part 397 would strengthen the final regulations, as 
they already incorporate the requirements to document the completion of 
pre-employment transition services and/or transition services for youth 
with disabilities, which include these activities.
    Finally, we made a technical change in the title of this section, 
replacing ``considering'' with ``seeking'' to be consistent with Sec.  
397.30. ``Seeking'' more appropriately describes those youth who have 
determined that they would like to pursue subminimum wage employment.
    Changes: We added Sec.  397.20(a)(1)(i) and (ii) to require DSUs to 
document completion of transition services under the IDEA in addition 
to completion of pre-employment transition services under the VR 
program. Additionally, we inserted ``a student with a disability'' in 
final Sec.  397.20(a)(1)(i) because pre-employment transition services 
are available only to students with disabilities. Finally, we replaced 
the word ``considering'' with ``seeking'' in the title of this section 
to be consistent with the title in Sec.  397.30.

Other Comments

    Comments: A commenter posed a series of questions and concerns 
about how to serve eligible VR consumers who might be contemplating 
subminimum wage employment if there is a lag time or lack of supported 
employment providers or customized employment and the consequences to 
consumers and families, as well as DSUs, if an individual chooses to 
opt out of the vocational rehabilitation process.
    Other commenters asked whether the employment goal specified in the 
individualized plan for employment needs to be consistent with 
competitive integrated employment when considering the individual's 
strengths, resources, priorities, concerns, abilities, capabilities, 
interests and informed choice. Also, they asked what the expectations 
are around the determination of ineligibility, including how many work 
experiences must be provided and how long to pursue supported 
employment after the 24-month period or customized employment when 
resources for long-term supports are not available. Finally, commenters 
asked how to consider an individual's geographic area when providing 
referrals to Federal and State programs and other resources that offer 
employment-related services and supports designed to enable the 
individual to explore, discover, experience, and attain competitive 
integrated employment.

[[Page 55720]]

    Discussion: We understand that commenters have concerns and 
questions about the responsibilities of DSUs in this section. Limited 
resources and available providers of services, including providers of 
long-term supports, provide a challenge for DSUs as they work to locate 
services that will assist individuals with disabilities in achieving 
competitive integrated employment or supported employment. Without 
sufficient service providers or resources, a youth may choose to opt 
out of the VR process entirely, precluding him or her from achieving 
even subminimum wage employment given the limitations imposed by 
section 511 of the Act and final part 397. In the event a youth opts 
out of the vocational rehabilitation process because of a lack of 
resources in the community, there would be no consequences for the DSU 
under this part.
    The specified employment goal must be consistent with the general 
goal of competitive integrated employment when considering the 
individual's strengths, resources, priorities, concerns, abilities, 
capabilities, interests, and informed choice in accordance with section 
102(b)(4) of the Act, as amended by WIOA, and final 34 CFR 361.46(a). 
The answers to the other questions posed by the commenter are dependent 
upon circumstances and require the judgment of the DSU and the 
vocational rehabilitation counselor in consideration of the consumer's 
choice and needs.
    Changes: None.

Responsibilities of a Local Educational Agency to Youth With 
Disabilities Who Are Known To Be Seeking Subminimum Wage Employment 
(Sec.  397.30)

    Comments: Commenters recommended several changes to proposed Sec.  
397.30 regarding the responsibilities of a local educational agency to 
youth with disabilities seeking subminimum wage employment. Several 
commenters recommended that we require the local educational agency to 
retain copies of documentation that a youth has completed transition 
services and to make this documentation available for review by the CAP 
or a protection and advocacy system. A few commenters also recommended 
that the phrase ``who are known to be seeking subminimum wage 
employment'' or, alternatively, ``who are known to be'' be deleted from 
the title of proposed Sec.  397.30, presumably to include all youth 
with disabilities under the responsibilities of the local educational 
agency in this part, not just those seeking subminimum wage employment. 
Commenters also recommended that the language indicating that a local 
educational agency may provide a youth with a disability documentation 
of transitions services received under the IDEA be changed to indicate 
that this is not optional, but a requirement. Finally, one commenter 
offered additional language that a local educational agency is 
responsible for referring youth with disabilities considering 
subminimum wage employment as a transition outcome to the designated 
State unit in order to complete the requirements under proposed Sec.  
397.20.
    Discussion: We appreciate all of the comments and suggestions on 
this section. While the suggestion to require local educational 
agencies to retain copies of documentation that a youth has completed 
transition services is unnecessary given the requirements of 2 CFR 
200.333, we understand the concerns expressed. After much 
consideration, the Secretary has revised final Sec.  397.30 to require 
the educational agency to retain a copy of all documentation provided 
to the DSU in accordance with 2 CFR 200.333. This requirement in final 
Sec.  397.30(d) should pose no additional burden to the local 
educational agencies because the agencies are already subject to 
Federal record retention requirements. Final Sec.  397.30(d) is 
consistent with a similar provision in final Sec.  397.10(c), thereby 
ensuring consistency between the DSU and local educational agencies for 
purposes of the documentation process. Similarly, the Secretary has 
revised final Sec.  397.30(a) to state that the documentation 
transmitted to the DSU must comply with the confidentiality 
requirements of FERPA and the IDEA. Additionally, final Sec.  397.30 is 
revised to establish minimum information content requirements for the 
documentation to be provided to the DSU upon completion of the 
transition services under the IDEA or the youth's refusal to 
participate in those activities. In addition, the Secretary has also 
added a new paragraph in final Sec.  397.30 to require a time frame for 
the transmittal of the documentation to the DSU--of no more than 30 
calendar days after completion of the transition service, or no more 
than 60 calendar days after completion of the transition service if 
additional time is needed due to extenuating circumstances, or within 5 
calendar days of the youth refusal to participate. This gives the DSU 
the time necessary to transmit the documentation to the youth within 
the time required by final Sec.  397.10(c).
    In addition, final Sec.  397.30(c)(2) requires educational 
personnel, when transmitting documentation of the last service or 
activity completed by the youth to the DSU, to provide a coversheet 
that itemizes all documentation transmitted to the DSU regarding that 
youth. In so doing, the DSU will have a checklist to ensure receipt of 
each documentation, thereby ensuring the youth obtains all necessary 
documentation. These additional provisions are necessary to ensure 
consistency between the DSU and the local educational agencies in the 
documentation process. All of these changes are consistent with those 
made in final Sec.  397.10.
    As previously discussed in other sections of this part, the CAP and 
protection and advocacy systems already have access to records in 
accordance with their governing statutes and regulations and section 
511 of the Act does not expand this access.
    We disagree with the recommendation to remove the phrase ``who are 
known to be seeking subminimum wage employment'' or, alternatively, 
``who are known to be'' from the title in final Sec.  397.30. The 
provisions relate directly to youth who are contemplating or seeking 
subminimum wage employment, and local educational agencies have 
knowledge of these individuals in meeting the IDEA requirements for 
transition services in the individualized education program in 20 
U.S.C. 1414(d)(1)(A)(i)(VIII)(aa)-(bb).
    In considering the commenter who recommended making it mandatory 
for the local educational agency to provide documentation of the 
completion of required activities to the student, upon further review, 
the Department has determined that providing documentation of completed 
activities by the local educational agency directly to a youth with a 
disability seeking subminimum wage employment is not mandatory, and we 
are removing this language in the final regulation to be more 
consistent with the statute and final Sec.  397.10. The documentation 
must be provided by the local education agency to the DSU in accordance 
with section 511(d)(2)(ii) and (iii).
    The local educational agency, in accordance with the requirements 
in section 511(d)(2) and the documentation process developed by the DSU 
in consultation with the State educational agency, must provide 
documentation to the DSU. The DSU is then responsible under section 
511(d)(2)(A)(iii) to provide this documentation to the student with a 
disability. Final Sec. Sec.  397.10 and 397.30 make this requirement 
clear and ensure

[[Page 55721]]

consistency with specific statutory requirements.
    While we agree that it is in the best interest of a student with a 
disability considering subminimum wage employment to be referred by a 
local educational agency to the DSU in order to complete the 
requirements under final Sec.  397.20, we believe that this is best 
left to the DSU and the State educational agency to negotiate when 
developing the interagency agreement required by 34 CFR 361.22. 
Nevertheless, we believe that this practice represents the type of 
coordination and cooperation that should exist between DSUs and local 
educational agencies and enables collaboration with the student with a 
disability to provide a complete program of services that may result in 
an employment outcome in competitive integrated employment. See a more 
detailed discussion of this issue earlier in this preamble. Regardless, 
once the DSU receives documentation of completed transition activities 
from the local educational agency, then the individual will become 
known to the DSU, and thus ``referred.''
    Changes: We have revised final Sec.  397.30 in several ways. We 
have revised final Sec.  397.30(a) by deleting the language stating 
that a local educational agency may provide documentation to a youth of 
the completion of actions described in Sec.  397.20(a) and inserting in 
its place language that the local educational agency must provide the 
DSU with such documentation in accordance with section 511(d)(2). We 
also stated that the documentation must be transmitted in a manner that 
complies with the confidentiality requirements of FERPA and the IDEA. 
We added final Sec.  397.30(b), which establishes minimum content 
requirements for the documentation that must be transmitted by the 
local educational agency to the DSU. We added final Sec.  397.30(c), 
which establishes the time frame under which a local educational agency 
must provide the DSU with required documentation and requires the local 
educational agency to retain a copy of all documentation provided to 
the DSU under this part. Final Sec.  397.30(c)(2) requires educational 
personnel to transmit a coversheet to the DSU that itemizes all 
documentation provided to the DSU regarding the youth. This coversheet 
is to be provided when the educational personnel transmits 
documentation of the last activity completed by the youth. Lastly, we 
added final Sec.  397.30(d), which establishes the timeline in which 
documentation must be transmitted by the educational agency to the DSU.

Contracting Prohibition on Educational Agencies (Sec.  397.31)

    Comments: A few commenters supported proposed Sec.  397.31. A few 
commenters also suggested that the Department of Labor has the 
responsibility to oversee the DSUs and State educational agencies to 
ensure that subminimum wage employment is not being used 
inappropriately.
    Most commenters expressed concern that the proposed regulation was 
being interpreted by educational agencies and DSUs to mean that an 
entity that holds a section 14(c) certificate is automatically 
prohibited from providing any service paid for by local and State 
educational agencies and that this was not the intent of section 
511(b)(2) of the Act. The commenters requested that we clarify that 
State and local educational agencies may contract with entities holding 
section 14(c) certificates such as community rehabilitation programs 
for other purposes, including transition and pre-employment transition 
services that are beneficial to students with disabilities and 
supported by parents of these individuals. One commenter asked whether 
proposed Sec.  397.31 eliminates the ability of local educational 
agencies to contract with holders of section 14(c) certificates for the 
provision of internships and work-based tryouts, among other services.
    One commenter mentioned that in rural States or areas, the 
availability of services may be limited to providers who hold special 
wage certificates, thus provisions in part 397 should not preclude 
students from accessing the expertise section 14(c) certificate holders 
have in assisting people into competitive integrated employment.
    Additionally, a commenter strongly emphasized the desire to sustain 
a wide range of quality rehabilitation services for youth with 
disabilities and believed that restricting the legitimate engagement of 
State educational agencies with section 14(c) certificate holders would 
result in a reduction of service availability, and curtail learning 
opportunities and services available to youth with disabilities.
    A commenter asked whether schools may contract with providers that 
offer subminimum wage and minimum wage services when the only service 
being contracted for would be opportunities paid at minimum wage.
    A few commenters suggested that the regulatory language as proposed 
should not be modified to suggest that some types of contracts between 
an educational agency and an entity using section 14(c) certificates 
are permissible. A few others expressed support for the regulation but 
suggested that the language should clearly indicate that States cannot 
engage at all in any contracts for any vocational rehabilitation 
services with agencies that pay subminimum wages.
    One commenter emphasized that the types of jobs students with 
disabilities are introduced to during high school correlate to the 
types of jobs they will obtain following graduation. They therefore 
supported proposed Sec.  397.31, which reduces students' exposure to 
subminimum wage employment and increases students' opportunities for 
obtaining competitive integrated employment. Similarly, another 
commenter stated that limiting the opportunity for inadvertent slotting 
into subminimum wage employment is a step in the right direction for 
students with disabilities toward achieving competitive integrated 
employment. One commenter, citing research predicting post-school 
employment, suggested that all work-related activities to prepare 
individuals with disabilities for jobs and careers should happen in 
realistic integrated environments, not in segregated workplaces or 
where an individual is paid a subminimum wage.
    A few commenters suggested that the formal interagency agreement 
between the DSU and the State educational agency in proposed 34 CFR 
361.22 prohibit contracts or arrangements with, or referrals to, 
programs in which youth with disabilities are employed at subminimum 
wages. Commenters also recommended inserting the requirement for 
referrals in proposed Sec.  397.31.
    Other commenters suggested inserting the word ``sub-contract'' 
between ``contract'' and ``other arrangements'' to align proposed Sec.  
397.31 with the language in section 511(a) of the Act regarding 
entities, including contractors and subcontractors of entities. 
Additionally, many of these commenters also requested that the 
prohibition be extended to local and State educational agencies that 
operate a program where a youth with a disability is engaged in 
subminimum wage employment. A few commenters were unclear about the 
term ``other arrangement'' and interpreted this as not specifically 
prohibiting referrals to programs employing youth with disabilities at 
subminimum wages.
    A number of commenters requested either that the Department issue 
guidance to local and State educational agencies clarifying that the 
contracting prohibitions only apply to contracts for the purposes of 
operating a program under which a youth with disabilities is

[[Page 55722]]

employed at subminimum wage. In the alternative, the commenters 
suggested that the Department require State educational agencies to 
issue clear policy directives to local educational agencies regarding 
the prohibition on State and local educational agencies contracting 
with section 14(c) certificate holders in order to pay individuals 
subminimum wages. In addition, commenters asked that the Department add 
additional language regarding the responsibilities of State educational 
agencies to enforce this provision.
    Discussion: We appreciate the support for proposed Sec.  397.31. We 
disagree with the recommendation that the Department of Labor should 
have oversight responsibility for the DSUs and the State educational 
agencies to ensure that subminimum wage employment is not being used 
inappropriately. Rather, both the Departments of Education and Labor 
have responsibilities for oversight under section 511. Specifically, 
the Department has sole responsibility for overseeing all requirements 
under section 511 and final part 397 that relate to requirements that 
fall under its purview, such as the documentation process and the 
prohibition against a State or local educational agency entering into a 
contract with an entity holding a special wage certificate for the 
purpose of operating a program in which a youth is compensated for work 
at subminimum wage. The Department of Labor, on the other hand, has 
sole responsibility for overseeing requirements that fall under its 
purview, such as those related to entities holding special wage 
certificates paying individuals with disabilities subminimum wages 
without the requirements of section 511 of the Act and final part 397 
being met. There is no statutory authority for the Department to compel 
the Department of Labor to oversee entities, such as the DSUs and 
educational agencies, that are under the Department's purview.
    We appreciate the significance of the contracting prohibition in 
section 511(b)(2) of the Act and the comments received in response to 
proposed Sec.  397.31 seeking clarification and making recommendations. 
We agree with the substantial number of commenters that this section 
does not preclude State and local educational agencies from contracting 
with entities holding section 14(c) certificates, such as community 
rehabilitation programs, for purposes other than operating a program 
for youth under which work is compensated at a subminimum wage. In 
other words, nothing in section 511(b)(2) of the Act or final Sec.  
397.31 precludes a State or local educational agency from contracting 
with an entity, even if that entity holds a special wage certificate 
under section 14(c) of the FLSA, for another purpose, including the 
provision of transition and pre-employment transition services that are 
beneficial to students with disabilities, so long as they are not paid 
subminimum wage if compensation is provided. Pre-employment transition 
services under final 34 CFR 361.48(a) and assessment services provided 
to vocational rehabilitation consumers must be provided in integrated 
settings to the maximum extent possible. Further, nothing in section 
511(b)(2) of the Act or final Sec.  397.31 prohibits a State or local 
educational agency from contracting with an entity holding a special 
wage certificate for the purpose of operating a program in which the 
youth is paid at or above minimum wage. A State or local educational 
agency, prior to entering into such a contract, must ensure that the 
youth will be paid at least minimum wage. Only in doing this can the 
local or State educational agency ensure its compliance with section 
511(b)(2) and final Sec.  397.31. It is not necessary to revise final 
Sec.  397.31 because the regulation mirrors the statute and states that 
the prohibition is against contracting for ``the purpose'' of operating 
a program for youth under which work is compensated at a subminimum 
wage.
    The Department also agrees with commenters who regard the 
contracting prohibition as a step toward limiting the progression of 
students and transition-age youth into subminimum wage employment, 
since it seeks to limit the exposure of these individuals to settings 
that pay subminimum wages. Final Sec.  397.31 raises expectations for 
both youth with disabilities and their families, and redirects them 
toward experiences leading to competitive integrated employment in the 
community.
    While we understand the commenters' desire to align the language in 
final Sec.  397.31 with section 511(a) of the Act, which references 
entities holding special wage certificates as well as their contractors 
and subcontractors, we disagree that it is necessary to specifically 
mention ``subcontractors'' in these final regulations. Final Sec.  
397.31 prohibits the State or local educational agency from entering 
into a contract or other arrangement with an ``entity, as defined in 
Sec.  397.5(d)'' for the purpose of operating a program in which the 
youth is engaged in work compensated at a subminimum wage. Final Sec.  
397.5(d) defines ``entity'' as an employer, or a contractor or 
subcontractor of that employer, that holds a special wage certificate 
described in section 14(c) of the FLSA. Therefore, contractors and 
subcontractors of the employer holding the special wage certificate are 
already included in that definition, making specific reference to 
contractors and subcontractors unnecessary. The reference to ``other 
arrangements'' in both section 511(b)(2) and final Sec.  397.31 refers 
to any other type of agreement (other than a contract), such as a 
memorandum of understanding or subcontract, through which the State or 
local educational agency makes arrangements with entities operating 
programs in which youth with disabilities are paid subminimum wages 
under section 14(c) of the FLSA. The term allows for a broad 
interpretation of the relationships that might exist between a local or 
State educational agency and an entity, as well as the types of 
agreements they may enter into to establish those relationships, 
including sub-contracts. For purposes of the requirements and 
limitations in final part 397 (including the contracting prohibition in 
final Sec.  397.31), a local or State educational agency that holds a 
section 14(c) certificate to operate a program in which a youth with a 
disability is engaged in work compensated at a subminimum wage is 
treated in the same manner as any other entity holding a special wage 
certificate under section 14(c) of the FLSA.
    We agree that the interagency agreement between the DSU and State 
educational agency, as described in 34 CFR 361.22, should include 
reference to the prohibition in final Sec.  397.31. Therefore, 34 CFR 
361.22(b)(6), both proposed and final, requires the interagency 
agreement to include an assurance that neither the State or local 
educational agency will enter into a contract or other arrangement for 
the purpose of operating a program in which youth with disabilities are 
engaged in work compensated at a subminimum wage. Thus, final 34 CFR 
361.22(b)(6) ensures consistency between the interagency agreement 
required under that part and the requirements of final Sec.  397.31.
    The Secretary disagrees with the recommendation to revise final 
Sec.  397.31 to prohibit local or State educational agencies from 
making referrals to entities holding special wage certificates. As 
discussed previously, as well as in detail in the preamble to final 34 
CFR part 361, the Act does not prohibit services such as assessments, 
pre-employment transition services, and other services from being 
provided by

[[Page 55723]]

entities holding special wage certificates under section 14(c) of the 
FLSA. However, the Act requires that each of these services be 
provided, to the maximum extent possible, in integrated settings. We 
wish to point out that entities holding special wage certificates under 
section 14(c) of the FLSA, also include businesses, in addition to 
community rehabilitation programs, that operate in integrated settings 
in the community. The focus of the prohibition in final Sec.  397.31 is 
the payment of subminimum wages to youth with disabilities-not the 
setting in which the work is performed. Therefore, there is nothing in 
the Act to prohibit a State or local educational agency from making a 
referral to such entity, so long as the purpose of the referral is not 
for the payment of subminimum wages to the youth with a disability.
    With regard to the request that final Sec.  397.31 be revised to 
specify that the State educational agency is responsible for enforcing 
final Sec.  397.31, the Secretary disagrees that such change is 
necessary. First, the Department will be enforcing this provision 
through its regular monitoring activities. Second, the prohibition 
applies to both the State and local educational agencies; therefore, it 
would not be appropriate for the State educational agency to enforce a 
requirement against itself. As stated above, the Department intends to 
issue operating guidance to the States regarding the implementation of 
the requirements of final part 397, including the prohibition contained 
in final Sec.  397.31.
    Changes: None.

Responsibilities of a DSU for Individuals Regardless of Age in 
Subminimum Wage Employment (Sec.  397.40)

Counseling, Information and Referral Services

    Comments: Many commenters expressed support for the provision of 
services by DSUs described in proposed Sec.  397.40 for individuals 
employed at a subminimum wage, regardless of age. Many were encouraged 
by the requirement for ongoing information and referral, as well as, 
career counseling and the potential benefit that it could bring to 
consumers in the future. Others suggested that proposed Sec.  397.40 
require information be provided to family members and/or caregivers as 
appropriate, in addition to the individual. Still others asked that 
this section require the provision of benefits counseling so that 
individuals would understand the impact and benefits, rather than the 
perceived barriers, of moving out of subminimum wage employment into 
competitive integrated employment. A few indicated that it is 
imperative that any career counseling provide participants with 
information on Federal and State programs that continue healthcare and 
income supports to individuals with disabilities who engage in the 
workforce.
    A few commenters expressed concerns related to the requirement to 
provide information and career counseling-related services to adults 
working in subminimum wage jobs, suggesting that the requirement places 
pressure on DSU staff and fiscal resources due to the sheer numbers of 
these individuals, and could impact the ability to serve all eligible 
individuals in the State through the VR program without implementing an 
order of selection.
    Another commenter asked whether the services described in proposed 
Sec.  397.40 were for all individuals or just those individuals that 
have been served by the DSU.
    Regarding required intervals for providing information and referral 
and career counseling, many commenters provided requests for 
clarification and recommendations related to the semi-annual and annual 
intervals for providing these services to individuals in subminimum 
wage employment. Several recommended referencing and reconciling the 
requirements under proposed Sec.  397.40 with those under proposed 34 
CFR 361.55 related to semi-annual and annual reviews for individuals in 
extended employment or subminimum wage employment.
    A few commenters sought clarification regarding the individuals to 
be served and whether there were differences in the requirements for 
youth and other individuals with disabilities. One commenter asked 
whether entities were to refer every subminimum wage employee for 
career counseling by January of 2017 or whether this section only 
applies to individuals who become employed in subminimum wage after the 
effective date of section 511, July 22, 2016, citing that, either way, 
the workload would be significant.
    Another commenter questioned why these services were available 
every six months for the first year of employment only, suggesting that 
the more often individuals received career counseling and information 
and referral services, the more likely that the individual would become 
comfortable with the idea of future competitive integrated employment.
    Discussion: We appreciate the support for, and extensive comments 
and recommendations received in response to, proposed Sec.  397.40. 
Section 511 of the Act does not require that the DSU provide the 
information to the family or caregivers, as well as to the individual 
with a disability. As a recipient of services from a DSU, the 
individual with a disability would be protected by the provisions in 
final 34 CFR 361.38, governing the protection, use, and release of 
personal information, and other Federal and State privacy laws and 
regulations. For this reason, we lack the statutory authority to make 
the recommended change in final Sec.  397.40. However, if an individual 
chooses to include family members and caregivers in such activities, 
nothing would prohibit DSUs or their contractors from doing so with the 
informed consent of the individual. On the other hand, if a parent, 
other family member, or another individual has power of attorney for or 
guardianship over, or has any other legal authority to act as the 
individual's representative, the DSU could provide the information to 
that representative in accordance with the laws governing that 
representation.
    We agree with commenters that income-based benefits counseling 
would be beneficial to individuals with disabilities who are employed 
at subminimum wage. There is no prohibition in section 511 against 
providing benefits counseling as a part of information and referral or 
career counseling. The Secretary believes that information provided as 
part of benefits counseling could enable individuals with disabilities 
to have the information they need to understand the full opportunities 
provided by competitive integrated employment. For this reason, the 
Secretary has revised final Sec.  397.40(a) by adding paragraph (4) to 
specify that career counseling and information and referral services 
may include benefits counseling, particularly with regard to the 
interplay between earned income and income-based financial, medical, 
and other benefits.
    We understand the concerns and challenges with meeting the 
requirements under this section due to the potentially large numbers of 
individuals to be served on an annual or semi-annual basis. DSUs may 
contract these services to help mitigate the demands upon the DSU staff 
and resources. We also recognize these additional activities could 
impact a State's needs and decisions regarding order of selection. 
However, section 511 is explicit about the activities that must be 
performed by the DSU with regard to individuals with disabilities 
employed

[[Page 55724]]

at subminimum wage. Therefore, there is no statutory basis to limit the 
DSU's responsibilities under final Sec.  397.40, which is consistent 
with section 511(c) of the Act.
    To clarify, the services under this section are for any individual 
in subminimum wage employment, not just individuals who have been 
applicants or recipients of services under the VR program or who have 
been served by the DSU under another program administered by that 
agency.
    With respect to career counseling, and whether requirements for 
information and referral and career counseling differ between youth and 
other individuals with disabilities, all are required. The timing for 
the semi-annual provision of career counseling and information and 
referral services applies only for an individual with a disability who 
begins employment at subminimum wage on or after the effective date of 
section 511 (July 22, 2016). This means, for example, that an 
individual who begins employment at subminimum wage on July 30, 2016, 
must receive the first provision of the semi-annual career counselling 
and information and referral services no later than January 30, 2017, 
and the second provision of the semi-annual services no later than July 
30, 2017, and the annual set of services no later than July 30, of each 
year thereafter for as long as the individual maintains subminimum wage 
employment. For individuals who were already employed at subminimum 
wage when section 511 takes effect (July 22, 2016), the individual must 
receive career counseling and information and referral services at 
least once a year. Neither the statute nor these final regulations 
dictate when those annual reviews must be done. This is a matter for 
the entity holding the special wage certificate and/or the DSU to 
determine in terms of what works best within their operations. However, 
the Secretary clarifies here that all individuals employed at 
subminimum wage must have received the requisite first annual career 
counseling and information and referral services no later than July 22, 
2017, and annually thereafter by that date. Consistent with the Act, 
all individuals employed at subminimum wage, regardless of date of 
employment, must receive career counseling by at least one year after 
the effective date of section 511.
    We agree that frequent career counseling and guidance activities 
may assist individuals in subminimum wage employment to consider 
competitive integrated employment. Although the Act requires DSUs to 
provide these career counseling and information and referral services 
on a semi-annual basis for the first year of employment and annually 
thereafter, nothing in the Act prohibits a DSU from providing these 
services on a more frequent basis. The specific requirements for youth, 
and the semi-annual and annual counseling and information and referral 
requirements, along with the documentation requirements, as required by 
the statute become effective on July 22, 2016. The Secretary has 
revised final Sec.  397.40(c) to make these requirements related to the 
required intervals more clear.
    Changes: In final Sec.  397.40(a), we added paragraph (4) to 
specify that the career counseling and information and referral 
services a DSU must provide may include benefits counseling, 
particularly with regard to the interplay between earned income and 
income-based financial, medical, and other benefits. We made revisions 
to final Sec.  397.40(c) to provide that the required intervals for 
providing services under final Sec. Sec.  397.40(a) and (b) will be 
calculated based upon the date the individual becomes known to the DSU. 
We revised final Sec.  397.40(c) to clarify when the required services 
are due for both individuals hired at subminimum wage on or after the 
effective date of the statute and also for individuals hired at 
subminimum wage prior to that date. As part of the revisions to final 
Sec.  397.40(c), we specified in paragraphs (c)(3)(i) and (ii) that 
DSUs are responsible for providing the required services only when that 
individual becomes ``known'' to the DSU, and we specified what it means 
to become ``known.''

Identification and Referral of Individuals

    Comments: Several commenters requested that the phrase ``who are 
known'' be clarified, defined, or replaced with more specific language. 
A few thought that the language in proposed Sec.  397.40(a)(2) was 
vague, limiting, or misleading and could be interpreted to mean it 
applies only to individuals who have been through the vocational 
rehabilitation process or who have been referred by the CAP.
    A few commenters suggested that language be added mandating 
interagency agreements with the State educational agency, the State 
intellectual and developmental disabilities agency, and any other 
appropriate agency serving individuals who may be in subminimum wage 
employment to identify and refer individuals considering, or currently 
in, subminimum wage employment to the DSU. This suggestion aligned with 
other commenters who advocated a more expansive and proactive strategy 
by the DSU to identify all individuals who are contemplating or are 
currently in subminimum wage, which one commenter described as similar 
to ``child find'' under the IDEA. One commenter urged that a subsection 
be added to final 34 CFR 361.29(a)(1)(i) and (b) requiring the 
comprehensive statewide assessment under the VR program include 
information about individuals who are working in segregated and 
subminimum wage jobs for employers using section 14(c) certificates.
    One commenter asked whether the DSU was required to track an 
individual working in a sheltered workshop setting who contacted the 
agency for independent living services.
    Another commenter asked whether proposed Sec.  397.40 establishes 
an affirmative requirement or expectation that DSUs or their 
contractors seek out individuals in subminimum wage employment, noting 
the potential issue of confidentiality between the individual and the 
employer.
    A commenter suggested adding language that would require that any 
entity holding a section 14(c) certificate failing to refer an 
individual to the DSU have its section 14(c) certificate suspended 
until it has been documented that all employees working at subminimum 
wage have been referred to the DSU.
    Some commenters suggested that coordination and guidance from the 
Federal Departments on the identification issues would be helpful.
    Discussion: The use of the phrase ``who are known'' in several 
sections of these regulations highlights that the DSU must be aware 
that an individual with a disability is employed at the subminimum wage 
level in order to provide the services required by section 511 of the 
Act and final part 397, including the services and activities required 
by final Sec.  397.40. Such awareness may be made through the self-
identification by the individual with a disability, the vocational 
rehabilitation process, cooperative or coordinated activities with 
other agencies, or referral to the DSU, including referral by employing 
entities. Otherwise, there is no mandate in section 511 of the Act for 
the DSUs to seek out or solicit these individuals. To impose such a 
requirement in these final regulations would be extremely burdensome on 
the DSUs because of the thousands of entities holding special wage 
certificates under section 14(c) of the FLSA. It would not be practical 
or reasonable to expect or require the DSU to take on the role of 
seeking out individuals with disabilities who are

[[Page 55725]]

employed at subminimum wage. Moreover, confidentiality laws and 
regulations would prohibit the automatic release of personal 
information about the individual with a disability to the DSU without 
the written consent of the individual.
    Furthermore, there is no statutory mandate for entities holding 
section 14(c) certificates to refer to the DSU employees or individuals 
with disabilities seeking to enter subminimum wage employment.
    We considered using the words ``who are referred'' instead of ``who 
are known,'' but that phrase implied an active referral process 
required by other entities, all of whom are outside of the Department's 
purview. The phrase ``who are known'' allows for any method of 
identifying individuals to the DSU and clarifies there is no mandate 
that the DSU seek out or solicit individuals with disabilities employed 
at subminimum wage. In final Sec.  397.40(a)(2), we are including 
``self-referred'' in the list detailing examples of how the DSU knows 
of an individual. The Secretary has also added a paragraph in final 
Sec.  397.40(c)(3)(ii) to clarify when an individual with a disability 
becomes ``known'' to the DSU.
    While we agree that there is benefit in identifying individuals 
with disabilities in subminimum wage employment or those potentially 
seeking such employment, through interagency agreements with other 
State agencies such as the State educational agency, the State 
intellectual and developmental disabilities agency, and any other 
appropriate agency, we cannot require other agencies to make these 
referrals because section 511 does not impose any requirements on most 
of the agencies suggested by the commenters. State and local 
educational agencies will be providing, in effect, a referral when they 
transmit documentation to the DSU demonstrating the completion of 
transition and other services by students with disabilities. As stated 
in an earlier section of this preamble, we have encouraged DSUs and 
various other State and local agencies with whom they have 
relationships for cooperation and coordination of services, to include 
provisions in their interagency agreements related to the referral of 
individuals employed at subminimum wage. We do not believe it is 
appropriate to amend these final regulations to require such provisions 
because these matters are best left to the States to determine what 
meets their unique needs and circumstances. We expect that DSUs will 
use the opportunity as they develop relationships and agreements 
through the coordination and cooperative agreements set out in final 34 
CFR 361.24 to seek cross-agency referrals.
    With regard to entities holding 14(c) certificates under the FLSA, 
all authority to impose requirements (e.g., consequences for failure to 
comply including suspension or revocation of the special wage 
certificate) rests with the Department of Labor and are beyond the 
scope of these final regulations.
    We appreciate the question from the commenter who asked whether the 
DSU is required to track an individual who is employed in a sheltered 
workshop setting at subminimum wage, and who contacted the agency for 
independent living services. While such is not specifically required by 
statute, section 511 of the Act requires the DSU to provide certain 
services and/or documentation to individuals with disabilities, 
including youth with disabilities, who are seeking (for purposes of 
youth with disabilities only) or maintaining subminimum wage employment 
(for individuals with disabilities of any age). The Secretary has 
interpreted, for purposes of final part 397, and stated throughout this 
preamble, that the DSU must provide these required services or 
documentation to any individual with a disability whom it knows is 
seeking or maintaining employment at subminimum wage, not only 
individuals who have participated in the VR program or been referred by 
the CAP. As stated above, the DSU can know of these individuals in a 
variety of ways, including through the programs it administers, such as 
the VR program or the independent living programs. Therefore, if the 
DSU knows of an individual through the independent living program and 
knows that individual is seeking or maintaining subminimum wage 
employment, the DSU must provide the services and documentation 
required by section 511 of the Act and final part 397, including the 
requirements of final Sec.  397.40.
    We address the comment that we add requirements to the 
comprehensive statewide assessment to include information about 
individuals who are working in segregated and subminimum wage jobs for 
employers using section 14(c) certificates in the Analysis of Comments 
and Changes section for 34 CFR part 361, under the discussion of 34 CFR 
361.29, earlier in this preamble.
    It is anticipated that joint guidance from the Departments of 
Education and Labor is forthcoming and will address, among other 
aspects of WIOA, the limitations on use of subminimum wage if the 
required services and documentation have not been provided. In the 
meantime, the expectation is that, at every opportunity, DSUs will 
identify individuals with disabilities seeking employment or who are 
currently employed at a subminimum wage.
    Changes: We revised final Sec.  397.40(a)(2) to include ``self-
referral'' and added a paragraph in final Sec.  397.40(c)(3)(ii) to 
clarify when an individual with a disability becomes ``known'' to the 
DSU.

Financial Interest

    Comments: With regard to self-advocacy, self-determination, and 
peer mentoring training opportunities, several commenters requested 
clarification related to ``financial interest'' and what entities may 
not provide these services. One commenter proposed language that 
specifically includes the entity that employs the individual at 
subminimum wages among those entities deemed to have a financial 
interest for the purpose of this section. Some commenters asked that we 
clarify that an entity providing subminimum wage employment to an 
individual may not provide self-advocacy, self-determination, and peer 
mentoring training opportunities to the individual.
    A few commenters recommended that the Department further clarify 
that an entity that holds a section 14(c) certificate, but does not 
have a financial interest in the outcome of the individual, may provide 
the services required under section 511(c)(1). Some of those commenters 
expressed concern that an overly restrictive interpretation would have 
a detrimental impact on rural areas with few providers.
    Several commenters regarded section 14(c) certificate holders as 
clearly having a ``financial interest'' and therefore, should be 
precluded from providing services required under this section. Although 
these entities may not have an immediate financial interest in the 
employment outcome of the individual, some commenters viewed them as 
having a definite interest in encouraging the individual to apply for 
vocational rehabilitation services in anticipation of being selected at 
a later time to provide employment or supported employment services.
    Several commenters suggested that if the DSU contracts with public 
and private service providers to provide the services required for 
individuals who are currently in subminimum wage employment, rather 
than provide the services directly, language be added to proposed Sec.  
397.40 in the final regulations that explicitly and specifically 
prohibits section 14(c) certificate holders from providing these

[[Page 55726]]

services, to avoid what the commenters perceived as a clear conflict of 
interest for these entities. In this scenario, commenters emphasized 
that employers would have a financial interest in the outcome of these 
services and would not be positioned to provide adequate or objective 
career counseling.
    Discussion: With regard to self-advocacy, self-determination, and 
peer mentoring training opportunities, several commenters requested 
clarification of ``financial interest'' and what entities may not 
provide these services. Based upon the comments and our assessment, we 
have determined that all entities holding special wage certificates 
under section 14(c), irrespective of whether any employ the individual 
receiving the services, have a financial interest or a potential future 
financial interest in providing these services. Therefore, these 
entities may not be used to provide these services. The Secretary 
believes that many organizations and providers are available and are 
already providing self-advocacy, self-determination, and peer mentoring 
training services, such as the centers for independent living (CILs) in 
each State. Although some commenters have expressed concern about the 
potentially detrimental impact on rural areas with few providers, the 
Secretary believes that virtual and electronic technology allows access 
to these services even if the provider is not physically located in a 
particular rural area.
    We agree with the several commenters who suggested that if the DSU 
contracts with public and private service providers to provide the 
services required for individuals who are currently in subminimum wage 
employment, rather than provide the services directly itself, then the 
services may be provided, so long as the service providers are not 
section 14(c) certificate holders. We have added language in final 
Sec.  397.40, therefore, that prohibits section 14(c) certificate 
holders from providing these services.
    Changes: We inserted language in final Sec.  397.40(e) stating that 
a contractor providing the services on behalf of the DSU may not be an 
entity holding a special wage certificate under section 14(c) of the 
FLSA as defined in final Sec.  397.5(d).

Time Frames and Documentation Requirements

    Comments: One commenter recommended that the Department set a time 
frame for providing documentation of the completion of activities under 
proposed Sec.  397.40 to individuals with disabilities in subminimum 
wage employment, suggesting that this would circumvent resource-
intensive disputes and inconsistencies in the interpretation of 
timeliness.
    Discussion: Upon the suggestion of commenters, we include a 
specific time period for providing documentation of the completion of 
activities under final Sec.  397.40 to individuals with disabilities in 
subminimum wage employment. This time frame is consistent with that in 
Sec.  397.10 for the provision of documentation to youth with 
disabilities, thereby ensuring consistency between all provisions in 
final part 397 related to documentation. Similarly, the Secretary has 
revised final Sec.  397.40 to set minimal content requirements for the 
documentation that must be provided to the individual demonstrating 
completion of the career counseling and information and referral 
services. Again, this new regulatory text is consistent with that 
contained in final Sec.  397.10 and Sec.  397.30.
    Changes: We have included a time frame in final Sec.  397.40(d) of 
no later than 45 calendar days after completion of the required 
activities or services for the DSU to provide documentation of 
activities in this section to individuals with disabilities; however, 
where extenuating circumstances exist, the DSU can have up to 90 
calendar days after completion of the required activities or services. 
We also added final Sec.  397.40(d)(1)(ii) to provide a time frame of 
10 calendar days for DSUs to provide this documentation to an 
individual who has refused to participate in a required activity. We 
also added final Sec.  397.40(d)(2) and (3) to specify minimum content 
requirements for the documentation DSUs must provide to individuals, 
including individuals who refuse to participate in a required activity. 
We added final Sec.  397.40(d)(4) requiring DSUs to retain a copy of 
all documentation required by part 397, in a manner consistent with 2 
CFR 200.333.

Clarifications

    Comments: One commenter asked for an explanation as to why the DSU 
is only required to provide individuals in subminimum wage employment 
with self-advocacy, self-determination, and peer mentoring training 
opportunities, all of which are fundamental to achieving independence 
and self-sufficiency, if the employer holding a section 14(c) 
certificate has fifteen or fewer employees.
    Clarification was sought by a few commenters regarding how proposed 
part 397 would impact clients of the DSU who are being paid subminimum 
wages in a community rehabilitation program as part of their training 
under an individualized plan for employment. Additionally, a commenter 
asked if the DSU may contract with businesses to perform a service in a 
workshop, for a limited time, as part of the individual's 
individualized plan for employment.
    Discussion: The requirement that the DSU must provide individuals 
in subminimum wage employment with self-advocacy, self-determination, 
and peer mentoring training opportunities only when the employer 
holding a section 14(c) certificate has fifteen or fewer employees is 
consistent with the requirement of section 511(c)(3) of the Act. 
Employers holding a section 14(c) certificate that have more than 
fifteen employees are responsible for ensuring that individuals in 
subminimum wage employment are provided self-advocacy, self-
determination, and peer mentoring training opportunities in accordance 
with section 511(c)(1)(B) of the Act. This provision removes the burden 
that would otherwise be experienced by small businesses as a result of 
these requirements by having the DSU provide the services instead.
    The Secretary does not believe that final part 397 would impact 
clients of the DSU who receive a training stipend that is below minimum 
wage for work performed in a community rehabilitation program as part 
of their training under an individualized plan for employment. That 
being said, we encourage that all training and assessment take place in 
an integrated setting to the maximum extent possible to reinforce the 
expectation under the Act that all individuals with disabilities, given 
the proper training and supports, can achieve competitive integrated 
employment. However, neither section 511 of the Act nor final part 397 
prohibits a DSU from entering into a contract with a business in which 
clients in training receive a training stipend that is below minimum 
wage. Unlike the prohibition against these contracts for State and 
local educational agencies, such a prohibition for DSUs would go beyond 
the scope of section 511 of the Act and these final regulations. We 
wish to emphasize, however, that section 511(b)(2) of the Act and final 
Sec.  397.31 address contracting prohibitions for State and local 
educational agencies entering into contracts with entities holding 
section 14(c) certificates for the purpose of operating a program for 
youth in which work is compensated at a subminimum wage. In this case, 
work associated with a work experience, work adjustment training and 
extended employment, or other activities for which work is

[[Page 55727]]

compensated must be at or above the minimum wage.
    Changes: None.

Review of Documentation (Sec.  397.50)

    Comments: One commenter on proposed Sec.  397.50 recommended that 
we clarify the review process and the necessary documentation required.
    Most commenters responding to proposed Sec.  397.50 regarding the 
role of the DSU in the review of individual documentation maintained by 
entities, as defined in proposed Sec.  397.5(d) under this part, stated 
that the proposed regulation did not include sufficient language to 
provide for any enforcement mechanism, should the DSU discover that 
documentation does not exist or is not sufficient. Some commenters 
asked that an enforcement mechanism be included, reflecting, at a 
minimum, the requirement that the DSU report documentation deficiencies 
to the Department of Labor for action, or to the CAP. Some commenters 
suggested that, although the proposed regulation establishes a much 
needed opportunity to review individual documentation, it does not 
indicate what actions, including authorized corrective actions or 
revocation of section 14(c) certificates, may be taken if deficiencies 
are identified by the DSU or its contractor.
    Several commenters recommended that we remove the proposed language 
that allows a contractor working for the DSU to conduct documentation 
reviews of section 14(c) certificate holders, viewing this as 
conflicting with section 511. They suggested that if the final 
regulations continue to allow contractors to conduct documentation 
reviews, that additional language be added that specifies parameters 
for such contractors, including a prohibition of the use of 
organizations that are section 14(c) certificate holders to conduct 
such reviews.
    Several commenters requested that specified timelines for the 
review of documentation be added to enhance enforcement, and that 
language be added to specify that the CAP and protection and advocacy 
system have jurisdiction in reviewing compliance with Section 511 
requirements.
    A few commenters requested that we clarify whether the review of 
documentation by the DSU is a requirement, and if so, noted that the 
DSUs do not have the resources or expertise to conduct such reviews, 
suggesting that the reviews are best conducted by the agency 
responsible for the administration of the special wage certificate.
    Another commenter shared concerns about the record-keeping 
responsibilities and the supporting documentation for monitoring 
purposes. Other commenters had questions and concerns pertaining to 
whether the DSU can make a blanket documentation of an entity, or if 
requests to review documentation must be made on an individual basis. 
Commenters recommended that the final regulations task the Department 
of Labor with the responsibility for documentation reviews based upon 
its experience with reviewing and monitoring entities for compliance 
with section 14(c) of the FLSA.
    Discussion: We appreciate the comments regarding the need to review 
documentation of individuals who are employed at subminimum wage, 
consistent with the requirements in section 511. The commenters raise 
many important issues that necessitate clarification. As we discussed 
in an earlier section of the preamble for final part 397, neither 
section 511(e)(2)(B) of the Act nor final Sec.  397.50 requires either 
the DSU or the Department of Labor to review documentation maintained 
by entities holding special wage certificates. Rather, both section 
511(e)(2)(B) of the Act and final Sec.  397.50 subject those entities 
to a review of documentation should the DSU or the Department of Labor 
conduct such reviews. We appreciate the concerns expressed by 
commenters about the strategies, responsibilities, resources, and 
expertise required to conduct documentation reviews. However, there is 
no statutory basis to task the Department of Labor, Wage and Hour 
Division, with this exclusive responsibility even though it has more 
experience in conducting reviews of entities involving documentation of 
compliance with section 14(c) under the FLSA. As noted previously, 
section 511(e)(2)(B) of the Act and final Sec. Sec.  397.50 specify 
that both the DSU and the Department of Labor have authority to conduct 
these reviews. Therefore, to task only the Department of Labor with 
this responsibility in these final regulations would be inconsistent 
with the statute. While we understand the concerns about lack of 
resources, we disagree that the DSUs do not have sufficient expertise 
to conduct the reviews. In fact, much of the documentation to be 
reviewed would be that generated by the DSU itself and, therefore, 
would be familiar to the DSU. Moreover, we do not believe it is 
necessary to revise final Sec.  397.50 to identify the documentation to 
be reviewed during a review under this section because the 
documentation that must be reviewed is set out in these regulations in 
final Sec. Sec.  397.10, 397.20, 397.30, and 397.40. Given the intent 
of section 511 to limit the use of subminimum wage, the Secretary 
believes that DSUs, in conjunction with the Department of Labor may 
have an impact on the degree to which youth and other individuals with 
disabilities seek or maintain employment at subminimum wage through the 
documentation review process and the requirements set out elsewhere in 
this section.
    Because there is no requirement that these reviews be done, neither 
the statute nor these final regulations establish a time frame for the 
reviews. Section 511(e)(B) of the Act provides that the reviews are to 
be done ``at such a time'' as may be necessary to fulfill the intent of 
section 511. Therefore, the timing of any such reviews must be 
determined by the DSU or the Department of Labor as either deems 
necessary.
    We disagree with commenters that the DSU should report violations 
discovered during a review of documentation to the CAP. As previously 
discussed, the applicability of final part 397 to CAPs and protection 
and advocacy systems must be consistent with their responsibilities 
under their respective authorizing statutes and regulations. Monitoring 
and oversight activities are beyond the scope of the CAP's authority 
under section 112 of the Act. Therefore, we do not believe it is 
appropriate to include any specific language regarding their authority 
or jurisdiction in these final regulations.
    We also appreciate the many comments and suggested regulatory 
language submitted by a variety of commenters related to the DSU's role 
in the review of documentation. We agree that enforcement measures and 
consequences for non-compliance are important; however, section 511 of 
the Act does not include specific enforcement authority for DSUs and to 
include such measures in the final regulations would be inconsistent 
with the Act. Enforcement of section 14(c) of the Fair Labor Standards 
Act rests with the Department of Labor, Wage and Hour Division. 
Additionally, consequences for non-compliance with the requirements for 
documentation prior to hiring youth with disabilities or continuing to 
employ individuals with disabilities of any age and the retention of 
documentation records by entities under section 511 also rests with the 
Department of Labor, Wage and Hour Division. Although section 511 does 
not require DSUs to report documentation

[[Page 55728]]

deficiencies to the Department of Labor, Wage and Hour Division for 
action, the Secretary agrees with commenters that such reporting would 
be consistent with the purpose of final part 397.
    Similarly, if a parent or an individual with a disability brings an 
instance of non-compliance with the documentation or other requirements 
of section 511 to the attention of the DSU, we would encourage the DSU 
to report this to the Department of Labor, Wage and Hour Division as 
well. Therefore, the Secretary has revised final Sec.  397.50 by adding 
a new paragraph (b) to specify that DSUs should report deficiencies to 
the Department of Labor's Wage and Hour Division. The Secretary has 
intentionally used ``should'' rather than ``must'' because there is no 
requirement that the DSUs conduct reviews and, there is no mechanism 
for enforcement for failing to report deficiencies. We also want to 
emphasize that the Secretary purposely used ``should'' rather than 
``may'' to signal that the Department strongly encourages DSUs to 
report such deficiencies whenever they are found.
    We disagree with commenters that the use of a contractor working 
for the DSU to conduct documentation reviews of section 14(c) 
certificate holders is inconsistent with section 511. In fact, section 
511(e)(2)(B) refers to ``representatives working directly for'' the DSU 
or Department of Labor. If the authority to conduct reviews were 
limited to DSU or Department of labor personnel, the statute would have 
used such wording. Use of the words ``representative working directly 
for'' the DSU or Department of labor implies that it could be agency 
staff or contractors for those agencies. We agree, however, that if a 
contractor is working on behalf of the DSU to review documentation, the 
contractor may not be an entity holding a special wage certificate 
under section 14(c) of the FLSA. We believe that this is consistent 
with the intent of section 511 of the Act and, therefore, we include 
this language in final Sec.  397.50(a).
    Changes: We have revised final Sec.  397.50 by adding a new 
paragraph (b) and redesignating the proposed language as paragraph (a). 
We have inserted additional language in final Sec.  397.50(a) stating 
that the contractor may not be an entity holding a special wage 
certificate under section 14(c) of the FLSA. Final Sec.  397.50(b) 
states that DSUs should report deficiencies noted during documentation 
reviews to the Department of Labor's Wage and Hour Division.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by OMB. 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action likely to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This regulatory action is a significant regulatory action subject 
to review by OMB under section 3(f) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    We have assessed the potential costs and benefits of this 
regulatory action. The potential costs associated with the regulations 
are those resulting from statutory requirements and those we have 
determined as necessary for administering these programs effectively 
and efficiently. Elsewhere in this section under the Paperwork 
Reduction Act of 1995, we identify and explain burdens specifically 
associated with information collection requirements.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these final regulations, we have determined that 
the benefits would justify the costs.

Need for Regulatory Action

    Executive Order 12866 emphasizes that ``Federal agencies should 
promulgate only such regulations as are required by law, are necessary 
to interpret the law, or are made necessary by compelling public need, 
such as material failures of private markets to protect or improve the 
health and safety of the public, the environment, or the well-being of 
the American people.'' The Department's goal in regulating is to 
incorporate the provisions of the Act, as amended by WIOA, into the 
Department's regulations governing the VR program and Supported 
Employment program in parts 361 and 363, respectively, as well as to 
clarify, update, and improve these final regulations. This final 
regulatory action is also necessary to establish a new part 397 to 
implement specific provisions of section 511 of the Act, as added by 
WIOA, which fall under the purview of the Secretary. Section 511 of the 
Act, in general, places limitations on the use of

[[Page 55729]]

subminimum wages for individuals with disabilities.

Response to Comments on Reporting Burden Estimates VR Services Portion 
of the Unified or Combined State Plan Time Estimated for Submission

    Comments: One commenter stated that the time estimated for 
compiling the VR services portion of the Unified or Combined State plan 
is not accurate, given all the new requirements under the Act, as 
amended by WIOA, for collaboration with other entities, providing 
training and technical assistance to employers, providing pre-
employment transition services to students with disabilities, changes 
to CSPD requirements, and the new requirements in section 511 of the 
Act.
    Discussion: We appreciate the concerns expressed by the commenter 
regarding the estimated burden associated with developing and 
submitting the VR services portion of the Unified or Combined State 
plan. The estimated additional burden represents the hours needed by a 
DSU to compile and submit information as part of the VR services 
portion of the Unified or Combined State plan describing how the DSU is 
implementing new VR program requirements under WIOA, not the time the 
DSU engages in the actual implementation of the various activities 
described in the plan. Consequently, we believe the estimated burden is 
accurate.
    Changes: None.

Reports; Standards and Indicators

    The Department received numerous comments on the burden associated 
with new data collection and reporting requirements under this rule and 
the joint rule implementing the performance accountability system for 
the core programs under section 116 of WIOA. Most of these commenters 
stated that we underestimated the costs of new data collection and 
reporting requirements in the Summary of Potential Costs and Benefits 
section of the Regulatory Impact Analysis for these rules. In 
particular, commenters raised concerns about estimates of the amount of 
time needed for the collection of new data and the quarterly reporting 
of individual data on open and closed service records, as well as the 
cost of changes to State management information systems.

Data Collection

    Comments: In the NPRM, the Department estimated that it would take 
15 minutes per vocational rehabilitation counselor to collect the new 
data required under WIOA. Several commenters stated that we 
underestimated the burden for collecting new data. One commenter 
asserted that this estimate did not allow adequate time for counselors 
to collect the new data. Another commenter suggested that a more 
accurate estimate of the time required is 15 minutes per open service 
record and not per counselor. Several commenters indicated the burden 
for data collection should be based upon varying estimates for the 
total amount of minutes to collect this data, based on an individual 
service record basis, including 15, 30, 60, and 120 minutes per service 
record.
    Discussion: Upon further review, we have determined that time per 
data element provides a better estimate of the additional burden 
associated with the collection of new data required under WIOA, 
including the requirements in Sec.  361.40 of these final regulations. 
As a result of this change in methodology the estimated annual burden 
for the collection of new data elements has increased significantly 
from the estimate in the NPRM. Specifically, we now estimate the burden 
for the collection of new data elements to be reported in the 
Individual Service Report (RSA-911) at one minute per data element. 
Additional information on the calculation of this burden estimate is 
provided in the Summary of Potential Costs and Benefits section of this 
Regulatory Impact Analysis under the subheading Reports; Standards and 
Indicators.
    Changes: The estimated burden associated with the collection of new 
data in the RSA-911 Service Report discussed under the Summary of 
Potential Costs and Benefits of this final regulation (see Reports; 
Standards and Indicators) is calculated based on an average of one 
minute per data element.

Data Reporting

    Comments: In the NPRM, the Department estimated that it would take 
an additional 50 hours per year per DSU to submit the RSA-911 data file 
due to the need to report all open service record data quarterly rather 
than closed service records annually. Several commenters stated that we 
underestimated the burden related to the change in reporting for the 
RSA-911, including our estimate of the number of hours it currently 
takes to prepare the current annual submission of the RSA-911 report. 
One commenter suggested that if it currently takes an average of 50 
hours to submit the RSA-911 data file annually, it should take 200 
hours to produce the four required quarterly reports because the staff 
time required to generate and verify the data is the same as it is for 
an annual report. However, another commenter stated that it will take 
150 hours per quarter for an annual total of 600 hours to report RSA-
911 data. Still another commenter said that due to the increase in 
complexity of the RSA-911 reporting, it would be appropriate to 
recalculate the quarterly burden for submitting the RSA-911 report as 
400 hours, instead of 50 hours. One commenter claimed that its staff 
spent approximately 1,000 staff hours preparing the current annual RSA-
911 report.
    Discussion: We disagree that the hours needed to submit the RSA-911 
file of data open records on a quarterly basis will require at least 
four times as many hours as the previous annual submission of data on 
closed records. DSUs spend an extensive amount of time each year 
analyzing and revising their closed record data prior to reporting. 
However, under these regulations, DSUs are expected to report a 
quarterly ``snapshot'' of their open case data, a process that will be 
much less labor intensive for each submission. States are expected to 
maintain accurate and timely data in their case management systems. 
These data should be quickly and efficiently exported via reporting 
software to generate the RSA-911 report each quarter. However, we 
recognize that States may incur some additional burden in ensuring the 
quality of the new data to be reported and thus have increased the 
estimated quarterly RSA-911 data submission burden.
    Changes: The estimated annual burden for the submission of the RSA-
911 data file on a quarterly basis has been increased from an average 
of 100 hours (25 hours per quarter), as estimated in the NPRM, to 120 
hours (30 hours per quarter) per DSU.

Changes to State DSU Information Systems

    Comments: Several commenters stated that the Department 
underestimated the burden associated with updating and modifying agency 
case management systems. One commenter stated that its cost estimate 
for making the required changes to the agency's case management system 
to collect new data and report open service record data on a quarterly 
basis vastly exceeds the Department's estimate of $31,000. Another 
commenter noted that the burden estimates omit any mention of the costs 
to train staff and monitor data quality during implementation, and to 
build or change data collection instruments and processes that may be 
needed to collect information directly from participants post-exit. 
Three

[[Page 55730]]

commenters specifically provided cost estimates for modifying their 
information systems to collect and report the additional data required 
by WIOA of $200,000 to $500,000, $1,000,000 to $2,000,000, and 
$6,311,040. One commenter indicated there will be additional costs to 
update the agency's data collection software, which includes 
interfacing with a centralized data collection database at the State 
level, as well as several State and Federal databases. Three commenters 
indicated that DSUs will incur additional costs to modify, develop and 
maintain information technology systems to capture the required data. 
Another commenter cited costs for modifying systems to capture new or 
modified data elements and building automation to link vocational 
rehabilitation service records to Unemployment Insurance wage data for 
the reporting of employment or earnings.
    Discussion: In response to the comments regarding the burden 
associated with the reporting of data in accordance with final Sec.  
361.40 and as a result of further Departmental review, we have 
increased the burden estimate for modifying and maintaining agency 
information systems to collect and report the required new data. We 
recognize that modifications to agency case management systems 
necessitated by the redesigned RSA-911 will vary widely because 
agencies themselves range in size, the sophistication of their 
information technology systems, and how the system is supported. We are 
also aware that in addition to modifying their systems, agencies will 
incur increased labor and contractual costs to maintain their systems. 
The Department has taken these factors into consideration in 
calculating burden estimates for this final regulation and the joint 
final regulations. Additional information on the calculation of these 
burden estimates is provided in the Summary of Potential Costs and 
Benefits section of this Regulatory Impact Analysis under the 
subheading Reports; Standards and Indicators.
    Changes: The Department has expanded its analysis and revised its 
burden estimates associated with modifying and maintaining agency 
information systems under the Summary of Potential Costs and Benefits 
of these final regulations (see subheading Reports; Standards and 
Indicators) to reflect State variation.

Proration of Burden

    Comments: None.
    Discussion: DSUs will report data required by section 101(a)(10)(C) 
of the Act, as amended by WIOA, under these final regulations and by 
section 116 of WIOA under the joint final regulations through the RSA-
911. To more appropriately reflect the costs attributable to these two 
rules, we have prorated the burden based on an analysis of all new WIOA 
data elements to be reported through the RSA-911. Using this 
methodology, the Department estimates that approximately 64 percent of 
the increase in burden is related to these final regulations, while 36 
percent is related to the joint final regulations.
    Changes: Estimates of the total increase in burden for the 
collection and reporting of new data are prorated to reflect the 64 
percent of burden attributed to requirements under these final 
regulations.

Summary of Potential Costs and Benefits

    The Secretary believes the changes made by WIOA implemented through 
these final regulations will improve the programs covered in this final 
regulatory action and will yield substantial benefits in terms of 
program management, efficiency, and effectiveness. The Secretary 
believes that the final regulations represent the least burdensome way 
to implement the amendments to the Act made by WIOA. Due to the number 
of regulatory changes, our analysis focuses solely on new requirements 
imposed by WIOA, organized in the following manner. First, we discuss 
the potential costs and benefits related to implementing changes to the 
VR program under section A that specifically relate to: competitive 
integrated employment and employment outcomes, pre-employment 
transition services and transition services, and additional VR program 
provisions. Second, we discuss the potential costs and benefits related 
to implementing changes to the Supported Employment program under 
section B. Finally, we discuss the costs and benefits pertaining to 
implementing requirements of section 511 of the Act that fall under the 
purview of the Department under section C.
    Where possible, the Department derived estimates by comparing the 
costs and benefits incurred under existing program regulations against 
the benefits and costs associated with implementing requirements 
contained in these final regulations. The Department also made an 
effort, when feasible, to quantify and monetize the benefits and costs 
of the final regulations. When unable to quantify benefits and costs--
for example, due to data limitations--we describe them qualitatively. 
In accordance with the regulatory analysis guidance contained in OMB 
Circular A-4 and consistent with the Department's practices in previous 
rulemakings, this regulatory analysis focuses on the likely 
consequences (benefits and costs that accrue to individuals with 
disabilities) of these final regulations. In this analysis, the 
Department also considers the transfer of benefits from one group to 
another that do not affect total resources available to the VR program 
and Supported Employment program. However, in a number of instances, 
the Department is unable to quantify these transfers due to limitations 
of the data it currently collects.
    This Regulatory Impact Analysis presents the Department's estimate 
of the additional labor and other costs and benefits associated with 
the implementation of the provisions in these final regulations. In 
estimating DSU labor costs for this analysis, we use Bureau of Labor 
Statistics (BLS) data on mean hourly wage rate for State employees, as 
well as data on employer compensation costs to calculate loaded wage 
factors.1 2 Loaded wage factors account for non-wage factors 
such as health and retirement benefits. We then multiplied the loaded 
wage factor by each occupational category's wage rate to calculate an 
hourly compensation rate used throughout this analysis to estimate the 
labor costs for each provision. For DSU personnel, we used a loaded 
wage factor of 1.57, which represents the ratio of average total 
compensation to average wages.\3\
---------------------------------------------------------------------------

    \1\ Bureau of Labor Statistics. (2014-2015). May 2014-2015 
national industry-specific occupational employment and wage 
estimates: NAICS 999200--State government, excluding schools and 
hospitals (OES designation). Retrieved from: http://www.bls.gov/oes/current/naics4_999200.htm.
    \2\ Bureau of Labor Statistics. (2016). 2015). 2014 Employer 
Costs for Employee Compensation. Retrieved from: http://www.bls.gov/schedule/archives/ecec_nr.htm.
    The Department calculated this value using data from Table 3. 
``Employer Costs per Hour Worked for Employee Compensation and Costs 
as a Percent of Total Compensation: State and Local Government 
Workers, by Major Occupational and Industry Group.'' Wages and 
salaries for all workers. Average Series ID CMU3020000000000D, 
CMU3020000000000P. To calculate the average wage and salary in 2014-
2015 of $21,2228.41, we averaged the wage and salaries for all 
workers provided in March, June, September, and December releases.
    \3\ The State and local loaded wage factor was applied to all 
non-Federal employees. Discerning the number of State and local-
sector employees and private-sector employees at the local level is 
difficult; therefore, the Departments used the State and local-
sector loaded wage factor (1.5657) instead of the private-sector 
wage factor (1.43) for all non-Federal employees to avoid 
underestimating the costs.
---------------------------------------------------------------------------

    For Federal employees we use wage rates from the Office of 
Personnel

[[Page 55731]]

Management's (OPM) Salary Table for the 2015 General Schedule for 
Federal employees.\4\ For Federal employees, we used a loaded wage 
factor of 1.63 based on internal data from DOL.
---------------------------------------------------------------------------

    \4\ The wage rate for Federal employees is based on Step 5 of 
the General Schedule (Source: OPM, 2014-2015, ``Salary Table for the 
2014-2015 General Schedule''). Retrieved from: https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2014/GS_h.pdf.
---------------------------------------------------------------------------

A. Vocational Rehabilitation Program

Competitive Integrated Employment and Employment Outcomes
    The Act, as amended by WIOA, emphasizes the achievement of 
competitive integrated employment by individuals with disabilities, 
including those with the most significant disabilities. Congress added 
a new term and accompanying definition to the Act--``competitive 
integrated employment,'' which represents, in general, a consolidation 
of two existing regulatory terms and their definitions--``competitive 
employment'' and ``integrated setting.'' In implementing the new term 
and its definition in these final regulations, we replaced the existing 
regulatory term and definition of ``competitive employment'' with the 
new term ``competitive integrated employment,'' by mirroring the 
statute and incorporating relevant critical criteria from the existing 
regulatory definition of ``integrated setting.'' Because this change is 
more technical than substantive, and given that the substance of the 
definition already existed in two separate definitions, we believe this 
particular change will have no significant impact on the VR program, 
thereby resulting in no added cost burden to DSUs.
    In addition to implementing the new term and definition of 
``competitive integrated employment'' in these final regulations, we 
also have revised the regulatory definition of ``employment outcome.'' 
While the Act, as amended by WIOA, made only technical changes to the 
statutory definition of ``employment outcome,'' the Secretary believes 
a regulatory change is necessary in light of other amendments made by 
WIOA throughout the Act that emphasize the achievement of competitive 
integrated employment under the VR program and Supported Employment 
program. Consequently, the Secretary defines ``employment outcome'' in 
these final regulations as an outcome in competitive integrated 
employment or supported employment, thereby eliminating uncompensated 
employment (e.g., homemakers and unpaid family workers), which had been 
permitted to date as a matter of the Secretary's discretion, from the 
scope of employment outcomes for purposes of the VR program. The 
Secretary believes the regulatory definition of ``employment outcome'' 
in final Sec.  361.5(c)(15) is consistent with all amendments to the 
Act made by WIOA, from the purpose of the Act to the addition of 
section 511. With the change to the definition of ``employment 
outcome,'' individuals with disabilities requiring homemaker or other 
unpaid family worker services will need to obtain those services, more 
appropriately, from independent living and other programs serving 
individuals with disabilities, not the VR program.
    It is difficult to quantify the extent to which the change to the 
definition of ``employment outcome'' in these final regulations, which 
has the effect of eliminating homemakers and unpaid family workers from 
its scope, will affect VR program costs nationally due to a number of 
highly variable factors. For example, it is not known whether 
individuals who previously had achieved homemaker outcomes or would 
seek such outcomes will choose to pursue competitive integrated 
employment through the VR program in the future, or seek services from 
other resources, such as those available from independent living, 
aging, or other programs serving individuals with disabilities. Based 
on data reported by DSUs through the RSA-911 for the period beginning 
in fiscal year (FY) 1980 and ending in FY 2015, the percentage of 
individuals exiting the VR program as homemakers nationally declined 
significantly from 15 percent of all individuals achieving an 
employment outcome in FY 1980 to 1.7 percent in FY 2015 (representing 
3,257 of the 186,209 total employment outcomes that year). While the 
national percentage of homemaker outcomes compared to all employment 
outcomes is small, some DSUs have a greater percentage of homemaker 
outcomes than others, particularly those serving only individuals who 
are blind and visually impaired. In FY 2015, the 24 DSUs that only 
provided services to individuals who are blind and visually impaired 
reported that 885 of the 6,442 employment outcomes in that year, or 
about 13.7 percent, were homemaker outcomes. DSUs that serve 
individuals with disabilities other than those with blindness and 
visual impairments reported 480 homemaker outcomes in that year, or 0.5 
percent of the 96,404 employment outcomes. In addition, the 32 DSUs 
that serve individuals with all disabilities reported 1,892 homemaker 
outcomes in FY 2015, representing 2.3 percent of their total 83,362 
employment outcomes.
    The average cost per employment outcome, including the average cost 
per homemaker outcome, can be calculated based on data reported by DSUs 
in the RSA-911 on the cost of purchased services for individuals 
exiting the VR program with an employment outcome. In FY 2015, the 
average cost per homemaker outcome for the VR program was $6,574, while 
the comparable average cost per employment outcome for all individuals 
exiting the VR program with an employment outcome that year was $5,627. 
It is possible that this higher average cost is because individuals 
obtaining a homemaker outcome generally require more intensive services 
or costly equipment because the nature or severity of their 
disabilities have prevented them from pursuing competitive integrated 
employment. However, there may be other factors that increase the 
average cost of these outcomes. For example, it may be that some of 
these individuals originally had a goal of competitive employment, but 
after receiving services for an intensive or long period of time 
without obtaining such an outcome, they may have chosen to change their 
goal. Further analysis is needed to identify the factors that 
contribute to the average higher cost of homemaker closures.
    Given current information reported to the Department by DSUs, we 
are not able to predict how many individuals who would have possibly 
had a homemaker outcome might now choose to seek competitive integrated 
employment. However, for the purpose of providing a gross estimate of 
these costs, we assume that approximately one-fourth (814) of the 
number of individuals who exited the VR program with a homemaker 
outcome will choose a goal of competitive integrated employment and 
continue to seek services through the VR program. We also assume that 
obtaining competitive integrated employment for these individuals may 
be more expensive than the current cost for obtaining a homemaker 
outcome, but also assume it is unlikely that the average costs for 
providing services to these individuals would exceed more than 150 
percent of their current costs (or approximately 175 percent of the 
average cost per employment outcome for all agencies in FY 2015). As 
such, we estimate that the additional cost to DSUs to provide VR 
services to those individuals who previously would have exited the 
program with homemaker outcomes will not exceed $3,287 per outcome, or 
about

[[Page 55732]]

$2,675,618 per year for all DSUs. Alternatively, assuming that about 75 
percent of the number of individuals who would have otherwise attained 
a homemaker outcome will no longer seek services from DSUs (2,443), at 
an average cost of $6,574, there will be a savings of $16,060,282 to 
the VR program. Based on these assumptions, we estimate an overall net 
savings to the VR program of approximately $13,384,664.
    We recognize that the change in the definition of ``employment 
outcome'' could potentially increase the demand for services from 
independent living and other programs, such as the Independent Living 
Services for Older Individuals Who Are Blind (OIB) program and other 
programs for aging individuals or persons with disabilities, that can 
provide services similar to those that such individuals would have 
previously sought from the VR program. We also recognize that meeting 
this potential increase in demand may result in a cost transfer to 
other Federal, State, and local programs. However, without additional 
information, such as the likelihood of how many consumers would access 
which programs, we cannot provide sound quantifiable estimates of 
potential cost transfers at this time.
    For illustrative purposes we provide a quantitative description of 
the potential cost transfer to the OIB program resulting from the 
change in the definition of ``employment outcome'' in these final 
regulations. RSA-911 data show that 75.6 percent of individuals with a 
homemaker outcome in FY 2015 were individuals with blindness and visual 
impairments. In addition, 49 percent (1,208) of such individuals with a 
homemaker outcome were age 55 or older at application. We expect many 
of the individuals in the upper age range of this subgroup will be 
referred to and receive services through the OIB program. However, 
considering the differences in the focus of the VR and OIB programs and 
that a number of individuals with homemaker outcomes may have received 
employment-related services for a long period of time without obtaining 
a competitive integrated employment outcome, we expect the average cost 
per individual served for this population under the OIB program will be 
significantly lower than the average cost under the VR program. 
Assuming 75 percent of such individuals were to receive services from 
the OIB program at an average annual cost of $1,500 per individual, the 
annual cost transfer would be approximately $1.4 million. To assist 
States in meeting the increased demand for OIB services, including 
assistance in reducing the impact of the change in the definition of 
``employment outcome'' in these final regulations for those States that 
have typically reported higher numbers of homemaker outcomes, the 
Administration's FY 2017 Budget Request includes a $2 million increase 
for the OIB program.
Pre-Employment Transition Services and Transition Services
    The Act, as amended by WIOA, places heightened emphasis on the 
provision of pre-employment transition services and other transition 
services to students and youth with disabilities, as applicable. As a 
result, the Secretary makes numerous amendments in these final VR 
program regulations to implement new statutory requirements. A few of 
those changes are relevant to this discussion.
    Final Sec.  361.65(a)(3) requires DSUs to reserve at least 15 
percent of the State's VR allotment for the provision of pre-employment 
transition services to students with disabilities who are eligible or 
potentially eligible for vocational rehabilitation services. Based on a 
total of $3.024 billion in VR grant funds awarded to States from FY 
2015 appropriations, the total amount of funds required to be reserved 
for pre-employment transition services is $453.6 million. Overall, this 
reservation of funds will decrease the amounts available to support 
other authorized activities that State agencies provide through the VR 
program and result in a transfer of benefits from the VR eligible 
individuals a State agency may have historically served to students 
with disabilities in need of pre-employment transition services. 
Additionally, under final Sec.  361.65(a)(3)(ii)(B), States may not 
include administrative costs associated with the provision of pre-
employment transition services in the calculation or use of that 
reserved amount. We are unable to estimate the potential increase in 
DSU administrative costs that may arise from implementation of new 
section 113 of the Act or the required reservation of funds at this 
time. However, to implement these requirements, DSUs will need to 
dedicate resources to: (1) Ensure that the 15 percent minimum is 
reserved from the State's VR program allotment; (2) track the provision 
of pre-employment transition services to ensure the reserved funds were 
spent solely on allowable services specified in section 113 of the Act, 
as added by WIOA, and its implementing regulation in final Sec.  
361.48(a) and not on administrative costs; and (3) provide for 
administrative costs related to pre-employment transition services with 
non-reserved VR program funds.
    Second, section 113 of the Act, as added by WIOA, requires DSUs to 
provide pre-employment transition services to students with 
disabilities who are eligible or potentially eligible for vocational 
rehabilitation services. In final Sec.  361.48(a), ``potentially 
eligible'' means all students with disabilities who satisfy the 
definition in final Sec.  361.5(c)(51), regardless of whether they have 
applied, and been determined eligible, for the VR program. The 
Secretary believes this interpretation is consistent with congressional 
intent and the stated desires of some DSUs and other stakeholders 
expressed through comments.
    Although pre-employment transition services are a new category of 
services identified in the Act, many of these services historically 
were provided under the broader category of transition services. 
Therefore, the provision of these services is not new to DSUs. However, 
until the enactment of WIOA, all such services were provided only to 
those students with disabilities who had been determined eligible for 
the VR program. Consequently, providing pre-employment transition 
services to all students with disabilities under final Sec.  361.48(a) 
will likely increase staff time and resources spent on the provision of 
these services.
    We are unable to provide a quantitative estimate of the impact of 
this requirement on DSUs at this time because we do not currently have 
data on the number of students with disabilities that will be referred 
for such services or adequate data on the cost of providing pre-
employment transition services. In the future, information provided by 
the State in the VR services portion of the Unified or Combined State 
plan and RSA data collections, such as the revised RSA-911, should 
assist the Department in assessing the impact of the pre-employment 
transition service requirements.
    In general, the extent of the impact of the reservation on a 
particular State will likely depend on the extent to which it has been 
providing transition services that are now specified under section 113 
as pre-employment transition services to students with disabilities. 
DSUs that have provided extensive transition services to students with 
disabilities, including services that would meet the definition of pre-
employment transition services, are likely to see less transfer of 
benefits among individuals served. For State agencies that have not 
provided these services or have only provided these services to a small 
extent, there may be more extensive transfers of

[[Page 55733]]

services and benefits of the VR program among individuals (i.e., to 
students with disabilities and away from other individuals who 
otherwise would have been served). We are extremely limited in our 
ability to estimate the annual amount that State agencies have spent in 
providing similar services to eligible individuals prior to the 
implementation of section 113 of the Act that would have met the 
definition of a student with a disability because we do not collect the 
necessary annual data under the currently approved RSA-911 report.
    Under the current RSA-911, DSUs report individual level data in the 
year in which the service record is closed and the information reported 
on services and service costs are cumulative over the duration of the 
service record. In addition, while DSUs may directly provide many of 
the pre-employment transition services with VR staff, only the cost of 
services purchased by the agency on behalf of an individual are 
reported under the current RSA-911. Further, the pre-employment 
transition services that States are required to provide to students 
with disabilities are not specifically reported in the service 
categories of the currently approved RSA-911.
    However, for illustrative purposes, FY 2015 data on closed service 
records reported in the RSA-911 (the most recent year for which full 
data are available) for youth who were between the ages of 16 and 21 at 
the time of application do provide some limited insight into the amount 
spent on purchased services for the service categories that DSUs would 
have most likely reported the receipt of services similar to pre-
employment transition services. Although, the reservation requirement 
went into effect in FY 2015, we believe that it is still an appropriate 
base year since youth whose service records were closed in that year 
were not likely to have been affected by the new requirement.
    DSUs reported service record closures in the FY 2015 RSA-911 for 
98,454 youth who were between the ages of 16 and 21 at application and 
total purchase service costs of about $526.5 million (including about 
$11.6 million in title VI Supported Employment funds) for such youth. 
Because reporting is limited to closed cases, we are unable to 
determine the amount of the purchased services actually expended in FY 
2015. However, at least 85 percent of these purchases were for 
categories of service that would not include pre-employment transition 
services as defined in final Sec.  361.5(c)(42) (e.g., postsecondary 
education, assessment, diagnosis and treatment, and on-the-job 
supports). Similarly, for the subset of youth whose service records 
were closed in FY 2015 that were in secondary education and had an IEP 
or were receiving services under section 504 at the time of application 
to the VR program (53,734 students), about 82 percent of the $245 
million in reported purchased services for this group were for 
categories of service that would not meet the statutory definition of 
pre-employment transition services.
    While it is important to note that RSA data show significant 
variation in the number and amount of funds spent for this age group 
among State agencies, available information indicates that many State 
agencies will experience challenges in meeting the new reservation 
requirement and will need to develop and implement aggressive 
strategies in order to expend these funds in the initial years of 
implementation.
    Further, we recognize that the FY 2015 data include only those 
students with disabilities who had applied and been determined eligible 
for VR services and that under these final regulations DSUs will 
provide pre-employment transition services to students with 
disabilities who may not have applied or been determined eligible for 
the VR program. These final regulations also clarify that, in addition 
to secondary education, the term ``students with disabilities'' 
includes students in postsecondary or other recognized education 
programs that meet the age and other requirements contained in final 
Sec.  361.5(c)(51).
    Therefore, we anticipate that many DSUs will need to serve a larger 
number of students with disabilities in order to expend the reserved 
funds than they had prior to the passage of WIOA, thereby increasing 
the potential total value of the benefits transferred as a result of 
final Sec.  361.48(a).
    Fiscal reports submitted by DSUs appear to confirm the early 
challenges DSUs are having in spending these funds. FY 2015 fourth 
quarter Federal Financial (SF-425) reports document that in total, DSUs 
expended 33.6 percent of the $453.6 million that were required to be 
reserved for pre-employment transition services based on final FY 2015 
State VR grant awards. Provided that States matched their Federal VR 
grant funds, the remaining amount of the required reservation would 
have been carried over for obligation and liquidation in FY 2016.
    Despite these challenges, we are optimistic that as States 
implement the strategies described in the VR services portion of their 
Unified or Combined State plans to address the needs of students with 
disabilities for pre-employment transition services consistent with 
Sec.  361.29 (a)(4) (e.g., working with employers to provide 
opportunities for work-based learning experiences (including 
internships, short-term employment, apprenticeships, and fellowships), 
as required under final Sec.  361.32(b), and coordinating with schools 
to ensure the provision of pre-employment transition services for 
students with disabilities as required under final Sec.  361.48(a)(4)), 
they will adopt policies and practices that enable them to effectively 
spend the funds reserved for this purpose to improve employment 
outcomes for students with disabilities.
    Third, section 103(b)(7) of the Act, as added by WIOA, and in its 
implementing regulation in final Sec.  361.49(a)(7) permit DSUs to 
provide transition services to groups of youth and students with 
disabilities regardless of whether they have applied, and been 
determined eligible, for the VR program. Such services to groups were 
not permitted prior to the passage of WIOA. The regulation benefits 
DSUs in two significant ways by: (1) Giving them the ability to serve 
groups of youth and students with disabilities simultaneously, who may 
need only basic generalized services (i.e., group tours of universities 
and vocational training programs, employer or business site visits to 
learn about career opportunities, career fairs coordinated with 
workforce development and employers to facilitate mock interviews and 
resume writing, and other general services), thereby reducing the 
amount of funds expended per individual; and (2) reducing 
administrative burden on the DSUs, as well as the burden on students or 
youth with disabilities and their families, by not having to engage in 
processes for determining eligibility, conducting assessments, and 
developing individualized plans for employment. However, we are unable 
to quantify the impact of this regulatory provision due to the 
variability in the number of individuals who may seek out these 
services nationally, the degree to which individuals will require these 
services within each State, and the services that will be provided in 
each State.
Additional Vocational Rehabilitation Program Provisions VR Services 
Portion of the Unified or Combined State Plan
    Section 101(a)(1) of the Act, as amended by WIOA, requires the VR 
State plan, which has been a stand-alone State plan, to be submitted as 
a VR services portion of a Unified or Combined State plan for all six 
core programs of the workforce development system, including the VR 
program.

[[Page 55734]]

Requirements related to the submission of Unified or Combined State 
plans take effect in July 2016. Discussion of the burden associated 
with new Unified or Combined State plan requirements affecting all core 
programs, including the VR program, will be addressed in the Regulatory 
Impact Analysis for the joint final regulations published elsewhere in 
this issue of the Federal Register. This Regulatory Impact Analysis 
focuses solely on the impact of new requirements affecting the VR 
services portion of the Unified or Combined State plan and not any plan 
requirement that affects all core programs.
    In preparing for the transition to the submission of Unified or 
Combined State plans every four years, with modifications submitted 
every two years of the four-year plan, the final regulations no longer 
require DSUs to submit particular reports and updates annually, but, 
rather, at such time and in such manner as determined by the Secretary 
as required in final Sec.  361.29. This flexibility allows for VR 
program-specific reporting to be done in a manner consistent with those 
for the Unified or Combined State plan under section 102 or 103 of 
WIOA, thus avoiding additional burden or costs to DSUs through the 
submission of separate reports annually or whenever updates are made.
    Section 101(a) of the Act, as amended by WIOA, requires DSUs to 
include additional descriptive information in the VR services portion 
of the Unified or Combined State plan. Therefore, final Sec.  361.29 
requires DSUs to describe in the VR services portion of the Unified or 
Combined State plan: (1) The results of the comprehensive statewide 
needs assessment with respect to the needs of students and youth with 
disabilities for pre-employment transition services and other 
transition services, as appropriate; (2) goals and priorities to 
address these needs; and (3) strategies for the achievement of these 
goals. Final Sec.  361.24(c) also requires that the VR services portion 
of the Unified or Combined State plan include a description of how the 
DSU will work with employers to identify competitive integrated 
employment and career exploration opportunities, in order to facilitate 
the provision of VR services, including pre-employment transition 
services and transition services for youth and students with 
disabilities, as applicable. Final Sec.  361.24(g) further requires 
that the VR services portion of the Unified or Combined State plan 
contain a description of collaboration with the State agency 
responsible for administering the State Medicaid plan under title XIX 
of the Social Security Act, the State agency responsible for providing 
services for individuals with developmental disabilities, and the State 
agency responsible for providing mental health services, to develop 
opportunities for community-based employment in integrated settings, to 
the greatest extent practicable. As a result, DSUs will be required to 
expend additional effort in the development of these descriptions in 
the VR services portion of the Unified or Combined State plan beyond 
the 25 hours previously estimated for the development and submission of 
the entire stand-alone VR State plan, now the VR services portion of 
the Unified or Combined State plan. We estimate that DSUs will require 
an additional five hours for the development of these descriptions, for 
a total of 30 hours (25 hours previous burden plus 5 hours new 
additional burden) per DSU, or 2,400 hours for all 80 DSUs. The average 
hourly compensation rate of $54.21--based on data obtained from the 
Bureau of Labor Statistics for State social and community service 
managers (e.g., field services manager or other program manager 
responsible for development of the VR services portion of the Unified 
or Combined State plan) and the loaded wage factor--is more consistent 
with State rates of pay than the $22.00 per hour wage rate used to 
calculate costs from the most recent State plan information collection 
extension. At an hourly compensation rate of $54.21, each DSU would 
expend $271 in additional costs for the five hours needed to develop 
the new descriptions required for the VR services portion of the 
Unified or Combined State plan, resulting in a total of $21,684 and 400 
additional hours for all 80 DSUs. Despite the additional costs incurred 
by all 80 DSUs in the development and submission of the State plan, we 
believe that the additional burden is more accurate and outweighed by 
the benefit to the public through a more comprehensive understanding of 
the activities DSUs engage in to assist individuals with disabilities 
to obtain the skills necessary to achieve competitive integrated 
employment in job-driven careers.
Order of Selection
    Final Sec.  361.36(a)(3)(v) implements section 101(a)(5) of the 
Act, as amended by WIOA, by permitting DSUs, at their discretion, to 
serve eligible individuals who require specific services or equipment 
to maintain employment, regardless of whether they are receiving VR 
services under an order of selection. DSUs implementing an order of 
selection are not required to use this authority; rather, they may 
choose to do so based on agency policy, or the availability of 
financial and staff resources. Under final Sec.  361.36(a)(3)(v), DSUs 
implementing an order of selection must state in the VR services 
portion of the Unified or Combined State plan that they have elected to 
exercise this discretion, thereby signaling a decision to serve 
eligible individuals who otherwise might have been placed on a waiting 
list under the State's order of selection, and who are at risk of 
losing their employment. This change will increase flexibility for a 
State managing its resources. While a State that elects to implement 
this authority could prevent an individual from losing employment by 
avoiding a delay in services, DSUs doing so would potentially need to 
reallocate resources to cover expenditures for services or equipment 
for individuals who meet the qualifications of this provision and fall 
outside an open priority category of the DSU's order of selection.
    For FY 2015, the VR State plans of 35 of the 80 DSUs (44 percent) 
documented that the agency had established an order of selection, one 
agency more than in FY 2014. This total includes two of the 24 DSUs 
serving only individuals who are blind and visually impaired and 33 of 
the 56 other DSUs. Based on data reported through the RSA-911 in FY 
2015, nationwide, 20.4 percent of the individuals whose service records 
were closed and who received services were employed at application, 
with an average cost of purchased services of $4,617. In addition, 
according to data reported through the VR program Cumulative Caseload 
(RSA-113) report, 30,311 individuals nationwide were on a waiting list 
for VR services at the beginning of FY 2015 due to the implementation 
of an order of selection. Assuming that 20.4 percent of the 30,311 
individuals on the waiting list could potentially benefit from the 
provision of services and equipment to maintain employment (which 
assumes individuals on a waiting list are just as likely to be employed 
at the time of application as individuals whose records were closed and 
received services), a possible 6,183 individuals could benefit from 
this regulatory change, for a total cost of $28,546,911 across all 80 
DSUs. This figure represents the potential reallocation of resources to 
cover the cost of services for individuals who, prior to enactment of 
WIOA, may not have received them, and away from eligible individuals 
who would have received services based on a DSU's order of selection 
policy.

[[Page 55735]]

    However, the implementation of an order of selection by a DSU may 
differ from year to year, as well as within a given fiscal year. In 
fact, not all DSUs that indicate they have established order of 
selections as part of their State plans actually implement those orders 
or report that they had individuals on waiting lists during the year. 
For example, 63 percent of such agencies (22 of 35) reported that they 
had individuals on a waiting list in FY 2015. In addition, we are 
unable to predict which DSUs that have implemented an order of 
selection will choose this option. The degree to which individuals will 
be referred for this service could vary widely among DSUs, as could the 
level of services or equipment that an individual may need to maintain 
employment.
Reports; Standards and Indicators
    Final Sec.  361.40 implements changes to reporting requirements in 
section 116(b) in title I of WIOA and section 101(a)(10) of the Act, as 
amended by WIOA. Final Sec.  361.40 does not list the actual data to be 
reported, rather, it requires the collection and reporting of the 
information specified in sections 13, 14, and 101(a)(10) of the Act. 
New requirements under section 101(a)(10) include the reporting of data 
on the number of: Individuals with open service records and the types 
of services these individuals are receiving (including supported 
employment services); students with disabilities receiving pre-
employment transition services; and individuals referred to the State 
VR program by one-stop operators and individuals referred to such one-
stop operators by DSUs. The RSA-911 is revised as described in the 
information collection published for a 30-day public comment period at 
FR Document 2016-09713 consistent with the requirements in final Sec.  
361.40.
    Final Sec.  361.40 also requires States to report the data 
necessary to assess DSU performance on the standards and indicators 
subject to the performance accountability provisions described in 
section 116 of WIOA. The common performance accountability measures 
apply to all core programs of the workforce development system, 
including the VR program, and are implemented in part 677 of the joint 
regulations and set forth in subpart E of part 361. The impact and 
analysis of the joint regulations governing the common performance 
accountability system are addressed in the regulatory action for the 
joint regulations published elsewhere in this issue of the Federal 
Register.
    In response to the comments regarding the burden associated with 
the collection of data under final Sec.  361.40, described in the 
Comments section of this Regulatory Impact Analysis, and as a result of 
further Departmental review, we have adjusted the burden estimates as 
described here.
    We have increased the estimated burden for the collection of the 
new data required by section 101(a)(10), including data required to 
assess State agency performance under section 106 of the Act by 
recalculating the estimates using the time DSUs will spend collecting 
these additional data elements. We estimate that on average it will 
take DSU staff one minute per data element to collect the new required 
data.
    For the first year of data collection, DSUs will incur greater data 
collection burden than in subsequent years. As required by statute, the 
WIOA performance accountability system goes into effect July 1, 2016. 
All participants who are still receiving services (have not exited) by 
the start of program year (PY) 2016 become WIOA participants and will 
be counted and tracked in accordance with the WIOA performance 
requirements set forth in section 116 of WIOA. The final RSA-911 
Information Collection Request (ICR) will include new and/or revised 
data elements and definitions as necessary to provide alignment with 
the WIOA Participant Individual Record Layout (PIRL) and comply with 
new requirements under the Act as amended by WIOA.
    In order to meet the requirements in final Sec.  361.40, DSUs will 
need to collect additional information for new applicants and VR 
consumers as well as current eligible individuals who, as of the 
effective date of section 116 of title I (July 1, 2016), met the 
definition of ``participant,'' as that term is defined under the joint 
final regulations implementing the jointly administered performance 
accountability system requirements of section 116 of title I of WIOA 
published elsewhere in this issue of the Federal Register.
    DSUs are at varying stages of revising their case management 
systems consistent with the new joint data specifications described in 
the PIRL and the new elements required under title I of the Act as 
proposed in the ICR, published in the Federal Register on April 27, 
2016 (81 FR 24888).
    Based on data reported by DSUs through the Quarterly Caseload 
Report (RSA 113) for FYs 2014 and 2015, we estimate that in the first 
year of data collection DSUs will in total incur a minimum of about 
800,000 hours of additional burden to collect new data for VR consumers 
(an average of 10,000 to 11,250 per DSU), including participants and 
reportable individuals in the VR system at the beginning of FY 2016, 
individuals who will be determined eligible during the first year of 
data collection, students with disabilities who are receiving pre-
employment transition services and data needed for subminimum wage 
determinations under section 511 of the Act.
    Based on data reported through the RSA-113 for FY 2015 and the 
proportion of new VR-specific data elements to all new data elements 
required by WIOA (64 percent), we estimate that DSUs will spend a total 
of approximately 512,000 hours collecting the new VR-specific data 
elements, or an average of 6,400 hours per DSU in the first year of 
data collection. We further estimate that vocational rehabilitation 
counselors will complete 50 percent of data collection activities for 
new VR-specific data elements, and that vocational rehabilitation 
technicians or similar personnel will complete the remaining 50 
percent.
    Using an hourly compensation rate of $36.66 for vocational 
rehabilitation counselors (wage rate based on State-employed 
rehabilitation counselors), the estimated cost for 50 percent of the 
data collection burden (256,000 hours) is $9,384,960. Using an hourly 
compensation rate of $28.29 for vocational rehabilitation assistants or 
equivalent positions (wage rate based on State-employed social and 
human service assistants \5\ plus the loaded wage factor), the 
estimated cost for the remaining 50 percent of the data collection 
burden is $7,242,240. Consequently, we estimate that the total 
additional cost for all 80 DSUs to collect the new VR program-specific 
data elements is $16,627,200, or an average of $207,840 per DSU for the 
initial year of data collection.
---------------------------------------------------------------------------

    \5\ Bureau of Labor Statistics. (2015) May 2015 national 
industry-specific occupational employment and wage estimates: NAICS 
999200--State government, excluding schools and hospitals (OES 
designation). Retrieved from: http://www.bls.gov/oes/current/oes211093.htm.
---------------------------------------------------------------------------

    For the second and subsequent years of data collection under these 
final regulations, we estimate that in total DSUs will incur about 
200,000 hours of additional burden per year under WIOA. For new VR-
specific data elements, we estimate 128,000 hours, or an average of 
1,600 hours of additional annual burden per DSU, in the second and 
subsequent years of data collection. Using the same strategy to 
calculate the costs for the first year of data collection, we estimate 
that the total additional

[[Page 55736]]

annual cost for all 80 DSUs to collect the new VR program-specific data 
elements is $4,156,800, or an average of $51,960 per DSU for the second 
and subsequent years of data collection. The remaining portion of the 
burden for new data collection attributed to the performance 
accountability requirements in section 116 of title I of WIOA 
($10,558,080 or $131,976 per DSU) is included in the Regulatory Impact 
Analysis for the final joint regulations, published elsewhere in this 
issue of the Federal Register.
    As described in the discussion of comments on this Regulatory 
Impact Analysis, we estimate an average of 70 additional burden hours 
per year, or a total of 120 hours per year (30 hours per quarter), for 
each DSU to submit the RSA-911 data file of open case service records 
on a quarterly basis. As a result, the estimated total number of hours 
needed for the submission of the data file for 80 agencies will 
increase from 4,000 to 9,600 hours, resulting in an increase of 5,600 
hours. Using an average hourly compensation rate of $57.02 (wages based 
on State-employed database administrators), the estimated additional 
cost for all 80 DSUs to submit the RSA-911 data file of open service 
records on a quarterly basis is $319,312. The estimated additional cost 
per DSU is $3,991.
    The total additional VR-specific burden hours for both collection 
and submission of required data will be 6,470 hours per DSU (6,400 data 
collection hours and 70 data submission hours), or a total of 517,600 
hours for all 80 DSUs. The estimated total additional VR program-
specific cost for both collection and submission per DSU is $211,831, 
with a total additional burden cost of $16,946,512 for all 80 DSUs.
    DSUs will also incur additional costs related to programming and 
modifications of their case management systems to collect and report 
new VR program-specific data required under section 101(a)(10) of the 
Act. Additional burden related to the programming of case management 
systems as a result of the redesigned RSA-911 will vary widely because 
DSUs range in size and the sophistication of their information 
technology systems.
    Upon further Departmental review since the publication of the NPRM, 
including the review of comments summarized in the Comments section of 
this Regulatory Impact Analysis, we have adjusted the estimates 
associated with the modification of DSU data systems. The adjusted 
estimates are based on: The apportionment of the data elements in the 
RSA-911 necessitated by the requirements of section 116 of WIOA and 
section 101(a)(10) of the Act, as amended by WIOA; adjustments to the 
wage rates for DSU personnel; and updated information regarding the 
variation in the level of effort required by DSUs to modify and 
maintain their data systems.
    Although we estimate that each DSU will require computer systems 
analysts for this one-time task, the related burden for changing a 
State's case management system has been broken down to reflect the 
variation among the 80 DSUs with respect to their size and updated 
information regarding the number of DSUs that modify and maintain their 
case management and reporting systems and those that contract for these 
services. Roughly 30 of the 80 DSUs use case management and reporting 
systems purchased from software providers who are responsible for 
maintaining and updating the software. We estimate these 30 DSUs will 
require two computer systems analysts to spend 150 hours integrating 
the software changes into their own State systems, resulting in 300 
hours per DSU, or a total of 9,000 hours in additional burden for all 
30 DSUs. Of the remaining 50 DSUs that do not have agreements with a 
software provider to maintain and update software, five of these 
agencies are categorized as large agencies (more than 5,000 employment 
outcomes) and 45 of these agencies are categorized as small to medium-
sized agencies (less than 1,000 employment outcomes, and between 1,000 
and 5,000 employment outcomes, respectively). We estimate the five 
large agencies will require five computer systems analysts to spend 
1,000 hours each to maintain and update agency software (for a total of 
5,000 hours per agency), while the 45 small to medium-sized agencies 
will require two staff members to spend 1,000 hours each to maintain 
and update the software (for a total of 2,000 hours per agency) in 
order to make the necessary software changes. As a result, we estimate 
that the large agencies will need a total of 25,000 total hours and the 
small to medium-size agencies will need 90,000 hours, for a total of 
115,000 hours for the 50 agencies to maintain and update computer 
software. Combining these estimates with the 9,000 hours for the 30 
agencies that we believe will only have to integrate the software 
changes their providers are contracted to make, the total burden 
estimate for all 80 agencies is 124,000 hours. The VR program-specific 
burden (prorated at 64 percent of total burden) is estimated at 79,360 
hours. We estimate that the cost burden for all 80 agencies to maintain 
and update their computer software based on a total of 79,360 VR-
specific hours and an hourly compensation rate of $56.17 for State-
employed computer systems analysts, will be $4,457,651. The balance of 
the burden in modifying agency data systems associated with the common 
data reporting requirements under title I of WIOA (36 percent) is 
included in the Regulatory Impact Analysis of the joint final 
regulations published elsewhere in this issue of the Federal Register.
    In addition to maintaining and updating software, 48 agencies that 
utilize vendor supplied case management software will incur additional 
software licensing or user fees. Our discussions with case management 
software vendors informed our revised estimate of the average cost of 
$700.00 per user annually for software licensing or user fees, which 
will include a 20 percent increase due to new WIOA requirements, 
resulting in $140 of additional costs per user. Information obtained in 
discussions with case management software vendors also resulted in an 
estimate of approximately 6,600 users in States served by vendor 
systems. We estimate an additional total software licensing or user 
costs related to new WIOA requirements of $924,000. After adjusting 
this cost to reflect only the VR program-specific burden (64 percent), 
we estimate that the 48 States will incur an additional $591,360 in 
licensing or user fees, or $12,320 per agency.
    Finally, the 80 DSUs will be required to train vocational 
rehabilitation counselors regarding the new data reporting 
requirements. To estimate this labor cost, we assume an average of 62 
vocational rehabilitation counselors per agency and 8 hours of training 
per counselor. Using an hourly compensation rate of $36.66 per 
vocational rehabilitation counselor, the estimated labor costs for 
vocational rehabilitation counselors to receive training on collecting 
the new data is $1,454,669 for all 80 agencies, or $18,183 per agency. 
We estimate that development of the training materials and 
methodologies will require 1 staff trainer 8 hours per agency. Using 
the social and community service manager hourly compensation rate 
($54.21) as a proxy for the staff trainer, the total cost for 
development of the training is $34,694, or $434 per agency. The total 
cost for development of the training and vocational rehabilitation 
counselor participation in the training is $1,489,363. Since we are 
estimating that approximately 64 percent of the burden related to 
performance accountability is VR-specific burden, the estimated cost

[[Page 55737]]

will be $953,192 for all 80 agencies, or $11,915 per agency.
    Including all of the associated costs with the maintenance and 
updating of software ($4,457,651), licensing fees ($591,360), and 
agency staff training ($953,192), the estimated aggregate VR program-
specific burden for all 80 agencies is $6,002,203, which does not 
include the additional initial year combined RSA-911 data collection 
and submission burden of $16,946,512 because that burden estimate was 
described separately above.
    At the Federal level, RSA will develop its performance 
accountability and data analysis capacity using new staff positions. We 
estimate that it will take two full-time data management specialist 
positions, one at a GS-13 Step 5 and one at a GS-14 Step 5, to complete 
the necessary database programming requirements. With an hourly 
compensation rate of $64.71 for the GS-13 position and $76.48 for the 
GS-14 position, the total cost for software development is $293,675. 
Since we are estimating that approximately 64 percent of the burden 
related to performance accountability is VR-specific burden, the 
estimated cost will be $187,952.
    We believe that these data collection and reporting costs are 
outweighed by the benefits to the VR program because the new 
information to be reported and having access to more timely information 
on individuals currently participating in the VR program will better 
enable the Department and its Federal partners to assess the 
performance of the program and monitor the implementation of WIOA, 
particularly as it relates to key policy changes, such as the provision 
of pre-employment transition services and the integration of the VR 
program in the workforce development system.
Extended Evaluation
    Final Sec. Sec.  361.41 and 361.42 remove requirements related to 
extended evaluation because the Act, as amended by WIOA, no longer 
includes references to such evaluations. Instead, a DSU must use trial 
work experiences when conducting an exploration of an individual with a 
significant disability's abilities, capabilities, and capacity to 
perform in work situations. These revisions streamline the eligibility 
determination process for all applicants whose ability to benefit from 
VR services is in question.
    VR program data collected by the Department do not distinguish 
between individuals who had a trial work experience and those that had 
an extended evaluation. However, RSA-911 data show that 4,924 
individuals exited from the VR program during or after trial work 
experiences or extended evaluations in FY 2015. DSUs expended a total 
of $4,126,785 on the provision of services to these individuals for an 
average cost of $838 per individual. Because we are unable to estimate 
how many of the 4,924 individuals were in extended evaluation, as 
opposed to trial work experiences, we cannot quantify either the 
current costs or the potential change in costs for this specific group 
of individuals. Based on the monitoring of DSUs, we note that the use 
of these services varies among DSUs, mainly due to variations in 
opportunities for individuals to participate in trial work experiences, 
and the extent to which DSUs historically utilized extended evaluation. 
We believe that the benefits of streamlining the eligibility 
determination process for applicants whose ability to benefit from VR 
services is in question and ensuring that ineligibility determinations 
are based on a full assessment of the capacity of an applicant to 
perform in realistic work settings outweighs the costs of removing the 
limited exception to trial work experiences.
Time Frame for Completing the Individualized Plan for Employment
    Final Sec.  361.45 implements section 102(b) of the Act, as amended 
by WIOA, by requiring DSUs to develop individualized plans for 
employment as soon as possible, but not later than 90 days after the 
date of determination of eligibility, unless the DSU and the eligible 
individual agree to the extension of that deadline to a specific date 
by which the individualized plan for employment must be completed. Due 
to variations in current DSU timelines for the development of the 
individualized plan for employment, the establishment of a 90-day 
timeframe by WIOA will ensure consistency across the VR program 
nationally and the timely delivery of services, thereby improving DSU 
performance and the achievement of successful employment outcomes by 
individuals with disabilities.
    We are unable to quantify potential additional costs to DSUs to 
develop individualized plans for employment within 90 days of an 
eligibility determination due to the variance in timelines currently in 
place. It is likely that DSUs that have had prolonged timelines beyond 
90 days prior to the enactment of WIOA could experience a change in 
annual expenditure patterns. For example, if larger numbers of 
individuals, with approved individualized plans for employment, begin 
to receive VR services at an earlier time than had historically been 
the case, an agency will expend its funds at a faster rate. However, 
while the overall cost per individual served is not likely to be 
affected by this provision, the average time before some DSUs incur 
expenses related to the development of, and provision of VR services 
under, individualized plans for employment could be shortened, 
resulting in a shift in the outlay of program funds for services sooner 
than in previous years. Therefore, in any given fiscal year, the outlay 
of program funds for these DSUs could be higher. While costs over the 
life of the service record should not be affected, some DSUs could find 
it necessary to implement an order of selection due to the transfer of 
costs that would have been incurred in a subsequent fiscal year to the 
current fiscal year. As always, DSUs are encouraged to conduct planning 
that incorporates programmatic and fiscal elements to make projections 
and assessments of VR program resources and the number of individuals 
served, using management tools including order of selection, as 
appropriate.
The Establishment, Development, or Improvement of Assistive Technology 
Demonstration, Loan, Reutilization, or Financing Programs
    Section 103(b)(8) of the Act, as added by WIOA, permits a DSU to 
establish, develop, or improve assistive technology demonstration, 
loan, reutilization, or financing programs. Thus, final Sec.  
361.49(a)(8) permits DSUs to establish, develop, or improve these 
assistive technology programs in coordination with activities 
authorized under the Assistive Technology Act of 1998, to promote 
access to assistive technology for individuals with disabilities and 
employers. This regulation reflects the integral role assistive 
technology plays in the vocational rehabilitation and employment of 
individuals with disabilities. We are not able to quantify additional 
costs associated with this provision due to the variable nature of the 
specific assistive technology needs of individuals with disabilities, 
and the availability of assistive technology demonstration, loan, 
reutilization, or financing programs within each State.
Maintenance of Effort Requirements
    Section 111(a) of the Act, as amended by WIOA, and final Sec.  
361.62(a) require the Secretary to reduce a State's annual VR program 
award to satisfy a maintenance of effort (MOE) deficit in any prior 
year. Before the enactment of WIOA, the Secretary could only reduce

[[Page 55738]]

the subsequent year's grant to satisfy an MOE deficit from the 
preceding fiscal year. If an MOE deficit was discovered after it was 
too late to reduce the succeeding year's grant, the Secretary was 
required to seek recovery through an audit disallowance, whereby the 
State repaid the deficit amount with non-Federal funds.
    Because the Secretary is now able to reduce any subsequent year's 
VR program grant for any prior year's MOE deficit, DSUs benefit as they 
are no longer required to repay MOE shortfalls with non-Federal funds, 
thereby increasing the availability of non-Federal funds, in those 
instances, for obligation as match under the VR program. Since FY 2010, 
two States were required to pay a total of $791,342 in non-Federal 
funds for MOE penalties because their MOE shortfall was not known prior 
to the awarding of Federal funds in the year after the MOE deficit. 
Consequently, these funds were unavailable to be used as matching funds 
for the VR program in the year they were paid. On the other hand, the 
new authority could have resulted in the deduction of the $791,342 MOE 
penalties from a Federal award that was not limited to the year 
immediately following the year with the MOE deficit.

B. The Supported Employment Program

Services to Youth With the Most Significant Disabilities in Supported 
Employment
    Section 603(d) of the Act, as amended by WIOA, and final Sec.  
363.22 require DSUs to reserve 50 percent of their State Supported 
Employment Services Program grant allotment to provide supported 
employment services, including extended services, to youth with the 
most significant disabilities. This new requirement is consistent with 
the heightened emphasis throughout the Act on the provision of services 
to youth with disabilities, especially those with the most significant 
disabilities, and is consistent with the final VR program regulations 
in part 361, since the Supported Employment program is supplemental to 
that program.
    In addition, section 606(b) of the Act, as amended by WIOA, and 
final Sec.  363.23 require States to provide a 10 percent match for the 
50 percent of the Supported Employment allotment reserved for the 
provision of supported employment services, including extended 
services, to youth with the most significant disabilities. Prior to the 
enactment of WIOA, there was no match requirement under the Supported 
Employment program.
    Finally, section 604 of the Act, as amended by WIOA, and final 
Sec.  363.4(b) permit DSUs to provide extended services, for a period 
not to exceed four years, to youth with the most significant 
disabilities. DSUs may use the reserved funds to provide these extended 
services, as well as supported employment services, to youth with the 
most significant disabilities. Prior to the enactment of WIOA, DSUs 
were not permitted to provide extended services to any individual, 
including youth with the most significant disabilities.
    After setting aside funds to assist in carrying out section 21 of 
the Act, the FY 2015 Federal appropriation provided $27,272,520 for 
distribution to DSUs under the Supported Employment State Grants 
program. Assuming States were able to provide the required 10 percent 
non-Federal match for the available Supported Employment formula grant 
funds in FY 2015, the 50 percent reservation would result in the 
dedication of $13,636,260 for supported employment services, including 
extended services, to youth with the most significant disabilities. 
Conversely, the reserved funds would not be available for the provision 
of supported employment services to individuals who are not youth with 
the most significant disabilities, and may be viewed as a transfer of 
title VI funds from these individuals to youth with the most 
significant disabilities. The 10 percent match requirement would 
generate $1,515,140 in non-Federal funds for supported employment 
services, including extended services, for youth with the most 
significant disabilities. The match requirement represents additional 
non-Federal funds that States must expend in order to obligate and 
expend the Federal funds reserved for youth with the most significant 
disabilities. If the appropriation increases in future years, the match 
requirement would result in additional supported employment resources 
for youth with the most significant disabilities. However, States will 
have to identify additional non-Federal resources in order to match the 
Federal funds reserved for this purpose.
    Finally, as stated above, DSUs may provide extended services to 
youth with the most significant disabilities, whereas prior to the 
enactment of WIOA such services were not permitted for individuals of 
any age. Under the Act, as amended by WIOA, DSUs still may not provide 
extended services to individuals with the most significant disabilities 
who are not also youth with the most significant disabilities. Since 
extended services have not previously been an authorized activity with 
the use of VR program or supported employment program funds, this 
change could have a significant impact on States by creating a funding 
source for these services that previously was not available. However, 
because this is not a service that was previously permitted under 
either the VR program or the Supported Employment program, the 
Department has no data on which to quantify the impact this new 
requirement will have on States.
Extension of Time for the Provision of Supported Employment Services
    Section 7(39) of the Act, as amended by WIOA, and final Sec.  
361.5(c)(54) amend the definition of ``supported employment'' to permit 
the provision of supported employment services for a period up to 24 
months, rather than the previous 18 months. Although contained in part 
361, the definition of supported employment services applies to both 
the VR program and Supported Employment program. DSUs have the 
authority to exceed this time period under special circumstances if 
jointly agreed to by the individual and the vocational rehabilitation 
counselor.
    The change will benefit individuals with the most significant 
disabilities who require ongoing support services for a longer period 
of time to achieve stability in the employment setting, prior to full 
transition to extended services. This provision could result in DSUs 
using more resources under both the VR program and Supported Employment 
program to provide ongoing services.
    DSUs typically have not provided ongoing support services for a 
full 18 months for a majority of their consumers. In FY 2015, 13,652 
individuals achieved supported employment outcomes within 21 months 
following the development of the individualized plans for employment, 
which period we assume could include the provision of supported 
employment services for a full 18 months and a minimum period of 90 
days prior to program closure. Of these individuals, 9,592, or 
approximately 70.2 percent, achieved supported employment outcomes 
within 12 months. While we anticipate that most individuals may not 
need supported employment services for the full 24 months, in FY 2015, 
1,783 individuals achieved supported employment outcomes within a 
period ranging from 21 months to 27 months of the development of the 
individualized plan for employment. DSUs in total expended $13,237,902 
on purchased services for these individuals, or an average of $7,425 
per individual.

[[Page 55739]]

Assuming this period includes the provision of supported employment 
services for a full 24 months and a minimum period of 90 days prior to 
program closure, we estimate that an approximate number of individuals 
would benefit from the provision of supported employment services for 
an additional six months and that DSUs would incur similar costs for 
the provision of these services as a result of the regulatory change.
Limitations on Supported Employment Administrative Costs
    Section 603(c) of the Act, as amended by WIOA, and final Sec.  
363.51(b) reduce the maximum amount of a State's grant allotment under 
the Supported Employment program that can be used for administrative 
costs from 5 percent of the State's grant allotment to 2.5 percent. As 
a result, a larger portion of Federal Supported Employment funds must 
be spent on the provision of supported employment services, including 
extended services to youth with the most significant disabilities, 
rather than administrative costs. However, any administrative costs 
incurred beyond the 2.5 percent limit on the use of Supported 
Employment funds may be paid for with VR program funds.
    Based upon the $27,272,520 allotted to States under the Supported 
Employment program in FY 2015, the total allowable amount of these 
Federal funds that could be used to support administrative costs would 
be reduced by half, from $1,363,626 to $681,813. Thus, for those DSUs 
that have typically used more than 2.5 percent of their Supported 
Employment program allotment to cover administrative costs, the change 
would provide a small increase in the amount of funds available for the 
provision of services to individuals with the most significant 
disabilities pursuing a supported employment outcome. DSUs may shift 
these excess costs to the VR program since it does not have a cap on 
the amount of funds that can be spent on administrative costs under 
that program. We cannot estimate the impact of this shift on the VR 
program because DSUs do not report data showing the amount of VR 
program funds spent on administrative costs for the Supported 
Employment program.

C. Limitations on the Use of Subminimum Wage

    Section 511 of the Act, as added by WIOA, imposes limitations on 
the payment of subminimum wages by employers who hold special wage 
certificates under the Fair Labor Standards Act. These statutory 
requirements take effect on July 22, 2016.
    Pursuant to section 511 of the Act, as added by WIOA, final Sec.  
397.10 requires the DSU, in consultation with the State educational 
agency, to develop a process, or utilize an existing process, that 
ensures individuals with disabilities, including youth with 
disabilities, receive documentation demonstrating completion of the 
various activities required by section 511. Final Sec. Sec.  397.20 and 
397.30 establish the documentation that the DSUs and local educational 
agencies, as appropriate, must provide to demonstrate an individual's 
completion of the various activities required by section 511(a)(2) of 
the Act. These include completing pre-employment transition services 
under final Sec.  361.48(a) and the determination under an application 
for VR services under final Sec. Sec.  361.42 and 361.43. Final Sec.  
397.40 establishes the documentation that the DSUs must provide to 
individuals with disabilities upon the completion of certain 
information and career counseling-related services, as required by 
section 511(c) of the Act. We are not able to quantify the costs to the 
DSUs related to the provision of this required documentation because 
the number of youth and other individuals who potentially could receive 
services under part 397 will vary widely from State to State. In 
addition, there exists no reliable national data on which to base a 
calculation of costs. However, DSUs generate documentation throughout 
the vocational rehabilitation process that may meet the requirements of 
final Sec. Sec.  397.20 and 397.30, including written notification of a 
consumer's eligibility or ineligibility, copies of individualized plans 
for employment and subsequent amendments, and written notification when 
the consumer's record is closed. As a result, the use of this 
documentation to meet section 511 requirements should not result in 
significant additional burden to DSUs.
Paperwork Reduction Act of 1995
    The Paperwork Reduction Act of 1995 does not require the public to 
respond to a collection of information unless it displays a valid OMB 
control number. The valid OMB control numbers assigned to collections 
of information in these final regulations are: 1205-0522 (Required 
Elements for Submission of the Unified or Combined State Plan and Plan 
Modifications under the Workforce Innovation and Opportunity Act), 
1820-0013 (Cumulative Case Report), 1820-0017 (Annual Vocational 
Rehabilitation Program/Cost Report), 1820-0508 (VR Case Service 
Report), 1820-0563 (Annual Report of Appeals), 1820-0693 (Program 
Improvement Plan), and 1820-0694 (VR Program Corrective Action Plan). 
WIOA made several significant changes that affect the VR program 
collections of information. These substantive changes will be submitted 
to OMB with the final regulations.
Required Elements for Submission of the Unified or Combined State Plan 
and Plan Modifications Under the Workforce Innovation and Opportunity 
Act (1205-0522)
    Section 101(a) of the Act, as amended by WIOA, adds new content 
requirements to the State plan, which is now submitted as the VR 
services portion of the Unified or Combined State Plan under section 
102 or 103 of title I of WIOA. As a result, these information 
collection requirements are contained in the Required Elements for 
Submission of the Unified or Combined State Plan and Plan 
Modifications, and we will discontinue the VR State Plan (OMB 1820-
0500). In the NPRM, we described the substantive changes to the content 
of the VR State Plan, now collected under the VR services portion and 
supported employment supplement of the Unified or Combined State Plan 
(OMB control number 1205-0522), caused by final Sec. Sec.  361.10, 
361.18, 361.24, 361.29, and 361.36, along with final Sec. Sec.  363.10 
and 363.11. In addition, the form includes previously approved 
information collection requirements related to a number of regulations 
that remained unchanged as a result of the amendments to the Act, 
including Sec. Sec.  361.12, 361.13, 361.15, 361.16, 361.17, 361.19, 
361.20, 361.21, 361.22, 361.23, 361.25, 361.26, 361.27, 361.30, 361.31, 
361.34, 361.35, 361.37, 361.40, 361.46, 361.51, 361.52, 361.53, and 
361.55. We have made no changes in the content of the VR services 
portion of the Unified or Combined State Plan and supported employment 
supplement since publication of the NPRM.
    In the NPRM, we increased the estimated time for each DSU to 
prepare and submit the VR services portion of the Unified or Combined 
State Plan and its supported employment supplement from 25 to 30 hours 
annually.
    In addition, the total cost of this data collection increased due 
to the proposed adjustment to the average hourly wage rate of State 
personnel used to estimate the annual burden for this data collection 
from $22.00 to $39.78, so that wage rates are consistent with data 
reported by the Bureau of Labor Statistics. As a result of these 
changes, we estimated in the NPRM a total annual burden of 2,400 hours 
(30 hours for each of the 80 respondents), at

[[Page 55740]]

$39.78 per hour, for a total annual cost of $95,472.00. Since 
publication of the NPRM, we have adjusted the total annual estimated 
cost burden for submission of the VR services portion of the Unified or 
Combined State Plan due to further adjustments in the average hourly 
wage rate for State personnel responsible for the submission of the 
form of $54.21 based on data from the Bureau of Labor Statistics, for a 
total of $130,104 for all 80 agencies.
VR Case Service Report (1820-0508)
    The VR Case Service Report is used to collect annual individual 
level data on the individuals that have exited the VR program, 
including individuals receiving services with funds provided under the 
Supported Employment program. Sections 101(a)(10) and 607 of the Act 
contain data reporting requirements under the VR program and Supported 
Employment program, respectively. WIOA amends these sections to require 
States to report additional data describing the individuals served and 
the services provided through these programs. In addition, WIOA amends 
section 106 of the Act by requiring that the standards and indicators 
used to assess the performance of the VR program be consistent with the 
performance accountability measures for the core programs of the 
workforce development system established under section 116 of WIOA. We 
described in the NPRM the substantive changes made to final Sec. Sec.  
361.40 and 363.52 that cause substantive changes to the active and OMB-
approved data collection under 1820-0508--the VR Case Service Report 
(RSA-911). Since publication of the NPRM, we have made no substantive 
changes to the RSA-911 as a result of changes in these final 
regulations or the joint final regulations governing the performance 
accountability system published elsewhere in this issue of the Federal 
Register. However, since the NPRM, we have modified the RSA-911 to 
incorporate changes in the data collected through the joint ICR. In 
addition, we have revised the layout of the form in response to 
comments to better align the collection of specific data elements with 
the VR process and to clarify the data needed to track the provision of 
pre-employment transition services and the achievement of supported 
employment outcomes.
    In the NPRM, we increased the estimated burden for the submission 
of the RSA-911 caused by the reporting of the data for both open and 
closed cases on a quarterly basis. We estimated the total annual 
reporting burden to be 8,000 hours at $33.63 per hour (a rate more 
consistent with the rate reported through the Bureau of Labor 
Statistics for State-employed database administrators), for a total 
annual cost of $269,040.
    As described in the Regulatory Impact Analysis section of these 
final regulations, we have increased the estimated burden associated 
with the RSA-911 since publication of the NPRM for several reasons. We 
now include in the estimated burden the time needed for both collection 
and submission of the data. Previous burden estimates were based only 
on the time needed to prepare and submit the RSA-911. In addition, we 
have changed the method used to estimate the time needed to collect the 
data from a total of 15 minutes per vocational rehabilitation counselor 
to one minute for each new data element in the form. We also have 
revised the estimated hours associated with the submission of the data 
on a quarterly basis from a total of 100 per year to a total of 120 
hours (30 hours per quarter). Finally, we now estimate that 64 percent 
of the new data elements are required by substantive changes to the VR 
program-specific requirements in section 101(a)(10) of the Act and the 
remaining 36 percent are required by section 116 of WIOA. We have 
prorated the estimated burden for the collection of the new data 
elements based on these percentages. As a result of these changes, the 
total additional VR-specific burden hours for both collection and 
submission of required data is 6,470 hours per VR agency (6,400 data 
collection hours and 70 data submission hours), or a total of 517,600 
hours for all 80 VR agencies. The estimated total additional VR 
program-specific cost for both collection and submission per VR agency 
is $211,831, with a total additional burden cost of $16,946,512 for all 
80 VR agencies.
Intergovernmental Review
    These programs are subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
order is to foster an intergovernmental partnership and a strengthened 
federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.
    This document provides early notification of our specific plans and 
actions for these programs.
Assessment of Educational Impact
    In the NPRM we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available. We 
received no comments.
Federalism
    Executive Order 13132 requires us to ensure meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. In the NPRM we stated that parts 361, 363, and 397 may have 
federalism implications and encouraged State and local elected 
officials to review and provide comments on the proposed regulations. 
In the Public Comment section of this preamble, we discuss any comments 
we received on this subject.
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by the Department.

(Catalog of Federal Domestic Assistance Numbers: 84.126A State 
Vocational Rehabilitation Services program; and 84.187 State 
Supported Employment Services program)

List of Subjects

34 CFR Part 361

    Administrative practice and procedure, Grant programs-education, 
Grant programs-social programs, Reporting and recordkeeping 
requirements, Vocational rehabilitation.

[[Page 55741]]

34 CFR Part 363

    Grant programs-education, Grant programs-social programs, Manpower 
training programs, Reporting and recordkeeping requirements, Vocational 
rehabilitation.

34 CFR Part 397

    Individuals with disabilities, Reporting and recordkeeping 
requirements, Students, Vocational rehabilitation, Youth.

    Dated: June 30, 2016.
John B. King, Jr.,
Secretary of Education.
    The Secretary of Education amends 34 CFR chapter III as follows:

0
1. Part 361 is revised to read as follows:

PART 361--STATE VOCATIONAL REHABILITATION SERVICES PROGRAM

Subpart A--General
Sec.
361.1 Purpose.
361.2 Eligibility for a grant.
361.3 Authorized activities.
361.4 Applicable regulations.
361.5 Applicable definitions.
Subpart B--State Plan and Other Requirements for Vocational 
Rehabilitation Services
361.10 Submission, approval, and disapproval of the State plan.
361.11 Withholding of funds.

Administration

361.12 Methods of administration.
361.13 State agency for administration.
361.14 Substitute State agency.
361.15 Local administration.
361.16 Establishment of an independent commission or a State 
Rehabilitation Council.
361.17 Requirements for a State Rehabilitation Council.
361.18 Comprehensive system of personnel development.
361.19 Affirmative action for individuals with disabilities.
361.20 Public participation requirements.
361.21 Consultations regarding the administration of the vocational 
rehabilitation services portion of the Unified or Combined State 
Plan.
361.22 Coordination with education officials.
361.23 [Reserved]
361.24 Cooperation and coordination with other entities.
361.25 Statewideness.
361.26 Waiver of statewideness.
361.27 Shared funding and administration of joint programs.
361.28 Third-party cooperative arrangements involving funds from 
other public agencies.
361.29 Statewide assessment; annual estimates; annual State goals 
and priorities; strategies; and progress reports.
361.30 Services to American Indians.
361.31 Cooperative agreements with private nonprofit organizations.
361.32 Provision of training and services for employers.
361.33 [Reserved]
361.34 Supported employment State plan supplement.
361.35 Innovation and expansion activities.
361.36 Ability to serve all eligible individuals; order of selection 
for services.
361.37 Information and referral programs.
361.38 Protection, use, and release of personal information.
361.39 State-imposed requirements.
361.40 Reports; Evaluation standards and performance indicators.

Provision and Scope of Services

361.41 Processing referrals and applications.
361.42 Assessment for determining eligibility and priority for 
services.
361.43 Procedures for ineligibility determination.
361.44 Closure without eligibility determination.
361.45 Development of the individualized plan for employment.
361.46 Content of the individualized plan for employment.
361.47 Record of services.
361.48 Scope of vocational rehabilitation services for individuals 
with disabilities.
361.49 Scope of vocational rehabilitation services for groups of 
individuals with disabilities.
361.50 Written policies governing the provision of services for 
individuals with disabilities.
361.51 Standards for facilities and providers of services.
361.52 Informed choice.
361.53 Comparable services and benefits.
361.54 Participation of individuals in cost of services based on 
financial need.
361.55 Semi-annual and annual review of individuals in extended 
employment and other employment under special certificate provisions 
of the Fair Labor Standards Act.
361.56 Requirements for closing the record of services of an 
individual who has achieved an employment outcome.
361.57 Review of determinations made by designated State unit 
personnel.
Subpart C--Financing of State Vocational Rehabilitation Programs
361.60 Matching requirements.
361.61 Limitation on use of funds for construction expenditures.
361.62 Maintenance of effort requirements.
361.63 Program income.
361.64 Obligation of Federal funds.
361.65 Allotment and payment of Federal funds for vocational 
rehabilitation services.
Subparts D-F--[Reserved]

    Authority:  Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c), unless otherwise noted.

Subpart A--General


Sec.  361.1  Purpose.

    Under the State Vocational Rehabilitation Services Program, the 
Secretary provides grants to assist States in operating statewide 
comprehensive, coordinated, effective, efficient, and accountable 
vocational rehabilitation programs, each of which is--
    (a) An integral part of a statewide workforce development system; 
and
    (b) Designed to assess, plan, develop, and provide vocational 
rehabilitation services for individuals with disabilities, consistent 
with their unique strengths, resources, priorities, concerns, 
abilities, capabilities, interests, and informed choice so that they 
may prepare for and engage in competitive integrated employment and 
achieve economic self-sufficiency.

(Authority: Sections 12(c) and 100(a) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 720(a))

Sec.  361.2  Eligibility for a grant.

    Any State that submits to the Secretary a vocational rehabilitation 
services portion of the Unified or Combined State Plan that meets the 
requirements of section 101(a) of the Act and this part is eligible for 
a grant under this program.

(Authority: Section 101(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a))

Sec.  361.3  Authorized activities.

    The Secretary makes payments to a State to assist in--
    (a) The costs of providing vocational rehabilitation services under 
the vocational rehabilitation services portion of the Unified or 
Combined State Plan; and
    (b) Administrative costs under the vocational rehabilitation 
services portion of the Unified or Combined State Plan, including one-
stop infrastructure costs.

(Authority: Sections 12(c) and 111(a)(1) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 731(a)(1))

Sec.  361.4  Applicable regulations.

    The following regulations apply to this program:
    (a) The Education Department General Administrative Regulations 
(EDGAR) as follows:
    (1) 34 CFR part 76 (State-Administered Programs).
    (2) 34 CFR part 77 (Definitions that Apply to Department 
Regulations).
    (3) 34 CFR part 79 (Intergovernmental Review of Department of 
Education Programs and Activities).
    (4) 34 CFR part 81 (General Education Provisions Act--Enforcement).

[[Page 55742]]

    (5) 34 CFR part 82 (New Restrictions on Lobbying).
    (b) The regulations in this part 361.
    (c) 2 CFR part 190 (OMB Guidelines to Agencies on Governmentwide 
Debarment and Suspension (Nonprocurement)) as adopted in 2 CFR part 
3485.
    (d) 2 CFR part 200 (Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards) as adopted in 2 
CFR part 3474, except the requirements to accept third-party in-kind 
contributions to meet cost-sharing or matching requirements, as 
otherwise authorized under 2 CFR 200.306(b).

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.5  Applicable definitions.

    The following definitions apply to this part:
    (a) Definitions in EDGAR 77.1.
    (b) Definitions in 2 CFR part 200, subpart A.
    (c) The following definitions:
    (1) Act means the Rehabilitation Act of 1973, as amended (29 U.S.C. 
701 et seq.).
    (2) Administrative costs under the vocational rehabilitation 
services portion of the Unified or Combined State Plan means 
expenditures incurred in the performance of administrative functions 
under the vocational rehabilitation program carried out under this 
part, including expenses related to program planning, development, 
monitoring, and evaluation, including, but not limited to, expenses 
for--
    (i) Quality assurance;
    (ii) Budgeting, accounting, financial management, information 
systems, and related data processing;
    (iii) Providing information about the program to the public;
    (iv) Technical assistance and support services to other State 
agencies, private nonprofit organizations, and businesses and 
industries, except for technical assistance and support services 
described in Sec.  361.49(a)(4);
    (v) The State Rehabilitation Council and other advisory committees;
    (vi) Professional organization membership dues for designated State 
unit employees;
    (vii) The removal of architectural barriers in State vocational 
rehabilitation agency offices and State-operated rehabilitation 
facilities;
    (viii) Operating and maintaining designated State unit facilities, 
equipment, and grounds, as well as the infrastructure of the one-stop 
system;
    (ix) Supplies;
    (x) Administration of the comprehensive system of personnel 
development described in Sec.  361.18, including personnel 
administration, administration of affirmative action plans, and 
training and staff development;
    (xi) Administrative salaries, including clerical and other support 
staff salaries, in support of these administrative functions;
    (xii) Travel costs related to carrying out the program, other than 
travel costs related to the provision of services;
    (xiii) Costs incurred in conducting reviews of determinations made 
by personnel of the designated State unit, including costs associated 
with mediation and impartial due process hearings under Sec.  361.57; 
and
    (xiv) Legal expenses required in the administration of the program.

(Authority: Sections 7(1) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(1) and 709(c))


    (3) Applicant means an individual who submits an application for 
vocational rehabilitation services in accordance with Sec.  
361.41(b)(2).

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))


    (4) Appropriate modes of communication means specialized aids and 
supports that enable an individual with a disability to comprehend and 
respond to information that is being communicated. Appropriate modes of 
communication include, but are not limited to, the use of interpreters, 
open and closed captioned videos, specialized telecommunications 
services and audio recordings, Brailled and large print materials, 
materials in electronic formats, augmentative communication devices, 
graphic presentations, and simple language materials.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))


    (5) Assessment for determining eligibility and vocational 
rehabilitation needs means, as appropriate in each case--
    (i)(A) A review of existing data--
    (1) To determine if an individual is eligible for vocational 
rehabilitation services; and
    (2) To assign priority for an order of selection described in Sec.  
361.36 in the States that use an order of selection; and
    (B) To the extent necessary, the provision of appropriate 
assessment activities to obtain necessary additional data to make the 
eligibility determination and assignment;
    (ii) To the extent additional data are necessary to make a 
determination of the employment outcomes and the nature and scope of 
vocational rehabilitation services to be included in the individualized 
plan for employment of an eligible individual, a comprehensive 
assessment to determine the unique strengths, resources, priorities, 
concerns, abilities, capabilities, interests, and informed choice, 
including the need for supported employment, of the eligible 
individual. This comprehensive assessment--
    (A) Is limited to information that is necessary to identify the 
rehabilitation needs of the individual and to develop the 
individualized plan for employment of the eligible individual;
    (B) Uses as a primary source of information, to the maximum extent 
possible and appropriate and in accordance with confidentiality 
requirements--
    (1) Existing information obtained for the purposes of determining 
the eligibility of the individual and assigning priority for an order 
of selection described in Sec.  361.36 for the individual; and
    (2) Information that can be provided by the individual and, if 
appropriate, by the family of the individual;
    (C) May include, to the degree needed to make such a determination, 
an assessment of the personality, interests, interpersonal skills, 
intelligence and related functional capacities, educational 
achievements, work experience, vocational aptitudes, personal and 
social adjustments, and employment opportunities of the individual and 
the medical, psychiatric, psychological, and other pertinent 
vocational, educational, cultural, social, recreational, and 
environmental factors that affect the employment and rehabilitation 
needs of the individual;
    (D) May include, to the degree needed, an appraisal of the patterns 
of work behavior of the individual and services needed for the 
individual to acquire occupational skills and to develop work 
attitudes, work habits, work tolerance, and social and behavior 
patterns necessary for successful job performance, including the use of 
work in real job situations to assess and develop the capacities of the 
individual to perform adequately in a work environment; and
    (E) To the maximum extent possible, relies on information obtained 
from experiences in integrated employment settings in the community and 
in other integrated community settings;
    (iii) Referral, for the provision of rehabilitation technology 
services to the individual, to assess and develop the

[[Page 55743]]

capacities of the individual to perform in a work environment; and
    (iv) An exploration of the individual's abilities, capabilities, 
and capacity to perform in work situations, which must be assessed 
periodically during trial work experiences, including experiences in 
which the individual is provided appropriate supports and training.

(Authority: Sections 7(2) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(2) and 709(c))


    (6) Assistive technology terms--(i) Assistive technology has the 
meaning given such term in section 3 of the Assistive Technology Act of 
1998 (29 U.S.C. 3002).
    (ii) Assistive technology device has the meaning given such term in 
section 3 of the Assistive Technology Act of 1998, except that the 
reference in such section to the term individuals with disabilities 
will be deemed to mean more than one individual with a disability as 
defined in paragraph (20)(A) of the Act.
    (iii) Assistive technology service has the meaning given such term 
in section 3 of the Assistive Technology Act of 1998, except that the 
reference in such section to the term--
    (A) Individual with a disability will be deemed to mean an 
individual with a disability, as defined in paragraph (20)(A) of the 
Act; and
    (B) Individuals with disabilities will be deemed to mean more than 
one such individual.

(Authority: Sections 7(3) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(3) and 709(c))


    (7) Community rehabilitation program--(i) Community rehabilitation 
program means a program that provides directly or facilitates the 
provision of one or more of the following vocational rehabilitation 
services to individuals with disabilities to enable those individuals 
to maximize their opportunities for employment, including career 
advancement:
    (A) Medical, psychiatric, psychological, social, and vocational 
services that are provided under one management.
    (B) Testing, fitting, or training in the use of prosthetic and 
orthotic devices.
    (C) Recreational therapy.
    (D) Physical and occupational therapy.
    (E) Speech, language, and hearing therapy.
    (F) Psychiatric, psychological, and social services, including 
positive behavior management.
    (G) Assessment for determining eligibility and vocational 
rehabilitation needs.
    (H) Rehabilitation technology.
    (I) Job development, placement, and retention services.
    (J) Evaluation or control of specific disabilities.
    (K) Orientation and mobility services for individuals who are 
blind.
    (L) Extended employment.
    (M) Psychosocial rehabilitation services.
    (N) Supported employment services and extended services.
    (O) Customized employment.
    (P) Services to family members if necessary to enable the applicant 
or eligible individual to achieve an employment outcome.
    (Q) Personal assistance services.
    (R) Services similar to the services described in paragraphs 
(c)(7)(i)(A) through (Q) of this section.
    (ii) For the purposes of this definition, program means an agency, 
organization, or institution, or unit of an agency, organization, or 
institution, that provides directly or facilitates the provision of 
vocational rehabilitation services as one of its major functions.

(Authority: Section 7(4) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(4))


    (8) Comparable services and benefits--(i) Comparable services and 
benefits means services and benefits, including accommodations and 
auxiliary aids and services, that are--
    (A) Provided or paid for, in whole or in part, by other Federal, 
State, or local public agencies, by health insurance, or by employee 
benefits;
    (B) Available to the individual at the time needed to ensure the 
progress of the individual toward achieving the employment outcome in 
the individual's individualized plan for employment in accordance with 
Sec.  361.53; and
    (C) Commensurate to the services that the individual would 
otherwise receive from the designated State vocational rehabilitation 
agency.
    (ii) For the purposes of this definition, comparable services and 
benefits do not include awards and scholarships based on merit.

(Authority: Sections 12(c) and 101(a)(8) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(8))


    (9) Competitive integrated employment means work that--
    (i) Is performed on a full-time or part-time basis (including self-
employment) and for which an individual is compensated at a rate that-
    (A) Is not less than the higher of the rate specified in section 
6(a)(1) of the Fair Labor Standards Act of 1938 (29 U.S.C. 206(a)(1)) 
or the rate required under the applicable State or local minimum wage 
law for the place of employment;
    (B) Is not less than the customary rate paid by the employer for 
the same or similar work performed by other employees who are not 
individuals with disabilities and who are similarly situated in similar 
occupations by the same employer and who have similar training, 
experience, and skills; and
    (C) In the case of an individual who is self-employed, yields an 
income that is comparable to the income received by other individuals 
who are not individuals with disabilities and who are self-employed in 
similar occupations or on similar tasks and who have similar training, 
experience, and skills; and
    (D) Is eligible for the level of benefits provided to other 
employees; and
    (ii) Is at a location--
    (A) Typically found in the community; and
    (B) Where the employee with a disability interacts for the purpose 
of performing the duties of the position with other employees within 
the particular work unit and the entire work site, and, as appropriate 
to the work performed, other persons (e.g., customers and vendors), who 
are not individuals with disabilities (not including supervisory 
personnel or individuals who are providing services to such employee) 
to the same extent that employees who are not individuals with 
disabilities and who are in comparable positions interact with these 
persons; and
    (iii) Presents, as appropriate, opportunities for advancement that 
are similar to those for other employees who are not individuals with 
disabilities and who have similar positions.

(Authority: Sections 7(5) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(5) and 709(c))


    (10) Construction of a facility for a public or nonprofit community 
rehabilitation program means--
    (i) The acquisition of land in connection with the construction of 
a new building for a community rehabilitation program;
    (ii) The construction of new buildings;
    (iii) The acquisition of existing buildings;
    (iv) The expansion, remodeling, alteration, or renovation of 
existing buildings;
    (v) Architect's fees, site surveys, and soil investigation, if 
necessary, in

[[Page 55744]]

connection with the acquisition of land or existing buildings, or the 
construction, expansion, remodeling, or alteration of community 
rehabilitation facilities;
    (vi) The acquisition of initial fixed or movable equipment of any 
new, newly acquired, newly expanded, newly remodeled, newly altered, or 
newly renovated buildings that are to be used for community 
rehabilitation program purposes; and
    (vii) Other direct expenditures appropriate to the construction 
project, except costs of off-site improvements.

(Authority: Sections 7(6) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(6) and 709(c))


    (11) Customized employment means competitive integrated employment, 
for an individual with a significant disability, that is--
    (i) Based on an individualized determination of the unique 
strengths, needs, and interests of the individual with a significant 
disability;
    (ii) Designed to meet the specific abilities of the individual with 
a significant disability and the business needs of the employer; and
    (iii) Carried out through flexible strategies, such as--
    (A) Job exploration by the individual; and
    (B) Working with an employer to facilitate placement, including--
    (1) Customizing a job description based on current employer needs 
or on previously unidentified and unmet employer needs;
    (2) Developing a set of job duties, a work schedule and job 
arrangement, and specifics of supervision (including performance 
evaluation and review), and determining a job location;
    (3) Using a professional representative chosen by the individual, 
or if elected self-representation, to work with an employer to 
facilitate placement; and
    (4) Providing services and supports at the job location.

(Authority: Section 7(7) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(7) and 709(c))


    (12) Designated State agency or State agency means the sole State 
agency, designated, in accordance with Sec.  361.13(a), to administer, 
or supervise the local administration of, the vocational rehabilitation 
services portion of the Unified or Combined State Plan. The term 
includes the State agency for individuals who are blind, if designated 
as the sole State agency with respect to that part of the Unified or 
Combined State Plan relating to the vocational rehabilitation of 
individuals who are blind.

(Authority: Sections 7(8)(A) and 101(a)(2)(A) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(8)(A) and 721(a)(2)(A))


    (13) Designated State unit or State unit means either--
    (i) The State vocational rehabilitation bureau, division, or other 
organizational unit that is primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities and that is responsible for the administration of the 
vocational rehabilitation program of the State agency, as required 
under Sec.  361.13(b); or
    (ii) The State agency that is primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities.

(Authority: Sections 7(8)(B) and 101(a)(2)(B) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(8)(B) and 721(a)(2)(B))


    (14) Eligible individual means an applicant for vocational 
rehabilitation services who meets the eligibility requirements of Sec.  
361.42(a).

(Authority: Sections 7(20)(A) and 102(a)(1) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(20)(A) and 722(a)(1))


    (15) Employment outcome means, with respect to an individual, 
entering, advancing in, or retaining full-time or, if appropriate, 
part-time competitive integrated employment, as defined in paragraph 
(c)(9) of this section (including customized employment, self-
employment, telecommuting, or business ownership), or supported 
employment as defined in paragraph (c)(53) of this section, that is 
consistent with an individual's unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed 
choice.

    Note to paragraph (c)(15): A designated State unit may continue 
services to individuals with uncompensated employment goals on their 
approved individualized plans for employment prior to September 19, 
2016 until June 30, 2017, unless a longer period of time is required 
based on the needs of the individual with the disability, as 
documented in the individual's service record.


(Authority: Sections 7(11), 12(c), 100(a)(2), and 102(b)(4)(A) of 
the Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(11), 
709(c), 720(a)(2), and 722(b)(4)(A))


    (16) Establishment, development, or improvement of a public or 
nonprofit community rehabilitation program means--
    (i) The establishment of a facility for a public or nonprofit 
community rehabilitation program, as defined in paragraph (c)(17) of 
this section, to provide vocational rehabilitation services to 
applicants or eligible individuals;
    (ii) Staffing, if necessary to establish, develop, or improve a 
public or nonprofit community rehabilitation program for the purpose of 
providing vocational rehabilitation services to applicants or eligible 
individuals, for a maximum period of four years, with Federal financial 
participation available at the applicable matching rate for the 
following levels of staffing costs:
    (A) 100 percent of staffing costs for the first year;
    (B) 75 percent of staffing costs for the second year;
    (C) 60 percent of staffing costs for the third year; and
    (D) 45 percent of staffing costs for the fourth year; and
    (iii) Other expenditures and activities related to the 
establishment, development, or improvement of a public or nonprofit 
community rehabilitation program that are necessary to make the program 
functional or increase its effectiveness in providing vocational 
rehabilitation services to applicants or eligible individuals, but are 
not ongoing operating expenses of the program.

(Authority: Sections 7(12) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(12) and 709(c))


    (17) Establishment of a facility for a public or nonprofit 
community rehabilitation program means--
    (i) The acquisition of an existing building and, if necessary, the 
land in connection with the acquisition, if the building has been 
completed in all respects for at least one year prior to the date of 
acquisition and the Federal share of the cost of acquisition is not 
more than $300,000;
    (ii) The remodeling or alteration of an existing building, provided 
the estimated cost of remodeling or alteration does not exceed the 
appraised value of the existing building;
    (iii) The expansion of an existing building, provided that--
    (A) The existing building is complete in all respects;
    (B) The total size in square footage of the expanded building, 
notwithstanding the number of expansions, is not greater than twice the 
size of the existing building;
    (C) The expansion is joined structurally to the existing building 
and does not constitute a separate building; and
    (D) The costs of the expansion do not exceed the appraised value of 
the existing building;
    (iv) Architect's fees, site survey, and soil investigation, if 
necessary in

[[Page 55745]]

connection with the acquisition, remodeling, alteration, or expansion 
of an existing building; and
    (v) The acquisition of fixed or movable equipment, including the 
costs of installation of the equipment, if necessary to establish, 
develop, or improve a community rehabilitation program.

(Authority: Sections 7(12) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(12) and 709(c))


    (18) Extended employment means work in a non-integrated or 
sheltered setting for a public or private nonprofit agency or 
organization that provides compensation in accordance with the Fair 
Labor Standards Act.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))


    (19) Extended services means ongoing support services and other 
appropriate services that are--
    (i) Needed to support and maintain an individual with a most 
significant disability including a youth with a most significant 
disability, in supported employment;
    (ii) Organized or made available, singly or in combination, in such 
a way as to assist an eligible individual in maintaining supported 
employment;
    (iii) Based on the needs of an eligible individual, as specified in 
an individualized plan for employment;
    (iv) Provided by a State agency, a private nonprofit organization, 
employer, or any other appropriate resource, after an individual has 
made the transition from support from the designated State unit; and
    (v) Provided to a youth with a most significant disability by the 
designated State unit in accordance with requirements set forth in this 
part and part 363 for a period not to exceed four years, or at such 
time that a youth reaches age 25 and no longer meets the definition of 
a youth with a disability under paragraph (c)(58) of this section, 
whichever occurs first. The designated State unit may not provide 
extended services to an individual with a most significant disability 
who is not a youth with a most significant disability.

(Authority: Sections 7(13), 12(c), and 604(b) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(13), 709(c), and 795i(b))


    (20) Extreme medical risk means a probability of substantially 
increasing functional impairment or death if medical services, 
including mental health services, are not provided expeditiously.

(Authority: Sections 12(c) and 101(a)(8)(A)(i)(III) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
721(a)(8)(A)(i)(III))


    (21) Fair hearing board means a committee, body, or group of 
persons established by a State prior to January 1, 1985, that--
    (i) Is authorized under State law to review determinations made by 
personnel of the designated State unit that affect the provision of 
vocational rehabilitation services; and
    (ii) Carries out the responsibilities of the impartial hearing 
officer in accordance with the requirements in Sec.  361.57(j).

(Authority: Sections 12(c) and 102(c)(6) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 722(c)(6))


    (22) Family member, for purposes of receiving vocational 
rehabilitation services in accordance with Sec.  361.48(b)(9), means an 
individual--
    (i) Who either--
    (A) Is a relative or guardian of an applicant or eligible 
individual; or
    (B) Lives in the same household as an applicant or eligible 
individual;
    (ii) Who has a substantial interest in the well-being of that 
individual; and
    (iii) Whose receipt of vocational rehabilitation services is 
necessary to enable the applicant or eligible individual to achieve an 
employment outcome.

(Authority: Sections 12(c) and 103(a)(19) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(19))


    (23) Governor means a chief executive officer of a State.

(Authority: Section 7(15) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(15))


    (24) Impartial hearing officer--(i) Impartial hearing officer means 
an individual who--
    (A) Is not an employee of a public agency (other than an 
administrative law judge, hearing examiner, or employee of an 
institution of higher education);
    (B) Is not a member of the State Rehabilitation Council for the 
designated State unit;
    (C) Has not been involved previously in the vocational 
rehabilitation of the applicant or recipient of services;
    (D) Has knowledge of the delivery of vocational rehabilitation 
services, the vocational rehabilitation services portion of the Unified 
or Combined State Plan, and the Federal and State regulations governing 
the provision of services;
    (E) Has received training with respect to the performance of 
official duties; and
    (F) Has no personal, professional, or financial interest that could 
affect the objectivity of the individual.
    (ii) An individual is not considered to be an employee of a public 
agency for the purposes of this definition solely because the 
individual is paid by the agency to serve as a hearing officer.

(Authority: Sections 7(16) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(16) and 709(c))


    (25) Indian; American Indian; Indian American; Indian Tribe--(i) In 
general. The terms ``Indian'', ``American Indian'', and ``Indian 
American'' mean an individual who is a member of an Indian tribe and 
include a Native and a descendant of a Native, as such terms are 
defined in subsections (b) and (r) of section 3 of the Alaska Native 
Claims Settlement Act (43 U.S.C. 1602).
    (ii) Indian tribe. The term ``Indian tribe'' means any Federal or 
State Indian tribe, band, rancheria, pueblo, colony, or community, 
including any Alaska native village or regional village corporation (as 
defined in or established pursuant to the Alaska Native Claims 
Settlement Act) and a tribal organization (as defined in section 4(l) 
of the Indian Self-Determination and Education Assistance Act (25 
U.S.C. 450(b)(l)).

(Authority: Section 7(19) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(19))


    (26) Individual who is blind means a person who is blind within the 
meaning of applicable State law.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))


    (27) Individual with a disability, except as provided in paragraph 
(c)(28) of this section, means an individual--
    (i) Who has a physical or mental impairment;
    (ii) Whose impairment constitutes or results in a substantial 
impediment to employment; and
    (iii) Who can benefit in terms of an employment outcome from the 
provision of vocational rehabilitation services.

(Authority: Section 7(20)(A) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(20)(A))


    (28) Individual with a disability, for purposes of Sec. Sec.  
361.5(c)(13), 361.13(a), 361.13(b)(1), 361.17(a), (b), (c), and (j), 
361.18(b), 361.19, 361.20, 361.23(b)(2), 361.29(a) and (d)(8), and 
361.51(b), means an individual--
    (i) Who has a physical or mental impairment that substantially 
limits one or more major life activities;
    (ii) Who has a record of such an impairment; or

[[Page 55746]]

    (iii) Who is regarded as having such an impairment.

(Authority: Section 7(20)(B) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(20)(B))


    (29) Individual with a most significant disability means an 
individual with a significant disability who meets the designated State 
unit's criteria for an individual with a most significant disability. 
These criteria must be consistent with the requirements in Sec.  
361.36(d)(1) and (2).

(Authority: Sections 7(21)(E) and 101(a)(5)(C) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(21)(E) and 721(a)(5)(C))


    (30) Individual with a significant disability means an individual 
with a disability--
    (i) Who has a severe physical or mental impairment that seriously 
limits one or more functional capacities (such as mobility, 
communication, self-care, self-direction, interpersonal skills, work 
tolerance, or work skills) in terms of an employment outcome;
    (ii) Whose vocational rehabilitation can be expected to require 
multiple vocational rehabilitation services over an extended period of 
time; and
    (iii) Who has one or more physical or mental disabilities resulting 
from amputation, arthritis, autism, blindness, burn injury, cancer, 
cerebral palsy, cystic fibrosis, deafness, head injury, heart disease, 
hemiplegia, hemophilia, respiratory or pulmonary dysfunction, mental 
illness, multiple sclerosis, muscular dystrophy, musculo-skeletal 
disorders, neurological disorders (including stroke and epilepsy), 
spinal cord conditions (including paraplegia and quadriplegia), sickle 
cell anemia, intellectual disability, specific learning disability, 
end-stage renal disease, or another disability or combination of 
disabilities determined on the basis of an assessment for determining 
eligibility and vocational rehabilitation needs to cause comparable 
substantial functional limitation.

(Authority: Section 7(21)(A) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(21)(A))


    (31) Individual's representative means any representative chosen by 
an applicant or eligible individual, as appropriate, including a 
parent, guardian, other family member, or advocate, unless a 
representative has been appointed by a court to represent the 
individual, in which case the court-appointed representative is the 
individual's representative.

(Authority: Sections 7(22) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(22) and 709(c))


    (32) Integrated setting means--
    (i) With respect to the provision of services, a setting typically 
found in the community in which applicants or eligible individuals 
interact with non-disabled individuals other than non-disabled 
individuals who are providing services to those applicants or eligible 
individuals; and
    (ii) With respect to an employment outcome, means a setting--
    (A) Typically found in the community; and
    (B) Where the employee with a disability interacts, for the purpose 
of performing the duties of the position, with other employees within 
the particular work unit and the entire work site, and, as appropriate 
to the work performed, other persons (e.g., customers and vendors) who 
are not individuals with disabilities (not including supervisory 
personnel or individuals who are providing services to such employee) 
to the same extent that employees who are not individuals with 
disabilities and who are in comparable positions interact with these 
persons.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))


    (33) Local workforce development board means a local board, as 
defined in section 3 of the Workforce Innovation and Opportunity Act.

(Authority: Section 7(25) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(25))


    (34) Maintenance means monetary support provided to an individual 
for expenses, such as food, shelter, and clothing, that are in excess 
of the normal expenses of the individual and that are necessitated by 
the individual's participation in an assessment for determining 
eligibility and vocational rehabilitation needs or the individual's 
receipt of vocational rehabilitation services under an individualized 
plan for employment.

(Authority: Sections 12(c) and 103(a)(7) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(7))


    (i) Examples: The following are examples of expenses that would 
meet the definition of maintenance. The examples are illustrative, do 
not address all possible circumstances, and are not intended to 
substitute for individual counselor judgment.


    Example 1:  The cost of a uniform or other suitable clothing 
that is required for an individual's job placement or job-seeking 
activities.
    Example 2:  The cost of short-term shelter that is required in 
order for an individual to participate in assessment activities or 
vocational training at a site that is not within commuting distance 
of an individual's home.
    Example 3:  The initial one-time costs, such as a security 
deposit or charges for the initiation of utilities, that are 
required in order for an individual to relocate for a job placement.

    (ii) [Reserved]
    (35) Mediation means the act or process of using an independent 
third party to act as a mediator, intermediary, or conciliator to 
assist persons or parties in settling differences or disputes prior to 
pursuing formal administrative or other legal remedies. Mediation under 
the program must be conducted in accordance with the requirements in 
Sec.  361.57(d) by a qualified and impartial mediator as defined in 
Sec.  361.5(c)(43).

(Authority: Sections 12(c) and 102(c)(4) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 722(c)(4))


    (36) Nonprofit, with respect to a community rehabilitation program, 
means a community rehabilitation program carried out by a corporation 
or association, no part of the net earnings of which inures, or may 
lawfully inure, to the benefit of any private shareholder or individual 
and the income of which is exempt from taxation under section 501(c)(3) 
of the Internal Revenue Code of 1986.

(Authority: Section 7(26) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(26))


    (37) Ongoing support services, as used in the definition of 
supported employment, means services that--
    (i) Are needed to support and maintain an individual with a most 
significant disability, including a youth with a most significant 
disability, in supported employment;
    (ii) Are identified based on a determination by the designated 
State unit of the individual's need as specified in an individualized 
plan for employment;
    (iii) Are furnished by the designated State unit from the time of 
job placement until transition to extended services, unless post-
employment services are provided following transition, and thereafter 
by one or more extended services providers throughout the individual's 
term of employment in a particular job placement;
    (iv) Include an assessment of employment stability and provision of 
specific services or the coordination of services at or away from the 
worksite that are needed to maintain stability based on--

[[Page 55747]]

    (A) At a minimum, twice-monthly monitoring at the worksite of each 
individual in supported employment; or
    (B) If under specific circumstances, especially at the request of 
the individual, the individualized plan for employment provides for 
off-site monitoring, twice monthly meetings with the individual;
    (v) Consist of--
    (A) Any particularized assessment supplementary to the 
comprehensive assessment of rehabilitation needs described in paragraph 
(c)(5)(ii) of this section;
    (B) The provision of skilled job trainers who accompany the 
individual for intensive job skill training at the work site;
    (C) Job development and training;
    (D) Social skills training;
    (E) Regular observation or supervision of the individual;
    (F) Follow-up services including regular contact with the 
employers, the individuals, the parents, family members, guardians, 
advocates or authorized representatives of the individuals, and other 
suitable professional and informed advisors, in order to reinforce and 
stabilize the job placement;
    (G) Facilitation of natural supports at the worksite;
    (H) Any other service identified in the scope of vocational 
rehabilitation services for individuals, described in Sec.  361.48(b); 
or
    (I) Any service similar to the foregoing services.

(Authority: Sections 7(27) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(27) and 709(c))


    (38) Personal assistance services means a range of services, 
including, among other things, training in managing, supervising, and 
directing personal assistance services, provided by one or more 
persons, that are--
    (i) Designed to assist an individual with a disability to perform 
daily living activities on or off the job that the individual would 
typically perform without assistance if the individual did not have a 
disability;
    (ii) Designed to increase the individual's control in life and 
ability to perform everyday activities on or off the job;
    (iii) Necessary to the achievement of an employment outcome; and
    (iv) Provided only while the individual is receiving other 
vocational rehabilitation services. The services may include training 
in managing, supervising, and directing personal assistance services.

(Authority: Sections 7(28), 12(c), 102(b)(4)(B)(i)(I)(bb), and 
103(a)(9) of the Rehabilitation Act of 1973, as amended; 29 U.S.C. 
705(28), 709(c), 722(b)(4)(B)(i)(I)(bb), and 723(a)(9))


    (39) Physical and mental restoration services means--
    (i) Corrective surgery or therapeutic treatment that is likely, 
within a reasonable period of time, to correct or modify substantially 
a stable or slowly progressive physical or mental impairment that 
constitutes a substantial impediment to employment;
    (ii) Diagnosis of and treatment for mental or emotional disorders 
by qualified personnel in accordance with State licensure laws;
    (iii) Dentistry;
    (iv) Nursing services;
    (v) Necessary hospitalization (either inpatient or outpatient care) 
in connection with surgery or treatment and clinic services;
    (vi) Drugs and supplies;
    (vii) Prosthetic and orthotic devices;
    (viii) Eyeglasses and visual services, including visual training, 
and the examination and services necessary for the prescription and 
provision of eyeglasses, contact lenses, microscopic lenses, telescopic 
lenses, and other special visual aids prescribed by personnel who are 
qualified in accordance with State licensure laws;
    (ix) Podiatry;
    (x) Physical therapy;
    (xi) Occupational therapy;
    (xii) Speech or hearing therapy;
    (xiii) Mental health services;
    (xiv) Treatment of either acute or chronic medical complications 
and emergencies that are associated with or arise out of the provision 
of physical and mental restoration services, or that are inherent in 
the condition under treatment;
    (xv) Special services for the treatment of individuals with end-
stage renal disease, including transplantation, dialysis, artificial 
kidneys, and supplies; and
    (xvi) Other medical or medically related rehabilitation services.

(Authority: Sections 12(c) and 103(a)(6) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(6))


    (40) Physical or mental impairment means--
    (i) Any physiological disorder or condition, cosmetic 
disfigurement, or anatomical loss affecting one or more of the 
following body systems: neurological, musculo-skeletal, special sense 
organs, respiratory (including speech organs), cardiovascular, 
reproductive, digestive, genitourinary, hemic and lymphatic, skin, and 
endocrine; or
    (ii) Any mental or psychological disorder such as intellectual 
disability, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities.

(Authority: Sections 7(20)(A) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(20)(A) and 709(c))


    (41) Post-employment services means one or more of the services 
identified in Sec.  361.48(b) that are provided subsequent to the 
achievement of an employment outcome and that are necessary for an 
individual to maintain, regain, or advance in employment, consistent 
with the individual's unique strengths, resources, priorities, 
concerns, abilities, capabilities, interests, and informed choice.

(Authority: Sections 12(c) and 103(a)(20) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(20))


    Note to paragraph (c)(41): Post-employment services are intended 
to ensure that the employment outcome remains consistent with the 
individual's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interests, and informed choice. These 
services are available to meet rehabilitation needs that do not 
require a complex and comprehensive provision of services and, thus, 
should be limited in scope and duration. If more comprehensive 
services are required, then a new rehabilitation effort should be 
considered. Post-employment services are to be provided under an 
amended individualized plan for employment; thus, a re-determination 
of eligibility is not required. The provision of post-employment 
services is subject to the same requirements in this part as the 
provision of any other vocational rehabilitation service. Post-
employment services are available to assist an individual to 
maintain employment, e.g., the individual's employment is 
jeopardized because of conflicts with supervisors or co-workers, and 
the individual needs mental health services and counseling to 
maintain the employment, or the individual requires assistive 
technology to maintain the employment; to regain employment, e.g., 
the individual's job is eliminated through reorganization and new 
placement services are needed; and to advance in employment, e.g., 
the employment is no longer consistent with the individual's unique 
strengths, resources, priorities, concerns, abilities, capabilities, 
interests, and informed choice.

    (42) Pre-employment transition services means the required 
activities and authorized activities specified in Sec.  361.48(a)(2) 
and (3).

(Authority: Sections 7(30) and 113(b) and (c) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(30) and 733(b) and (c))


    (43) Qualified and impartial mediator--(i) Qualified and impartial 
mediator means an individual who--
    (A) Is not an employee of a public agency (other than an 
administrative law judge, hearing examiner, employee

[[Page 55748]]

of a State office of mediators, or employee of an institution of higher 
education);
    (B) Is not a member of the State Rehabilitation Council for the 
designated State unit;
    (C) Has not been involved previously in the vocational 
rehabilitation of the applicant or recipient of services;
    (D) Is knowledgeable of the vocational rehabilitation program and 
the applicable Federal and State laws, regulations, and policies 
governing the provision of vocational rehabilitation services;
    (E) Has been trained in effective mediation techniques consistent 
with any State-approved or -recognized certification, licensing, 
registration, or other requirements; and
    (F) Has no personal, professional, or financial interest that could 
affect the individual's objectivity during the mediation proceedings.
    (ii) An individual is not considered to be an employee of the 
designated State agency or designated State unit for the purposes of 
this definition solely because the individual is paid by the designated 
State agency or designated State unit to serve as a mediator.

(Authority: Sections 12(c) and 102(c)(4) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 722(c)(4))


    (44) Rehabilitation engineering means the systematic application of 
engineering sciences to design, develop, adapt, test, evaluate, apply, 
and distribute technological solutions to problems confronted by 
individuals with disabilities in functional areas, such as mobility, 
communications, hearing, vision, and cognition, and in activities 
associated with employment, independent living, education, and 
integration into the community.

(Authority: Sections 7(32) and (12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(32) and 709(c))


    (45) Rehabilitation technology means the systematic application of 
technologies, engineering methodologies, or scientific principles to 
meet the needs of, and address the barriers confronted by, individuals 
with disabilities in areas that include education, rehabilitation, 
employment, transportation, independent living, and recreation. The 
term includes rehabilitation engineering, assistive technology devices, 
and assistive technology services.

(Authority: Section 7(32) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(32))


    (46) Reservation means a Federal or State Indian reservation, a 
public domain Indian allotment, a former Indian reservation in 
Oklahoma, and land held by incorporated Native groups, regional 
corporations, and village corporations under the provisions of the 
Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.); or a 
defined area of land recognized by a State or the Federal Government 
where there is a concentration of tribal members and on which the 
tribal government is providing structured activities and services.

(Authority: Section 121(e) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 741(e))


    (47) Sole local agency means a unit or combination of units of 
general local government or one or more Indian tribes that has the sole 
responsibility under an agreement with, and the supervision of, the 
State agency to conduct a local or tribal vocational rehabilitation 
program, in accordance with the vocational rehabilitation services 
portion of the Unified or Combined State Plan.

(Authority: Section 7(24) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(24))


    (48) State means any of the 50 States, the District of Columbia, 
the Commonwealth of Puerto Rico, the United States Virgin Islands, 
Guam, American Samoa, and the Commonwealth of the Northern Mariana 
Islands.

(Authority: Section 7(34) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(34))


    (49) State workforce development board means a State workforce 
development board, as defined in section 3 of the Workforce Innovation 
and Opportunity Act (29 U.S.C. 3102).

(Authority: Section 7(35) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(35))


    (50) Statewide workforce development system means a workforce 
development system, as defined in section 3 of the Workforce Innovation 
and Opportunity Act (29 U.S.C. 3102).

(Authority: Section 7(36) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(36))


    (51) Student with a disability--(i) Student with a disability 
means, in general, an individual with a disability in a secondary, 
postsecondary, or other recognized education program who--
    (A)(1) Is not younger than the earliest age for the provision of 
transition services under section 614(d)(1)(A)(i)(VIII) of the 
Individuals with Disabilities Education Act (20 U.S.C. 
1414(d)(1)(A)(i)(VIII)); or
    (2) If the State involved elects to use a lower minimum age for 
receipt of pre-employment transition services under this Act, is not 
younger than that minimum age; and
    (B)(1) Is not older than 21 years of age; or
    (2) If the State law for the State provides for a higher maximum 
age for receipt of services under the Individuals with Disabilities 
Education Act (20 U.S.C. 1400 et seq.), is not older than that maximum 
age; and
    (C)(1) Is eligible for, and receiving, special education or related 
services under Part B of the Individuals with Disabilities Education 
Act (20 U.S.C. 1411 et seq.); or
    (2) Is a student who is an individual with a disability, for 
purposes of section 504.
    (ii) Students with disabilities means more than one student with a 
disability.

(Authority: Sections 7(37) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(37) and 709(c))


    (52) Substantial impediment to employment means that a physical or 
mental impairment (in light of attendant medical, psychological, 
vocational, educational, communication, and other related factors) 
hinders an individual from preparing for, entering into, engaging in, 
advancing in, or retaining employment consistent with the individual's 
abilities and capabilities.

(Authority: Sections 7(20)(A) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(20)(A) and 709(c))


    (53) Supported employment--(i) Supported employment means 
competitive integrated employment, including customized employment, or 
employment in an integrated work setting in which an individual with a 
most significant disability, including a youth with a most significant 
disability, is working on a short-term basis toward competitive 
integrated employment that is individualized, and customized, 
consistent with the unique strengths, abilities, interests, and 
informed choice of the individual, including with ongoing support 
services for individuals with the most significant disabilities--
    (A) For whom competitive integrated employment has not historically 
occurred, or for whom competitive integrated employment has been 
interrupted or intermittent as a result of a significant disability; 
and
    (B) Who, because of the nature and severity of their disabilities, 
need intensive supported employment services and extended services 
after the transition from support provided by the designated State 
unit, in order to perform this work.

[[Page 55749]]

    (ii) For purposes of this part, an individual with a most 
significant disability, whose supported employment in an integrated 
setting does not satisfy the criteria of competitive integrated 
employment, as defined in paragraph (c)(9) of this section is 
considered to be working on a short-term basis toward competitive 
integrated employment so long as the individual can reasonably 
anticipate achieving competitive integrated employment--
    (A) Within six months of achieving a supported employment outcome; 
or
    (B) In limited circumstances, within a period not to exceed 12 
months from the achievement of the supported employment outcome, if a 
longer period is necessary based on the needs of the individual, and 
the individual has demonstrated progress toward competitive earnings 
based on information contained in the service record.

(Authority: Sections 7(38), 12(c), and 602 of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 705(38), 709(c), and 795g)


    (54) Supported employment services means ongoing support services, 
including customized employment, and other appropriate services needed 
to support and maintain an individual with a most significant 
disability, including a youth with a most significant disability, in 
supported employment that are--
    (i) Organized and made available, singly or in combination, in such 
a way as to assist an eligible individual to achieve competitive 
integrated employment;
    (ii) Based on a determination of the needs of an eligible 
individual, as specified in an individualized plan for employment;
    (iii) Provided by the designated State unit for a period of time 
not to exceed 24 months, unless under special circumstances the 
eligible individual and the rehabilitation counselor jointly agree to 
extend the time to achieve the employment outcome identified in the 
individualized plan for employment; and
    (iv) Following transition, as post-employment services that are 
unavailable from an extended services provider and that are necessary 
to maintain or regain the job placement or advance in employment.

(Authority: Sections 7(39), 12(c), and 103(a)(16) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(39), 709(c), 
and 723(a)(16))


    (55) Transition services means a coordinated set of activities for 
a student or youth with a disability--
    (i) Designed within an outcome-oriented process that promotes 
movement from school to post-school activities, including postsecondary 
education, vocational training, competitive integrated employment, 
supported employment, continuing and adult education, adult services, 
independent living, or community participation;
    (ii) Based upon the individual student's or youth's needs, taking 
into account the student's or youth's preferences and interests;
    (iii) That includes instruction, community experiences, the 
development of employment and other post-school adult living 
objectives, and, if appropriate, acquisition of daily living skills and 
functional vocational evaluation;
    (iv) That promotes or facilitates the achievement of the employment 
outcome identified in the student's or youth's individualized plan for 
employment; and
    (v) That includes outreach to and engagement of the parents, or, as 
appropriate, the representative of such a student or youth with a 
disability.

(Authority: Sections 12(c) and 103(a)(15) and (b)(7) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
723(a)(15) and (b)(7))


    (56) Transportation means travel and related expenses that are 
necessary to enable an applicant or eligible individual to participate 
in a vocational rehabilitation service, including expenses for training 
in the use of public transportation vehicles and systems.

(Authority: Sections 12(c) and 103(a)(8) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(8))


    (i) Examples. The following are examples of expenses that would 
meet the definition of transportation. The examples are purely 
illustrative, do not address all possible circumstances, and are not 
intended as substitutes for individual counselor judgment.

    Example 1:  Travel and related expenses for a personal care 
attendant or aide if the services of that person are necessary to 
enable the applicant or eligible individual to travel to participate 
in any vocational rehabilitation service.
    Example 2:  The purchase and repair of vehicles, including vans, 
but not the modification of these vehicles, as modification would be 
considered a rehabilitation technology service.
    Example 3:  Relocation expenses incurred by an eligible 
individual in connection with a job placement that is a significant 
distance from the eligible individual's current residence.


    (ii) [Reserved]
    (57) Vocational rehabilitation services--(i) If provided to an 
individual, means those services listed in Sec.  361.48; and
    (ii) If provided for the benefit of groups of individuals, means 
those services listed in Sec.  361.49.

(Authority: Sections 7(40) and 103 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(40) and 723)


    (58) Youth with a disability--(i) Youth with a disability means an 
individual with a disability who is not--
    (A) Younger than 14 years of age; and
    (B) Older than 24 years of age.
    (ii) Youth with disabilities means more than one youth with a 
disability.

(Authority: Section 7(42) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(42))

Subpart B--State Plan and Other Requirements for Vocational 
Rehabilitation Services


Sec.  361.10  Submission, approval, and disapproval of the State plan.

    (a) Purpose. (1) To be eligible to receive funds under this part 
for a fiscal year, a State must submit, and have approved, a vocational 
rehabilitation services portion of a Unified or Combined State Plan in 
accordance with section 102 or 103 of the Workforce Innovation and 
Opportunity Act.
    (2) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must satisfy all requirements set forth in this 
part.
    (b) Separate part relating to the vocational rehabilitation of 
individuals who are blind. If a separate State agency administers or 
supervises the administration of a separate part of the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
relating to the vocational rehabilitation of individuals who are blind, 
that part of the vocational rehabilitation services portion of the 
Unified or Combined State Plan must separately conform to all 
applicable requirements under this part.
    (c) Public participation. Prior to the adoption of any substantive 
policies or procedures specific to the provision of vocational 
rehabilitation services under the vocational rehabilitation services 
portion of the Unified or Combined State Plan, including making any 
substantive amendment to those policies and procedures, the designated 
State agency must conduct public meetings throughout the State, in 
accordance with the requirements of Sec.  361.20.
    (d) [Reserved]
    (e) Submission of policies and procedures. The State is not 
required to

[[Page 55750]]

submit policies, procedures, or descriptions required under this part 
that have been previously submitted to the Secretary and that 
demonstrate that the State meets the requirements of this part, 
including any policies, procedures, or descriptions submitted under 
this part that are in effect on July 22, 2014.
    (f) Due process. If the Secretary disapproves the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
the Secretary will follow these procedures:
    (1) Informal resolution. Prior to disapproving the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
the Secretary attempts to resolve disputes informally with State 
officials.
    (2) Notice. If, after reasonable effort has been made to resolve 
the dispute, no resolution has been reached, the Secretary provides 
notice to the State agency of the intention to disapprove the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan and of the opportunity for a hearing.
    (3) State plan hearing. If the State agency requests a hearing, the 
Secretary designates one or more individuals, either from the 
Department or elsewhere, not responsible for or connected with the 
administration of this program, to conduct a hearing in accordance with 
the provisions of 34 CFR part 81, subpart A.
    (4) Initial decision. The hearing officer issues an initial 
decision in accordance with 34 CFR 81.41.
    (5) Petition for review of an initial decision. The State agency 
may seek the Secretary's review of the initial decision in accordance 
with 34 CFR part 81.
    (6) Review by the Secretary. The Secretary reviews the initial 
decision in accordance with 34 CFR 81.43.
    (7) Final decision of the Department. The final decision of the 
Department is made in accordance with 34 CFR 81.44.
    (8) Judicial review. A State may appeal the Secretary's decision to 
disapprove the vocational rehabilitation services portion of the 
Unified or Combined State Plan by filing a petition for review with the 
United States Court of Appeals for the circuit in which the State is 
located, in accordance with section 107(d) of the Act.

(Approved by the Office of Management and Budget under control 
number 1205-0522)


(Authority: Sections 101(a) and (b) and 107(d) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 721(a) and (b) and 727(d); and 20 
U.S.C. 1231g(a))

Sec.  361.11  Withholding of funds.

    (a) Basis for withholding. The Secretary may withhold or limit 
payments under section 111 or 603(a) of the Act, as provided by section 
107(c) of the Act, if the Secretary determines that--
    (1) The vocational rehabilitation services portion of the Unified 
or Combined State Plan, including the supported employment supplement, 
has been so changed that it no longer conforms with the requirements of 
this part or part 363; or
    (2) In the administration of the vocational rehabilitation services 
portion of the Unified or Combined State Plan there is a failure to 
comply substantially with any provision of such plan or with an 
evaluation standard or performance indicator established under section 
106 of the Act.
    (b) Informal resolution. Prior to withholding or limiting payments 
in accordance with this section, the Secretary attempts to resolve 
disputed issues informally with State officials.
    (c) Notice. If, after reasonable effort has been made to resolve 
the dispute, no resolution has been reached, the Secretary provides 
notice to the State agency of the intention to withhold or limit 
payments and of the opportunity for a hearing.
    (d) Withholding hearing. If the State agency requests a hearing, 
the Secretary designates one or more individuals, either from the 
Department or elsewhere, not responsible for or connected with the 
administration of this program, to conduct a hearing in accordance with 
the provisions of 34 CFR part 81, subpart A.
    (e) Initial decision. The hearing officer issues an initial 
decision in accordance with 34 CFR 81.41.
    (f) Petition for review of an initial decision. The State agency 
may seek the Secretary's review of the initial decision in accordance 
with 34 CFR 81.42.
    (g) Review by the Secretary. The Secretary reviews the initial 
decision in accordance with 34 CFR 81.43.
    (h) Final decision of the Department. The final decision of the 
Department is made in accordance with 34 CFR 81.44.
    (i) Judicial review. A State may appeal the Secretary's decision to 
withhold or limit payments by filing a petition for review with the 
United States Court of Appeals for the circuit in which the State is 
located, in accordance with section 107(d) of the Act.

(Authority: Sections 12(c), 101(b), and 107(c) and (d) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 721(b) and 
727(c) and (d))

Administration


Sec.  361.12  Methods of administration.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that the State agency, and the 
designated State unit if applicable, employs methods of administration 
found necessary by the Secretary for the proper and efficient 
administration of the plan and for carrying out all functions for which 
the State is responsible under the plan and this part. These methods 
must include procedures to ensure accurate data collection and 
financial accountability.

(Approved by the Office of Management and Budget under control 
number 1205-0522)


(Authority: Sections 12(c) and 101(a)(6) and (a)(10)(A) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
721(a)(6) and (a)(10)(A))

Sec.  361.13  State agency for administration.

    (a) Designation of State agency. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must designate a 
State agency as the sole State agency to administer the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
or to supervise its administration in a political subdivision of the 
State by a sole local agency, in accordance with the following 
requirements:
    (1) General. Except as provided in paragraphs (a)(2) and (3) of 
this section, the vocational rehabilitation services portion of the 
Unified or Combined State Plan must provide that the designated State 
agency is one of the following types of agencies:
    (i) A State agency that is primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities; or
    (ii) A State agency that includes a vocational rehabilitation unit 
as provided in paragraph (b) of this section.
    (2) American Samoa. In the case of American Samoa, the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must designate the Governor.
    (3) Designated State agency for individuals who are blind. If a 
State commission or other agency that provides assistance or services 
to individuals who are blind is authorized under State law to provide 
vocational rehabilitation services to individuals who are blind, and 
this commission or agency is primarily concerned with vocational 
rehabilitation or includes a vocational rehabilitation unit as provided 
in paragraph (b) of this section, the vocational rehabilitation 
services portion of the Unified or Combined State Plan may designate 
that agency as the sole State agency to

[[Page 55751]]

administer the part of the plan under which vocational rehabilitation 
services are provided for individuals who are blind or to supervise its 
administration in a political subdivision of the State by a sole local 
agency.
    (b) Designation of State unit--(1) General. If the designated State 
agency is not of the type specified in paragraph (a)(1)(i) of this 
section or if the designated State agency specified in paragraph (a)(3) 
of this section is not primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities, the vocational rehabilitation services portion of 
the Unified or Combined State Plan must assure that the agency (or each 
agency if two agencies are designated) includes a vocational 
rehabilitation bureau, division, or unit that--
    (i) Is primarily concerned with vocational rehabilitation or 
vocational and other rehabilitation of individuals with disabilities 
and is responsible for the administration of the State agency's 
vocational rehabilitation program under the vocational rehabilitation 
services portion of the Unified or Combined State Plan;
    (ii) Has a full-time director who is responsible for the day-to-day 
operations of the vocational rehabilitation program;
    (iii) Has a staff, at least 90 percent of whom are employed full 
time on the rehabilitation work of the organizational unit;
    (iv) Is located at an organizational level and has an 
organizational status within the State agency comparable to that of 
other major organizational units of the agency; and
    (v) Has the sole authority and responsibility described within the 
designated State agency in paragraph (a) of this section to expend 
funds made available under the Act in a manner that is consistent with 
the purpose of the Act.
    (2) In the case of a State that has not designated a separate State 
agency for individuals who are blind, as provided for in paragraph 
(a)(3) of this section, the State may assign responsibility for the 
part of the vocational rehabilitation services portion of the Unified 
or Combined State Plan under which vocational rehabilitation services 
are provided to individuals who are blind to one organizational unit of 
the designated State agency and may assign responsibility for the rest 
of the plan to another organizational unit of the designated State 
agency, with the provisions of paragraph (b)(1) of this section 
applying separately to each of these units.
    (c) Responsibility for administration--(1) Required activities. At 
a minimum, the following activities are the responsibility of the 
designated State unit or the sole local agency under the supervision of 
the State unit:
    (i) All decisions affecting eligibility for vocational 
rehabilitation services, the nature and scope of available services, 
and the provision of these services.
    (ii) The determination to close the record of services of an 
individual who has achieved an employment outcome in accordance with 
Sec.  361.56.
    (iii) Policy formulation and implementation.
    (iv) The allocation and expenditure of vocational rehabilitation 
funds.
    (v) Participation as a partner in the one-stop service delivery 
system established under title I of the Workforce Innovation and 
Opportunity Act, in accordance with 20 CFR part 678.
    (2) Non-delegable responsibility. The responsibility for the 
functions described in paragraph (c)(1) of this section may not be 
delegated to any other agency or individual.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(2) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a)(2))

Sec.  361.14  Substitute State agency.

    (a) General provisions. (1) If the Secretary has withheld all 
funding from a State under Sec.  361.11, the State may designate 
another agency to substitute for the designated State agency in 
carrying out the State's program of vocational rehabilitation services.
    (2) Any public or nonprofit private organization or agency within 
the State or any political subdivision of the State is eligible to be a 
substitute agency.
    (3) The substitute agency must submit a vocational rehabilitation 
services portion of the Unified or Combined State Plan that meets the 
requirements of this part.
    (4) The Secretary makes no grant to a substitute agency until the 
Secretary approves its plan.
    (b) Substitute agency matching share. The Secretary does not make 
any payment to a substitute agency unless it has provided assurances 
that it will contribute the same matching share as the State would have 
been required to contribute if the State agency were carrying out the 
vocational rehabilitation program.

(Authority: Section 107(c)(3) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 727(c)(3))

Sec.  361.15  Local administration.

    (a) If the vocational rehabilitation services portion of the 
Unified or Combined State Plan provides for the administration of the 
plan by a local agency, the designated State agency must--
    (1) Ensure that each local agency is under the supervision of the 
designated State unit and is the sole local agency as defined in Sec.  
361.5(c)(47) that is responsible for the administration of the program 
within the political subdivision that it serves; and
    (2) Develop methods that each local agency will use to administer 
the vocational rehabilitation program, in accordance with the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan.
    (b) A separate local agency serving individuals who are blind may 
administer that part of the plan relating to vocational rehabilitation 
of individuals who are blind, under the supervision of the designated 
State unit for individuals who are blind.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 7(24) and 101(a)(2)(A) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(24) and 721(a)(2)(A))

Sec.  361.16  Establishment of an independent commission or a State 
Rehabilitation Council.

    (a) General requirement. Except as provided in paragraph (b) of 
this section, the vocational rehabilitation services portion of the 
Unified or Combined State Plan must contain one of the following two 
assurances:
    (1) An assurance that the designated State agency is an independent 
State commission that--
    (i) Is responsible under State law for operating, or overseeing the 
operation of, the vocational rehabilitation program in the State and is 
primarily concerned with vocational rehabilitation or vocational and 
other rehabilitation services, in accordance with Sec.  
361.13(a)(1)(i);
    (ii) Is consumer-controlled by persons who--
    (A) Are individuals with physical or mental impairments that 
substantially limit major life activities; and
    (B) Represent individuals with a broad range of disabilities, 
unless the designated State unit under the direction of the commission 
is the State agency for individuals who are blind;
    (iii) Includes family members, advocates, or other representatives 
of individuals with mental impairments; and
    (iv) Conducts the functions identified in Sec.  361.17(h)(4).

[[Page 55752]]

    (2) An assurance that--
    (i) The State has established a State Rehabilitation Council 
(Council) that meets the requirements of Sec.  361.17;
    (ii) The designated State unit, in accordance with Sec.  361.29, 
jointly develops, agrees to, and reviews annually State goals and 
priorities and jointly submits to the Secretary annual reports of 
progress with the Council;
    (iii) The designated State unit regularly consults with the Council 
regarding the development, implementation, and revision of State 
policies and procedures of general applicability pertaining to the 
provision of vocational rehabilitation services;
    (iv) The designated State unit transmits to the Council--
    (A) All plans, reports, and other information required under this 
part to be submitted to the Secretary;
    (B) All policies and information on all practices and procedures of 
general applicability provided to or used by rehabilitation personnel 
providing vocational rehabilitation services under this part; and
    (C) Copies of due process hearing decisions issued under this part 
and transmitted in a manner to ensure that the identity of the 
participants in the hearings is kept confidential; and
    (v) The vocational rehabilitation services portion of the Unified 
or Combined State Plan, and any revision to the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
includes a summary of input provided by the Council, including 
recommendations from the annual report of the Council, the review and 
analysis of consumer satisfaction described in Sec.  361.17(h)(4), and 
other reports prepared by the Council, and the designated State unit's 
response to the input and recommendations, including its reasons for 
rejecting any input or recommendation of the Council.
    (b) Exception for separate State agency for individuals who are 
blind. In the case of a State that designates a separate State agency 
under Sec.  361.13(a)(3) to administer the part of the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
under which vocational rehabilitation services are provided to 
individuals who are blind, the State must either establish a separate 
State Rehabilitation Council for each agency that does not meet the 
requirements in paragraph (a)(1) of this section or establish one State 
Rehabilitation Council for both agencies if neither agency meets the 
requirements of paragraph (a)(1) of this section.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 101(a)(21) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(21))

Sec.  361.17  Requirements for a State Rehabilitation Council.

    If the State has established a Council under Sec.  361.16(a)(2) or 
(b), the Council must meet the following requirements:
    (a) Appointment. (1) The members of the Council must be appointed 
by the Governor or, in the case of a State that, under State law, vests 
authority for the administration of the activities carried out under 
this part in an entity other than the Governor (such as one or more 
houses of the State legislature or an independent board), the chief 
officer of that entity.
    (2) The appointing authority must select members of the Council 
after soliciting recommendations from representatives of organizations 
representing a broad range of individuals with disabilities and 
organizations interested in individuals with disabilities. In selecting 
members, the appointing authority must consider, to the greatest extent 
practicable, the extent to which minority populations are represented 
on the Council.
    (b) Composition--(1) General. Except as provided in paragraph 
(b)(3) of this section, the Council must be composed of at least 15 
members, including--
    (i) At least one representative of the Statewide Independent Living 
Council, who must be the chairperson or other designee of the Statewide 
Independent Living Council;
    (ii) At least one representative of a parent training and 
information center established pursuant to section 682(a) of the 
Individuals with Disabilities Education Act;
    (iii) At least one representative of the Client Assistance Program 
established under part 370 of this chapter, who must be the director of 
or other individual recommended by the Client Assistance Program;
    (iv) At least one qualified vocational rehabilitation counselor 
with knowledge of and experience with vocational rehabilitation 
programs who serves as an ex officio, nonvoting member of the Council 
if employed by the designated State agency;
    (v) At least one representative of community rehabilitation program 
service providers;
    (vi) Four representatives of business, industry, and labor;
    (vii) Representatives of disability groups that include a cross 
section of--
    (A) Individuals with physical, cognitive, sensory, and mental 
disabilities; and
    (B) Representatives of individuals with disabilities who have 
difficulty representing themselves or are unable due to their 
disabilities to represent themselves;
    (viii) Current or former applicants for, or recipients of, 
vocational rehabilitation services;
    (ix) In a State in which one or more projects are funded under 
section 121 of the Act (American Indian Vocational Rehabilitation 
Services), at least one representative of the directors of the projects 
in such State;
    (x) At least one representative of the State educational agency 
responsible for the public education of students with disabilities who 
are eligible to receive services under this part and part B of the 
Individuals with Disabilities Education Act;
    (xi) At least one representative of the State workforce development 
board; and
    (xii) The director of the designated State unit as an ex officio, 
nonvoting member of the Council.
    (2) Employees of the designated State agency. Employees of the 
designated State agency may serve only as nonvoting members of the 
Council. This provision does not apply to the representative appointed 
pursuant to paragraph (b)(1)(iii) of this section.
    (3) Composition of a separate Council for a separate State agency 
for individuals who are blind. Except as provided in paragraph (b)(4) 
of this section, if the State establishes a separate Council for a 
separate State agency for individuals who are blind, that Council 
must--
    (i) Conform with all of the composition requirements for a Council 
under paragraph (b)(1) of this section, except the requirements in 
paragraph (b)(1)(vii), unless the exception in paragraph (b)(4) of this 
section applies; and
    (ii) Include--
    (A) At least one representative of a disability advocacy group 
representing individuals who are blind; and
    (B) At least one representative of an individual who is blind, has 
multiple disabilities, and has difficulty representing himself or 
herself or is unable due to disabilities to represent himself or 
herself.
    (4) Exception. If State law in effect on October 29, 1992 requires 
a separate Council under paragraph (b)(3) of this section to have fewer 
than 15 members, the separate Council is in compliance with the 
composition requirements in paragraphs (b)(1)(vi) and (viii) of this 
section if it includes at least one representative who meets the 
requirements for each of those paragraphs.
    (c) Majority. (1) A majority of the Council members must be 
individuals

[[Page 55753]]

with disabilities who meet the requirements of Sec.  361.5(c)(28) and 
are not employed by the designated State unit.
    (2) In the case of a separate Council established under Sec.  
361.16(b), a majority of the Council members must be individuals who 
are blind and are not employed by the designated State unit.
    (d) Chairperson. (1) The chairperson must be selected by the 
members of the Council from among the voting members of the Council, 
subject to the veto power of the Governor; or
    (2) In States in which the Governor does not have veto power 
pursuant to State law, the appointing authority described in paragraph 
(a)(1) of this section must designate a member of the Council to serve 
as the chairperson of the Council or must require the Council to 
designate a member to serve as chairperson.
    (e) Terms of appointment. (1) Each member of the Council must be 
appointed for a term of no more than three years, and each member of 
the Council, other than a representative identified in paragraph 
(b)(1)(iii) or (ix) of this section, may serve for no more than two 
consecutive full terms.
    (2) A member appointed to fill a vacancy occurring prior to the end 
of the term for which the predecessor was appointed must be appointed 
for the remainder of the predecessor's term.
    (3) The terms of service of the members initially appointed must 
be, as specified by the appointing authority as described in paragraph 
(a)(1) of this section, for varied numbers of years to ensure that 
terms expire on a staggered basis.
    (f) Vacancies. (1) A vacancy in the membership of the Council must 
be filled in the same manner as the original appointment, except the 
appointing authority as described in paragraph (a)(1) of this section 
may delegate the authority to fill that vacancy to the remaining 
members of the Council after making the original appointment.
    (2) No vacancy affects the power of the remaining members to 
execute the duties of the Council.
    (g) Conflict of interest. No member of the Council may cast a vote 
on any matter that would provide direct financial benefit to the member 
or the member's organization or otherwise give the appearance of a 
conflict of interest under State law.
    (h) Functions. The Council must, after consulting with the State 
workforce development board--
    (1) Review, analyze, and advise the designated State unit regarding 
the performance of the State unit's responsibilities under this part, 
particularly responsibilities related to--
    (i) Eligibility, including order of selection;
    (ii) The extent, scope, and effectiveness of services provided; and
    (iii) Functions performed by State agencies that affect or 
potentially affect the ability of individuals with disabilities in 
achieving employment outcomes under this part;
    (2) In partnership with the designated State unit--
    (i) Develop, agree to, and review State goals and priorities in 
accordance with Sec.  361.29(c); and
    (ii) Evaluate the effectiveness of the vocational rehabilitation 
program and submit reports of progress to the Secretary in accordance 
with Sec.  361.29(e);
    (3) Advise the designated State agency and the designated State 
unit regarding activities carried out under this part and assist in the 
preparation of the vocational rehabilitation services portion of the 
Unified or Combined State Plan and amendments to the plan, 
applications, reports, needs assessments, and evaluations required by 
this part;
    (4) To the extent feasible, conduct a review and analysis of the 
effectiveness of, and consumer satisfaction with--
    (i) The functions performed by the designated State agency;
    (ii) The vocational rehabilitation services provided by State 
agencies and other public and private entities responsible for 
providing vocational rehabilitation services to individuals with 
disabilities under the Act; and
    (iii) The employment outcomes achieved by eligible individuals 
receiving services under this part, including the availability of 
health and other employment benefits in connection with those 
employment outcomes;
    (5) Prepare and submit to the Governor and to the Secretary no 
later than 90 days after the end of the Federal fiscal year an annual 
report on the status of vocational rehabilitation programs operated 
within the State and make the report available to the public through 
appropriate modes of communication;
    (6) To avoid duplication of efforts and enhance the number of 
individuals served, coordinate activities with the activities of other 
councils within the State, including the Statewide Independent Living 
Council established under chapter 1, title VII of the Act, the advisory 
panel established under section 612(a)(21) of the Individuals with 
Disabilities Education Act, the State Developmental Disabilities 
Planning Council described in section 124 of the Developmental 
Disabilities Assistance and Bill of Rights Act, the State mental health 
planning council established under section 1914(a) of the Public Health 
Service Act, and the State workforce development board, and with the 
activities of entities carrying out programs under the Assistive 
Technology Act of 1998;
    (7) Provide for coordination and the establishment of working 
relationships between the designated State agency and the Statewide 
Independent Living Council and centers for independent living within 
the State; and
    (8) Perform other comparable functions, consistent with the purpose 
of this part, as the Council determines to be appropriate, that are 
comparable to the other functions performed by the Council.
    (i) Resources. (1) The Council, in conjunction with the designated 
State unit, must prepare a plan for the provision of resources, 
including staff and other personnel, that may be necessary and 
sufficient for the Council to carry out its functions under this part.
    (2) The resource plan must, to the maximum extent possible, rely on 
the use of resources in existence during the period of implementation 
of the plan.
    (3) Any disagreements between the designated State unit and the 
Council regarding the amount of resources necessary to carry out the 
functions of the Council must be resolved by the Governor, consistent 
with paragraphs (i)(1) and (2) of this section.
    (4) The Council must, consistent with State law, supervise and 
evaluate the staff and personnel that are necessary to carry out its 
functions.
    (5) Those staff and personnel that are assisting the Council in 
carrying out its functions may not be assigned duties by the designated 
State unit or any other agency or office of the State that would create 
a conflict of interest.
    (j) Meetings. The Council must--
    (1) Convene at least four meetings a year in locations determined 
by the Council to be necessary to conduct Council business. The 
meetings must be publicly announced, open, and accessible to the 
general public, including individuals with disabilities, unless there 
is a valid reason for an executive session; and
    (2) Conduct forums or hearings, as appropriate, that are publicly 
announced, open, and accessible to the public, including individuals 
with disabilities.
    (k) Compensation. Funds appropriated under title I of the Act, 
except funds to carry out sections 112 and 121 of the Act, may be used 
to compensate and reimburse the expenses

[[Page 55754]]

of Council members in accordance with section 105(g) of the Act.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 105 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 725)

Sec.  361.18  Comprehensive system of personnel development.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must describe the procedures and activities the 
State agency will undertake to establish and maintain a comprehensive 
system of personnel development designed to ensure an adequate supply 
of qualified rehabilitation personnel, including professionals and 
paraprofessionals, for the designated State unit. If the State agency 
has a State Rehabilitation Council, this description must, at a 
minimum, specify that the Council has an opportunity to review and 
comment on the development of plans, policies, and procedures necessary 
to meet the requirements of paragraphs (b) through (d) of this section. 
This description must also conform with the following requirements:
    (a) Personnel and personnel development data system. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must describe the development and maintenance of a system by the State 
agency for collecting and analyzing on an annual basis data on 
qualified personnel needs and personnel development, in accordance with 
the following requirements:
    (1) Data on qualified personnel needs must include--
    (i) The number of personnel who are employed by the State agency in 
the provision of vocational rehabilitation services in relation to the 
number of individuals served, broken down by personnel category;
    (ii) The number of personnel currently needed by the State agency 
to provide vocational rehabilitation services, broken down by personnel 
category; and
    (iii) Projections of the number of personnel, broken down by 
personnel category, who will be needed by the State agency to provide 
vocational rehabilitation services in the State in five years based on 
projections of the number of individuals to be served, including 
individuals with significant disabilities, the number of personnel 
expected to retire or leave the field, and other relevant factors.
    (2) Data on personnel development must include--
    (i) A list of the institutions of higher education in the State 
that are preparing vocational rehabilitation professionals, by type of 
program;
    (ii) The number of students enrolled at each of those institutions, 
broken down by type of program; and
    (iii) The number of students who graduated during the prior year 
from each of those institutions with certification or licensure, or 
with the credentials for certification or licensure, broken down by the 
personnel category for which they have received, or have the 
credentials to receive, certification or licensure.
    (b) Plan for recruitment, preparation, and retention of qualified 
personnel. The vocational rehabilitation services portion of the 
Unified or Combined State Plan must describe the development, updating, 
and implementation of a plan to address the current and projected needs 
for personnel who are qualified in accordance with paragraph (c) of 
this section. The plan must identify the personnel needs based on the 
data collection and analysis system described in paragraph (a) of this 
section and must provide for the coordination and facilitation of 
efforts between the designated State unit and institutions of higher 
education and professional associations to recruit, prepare, and retain 
personnel who are qualified in accordance with paragraph (c) of this 
section, including personnel from minority backgrounds and personnel 
who are individuals with disabilities.
    (c) Personnel standards. (1) The vocational rehabilitation services 
portion of the Unified or Combined State Plan must include the State 
agency's policies and describe--
    (i) Standards that are consistent with any national or State-
approved or recognized certification, licensing, or registration 
requirements, or, in the absence of these requirements, other 
comparable requirements (including State personnel requirements) that 
apply to the profession or discipline in which that category of 
personnel is providing vocational rehabilitation services; and
    (ii) The establishment and maintenance of education and experience 
requirements, to ensure that the personnel have a 21st-century 
understanding of the evolving labor force and the needs of individuals 
with disabilities, including requirements for--
    (A)(1) Attainment of a baccalaureate degree in a field of study 
reasonably related to vocational rehabilitation, to indicate a level of 
competency and skill demonstrating basic preparation in a field of 
study such as vocational rehabilitation counseling, social work, 
psychology, disability studies, business administration, human 
resources, special education, supported employment, customized 
employment, economics, or another field that reasonably prepares 
individuals to work with consumers and employers; and
    (2) Demonstrated paid or unpaid experience, for not less than one 
year, consisting of--
    (i) Direct work with individuals with disabilities in a setting 
such as an independent living center;
    (ii) Direct service or advocacy activities that provide such 
individual with experience and skills in working with individuals with 
disabilities; or
    (iii) Direct experience in competitive integrated employment 
environments as an employer, as a small business owner or operator, or 
in self-employment, or other experience in human resources or 
recruitment, or experience in supervising employees, training, or other 
activities; or
    (B) Attainment of a master's or doctoral degree in a field of study 
such as vocational rehabilitation counseling, law, social work, 
psychology, disability studies, business administration, human 
resources, special education, management, public administration, or 
another field that reasonably provides competence in the employment 
sector, in a disability field, or in both business-related and 
rehabilitation-related fields; and
    (2) As used in this section--
    (i) Profession or discipline means a specific occupational 
category, including any paraprofessional occupational category, that--
    (A) Provides rehabilitation services to individuals with 
disabilities;
    (B) Has been established or designated by the State unit; and
    (C) Has a specified scope of responsibility.
    (ii) Ensuring that personnel have a 21st-century understanding of 
the evolving labor force and the needs of individuals with disabilities 
means that personnel have specialized training and experience that 
enables them to work effectively with individuals with disabilities to 
assist them to achieve competitive integrated employment and with 
employers who hire such individuals. Relevant personnel skills include, 
but are not limited to--
    (A) Understanding the functional limitations of various 
disabilities and the vocational implications of functional limitations 
on employment, especially with regard to individuals whose disabilities 
may require specialized services or groups of individuals with 
disabilities who

[[Page 55755]]

comprise an increasing proportion of the State VR caseloads, such as 
individuals with traumatic brain injury, post-traumatic stress 
syndrome, mental illnesses, autism, blindness or deaf-blindness;
    (B) Vocational assessment tools and strategies and the 
interpretation of vocational assessment results, including, when 
appropriate, situational and work-based assessments and analysis of 
transferrable work skills;
    (C) Counseling and guidance skills, including individual and group 
counseling and career guidance;
    (D) Effective use of practices leading to competitive integrated 
employment, such as supported employment, customized employment, 
internships, apprenticeships, paid work experiences, etc.;
    (E) Case management and employment services planning, including 
familiarity and use of the broad range of disability, employment, and 
social services programs in the state and local area, such as 
independent living programs, Social Security work incentives, and the 
Social Security Administration`s Ticket-to-Work program;
    (F) Caseload management, including familiarity with effective 
caseload management practices and the use of any available automated or 
information technology resources;
    (G) In-depth knowledge of labor market trends, occupational 
requirements, and other labor market information that provides 
information about employers, business practices, and employer personnel 
needs, such as data provided by the Bureau of Labor Statistics and the 
Department of Labor's O*NET occupational system;
    (H) The use of labor market information for vocational 
rehabilitation counseling, vocational planning, and the provision of 
information to consumers for the purposes of making informed choices, 
business engagement and business relationships, and job development and 
job placement;
    (I) The use of labor market information to support building and 
maintaining relationships with employers and to inform delivery of job 
development and job placement activities that respond to today's labor 
market;
    (J) Understanding the effective utilization of rehabilitation 
technology and job accommodations;
    (K) Training in understanding the provisions of the Americans with 
Disabilities Act and other employment discrimination and employment-
related laws;
    (L) Advocacy skills to modify attitudinal and environmental 
barriers to employment for individuals with disabilities, including 
those with the most significant disabilities;
    (M) Skills to address cultural diversity among consumers, 
particularly affecting workplace settings, including racial and ethnic 
diversity and generational differences; and
    (N) Understanding confidentiality and ethical standards and 
practices, especially related to new challenges in use of social media, 
new partnerships, and data sharing.
    (d) Staff development. (1) The vocational rehabilitation services 
portion of the Unified or Combined State Plan must include the State 
agency's policies and describe the procedures and activities the State 
agency will undertake to ensure that all personnel employed by the 
State unit receive appropriate and adequate training, including a 
description of--
    (i) A system of staff development for rehabilitation professionals 
and paraprofessionals within the State unit, particularly with respect 
to assessment, vocational counseling, job placement, and rehabilitation 
technology, including training implemented in coordination with 
entities carrying out State programs under section 4 of the Assistive 
Technology Act of 1998 (29 U.S.C. 3003);
    (ii) Procedures for acquiring and disseminating to rehabilitation 
professionals and paraprofessionals within the designated State unit 
significant knowledge from research and other sources; and
    (iii) Policies and procedures relating to the establishment and 
maintenance of standards to ensure that personnel, including 
rehabilitation professionals and paraprofessionals, needed within the 
designated State unit to carry out this part are appropriately and 
adequately prepared and trained.
    (2) The specific training areas for staff development must be based 
on the needs of each State unit and may include, but are not limited 
to--
    (i) Training regarding the Workforce Innovation and Opportunity Act 
and the amendments it made to the Rehabilitation Act of 1973;
    (ii) Training with respect to the requirements of the Americans 
with Disabilities Act, the Individuals with Disabilities Education Act, 
and Social Security work incentive programs, including programs under 
the Ticket to Work and Work Incentives Improvement Act of 1999, 
training to facilitate informed choice under this program, and training 
to improve the provision of services to culturally diverse populations; 
and
    (iii) Activities related to--
    (A) Recruitment and retention of qualified rehabilitation 
personnel;
    (B) Succession planning; and
    (C) Leadership development and capacity building.
    (e) Personnel to address individual communication needs. The 
vocational rehabilitation services portion of the Unified or Combined 
State Plan must describe how the designated State unit includes among 
its personnel, or obtains the services of--
    (1) Individuals able to communicate in the native languages of 
applicants, recipients of services, and eligible individuals who have 
limited English proficiency; and
    (2) Individuals able to communicate with applicants, recipients of 
services, and eligible individuals in appropriate modes of 
communication.
    (f) Coordination with personnel development under the Individuals 
with Disabilities Education Act. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must describe the 
procedures and activities the State agency will undertake to coordinate 
its comprehensive system of personnel development under the Act with 
personnel development under the Individuals with Disabilities Education 
Act.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c) and 101(a)(7) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(7))

Sec.  361.19  Affirmative action for individuals with disabilities.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that the State agency takes affirmative 
action to employ and advance in employment qualified individuals with 
disabilities covered under and on the same terms and conditions as 
stated in section 503 of the Act.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(6)(B) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(6)(B))

Sec.  361.20  Public participation requirements.

    (a) Conduct of public meetings. (1) The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
prior to the adoption of any substantive policies or procedures 
governing the provision of vocational rehabilitation services under the 
Unified or Combined State Plan, the

[[Page 55756]]

designated State agency conducts public meetings throughout the State 
to provide the public, including individuals with disabilities, an 
opportunity to comment on the policies or procedures.
    (2) For purposes of this section, substantive changes to the 
policies or procedures governing the provision of vocational 
rehabilitation services that would require the conduct of public 
meetings are those that directly impact the nature and scope of the 
services provided to individuals with disabilities, or the manner in 
which individuals interact with the designated State agency or in 
matters related to the delivery of vocational rehabilitation services. 
Examples of substantive changes include, but are not limited to--
    (i) Any changes to policies or procedures that fundamentally alter 
the rights and responsibilities of individuals with disabilities in the 
vocational rehabilitation process;
    (ii) Organizational changes to the designated State agency or unit 
that would likely affect the manner in which services are delivered;
    (iii) Any changes that affect the nature and scope of vocational 
rehabilitation services provided by the designated State agency or 
unit;
    (iv) Changes in formal or informal dispute procedures;
    (v) The adoption or amendment of policies instituting an order of 
selection; and
    (vi) Changes to policies and procedures regarding the financial 
participation of eligible individuals.
    (3) Non-substantive, e.g., administrative changes that would not 
require the need for public hearings include:
    (i) Internal procedures that do not directly affect individuals 
receiving vocational rehabilitation services, such as payment 
processing or personnel procedures;
    (ii) Changes to the case management system that only affect 
vocational rehabilitation personnel;
    (iii) Changes in indirect cost allocations, internal fiscal review 
procedures, or routine reporting requirements;
    (iv) Minor revisions to vocational rehabilitation procedures or 
policies to correct production errors, such as typographical and 
grammatical mistakes; and
    (v) Changes to contract procedures that do not affect the delivery 
of vocational rehabilitation services.
    (b) Notice requirements. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that the 
designated State agency, prior to conducting the public meetings, 
provides appropriate and sufficient notice throughout the State of the 
meetings in accordance with--
    (1) State law governing public meetings; or
    (2) In the absence of State law governing public meetings, 
procedures developed by the designated State agency in consultation 
with the State Rehabilitation Council.
    (c) Summary of input of the State Rehabilitation Council. The 
vocational rehabilitation services portion of the Unified or Combined 
State Plan must provide a summary of the input of the State 
Rehabilitation Council, if the State agency has a Council, into the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan and any amendment to that portion of the plan, in accordance 
with Sec.  361.16(a)(2)(v).
    (d) Special consultation requirements. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must assure that the State agency actively consults with the director 
of the Client Assistance Program, the State Rehabilitation Council, if 
the State agency has a Council, and, as appropriate, Indian tribes, 
tribal organizations, and native Hawaiian organizations on its policies 
and procedures governing the provision of vocational rehabilitation 
services under the vocational rehabilitation services portion of the 
Unified or Combined State Plan.
    (e) Appropriate modes of communication. The State unit must provide 
to the public, through appropriate modes of communication, notices of 
the public meetings, any materials furnished prior to or during the 
public meetings, and the policies and procedures governing the 
provision of vocational rehabilitation services under the vocational 
rehabilitation services portion of the Unified or Combined State Plan.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c), 101(a)(16)(A), and 105(c)(3) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(16)(A), and 725(c)(3))

Sec.  361.21  Consultations regarding the administration of the 
vocational rehabilitation services portion of the Unified or Combined 
State plan.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that, in connection with matters of 
general policy arising in the administration of the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
the designated State agency takes into account the views of--
    (a) Individuals and groups of individuals who are recipients of 
vocational rehabilitation services or, as appropriate, the individuals' 
representatives;
    (b) Personnel working in programs that provide vocational 
rehabilitation services to individuals with disabilities;
    (c) Providers of vocational rehabilitation services to individuals 
with disabilities;
    (d) The director of the Client Assistance Program; and
    (e) The State Rehabilitation Council, if the State has a Council.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 101(a)(16)(B) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 721(a)(16)(B))

Sec.  361.22  Coordination with education officials.

    (a) Plans, policies, and procedures. (1) The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must contain plans, policies, and procedures for coordination between 
the designated State agency and education officials responsible for the 
public education of students with disabilities that are designed to 
facilitate the transition of students with disabilities from the 
receipt of educational services, including pre-employment transition 
services, in school to the receipt of vocational rehabilitation 
services under the responsibility of the designated State agency.
    (2) These plans, policies, and procedures in paragraph (a)(1) of 
this section must provide for the development and approval of an 
individualized plan for employment in accordance with Sec.  361.45 as 
early as possible during the transition planning process and not later 
than the time a student with a disability determined to be eligible for 
vocational rehabilitation services leaves the school setting or, if the 
designated State unit is operating under an order of selection, before 
each eligible student with a disability able to be served under the 
order leaves the school setting.
    (b) Formal interagency agreement. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must include 
information on a formal interagency agreement with the State 
educational agency that, at a minimum, provides for--
    (1) Consultation and technical assistance, which may be provided

[[Page 55757]]

using alternative means for meeting participation (such as video 
conferences and conference calls), to assist educational agencies in 
planning for the transition of students with disabilities from school 
to post-school activities, including pre-employment transition services 
and other vocational rehabilitation services;
    (2) Transition planning by personnel of the designated State agency 
and educational agency personnel for students with disabilities that 
facilitates the development and implementation of their individualized 
education programs (IEPs) under section 614(d) of the Individuals with 
Disabilities Education Act;
    (3) The roles and responsibilities, including financial 
responsibilities, of each agency, including provisions for determining 
State lead agencies and qualified personnel responsible for transition 
services and pre-employment transition services;
    (4) Procedures for outreach to and identification of students with 
disabilities who are in need of transition services and pre-employment 
transition services. Outreach to these students should occur as early 
as possible during the transition planning process and must include, at 
a minimum, a description of the purpose of the vocational 
rehabilitation program, eligibility requirements, application 
procedures, and scope of services that may be provided to eligible 
individuals;
    (5) Coordination necessary to satisfy documentation requirements 
set forth in 34 CFR part 397 with regard to students and youth with 
disabilities who are seeking subminimum wage employment; and
    (6) Assurance that, in accordance with 34 CFR 397.31, neither the 
State educational agency nor the local educational agency will enter 
into a contract or other arrangement with an entity, as defined in 34 
CFR 397.5(d), for the purpose of operating a program under which a 
youth with a disability is engaged in work compensated at a subminimum 
wage.
    (c) Construction. Nothing in this part will be construed to reduce 
the obligation under the Individuals with Disabilities Education Act 
(20 U.S.C. 1400 et seq.) of a local educational agency or any other 
agency to provide or pay for any transition services that are also 
considered special education or related services and that are necessary 
for ensuring a free appropriate public education to children with 
disabilities within the State involved.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c), 101(a)(11)(D), 101(c), and 511 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(11)(D), 721(c), and 794g)

Sec.  361.23   [Reserved]


Sec.  361.24  Cooperation and coordination with other entities.

    (a) Interagency cooperation. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must describe the 
designated State agency's cooperation with and use of the services and 
facilities of Federal, State, and local agencies and programs, 
including the State programs carried out under section 4 of the 
Assistive Technology Act of 1998 (29 U.S.C. 3003), programs carried out 
by the Under Secretary for Rural Development of the Department of 
Agriculture, noneducational agencies serving out-of-school youth, and 
State use contracting programs, to the extent that such Federal, State, 
and local agencies and programs are not carrying out activities through 
the statewide workforce development system.
    (b) Coordination with the Statewide Independent Living Council and 
independent living centers. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that the 
designated State unit, the Statewide Independent Living Council 
established under title VII, chapter 1, part B of the Act, and the 
independent living centers established under title VII, Chapter 1, Part 
C of the Act have developed working relationships and coordinate their 
activities.
    (c) Coordination with Employers. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must describe 
how the designated State unit will work with employers to identify 
competitive integrated employment opportunities and career exploration 
opportunities, in order to facilitate the provision of--
    (1) Vocational rehabilitation services; and
    (2) Transition services for youth with disabilities and students 
with disabilities, such as pre-employment transition services.
    (d) Cooperative agreement with recipients of grants for services to 
American Indians--(1) General. In applicable cases, the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must assure that the designated State agency has entered into a formal 
cooperative agreement with each grant recipient in the State that 
receives funds under part C of the Act (American Indian Vocational 
Rehabilitation Services).
    (2) Contents of formal cooperative agreement. The agreement 
required under paragraph (d)(1) of this section must describe 
strategies for collaboration and coordination in providing vocational 
rehabilitation services to American Indians who are individuals with 
disabilities, including--
    (i) Strategies for interagency referral and information sharing 
that will assist in eligibility determinations and the development of 
individualized plans for employment;
    (ii) Procedures for ensuring that American Indians who are 
individuals with disabilities and are living on or near a reservation 
or tribal service area are provided vocational rehabilitation services;
    (iii) Strategies for the provision of transition planning by 
personnel of the designated State unit, the State educational agency, 
and the recipient of funds under part C of the Act, that will 
facilitate the development and approval of the individualized plan for 
employment under Sec.  361.45; and
    (iv) Provisions for sharing resources in cooperative studies and 
assessments, joint training activities, and other collaborative 
activities designed to improve the provision of services to American 
Indians who are individuals with disabilities.
    (e) Reciprocal referral services between two designated State units 
in the same State. If there is a separate designated State unit for 
individuals who are blind, the two designated State units must 
establish reciprocal referral services, use each other's services and 
facilities to the extent feasible, jointly plan activities to improve 
services in the State for individuals with multiple impairments, 
including visual impairments, and otherwise cooperate to provide more 
effective services, including, if appropriate, entering into a written 
cooperative agreement.
    (f) Cooperative agreement regarding individuals eligible for home 
and community-based waiver programs. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must include an 
assurance that the designated State unit has entered into a formal 
cooperative agreement with the State agency responsible for 
administering the State Medicaid plan under title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) and the State agency with primary 
responsibility for providing services and supports for individuals with 
intellectual disabilities and individuals with developmental 
disabilities, with respect to the delivery of vocational rehabilitation 
services, including

[[Page 55758]]

extended services, for individuals with the most significant 
disabilities who have been determined to be eligible for home and 
community-based services under a Medicaid waiver, Medicaid State plan 
amendment, or other authority related to a State Medicaid program.
    (g) Interagency cooperation. The vocational rehabilitation services 
portion of the Unified or Combined State Plan shall describe how the 
designated State agency will collaborate with the State agency 
responsible for administering the State Medicaid plan under title XIX 
of the Social Security Act (42 U.S.C. 1396 et seq.), the State agency 
responsible for providing services for individuals with developmental 
disabilities, and the State agency responsible for providing mental 
health services, to develop opportunities for community-based 
employment in integrated settings, to the greatest extent practicable.
    (h) Coordination with assistive technology programs. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must include an assurance that the designated State unit, and the lead 
agency and implementing entity (if any) designated by the Governor of 
the State under section 4 of the Assistive Technology Act of 1998 (29 
U.S.C. 3003), have developed working relationships and will enter into 
agreements for the coordination of their activities, including the 
referral of individuals with disabilities to programs and activities 
described in that section.
    (i) Coordination with ticket to work and self-sufficiency program. 
The vocational rehabilitation services portion of the Unified or 
Combined State Plan must include an assurance that the designated State 
unit will coordinate activities with any other State agency that is 
functioning as an employment network under the Ticket to Work and Self-
Sufficiency Program established under section 1148 of the Social 
Security Act (42 U.S.C. 1320b-19).

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c) and 101(a)(11) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(11))

Sec.  361.25  Statewideness.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that services provided under the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan will be available in all political subdivisions of the 
State, unless a waiver of statewideness is requested and approved in 
accordance with Sec.  361.26.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(4) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a)(4))

Sec.  361.26  Waiver of statewideness.

    (a) Availability. The State unit may provide services in one or 
more political subdivisions of the State that increase services or 
expand the scope of services that are available statewide under the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan if--
    (1) The non-Federal share of the cost of these services is met from 
funds provided by a local public agency, including funds contributed to 
a local public agency by a private agency, organization, or individual;
    (2) The services are likely to promote the vocational 
rehabilitation of substantially larger numbers of individuals with 
disabilities or of individuals with disabilities with particular types 
of impairments; and
    (3) For purposes other than those specified in Sec.  
361.60(b)(3)(i) and consistent with the requirements in Sec.  
361.60(b)(3)(ii), the State includes in its vocational rehabilitation 
services portion of the Unified or Combined State Plan, and the 
Secretary approves, a waiver of the statewideness requirement, in 
accordance with the requirements of paragraph (b) of this section.
    (b) Request for waiver. The request for a waiver of statewideness 
must--
    (1) Identify the types of services to be provided;
    (2) Contain a written assurance from the local public agency that 
it will make available to the State unit the non-Federal share of 
funds;
    (3) Contain a written assurance that State unit approval will be 
obtained for each proposed service before it is put into effect; and
    (4) Contain a written assurance that all other requirements of the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan, including a State's order of selection requirements, will 
apply to all services approved under the waiver.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(4) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a)(4))

Sec.  361.27  Shared funding and administration of joint programs.

    (a) If the vocational rehabilitation services portion of the 
Unified or Combined State Plan provides for the designated State agency 
to share funding and administrative responsibility with another State 
agency or local public agency to carry out a joint program to provide 
services to individuals with disabilities, the State must submit to the 
Secretary for approval a plan that describes its shared funding and 
administrative arrangement.
    (b) The plan under paragraph (a) of this section must include--
    (1) A description of the nature and scope of the joint program;
    (2) The services to be provided under the joint program;
    (3) The respective roles of each participating agency in the 
administration and provision of services; and
    (4) The share of the costs to be assumed by each agency.
    (c) If a proposed joint program does not comply with the 
statewideness requirement in Sec.  361.25, the State unit must obtain a 
waiver of statewideness, in accordance with Sec.  361.26.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(2)(A) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(2)(A))

Sec.  361.28  Third-party cooperative arrangements involving funds from 
other public agencies.

    (a) The designated State unit may enter into a third-party 
cooperative arrangement for providing or contracting for the provision 
of vocational rehabilitation services with another State agency or a 
local public agency that is providing part or all of the non-Federal 
share in accordance with paragraph (c) of this section, if the 
designated State unit ensures that--
    (1) The services provided by the cooperating agency are not the 
customary or typical services provided by that agency but are new 
services that have a vocational rehabilitation focus or existing 
services that have been modified, adapted, expanded, or reconfigured to 
have a vocational rehabilitation focus;
    (2) The services provided by the cooperating agency are only 
available to applicants for, or recipients of, services from the 
designated State unit;
    (3) Program expenditures and staff providing services under the 
cooperative arrangement are under the administrative supervision of the 
designated State unit; and
    (4) All requirements of the vocational rehabilitation services 
portion of the Unified or Combined State Plan, including a State's 
order of selection,

[[Page 55759]]

will apply to all services provided under the cooperative arrangement.
    (b) If a third party cooperative arrangement does not comply with 
the statewideness requirement in Sec.  361.25, the State unit must 
obtain a waiver of statewideness, in accordance with Sec.  361.26.
    (c) The cooperating agency's contribution toward the non-Federal 
share required under the arrangement, as set forth in paragraph (a) of 
this section, may be made through:
    (1) Cash transfers to the designated State unit;
    (2) Certified personnel expenditures for the time cooperating 
agency staff spent providing direct vocational rehabilitation services 
pursuant to a third-party cooperative arrangement that meets the 
requirements of this section. Certified personnel expenditures may 
include the allocable portion of staff salary and fringe benefits based 
upon the amount of time cooperating agency staff directly spent 
providing services under the arrangement; and
    (3) other direct expenditures incurred by the cooperating agency 
for the sole purpose of providing services under this section pursuant 
to a third-party cooperative arrangement that--
    (i) Meets the requirements of this section;
    (ii) Are verifiable as being incurred under the third-party 
cooperative arrangement; and
    (iii) Do not meet the definition of third-party in-kind 
contributions under 2 CFR 200.96.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.29  Statewide assessment; annual estimates; annual State 
goals and priorities; strategies; and progress reports.

    (a) Comprehensive statewide assessment. (1) The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must include--
    (i) The results of a comprehensive, statewide assessment, jointly 
conducted by the designated State unit and the State Rehabilitation 
Council (if the State unit has a Council) every three years. Results of 
the assessment are to be included in the vocational rehabilitation 
portion of the Unified or Combined State Plan, submitted in accordance 
with the requirements of Sec.  361.10(a) and the joint regulations of 
this part. The comprehensive needs assessment must describe the 
rehabilitation needs of individuals with disabilities residing within 
the State, particularly the vocational rehabilitation services needs 
of--
    (A) Individuals with the most significant disabilities, including 
their need for supported employment services;
    (B) Individuals with disabilities who are minorities and 
individuals with disabilities who have been unserved or underserved by 
the vocational rehabilitation program carried out under this part;
    (C) Individuals with disabilities served through other components 
of the statewide workforce development system as identified by those 
individuals and personnel assisting those individuals through the 
components of the system; and
    (D) Youth with disabilities, and students with disabilities, 
including
    (1) Their need for pre-employment transition services or other 
transition services; and
    (2) An assessment of the needs of individuals with disabilities for 
transition services and pre-employment transition services, and the 
extent to which such services provided under this part are coordinated 
with transition services provided under the Individuals with 
Disabilities Education Act (20 U.S.C. 1400 et seq.) in order to meet 
the needs of individuals with disabilities.
    (ii) An assessment of the need to establish, develop, or improve 
community rehabilitation programs within the State.
    (2) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the State will submit to the 
Secretary a report containing information regarding updates to the 
assessments under paragraph (a) of this section for any year in which 
the State updates the assessments at such time and in such manner as 
the Secretary determines appropriate.
    (b) Annual estimates. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must include, and must 
assure that the State will submit a report to the Secretary (at such 
time and in such manner determined appropriate by the Secretary) that 
includes, State estimates of--
    (1) The number of individuals in the State who are eligible for 
services under this part;
    (2) The number of eligible individuals who will receive services 
provided with funds provided under this part and under part Sec.  363, 
including, if the designated State agency uses an order of selection in 
accordance with Sec.  361.36, estimates of the number of individuals to 
be served under each priority category within the order;
    (3) The number of individuals who are eligible for services under 
paragraph (b)(1) of this section, but are not receiving such services 
due to an order of selection; and
    (4) The costs of the services described in paragraph (b)(2) of this 
section, including, if the designated State agency uses an order of 
selection, the service costs for each priority category within the 
order.
    (c) Goals and priorities--(1) In general. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must identify the goals and priorities of the State in carrying out the 
program.
    (2) Council. The goals and priorities must be jointly developed, 
agreed to, reviewed annually, and, as necessary, revised by the 
designated State unit and the State Rehabilitation Council, if the 
State unit has a Council.
    (3) Submission. The vocational rehabilitation services portion of 
the Unified or Combined State Plan must assure that the State will 
submit to the Secretary a report containing information regarding 
revisions in the goals and priorities for any year in which the State 
revises the goals and priorities at such time and in such manner as 
determined appropriate by the Secretary.
    (4) Basis for goals and priorities. The State goals and priorities 
must be based on an analysis of--
    (i) The comprehensive statewide assessment described in paragraph 
(a) of this section, including any updates to the assessment;
    (ii) The performance of the State on the standards and indicators 
established under section 106 of the Act; and
    (iii) Other available information on the operation and the 
effectiveness of the vocational rehabilitation program carried out in 
the State, including any reports received from the State Rehabilitation 
Council under Sec.  361.17(h) and the findings and recommendations from 
monitoring activities conducted under section 107 of the Act.
    (5) Service and outcome goals for categories in order of selection. 
If the designated State agency uses an order of selection in accordance 
with Sec.  361.36, the vocational rehabilitation services portion of 
the Unified or Combined State Plan must identify the State's service 
and outcome goals and the time within which these goals may be achieved 
for individuals in each priority category within the order.
    (d) Strategies. The vocational rehabilitation services portion of 
the Unified or Combined State Plan must describe the strategies the 
State will use

[[Page 55760]]

to address the needs identified in the assessment conducted under 
paragraph (a) of this section and achieve the goals and priorities 
identified in paragraph (c) of this section, including--
    (1) The methods to be used to expand and improve services to 
individuals with disabilities, including how a broad range of assistive 
technology services and assistive technology devices will be provided 
to those individuals at each stage of the rehabilitation process and 
how those services and devices will be provided to individuals with 
disabilities on a statewide basis;
    (2) The methods to be used to improve and expand vocational 
rehabilitation services for students with disabilities, including the 
coordination of services designed to facilitate the transition of such 
students from the receipt of educational services in school to 
postsecondary life, including the receipt of vocational rehabilitation 
services under the Act, postsecondary education, employment, and pre-
employment transition services;
    (3) Strategies developed and implemented by the State to address 
the needs of students and youth with disabilities identified in the 
assessments described in paragraph (a) of this section and strategies 
to achieve the goals and priorities identified by the State to improve 
and expand vocational rehabilitation services for students and youth 
with disabilities on a statewide basis;
    (4) Strategies to provide pre-employment transition services;
    (5) Outreach procedures to identify and serve individuals with 
disabilities who are minorities and individuals with disabilities who 
have been unserved or underserved by the vocational rehabilitation 
program;
    (6) As applicable, the plan of the State for establishing, 
developing, or improving community rehabilitation programs;
    (7) Strategies to improve the performance of the State with respect 
to the evaluation standards and performance indicators established 
pursuant to section 106 of the Act and section 116 of Workforce 
Innovation and Opportunity Act; and
    (8) Strategies for assisting other components of the statewide 
workforce development system in assisting individuals with 
disabilities.
    (e) Evaluation and reports of progress. (1) The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must include--
    (i) The results of an evaluation of the effectiveness of the 
vocational rehabilitation program; and
    (ii) A joint report by the designated State unit and the State 
Rehabilitation Council, if the State unit has a Council, to the 
Secretary on the progress made in improving the effectiveness of the 
program from the previous year. This evaluation and joint report must 
include--
    (A) An evaluation of the extent to which the goals and priorities 
identified in paragraph (c) of this section were achieved;
    (B) A description of the strategies that contributed to the 
achievement of the goals and priorities;
    (C) To the extent to which the goals and priorities were not 
achieved, a description of the factors that impeded that achievement; 
and
    (D) An assessment of the performance of the State on the standards 
and indicators established pursuant to section 106 of the Act.
    (2) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the designated State unit and 
the State Rehabilitation Council, if the State unit has a Council, will 
jointly submit to the Secretary a report that contains the information 
described in paragraph (e)(1) of this section at such time and in such 
manner the Secretary determines appropriate.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(15) and (25) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 721(a)(15) and (25))

Sec.  361.30  Services to American Indians.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that the designated State agency 
provides vocational rehabilitation services to American Indians who are 
individuals with disabilities residing in the State to the same extent 
as the designated State agency provides vocational rehabilitation 
services to other significant populations of individuals with 
disabilities residing in the State.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 101(a)(13) and 121(b)(3) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 721(a)(13) and 741(b)(3))

Sec.  361.31  Cooperative agreements with private nonprofit 
organizations.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must describe the manner in which cooperative 
agreements with private nonprofit vocational rehabilitation service 
providers will be established.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(24)(B) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(24)(B))

Sec.  361.32  Provision of training and services for employers.

    The designated State unit may expend payments received under this 
part to educate and provide services to employers who have hired or are 
interested in hiring individuals with disabilities under the vocational 
rehabilitation program, including--
    (a) Providing training and technical assistance to employers 
regarding the employment of individuals with disabilities, including 
disability awareness, and the requirements of the Americans with 
Disabilities Act of 1990 (42 U.S.C. 12101 et seq.) and other 
employment-related laws;
    (b) Working with employers to--
    (1) Provide opportunities for work-based learning experiences 
(including internships, short-term employment, apprenticeships, and 
fellowships);
    (2) Provide opportunities for pre-employment transition services, 
in accordance with the requirements under Sec.  361.48(a);
    (3) Recruit qualified applicants who are individuals with 
disabilities;
    (4) Train employees who are individuals with disabilities; and
    (5) Promote awareness of disability-related obstacles to continued 
employment.
    (c) Providing consultation, technical assistance, and support to 
employers on workplace accommodations, assistive technology, and 
facilities and workplace access through collaboration with community 
partners and employers, across States and nationally, to enable the 
employers to recruit, job match, hire, and retain qualified individuals 
with disabilities who are recipients of vocational rehabilitation 
services under this part, or who are applicants for such services; and
    (d) Assisting employers with utilizing available financial support 
for hiring or accommodating individuals with disabilities.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 109 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 728A)

Sec.  361.33  [Reserved]


Sec.  361.34  Supported employment State plan supplement.

    (a) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the State has an acceptable 
plan under

[[Page 55761]]

part 363 of this chapter that provides for the use of funds under that 
part to supplement funds under this part for the cost of services 
leading to supported employment.
    (b) The supported employment plan, including any needed revisions, 
must be submitted as a supplement to the vocational rehabilitation 
services portion of the Unified or Combined State Plan submitted under 
this part.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 101(a)(22) and 606 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 721(a)(22) and 795k)

Sec.  361.35  Innovation and expansion activities.

    (a) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the State will reserve and use 
a portion of the funds allotted to the State under section 110 of the 
Act--
    (1) For the development and implementation of innovative approaches 
to expand and improve the provision of vocational rehabilitation 
services to individuals with disabilities, particularly individuals 
with the most significant disabilities, including transition services 
for students and youth with disabilities and pre-employment transition 
services for students with disabilities, consistent with the findings 
of the comprehensive statewide assessment of the rehabilitation needs 
of individuals with disabilities under Sec.  361.29(a) and the State's 
goals and priorities under Sec.  361.29(c);
    (2) To support the funding of the State Rehabilitation Council, if 
the State has a Council, consistent with the resource plan identified 
in Sec.  361.17(i); and
    (3) To support the funding of the Statewide Independent Living 
Council, consistent with the Statewide Independent Living Council 
resource plan prepared under Section 705(e)(1) of the Act.
    (b) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must--
    (1) Describe how the reserved funds will be used; and
    (2) Include a report describing how the reserved funds were used.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c) and 101(a)(18) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a) (18))

Sec.  361.36  Ability to serve all eligible individuals; order of 
selection for services.

    (a) General provisions--(1) The designated State unit either must 
be able to provide the full range of services listed in section 103(a) 
of the Act and Sec.  361.48, as appropriate, to all eligible 
individuals or, in the event that vocational rehabilitation services 
cannot be provided to all eligible individuals in the State who apply 
for the services, include in the vocational rehabilitation services 
portion of the Unified or Combined State Plan the order to be followed 
in selecting eligible individuals to be provided vocational 
rehabilitation services.
    (2) The ability of the designated State unit to provide the full 
range of vocational rehabilitation services to all eligible individuals 
must be supported by a determination that satisfies the requirements of 
paragraph (b) or (c) of this section and a determination that, on the 
basis of the designated State unit's projected fiscal and personnel 
resources and its assessment of the rehabilitation needs of individuals 
with significant disabilities within the State, it can--
    (i) Continue to provide services to all individuals currently 
receiving services;
    (ii) Provide assessment services to all individuals expected to 
apply for services in the next fiscal year;
    (iii) Provide services to all individuals who are expected to be 
determined eligible in the next fiscal year; and
    (iv) Meet all program requirements.
    (3) If the designated State unit is unable to provide the full 
range of vocational rehabilitation services to all eligible individuals 
in the State who apply for the services, the vocational rehabilitation 
services portion of the Unified or Combined State Plan must--
    (i) Show the order to be followed in selecting eligible individuals 
to be provided vocational rehabilitation services;
    (ii) Provide a justification for the order of selection;
    (iii) Identify service and outcome goals and the time within which 
the goals may be achieved for individuals in each priority category 
within the order, as required under Sec.  361.29(c)(5);
    (iv) Assure that--
    (A) In accordance with criteria established by the State for the 
order of selection, individuals with the most significant disabilities 
will be selected first for the provision of vocational rehabilitation 
services; and
    (B) Individuals who do not meet the order of selection criteria 
will have access to services provided through the information and 
referral system established under Sec.  361.37; and
    (v) State whether the designated State unit will elect to serve, in 
its discretion, eligible individuals (whether or not the individuals 
are receiving vocational rehabilitation services under the order of 
selection) who require specific services or equipment to maintain 
employment, notwithstanding the assurance provided pursuant to 
paragraph (3)(iv)(A) of this section.
    (b) Basis for assurance that services can be provided to all 
eligible individuals. (1) For a designated State unit that determined, 
for the current fiscal year and the preceding fiscal year, that it is 
able to provide the full range of services, as appropriate, to all 
eligible individuals, the State unit, during the current fiscal and 
preceding fiscal year, must have in fact--
    (i) Provided assessment services to all applicants and the full 
range of services, as appropriate, to all eligible individuals;
    (ii) Made referral forms widely available throughout the State;
    (iii) Conducted outreach efforts to identify and serve individuals 
with disabilities who have been unserved or underserved by the 
vocational rehabilitation system; and
    (iv) Not delayed, through waiting lists or other means, 
determinations of eligibility, the development of individualized plans 
for employment for individuals determined eligible for vocational 
rehabilitation services, or the provision of services for eligible 
individuals for whom individualized plans for employment have been 
developed.
    (2) For a designated State unit that was unable to provide the full 
range of services to all eligible individuals during the current or 
preceding fiscal year or that has not met the requirements in paragraph 
(b)(1) of this section, the determination that the designated State 
unit is able to provide the full range of vocational rehabilitation 
services to all eligible individuals in the next fiscal year must be 
based on--
    (i) A demonstration that circumstances have changed that will allow 
the designated State unit to meet the requirements of paragraph (a)(2) 
of this section in the next fiscal year, including--
    (A) An estimate of the number of and projected costs of serving, in 
the next fiscal year, individuals with existing individualized plans 
for employment;
    (B) The projected number of individuals with disabilities who will 
apply for services and will be determined eligible in the next fiscal 
year and the projected costs of serving those individuals;
    (C) The projected costs of administering the program in the next 
fiscal year, including, but not limited to, costs of staff salaries and 
benefits,

[[Page 55762]]

outreach activities, and required statewide studies; and
    (D) The projected revenues and projected number of qualified 
personnel for the program in the next fiscal year.
    (ii) Comparable data, as relevant, for the current or preceding 
fiscal year, or for both years, of the costs listed in paragraphs 
(b)(2)(i)(A) through (C) of this section and the resources identified 
in paragraph (b)(2)(i)(D) of this section and an explanation of any 
projected increases or decreases in these costs and resources; and
    (iii) A determination that the projected revenues and the projected 
number of qualified personnel for the program in the next fiscal year 
are adequate to cover the costs identified in paragraphs (b)(2)(i)(A) 
through (C) of this section to ensure the provision of the full range 
of services, as appropriate, to all eligible individuals.
    (c) Determining need for establishing and implementing an order of 
selection. (1) The designated State unit must determine, prior to the 
beginning of each fiscal year, whether to establish and implement an 
order of selection.
    (2) If the designated State unit determines that it does not need 
to establish an order of selection, it must reevaluate this 
determination whenever changed circumstances during the course of a 
fiscal year, such as a decrease in its fiscal or personnel resources or 
an increase in its program costs, indicate that it may no longer be 
able to provide the full range of services, as appropriate, to all 
eligible individuals, as described in paragraph (a)(2) of this section.
    (3) If a designated State unit establishes an order of selection, 
but determines that it does not need to implement that order at the 
beginning of the fiscal year, it must continue to meet the requirements 
of paragraph (a)(2) of this section, or it must implement the order of 
selection by closing one or more priority categories.
    (d) Establishing an order of selection--(1) Basis for order of 
selection. An order of selection must be based on a refinement of the 
three criteria in the definition of individual with a significant 
disability in section 7(21)(A) of the Act and Sec.  361.5(c)(30).
    (2) Factors that cannot be used in determining order of selection 
of eligible individuals. An order of selection may not be based on any 
other factors, including--
    (i) Any duration of residency requirement, provided the individual 
is present in the State;
    (ii) Type of disability;
    (iii) Age, sex, race, color, or national origin;
    (iv) Source of referral;
    (v) Type of expected employment outcome;
    (vi) The need for specific services except those services provided 
in accordance with 361.36(a)(3)(v), or anticipated cost of services 
required by an individual; or
    (vii) The income level of an individual or an individual's family.
    (e) Administrative requirements. In administering the order of 
selection, the designated State unit must--
    (1) Implement the order of selection on a statewide basis;
    (2) Notify all eligible individuals of the priority categories in a 
State's order of selection, their assignment to a particular category, 
and their right to appeal their category assignment;
    (3) Continue to provide services to any recipient who has begun to 
receive services irrespective of the severity of the individual's 
disability as follows--
    (i) The designated State unit must continue to provide pre-
employment transition services to students with disabilities who were 
receiving such services prior to being determined eligible for 
vocational rehabilitation services; and
    (ii) The designated State unit must continue to provide to an 
eligible individual all needed services listed on the individualized 
plan for employment if the individual had begun receiving such services 
prior to the effective date of the State's order of selection; and
    (4) Ensure that its funding arrangements for providing services 
under the vocational rehabilitation services portion of the Unified or 
Combined State Plan, including third-party arrangements and awards 
under the establishment authority, are consistent with the order of 
selection. If any funding arrangements are inconsistent with the order 
of selection, the designated State unit must renegotiate these funding 
arrangements so that they are consistent with the order of selection.
    (f) State Rehabilitation Council. The designated State unit must 
consult with the State Rehabilitation Council, if the State unit has a 
Council, regarding the--
    (1) Need to establish an order of selection, including any 
reevaluation of the need under paragraph (c)(2) of this section;
    (2) Priority categories of the particular order of selection;
    (3) Criteria for determining individuals with the most significant 
disabilities; and
    (4) Administration of the order of selection.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(d); 101(a)(5); 101(a)(12); 101(a)(15)(A), 
(B) and (C); 101(a)(21)(A)(ii); and 504(a) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(d), 721(a)(5), 721(a)(12), 
721(a)(15)(A), (B) and (C); 721(a)(21)(A)(ii), and 794(a))

Sec.  361.37  Information and referral programs.

    (a) General provisions. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that--
    (1) The designated State agency will implement an information and 
referral system adequate to ensure that individuals with disabilities, 
including eligible individuals who do not meet the agency's order of 
selection criteria for receiving vocational rehabilitation services if 
the agency is operating on an order of selection, are provided accurate 
vocational rehabilitation information and guidance (which may include 
counseling and referral for job placement) using appropriate modes of 
communication to assist them in preparing for, securing, retaining, 
advancing in, or regaining employment; and
    (2) The designated State agency will refer individuals with 
disabilities to other appropriate Federal and State programs, including 
other components of the statewide workforce development system.
    (b) The designated State unit must refer to appropriate programs 
and service providers best suited to address the specific 
rehabilitation, independent living and employment needs of an 
individual with a disability who makes an informed choice not to pursue 
an employment outcome under the vocational rehabilitation program, as 
defined in Sec.  361.5(c)(15). Before making the referral required by 
this paragraph, the State unit must--
    (1) Consistent with Sec.  361.42(a)(4)(i), explain to the 
individual that the purpose of the vocational rehabilitation program is 
to assist individuals to achieve an employment outcome as defined in 
Sec.  361.5(c)(15);
    (2) Consistent with Sec.  361.52, provide the individual with 
information concerning the availability of employment options, and of 
vocational rehabilitation services, to assist the individual to achieve 
an appropriate employment outcome;
    (3) Inform the individual that services under the vocational 
rehabilitation program can be provided to eligible individuals in an 
extended employment setting if necessary for purposes of training or 
otherwise preparing for employment in an integrated setting;

[[Page 55763]]

    (4) Inform the individual that, if he or she initially chooses not 
to pursue an employment outcome as defined in Sec.  361.5(c)(15), he or 
she can seek services from the designated State unit at a later date 
if, at that time, he or she chooses to pursue an employment outcome; 
and
    (5) Refer the individual, as appropriate, to the Social Security 
Administration in order to obtain information concerning the ability of 
individuals with disabilities to work while receiving benefits from the 
Social Security Administration.
    (c) Criteria for appropriate referrals. In making the referrals 
identified in paragraph (a)(2) of this section, the designated State 
unit must--
    (1) Refer the individual to Federal or State programs, including 
programs carried out by other components of the statewide workforce 
development system, best suited to address the specific employment 
needs of an individual with a disability; and
    (2) Provide the individual who is being referred--
    (i) A notice of the referral by the designated State agency to the 
agency carrying out the program;
    (ii) Information identifying a specific point of contact within the 
agency to which the individual is being referred; and
    (iii) Information and advice regarding the most suitable services 
to assist the individual to prepare for, secure, retain, or regain 
employment.
    (d) Order of selection. In providing the information and referral 
services under this section to eligible individuals who are not in the 
priority category or categories to receive vocational rehabilitation 
services under the State's order of selection, the State unit must 
identify, as part of its reporting under section 101(a)(10) of the Act 
and Sec.  361.40, the number of eligible individuals who did not meet 
the agency's order of selection criteria for receiving vocational 
rehabilitation services and did receive information and referral 
services under this section.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 7(11), 12(c), 101(a)(5)(E), 101(a)(10)(C)(ii), 
and 101(a)(20) of the Rehabilitation Act of 1973, as amended; 29 
U.S.C. 705(11), 709(c), 721(a)(5)(E), 721(a)(10)(C)(ii), and 
721(a)(20))

Sec.  361.38  Protection, use, and release of personal information.

    (a) General provisions. (1) The State agency and the State unit 
must adopt and implement written policies and procedures to safeguard 
the confidentiality of all personal information, including photographs 
and lists of names. These policies and procedures must ensure that--
    (i) Specific safeguards are established to protect current and 
stored personal information, including a requirement that data only be 
released when governed by a written agreement between the designated 
State unit and receiving entity under paragraphs (d) and (e)(1) of this 
section, which addresses the requirements in this section;
    (ii) All applicants and recipients of services and, as appropriate, 
those individuals' representatives, service providers, cooperating 
agencies, and interested persons are informed through appropriate modes 
of communication of the confidentiality of personal information and the 
conditions for accessing and releasing this information;
    (iii) All applicants and recipients of services or their 
representatives are informed about the State unit's need to collect 
personal information and the policies governing its use, including--
    (A) Identification of the authority under which information is 
collected;
    (B) Explanation of the principal purposes for which the State unit 
intends to use or release the information;
    (C) Explanation of whether providing requested information to the 
State unit is mandatory or voluntary and the effects of not providing 
requested information;
    (D) Identification of those situations in which the State unit 
requires or does not require informed written consent of the individual 
before information may be released; and
    (E) Identification of other agencies to which information is 
routinely released;
    (iv) An explanation of State policies and procedures affecting 
personal information will be provided to each individual in that 
individual's native language or through the appropriate mode of 
communication; and
    (v) These policies and procedures provide no fewer protections for 
individuals than State laws and regulations.
    (2) The State unit may establish reasonable fees to cover 
extraordinary costs of duplicating records or making extensive searches 
and must establish policies and procedures governing access to records.
    (b) State program use. All personal information in the possession 
of the State agency or the designated State unit must be used only for 
the purposes directly connected with the administration of the 
vocational rehabilitation program. Information containing identifiable 
personal information may not be shared with advisory or other bodies 
that do not have official responsibility for administration of the 
program. In the administration of the program, the State unit may 
obtain personal information from service providers and cooperating 
agencies under assurances that the information may not be further 
divulged, except as provided under paragraphs (c), (d), and (e) of this 
section.
    (c) Release to applicants and recipients of services. (1) Except as 
provided in paragraphs (c)(2) and (3) of this section, if requested in 
writing by an applicant or recipient of services, the State unit must 
make all requested information in that individual's record of services 
accessible to and must release the information to the individual or the 
individual's representative in a timely manner.
    (2) Medical, psychological, or other information that the State 
unit determines may be harmful to the individual may not be released 
directly to the individual, but must be provided to the individual 
through a third party chosen by the individual, which may include, 
among others, an advocate, a family member, or a qualified medical or 
mental health professional, unless a representative has been appointed 
by a court to represent the individual, in which case the information 
must be released to the court-appointed representative.
    (3) If personal information has been obtained from another agency 
or organization, it may be released only by, or under the conditions 
established by, the other agency or organization.
    (4) An applicant or recipient of services who believes that 
information in the individual's record of services is inaccurate or 
misleading may request that the designated State unit amend the 
information. If the information is not amended, the request for an 
amendment must be documented in the record of services, consistent with 
Sec.  361.47(a)(12).
    (d) Release for audit, evaluation, and research. Personal 
information may be released to an organization, agency, or individual 
engaged in audit, evaluation, or research only for purposes directly 
connected with the administration of the vocational rehabilitation 
program or for purposes that would significantly improve the quality of 
life for applicants and recipients of services and only if, in 
accordance with a written agreement, the organization, agency, or 
individual assures that--
    (1) The information will be used only for the purposes for which it 
is being provided;

[[Page 55764]]

    (2) The information will be released only to persons officially 
connected with the audit, evaluation, or research;
    (3) The information will not be released to the involved 
individual;
    (4) The information will be managed in a manner to safeguard 
confidentiality; and
    (5) The final product will not reveal any personal identifying 
information without the informed written consent of the involved 
individual or the individual's representative.
    (e) Release to other programs or authorities. (1) Upon receiving 
the informed written consent of the individual or, if appropriate, the 
individual's representative, the State unit may release personal 
information to another agency or organization, in accordance with a 
written agreement, for its program purposes only to the extent that the 
information may be released to the involved individual or the 
individual's representative and only to the extent that the other 
agency or organization demonstrates that the information requested is 
necessary for its program.
    (2) Medical or psychological information that the State unit 
determines may be harmful to the individual may be released if the 
other agency or organization assures the State unit that the 
information will be used only for the purpose for which it is being 
provided and will not be further released to the individual.
    (3) The State unit must release personal information if required by 
Federal law or regulations.
    (4) The State unit must release personal information in response to 
investigations in connection with law enforcement, fraud, or abuse, 
unless expressly prohibited by Federal or State laws or regulations, 
and in response to an order issued by a judge, magistrate, or other 
authorized judicial officer.
    (5) The State unit also may release personal information in order 
to protect the individual or others if the individual poses a threat to 
his or her safety or to the safety of others.

(Authority: Sections 12(c) and 101(a)(6)(A) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(6)(A))

Sec.  361.39  State-imposed requirements.

    The designated State unit must, upon request, identify those 
regulations and policies relating to the administration or operation of 
its vocational rehabilitation program that are State-imposed, including 
any regulations or policy based on State interpretation of any Federal 
law, regulation, or guideline.

(Authority: Section 17 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 714)

Sec.  361.40  Reports; Evaluation standards and performance indicators.

    (a) Reports. (1) The vocational rehabilitation services portion of 
the Unified or Combined State Plan must assure that the designated 
State agency will submit reports, including reports required under 
sections 13, 14, and 101(a)(10) of the Act--
    (i) In the form and level of detail and at the time required by the 
Secretary regarding applicants for and eligible individuals receiving 
services, including students receiving pre-employment transition 
services in accordance with Sec.  361.48(a); and
    (ii) In a manner that provides a complete count (other than the 
information obtained through sampling consistent with section 
101(a)(10)(E) of the Act) of the applicants and eligible individuals 
to--
    (A) Permit the greatest possible cross-classification of data; and
    (B) Protect the confidentiality of the identity of each individual.
    (2) The designated State agency must comply with any requirements 
necessary to ensure the accuracy and verification of those reports.
    (b) [Reserved]

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c), 101(a)(10)(A) and (F), and 106 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 
709(c),721(a)(10)(A) and (F), and 726)

Provision and Scope of Services


Sec.  361.41  Processing referrals and applications.

    (a) Referrals. The designated State unit must establish and 
implement standards for the prompt and equitable handling of referrals 
of individuals for vocational rehabilitation services, including 
referrals of individuals made through the one-stop service delivery 
systems under section 121 of the Workforce Innovation and Opportunity 
Act. The standards must include timelines for making good faith efforts 
to inform these individuals of application requirements and to gather 
information necessary to initiate an assessment for determining 
eligibility and priority for services.
    (b) Applications. (1) Once an individual has submitted an 
application for vocational rehabilitation services, including 
applications made through common intake procedures in one-stop centers 
under section 121 of the Workforce Innovation and Opportunity Act, an 
eligibility determination must be made within 60 days, unless--
    (i) Exceptional and unforeseen circumstances beyond the control of 
the designated State unit preclude making an eligibility determination 
within 60 days and the designated State unit and the individual agree 
to a specific extension of time; or
    (ii) An exploration of the individual's abilities, capabilities, 
and capacity to perform in work situations is carried out in accordance 
with Sec.  361.42(e).
    (2) An individual is considered to have submitted an application 
when the individual or the individual's representative, as 
appropriate--
    (i)(A) Has completed and signed an agency application form;
    (B) Has completed a common intake application form in a one-stop 
center requesting vocational rehabilitation services; or
    (C) Has otherwise requested services from the designated State 
unit;
    (ii) Has provided to the designated State unit information 
necessary to initiate an assessment to determine eligibility and 
priority for services; and
    (iii) Is available to complete the assessment process.
    (3) The designated State unit must ensure that its application 
forms are widely available throughout the State, particularly in the 
one-stop centers under section 121 of the Workforce Innovation and 
Opportunity Act.

(Authority: Sections 12(c), 101(a)(6)(A), and 102(a)(6) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(6)(A), and 722(a)(6))

Sec.  361.42  Assessment for determining eligibility and priority for 
services.

    In order to determine whether an individual is eligible for 
vocational rehabilitation services and the individual's priority under 
an order of selection for services (if the State is operating under an 
order of selection), the designated State unit must conduct an 
assessment for determining eligibility and priority for services. The 
assessment must be conducted in the most integrated setting possible, 
consistent with the individual's needs and informed choice, and in 
accordance with the following provisions:
    (a) Eligibility requirements--(1) Basic requirements. The 
designated State unit's determination of an applicant's eligibility for 
vocational rehabilitation services must be based only on the following 
requirements:
    (i) A determination by qualified personnel that the applicant has a 
physical or mental impairment;
    (ii) A determination by qualified personnel that the applicant's 
physical or mental impairment constitutes or results in a substantial 
impediment to employment for the applicant; and
    (iii) A determination by a qualified vocational rehabilitation 
counselor

[[Page 55765]]

employed by the designated State unit that the applicant requires 
vocational rehabilitation services to prepare for, secure, retain, 
advance in, or regain employment that is consistent with the 
individual's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interest, and informed choice. For purposes of 
an assessment for determining eligibility and vocational rehabilitation 
needs under this part, an individual is presumed to have a goal of an 
employment outcome.
    (2) Presumption of benefit. The designated State unit must presume 
that an applicant who meets the eligibility requirements in paragraphs 
(a)(1)(i) and (ii) of this section can benefit in terms of an 
employment outcome.
    (3) Presumption of eligibility for Social Security recipients and 
beneficiaries. (i) Any applicant who has been determined eligible for 
Social Security benefits under title II or title XVI of the Social 
Security Act is--
    (A) Presumed eligible for vocational rehabilitation services under 
paragraphs (a)(1) and (2) of this section; and
    (B) Considered an individual with a significant disability as 
defined in Sec.  361.5(c)(29).
    (ii) If an applicant for vocational rehabilitation services asserts 
that he or she is eligible for Social Security benefits under title II 
or title XVI of the Social Security Act (and, therefore, is presumed 
eligible for vocational rehabilitation services under paragraph 
(a)(3)(i)(A) of this section), but is unable to provide appropriate 
evidence, such as an award letter, to support that assertion, the State 
unit must verify the applicant's eligibility under title II or title 
XVI of the Social Security Act by contacting the Social Security 
Administration. This verification must be made within a reasonable 
period of time that enables the State unit to determine the applicant's 
eligibility for vocational rehabilitation services within 60 days of 
the individual submitting an application for services in accordance 
with Sec.  361.41(b)(2).
    (4) Achievement of an employment outcome. Any eligible individual, 
including an individual whose eligibility for vocational rehabilitation 
services is based on the individual being eligible for Social Security 
benefits under title II or title XVI of the Social Security Act, must 
intend to achieve an employment outcome that is consistent with the 
applicant's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interests, and informed choice.
    (i) The State unit is responsible for informing individuals, 
through its application process for vocational rehabilitation services, 
that individuals who receive services under the program must intend to 
achieve an employment outcome.
    (ii) The applicant's completion of the application process for 
vocational rehabilitation services is sufficient evidence of the 
individual's intent to achieve an employment outcome, and no additional 
demonstration on the part of the applicant is required for purposes of 
satisfying paragraph (a)(4) of this section.
    (5) Interpretation. Nothing in this section, including paragraph 
(a)(3)(i), is to be construed to create an entitlement to any 
vocational rehabilitation service.
    (b) Interim determination of eligibility. (1) The designated State 
unit may initiate the provision of vocational rehabilitation services 
for an applicant on the basis of an interim determination of 
eligibility prior to the 60-day period described in Sec.  361.41(b)(2).
    (2) If a State chooses to make interim determinations of 
eligibility, the designated State unit must--
    (i) Establish criteria and conditions for making those 
determinations;
    (ii) Develop and implement procedures for making the 
determinations; and
    (iii) Determine the scope of services that may be provided pending 
the final determination of eligibility.
    (3) If a State elects to use an interim eligibility determination, 
the designated State unit must make a final determination of 
eligibility within 60 days of the individual submitting an application 
for services in accordance with Sec.  361.41(b)(2).
    (c) Prohibited factors. (1) The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that the 
State unit will not impose, as part of determining eligibility under 
this section, a duration of residence requirement that excludes from 
services any applicant who is present in the State. The designated 
State unit may not require the applicant to demonstrate a presence in 
the State through the production of any documentation that under State 
or local law, or practical circumstances, results in a de facto 
duration of residence requirement.
    (2) In making a determination of eligibility under this section, 
the designated State unit also must ensure that--
    (i) No applicant or group of applicants is excluded or found 
ineligible solely on the basis of the type of disability; and
    (ii) The eligibility requirements are applied without regard to 
the--
    (A) Age, sex, race, color, or national origin of the applicant;
    (B) Type of expected employment outcome;
    (C) Source of referral for vocational rehabilitation services;
    (D) Particular service needs or anticipated cost of services 
required by an applicant or the income level of an applicant or 
applicant's family;
    (E) Applicants' employment history or current employment status; 
and
    (F) Applicants' educational status or current educational 
credential.
    (d) Review and assessment of data for eligibility determination. 
Except as provided in paragraph (e) of this section, the designated 
State unit--
    (1) Must base its determination of each of the basic eligibility 
requirements in paragraph (a) of this section on--
    (i) A review and assessment of existing data, including counselor 
observations, education records, information provided by the individual 
or the individual's family, particularly information used by education 
officials, and determinations made by officials of other agencies; and
    (ii) To the extent existing data do not describe the current 
functioning of the individual or are unavailable, insufficient, or 
inappropriate to make an eligibility determination, an assessment of 
additional data resulting from the provision of vocational 
rehabilitation services, including trial work experiences, assistive 
technology devices and services, personal assistance services, and any 
other support services that are necessary to determine whether an 
individual is eligible; and
    (2) Must base its presumption under paragraph (a)(3)(i) of this 
section that an applicant who has been determined eligible for Social 
Security benefits under title II or title XVI of the Social Security 
Act satisfies each of the basic eligibility requirements in paragraph 
(a) of this section on determinations made by the Social Security 
Administration.
    (e) Trial work experiences for individuals with significant 
disabilities. (1) Prior to any determination that an individual with a 
disability is unable to benefit from vocational rehabilitation services 
in terms of an employment outcome because of the severity of that 
individual's disability or that the individual is ineligible for 
vocational rehabilitation services, the designated State unit must 
conduct an exploration of the individual's abilities, capabilities, and 
capacity to perform in realistic work situations.
    (2)(i) The designated State unit must develop a written plan to 
assess periodically the individual's abilities, capabilities, and 
capacity to perform in competitive integrated work situations

[[Page 55766]]

through the use of trial work experiences, which must be provided in 
competitive integrated employment settings to the maximum extent 
possible, consistent with the informed choice and rehabilitation needs 
of the individual.
    (ii) Trial work experiences include supported employment, on-the-
job training, and other experiences using realistic integrated work 
settings.
    (iii) Trial work experiences must be of sufficient variety and over 
a sufficient period of time for the designated State unit to determine 
that--
    (A) There is sufficient evidence to conclude that the individual 
can benefit from the provision of vocational rehabilitation services in 
terms of an employment outcome; or
    (B) There is clear and convincing evidence that due to the severity 
of the individual's disability, the individual is incapable of 
benefitting from the provision of vocational rehabilitation services in 
terms of an employment outcome; and
    (iv) The designated State unit must provide appropriate supports, 
including, but not limited to, assistive technology devices and 
services and personal assistance services, to accommodate the 
rehabilitation needs of the individual during the trial work 
experiences.
    (f) Data for determination of priority for services under an order 
of selection. If the designated State unit is operating under an order 
of selection for services, as provided in Sec.  361.36, the State unit 
must base its priority assignments on--
    (1) A review of the data that was developed under paragraphs (d) 
and (e) of this section to make the eligibility determination; and
    (2) An assessment of additional data, to the extent necessary.

(Authority: Sections 7(2), 12(c), 101(a)(12), 102(a), 103(a)(1), 
103(a)(9), 103(a)(10), and 103(a)(14) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(2), 709(c), 721(a)(12), 722(a), 
723(a)(1), 723(a)(9), 723(a)(10), and 723(a)(14))


    Note to Sec.  361.42: Clear and convincing evidence means that 
the designated State unit has a high degree of certainty before it 
can conclude that an individual is incapable of benefiting from 
services in terms of an employment outcome. The clear and convincing 
standard constitutes the highest standard used in our civil system 
of law and is to be individually applied on a case-by-case basis. 
The term clear means unequivocal. For example, the use of an 
intelligence test result alone would not constitute clear and 
convincing evidence. Clear and convincing evidence might include a 
description of assessments, including situational assessments and 
supported employment assessments, from service providers who have 
concluded that they would be unable to meet the individual's needs 
due to the severity of the individual's disability. The 
demonstration of ``clear and convincing evidence'' must include, if 
appropriate, a functional assessment of skill development 
activities, with any necessary supports (including assistive 
technology), in real life settings. (S. Rep. No. 357, 102d Cong., 
2d. Sess. 37-38 (1992))

Sec.  361.43  Procedures for ineligibility determination.

    If the State unit determines that an applicant is ineligible for 
vocational rehabilitation services or determines that an individual 
receiving services under an individualized plan for employment is no 
longer eligible for services, the State unit must--
    (a) Make the determination only after providing an opportunity for 
full consultation with the individual or, as appropriate, with the 
individual's representative;
    (b) Inform the individual in writing, supplemented as necessary by 
other appropriate modes of communication consistent with the informed 
choice of the individual, of the ineligibility determination, including 
the reasons for that determination, the requirements under this 
section, and the means by which the individual may express and seek 
remedy for any dissatisfaction, including the procedures for review of 
State unit personnel determinations in accordance with Sec.  361.57;
    (c) Provide the individual with a description of services available 
from a client assistance program established under 34 CFR part 370 and 
information on how to contact that program;
    (d) Refer the individual--
    (1) To other programs that are part of the one-stop service 
delivery system under the Workforce Innovation and Opportunity Act that 
can address the individual's training or employment-related needs; or
    (2) To Federal, State, or local programs or service providers, 
including, as appropriate, independent living programs and extended 
employment providers, best suited to meet their rehabilitation needs, 
if the ineligibility determination is based on a finding that the 
individual has chosen not to pursue, or is incapable of achieving, an 
employment outcome as defined in Sec.  361.5(c)(15).
    (e) Review within 12 months and annually thereafter if requested by 
the individual or, if appropriate, by the individual's representative 
any ineligibility determination that is based on a finding that the 
individual is incapable of achieving an employment outcome. This review 
need not be conducted in situations in which the individual has refused 
it, the individual is no longer present in the State, the individual's 
whereabouts are unknown, or the individual's medical condition is 
rapidly progressive or terminal.

(Authority: Sections 12(c) and 102(a)(5) and (c) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
722(a)(5)and (c))

Sec.  361.44  Closure without eligibility determination.

    The designated State unit may not close an applicant's record of 
services prior to making an eligibility determination unless the 
applicant declines to participate in, or is unavailable to complete, an 
assessment for determining eligibility and priority for services, and 
the State unit has made a reasonable number of attempts to contact the 
applicant or, if appropriate, the applicant's representative to 
encourage the applicant's participation.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.45  Development of the individualized plan for employment.

    (a) General requirements. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that--
    (1) An individualized plan for employment meeting the requirements 
of this section and Sec.  361.46 is developed and implemented in a 
timely manner for each individual determined to be eligible for 
vocational rehabilitation services or, if the designated State unit is 
operating under an order of selection in accordance with Sec.  361.36, 
for each eligible individual to whom the State unit is able to provide 
services; and
    (2) Services will be provided in accordance with the provisions of 
the individualized plan for employment.
    (b) Purpose. (1) The designated State unit must conduct an 
assessment for determining vocational rehabilitation needs, if 
appropriate, for each eligible individual or, if the State is operating 
under an order of selection, for each eligible individual to whom the 
State is able to provide services. The purpose of this assessment is to 
determine the employment outcome, and the nature and scope of 
vocational rehabilitation services to be included in the individualized 
plan for employment.
    (2) The individualized plan for employment must be designed to 
achieve a specific employment outcome, as defined in Sec.  
361.5(c)(15), that is selected by the individual consistent with the 
individual's unique strengths, resources, priorities, concerns, 
abilities,

[[Page 55767]]

capabilities, interests, and informed choice.
    (c) Required information. The State unit must provide the following 
information to each eligible individual or, as appropriate, the 
individual's representative, in writing and, if appropriate, in the 
native language or mode of communication of the individual or the 
individual's representative:
    (1) Options for developing an individualized plan for employment. 
Information on the available options for developing the individualized 
plan for employment, including the option that an eligible individual 
or, as appropriate, the individual's representative may develop all or 
part of the individualized plan for employment--
    (i) Without assistance from the State unit or other entity; or
    (ii) With assistance from--
    (A) A qualified vocational rehabilitation counselor employed by the 
State unit;
    (B) A qualified vocational rehabilitation counselor who is not 
employed by the State unit;
    (C) A disability advocacy organization; or
    (D) Resources other than those in paragraph (c)(1)(ii)(A) through 
(C) of this section.
    (2) Additional information. Additional information to assist the 
eligible individual or, as appropriate, the individual's representative 
in developing the individualized plan for employment, including--
    (i) Information describing the full range of components that must 
be included in an individualized plan for employment;
    (ii) As appropriate to each eligible individual--
    (A) An explanation of agency guidelines and criteria for 
determining an eligible individual's financial commitments under an 
individualized plan for employment;
    (B) Information on the availability of assistance in completing 
State unit forms required as part of the individualized plan for 
employment; and
    (C) Additional information that the eligible individual requests or 
the State unit determines to be necessary to the development of the 
individualized plan for employment;
    (iii) A description of the rights and remedies available to the 
individual, including, if appropriate, recourse to the processes 
described in Sec.  361.57; and
    (iv) A description of the availability of a client assistance 
program established under part 370 of this chapter and information on 
how to contact the client assistance program.
    (3) Individuals entitled to benefits under title II or XVI of the 
Social Security Act. For individuals entitled to benefits under title 
II or XVI of the Social Security Act on the basis of a disability or 
blindness, the State unit must provide to the individual general 
information on additional supports and assistance for individuals with 
disabilities desiring to enter the workforce, including assistance with 
benefits planning.
    (d) Mandatory procedures. The designated State unit must ensure 
that--
    (1) The individualized plan for employment is a written document 
prepared on forms provided by the State unit;
    (2) The individualized plan for employment is developed and 
implemented in a manner that gives eligible individuals the opportunity 
to exercise informed choice, consistent with Sec.  361.52, in 
selecting--
    (i) The employment outcome, including the employment setting;
    (ii) The specific vocational rehabilitation services needed to 
achieve the employment outcome, including the settings in which 
services will be provided;
    (iii) The entity or entities that will provide the vocational 
rehabilitation services; and
    (iv) The methods available for procuring the services;
    (3) The individualized plan for employment is--
    (i) Agreed to and signed by the eligible individual or, as 
appropriate, the individual's representative; and
    (ii) Approved and signed by a qualified vocational rehabilitation 
counselor employed by the designated State unit;
    (4) A copy of the individualized plan for employment and a copy of 
any amendments to the individualized plan for employment are provided 
to the eligible individual or, as appropriate, to the individual's 
representative, in writing and, if appropriate, in the native language 
or mode of communication of the individual or, as appropriate, the 
individual's representative;
    (5) The individualized plan for employment is reviewed at least 
annually by a qualified vocational rehabilitation counselor and the 
eligible individual or, as appropriate, the individual's representative 
to assess the eligible individual's progress in achieving the 
identified employment outcome;
    (6) The individualized plan for employment is amended, as 
necessary, by the individual or, as appropriate, the individual's 
representative, in collaboration with a representative of the State 
unit or a qualified vocational rehabilitation counselor (to the extent 
determined to be appropriate by the individual), if there are 
substantive changes in the employment outcome, the vocational 
rehabilitation services to be provided, or the providers of the 
vocational rehabilitation services;
    (7) Amendments to the individualized plan for employment do not 
take effect until agreed to and signed by the eligible individual or, 
as appropriate, the individual's representative and by a qualified 
vocational rehabilitation counselor employed by the designated State 
unit;
    (8) The individualized plan for employment is amended, as 
necessary, to include the postemployment services and service providers 
that are necessary for the individual to maintain, advance in or regain 
employment, consistent with the individual's unique strengths, 
resources, priorities, concerns, abilities, capabilities, interests, 
and informed choice; and
    (9) An individualized plan for employment for a student with a 
disability is developed--
    (i) In consideration of the student's individualized education 
program or 504 services, as applicable; and
    (ii) In accordance with the plans, policies, procedures, and terms 
of the interagency agreement required under Sec.  361.22.
    (e) Standards for developing the individualized plan for 
employment. The individualized plan for employment must be developed as 
soon as possible, but not later than 90 days after the date of 
determination of eligibility, unless the State unit and the eligible 
individual agree to the extension of that deadline to a specific date 
by which the individualized plan for employment must be completed.
    (f) Data for preparing the individualized plan for employment. (1) 
Preparation without comprehensive assessment. To the extent possible, 
the employment outcome and the nature and scope of rehabilitation 
services to be included in the individual's individualized plan for 
employment must be determined based on the data used for the assessment 
of eligibility and priority for services under Sec.  361.42.
    (2) Preparation based on comprehensive assessment.
    (i) If additional data are necessary to determine the employment 
outcome and the nature and scope of services to be included in the 
individualized plan for employment of an eligible individual, the State 
unit must conduct a comprehensive assessment of the unique strengths, 
resources, priorities, concerns, abilities, capabilities,

[[Page 55768]]

interests, and informed choice, including the need for supported 
employment services, of the eligible individual, in the most integrated 
setting possible, consistent with the informed choice of the individual 
in accordance with the provisions of Sec.  361.5(c)(5)(ii).
    (ii) In preparing the comprehensive assessment, the State unit must 
use, to the maximum extent possible and appropriate and in accordance 
with confidentiality requirements, existing information that is current 
as of the date of the development of the individualized plan for 
employment, including information--
    (A) Available from other programs and providers, particularly 
information used by education officials and the Social Security 
Administration;
    (B) Provided by the individual and the individual's family; and
    (C) Obtained under the assessment for determining the individual's 
eligibility and vocational rehabilitation needs.

(Authority: Sections 7(2)(B), 101(a)(9), 102(b), and 103(a)(1) of 
the Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(2)(B), 
721(a)(9), 722(b), and 723(a)(1))

Sec.  361.46  Content of the individualized plan for employment.

    (a) Mandatory components. Regardless of the approach in Sec.  
361.45(c)(1) that an eligible individual selects for purposes of 
developing the individualized plan for employment, each individualized 
plan for employment must--
    (1) Include a description of the specific employment outcome, as 
defined in Sec.  361.5(c)(15), that is chosen by the eligible 
individual and is consistent with the individual's unique strengths, 
resources, priorities, concerns, abilities, capabilities, career 
interests, and informed choice consistent with the general goal of 
competitive integrated employment (except that in the case of an 
eligible individual who is a student or a youth with a disability, the 
description may be a description of the individual's projected post-
school employment outcome);
    (2) Include a description under Sec.  361.48 of--
    (i) These specific rehabilitation services needed to achieve the 
employment outcome, including, as appropriate, the provision of 
assistive technology devices, assistive technology services, and 
personal assistance services, including training in the management of 
those services; and
    (ii) In the case of a plan for an eligible individual that is a 
student or youth with a disability, the specific transition services 
and supports needed to achieve the individual's employment outcome or 
projected post-school employment outcome.
    (3) Provide for services in the most integrated setting that is 
appropriate for the services involved and is consistent with the 
informed choice of the eligible individual;
    (4) Include timelines for the achievement of the employment outcome 
and for the initiation of services;
    (5) Include a description of the entity or entities chosen by the 
eligible individual or, as appropriate, the individual's representative 
that will provide the vocational rehabilitation services and the 
methods used to procure those services;
    (6) Include a description of the criteria that will be used to 
evaluate progress toward achievement of the employment outcome; and
    (7) Include the terms and conditions of the individualized plan for 
employment, including, as appropriate, information describing--
    (i) The responsibilities of the designated State unit;
    (ii) The responsibilities of the eligible individual, including--
    (A) The responsibilities the individual will assume in relation to 
achieving the employment outcome;
    (B) If applicable, the extent of the individual's participation in 
paying for the cost of services; and
    (C) The responsibility of the individual with regard to applying 
for and securing comparable services and benefits as described in Sec.  
361.53; and
    (iii) The responsibilities of other entities as the result of 
arrangements made pursuant to the comparable services or benefits 
requirements in Sec.  361.53.
    (b) Supported employment requirements. An individualized plan for 
employment for an individual with a most significant disability for 
whom an employment outcome in a supported employment setting has been 
determined to be appropriate must--
    (1) Specify the supported employment services to be provided by the 
designated State unit;
    (2) Specify the expected extended services needed, which may 
include natural supports;
    (3) Identify the source of extended services or, to the extent that 
it is not possible to identify the source of extended services at the 
time the individualized plan for employment is developed, include a 
description of the basis for concluding that there is a reasonable 
expectation that those sources will become available;
    (4) Provide for periodic monitoring to ensure that the individual 
is making satisfactory progress toward meeting the weekly work 
requirement established in the individualized plan for employment by 
the time of transition to extended services;
    (5) Provide for the coordination of services provided under an 
individualized plan for employment with services provided under other 
individualized plans established under other Federal or State programs;
    (6) To the extent that job skills training is provided, identify 
that the training will be provided on site; and
    (7) Include placement in an integrated setting for the maximum 
number of hours possible based on the unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed 
choice of individuals with the most significant disabilities.
    (c) Post-employment services. The individualized plan for 
employment for each individual must contain, as determined to be 
necessary, statements concerning--
    (1) The expected need for post-employment services prior to closing 
the record of services of an individual who has achieved an employment 
outcome;
    (2) A description of the terms and conditions for the provision of 
any post-employment services; and
    (3) If appropriate, a statement of how post-employment services 
will be provided or arranged through other entities as the result of 
arrangements made pursuant to the comparable services or benefits 
requirements in Sec.  361.53.
    (d) Coordination of services for students with disabilities. The 
individualized plan for employment for a student with a disability must 
be coordinated with the individualized education program or 504 
services, as applicable, for that individual in terms of the goals, 
objectives, and services identified in the education program.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 101(a)(8), 101(a)(9), and 102(b)(4) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 721(a)(8), 
721(a)(9), and 722(b)(4))

Sec.  361.47  Record of services.

    (a) The designated State unit must maintain for each applicant and 
eligible individual a record of services that includes, to the extent 
pertinent, the following documentation:
    (1) If an applicant has been determined to be an eligible 
individual, documentation supporting that

[[Page 55769]]

determination in accordance with the requirements under Sec.  361.42.
    (2) If an applicant or eligible individual receiving services under 
an individualized plan for employment has been determined to be 
ineligible, documentation supporting that determination in accordance 
with the requirements under Sec.  361.43.
    (3) Documentation that describes the justification for closing an 
applicant's or eligible individual's record of services if that closure 
is based on reasons other than ineligibility, including, as 
appropriate, documentation indicating that the State unit has satisfied 
the requirements in Sec.  361.44.
    (4) If an individual has been determined to be an individual with a 
significant disability or an individual with a most significant 
disability, documentation supporting that determination.
    (5) If an individual with a significant disability requires an 
exploration of abilities, capabilities, and capacity to perform in 
realistic work situations through the use of trial work experiences to 
determine whether the individual is an eligible individual, 
documentation supporting the need for, and the plan relating to, that 
exploration and documentation regarding the periodic assessments 
carried out during the trial work experiences in accordance with the 
requirements under Sec.  361.42(e).
    (6) The individualized plan for employment, and any amendments to 
the individualized plan for employment, consistent with the 
requirements under Sec.  361.46.
    (7) Documentation describing the extent to which the applicant or 
eligible individual exercised informed choice regarding the provision 
of assessment services and the extent to which the eligible individual 
exercised informed choice in the development of the individualized plan 
for employment with respect to the selection of the specific employment 
outcome, the specific vocational rehabilitation services needed to 
achieve the employment outcome, the entity to provide the services, the 
employment setting, the settings in which the services will be 
provided, and the methods to procure the services.
    (8) In the event that an individual's individualized plan for 
employment provides for vocational rehabilitation services in a non-
integrated setting, a justification to support the need for the non-
integrated setting.
    (9) In the event that an individual obtains competitive employment, 
verification that the individual is compensated at or above the minimum 
wage and that the individual's wage and level of benefits are not less 
than that customarily paid by the employer for the same or similar work 
performed by non-disabled individuals in accordance with Sec.  
361.5(c)(9)(i).
    (10) In the event an individual achieves an employment outcome in 
which the individual is compensated in accordance with section 14(c) of 
the Fair Labor Standards Act or the designated State unit closes the 
record of services of an individual in extended employment on the basis 
that the individual is unable to achieve an employment outcome 
consistent with Sec.  361.5(c)(15) or that an eligible individual 
through informed choice chooses to remain in extended employment, 
documentation of the results of the semi-annual and annual reviews 
required under Sec.  361.55, of the individual's input into those 
reviews, and of the individual's or, if appropriate, the individual's 
representative's acknowledgment that those reviews were conducted.
    (11) Documentation concerning any action or decision resulting from 
a request by an individual under Sec.  361.57 for a review of 
determinations made by designated State unit personnel.
    (12) In the event that an applicant or eligible individual requests 
under Sec.  361.38(c)(4) that documentation in the record of services 
be amended and the documentation is not amended, documentation of the 
request.
    (13) In the event an individual is referred to another program 
through the State unit's information and referral system under Sec.  
361.37, including other components of the statewide workforce 
development system, documentation on the nature and scope of services 
provided by the designated State unit to the individual and on the 
referral itself, consistent with the requirements of Sec.  361.37.
    (14) In the event an individual's record of service is closed under 
Sec.  361.56, documentation that demonstrates the services provided 
under the individual's individualized plan for employment contributed 
to the achievement of the employment outcome.
    (15) In the event an individual's record of service is closed under 
Sec.  361.56, documentation verifying that the provisions of Sec.  
361.56 have been satisfied.
    (b) The State unit, in consultation with the State Rehabilitation 
Council if the State has a Council, must determine the type of 
documentation that the State unit must maintain for each applicant and 
eligible individual in order to meet the requirements in paragraph (a) 
of this section.

(Authority: Sections 12(c), 101(a)(6), (9), (14), and (20) and 
102(a), (b), and (d) of the Rehabilitation Act of 1973, as amended; 
29 U.S.C. 709(c), 721(a)(6), (9), (14), and (20), and 722(a), (b), 
and (d))

Sec.  361.48  Scope of vocational rehabilitation services for 
individuals with disabilities.

    (a) Pre-employment transition services. Each State must ensure that 
the designated State unit, in collaboration with the local educational 
agencies involved, provide, or arrange for the provision of, pre-
employment transition services for all students with disabilities, as 
defined in Sec.  361.5(c)(51), in need of such services, without regard 
to the type of disability, from Federal funds reserved in accordance 
with Sec.  361.65, and any funds made available from State, local, or 
private funding sources. Funds reserved and made available may be used 
for the required, authorized, and pre-employment transition 
coordination activities under paragraphs (2), (3) and (4) of this 
section.
    (1) Availability of services. Pre-employment transition services 
must be made available Statewide to all students with disabilities, 
regardless of whether the student has applied or been determined 
eligible for vocational rehabilitation services.
    (2) Required activities. The designated State unit must provide the 
following pre-employment transition services:
    (i) Job exploration counseling;
    (ii) Work-based learning experiences, which may include in-school 
or after school opportunities, or experience outside the traditional 
school setting (including internships), that is provided in an 
integrated environment in the community to the maximum extent possible;
    (iii) Counseling on opportunities for enrollment in comprehensive 
transition or postsecondary educational programs at institutions of 
higher education;
    (iv) Workplace readiness training to develop social skills and 
independent living; and
    (v) Instruction in self-advocacy (including instruction in person-
centered planning), which may include peer mentoring (including peer 
mentoring from individuals with disabilities working in competitive 
integrated employment).
    (3) Authorized activities. Funds available and remaining after the 
provision of the required activities described in paragraph (a)(2) of 
this section may be used to improve the transition of students with 
disabilities from school to postsecondary education or an employment 
outcome by--
    (i) Implementing effective strategies to increase the likelihood of 
independent

[[Page 55770]]

living and inclusion in communities and competitive integrated 
workplaces;
    (ii) Developing and improving strategies for individuals with 
intellectual disabilities and individuals with significant disabilities 
to live independently; participate in postsecondary education 
experiences; and obtain, advance in and retain competitive integrated 
employment;
    (iii) Providing instruction to vocational rehabilitation 
counselors, school transition personnel, and other persons supporting 
students with disabilities;
    (iv) Disseminating information about innovative, effective, and 
efficient approaches to achieve the goals of this section;
    (v) Coordinating activities with transition services provided by 
local educational agencies under the Individuals with Disabilities 
Education Act (20 U.S.C. 1400 et seq.);
    (vi) Applying evidence-based findings to improve policy, procedure, 
practice, and the preparation of personnel, in order to better achieve 
the goals of this section;
    (vii) Developing model transition demonstration projects;
    (viii) Establishing or supporting multistate or regional 
partnerships involving States, local educational agencies, designated 
State units, developmental disability agencies, private businesses, or 
other participants to achieve the goals of this section; and
    (ix) Disseminating information and strategies to improve the 
transition to postsecondary activities of individuals who are members 
of traditionally unserved and underserved populations.
    (4) Pre-employment transition coordination. Each local office of a 
designated State unit must carry out responsibilities consisting of--
    (i) Attending individualized education program meetings for 
students with disabilities, when invited;
    (ii) Working with the local workforce development boards, one-stop 
centers, and employers to develop work opportunities for students with 
disabilities, including internships, summer employment and other 
employment opportunities available throughout the school year, and 
apprenticeships;
    (iii) Working with schools, including those carrying out activities 
under section 614(d) of the IDEA, to coordinate and ensure the 
provision of pre-employment transition services under this section;
    (iv) When invited, attending person-centered planning meetings for 
individuals receiving services under title XIX of the Social Security 
Act (42 U.S.C. 1396 et seq.); and
    (b) Services for individuals who have applied for or been 
determined eligible for vocational rehabilitation services. As 
appropriate to the vocational rehabilitation needs of each individual 
and consistent with each individual's individualized plan for 
employment, the designated State unit must ensure that the following 
vocational rehabilitation services are available to assist the 
individual with a disability in preparing for, securing, retaining, 
advancing in or regaining an employment outcome that is consistent with 
the individual's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interests, and informed choice:
    (1) Assessment for determining eligibility and priority for 
services by qualified personnel, including, if appropriate, an 
assessment by personnel skilled in rehabilitation technology, in 
accordance with Sec.  361.42.
    (2) Assessment for determining vocational rehabilitation needs by 
qualified personnel, including, if appropriate, an assessment by 
personnel skilled in rehabilitation technology, in accordance with 
Sec.  361.45.
    (3) Vocational rehabilitation counseling and guidance, including 
information and support services to assist an individual in exercising 
informed choice in accordance with Sec.  361.52.
    (4) Referral and other services necessary to assist applicants and 
eligible individuals to secure needed services from other agencies, 
including other components of the statewide workforce development 
system, in accordance with Sec. Sec.  361.23, 361.24, and 361.37, and 
to advise those individuals about client assistance programs 
established under 34 CFR part 370.
    (5) In accordance with the definition in Sec.  361.5(c)(39), 
physical and mental restoration services, to the extent that financial 
support is not readily available from a source other than the 
designated State unit (such as through health insurance or a comparable 
service or benefit as defined in Sec.  361.5(c)(10)).
    (6) Vocational and other training services, including personal and 
vocational adjustment training, advanced training in, but not limited 
to, a field of science, technology, engineering, mathematics (including 
computer science), medicine, law, or business); books, tools, and other 
training materials, except that no training or training services in an 
institution of higher education (universities, colleges, community or 
junior colleges, vocational schools, technical institutes, or hospital 
schools of nursing or any other postsecondary education institution) 
may be paid for with funds under this part unless maximum efforts have 
been made by the State unit and the individual to secure grant 
assistance in whole or in part from other sources to pay for that 
training.
    (7) Maintenance, in accordance with the definition of that term in 
Sec.  361.5(c)(34).
    (8) Transportation in connection with the provision of any 
vocational rehabilitation service and in accordance with the definition 
of that term in Sec.  361.5(c)(57).
    (9) Vocational rehabilitation services to family members, as 
defined in Sec.  361.5(c)(23), of an applicant or eligible individual 
if necessary to enable the applicant or eligible individual to achieve 
an employment outcome.
    (10) Interpreter services, including sign language and oral 
interpreter services, for individuals who are deaf or hard of hearing 
and tactile interpreting services for individuals who are deaf-blind 
provided by qualified personnel.
    (11) Reader services, rehabilitation teaching services, and 
orientation and mobility services for individuals who are blind.
    (12) Job-related services, including job search and placement 
assistance, job retention services, follow-up services, and follow-
along services.
    (13) Supported employment services in accordance with the 
definition of that term in Sec.  361.5(c)(54).
    (14) Personal assistance services in accordance with the definition 
of that term in Sec.  361.5(c)(39).
    (15) Post-employment services in accordance with the definition of 
that term in Sec.  361.5(c)(42).
    (16) Occupational licenses, tools, equipment, initial stocks, and 
supplies.
    (17) Rehabilitation technology in accordance with the definition of 
that term in Sec.  361.5(c)(45), including vehicular modification, 
telecommunications, sensory, and other technological aids and devices.
    (18) Transition services for students and youth with disabilities, 
that facilitate the transition from school to postsecondary life, such 
as achievement of an employment outcome in competitive integrated 
employment, or pre-employment transition services for students.
    (19) Technical assistance and other consultation services to 
conduct market analyses, develop business plans, and otherwise provide 
resources, to the extent those resources are authorized to be provided 
through the statewide workforce development system, to eligible 
individuals who are pursuing

[[Page 55771]]

self-employment or telecommuting or establishing a small business 
operation as an employment outcome.
    (20) Customized employment in accordance with the definition of 
that term in Sec.  361.5(c)(11).
    (21) Other goods and services determined necessary for the 
individual with a disability to achieve an employment outcome.

(Authority: Sections 7(37), 12(c), 103(a), and 113 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(37), 709(c), 
723(a), and 733)

Sec.  361.49  Scope of vocational rehabilitation services for groups of 
individuals with disabilities.

    (a) The designated State unit may provide for the following 
vocational rehabilitation services for the benefit of groups of 
individuals with disabilities:
    (1) The establishment, development, or improvement of a public or 
other nonprofit community rehabilitation program that is used to 
provide vocational rehabilitation services that promote integration 
into the community and prepare individuals with disabilities for 
competitive integrated employment, including supported employment and 
customized employment, and under special circumstances, the 
construction of a facility for a public or nonprofit community 
rehabilitation program as defined in Sec. Sec.  361.5(c)(10), 
361.5(c)(16) and 361.5(c)(17). Examples of special circumstances 
include the destruction by natural disaster of the only available 
center serving an area or a State determination that construction is 
necessary in a rural area because no other public agencies or private 
nonprofit organizations are currently able to provide vocational 
rehabilitation services to individuals.
    (2) Telecommunications systems that have the potential for 
substantially improving vocational rehabilitation service delivery 
methods and developing appropriate programming to meet the particular 
needs of individuals with disabilities, including telephone, 
television, video description services, satellite, tactile-vibratory 
devices, and similar systems, as appropriate.
    (3) Special services to provide nonvisual access to information for 
individuals who are blind, including the use of telecommunications, 
Braille, sound recordings, or other appropriate media; captioned 
television, films, or video cassettes for individuals who are deaf or 
hard of hearing; tactile materials for individuals who are deaf-blind; 
and other special services that provide information through tactile, 
vibratory, auditory, and visual media.
    (4) Technical assistance to businesses that are seeking to employ 
individuals with disabilities.
    (5) In the case of any small business enterprise operated by 
individuals with significant disabilities under the supervision of the 
designated State unit, including enterprises established under the 
Randolph-Sheppard program, management services and supervision provided 
by the State unit along with the acquisition by the State unit of 
vending facilities or other equipment, initial stocks and supplies, and 
initial operating expenses, in accordance with the following 
requirements:
    (i) Management services and supervision includes inspection, 
quality control, consultation, accounting, regulating, in-service 
training, and related services provided on a systematic basis to 
support and improve small business enterprises operated by individuals 
with significant disabilities. Management services and supervision may 
be provided throughout the operation of the small business enterprise.
    (ii) Initial stocks and supplies includes those items necessary to 
the establishment of a new business enterprise during the initial 
establishment period, which may not exceed six months.
    (iii) Costs of establishing a small business enterprise may include 
operational costs during the initial establishment period, which may 
not exceed six months.
    (iv) If the designated State unit provides for these services, it 
must ensure that only individuals with significant disabilities will be 
selected to participate in this supervised program.
    (v) If the designated State unit provides for these services and 
chooses to set aside funds from the proceeds of the operation of the 
small business enterprises, the State unit must maintain a description 
of the methods used in setting aside funds and the purposes for which 
funds are set aside. Funds may be used only for small business 
enterprises purposes, and benefits that are provided to operators from 
set-aside funds must be provided on an equitable basis.
    (6) Consultation and technical assistance services to assist State 
educational agencies and local educational agencies in planning for the 
transition of students and youth with disabilities from school to 
postsecondary life, including employment.
    (7) Transition services to youth with disabilities and students 
with disabilities who may not have yet applied or been determined 
eligible for vocational rehabilitation services, for which a vocational 
rehabilitation counselor works in concert with educational agencies, 
providers of job training programs, providers of services under the 
Medicaid program under title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.), entities designated by the State to provide services for 
individuals with developmental disabilities, centers for independent 
living (as defined in section 702 of the Act), housing and 
transportation authorities, workforce development systems, and 
businesses and employers. These specific transition services are to 
benefit a group of students with disabilities or youth with 
disabilities and are not individualized services directly related to an 
individualized plan for employment goal. Services may include, but are 
not limited to, group tours of universities and vocational training 
programs, employer or business site visits to learn about career 
opportunities, career fairs coordinated with workforce development and 
employers to facilitate mock interviews and resume writing, and other 
general services applicable to groups of students with disabilities and 
youth with disabilities.
    (8) The establishment, development, or improvement of assistive 
technology demonstration, loan, reutilization, or financing programs in 
coordination with activities authorized under the Assistive Technology 
Act of 1998 (29 U.S.C. 3001 et seq.) to promote access to assistive 
technology for individuals with disabilities and employers.
    (9) Support (including, as appropriate, tuition) for advanced 
training in a field of science, technology, engineering, or mathematics 
(including computer science), medicine, law, or business, provided 
after an individual eligible to receive services under this title 
demonstrates--
    (i) Such eligibility;
    (ii) Previous completion of a bachelor's degree program at an 
institution of higher education or scheduled completion of such a 
degree program prior to matriculating in the program for which the 
individual proposes to use the support; and
    (iii) Acceptance by a program at an institution of higher education 
in the United States that confers a master's degree in a field of 
science, technology, engineering, or mathematics (including computer 
science), a juris doctor degree, a master of business administration 
degree, or a doctor of medicine degree, except that--
    (A) No training provided at an institution of higher education may 
be paid for with funds under this program

[[Page 55772]]

unless maximum efforts have been made by the designated State unit to 
secure grant assistance, in whole or in part, from other sources to pay 
for such training; and
    (B) Nothing in this paragraph prevents any designated State unit 
from providing similar support to individuals with disabilities within 
the State who are eligible to receive support under this title and who 
are not served under this section.
    (b) If the designated State unit provides for vocational 
rehabilitation services for groups of individuals, it must--
    (1) Develop and maintain written policies covering the nature and 
scope of each of the vocational rehabilitation services it provides and 
the criteria under which each service is provided; and
    (2) Maintain information to ensure the proper and efficient 
administration of those services in the form and detail and at the time 
required by the Secretary, including the types of services provided, 
the costs of those services, and, to the extent feasible, estimates of 
the numbers of individuals benefiting from those services.

(Authority: Sections 12(c), 101(a)(6)(A), and 103(b) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 721(a)(6), 
and 723(b))

Sec.  361.50  Written policies governing the provision of services for 
individuals with disabilities.

    (a) Policies. The State unit must develop and maintain written 
policies covering the nature and scope of each of the vocational 
rehabilitation services specified in Sec.  361.48 and the criteria 
under which each service is provided. The policies must ensure that the 
provision of services is based on the rehabilitation needs of each 
individual as identified in that individual's individualized plan for 
employment and is consistent with the individual's informed choice. The 
written policies may not establish any arbitrary limits on the nature 
and scope of vocational rehabilitation services to be provided to the 
individual to achieve an employment outcome. The policies must be 
developed in accordance with the following provisions:
    (b) Out-of-State services. (1) The State unit may establish a 
preference for in-State services, provided that the preference does not 
effectively deny an individual a necessary service. If the individual 
chooses an out-of-State service at a higher cost than an in-State 
service, if either service would meet the individual's rehabilitation 
needs, the designated State unit is not responsible for those costs in 
excess of the cost of the in-State service.
    (2) The State unit may not establish policies that effectively 
prohibit the provision of out-of-State services.
    (c) Payment for services. (1) The State unit must establish and 
maintain written policies to govern the rates of payment for all 
purchased vocational rehabilitation services.
    (2) The State unit may establish a fee schedule designed to ensure 
a reasonable cost to the program for each service, if the schedule is--
    (i) Not so low as to effectively deny an individual a necessary 
service; and
    (ii) Not absolute and permits exceptions so that individual needs 
can be addressed.
    (3) The State unit may not place absolute dollar limits on specific 
service categories or on the total services provided to an individual.
    (d) Duration of services. (1) The State unit may establish 
reasonable time periods for the provision of services provided that the 
time periods are--
    (i) Not so short as to effectively deny an individual a necessary 
service; and
    (ii) Not absolute and permit exceptions so that individual needs 
can be addressed.
    (2) The State unit may not establish absolute time limits on the 
provision of specific services or on the provision of services to an 
individual. The duration of each service needed by an individual must 
be determined on an individual basis and reflected in that individual's 
individualized plan for employment.
    (e) Authorization of services. The State unit must establish 
policies related to the timely authorization of services, including any 
conditions under which verbal authorization can be given.

(Authority: Sections 12(c) and 101(a)(6) of the Rehabilitation Act 
of 1973, as amended and 29 U.S.C. 709(c) and 721(a)(6))

Sec.  361.51  Standards for facilities and providers of services.

    (a) Accessibility of facilities. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
any facility used in connection with the delivery of vocational 
rehabilitation services under this part meets program accessibility 
requirements consistent with the requirements, as applicable, of the 
Architectural Barriers Act of 1968, the Americans with Disabilities Act 
of 1990, section 504 of the Act, and the regulations implementing these 
laws.
    (b) Affirmative action. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that 
community rehabilitation programs that receive assistance under part B 
of title I of the Act take affirmative action to employ and advance in 
employment qualified individuals with disabilities covered under and on 
the same terms and conditions as in section 503 of the Act.
    (c) Special communication needs personnel. The designated State 
unit must ensure that providers of vocational rehabilitation services 
are able to communicate--
    (1) In the native language of applicants and eligible individuals 
who have limited English proficiency; and
    (2) By using appropriate modes of communication used by applicants 
and eligible individuals.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c) and 101(a)(6)(B) and (C) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
721(a)(6)(B) and (C))

Sec.  361.52  Informed choice.

    (a) General provision. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that 
applicants and recipients of services or, as appropriate, their 
representatives are provided information and support services to assist 
applicants and recipients of services in exercising informed choice 
throughout the rehabilitation process consistent with the provisions of 
section 102(d) of the Act and the requirements of this section.
    (b) Written policies and procedures. The designated State unit, in 
consultation with its State Rehabilitation Council, if it has a 
Council, must develop and implement written policies and procedures 
that enable an applicant or recipient of services to exercise informed 
choice throughout the vocational rehabilitation process. These policies 
and procedures must provide for--
    (1) Informing each applicant and recipient of services (including 
students with disabilities who are making the transition from programs 
under the responsibility of an educational agency to programs under the 
responsibility of the designated State unit and including youth with 
disabilities), through appropriate modes of communication, about the 
availability of and opportunities to exercise informed choice, 
including the availability of support services for individuals with 
cognitive or other disabilities who require assistance in exercising 
informed choice throughout the vocational rehabilitation process;
    (2) Assisting applicants and recipients of services in exercising 
informed

[[Page 55773]]

choice in decisions related to the provision of assessment services;
    (3) Developing and implementing flexible procurement policies and 
methods that facilitate the provision of vocational rehabilitation 
services and that afford recipients of services meaningful choices 
among the methods used to procure vocational rehabilitation services;
    (4) Assisting eligible individuals or, as appropriate, the 
individuals' representatives, in acquiring information that enables 
them to exercise informed choice in the development of their 
individualized plans for employment with respect to the selection of 
the--
    (i) Employment outcome;
    (ii) Specific vocational rehabilitation services needed to achieve 
the employment outcome;
    (iii) Entity that will provide the services;
    (iv) Employment setting and the settings in which the services will 
be provided; and
    (v) Methods available for procuring the services; and
    (5) Ensuring that the availability and scope of informed choice is 
consistent with the obligations of the designated State agency under 
this part.
    (c) Information and assistance in the selection of vocational 
rehabilitation services and service providers. In assisting an 
applicant and eligible individual in exercising informed choice during 
the assessment for determining eligibility and vocational 
rehabilitation needs and during development of the individualized plan 
for employment, the designated State unit must provide the individual 
or the individual's representative, or assist the individual or the 
individual's representative in acquiring, information necessary to make 
an informed choice about the specific vocational rehabilitation 
services, including the providers of those services, that are needed to 
achieve the individual's employment outcome. This information must 
include, at a minimum, information relating to the--
    (1) Cost, accessibility, and duration of potential services;
    (2) Consumer satisfaction with those services to the extent that 
information relating to consumer satisfaction is available;
    (3) Qualifications of potential service providers;
    (4) Types of services offered by the potential providers;
    (5) Degree to which services are provided in integrated settings; 
and
    (6) Outcomes achieved by individuals working with service 
providers, to the extent that such information is available.
    (d) Methods or sources of information. In providing or assisting 
the individual or the individual's representative in acquiring the 
information required under paragraph (c) of this section, the State 
unit may use, but is not limited to, the following methods or sources 
of information:
    (1) Lists of services and service providers.
    (2) Periodic consumer satisfaction surveys and reports.
    (3) Referrals to other consumers, consumer groups, or disability 
advisory councils qualified to discuss the services or service 
providers.
    (4) Relevant accreditation, certification, or other information 
relating to the qualifications of service providers.
    (5) Opportunities for individuals to visit or experience various 
work and service provider settings.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c), 101(a)(19), 102(b)(2)(B), and 102(d) of 
the Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(19), 722(b)(2)(B), and 722(d))

Sec.  361.53  Comparable services and benefits.

    (a) Determination of availability. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
prior to providing an accommodation or auxiliary aid or service or any 
vocational rehabilitation services, except those services listed in 
paragraph (b) of this section, to an eligible individual or to members 
of the individual's family, the State unit must determine whether 
comparable services and benefits, as defined in Sec.  361.5(c)(8), 
exist under any other program and whether those services and benefits 
are available to the individual unless such a determination would 
interrupt or delay--
    (1) The progress of the individual toward achieving the employment 
outcome identified in the individualized plan for employment;
    (2) An immediate job placement; or
    (3) The provision of vocational rehabilitation services to any 
individual who is determined to be at extreme medical risk, based on 
medical evidence provided by an appropriate qualified medical 
professional.
    (b) Exempt services. The following vocational rehabilitation 
services described in Sec.  361.48(b) are exempt from a determination 
of the availability of comparable services and benefits under paragraph 
(a) of this section:
    (1) Assessment for determining eligibility and vocational 
rehabilitation needs.
    (2) Counseling and guidance, including information and support 
services to assist an individual in exercising informed choice.
    (3) Referral and other services to secure needed services from 
other agencies, including other components of the statewide workforce 
development system, if those services are not available under this 
part.
    (4) Job-related services, including job search and placement 
assistance, job retention services, follow-up services, and follow-
along services.
    (5) Rehabilitation technology, including telecommunications, 
sensory, and other technological aids and devices.
    (6) Post-employment services consisting of the services listed 
under paragraphs (b)(1) through (5) of this section.
    (c) Provision of services. (1) If comparable services or benefits 
exist under any other program and are available to the individual at 
the time needed to ensure the progress of the individual toward 
achieving the employment outcome in the individual's individualized 
plan for employment, the designated State unit must use those 
comparable services or benefits to meet, in whole or part, the costs of 
the vocational rehabilitation services.
    (2) If comparable services or benefits exist under any other 
program, but are not available to the individual at the time needed to 
ensure the progress of the individual toward achieving the employment 
outcome specified in the individualized plan for employment, the 
designated State unit must provide vocational rehabilitation services 
until those comparable services and benefits become available.
    (d) Interagency coordination. (1) The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
the Governor, in consultation with the entity in the State responsible 
for the vocational rehabilitation program and other appropriate 
agencies, will ensure that an interagency agreement or other mechanism 
for interagency coordination takes effect between the designated State 
vocational rehabilitation unit and any appropriate public entity, 
including the State entity responsible for administering the State 
Medicaid program, a public institution of higher education, and a 
component of the statewide workforce development system, to ensure the 
provision of vocational rehabilitation services, and,

[[Page 55774]]

if appropriate, accommodations or auxiliary aids and services, (other 
than those services listed in paragraph (b) of this section) that are 
included in the individualized plan for employment of an eligible 
individual, including the provision of those vocational rehabilitation 
services (including, if appropriate, accommodations or auxiliary aids 
and services) during the pendency of any interagency dispute in 
accordance with the provisions of paragraph (d)(3)(iii) of this 
section.
    (2) The Governor may meet the requirements of paragraph (d)(1) of 
this section through--
    (i) A State statute or regulation;
    (ii) A signed agreement between the respective officials of the 
public entities that clearly identifies the responsibilities of each 
public entity for the provision of the services; or
    (iii) Another appropriate mechanism as determined by the designated 
State vocational rehabilitation unit.
    (3) The interagency agreement or other mechanism for interagency 
coordination must include the following:
    (i) Agency financial responsibility. An identification of, or 
description of a method for defining, the financial responsibility of 
the designated State unit and other public entities for the provision 
of vocational rehabilitation services, and, if appropriate, 
accommodations or auxiliary aids and services other than those listed 
in paragraph (b) of this section and a provision stating the financial 
responsibility of the public entity for providing those services.
    (ii) Conditions, terms, and procedures of reimbursement. 
Information specifying the conditions, terms, and procedures under 
which the designated State unit must be reimbursed by the other public 
entities for providing vocational rehabilitation services, and 
accommodations or auxiliary aids and services based on the terms of the 
interagency agreement or other mechanism for interagency coordination.
    (iii) Interagency disputes. Information specifying procedures for 
resolving interagency disputes under the interagency agreement or other 
mechanism for interagency coordination, including procedures under 
which the designated State unit may initiate proceedings to secure 
reimbursement from other public entities or otherwise implement the 
provisions of the agreement or mechanism.
    (iv) Procedures for coordination of services. Information 
specifying policies and procedures for public entities to determine and 
identify interagency coordination responsibilities of each public 
entity to promote the coordination and timely delivery of vocational 
rehabilitation services, and accommodations or auxiliary aids and 
services, other than those listed in paragraph (b) of this section.
    (e) Responsibilities under other law. (1) If a public entity (other 
than the designated State unit) is obligated under Federal law (such as 
the Americans with Disabilities Act, section 504 of the Act, or section 
188 of the Workforce Innovation and Opportunity Act) or State law, or 
assigned responsibility under State policy or an interagency agreement 
established under this section, to provide or pay for any services 
considered to be vocational rehabilitation services (e.g., interpreter 
services under Sec.  361.48(j)), and, if appropriate, accommodations or 
auxiliary aids and services other than those services listed in 
paragraph (b) of this section, the public entity must fulfill that 
obligation or responsibility through--
    (i) The terms of the interagency agreement or other requirements of 
this section;
    (ii) Providing or paying for the service directly or by contract; 
or
    (iii) Other arrangement.
    (2) If a public entity other than the designated State unit fails 
to provide or pay for vocational rehabilitation services, and, if 
appropriate, accommodations or auxiliary aids and services for an 
eligible individual as established under this section, the designated 
State unit must provide or pay for those services to the individual and 
may claim reimbursement for the services from the public entity that 
failed to provide or pay for those services. The public entity must 
reimburse the designated State unit pursuant to the terms of the 
interagency agreement or other mechanism described in paragraph (d) of 
this section in accordance with the procedures established in the 
agreement or mechanism pursuant to paragraph (d)(3)(ii) of this 
section.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c) and 101(a)(8) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(8))

Sec.  361.54  Participation of individuals in cost of services based on 
financial need.

    (a) No Federal requirement. There is no Federal requirement that 
the financial need of individuals be considered in the provision of 
vocational rehabilitation services.
    (b) State unit requirements. (1) The State unit may choose to 
consider the financial need of eligible individuals or individuals who 
are receiving services through trial work experiences under Sec.  
361.42(e) for purposes of determining the extent of their participation 
in the costs of vocational rehabilitation services, other than those 
services identified in paragraph (b)(3) of this section.
    (2) If the State unit chooses to consider financial need--
    (i) It must maintain written policies--
    (A) Explaining the method for determining the financial need of an 
eligible individual; and
    (B) Specifying the types of vocational rehabilitation services for 
which the unit has established a financial needs test;
    (ii) The policies must be applied uniformly to all individuals in 
similar circumstances;
    (iii) The policies may require different levels of need for 
different geographic regions in the State, but must be applied 
uniformly to all individuals within each geographic region; and
    (iv) The policies must ensure that the level of an individual's 
participation in the cost of vocational rehabilitation services is--
    (A) Reasonable;
    (B) Based on the individual's financial need, including 
consideration of any disability-related expenses paid by the 
individual; and
    (C) Not so high as to effectively deny the individual a necessary 
service.
    (3) The designated State unit may not apply a financial needs test, 
or require the financial participation of the individual--
    (i) As a condition for furnishing the following vocational 
rehabilitation services:
    (A) Assessment for determining eligibility and priority for 
services under Sec.  361.48(b)(1), except those non-assessment services 
that are provided to an individual with a significant disability during 
either an exploration of the individual's abilities, capabilities, and 
capacity to perform in work situations through the use of trial work 
experiences under Sec.  361.42(e).
    (B) Assessment for determining vocational rehabilitation needs 
under Sec.  361.48(b)(2).
    (C) Vocational rehabilitation counseling and guidance under Sec.  
361.48(b)(3).
    (D) Referral and other services under Sec.  361.48(b)(4).
    (E) Job-related services under Sec.  361.48(b)(12).
    (F) Personal assistance services under Sec.  361.48(b)(14).

[[Page 55775]]

    (G) Any auxiliary aid or service (e.g., interpreter services under 
Sec.  361.48(b)(10), reader services under Sec.  361.48(b)(11)) that an 
individual with a disability requires under section 504 of the Act (29 
U.S.C. 794) or the Americans with Disabilities Act (42 U.S.C. 12101, et 
seq.), or regulations implementing those laws, in order for the 
individual to participate in the vocational rehabilitation program as 
authorized under this part; or
    (ii) As a condition for furnishing any vocational rehabilitation 
service if the individual in need of the service has been determined 
eligible for Social Security benefits under titles II or XVI of the 
Social Security Act.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.55  Semi-annual and annual review of individuals in extended 
employment and other employment under special certificate provisions of 
the Fair Labor Standards Act.

    (a) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the designated State unit 
conducts a semi-annual review and reevaluation for the first two years 
of such employment and annually thereafter, in accordance with the 
requirements in paragraph (b) of this section for an individual with a 
disability served under this part--
    (1) Who has a record of service, as described in Sec.  361.47, as 
either an applicant or eligible individual under the vocational 
rehabilitation program; and
    (2)(i) Who has achieved employment in which the individual is 
compensated in accordance with section 14(c) of the Fair Labor 
Standards Act; or
    (ii) Who is in extended employment, including those individuals 
whose record of service is closed while the individual is in extended 
employment on the basis that the individual is unable to achieve an 
employment outcome consistent with Sec.  361.5(c)(15) or that the 
individual made an informed choice to remain in extended employment.
    (b) For each individual with a disability who meets the criteria in 
paragraph (a) of this section, the designated State unit must--
    (1) Semi-annually review and reevaluate the status of each 
individual for two years after the individual's record of services is 
closed (and annually thereafter) to determine the interests, 
priorities, and needs of the individual with respect to competitive 
integrated employment or training for competitive integrated 
employment;
    (2) Enable the individual or, if appropriate, the individual's 
representative to provide input into the review and reevaluation and 
must document that input in the record of services, consistent with 
Sec.  361.47(a)(10), with the individual's or, as appropriate, the 
individual's representative's signed acknowledgment that the review and 
reevaluation have been conducted; and
    (3) Make maximum efforts, including identifying and providing 
vocational rehabilitation services, reasonable accommodations, and 
other necessary support services, to assist the individual in engaging 
in competitive integrated employment as defined in Sec.  361.5(c)(9).

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Sections 12(c) and 101(a)(14) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(14))

Sec.  361.56  Requirements for closing the record of services of an 
individual who has achieved an employment outcome.

    The record of services of an individual who has achieved an 
employment outcome may be closed only if all of the following 
requirements are met:
    (a) Employment outcome achieved. The individual has achieved the 
employment outcome that is described in the individual's individualized 
plan for employment in accordance with Sec.  361.46(a)(1) and is 
consistent with the individual's unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed 
choice.
    (b) Employment outcome maintained. The individual has maintained 
the employment outcome for an appropriate period of time, but not less 
than 90 days, necessary to ensure the stability of the employment 
outcome, and the individual no longer needs vocational rehabilitation 
services.
    (c) Satisfactory outcome. At the end of the appropriate period 
under paragraph (b) of this section, the individual and the qualified 
rehabilitation counselor employed by the designated State unit consider 
the employment outcome to be satisfactory and agree that the individual 
is performing well in the employment.
    (d) Post-employment services. The individual is informed through 
appropriate modes of communication of the availability of post-
employment services.

(Authority: Sections 12(c), 101(a)(6), and 106(a)(2) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 721(a)(6), 
and 726(a)(2))

Sec.  361.57  Review of determinations made by designated State unit 
personnel.

    (a) Procedures. The designated State unit must develop and 
implement procedures to ensure that an applicant or recipient of 
services who is dissatisfied with any determination made by personnel 
of the designated State unit that affects the provision of vocational 
rehabilitation services may request, or, if appropriate, may request 
through the individual's representative, a timely review of that 
determination. The procedures must be in accordance with paragraphs (b) 
through (k) of this section:
    (b) General requirements. (1) Notification. Procedures established 
by the State unit under this section must provide an applicant or 
recipient or, as appropriate, the individual's representative notice 
of--
    (i) The right to obtain review of State unit determinations that 
affect the provision of vocational rehabilitation services through an 
impartial due process hearing under paragraph (e) of this section;
    (ii) The right to pursue mediation under paragraph (d) of this 
section with respect to determinations made by designated State unit 
personnel that affect the provision of vocational rehabilitation 
services to an applicant or recipient;
    (iii) The names and addresses of individuals with whom requests for 
mediation or due process hearings may be filed;
    (iv) The manner in which a mediator or impartial hearing officer 
may be selected consistent with the requirements of paragraphs (d) and 
(f) of this section; and
    (v) The availability of the client assistance program, established 
under 34 CFR part 370, to assist the applicant or recipient during 
mediation sessions or impartial due process hearings.
    (2) Timing. Notice described in paragraph (b)(1) of this section 
must be provided in writing--
    (i) At the time the individual applies for vocational 
rehabilitation services under this part;
    (ii) At the time the individual is assigned to a category in the 
State's order of selection, if the State has established an order of 
selection under Sec.  361.36;
    (iii) At the time the individualized plan for employment is 
developed; and
    (iv) Whenever vocational rehabilitation services for an individual 
are reduced, suspended, or terminated.
    (3) Evidence and representation. Procedures established under this 
section must--

[[Page 55776]]

    (i) Provide an applicant or recipient or, as appropriate, the 
individual's representative with an opportunity to submit during 
mediation sessions or due process hearings evidence and other 
information that supports the applicant's or recipient's position; and
    (ii) Allow an applicant or recipient to be represented during 
mediation sessions or due process hearings by counsel or other advocate 
selected by the applicant or recipient.
    (4) Impact on provision of services. The State unit may not 
institute a suspension, reduction, or termination of vocational 
rehabilitation services being provided to an applicant or recipient, 
including evaluation and assessment services and individualized plan 
for employment development, pending a resolution through mediation, 
pending a decision by a hearing officer or reviewing official, or 
pending informal resolution under this section unless--
    (i) The individual or, in appropriate cases, the individual's 
representative requests a suspension, reduction, or termination of 
services; or
    (ii) The State agency has evidence that the services have been 
obtained through misrepresentation, fraud, collusion, or criminal 
conduct on the part of the individual or the individual's 
representative.
    (5) Ineligibility. Applicants who are found ineligible for 
vocational rehabilitation services and previously eligible individuals 
who are determined to be no longer eligible for vocational 
rehabilitation services pursuant to Sec.  361.43 are permitted to 
challenge the determinations of ineligibility under the procedures 
described in this section.
    (c) Informal dispute resolution. The State unit may develop an 
informal process for resolving a request for review without conducting 
mediation or a formal hearing. A State's informal process must not be 
used to deny the right of an applicant or recipient to a hearing under 
paragraph (e) of this section or any other right provided under this 
part, including the right to pursue mediation under paragraph (d) of 
this section. If informal resolution under this paragraph or mediation 
under paragraph (d) of this section is not successful in resolving the 
dispute within the time period established under paragraph (e)(1) of 
this section, a formal hearing must be conducted within that same time 
period, unless the parties agree to a specific extension of time.
    (d) Mediation. (1) The State must establish and implement 
procedures, as required under paragraph (b)(1)(ii) of this section, to 
allow an applicant or recipient and the State unit to resolve disputes 
involving State unit determinations that affect the provision of 
vocational rehabilitation services through a mediation process that 
must be made available, at a minimum, whenever an applicant or 
recipient or, as appropriate, the individual's representative requests 
an impartial due process hearing under this section.
    (2) Mediation procedures established by the State unit under 
paragraph (d) of this section must ensure that--
    (i) Participation in the mediation process is voluntary on the part 
of the applicant or recipient, as appropriate, and on the part of the 
State unit;
    (ii) Use of the mediation process is not used to deny or delay the 
applicant's or recipient's right to pursue resolution of the dispute 
through an impartial hearing held within the time period specified in 
paragraph (e)(1) of this section or any other rights provided under 
this part. At any point during the mediation process, either party or 
the mediator may elect to terminate the mediation. In the event 
mediation is terminated, either party may pursue resolution through an 
impartial hearing;
    (iii) The mediation process is conducted by a qualified and 
impartial mediator, as defined in Sec.  361.5(c)(43), who must be 
selected from a list of qualified and impartial mediators maintained by 
the State--
    (A) On a random basis;
    (B) By agreement between the director of the designated State unit 
and the applicant or recipient or, as appropriate, the recipient's 
representative; or
    (C) In accordance with a procedure established in the State for 
assigning mediators, provided this procedure ensures the neutrality of 
the mediator assigned; and
    (iv) Mediation sessions are scheduled and conducted in a timely 
manner and are held in a location and manner that is convenient to the 
parties to the dispute.
    (3) Discussions that occur during the mediation process must be 
kept confidential and may not be used as evidence in any subsequent due 
process hearings or civil proceedings, and the parties to the mediation 
process may be required to sign a confidentiality pledge prior to the 
commencement of the process.
    (4) An agreement reached by the parties to the dispute in the 
mediation process must be described in a written mediation agreement 
that is developed by the parties with the assistance of the qualified 
and impartial mediator and signed by both parties. Copies of the 
agreement must be sent to both parties.
    (5) The costs of the mediation process must be paid by the State. 
The State is not required to pay for any costs related to the 
representation of an applicant or recipient authorized under paragraph 
(b)(3)(ii) of this section.
    (e) Impartial due process hearings. The State unit must establish 
and implement formal review procedures, as required under paragraph 
(b)(1)(i) of this section, that provide that--
    (1) Hearing conducted by an impartial hearing officer, selected in 
accordance with paragraph (f) of this section, must be held within 60 
days of an applicant's or recipient 's request for review of a 
determination made by personnel of the State unit that affects the 
provision of vocational rehabilitation services to the individual, 
unless informal resolution or a mediation agreement is achieved prior 
to the 60th day or the parties agree to a specific extension of time;
    (2) In addition to the rights described in paragraph (b)(3) of this 
section, the applicant or recipient or, if appropriate, the 
individual's representative must be given the opportunity to present 
witnesses during the hearing and to examine all witnesses and other 
relevant sources of information and evidence;
    (3) The impartial hearing officer must--
    (i) Make a decision based on the provisions of the approved 
vocational rehabilitation services portion of the Unified or Combined 
State Plan, the Act, Federal vocational rehabilitation regulations, and 
State regulations and policies that are consistent with Federal 
requirements; and
    (ii) Provide to the individual or, if appropriate, the individual's 
representative and to the State unit a full written report of the 
findings and grounds for the decision within 30 days of the completion 
of the hearing; and
    (4) The hearing officer's decision is final, except that a party 
may request an impartial review under paragraph (g)(1) of this section 
if the State has established procedures for that review, and a party 
involved in a hearing may bring a civil action under paragraph (i) of 
this section.
    (f) Selection of impartial hearing officers. The impartial hearing 
officer for a particular case must be selected--
    (1) From a list of qualified impartial hearing officers maintained 
by the State unit. Impartial hearing officers included on the list must 
be--
    (i) Identified by the State unit if the State unit is an 
independent commission; or
    (ii) Jointly identified by the State unit and the State 
Rehabilitation Council if the State has a Council; and
    (2)(i) On a random basis; or

[[Page 55777]]

    (ii) By agreement between the director of the designated State unit 
and the applicant or recipient or, as appropriate, the individual's 
representative.
    (g) Administrative review of hearing officer's decision. The State 
may establish procedures to enable a party who is dissatisfied with the 
decision of the impartial hearing officer to seek an impartial 
administrative review of the decision under paragraph (e)(3) of this 
section in accordance with the following requirements:
    (1) A request for administrative review under paragraph (g) of this 
section must be made within 20 days of the mailing of the impartial 
hearing officer's decision.
    (2) Administrative review of the hearing officer's decision must be 
conducted by--
    (i) The chief official of the designated State agency if the State 
has established both a designated State agency and a designated State 
unit under Sec.  361.13(b); or
    (ii) An official from the office of the Governor.
    (3) The reviewing official described in paragraph (g)(2)(i) of this 
section--
    (i) Provides both parties with an opportunity to submit additional 
evidence and information relevant to a final decision concerning the 
matter under review;
    (ii) May not overturn or modify the hearing officer's decision, or 
any part of that decision, that supports the position of the applicant 
or recipient unless the reviewing official concludes, based on clear 
and convincing evidence, that the decision of the impartial hearing 
officer is clearly erroneous on the basis of being contrary to the 
approved vocational rehabilitation services portion of the Unified or 
Combined State Plan, the Act, Federal vocational rehabilitation 
regulations, or State regulations and policies that are consistent with 
Federal requirements;
    (iii) Makes an independent, final decision following a review of 
the entire hearing record and provides the decision in writing, 
including a full report of the findings and the statutory, regulatory, 
or policy grounds for the decision, to the applicant or recipient or, 
as appropriate, the individual's representative and to the State unit 
within 30 days of the request for administrative review under paragraph 
(g)(1) of this section; and
    (iv) May not delegate the responsibility for making the final 
decision under paragraph (g) of this section to any officer or employee 
of the designated State unit.
    (4) The reviewing official's decision under paragraph (g) of this 
section is final unless either party brings a civil action under 
paragraph (i) of this section.
    (h) Implementation of final decisions. If a party brings a civil 
action under paragraph (h) of this section to challenge the final 
decision of a hearing officer under paragraph (e) of this section or to 
challenge the final decision of a State reviewing official under 
paragraph (g) of this section, the final decision of the hearing 
officer or State reviewing official must be implemented pending review 
by the court.
    (i) Civil action. (1) Any party who disagrees with the findings and 
decision of an impartial hearing officer under paragraph (e) of this 
section in a State that has not established administrative review 
procedures under paragraph (g) of this section and any party who 
disagrees with the findings and decision under paragraph (g)(3)(iii) of 
this section have a right to bring a civil action with respect to the 
matter in dispute. The action may be brought in any State court of 
competent jurisdiction or in a district court of the United States of 
competent jurisdiction without regard to the amount in controversy.
    (2) In any action brought under paragraph (i) of this section, the 
court--
    (i) Receives the records related to the impartial due process 
hearing and the records related to the administrative review process, 
if applicable;
    (ii) Hears additional evidence at the request of a party; and
    (iii) Basing its decision on the preponderance of the evidence, 
grants the relief that the court determines to be appropriate.
    (j) State fair hearing board. A fair hearing board as defined in 
Sec.  361.5(c)(21) is authorized to carry out the responsibilities of 
the impartial hearing officer under paragraph (e) of this section in 
accordance with the following criteria:
    (1) The fair hearing board may conduct due process hearings either 
collectively or by assigning responsibility for conducting the hearing 
to one or more members of the fair hearing board.
    (2) The final decision issued by the fair hearing board following a 
hearing under paragraph (j)(1) of this section must be made 
collectively by, or by a majority vote of, the fair hearing board.
    (3) The provisions of paragraphs (b)(1), (2), and (3) of this 
section that relate to due process hearings and of paragraphs (e), (f), 
(g), and (h) of this section do not apply to fair hearing boards under 
this paragraph (j).
    (k) Data collection. (1) The director of the designated State unit 
must collect and submit, at a minimum, the following data to the 
Secretary for inclusion each year in the annual report to Congress 
under section 13 of the Act:
    (i) A copy of the standards used by State reviewing officials for 
reviewing decisions made by impartial hearing officers under this 
section.
    (ii) The number of mediations held, including the number of 
mediation agreements reached.
    (iii) The number of hearings and reviews sought from impartial 
hearing officers and State reviewing officials, including the type of 
complaints and the issues involved.
    (iv) The number of hearing officer decisions that were not reviewed 
by administrative reviewing officials.
    (v) The number of hearing decisions that were reviewed by State 
reviewing officials and, based on these reviews, the number of hearing 
decisions that were--
    (A) Sustained in favor of an applicant or recipient;
    (B) Sustained in favor of the designated State unit;
    (C) Reversed in whole or in part in favor of the applicant or 
recipient; and
    (D) Reversed in whole or in part in favor of the State unit.
    (2) The State unit director also must collect and submit to the 
Secretary copies of all final decisions issued by impartial hearing 
officers under paragraph (e) of this section and by State review 
officials under paragraph (g) of this section.
    (3) The confidentiality of records of applicants and recipients 
maintained by the State unit may not preclude the access of the 
Secretary to those records for the purposes described in this section.

(Authority: Sections 12(c) and 102(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 722(c))

Subpart C--Financing of State Vocational Rehabilitation Programs


Sec.  361.60  Matching requirements.

    (a) Federal share--(1) General. Except as provided in paragraph 
(a)(2) of this section, the Federal share for expenditures made by the 
State under the vocational rehabilitation services portion of the 
Unified or Combined State Plan, including expenditures for the 
provision of vocational rehabilitation services and the administration 
of the vocational rehabilitation services portion of the Unified or 
Combined State Plan, is 78.7 percent.
    (2) Construction projects. The Federal share for expenditures made 
for the construction of a facility for community rehabilitation program 
purposes may

[[Page 55778]]

not be more than 50 percent of the total cost of the project.
    (b) Non-Federal share--(1) General. Except as provided in paragraph 
(b)(2) and (b)(3) of this section, expenditures made under the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan to meet the non-Federal share under this section must be 
consistent with the provisions of 2 CFR 200.306(b).
    (2) Third party in-kind contributions. Third party in-kind 
contributions specified in 2 CFR 200.306(b) may not be used to meet the 
non-Federal share under this section.
    (3) Contributions by private entities. Expenditures made from those 
cash contributions provided by private organizations, agencies, or 
individuals and that are deposited in the State agency's account or, if 
applicable, sole local agency's account, in accordance with State law 
prior to their expenditure and that are earmarked, under a condition 
imposed by the contributor, may be used as part of the non-Federal 
share under this section if the funds are earmarked for--
    (i) Meeting in whole or in part the State's share for establishing 
a community rehabilitation program or constructing a particular 
facility for community rehabilitation program purposes;
    (ii) Particular geographic areas within the State for any purpose 
under the vocational rehabilitation services portion of the Unified or 
Combined State Plan, other than those described in paragraph (b)(3)(i) 
of this section, in accordance with the following criteria:
    (A) Before funds that are earmarked for a particular geographic 
area may be used as part of the non-Federal share, the State must 
notify the Secretary that the State cannot provide the full non-Federal 
share without using these funds.
    (B) Funds that are earmarked for a particular geographic area may 
be used as part of the non-Federal share without requesting a waiver of 
statewideness under Sec.  361.26.
    (C) Except as provided in paragraph (b)(3)(i) of this section, all 
Federal funds must be used on a statewide basis consistent with Sec.  
361.25, unless a waiver of statewideness is obtained under Sec.  
361.26; and
    (iii) Any other purpose under the vocational rehabilitation 
services portion of the Unified or Combined State Plan, provided the 
expenditures do not benefit in any way the donor, employee, officer, or 
agent, any member of his or her immediate family, his or her partner, 
an individual with whom the donor has a close personal relationship, or 
an individual, entity, or organization with whom the donor shares a 
financial or other interest. The Secretary does not consider a donor's 
receipt from the State unit of a subaward or contract with funds 
allotted under this part to be a benefit for the purposes of this 
paragraph if the subaward or contract is awarded under the State's 
regular competitive procedures.

(Authority: Sections 7(14), 12(c), 101(a)(3), 101(a)(4), and 104 of 
the Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(14), 
709(c), 721(a)(3), 721(a)(4), and 724))


    Example for paragraph (b)(3):  Contributions may be earmarked in 
accordance with Sec.  361.60(b)(3)(iii) for providing particular 
services (e.g., rehabilitation technology services); serving 
individuals with certain types of disabilities (e.g., individuals 
who are blind), consistent with the State's order of selection, if 
applicable; providing services to special groups that State or 
Federal law permits to be targeted for services (e.g., students with 
disabilities who are receiving special education services), 
consistent with the State's order of selection, if applicable; or 
carrying out particular types of administrative activities 
permissible under State law. Contributions also may be restricted to 
particular geographic areas to increase services or expand the scope 
of services that are available statewide under the vocational 
rehabilitation services portion of the Unified or Combined State 
Plan in accordance with the requirements in Sec.  361.60(b)(3)(ii).


Sec.  361.61  Limitation on use of funds for construction expenditures.

    No more than 10 percent of a State's allotment for any fiscal year 
under section 110 of the Act may be spent on the construction of 
facilities for community rehabilitation program purposes.

(Authority: Section 101(a)(17)(A) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(17)(A))

Sec.  361.62  Maintenance of effort requirements.

    (a) General requirements. The Secretary reduces the amount 
otherwise payable to a State for any fiscal year by the amount by which 
the total expenditures from non-Federal sources under the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
for any previous fiscal year were less than the total of those 
expenditures for the fiscal year two years prior to that previous 
fiscal year.
    (b) Specific requirements for construction of facilities. If the 
State provides for the construction of a facility for community 
rehabilitation program purposes, the amount of the State's share of 
expenditures for vocational rehabilitation services under the plan, 
other than for the construction of a facility for community 
rehabilitation program purposes or the establishment of a facility for 
community rehabilitation purposes, must be at least equal to the 
expenditures for those services for the second prior fiscal year.
    (c) Separate State agency for vocational rehabilitation services 
for individuals who are blind. If there is a separate part of the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan administered by a separate State agency to provide 
vocational rehabilitation services for individuals who are blind--
    (1) Satisfaction of the maintenance of effort requirements under 
paragraphs (a) and (b) of this section is determined based on the total 
amount of a State's non-Federal expenditures under both parts of the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan; and
    (2) If a State fails to meet any maintenance of effort requirement, 
the Secretary reduces the amount otherwise payable to the State for a 
fiscal year under each part of the plan in direct proportion to the 
amount by which non-Federal expenditures under each part of the plan in 
any previous fiscal year were less than they were for that part of the 
plan for the fiscal year 2 years prior to that previous fiscal year.
    (d) Waiver or modification. (1) The Secretary may waive or modify 
the maintenance of effort requirement in paragraph (a) of this section 
if the Secretary determines that a waiver or modification is necessary 
to permit the State to respond to exceptional or uncontrollable 
circumstances, such as a major natural disaster or a serious economic 
downturn, that--
    (i) Cause significant unanticipated expenditures or reductions in 
revenue that result in a general reduction of programs within the 
State; or
    (ii) Require the State to make substantial expenditures in the 
vocational rehabilitation program for long-term purposes due to the 
one-time costs associated with the construction of a facility for 
community rehabilitation program purposes, the establishment of a 
facility for community rehabilitation program purposes, or the 
acquisition of equipment.
    (2) The Secretary may waive or modify the maintenance of effort 
requirement in paragraph (b) of this section or the 10 percent 
allotment limitation in Sec.  361.61 if the Secretary determines that a 
waiver or modification is necessary to permit the State to respond to 
exceptional or

[[Page 55779]]

uncontrollable circumstances, such as a major natural disaster, that 
result in significant destruction of existing facilities and require 
the State to make substantial expenditures for the construction of a 
facility for community rehabilitation program purposes or the 
establishment of a facility for community rehabilitation program 
purposes in order to provide vocational rehabilitation services.
    (3) A written request for waiver or modification, including 
supporting justification, must be submitted to the Secretary for 
consideration as soon as the State has determined that it has failed to 
satisfy its maintenance of effort requirement due to an exceptional or 
uncontrollable circumstance, as described in paragraphs (d)(1) and (2) 
of this section.

(Authority: Sections 101(a)(17) and 111(a)(2) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 721(a)(17) and 731(a)(2))

Sec.  361.63  Program income.

    (a) Definition. For purposes of this section, program income means 
gross income received by the State that is directly generated by a 
supported activity under this part or earned as a result of the Federal 
award during the period of performance, as defined in 2 CFR 200.80.
    (b) Sources. Sources of program income include, but are not limited 
to: Payments from the Social Security Administration for assisting 
Social Security beneficiaries and recipients to achieve employment 
outcomes; payments received from workers' compensation funds; payments 
received by the State agency from insurers, consumers, or others for 
services to defray part or all of the costs of services provided to 
particular individuals; and income generated by a State-operated 
community rehabilitation program for activities authorized under this 
part.
    (c) Use of program income. (1) Except as provided in paragraph 
(c)(2) of this section, program income, whenever earned, must be used 
for the provision of vocational rehabilitation services and the 
administration of the vocational rehabilitation services portion of the 
Unified or Combined State Plan. Program income--
    (i) Is considered earned in the fiscal year in which it is 
received; and
    (ii) Must be disbursed during the period of performance of the 
award.
    (2) Payments provided to a State from the Social Security 
Administration for assisting Social Security beneficiaries and 
recipients to achieve employment outcomes may also be used to carry out 
programs under part B of title I of the Act (client assistance), title 
VI of the Act (supported employment), and title VII of the Act 
(independent living).
    (3)(i) The State must use program income to supplement Federal 
funds that support program activities that are subject to this part. 
See, for example, 2 CFR 200.307(e)(2).
    (ii) Notwithstanding 2 CFR 200.305(a) and to the extent that 
program income funds are available, a State must disburse those funds 
(including repayments to a revolving fund), rebates, refunds, contract 
settlements, audit recoveries, and interest earned on such funds before 
requesting additional funds from the Department.
    (4) Program income cannot be used to meet the non-Federal share 
requirement under Sec.  361.60.

(Authority: Sections 12(c) and 108 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 728; 2 CFR part 200)

Sec.  361.64  Obligation of Federal funds.

    (a) Except as provided in paragraph (b) of this section, any 
Federal award funds, including reallotted funds, that are appropriated 
for a fiscal year to carry out a program under this part that are not 
obligated by the State by the beginning of the succeeding fiscal year 
remain available for obligation by the State during that succeeding 
fiscal year.
    (b) Federal funds appropriated for a fiscal year remain available 
for obligation in the succeeding fiscal year only to the extent that 
the State met the matching requirement for those Federal funds by 
obligating, in accordance with 34 CFR 76.707, the non-Federal share in 
the fiscal year for which the funds were appropriated.

(Authority: Section 19 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 716)

Sec.  361.65  Allotment and payment of Federal funds for vocational 
rehabilitation services.

    (a) Allotment. (1) The allotment of Federal funds for vocational 
rehabilitation services for each State is computed in accordance with 
the requirements of section 110 of the Act, and payments are made to 
the State on a quarterly basis, unless some other period is established 
by the Secretary.
    (2) If the vocational rehabilitation services portion of the 
Unified or Combined State Plan designates one State agency to 
administer, or supervise the administration of, the part of the plan 
under which vocational rehabilitation services are provided for 
individuals who are blind and another State agency to administer the 
rest of the plan, the division of the State's allotment is a matter for 
State determination.
    (3) Reservation for pre-employment transition services. (i) 
Pursuant to section 110(d) of the Act, the State must reserve at least 
15 percent of the State's allotment, received in accordance with 
section 110(a) of the Act for the provision of pre-employment 
transition services, as described in Sec.  361.48(a) of this part.
    (ii) The funds reserved in accordance with paragraph (a)(3)(i) of 
this section--
    (A) Must only be used for pre-employment transition services 
specified in Sec.  361.48(a); and
    (B) Must not be used to pay for administrative costs, (as defined 
in Sec.  361.5(c)(2)) associated with the provision of such services or 
any other vocational rehabilitation services.
    (b) Reallotment. (1) The Secretary determines not later than 45 
days before the end of a fiscal year which States, if any, will not use 
their full allotment.
    (2) As soon as possible, but not later than the end of the fiscal 
year, the Secretary reallots these funds to other States that can use 
those additional funds during the period of performance of the award, 
provided the State can meet the matching requirement by obligating the 
non-Federal share of any reallotted funds in the fiscal year for which 
the funds were appropriated.
    (3) In the event more funds are requested by agencies than are 
available, the Secretary will determine the process for allocating 
funds available for reallotment.
    (4) Funds reallotted to another State are considered to be an 
increase in the recipient State's allotment for the fiscal year for 
which the funds were appropriated.

(Authority: Sections 12(c), 110, and 111 of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c), 730, and 731)

Subparts D-F--[Reserved]

0
2. Effective October 18, 2016, Sec.  361.10 is amended by adding 
paragraph (d) to read as follows:


Sec.  361.10  Submission, approval, and disapproval of the State plan.

* * * * *
    (d) Submission, approval, disapproval, and duration. All 
requirements regarding the submission, approval, disapproval, and 
duration of the vocational rehabilitation services portion of the 
Unified or Combined State Plan are governed by regulations set forth in 
subpart D of this part.
* * * * *

0
3. Effective October 18, 2016, Sec.  361.23 is added to read as 
follows:


Sec.  361.23  Requirements related to the statewide workforce 
development system.

    As a required partner in the one-stop service delivery system 
(which is part of

[[Page 55780]]

the statewide workforce development system under title I of the 
Workforce Innovation and Opportunity Act), the designated State unit 
must satisfy all requirements set forth in regulations in subpart F of 
this part.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 101(a)(11)(A) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(11)(A); Section 121(b)(1)(B)(iv) of the 
Workforce Innovation and Opportunity Act; 29 U.S.C. 3151)



0
4. Effective October 18, 2016, Sec.  361.40 is amended by adding 
paragraph (b) to read as follows:


Sec.  361.40  Reports; Evaluation standards and performance indicators.

* * * * *
    (b) Evaluation standards and performance indicators--(1) Standards 
and indicators. The evaluation standards and performance indicators for 
the vocational rehabilitation program carried out under this part are 
subject to the performance accountability provisions described in 
section 116(b) of the Workforce Innovation and Opportunity Act and 
implemented in regulations set forth in subpart E of this part.
    (2) Compliance. A State's compliance with common performance 
measures and any necessary corrective actions will be determined in 
accordance with regulations set forth in subpart E of this part.

0
5. Part 363 is revised to read as follows:

PART 363--THE STATE SUPPORTED EMPLOYMENT SERVICES PROGRAM

Subpart A--General
Sec.
363.1 What is the State Supported Employment Services program?
363.2 Who is eligible for an award?
363.3 Who is eligible for services?
363.4 What are the authorized activities under the State Supported 
Employment Services program?
363.5 What regulations apply?
363.6 What definitions apply?
Subpart B--How Does a State Apply for a Grant?
363.10 What documents must a State submit to receive a grant?
363.11 What are the vocational rehabilitation services portion of 
the Unified or Combined State Plan supplement requirements?
Subpart C--How Are State Supported Employment Services Programs 
Financed?
363.20 How does the Secretary allot funds?
363.21 How does the Secretary reallot funds?
363.22 How are funds reserved for youth with the most significant 
disabilities?
363.23 What are the matching requirements?
363.24 What is program income and how may it be used?
363.25 What is the period of availability of funds?
Subparts D-E--[Reserved]
Subpart F--What Post-Award Conditions Must Be Met by a State?
363.50 What collaborative agreements must the State develop?
363.51 What are the allowable administrative costs?
363.52 What are the information collection and reporting 
requirements?
363.53 What requirements must a designated State unit meet for the 
transition of an individual to extended services?
363.54 When will an individual be considered to have achieved an 
employment outcome in supported employment?
363.55 When will the service record of an individual who has 
achieved an employment outcome in supported employment be closed?
363.56 What notice requirements apply to this program?

    Authority:  Sections 602-608 of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 795g-795m, unless otherwise noted.

Subpart A--General


Sec.  363.1  What is the State Supported Employment Services program?

    (a) Under the State supported employment services program, the 
Secretary provides grants to assist States in developing and 
implementing collaborative programs with appropriate entities to 
provide programs of supported employment services for individuals with 
the most significant disabilities, including youth with the most 
significant disabilities, to enable them to achieve an employment 
outcome of supported employment in competitive integrated employment. 
Grants made under the State supported employment services program 
supplement a State's vocational rehabilitation program grants under 34 
CFR part 361.
    (b) For purposes of this part and 34 CFR part 361, ``supported 
employment'' means competitive integrated employment, including 
customized employment, or employment in an integrated work setting in 
which an individual with a most significant disability, including a 
youth with a most significant disability, is working on a short-term 
basis toward competitive integrated employment, that is individualized 
and customized, consistent with the unique strengths, abilities, 
interests, and informed choice of the individual, including with 
ongoing support services for individuals with the most significant 
disabilities--
    (1)(i) For whom competitive integrated employment has not 
historically occurred; or
    (ii) For whom competitive integrated employment has been 
interrupted or intermittent as a result of a significant disability; 
and
    (2) Who, because of the nature and severity of the disability, need 
intensive supported employment services, and extended services after 
the transition from support provided by the designated State unit in 
order to perform the work.
    (c) Short-term basis. For purposes of this part, an individual with 
a most significant disability, whose supported employment in an 
integrated setting does not satisfy the criteria of competitive 
integrated employment, as defined in 34 CFR 361.5(c)(9), is considered 
to be working on a short-term basis toward competitive integrated 
employment so long as the individual can reasonably anticipate 
achieving competitive integrated employment--
    (1) Within six months of achieving a supported employment outcome; 
or,
    (2) In limited circumstances, within a period not to exceed 12 
months from the achievement of the supported employment outcome, if a 
longer period is necessary based on the needs of the individual, and 
the individual has demonstrated progress toward competitive earnings 
based on information contained in the service record.

(Authority: Sections 7(38), 7(39), 12(c), and 602 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(38) 705(39), 
709(c), and 795g)

Sec.  363.2  Who is eligible for an award?

    Any State that submits the documentation required by Sec.  363.10, 
as part of the vocational rehabilitation services portion of the 
Unified or Combined State Plan under 34 CFR part 361, is eligible for 
an award under this part.

(Authority: Section 606(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795k(a))

Sec.  363.3  Who is eligible for services?

    A State may provide services under this part to any individual, 
including a youth with a disability, if--
    (a) The individual has been determined to be--
    (1) Eligible for vocational rehabilitation services in accordance 
with 34 CFR 361.42; and
    (2) An individual with a most significant disability;

[[Page 55781]]

    (b) For purposes of activities carried out under Sec.  363.4(a)(2), 
the individual is a youth with a disability, as defined in 34 CFR 
361.5(c)(59), who satisfies the requirements of this section; and
    (c) Supported employment has been identified as the appropriate 
employment outcome for the individual on the basis of a comprehensive 
assessment of rehabilitation needs, as defined in 34 CFR 361.5(c)(5), 
including an evaluation of rehabilitation, career, and job needs.

(Authority: Section 605 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795j)

Sec.  363.4  What are the authorized activities under the State 
Supported Employment Services program?

    (a) The State may use funds allotted under this part to--
    (1) Provide supported employment services, as defined in 34 CFR 
361.5(c)(54);
    (2) Provide extended services, as defined in 34 CFR 361.5(c)(19), 
to youth with the most significant disabilities, in accordance with 
Sec.  363.11(f), for a period of time not to exceed four years, or 
until such time that a youth reaches the age of 25 and no longer meets 
the definition of a youth with a disability under 34 CFR 361.5(c)(58), 
whichever occurs first; and
    (3) With funds reserved, in accordance with Sec.  363.22 for the 
provision of supported employment services to youth with the most 
significant disabilities, leverage other public and private funds to 
increase resources for extended services and expand supported 
employment opportunities.
    (b) Except as provided in paragraph (a)(2) of this section, a State 
may not use funds under this part to provide extended services to 
individuals with the most significant disabilities.
    (c) Nothing in this part will be construed to prohibit a State from 
providing--
    (1) Supported employment services in accordance with the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
submitted under 34 CFR part 361 by using funds made available through a 
State allotment under that part.
    (2) Discrete postemployment services in accordance with 34 CFR 
361.48(b) by using funds made available under 34 CFR part 361 to an 
individual who is eligible under this part.
    (d) A State must coordinate with the entities described in Sec.  
363.50(a) regarding the services provided to individuals with the most 
significant disabilities, including youth with the most significant 
disabilities, under this part and under 34 CFR part 361 to ensure that 
the services are complementary and not duplicative.

(Authority: Sections 7(39), 12(c), 604, 606(b)(6), and 608 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(39), 709(c), 
795i, 795k(b)(6), and 795m)

Sec.  363.5  What regulations apply?

    The following regulations apply to the State supported employment 
services program:
    (a) The Education Department General Administrative Regulations 
(EDGAR) as follows:
    (1) 34 CFR part 76 (State-Administered Programs).
    (2) 34 CFR part 77 (Definitions that Apply to Department 
Regulations).
    (3) 34 CFR part 79 (Intergovernmental Review of Department of 
Education Programs and Activities).
    (4) 34 CFR part 81 (General Education Provisions Act--Enforcement).
    (5) 34 CFR part 82 (New Restrictions on Lobbying).
    (b) The regulations in this part 363.
    (c) The following regulations in 34 CFR part 361 (The State 
Vocational Rehabilitation Services Program): Sec. Sec.  361.5, 361.31, 
361.32, 361.34, 361.35, 361.39, 361.40, 361.41, 361.42, 361.47(a), 
361.48, 361.49, and 361.53.
    (d) 2 CFR part 200 (Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards), as adopted in 2 
CFR part 3474.
    (e) 2 CFR part 180 (OMB Guidelines to Agencies on Governmentwide 
Debarment and Suspension (Nonprocurement)), as adopted in 2 CFR part 
3485.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  363.6  What definitions apply?

    The following definitions apply to this part:
    (a) Definitions in 34 CFR part 361.
    (b) Definitions in 34 CFR part 77.
    (c) Definitions in 2 CFR part 200, subpart A.

(Authority: Sections 7 and 12(c) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 705 and 709(c))

Subpart B--How Does a State Apply for a Grant?


Sec.  363.10  What documents must a State submit to receive a grant?

    (a) To be eligible to receive a grant under this part, a State must 
submit to the Secretary, as part of the vocational rehabilitation 
services portion of the Unified or Combined State Plan under 34 CFR 
part 361, a State plan supplement that meets the requirements of Sec.  
363.11.
    (b) A State must submit revisions to the vocational rehabilitation 
services portion of the Unified or Combined State Plan supplement 
submitted under this part as may be necessary.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 606(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795k(a))

Sec.  363.11  What are the vocational rehabilitation services portion 
of the Unified or Combined State Plan supplement requirements?

    Each State plan supplement, submitted in accordance with Sec.  
363.10, must--
    (a) Designate a designated State unit or, as applicable, units, as 
defined in 34 CFR 361.5(c)(13), as the State agency or agencies to 
administer the Supported Employment program under this part;
    (b) Summarize the results of the needs assessment of individuals 
with most significant disabilities, including youth with the most 
significant disabilities, conducted under 34 CFR 361.29(a), with 
respect to the rehabilitation and career needs of individuals with most 
significant disabilities and their need for supported employment 
services. The results of the needs assessment must also address needs 
relating to coordination;
    (c) Describe the quality, scope, and extent of supported employment 
services to be provided to eligible individuals with the most 
significant disabilities under this part, including youth with the most 
significant disabilities;
    (d) Describe the State's goals and plans with respect to the 
distribution of funds received under Sec.  363.20;
    (e) Demonstrate evidence of the designated State unit's efforts to 
identify and make arrangements, including entering into cooperative 
agreements, with--
    (1) Other State agencies and other appropriate entities to assist 
in the provision of supported employment services; and
    (2) Other public or non-profit agencies or organizations within the 
State, employers, natural supports, and other entities with respect to 
the provision of extended services;
    (f) Describe the activities to be conducted for youth with the most 
significant disabilities with the funds reserved in accordance with 
Sec.  363.22, including--
    (1) The provision of extended services to youth with the most 
significant disabilities for a period not to exceed

[[Page 55782]]

four years, in accordance with Sec.  363.4(a)(2); and
    (2) How the State will use supported employment funds reserved 
under Sec.  363.22 to leverage other public and private funds to 
increase resources for extended services and expand supported 
employment opportunities for youth with the most significant 
disabilities;
    (g) Assure that--
    (1) Funds made available under this part will only be used to 
provide authorized supported employment services to individuals who are 
eligible under this part to receive such services;
    (2) The comprehensive assessments of individuals with significant 
disabilities, including youth with the most significant disabilities, 
conducted under 34 CFR part 361 will include consideration of supported 
employment as an appropriate employment outcome;
    (3) An individualized plan for employment, as described in 34 CFR 
361.45 and 361.46, will be developed and updated, using funds received 
under 34 CFR part 361, in order to--
    (i) Specify the supported employment services to be provided, 
including, as appropriate, transition services and pre-employment 
transition services to be provided for youth with the most significant 
disabilities;
    (ii) Specify the expected extended services needed, including the 
extended services that may be provided under this part to youth with 
the most significant disabilities in accordance with an approved 
individualized plan for employment for a period not to exceed four 
years; and
    (iii) Identify, as appropriate, the source of extended services, 
which may include natural supports, programs, or other entities, or an 
indication that it is not possible to identify the source of extended 
services at the time the individualized plan for employment is 
developed;
    (4) The State will use funds provided under this part only to 
supplement, and not supplant, the funds received under 34 CFR part 361, 
in providing supported employment services specified in the 
individualized plan for employment;
    (5) Services provided under an individualized plan for employment 
will be coordinated with services provided under other individualized 
plans established under other Federal or State programs;
    (6) To the extent job skills training is provided, the training 
will be provided onsite;
    (7) Supported employment services will include placement in an 
integrated setting based on the unique strengths, resources, interests, 
concerns, abilities, and capabilities of individuals with the most 
significant disabilities, including youth with the most significant 
disabilities;
    (8) The designated State agency or agencies, as described in 
paragraph (a) of this section, will expend no more than 2.5 percent of 
the State's allotment under this part for administrative costs of 
carrying out this program; and
    (9) The designated State agency or agencies will provide, directly 
or indirectly through public or private entities, non-Federal 
contributions in an amount that is not less than 10 percent of the 
costs of carrying out supported employment services provided to youth 
with the most significant disabilities with the funds reserved for such 
purpose under Sec.  363.22; and
    (h) Contain any other information and be submitted in the form and 
in accordance with the procedures that the Secretary may require.

(Approved by the Office of Management and Budget under control 
number 1205-0522)

(Authority: Section 606 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795k)

Subpart C--How Are State Supported Employment Services Programs 
Financed?


Sec.  363.20  How does the Secretary allot funds?

    (a) States. The Secretary will allot the sums appropriated for each 
fiscal year to carry out the activities of this part among the States 
on the basis of relative population of each State, except that--
    (1) No State will receive less than $250,000, or \1/3\ of 1 percent 
of the sums appropriated for the fiscal year for which the allotment is 
made, whichever amount is greater; and
    (2) If the sums appropriated to carry out this part for the fiscal 
year exceed the sums appropriated to carry out this part (as in effect 
on September 30, 1992) in fiscal year 1992 by $1,000,000 or more, no 
State will receive less than $300,000, or \1/3\ of 1 percent of the 
sums appropriated for the fiscal year for which the allotment is made, 
whichever amount is greater.
    (b) Certain Territories. (1) For the purposes of this section, 
Guam, American Samoa, the United States Virgin Islands, and the 
Commonwealth of the Northern Mariana Islands are not considered to be 
States.
    (2) Each jurisdiction described in paragraph (b)(1) of this section 
will be allotted not less than \1/8\ of 1 percent of the amounts 
appropriated for the fiscal year for which the allotment is made.

(Authority: Section 603(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795h(a))

Sec.  363.21  How does the Secretary reallot funds?

    (a) Whenever the Secretary determines that any amount of an 
allotment to a State under Sec.  363.20 for any fiscal year will not be 
expended by such State for carrying out the provisions of this part, 
the Secretary will make such amount available for carrying out the 
provisions of this part to one or more of the States that the Secretary 
determines will be able to use additional amounts during such year for 
carrying out such provisions.
    (b) Any amount made available to a State for any fiscal year in 
accordance with paragraph (a) will be regarded as an increase in the 
State's allotment under this part for such year.

(Authority: Section 603(b) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795h(b))

Sec.  363.22  How are funds reserved for youth with the most 
significant disabilities?

    A State that receives an allotment under this part must reserve and 
expend 50 percent of such allotment for the provision of supported 
employment services, including extended services, to youth with the 
most significant disabilities in order to assist those youth in 
achieving an employment outcome in supported employment.

(Authority: Sections 12(c) and 603(d) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 795h(d))

Sec.  363.23  What are the matching requirements?

    (a) Non-Federal share. (1) For funds allotted under Sec.  363.20 
and not reserved under Sec.  363.22 for the provision of supported 
employment services to youth with the most significant disabilities, 
there is no non-Federal share requirement.
    (2)(i) For funds allotted under Sec.  363.20 and reserved under 
Sec.  363.22 for the provision of supported employment services to 
youth with the most significant disabilities, a designated State agency 
must provide non-Federal expenditures in an amount that is not less 
than 10 percent of the total expenditures, including the Federal 
reserved funds and the non-Federal share, incurred for the provision of 
supported employment services to youth with the most significant 
disabilities, including extended services.
    (ii) In the event that a designated State agency uses more than 50 
percent of its allotment under this part to provide supported 
employment services to

[[Page 55783]]

youth with the most significant disabilities as required by Sec.  
363.22, there is no requirement that a designated State agency provide 
non-Federal expenditures to match the excess Federal funds spent for 
this purpose.
    (3) Except as provided under paragraphs (b) and (c) of this 
section, non-Federal expenditures made under the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
supplement to meet the non-Federal share requirement under this section 
must be consistent with the provision of 2 CFR 200.306.
    (b) Third-party in-kind contributions. Third-party in-kind 
contributions, as described in 2 CFR 200.306(b), may not be used to 
meet the non-Federal share under this section.
    (c)(1) Contributions by private entities. Expenditures made from 
contributions by private organizations, agencies, or individuals that 
are deposited into the sole account of the State agency, in accordance 
with State law may be used as part of the non-Federal share under this 
section, provided the expenditures under the vocational rehabilitation 
services portion of the Unified or Combined State Plan supplement, as 
described in Sec.  363.11, do not benefit in any way the donor, an 
individual to whom the donor is related by blood or marriage or with 
whom the donor shares a financial interest.
    (2) The Secretary does not consider a donor's receipt from the 
State unit of a contract or subaward with funds allotted under this 
part to be a benefit for the purpose of this paragraph if the contract 
or subaward is awarded under the State's regular competitive 
procedures.

(Authority: Sections 12(c) and 606(b)(7)(I) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 709(c) and 795k(b)(7)(I))

Sec.  363.24  What is program income and how may it be used?

    (a) Definition. (1) Program income means gross income earned by the 
State that is directly generated by authorized activities supported 
under this part or earned as a result of the Federal award during the 
period of performance.
    (2) Program income received through the transfer of Social Security 
Administration payments from the State Vocational Rehabilitation 
Services program, in accordance with 34 CFR 361.63(c)(2), will be 
treated as program income received under this part.
    (b) Use of program income. (1) Program income must be used for the 
provision of services authorized under Sec.  363.4. Program income 
earned or received during the fiscal year must be disbursed during the 
period of performance of the award, prior to requesting additional cash 
payments.
    (2) States are authorized to treat program income as an addition to 
the grant funds to be used for additional allowable program 
expenditures, in accordance with 2 CFR 200.307(e)(2).
    (3) Program income cannot be used to meet the non-Federal share 
requirement under Sec.  363.23.

(Authority: Sections 12(c) and 108 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 728)

Sec.  363.25  What is the period of availability of funds?

    (a) Except as provided in paragraph (b) of this section, any 
Federal award funds, including reallotted funds, that are appropriated 
for a fiscal year to carry out a program under this part that are not 
obligated by the State by the beginning of the succeeding fiscal year, 
and any program income received during a fiscal year that is not 
obligated or expended by the State prior to the beginning of the 
succeeding fiscal year in which the program income was received, remain 
available for obligation by the State during that succeeding fiscal 
year.
    (b) Federal funds appropriated for a fiscal year and reserved for 
the provision of supported employment services to youth with the most 
significant disabilities, in accordance with Sec.  363.22 of this part, 
remain available for obligation in the succeeding fiscal year only to 
the extent that the State met the matching requirement, as described in 
Sec.  363.23, for those Federal funds by obligating, in accordance with 
34 CFR 76.707, the non-Federal share in the fiscal year for which the 
funds were appropriated. Any reserved funds carried over may only be 
obligated and expended in that succeeding Federal fiscal year for the 
provision of supported employment services to youth with the most 
significant disabilities.

(Authority: Sections 12(c) and 19 of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 709(c) and 716)

Subparts D-E--[Reserved]

Subpart F--What Post-Award Conditions Must Be Met by a State?


Sec.  363.50  What collaborative agreements must the State develop?

    (a) A designated State unit must enter into one or more written 
collaborative agreements, memoranda of understanding, or other 
appropriate mechanisms with other public agencies, private nonprofit 
organizations, and other available funding sources, including employers 
and other natural supports, as appropriate, to assist with the 
provision of supported employment services and extended services to 
individuals with the most significant disabilities in the State, 
including youth with the most significant disabilities, to enable them 
to achieve an employment outcome of supported employment in competitive 
integrated employment.
    (b) These agreements provide the mechanism for collaboration at the 
State level that is necessary to ensure the smooth transition from 
supported employment services to extended services, the transition of 
which is inherent to the definition of ``supported employment'' in 
Sec.  363.1(b). The agreement may contain information regarding the--
    (1) Supported employment services to be provided, for a period not 
to exceed 24 months, by the designated State unit with funds received 
under this part;
    (2) Extended services to be provided to youth with the most 
significant disabilities, for a period not to exceed four years, by the 
designated State unit with the funds reserved under Sec.  363.22 of 
this part;
    (3) Extended services to be provided by other public agencies, 
private nonprofit organizations, or other sources, including employers 
and other natural supports, following the provision of authorized 
supported employment services, or extended services as appropriate for 
youth with the most significant disabilities, under this part; and
    (4) Collaborative efforts that will be undertaken by all relevant 
entities to increase opportunities for competitive integrated 
employment in the State for individuals with the most significant 
disabilities, especially youth with the most significant disabilities.

(Authority: Sections 7(38), 7(39), 12(c), 602, and 606(b) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(38), 705(39), 
709(c), 795g, and 795k(b))

Sec.  363.51  What are the allowable administrative costs?

    (a) A State may use funds under this part to pay for expenditures 
incurred in the administration of activities carried out under this 
part, consistent with the definition of administrative costs in 34 CFR 
361.5(c)(2).
    (b) A designated State agency may not expend more than 2.5 percent 
of a State's allotment under this part for administrative costs for 
carrying out the State supported employment program.

[[Page 55784]]


(Authority: Sections 7(1), 12(c), and 603(c) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(1), 709(c), and 795h(c))

Sec.  363.52  What are the information collection and reporting 
requirements?

    Each State agency designated in Sec.  363.11(a) must collect and 
report separately the information required under 34 CFR 361.40 for--
    (a) Eligible individuals receiving supported employment services 
under this part;
    (b) Eligible individuals receiving supported employment services 
under 34 CFR part 361;
    (c) Eligible youth receiving supported employment services and 
extended services under this part; and
    (d) Eligible youth receiving supported employment services under 34 
CFR part 361 and extended services.

(Authority: Sections 13 and 607 of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 710 and 795l)

Sec.  363.53  What requirements must a designated State unit meet for 
the transition of an individual to extended services?

    (a) A designated State unit must provide for the transition of an 
individual with a most significant disability, including a youth with a 
most significant disability, to extended services, as defined in 34 CFR 
361.5(c)(19), no later than 24 months after the individual enters 
supported employment, unless a longer period is established in the 
individualized plan for employment.
    (b) Prior to assisting the individual in transitioning from 
supported employment services to extended services, the designated 
State unit must ensure--
    (1) The counselor and individual have considered extending the 
provision of supported employment services beyond 24 months, as 
appropriate, and have determined that no further supported employment 
services are necessary to support and maintain the individual in 
supported employment before the individual transitions to extended 
services; and
    (2) The source of extended services for the individual has been 
identified in order to ensure there will be no interruption of 
services. The providers of extended services may include--
    (i) A State agency, a private nonprofit organization, employer, or 
any other appropriate resource, after an individual has made the 
transition from support from the designated State unit; or,
    (ii) The designated State unit, in the case of a youth with a most 
significant disability, in accordance with requirements set forth in 34 
CFR 361.5(c)(19) and this part for a period not to exceed four years, 
or at such time that a youth reaches the age of 25 and no longer meets 
the definition of a youth with a disability under 34 CFR 361.5(c)(58), 
whichever occurs first. For youth who still require extended services 
after they can no longer receive them from the designated State unit, 
the designated State unit must identify another source of extended 
services for those youth in order to ensure there will be no 
interruption of services. The designated State unit may not provide 
extended services to individuals with the most significant disabilities 
who are not youth with the most significant disabilities.

(Authority: Sections 7(13), 12(c), and 604(b) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(13), 709(c) and 795i)

Sec.  363.54  When will an individual be considered to have achieved an 
employment outcome in supported employment?

    An individual with a most significant disability, including a youth 
with a most significant disability, who is employed in competitive 
integrated employment or who is employed in an integrated setting 
working on a short-term basis to achieve competitive integrated 
employment will be considered to have achieved an employment outcome, 
including customized employment, in supported employment when--
    (a) The individual has completed supported employment services 
provided under this part and 34 CFR part 361, except for any other 
vocational rehabilitation services listed on the individualized plan 
for employment provided to individuals who are working on a short-term 
basis toward the achievement of competitive integrated employment in 
supported employment. An individual has completed supported employment 
services when--
    (1) The individual has received up to 24 months of supported 
employment services; or
    (2) The counselor and individual have determined that an extension 
of time to provide supported employment services beyond 24 months is 
necessary to support and maintain the individual in supported 
employment before the individual transitions to extended services and 
that extension of time has concluded; and
    (b) The individual has transitioned to extended services provided 
by either the designated State unit for youth with the most significant 
disabilities, or another provider, consistent with the provisions of 
Sec. Sec.  363.4(a)(2) and 363.22; and
    (c) The individual has maintained employment and achieved stability 
in the work setting for at least 90 days after transitioning to 
extended services; and
    (d) The employment is individualized and customized consistent with 
the strengths, abilities, interests, and informed choice of the 
individual.

(Authority: Sections 7(11), 7(13), 7(38), 7(39), 7(40), 12(c), 602, 
and 606(b) of the Rehabilitation Act of 1973, as amended; 29 U.S.C. 
705(11), 705(13), 705(38), 705(39), 705(40), 709(c), 795g, and 
795k(b))

Sec.  363.55  When will the service record of an individual who has 
achieved an employment outcome in supported employment be closed?

    (a) The service record of an individual with a most significant 
disability, including a youth with a most significant disability, who 
has achieved an employment outcome in supported employment in 
competitive integrated employment will be closed concurrently with the 
achievement of the employment outcome in supported employment when the 
individual--
    (1) Satisfies requirements for case closure, as set forth in 34 CFR 
361.56; and
    (2) Is not receiving extended services or any other vocational 
rehabilitation service provided by the designated State unit with funds 
under this part or 34 CFR part 361.
    (b) The service record of an individual with a most significant 
disability, including a youth with a most significant disability who is 
working toward competitive integrated employment on a short-term basis 
and is receiving extended services from funds other than those allotted 
under this part and 34 CFR part 361 will be closed when the 
individual--
    (1) Achieves competitive integrated employment within the short-
term basis period established pursuant to Sec.  363.1(c); and the 
individual--
    (i) Satisfies requirements for case closure, as set forth in 34 CFR 
361.56; and
    (ii) Is no longer receiving vocational rehabilitation services 
provided by the designated State unit with funds under 34 CFR part 361; 
or
    (2) Does not achieve competitive integrated employment within the 
short-term basis period established pursuant to Sec.  363.1(c).
    (c) The service record of a youth with a most significant 
disability who is receiving extended services provided by the 
designated State unit from funds under this part or 34 CFR part 361 
will be closed when--
    (1) The youth with a most significant disability achieves an 
employment

[[Page 55785]]

outcome in supported employment in competitive integrated employment 
without entering the short-term basis period; and
    (i) Is no longer eligible to receive extended services provided by 
the designated State unit with funds allotted under this part and 34 
CFR part 361 because the individual--
    (A) No longer meets age requirements established in the definition 
of a youth with a disability pursuant to 34 CFR 361.5(c)(58); or
    (B) Has received extended services for a period of four years; or
    (C) Has transitioned to extended services provided with funds other 
than those allotted under this part or part 361 prior to meeting the 
age or time restrictions established under paragraphs (c)(1)(i)(A) and 
(B) of this section, respectively; and
    (ii) Satisfies requirements for case closure, as set forth in 34 
CFR 361.56; and
    (iii) The individual is no longer receiving any other vocational 
rehabilitation service from the designated State unit provided with 
funds under 34 CFR part 361; or
    (2) The youth with a most significant disability who is working 
toward competitive integrated employment on a short-term basis--
    (i) Achieves competitive integrated employment within the short-
term basis period established pursuant to Sec.  363.1(c);
    (ii) Is no longer eligible to receive extended services provided by 
the designated State unit with funds allotted under this part and 34 
CFR part 361 because the individual--
    (A) No longer meets age requirements established in the definition 
of a youth with a disability pursuant to 34 CFR 361.5(c)(58); or
    (B) Has received extended services for a period of four years; or
    (C) Has transitioned to extended services provided with funds other 
than those allotted under this part or 34 CFR part 361 prior to meeting 
the age or time restrictions established under paragraphs (c)(2)(ii)(A) 
and (B) of this section, respectively; and
    (iii) Satisfies requirements for case closure, as set forth in 34 
CFR 361.56; or
    (3) The youth with a most significant disability working toward 
competitive integrated employment on a short-term basis does not 
achieve competitive integrated employment within the short-term basis 
period established pursuant to Sec.  363.1(c).

(Authority: Sections 7(11), 7(13), 7(38), 7(39), 7(40), 7(42), 
12(c), 602, and 606(b) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(11), 705(13), 705(38), 705(39), 705(40), 
705(42), 709(c), 795g, and 795k(b))

Sec.  363.56  What notice requirements apply to this program?

    Each grantee must advise applicants for or recipients of services 
under this part, or as appropriate, the parents, family members, 
guardians, advocates, or authorized representatives of those 
individuals, including youth with the most significant disabilities, of 
the availability and purposes of the Client Assistance Program, 
including information on seeking assistance from that program.

(Authority: Section 20 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 717)



0
6. Part 397 is added to read as follows:

PART 397--LIMITATIONS ON USE OF SUBMINIMUM WAGE

Subpart A--General Provisions
Sec.
397.1 Purpose.
397.2 What is the Department of Education's jurisdiction under this 
part?
397.3 What rules of construction apply to this part?
397.4 What regulations apply?
397.5 What definitions apply?
Subpart B--Coordinated Documentation Procedures Related to Youth with 
Disabilities
397.10 What documentation process must the designated State unit 
develop?
Subpart C--Designated State Unit Responsibilities Prior to Youth with 
Disabilities Starting Subminimum Wage Employment
397.20 What are the responsibilities of a designated State unit to 
youth with disabilities who are known to be seeking subminimum wage 
employment?
Subpart D--Local Educational Agency Responsibilities Prior to Youth 
with Disabilities Starting Subminimum Wage Employment
397.30 What are the responsibilities of a local educational agency 
to youth with disabilities who are known to be seeking subminimum 
wage employment?
397.31 What are the contracting limitations on educational agencies 
under this part?
Subpart E--Designated State Unit Responsibilities to Individuals with 
Disabilities During Subminimum Wage Employment
397.40 What are the responsibilities of a designated State unit for 
individuals with disabilities, regardless of age, who are employed 
at subminimum wage?
Subpart F--Review of Documentation
397.50 What is the role of the designated State unit in the review 
of documentation under this part?

    Authority:  Section 511 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 794g, unless otherwise noted.

Subpart A--General Provisions


Sec.  397.1   Purpose.

    (a) The purpose of this part is to set forth requirements the 
designated State units and State and local educational agencies must 
satisfy to ensure that individuals with disabilities, especially youth 
with disabilities, have a meaningful opportunity to prepare for, 
obtain, maintain, advance in, or regain competitive integrated 
employment, including supported or customized employment.
    (b) This part requires--
    (1) A designated State unit to provide youth with disabilities 
documentation demonstrating that they have completed certain 
requirements, as described in this part, prior to starting subminimum 
wage employment with entities (as defined in Sec.  397.5(d)) holding 
special wage certificates under section 14(c) of the Fair Labor 
Standards Act of 1938 (29 U.S.C. 214(c));
    (2) A designated State unit to provide, at certain prescribed 
intervals for the duration of such employment, career counseling and 
information and referral services, designed to promote opportunities 
for competitive integrated employment, to individuals with 
disabilities, regardless of age, who are known to be employed at 
subminimum wage; and
    (3) A designated State unit, in consultation with the State 
educational agency, to develop a process or utilize an existing 
process, to document completion of required activities under this part 
by a youth with a disability known to be seeking employment at 
subminimum wage.
    (c) This part authorizes a designated State unit, or a 
representative of a designated State unit, to review individual 
documentation required to be maintained by these entities under this 
part.
    (d) The provisions in this part work in concert with requirements 
in 34 CFR parts 300, 361, and 363, and do not alter any requirements 
under those parts.

(Authority: Sections 12(c) and 511 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 794g)

Sec.  397.2  What is the Department of Education's jurisdiction under 
this part?

    (a) The Department of Education has jurisdiction under this part to 
implement guidelines for--
    (1) Documentation requirements imposed on designated State units 
and local educational agencies, including the documentation process 
that the

[[Page 55786]]

designated State unit must develop in consultation with the State 
educational agency;
    (2) Requirements related to the services that designated State 
units must provide to individuals regardless of age who are employed at 
subminimum wage; and
    (3) Requirements under Sec.  397.31.
    (b) Nothing in this part will be construed to grant to the 
Department of Education, or its grantees, jurisdiction over 
requirements set forth in the Fair Labor Standards Act, including those 
imposed on entities holding special wage certificates under section 
14(c) of that Act, which is administered by the Department of Labor.

(Authority: Sections 12(c), 511(b)(3), 511(c), and 511(d) of the 
Rehabilitation Act of 1973, as amended; 709(c), 794g(b)(3), 794g(c), 
and 794g(d))

Sec.  397.3  What rules of construction apply to this part?

    Nothing in this part will be construed to--
    (a) Change the purpose of the Rehabilitation Act, which is to 
empower individuals with disabilities to maximize opportunities for 
achieving competitive integrated employment;
    (b) Promote subminimum wage employment as a vocational 
rehabilitation strategy or employment outcome, as defined in 34 CFR 
361.5(c)(15); or
    (c) Be inconsistent with the provisions of the Fair Labor Standards 
Act, as amended before or after July 22, 2014.

(Authority: Sections 12(c) and 511(b) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 794g(b))

Sec.  397.4  What regulations apply?

    (a) The regulations in 34 CFR part 300 governing the definition of 
transition services, and the Individualized Education Program 
requirements related to the development of postsecondary goals and the 
transition services needed to assist the eligible child in reaching 
those goals (Sec. Sec.  300.320(b), 300.321(b), 300.324(c), and 
300.43).
    (b) The regulations in 34 CFR part 361 governing the vocational 
rehabilitation program, especially those regarding protection and use 
of personal information in 34 CFR 361.38; eligibility determinations in 
34 CFR 361.42; individualized plans for employment in 34 CFR 361.45 and 
34 CFR 361.46; provision of vocational rehabilitation services, 
including pre-employment transition services, transition services, and 
supported employment services in 34 CFR 361.48; ineligibility 
determinations in 34 CFR 361.43; informed choice in 34 CFR 361.52; and 
case closures in 34 CFR 361.56.
    (c) The regulations in 29 CFR part 525 governing the employment of 
individuals with disabilities at subminimum wage rates pursuant to a 
certificate issued by the Secretary of Labor.
    (d) The regulations in this part 397.

(Authority: Sections 12(c), 102(a) and (b), 103(a), and 113 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 722(a) and 
(b), 723(a), and 733; sections 601(34) and 614(d)(1)(A)(i)(VIII) of 
the Individuals with Disabilities Education Act (20 U.S.C. 1401(34) 
and 1414(d)); and section 14(c) of the Fair Labor Standards Act (29 
U.S.C. 214(c))

Sec.  397.5  What definitions apply?

    (a) The following terms have the meanings given to them in 34 CFR 
361.5(c):
    (1) Act;
    (2) Competitive integrated employment;
    (3) Customized employment;
    (4) Designated State unit;
    (5) Extended services;
    (6) Individual with a disability;
    (7) Individual with a most significant disability;
    (8) Individual's representative;
    (9) Individualized plan for employment;
    (10) Pre-employment transition services;
    (11) Student with a disability;
    (12) Supported employment;
    (13) Vocational rehabilitation services; and
    (14) Youth with a disability.
    (b) The following terms have the meanings given to them in 34 CFR 
part 300:
    (1) Local educational agency (Sec.  300.28);
    (2) State educational agency (Sec.  300.41); and
    (3) Transition services (Sec.  300.43).
    (c) The following terms have the meanings given to them in 29 CFR 
525.3 and section 6(a)(1) of the Fair Labor Standards Act (29 U.S.C. 
206(a)(1)):
    (1) Federal minimum wage has the meaning given to that term in 
section 6(a)(1) of the Fair Labor Standards Act (29 U.S.C. 206(a)(1)); 
and
    (2) Special wage certificate means a certificate issued to an 
employer under section 14(c) of the Fair Labor Standards Act (29 U.S.C. 
214(c)) and 29 CFR part 525 that authorizes payment of subminimum 
wages, wages less than the statutory minimum wage.
    (d) Entity means an employer, or a contractor or subcontractor of 
that employer, that holds a special wage certificate described in 
section 14(c) of the Fair Labor Standards Act (29 U.S.C. 214(c)).

(Authority: Sections 7, 12(c), and 511(a) and (f) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705, 709(c), and 
794g(a) and (f); sections 601 and 614(d) of the Individuals with 
Disabilities Education Act, 20 U.S.C. 1401 and 1414(d); section 901 
of the Elementary and Secondary Education Act of 1965, 20 U.S.C. 
7801; and sections 6(a)(1) and 14(c) of the Fair Labor Standards 
Act, 29 U.S.C. 206(a)(1) and 29 U.S.C. 214(c))

Subpart B--Coordinated Documentation Procedures Related to Youth 
with Disabilities


Sec.  397.10  What documentation process must the designated State unit 
develop?

    (a) The designated State unit, in consultation with the State 
educational agency, must develop a new process, or utilize an existing 
process, to document the completion of the actions described in Sec.  
397.20 and Sec.  397.30 by a youth with a disability, as well as a 
process for the transmittal of that documentation from the educational 
agency to the designated State unit, consistent with confidentiality 
requirements of the Family Education Rights and Privacy Act (20 U.S.C. 
1232g(b) and 34 CFR 99.30 and 99.31) and the Individuals with 
Disabilities Education Act (20 U.S.C. 1417(c) and 34 CFR 300.622).
    (1) Such documentation must, at a minimum, contain the--
    (i) Youth's name;
    (ii) Determination made, including a summary of the reason for the 
determination, or description of the service or activity completed;
    (iii) Name of the individual making the determination or the 
provider of the required service or activity;
    (iv) Date determination made or required service or activity 
completed;
    (v) Signature of the designated State unit or educational personnel 
making the determination or documenting completion of the required 
services or activity;
    (vi) Date of signature described in paragraph (a)(1)(v) of this 
section;
    (vii) Signature of designated State unit personnel transmitting 
documentation to the youth with a disability; and
    (viii) Date and method (e.g., hand-delivered, faxed, mailed, 
emailed, etc.) by which document was transmitted to the youth.
    (2) In the event a youth with a disability or, as applicable, the 
youth's parent or guardian, refuses, through informed choice, to 
participate in the activities required by this part, such documentation 
must, at a minimum, contain the--
    (i) Youth's name;
    (ii) Description of the refusal and the reason for such refusal;

[[Page 55787]]

    (iii) Signature of the youth or, as applicable, the youth's parent 
or guardian;
    (iv) Signature of the designated State unit or educational 
personnel documenting the youth's refusal;
    (v) Date of signatures; and
    (vi) Date and method (e.g., hand-delivered, faxed, mailed, emailed, 
etc.) by which documentation was transmitted to the youth.
    (3) The documentation process must include procedures for the 
designated State unit to retain a copy of all documentation required by 
this part in a manner consistent with the designated State unit's case 
management system and the requirements of 2 CFR 200.333.
    (b) The documentation process must ensure that--
    (1) A designated State unit provides, in the case of a student with 
a disability, documentation of completion of appropriate pre-employment 
transition services, in accordance with Sec.  361.48(a) of this chapter 
and as required by Sec.  397.20(a)(1);
    (2) In the case of a student with a disability, for actions 
described in Sec.  397.30--
    (i) The appropriate school official, responsible for the provision 
of transition services, must provide the designated State unit 
documentation of completion of appropriate transition services under 
the Individuals with Disabilities Education Act, including those 
provided under section 614(d)(1)(A)(i)(VIII) (20 U.S.C. 
1414(d)(1)(A)(i)(VIII));
    (ii) The designated State unit must provide documentation of 
completion of the transition services, as documented and provided by 
the appropriate school official in accordance with paragraph (b)(2) of 
this section, to the youth with a disability.
    (c) The designated State unit must provide--
    (1) Documentation required by this part in a form and manner 
consistent with this part and in an accessible format for the youth; 
and
    (2)(i) Documentation required by paragraph (a)(1) of this section 
to a youth as soon as possible upon the completion of each of the 
required actions, but no later than--
    (A) 45 calendar days after the determination or completion of the 
required activity or service; or
    (B) 90 calendar days, if additional time is necessary due to 
extenuating circumstances, after the determination or completion of 
each of the required actions in Sec.  397.20 and Sec.  397.30(a). 
Extenuating circumstances should be interpreted narrowly to include 
circumstances such as the unexpected lengthy absence of the educational 
or designated State unit personnel necessary for the production of the 
documentation or the transmittal of that documentation due to illness 
or family emergency, or a natural disaster.
    (ii) Documentation required by paragraph (a)(2) of this section, 
when a youth has refused to participate in an action required by this 
part, must be provided to the youth within 10 calendar days of the 
youth's refusal to participate.
    (3) When transmitting documentation of the final determination or 
activity completed, as required by Sec.  397.20 and Sec.  397.30(a), 
the designated State unit must provide a coversheet that itemizes each 
of the documents that have been provided to the youth.

(Authority: Sections 12(c) and 511(d) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 794g(d))

Subpart C--Designated State Unit Responsibilities Prior to Youth 
With Disabilities Starting Subminimum Wage Employment


Sec.  397.20  What are the responsibilities of a designated State unit 
to youth with disabilities who are known to be seeking subminimum wage 
employment?

    (a) A designated State unit must provide youth with disabilities 
documentation upon the completion of the following actions:
    (1)(i) Pre-employment transition services that are available to a 
student with a disability under 34 CFR 361.48; or
    (ii) Transition services under the Individuals with Disabilities 
Education Act (20 U.S.C. 1400 et seq.), such as transition services 
available to the individual under section 614(d) of that Act (20 U.S.C. 
1414(d));
    (2) Application for vocational rehabilitation services, in 
accordance with 34 CFR 361.41(b), with the result that the individual 
was determined--
    (i) Ineligible for vocational rehabilitation services, in 
accordance with 34 CFR 361.43; or
    (ii) Eligible for vocational rehabilitation services, in accordance 
with 34 CFR 361.42; and
    (A) The youth with a disability had an approved individualized plan 
for employment, in accordance with 34 CFR 361.46;
    (B) The youth with a disability was unable to achieve the 
employment outcome specified in the individualized plan for employment, 
as described in 34 CFR 361.5(c)(15) and 361.46, despite working toward 
the employment outcome with reasonable accommodations and appropriate 
supports and services, including supported employment services and 
customized employment services, for a reasonable period of time; and
    (C) The youth with a disability's case record, which meets all of 
the requirements of 34 CFR 361.47, is closed.
    (3)(i) Regardless of the determination made under paragraph (a)(2) 
of this section, the youth with a disability has received career 
counseling, and information and referrals from the designated State 
unit to Federal and State programs and other resources in the 
individual's geographic area that offer employment-related services and 
supports designed to enable the individual to explore, discover, 
experience, and attain competitive integrated employment.
    (ii) The career counseling and information and referral services 
provided in accordance with paragraph (a)(3)(i) of this section must--
    (A) Be provided by the designated State unit in a manner that 
facilitates informed choice and decision-making by the youth, or the 
youth's representative as appropriate;
    (B) Not be for subminimum wage employment by an entity defined in 
Sec.  397.5(d), and such employment-related services are not 
compensated at a subminimum wage and do not directly result in 
employment compensated at a subminimum wage provided by such an entity; 
and
    (C) Be provided within 30 calendar days of a determination under 
paragraph (a)(2)(i) or (a)(2)(ii)(C) of this section for a youth known 
by the designated State unit to be seeking employment at subminimum 
wage.
    (b) The following special requirements apply--
    (1) For purposes of this part, all documentation provided by a 
designated State unit must satisfy the requirements for such 
documentation, as applicable, under 34 CFR part 361.
    (2) The individualized plan for employment, required in paragraph 
(a)(2)(ii)(A) of this section, must include a specific employment goal 
consistent with competitive integrated employment, including supported 
or customized employment.
    (3)(i) For purposes of paragraph (a)(2)(ii)(B) of this section, a 
determination as to what constitutes a ``reasonable period of time'' 
must be consistent with the disability-related and vocational needs of 
the individual, as well as the anticipated length of time required to 
complete the services identified in the individualized plan for 
employment.

[[Page 55788]]

    (ii) For an individual whose specified employment goal is in 
supported employment, such reasonable period of time is up to 24 
months, unless under special circumstances the individual and the 
rehabilitation counselor jointly agree to extend the time to achieve 
the employment outcome identified in the individualized plan for 
employment.

(Authority: Sections 7(5), 7(39), 12(c), 102(a) and (b), 103(a), 
113, and 511(a) and (d) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(5), 705(39), 709(c), 722(a) and (b), 723(a), 
733, and 794g(a) and (d))

Subpart D--Local Educational Agency Responsibilities Prior to Youth 
With Disabilities Starting Subminimum Wage Employment


Sec.  397.30  What are the responsibilities of a local educational 
agency to youth with disabilities who are known to be seeking 
subminimum wage employment?

    (a) Of the documentation to demonstrate a youth with a disability's 
completion of the actions described in Sec.  397.20(a), a local 
educational agency, as defined in Sec.  397.5(b)(1), must provide the 
designated State unit with documentation that the youth has received 
transition services under the Individuals with Disabilities Education 
Act (20 U.S.C. 1400 et seq.), such as transition services available to 
the individual under section 614(d) of that Act (20 U.S.C. 1414(d)). 
The documentation must be provided to the designated State unit in a 
manner that complies with confidentiality requirements of the Family 
Education Rights and Privacy Act (20 U.S.C. 1232g(b) and 34 CFR 99.30 
and 99.31) and the Individuals with Disabilities Education Act (20 
U.S.C. 1417(c) and 34 CFR 300.622).
    (b)(1) The documentation of completed services or activities 
required by paragraph (a) of this section must, at a minimum, contain 
the--
    (i) Youth's name;
    (ii) Description of the service or activity completed;
    (iii) Name of the provider of the required service or activity;
    (iv) Date required service or activity completed;
    (v) Signature of educational personnel documenting completion of 
the required service or activity;
    (vi) Date of signature described in paragraph (b)(1)(v) of this 
section; and
    (vii) Signature of educational personnel transmitting documentation 
to the designated State unit; and
    (viii) Date and method (e.g., hand-delivered, faxed, mailed, 
emailed, etc.) by which document was transmitted to the designated 
State unit.
    (2) In the event a youth with a disability or, as applicable, the 
youth's parent or guardian, refuses, through informed choice, to 
participate in the activities required by this part, such documentation 
must, at a minimum, contain the--
    (i) Youth's name;
    (ii) Description of the refusal and the reason for such refusal;
    (iii) Signature of the youth or, as applicable, the youth's parent 
or guardian;
    (iv) Signature of the educational personnel documenting the youth's 
refusal;
    (v) Date of signatures required by paragraphs (b)(2)(iii) and (iv) 
of this section;
    (vi) Signature of educational personnel transmitting documentation 
of the refusal to the designated State unit; and
    (vii) Date and method (e.g., hand-delivered, faxed, mailed, 
emailed, etc.) by which documentation was transmitted to the designated 
State unit.
    (c)(1)(i) The educational personnel must transmit the documentation 
required by paragraph (b)(1) of this section to the designated State 
unit as soon as possible upon the completion of each of the required 
actions, but no later than--
    (A) 30 calendar days after the completion of the required activity 
or service; or
    (B) 60 calendar days, if additional time is necessary due to 
extenuating circumstances, after the completion of each of the required 
actions in paragraph (a) of this section. Extenuating circumstances 
should be interpreted narrowly to include the unexpected lengthy 
absence due to illness or family emergency of the educational personnel 
necessary to produce or transmit the documentation, or a natural 
disaster.
    (ii) Documentation required by paragraph (b)(2) of this section, 
when a youth has refused to participate in an action required by this 
part, must be provided to the DSU within 5 calendar days of the youth's 
refusal to participate.
    (2) When the educational personnel transmits the last documentation 
to the designated State unit regarding the services provided to the 
youth under paragraph (a) of this section, the educational personnel 
must provide a cover sheet that itemizes the documentation that has 
been provided to the designated State unit regarding that youth.
    (d) The educational agency must retain a copy of all documentation 
provided to the designated State unit under this section in a manner 
consistent with the requirements of 2 CFR 200.333.

(Authority: Sections 12(c), 511(a)(2)(A), and 511(d) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
794g(a)(2)(A), and (d))

Sec.  397.31  What are the contracting limitations on educational 
agencies under this part?

    Neither a local educational agency, as defined in Sec.  
397.5(b)(1), nor a State educational agency, as defined in Sec.  
397.5(b)(2), may enter into a contract or other arrangement with an 
entity, as defined in Sec.  397.5(d), for the purpose of operating a 
program for a youth under which work is compensated at a subminimum 
wage.

(Authority: Section 511(b)(2) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 794g(b)(2))

Subpart E--Designated State Unit Responsibilities to Individuals 
With Disabilities During Subminimum Wage Employment


Sec.  397.40  What are the responsibilities of a designated State unit 
for individuals with disabilities, regardless of age, who are employed 
at a subminimum wage?

    (a) Counseling and information services. (1) A designated State 
unit must provide career counseling and information and referral 
services, as described in Sec.  397.20(a)(3), to individuals with 
disabilities, regardless of age, or the individual's representative as 
appropriate, who are known by the designated State unit to be employed 
by an entity, as defined in Sec.  397.5(d), at a subminimum wage level.
    (2) A designated State unit may know of an individual with a 
disability described in this paragraph through the vocational 
rehabilitation process, self-referral, or by referral from the client 
assistance program, another agency, or an entity, as defined in Sec.  
397.5(d).
    (3) The career counseling and information and referral services 
must be provided in a manner that--
    (i) Is understandable to the individual with a disability; and
    (ii) Facilitates independent decision-making and informed choice as 
the individual makes decisions regarding opportunities for competitive 
integrated employment and career advancement, particularly with respect 
to supported employment, including customized employment.
    (4) The career counseling and information and referral services 
provided under this section may include benefits counseling, 
particularly with regard to the interplay between

[[Page 55789]]

earned income and income-based financial, medical, and other benefits.
    (b) Other services. (1) Upon a referral by an entity, as defined in 
Sec.  397.5(d), that has fewer than 15 employees, of an individual with 
a disability who is employed at a subminimum wage by that entity, a 
designated State unit must also inform the individual within 30 
calendar days of the referral by the entity, of self-advocacy, self-
determination, and peer mentoring training opportunities available in 
the community.
    (2) The services described in paragraph (b)(1) of this section must 
not be provided by an entity as defined in Sec.  397.5(d).
    (c) Required intervals. (1) For individuals hired at subminimum 
wage on or after July 22, 2016, the services required by this section 
must be carried out once every six months for the first year of the 
individual's subminimum wage employment and annually thereafter for the 
duration of such employment.
    (2) For individuals already employed at subminimum wage prior to 
July 22, 2016, the services required by this section must be carried 
out once by July 22, 2017, and annually thereafter for the duration of 
such employment.
    (3)(i) With regard to the intervals required by paragraphs (c)(1) 
and (2) of this section for purposes of the designated State unit's 
responsibilities to provide certain services to individuals employed at 
subminimum wage, the applicable intervals will be calculated based upon 
the date the individual becomes known to the designated State unit.
    (ii) An individual with a disability may become ``known'' to the 
designated State unit through self-identification by the individual 
with a disability, referral by a third-party (including an entity as 
defined in Sec.  397.5(d)), through the individual's involvement with 
the vocational rehabilitation process, or any other method.
    (d) Documentation. (1)(i) The designated State unit must provide 
documentation to the individual as soon as possible, but no later 
than--
    (A) 45 calendar days after completion of the activities required 
under this section; or
    (B) 90 calendar days, if additional time is necessary due to 
extenuating circumstances, after the completion of the required actions 
in this section. Extenuating circumstances should be interpreted 
narrowly to include circumstances such as the unexpected lengthy 
absence of the designated State unit personnel, due to illness or other 
family emergency, who is responsible for producing or transmitting the 
documentation to the individual with a disability, or a natural 
disaster.
    (ii) Documentation required by paragraph (d)(3) of this section, 
when an individual has refused to participate in an activity required 
by this section, must be provided to the individual within 10 calendar 
days of the individual's refusal to participate.
    (2) Such documentation must, at a minimum, contain the--
    (i) Name of the individual;
    (ii) Description of the service or activity completed;
    (iii) Name of the provider of the required service or activity;
    (iv) Date required service or activity completed;
    (v) Signature of individual documenting completion of the required 
service or activity;
    (vi) Date of signature described in paragraph (d)(2)(v) of this 
section;
    (vii) Signature of designated State unit personnel (if different 
from that in paragraph (d)(2)(v) of this section) transmitting 
documentation to the individual with a disability; and
    (viii) Date and method (e.g., hand-delivered, faxed, mailed, 
emailed, etc.) by which document was transmitted to the individual.
    (3) In the event an individual with a disability or, as applicable, 
the individual's representative, refuses, through informed choice, to 
participate in the activities required by this section, such 
documentation must, at a minimum, contain the--
    (i) Name of the individual;
    (ii) Description of the refusal and the reason for such refusal;
    (iii) Signature of the individual or, as applicable, the 
individual's representative;
    (iv) Signature of the designated State unit personnel documenting 
the individual's refusal;
    (v) Date of signatures; and
    (vi) Date and method (e.g., hand-delivered, faxed, mailed, emailed, 
etc.) by which documentation was transmitted to the individual.
    (4) The designated State unit must retain a copy of all 
documentation required by this part in a manner consistent with the 
designated State unit's case management system and the requirements of 
2 CFR 200.333.
    (e) Provision of services. Nothing in this section will be 
construed as requiring a designated State unit to provide the services 
required by this section directly. A designated State unit may contract 
with other entities, i.e., other public and private service providers, 
as appropriate, to fulfill the requirements of this section. The 
contractor providing the services on behalf of the designated State 
unit may not be an entity holding a special wage certificate under 
section 14(c) of the Fair Labor Standards Act (29 U.S.C. 214(c)) as 
defined in 397.5(d).

(Authority: Sections 12(c) and 511(c) and (d) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 709(c) and 794g(c) and (d))

Subpart F--Review of Documentation


Sec.  397.50  What is the role of the designated State unit in the 
review of documentation under this part?

    (a) The designated State unit, or a contractor working directly for 
the designated State unit, is authorized to engage in the review of 
individual documentation required under this part that is maintained by 
an entity, as defined in 397.5(d), under this part. The contractor 
referred in this section may not be an entity holding a special wage 
certificate under section 14(c) of the Fair Labor Standards Act (29 
U.S.C. 214(c)).
    (b) If deficiencies are noted during a documentation review 
conducted under paragraph (a) of this section, the designated State 
unit should report the deficiency to the U.S. Department of Labor's 
Wage and Hour Division.

(Authority: Sections 12(c) and 511(e)(2)(B) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 709(c) and 794g(e)(2)(B))


[FR Doc. 2016-15980 Filed 8-8-16; 11:15 am]
BILLING CODE 4000-01-P