Social Security Programs: Fraud and Abuse; Establishment of New Part 498 to Address Civil Monetary Penalties, Assessments and Exclusions

SOCIAL SECURITY ADMINISTRATION

20 CFR Part 498

RIN 0960-AE33

Social Security Programs: Fraud and Abuse; Establishment of New

Part 498 to Address Civil Monetary Penalties, Assessments and

Exclusions

AGENCY: Office of the Inspector General (OTG), SSA.

ACTION: Final rule.

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SUMMARY: This final rule establishes a new part 498, which will serve

as a repository for the Social Security Administration's existing civil

monetary penalty authorities and which will reflect and implement new

civil monetary penalty authorities provided under the Social Security

Independence and Program Improvements Act of 1994. In the first phase

of this process, the Social Security Administration in this final rule

will relocate its existing regulations for misuse of Social Security

program words, letters, symbols, and emblems to part 498. In addition,

the existing regulations will be updated in this final rule to reflect

nondiscretionary changes made by the Social Security Independence and

Program Improvements Act of 1994.

EFFECTIVE DATE: November 27, 1995.

FOR FURTHER INFORMATION CONTACT: Judith A. Kidwell, Office of the

Inspector General, (410) 965-9750 or Glenn Sklar, Office of the General

Counsel, (410) 965-6247.

SUPPLEMENTARY INFORMATION:

Background

Section 101 of Public Law (Pub. L.) 103-296, the Social Security

Independence and Program Improvements Act of 1994 (SSIPIA), established

the Social Security Administration (SSA) as an independent agency in

the Executive Branch effective March 31, 1995. Previously, SSA had been

a component of the Department of Health and Human Services (HHS).

In creating an independent SSA, the SSIPIA also established an

independent Office of the Inspector General (OIG) within SSA, and

authorized the Commissioner of Social Security (Commissioner) to

delegate authority to impose certain civil monetary penalties (CMPs).

In order to properly reflect its delegated authority with respect to

CMPs, the OIG is establishing 20 CFR part 498. This part will: (1)

Incorporate existing CMP authorities for misuse of Social Security

program words, letters, symbols, and emblems which had previously been

located in 42 CFR part 1003; (2) establish a new location for newly

designated and future CMP provisions; (3) set forth the basis for any

OIG penalty authorities and the factors to be considered in determining

penalty amounts; and (4) detail the hearing process to be utilized in

the imposition of these CMP provisions.

New Authorities for SSA Inspector General

Section 1129 of the Social Security Act

Section 206(b) of the SSIPIA provided expanded authority for SSA to

impose CMPs and assessments against persons who make false statements

or representations for use in determining any initial or continuing

right to or amount of benefit payments under title II or title XVI of

the Social Security Act (the Act), if such person knew or should have

known that the statement was false, misleading or omitted a material

fact. Section 206(b) of the SSIPIA added section 1129 to the Act,

effective October 1, 1994, and section 108 of the SSIPIA made

additional conforming amendments effective March 31, 1995. This section

1129 authority to impose CMPs, including the authority to issue

implementing rules, was delegated to

[[Page 58226]]

the Inspector General (IG) of Social Security by the Commissioner on

June 28, 1995. Because the regulations implementing section 1129 will

involve discretionary issues they will be developed in a separate

notice of proposed rulemaking. We have reserved certain sections in

this final rule to accommodate the regulations reflecting and

implementing section 1129 and will finalize them after we have received

and considered public comments.

Section 1140 of the Social Security Act

The SSIPIA also includes several changes to section 1140 of the Act

that require us to alter the scope and content of the existing misuse

of program words, letters, symbols, and emblems penalty regulations

currently located at 42 CFR 1003. Specifically, section 312 of the

SSIPIA amended section 1140 of the Act by adding several provisions

which broaden existing deterrents against misleading mailings and

advertisements directly involving the SSA. Section 312 of the SSIPIA:

(1) Broadened the list of prohibited words, symbols and acronyms

subject to a violation; (2) revised the standard of conduct for

determining a violation; (3) exempted any State agency (or any

instrumentality or political subdivision of the State) from the

prohibited use of these program words, letters, symbols, or emblems

where such use serves to identify these entities; (4) specifically

defined a violation in regard to mailings; (5) eliminated the annual

penalty cap of $100,000; (6) eliminated the use of a disclaimer as a

defense to a violation under this provision; and (7) repealed the

provision that required a formal declination to be obtained from the

Department of Justice before pursuing a CMP case under section 1140 of

the Act.

Section 312 of the SSIPIA also includes a prohibition against

reproducing, reprinting, or distributing forms, applications, or other

publications of the SSA for a fee, unless the person has obtained

written authorization in accordance with regulations prescribed by the

Commissioner. These regulations will involve discretionary issues and

will be published in a separate notice of proposed rulemaking.

Hearing Process

The Act mandates that all individuals subject to the imposition of

a CMP be provided with the opportunity for a hearing. We are reserving

20 CFR 498.200 et seq. to address the CMP hearing process which will be

developed at a future date.

The Handling of Dual Violations

The SSA/OIG and the HHS/OIG may make separate and independent

determinations in regard to violations of section 1140 of the Act and

impose separate CMPs against individuals, entities or organizations who

make prohibited use of both the SSA and HHS program words, letters,

symbols, or emblems in the same advertisement or solicitation.

Regulatory Procedures

Waiver of Proposed Rulemaking

When developing our regulations, we follow the notice of proposed

rulemaking and public comment procedures specified in the

Administrative Procedure Act (APA), 5 U.S.C. 553. The APA provides an

exception to its notice and comment procedures when an agency finds

there is good cause for dispensing with such procedures on the basis

that they are impracticable, unnecessary, or contrary to the public

interest. We have determined that under 5 U.S.C. 553(b)(3)(B), good

cause exists for dispensing with the notice of proposed rulemaking and

public comment procedures in this case. Good cause exists because this

rulemaking reflects the statutory amendments to section 1140 of the

Act, with no issues of policy discretion. Therefore, opportunity for

prior comment is unnecessary and we are issuing these changes to our

regulations as a final rule.

Waiver of 30-Day Delay in Effective Date

We find good cause for dispensing with the 30-day delay in the

effective date of a substantive rule, provided for by 5 U.S.C. 553(d).

As explained above, the only substantive changes we are making merely

reflect legislation and involve no discretionary policy. Thus, we find

that it is in the public interest to make this rule effective upon

publication.

Executive Order 12866

We have consulted with the Office of Management and Budget (OMB)

and determined that this rule does not meet the criteria for a

significant regulatory action under Executive Order 12866. Thus, it was

not subject to OMB review.

Regulatory Flexibility Act

We generally prepare a regulatory flexibility analysis consistent

with Pub. L. 96-354, the Regulatory Flexibility Act, unless the IG

certifies that a regulation will not have a significant economic impact

on a substantial number of small business entities. While some

sanctions and penalties provided for under the Act may have an impact

on small entities, it is the nature of the violation and not the size

of the entity that will result in an action by the OIG. In either case,

we do not anticipate that a substantial number of small entities will

be significantly affected by this revised rulemaking. Therefore, we

have concluded, and the IG certifies, that a regulatory flexibility

analysis is not required for this final rule.

Paperwork Reduction Act

This rule imposes no new reporting or recordkeeping requirements

necessitating clearance by OMB.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social

Security-Disability Insurance; 96.002, Social Security-Retirement

Insurance; 96.004, Social Security-Survivors Insurance; 96.006,

Supplemental Security Income Program)

List of Subjects in 20 CFR Part 498

Administrative practice and procedure, Fraud, Penalties.

Approved: October 10, 1995.

June Gibbs Brown,

Inspector General.

20 CFR chapter III is amended by adding part 498 to read as

follows:

PART 498--CIVIL MONETARY PENALTIES, ASSESSMENTS AND RECOMMENDED

EXCLUSIONS

Sec.

498.100 Basis and purpose.

498.101 Definitions.

498.102 Basis for civil monetary penalties.

498.103 Amount of penalty.

498.104 [Reserved]

498.105 [Reserved]

498.106 Determinations regarding the amount or scope of penalties.

498.107 [Reserved]

498.108 Penalty not exclusive.

498.109 Notice of proposed determination.

498.110 Failure to request a hearing.

498.114-498.125 [Reserved]

498.126 Settlement.

498.127 Judicial review.

498.128 Collection of penalty.

498.129 [Reserved]

498.132 Limitations.

498.200 [Reserved]

Authority: Secs. 702(a)(5) and 1140 of the Social Security Act

(42 U.S.C. 902(a)(5) and 1320b-10).

Sec. 498.100 Basis and purpose.

(a) Basis. This part implements section 1140 of the Social Security

Act (42 U.S.C. 1320b-10).

(b) Purpose. This part provides for the imposition of civil

monetary penalties against persons who--

(1) [Reserved]

(2) Misuse certain Social Security program words, letters, symbols,

and emblems.

[[Page 58227]]

Sec. 498.101 Definitions.

As used in this part:

Agency means the Social Security Administration.

Commissioner means the Commissioner of Social Security or his or

her designees.

Department means the U.S. Department of Health and Human Services.

General Counsel means the General Counsel of the Social Security

Administration or his or her designees.

Inspector General means the Inspector General of the Social

Security Administration or his or her designees.

Penalty means the amount described in Sec. 498.103 and includes the

plural of that term.

Person means an individual, organization, agency, or other entity.

Respondent means the person upon whom the Commissioner or the

Inspector General has imposed, or intends to impose, a penalty.

Secretary means the Secretary of the U.S. Department of Health and

Human Services or his or her designees.

SSA means the Social Security Administration.

SSI means Supplemental Security Income.

Sec. 498.102 Basis for civil monetary penalties.

(a) [Reserved]

(b) The Office of the Inspector General may impose a penalty

against any person whom it determines in accordance with this part has

made use of certain Social Security program words, letters, symbols, or

emblems in such a manner that they knew or should have known would

convey, or in a manner which reasonably could be interpreted or

construed as conveying, the false impression that an advertisement or

other item was authorized, approved, or endorsed by the Social Security

Administration, or that such person has some connection with, or

authorization from, the Social Security Administration.

(1) Civil monetary penalties may be imposed for misuse, as set

forth in Sec. 498.102(b), of--

(i) The words ``Social Security,'' ``Social Security Account,''

``Social Security Administration,'' ``Social Security System,''

``Supplemental Security Income Program,'' or any combination or

variation of such words; or

(ii) The letters ``SSA,'' or ``SSI,'' or any other combination or

variation of such letters; or

(iii) A symbol or emblem of the Social Security Administration

(including the design of, or a reasonable facsimile of the design of,

the Social Security card, the check used for payment of benefits under

title II, or envelopes or other stationery used by the Social Security

Administration), or any other combination or variation of such symbols

or emblems.

(2) Civil monetary penalties will not be imposed against any agency

or instrumentality of a State, or political subdivision of a State,

that makes use of any symbol or emblem, or any words or letters which

identify that agency or instrumentality of the State or political

subdivision.

(c) The use of a disclaimer of affiliation with the United States

Government, the Social Security Administration or its programs, or any

other agency or instrumentality of the United States Government, will

not be considered as a defense in determining a violation of section

1140 of the Social Security Act.

Sec. 498.103 Amount of penalty.

(a) [Reserved]

(b) Under section Sec. 498.102(b), the Office of the Inspector

General may impose a penalty of not more than $5,000 for each violation

resulting from the misuse of Social Security Administration program

words, letters, symbols, or emblems relating to printed media, and a

penalty of not more than $25,000 in the case of such misuse related to

a broadcast or telecast.

(c) For purposes of paragraph (b) of this section, a violation is

defined as--

(1) In the case of a direct mailing solicitation or advertisement,

each separate piece of mail which contains one or more program words,

letters, symbols, or emblems related to a determination under

Sec. 498.102(b); and

(2) In the case of a broadcast or telecast, each airing of a single

commercial or solicitation related to a determination under

Sec. 498.102(b).

Sec. 498.104 [Reserved]

Sec. 498.105 [Reserved]

Sec. 498.106 Determinations regarding the amount or scope of

penalties.

(a) [Reserved]

(b) In determining the amount of any penalty in accordance with

Sec. 498.103(b), the Office of the Inspector General will take into

account--

(1) The nature and objective of the advertisement, solicitation, or

other communication, and the circumstances under which they were

presented;

(2) The frequency and scope of the violation, and whether a

specific segment of the population was targeted;

(3) The prior history of the individual, organization, or entity in

their willingness or refusal to comply with informal requests to

correct violations;

(4) The history of prior offenses of the individual, organization,

or entity in their misuse of program words, letters, symbols, and

emblems;

(5) The financial condition of the individual or entity; and

(6) Such other matters as justice may require.

(c) In cases brought under section 1140 of the Social Security Act,

the use of a disclaimer of affiliation with the United States

Government, the Social Security Administration or its programs will not

be considered as a mitigating factor in determining the amount of a

penalty in accordance with Sec. 498.106.

Sec. 498.107 [Reserved]

Sec. 498.108 Penalties not exclusive.

Penalties imposed under this part are in addition to any other

penalties prescribed by law.

Sec. 498.109 Notice of proposed determination.

(a) If the Office of the Inspector General seeks to impose a

penalty, it will serve written notice of the intent to take such

action. The notice will include:

(1) Reference to the statutory basis for the penalty;

(2) A description of the incident(s) with respect to which the

penalty is proposed;

(3) The amount of the proposed penalty;

(4) Any circumstances described in Sec. 498.106 that were

considered when determining the amount of the proposed penalty; and

(5) Instructions for responding to the notice, including--

(i) A specific statement of respondent's right to a hearing, and

(ii) A statement that failure to request a hearing within 60 days

permits the imposition of the proposed penalty without right of appeal.

(b) Any person upon whom the Office of the Inspector General

intends the imposition of a penalty may request a hearing on such

proposed penalty.

(c) If the respondent fails to exercise the respondent's right to a

hearing, within the time permitted under this section, any penalty

becomes final.

Sec. 498.110 Failure to request a hearing.

If the respondent does not request a hearing within the time

prescribed by Sec. 498.109, the Office of the Inspector General may

seek the proposed penalty, or any less severe penalty. The Office of

the Inspector General will notify the respondent by certified mail,

return receipt requested, of any penalty that

[[Page 58228]]

has been imposed and of the means by which the respondent may satisfy

the amount owed.

Secs. 498.114-498.125 [Reserved]

Sec. 498.126 Settlement.

The Inspector General has exclusive authority to settle any issues

or case, without the consent of the administrative law judge or the

Commissioner, at any time prior to a final determination. Thereafter,

the Commissioner or his or her designee has such exclusive authority.

Sec. 498.127 Judicial review.

Section 1140 of the Social Security Act authorizes judicial review

of a penalty that has become final. Judicial review may be sought by a

respondent only in regard to a penalty with respect to which the

respondent requested a hearing under Sec. 498.200ff of this part,

unless the failure or neglect to urge such objection is excused by the

court because of extraordinary circumstances.

Sec. 498.128 Collection of penalty.

(a) Once a determination has become final, collection of any

penalty will be the responsibility of the Commissioner or his or her

designee.

(b) [Reserved]

(c) In cases brought under section 1140 of the Social Security Act,

a penalty imposed under this part may be compromised by the

Commissioner or his or her designee and may be recovered in a civil

action brought in the United States district court for the district

where, as determined by the Commissioner, the:

(1) Violation referred to in Sec. 498.102(b) occurred; or

(2) Respondent resides; or

(3) Respondent has its principal office; or

(4) Respondent may be found.

Sec. 498.129 [Reserved]

Sec. 498.132 Limitations.

The Office of the Inspector General may initiate a proceeding in

accordance with Sec. 498.109 of this part to determine whether to

impose a penalty within 6 years from the date on which the violation

was committed.

Sec. 498.200 [Reserved]

[FR Doc. 95-28308 Filed 11-24-95; 8:45 am]

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