Determining Disability and Blindness; Substantial Gainful Activity Guides

Federal RegisterMar 6, 1995

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Parts 404 and 416

[Regs. No. 4 and 16]

RIN 0960-AB73

Determining Disability and Blindness; Substantial Gainful

Activity Guides

AGENCY: Social Security Administration, HHS.

ACTION: Proposed rules.

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SUMMARY: These proposed rules reflect amendments to the Social Security

Act (the Act) concerning the trial work period and the disability

insurance reentitlement period. The proposed rules also clarify certain

standards we use to determine whether work is substantial gainful

activity and whether an individual is entitled to a trial work period,

thereby further explaining how we determine disability under titles II

and XVI of the Act.

DATES: To be sure that your comments are considered, we must receive

them no later than May 5, 1995.

ADDRESSES: Comments should be telefaxed to (410) 966-0869 or submitted

in writing to the Commissioner of Social Security, Department of Health

and Human Services, P.O. Box 1585, Baltimore, MD 21235, or delivered to

the Office of Regulations, Social Security Administration, 3-B-1

Operations Building, 6401 Security Boulevard, Baltimore, MD 21235,

between 8 a.m. and 4:30 p.m. on regular business days. Comments may be

inspected during these same hours by making arrangements with the

contact person shown below.

[[Page 12167]] FOR FURTHER INFORMATION CONTACT: Sandy Bond, Office of

Regulations, Social Security Administration, 6401 Security Boulevard,

Baltimore, MD 21235, (410) 965-1794.

SUPPLEMENTARY INFORMATION: We propose to revise Secs. 404.1573(c) and

416.973(c) to explain in greater detail what we mean by work under

special conditions that take into account an individual's impairments.

We have added information found in Social Security Ruling 84-25 to

clarify these regulatory provisions.

We propose to amend Secs. 404.1574(a) and 416.974(a) to add an

expanded description of how we determine whether work performed by an

employee is substantial gainful activity, what we mean by subsidized

work, and how we determine the value of a subsidy. We explain in more

detail: (1) How earnings may show that an employee has done substantial

gainful activity; (2) what we consider in determining the amount an

employee earns; (3) how we use information from an employer as to

whether wages have been subsidized; (4) how we determine the value of

subsidized earnings when the value has not been explained adequately by

the employer; (5) how we determine the amount of any subsidy that may

be provided by organizations that employ individuals with handicaps;

and (6) how we evaluate earnings received by persons working in a

sheltered or special environment. The changes we are proposing to these

regulations reflect Social Security Ruling 83-33.

These proposed rules also clarify how we evaluate earnings from

work in sheltered workshops. Under Secs. 404.1574(b)(4) and

416.974(b)(4) of our current and proposed regulations, a person working

in a sheltered workshop ordinarily will be found not to be doing

substantial gainful activity when his or her average monthly earnings

are not greater than the specified amounts that ordinarily show that a

worker who is not in a sheltered workshop situation is engaging in

substantial gainful activity. The average monthly earnings amount

currently specified is $500 per month for years after 1989. These

sections of the current regulations do not provide rules for evaluating

sheltered workshop earnings above the specified average monthly

earnings amount because it is our policy that sheltered workshop

earnings that exceed the specified average monthly earnings amount must

be evaluated under Secs. 404.1574(b)(2) and 416.974(b)(2) in the same

way as non-sheltered workshop earnings. We propose to amend

Secs. 404.1574(b)(4) and 416.974(b)(4) to state this policy explicitly.

Our current regulations also specify a lower amount (currently $300

per month for earnings in calendar years after 1989) below which

earnings outside a sheltered workshop will ordinarily show that an

individual has not engaged in substantial gainful activity. Non-

sheltered workshop earnings that are above these amounts but below the

upper substantial gainful activity threshold amounts, that is, between

$300 and $500 per month for calendar years after 1989, are ordinarily

evaluated on a more case-by-case basis. However, there is no such

middle ground for evaluating earnings from sheltered workshop

employment on a more case-by-case basis because we do not impose

separate, lower amounts on sheltered workshop employees as we have done

for employees outside of sheltered workshops. If sheltered workshop

earnings exceed the upper substantial gainful activity threshold

amounts, we ordinarily consider the individual to have engaged in

substantial gainful activity. A Federal circuit court decision,

Iamarino v. Bowen, 795 F.2d 59 (8th Cir. 1986), has interpreted our

regulations differently. In Iamarino, the court held that because our

regulations provide a middle ground for evaluating non-sheltered

workshop earnings between specified upper and lower limits, we also

must provide a middle ground for evaluating sheltered workshop earnings

and not presume substantial gainful activity when sheltered workshop

earnings exceed the upper substantial gainful activity threshold

amounts. Because this was not the intent of our regulations, we propose

to revise Secs. 404.1574(b)(4) and 416.974(b)(4) to clarify our policy

on this point. At the same time we are proposing a minor editorial

correction to the heading of paragraph 404.1574(b)(6) to change the

word ``of'' to the word ``or.''

We also propose to add new paragraphs 404.1574(d) and 416.974(d)

and to revise paragraph 404.1592(b) to provide that volunteer work done

under programs mentioned in the Domestic Volunteer Service Act of 1973

or the Small Business Act shall not be considered in determining

whether an individual has performed substantial gainful activity or

services in the trial work period. This exclusion is currently stated

in Social Security Ruling 84-24 and is required by 42 U.S.C. 5044 and

15 U.S.C. 637.

We also propose to add new Secs. 404.1574a and 416.974a to explain

how we average earnings or self-employment income to determine if a

person has been performing substantial gainful activity and the periods

used for averaging. These amendments are based upon Social Security

Ruling 83-35 and do not represent a change in policy.

We propose revisions to Secs. 404.1575(a) and 416.975(a) to explain

the order in which we will apply the three tests used to determine

whether self-employed persons have engaged in substantial gainful

activity. We also propose to expand the discussion in Secs. 404.1575(c)

and 416.975(c) of what we mean by substantial income for purposes of

determining whether a self-employed person has engaged in substantial

gainful activity. These revisions are based upon Social Security Ruling

83-34 and do not represent a change in policy.

We are also proposing to add to Secs. 404.1574, 404.1575, 416.974,

and 416.975 an explanation, now found in Social Security Ruling 84-25,

of how we evaluate periods of brief work activity to determine if they

should be considered unsuccessful work attempts. The proposed rules on

an unsuccessful work attempt provide, consistent with Social Security

Ruling 84-25, that we will not consider work performed at the

substantial gainful activity level for more than six months to be an

unsuccessful work attempt regardless of why it ended or why earnings

were reduced to below the substantial gainful activity earnings level.

We propose to amend Secs. 404.1574, 404.1575, 416.974, and 416.975 to

explain when we will find that substantial work activity that is

discontinued or reduced below a specified level is an unsuccessful work

attempt. If there is an unsuccessful work attempt, we disregard, for

substantial gainful activity determination purposes, brief work

attempts that do not demonstrate sustained substantial gainful

activity. The criteria for an unsuccessful work attempt differ

depending on whether the work effort is for a duration of three months

or less or for a duration of between three and six months. These

proposed amendments to the regulations on unsuccessful work attempts

reflect Social Security Ruling 84-25.

In addition, we propose to add to Sec. 404.1584(d) the substantial

gainful activity earnings guidelines for evaluating the work activity

of blind persons under title II for the years 1983 through 1994.

We propose to revise the last sentence of current Sec. 404.1592(b)

to clarify that we generally do not consider work which is done without

remuneration to be ``services'' for purposes of determining when the

trial work period has ended if it is done merely as therapy

[[Page 12168]] or training or if it is work usually done in a daily

routine around the house or in self-care.

We propose revisions to Sec. 404.1592(d) to explain, consistent

with Social Security Ruling 82-52, that a trial work period may not be

awarded when a claimant performs work demonstrating the ability to

engage in substantial gainful activity within 12 months after the

alleged onset of disability and prior to an award of benefits. These

revisions, which do not represent a change in policy, are based upon

our interpretation of the duration requirement of section 223(d)(1)(A)

of the Act and will clarify the issues raised by the courts in McDonald

v. Bowen, 800 F.2d 153 (7th Cir. 1986), amended on rehearing, 818 F.2d

559 (7th Cir. 1987) and Walker v. Secretary of Health and Human

Services, 943 F.2d 1257 (10th Cir. 1991).

The trial work period is a period during which a person who becomes

entitled to title II benefits may test his or her ability to work and

still be considered disabled. Under section 222(c)(3) of the Act, the

trial work period begins with the month an individual ``becomes

entitled'' to title II disability benefits and it generally ends after

9 months of work whether or not the 9 months are consecutive. Section

222(c) provides that work performed during the trial work period may

not be considered in determining whether ``disability has ceased''

during that period.

In order to be found disabled under section 223(d)(1)(A), an

individual must be unable to engage in substantial gainful activity by

reason of a medically determinable physical or mental impairment which

can be expected to result in death or ``which has lasted or can be

expected to last for a continuous period of not less than 12 months.''

(Emphasis added.) Under our longstanding interpretation of this

provision as reflected in Social Security Ruling 82-52, the duration

requirement to establish disability will be found not to have been met

and a disability claim denied based on evidence that, within 12 months

of the onset of an impairment which prevented substantial gainful

activity and prior to an award of benefits, the impairment no longer

prevents substantial gainful activity. Under these circumstances, it is

not necessary to determine whether earlier in the 12-month period the

impairment was expected to prevent the performance of substantial

gainful activity for 12 months. We determine whether an impairment is

expected to prevent substantial gainful activity for 12 months only

when the claim is being adjudicated within 12 months of onset and the

evidence shows that the impairment currently prevents substantial

gainful activity. We believe that Congress provided that disability can

be found based on an impairment which ``can be expected to last'' 12

months simply to provide a means for the Social Security Administration

to adjudicate disability claims without having to wait 12 months from

the alleged onset of disability, rather than to permit claims to be

allowed in the face of evidence that the claimant's impairment did not

prevent substantial gainful activity for 12 continuous months.

Because section 222(c) provides that a trial work period shall

begin with the month in which a person becomes entitled to title II

disability benefits, a claimant who does not become entitled to

disability benefits cannot receive a trial work period. Under our

interpretation of the duration requirement, a person cannot be found to

be under a disability if he or she performs work demonstrating the

ability to perform substantial gainful activity within 12 months of

onset and prior to an award of benefits. Because the person cannot

become entitled to disability benefits in this situation, there can be

no trial work period. On the other hand, if a claimant returns to work

prior to an award of benefits, but more than 12 months from onset, the

duration requirement may be satisfied, the claimant may become entitled

to benefits, and the work may be protected by the trial work period

even though the work began prior to an award of benefits.

We propose to revise Sec. 404.1592(d)(2) by deleting the rule

stating that an individual is not entitled to a trial work period if he

or she is receiving disability insurance benefits in a second period of

disability for which a waiting period was not required. We are also

proposing to revise Sec. 404.1592(e) to show that the trial work period

ends when 9 service months are completed within a consecutive 60-month

rolling period. Prior to a statutory change, the trial work period

would end after 9 service months no matter when they were completed.

These two proposed changes reflect section 5112 of Public Law (Pub. L.)

101-508 which took effect on January 1, 1992.

We are proposing to make minor wording changes to

Sec. 404.1592(d)(1) to establish consistency with the wording in

Sec. 404.1592(d)(2)(i). This rewording does not represent a change in

our policy concerning who is entitled to a trial work period.

We are also proposing to add a new Sec. 404.1592(d)(2)(iv) to

clarify our policy, consistent with current Sec. 404.1592(e), that an

individual is not entitled to a trial work period if he or she

demonstrates an ability to engage in substantial gainful activity level

work at any time after the onset of the impairment(s) which prevented

the individual from engaging in substantial gainful activity but before

the month he or she files an application for disability benefits.

We are also proposing to amend Sec. 404.1592a to clarify that the

earnings averaging and unsuccessful work attempt concepts do not apply

in determining whether to pay benefits for any month during or after

the reentitlement period after disability has been determined to have

ceased because of the performance of substantial gainful activity.

Those concepts do apply during and after the reentitlement period in

determining whether disability has ceased due to the performance of

substantial gainful activity. This amendment reflects and clarifies

Social Security Ruling 83-35 and Social Security Ruling 84-25. This

amendment also will clarify the averaging methodology issue raised by

the court in Conley v. Bowen, 859 F.2d 261 (2d Cir. 1988). These

proposed rules also provide cross-references to Sec. 404.1592a in the

explanations of the averaging and unsuccessful work attempts concepts

contained in Secs. 404.1574(c), 404.1574a, and 404.1575(d).

These proposed regulations also reflect section 9010 of Pub. L.

100-203 which extended, as of January 1, 1988, the reentitlement period

from 15 months to 36 months. During this extended reentitlement period,

the title II benefits of a disabled individual whose benefits are

stopped because of substantial gainful activity can be reinstated

without the need to file a new application if his or her work falls

below the substantial gainful activity level. These statutory changes

are reflected in proposed amendments to Secs. 404.321, 404.325 and

404.1592a.

Public Law 99-643 made a number of changes in the way we handle

supplemental security income cases under title XVI of the Act when a

disabled person, eligible for supplemental security income benefits,

works. Certain supplemental security income recipients who work despite

otherwise disabling impairments and begin to earn amounts that would

ordinarily represent substantial gainful activity will not have their

earnings considered when determining whether they continue to be

disabled. Pursuant [[Page 12169]] to section 4 of Pub. L. 99-643, the

trial work period and the reentitlement period no longer apply in title

XVI disability cases, and we are accordingly proposing to delete

Secs. 416.973(f), 416.976(f)(2), 416.992, 416.992a, and

416.994(b)(3)(v), (b)(5)(i), the first paragraph of (b)(6)(i),

(b)(6)(i)(D), and (b)(6)(ii) from the regulations and to amend

Secs. 416.901(m), 416.991, and 416.1331(a) by removing references to

the trial work period and reentitlement period. A substantial gainful

activity test is still necessary to establish an individual's initial

eligibility for SSI benefits based on disability under title XVI.

Regulatory Procedures

Paperwork Reduction Act

These regulations contain reporting requirements in

Secs. 404.1574(a)(3) and 416.974(a)(3). We would normally seek approval

of these requirements (under the Paperwork Reduction Act) from the

Office of Management and Budget (OMB). We are not doing so in this

situation because we already have clearance from the OMB to collect

this information using form SSA-3033 (OMB No. 0960-0483).

The public reporting burden for this collection of information is

estimated to average 15 minutes per response. This includes the time it

will take to read the instructions, gather the necessary facts, and

provide the information. We expect approximately 12,500 employers to

complete form SSA-3033 annually, and estimate the total burden to be

3,125 hours. If you have any comments or suggestions on this estimate,

write to the Social Security Administration, ATTN: Reports Clearance

Officer, 1-A-21 Operations Building, Baltimore, Maryland 21235, and to

the Office of Management and Budget, Paperwork Reduction Project (0960-

0483), Washington, DC 20503.

Regulatory Flexibility Act

We certify that these proposed regulations, if promulgated, will

not have a significant economic impact on a substantial number of small

entities because they primarily affect individuals who are applying for

or receiving title II or title XVI benefits because of disability or

blindness.

Executive Order 12866

OMB has reviewed these rules and determined they do not meet the

criteria for a significant regulatory action under E.O. 12866.

(Catalog of Federal Domestic Assistance Program No. 93.802, Social

Security-Disability Insurance; No. 93.807, Supplemental Security

Income.)

List of Subjects in 20 CFR Part 404

Administrative practice and procedure, Death benefits, Disability

benefits, Old-Age, Survivors and Disability Insurance.

List of Subjects in 20 CFR Part 416

Administrative practice and procedure, Aged, blind, disability

benefits, Public assistance programs, Supplemental security income.

Dated: September 6, 1994.

Shirley S. Chater,

Commissioner of Social Security.

Approved: November 22, 1994.

Donna E. Shalala,

Secretary of Health and Human Services.

Parts 404 and 416 of chapter III of title 20 of the Code of Federal

Regulations are proposed to be amended as follows:

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE

(1950- )

1. The authority citation for subpart D of Part 404 continues to

read as follows:

Authority: Secs. 202, 203(a) and (b), 205(a), 216, 223, 228(a)-

(e), and 1102 of the Social Security Act; 42 U.S.C. 402, 403(a) and

(b), 405(a), 416, 423, 428(a)-(e), and 1302.

2. Section 404.321 is amended by revising paragraph (c)(3) to read

as follows:

Sec. 404.321 When a period of disability begins and ends.

* * * * *

(3) If you perform substantial gainful activity during the

reentitlement period described in Sec. 404.1592a, the last month for

which you received benefits.

3. Section 404.325 is revised to read as follows:

Sec. 404.325 The termination month.

If you do not have a disabling impairment, your termination month

is the third month following the month in which your impairment is not

disabling even if it occurs during the trial work period or the

reentitlement period. If you continue to have a disabling impairment

and complete 9 months of trial work, your termination month will be the

third month following the earliest month you perform substantial

gainful activity or are determined able to perform substantial gainful

activity; however, in no event will the termination month under these

circumstances be earlier than the first month after the end of the

reentitlement period described in Sec. 404.1592a.

Example: You complete your trial work period in December 1988.

You are then working at the substantial gainful activity level and

continue to do so throughout the 36 months following completion of

your trial work period and thereafter. Your termination month will

be January 1992, which is the 37th month--that is, the first month

in which you performed substantial gainful activity after the 36th

month following your trial work period.

Example: You complete your trial work period in December 1988

but you are not able to work at the substantial gainful activity

level until March 1992, 3 months after the last month of your

reentitlement period. Your termination month will be June 1992--that

is, the third month after the earliest month you performed

substantial gainful activity.

4. The authority citation for subpart P of Part 404 continues to

read as follows:

Authority: Secs. 202, 205(a), (b), and (d)-(h), 216(i), 221(a)

and (i), 222(c), 223, 225, and 1102 of the Social Security Act; 42

U.S.C. 402, 405(a), (b), and (d)-(h), 416(i), 421(a) and (i),

422(c), 423, 425, and 1302; sec. 505(a) of Pub. L. 96-265, 94 Stat.

473; secs 2(d)(2), 5, 6, and 15 of Pub. L. 98-460, 98 Stat. 1797,

1801, 1802, and 1808; sec. 10103 of Pub. L. 101-239, 103 Stat. 2472.

5. Section 404.1573 is amended by revising paragraph (c) to read as

follows:

Sec. 404.1573 General information about work activity.

* * * * *

work you are doing is done under special conditions that take into

account your impairment, such as work done in a sheltered workshop or

as a patient in a hospital, it may still show that you have the

necessary skills and ability to work at the substantial gainful

activity level. Also, if you are forced to stop or reduce your work

because of the removal of special conditions that were related to your

impairment and essential to your work, we may find that your work does

not show that you are able to do substantial gainful activity. Examples

of the special conditions that may relate to your impairment include

situations in which--

(1) You required and received special assistance from other

employees in performing your work;

(2) You were allowed to work irregular hours or take frequent rest

periods;

(3) You were provided with special equipment or were assigned work

especially suited to your impairment;

(4) You were able to work only because of specially arranged

circumstances, for example, other persons helped you prepare for or get

to and from your work;

(5) You were permitted to work at a lower standard of productivity

or efficiency than other employees; or [[Page 12170]]

(6) You were given the opportunity to work, despite your

impairment, because of family relationship, past association with your

employer, or your employer's concern for your welfare.

* * * * *

6. Section 404.1574 is amended by redesignating current paragraph

(a)(3) as (a)(6); revising paragraphs (a)(1), (a)(2), newly designated

(a)(6), (b)(1), and (b)(4) and the heading of paragraph (b)(6); and

adding new paragraphs (a)(3) through (a)(5), (c), and (d) to read as

follows:

Sec. 404.1574 Evaluation guides if you are an employee.

(a) * * *

(1) Your earnings may show you have done substantial gainful

activity. In evaluating an employee's work activity for substantial

gainful activity purposes, our primary consideration is the earnings

that are derived from the work activity. The amount of your earnings

from work you have done may show that you have engaged in substantial

gainful activity. Generally, if you worked for substantial earnings, we

will find that you are able to do substantial gainful activity.

However, the fact that your earnings were not substantial will not

necessarily show that you are not able to do substantial gainful

activity. We generally consider work that you are forced to stop or to

reduce below the substantial gainful activity level after a short time

because of your impairment to be an unsuccessful work attempt. Your

earnings from an unsuccessful work attempt will not show that you are

able to do substantial gainful activity. We use the criteria in

paragraph (c) of this section to determine if the work you did was an

unsuccessful work attempt.

(2) We consider only the amounts you earn. When we decide whether

your earnings show that you have done substantial gainful activity, we

do not consider any income that is not directly related to your

productivity. When your earnings exceed the reasonable value of the

work you perform, we consider only that part of your pay which you

actually earn. If your earnings are being subsidized, we do not

consider the amount of the subsidy when we determine if your earnings

show that you have done substantial gainful activity. We consider your

work to be subsidized if the true value of your work, when compared

with the same or similar work done by unimpaired persons, is less than

the actual amount of earnings paid to you for your work. For example,

when a handicapped person does simple tasks under close and continuous

supervision, our determination of whether that person has done

substantial gainful activity will not be based only on the amount of

the wages paid. We will first determine whether the person received a

subsidy; that is, we will determine whether the person was being paid

more than the reasonable value of the actual services performed. We

will then subtract the value of the subsidy from the person's gross

earnings to determine the earnings we will use to determine if he or

she has done substantial gainful activity. Paragraphs (a)(3), (a)(4),

(a)(5), and (a)(6) of this section explain how we determine the amounts

of subsidies.

(3) Evidence of subsidy from your employer. We will first ask your

employer to tell us if your wages have been subsidized and, if so, the

amount of the subsidy. Your employer may set a specific amount as the

reasonable value of your services. If the wages you receive exceed the

reasonable value of the actual services you performed, we will regard

the excess as a subsidy rather than earnings. Any of the following

circumstances may indicate the existence of a subsidy:

(i) You work in sheltered employment.

(ii) Childhood disability is involved.

(iii) You have a mental impairment.

(iv) There is a marked discrepancy between the amount of your pay

and the value of your services.

(v) You receive an unusual degree of help from others to do your

work.

(vi) Your impairment indicates you would need an unusual degree of

help from others.

(vii) You are involved in a government-sponsored job training and

employment program.

(4) When your employer does not tell us the value of your subsidy.

If your earnings are subsidized and your employer does not set the

amount of the subsidy, or does not adequately explain how the subsidy

was determined, we will use the following criteria to determine the

amount of your subsidy:

(i) In most instances, we will determine the amount of your subsidy

by comparing the time, energy, skills, and responsibility involved in

your services with the time, energy, skills, and responsibility

involved in the performance of the same or similar work by unimpaired

individuals in your community. We will estimate the proportionate value

of your services according to the prevailing pay scale for your work.

(ii) In other instances, it may be possible for us to determine the

approximate extent of your subsidy based upon other indications of your

productivity, such as your need for an unusual degree of supervision or

assistance in the performance of simple tasks, the length of time you

need to do simple tasks, or how efficiently you are able to do simple

tasks.

(5) Subsidies in organizations that hire the handicapped. If you

work for an organization that hires the handicapped and the

organization either operates at a loss or receives charitable

contributions or government aid, this does not necessarily establish

that your work is subsidized. Our determination of whether or not you

receive a subsidy, and the amount of any subsidy you may receive, will

depend upon your productivity rather than the financial condition of

your employer's business.

(6) If you are working in a sheltered or special environment. If

you are working in a sheltered workshop, you may or may not be earning

the amounts you are being paid. The fact that the sheltered workshop or

similar facility is operating at a loss or is receiving some charitable

contributions or governmental aid does not establish that you are not

earning all you are being paid. Because persons in military service

being treated for severe impairments usually continue to receive full

pay, we evaluate their work activity in a therapy program or while on

limited duty by comparing it with similar work in the civilian work

force or on the basis of reasonable worth of the work, rather than on

the actual amount of the earnings.

(b) Earnings guidelines.--(1) General. If you are an employee, we

first consider the criteria in paragraph (a) of this section and

Sec. 404.1576, and then the guides in paragraphs (b)(2), (3), (4), (5),

and (6) of this section. When we review your earnings to determine if

you have been performing substantial gainful activity, we will subtract

the value of any subsidized earnings (see paragraph (a)(2) of this

section) and the reasonable cost of any impairment-related work

expenses from your gross earnings (see Sec. 404.1576). The resulting

amount is the amount we use to determine if you have done substantial

gainful activity. We will generally average your earnings for

comparison with the earnings guidelines in paragraphs (b)(2), (3), (4),

and (6) of this section. See Sec. 404.1574a for our rules on averaging

earnings.

(2) * * *

(3) * * *

(4) If you work in a sheltered workshop. If you work in a sheltered

workshop or a comparable facility especially set up for severely

impaired persons, we ordinarily will consider that your earnings from

this work show that you have engaged in substantial gainful activity if

the guides in paragraph (b)(2) of this section are met.

[[Page 12171]] Earnings less than those indicated in paragraph (b)(2)

of this section will ordinarily show that you have not engaged in

substantial gainful activity without the need to consider the other

information discussed in paragraph (b)(6) of this section even if those

earnings are more than those indicated in paragraph (b)(3) of this

section.

(5) * * *

(6) Earnings that are not high or low enough to show whether you

engaged in substantial gainful activity. * * *

you have done will not show that you are able to do substantial gainful

activity if, after working for a period of 6 months or less, you were

forced by your impairment to stop working or to reduce the amount of

work you do so that your earnings from such work fall below the

substantial gainful activity earnings level in paragraph (b)(3) of this

section and you meet the conditions described in paragraphs (c)(2),

(3), (4), and (5), of this section. The unsuccessful work attempt

criteria do not apply in determining whether payment should be made for

any month(s) during or after the reentitlement period that occurs after

the month disability has been determined to have ceased because of the

performance of substantial gainful activity. The reentitlement period

is explained in Sec. 404.1592a.

(2) Event that must precede an unsuccessful work attempt. There

must be a significant break in the continuity of your work before we

will consider you to have begun a work attempt that later proved

unsuccessful. Your work must have been discontinued or reduced below

the substantial gainful activity earnings level because of your

impairment or because of the removal of special conditions that were

essential to the further performance of your work. We explain what we

mean by special conditions in Sec. 404.1573(c). We will consider your

prior work to be ``discontinued'' if you were out of work at least 30

consecutive days. We will also consider your prior work to be

``discontinued'' if, because of your impairment, you were forced to

change to another type of work or another employer.

(3) If you worked 3 months or less. We will consider work of 3

months or less which ended, or was reduced below the substantial

gainful activity earnings level, because of your impairment or due to

the removal of special conditions which took into account your

impairment and permitted you to work to be an unsuccessful work

attempt.

(4) If you worked between 3 and 6 months. We will consider work

that lasted longer than 3 months to be an unsuccessful work attempt if

it ended, or was reduced below the substantial gainful activity

earnings level, within 6 months because of your impairment and--

(i) You were frequently absent from work because of your

impairment;

(ii) Your work was unsatisfactory because of your impairment;

(iii) Your work was performed during a period of temporary

remission of your impairment; or

(iv) Your work was done under special conditions that were

essential to your performance and these conditions were removed.

(5) If you worked more than 6 months. We will not consider work you

performed at the substantial gainful activity earnings level for more

than 6 months to be an unsuccessful work attempt regardless of why it

ended or was reduced below the substantial gainful activity earnings

level.

(d) Work activity in certain volunteer programs. If you work as a

volunteer in certain programs administered by the Federal government

under the Domestic Volunteer Service Act of 1973 or the Small Business

Act, any payments you receive from these programs will not be counted

as earnings when we determine whether you are engaging in substantial

gainful activity. These payments may include a minimal stipend,

payments for supportive services such as housing, supplies and

equipment, an expense allowance, or reimbursement of out-of-pocket

expenses. We will also disregard the services you perform as a

volunteer in applying any of the substantial gainful activity tests

discussed in paragraph (b)(6) of this section. This exclusion from the

substantial gainful activity provisions will apply only if you are a

volunteer in a program explicitly mentioned in the Domestic Volunteer

Service Act of 1973 or the Small Business Act. Programs explicitly

mentioned in those Acts include Volunteers in Service to America,

University Year for ACTION, Special Volunteer Programs, Retired Senior

Volunteer Program, Foster Grandparent Program, Service Corps of Retired

Executives, and Active Corps of Executives. Volunteer work you perform

in other programs or any nonvolunteer work you may perform is not

excluded under this paragraph. Also, your work will not be excluded if

you work for one of the specified programs but are not a volunteer. For

civilians in certain government-sponsored job training and employment

programs, we evaluate the work activity on a case-by-case basis under

the substantial gainful activity earnings test. In programs such as

these, subsidies often occur. The value of any subsidy must be

subtracted and the remainder used to determine if you have done

substantial gainful activity. See paragraphs (a)(2)-(6) of this

section.

7. A new Sec. 404.1574a is added to read as follows:

Sec. 404.1574a When and how we will average your earnings.

(a) If your work as an employee or as a self-employed person was

continuous without significant change in work patterns or earnings, and

there has been no change in the substantial gainful activity earnings

levels, your earnings will be averaged over the entire period of work

requiring evaluation to determine if you have done substantial gainful

activity. See Sec. 404.1592a for information on the reentitlement

period.

(b) If you work over a period of time during which the substantial

gainful activity earnings levels change, we will average your earnings

separately for each period in which a different substantial gainful

activity earnings level applies.

earnings during the period of work requiring evaluation, we will

average your earnings over each separate period of work to determine if

any of your work efforts were substantial gainful activity.

(d) Earnings will not be averaged in determining whether payment

should be made for any month(s) during or after the reentitlement

period that occurs after the month disability has been determined to

have ceased because of the performance of substantial gainful activity.

See Sec. 404.1592a for information on the reentitlement period. The

following example illustrates what we mean by a significant change in

the work pattern of an employee.

Example: Mary Holmes began receiving disability insurance

benefits in March 1986. In January 1988 she began selling magazines

by telephone solicitation, with minimum time being expended, for

which she received $125 monthly. In this manner, Mrs. Holmes used up

her trial work period during the months of January 1988 through

September 1988. It was determined, however, that she had not engaged

in substantial gainful activity during her trial work period. Her

reentitlement period began October 1988. In December 1988, Mrs.

Holmes discontinued her telephone solicitation work to take a course

in secretarial skills. In January 1990, she began work as a part-

time temporary secretary in a banking firm. Mrs. Holmes worked 20

hours a week, without any subsidy or impairment-related work

expenses, at beginner rates. She earned $285 per month in January

1990 and February 1990. In March 1990 she had increased her

secretarial skills to journeyman level and was assigned as a part-

time private secretary to [[Page 12172]] one of the vice-presidents

of the banking firm. Mrs. Holmes' earnings increased to $525 per

month effective March 1990. It was determined that she was engaging

in substantial gainful activity in March 1990. A finding of

disability cessation was made effective March 1990. Earnings for the

period January 1990 and February 1990 were not averaged with the

period beginning March 1990, because a significant change in

earnings and work activity had taken place and made the two periods

unrepresentative of each other. Thus, the earnings of January 1990

and February 1990 could not be averaged with those of March 1990 to

reduce March 1990 earnings below the substantial gainful activity

level. After disability has been determined to have ceased because

of the performance of substantial gainful activity, her earnings

cannot be averaged in determining whether payment should be made for

any month during or after the reentitlement period. From March 1990

(the month of cessation) on, all of Mrs. Holmes' work activity would

then be evaluated on a month-by-month basis.

8. Section 404.1575 is amended by revising paragraphs (a) and (c)

and adding a new paragraph (d) to read as follows:

Sec. 404.1575 Evaluation guides if you are self-employed.

(a) If you are a self-employed person. We will consider your

activities and their value to your business to decide whether you have

engaged in substantial gainful activity if you are self-employed. We

will not consider your income alone because the amount of income you

actually receive may depend upon a number of different factors, such as

capital investment and profit sharing agreements. We will generally

consider work that you were forced to stop or reduce below substantial

gainful activity after 6 months or less because of your impairment as

an unsuccessful work attempt. See paragraph (d) of this section. We

will evaluate your work activity based on the value of your services to

the business regardless of whether you receive an immediate income for

your services. We determine whether you have engaged in substantial

gainful activity by applying three tests. If you have not engaged in

substantial gainful activity under test one, tests two and three must

be considered. The tests are as follows:

(1) Test One: You have engaged in substantial gainful activity if

you render services that are significant to the operation of the

business and receive a substantial income from the business. Paragraphs

(b) and (c) of this section explain what we mean by significant

services and substantial income for purposes of this test.

(2) Test Two: You have engaged in substantial gainful activity if

your work activity, in terms of factors such as hours, skills, energy

output, efficiency, duties, and responsibilities, is comparable to that

of unimpaired individuals in your community who are in the same or

similar businesses as their means of livelihood.

(3) Test Three: You have engaged in substantial gainful activity if

your work activity, although not comparable to that of unimpaired

individuals, is clearly worth the amount shown in Sec. 404.1574(b)(2)

when considered in terms of its value to the business, or when compared

to the salary that an owner would pay to an employee to do the work you

are doing.

(b) * * *

expenses are deducted from your gross income to determine net income.

Once net income is determined, we deduct the reasonable value of any

significant amount of unpaid help furnished by your spouse, children,

or others. Miscellaneous duties which ordinarily would not have

commercial value would not be considered significant. We deduct

impairment-related work expenses that have not already been deducted in

determining your net income. Impairment-related work expenses are

explained in Sec. 404.1576. We deduct unincurred business expenses paid

for you by another individual or agency. An unincurred business expense

occurs when a sponsoring agency or another person incurs responsibility

for the payment of certain business expenses, e.g., rent, utilities, or

purchases and repair of equipment, or provides you with equipment,

stock, or other material for the operation of your business. We deduct

soil bank payments if they were included as farm income. That part of

your income remaining after we have made all applicable deductions

represents the actual value of work performed. The resulting amount is

the amount we use to determine if you have done substantial gainful

activity. We will generally average your income for comparison with the

earnings guidelines in Secs. 404.1574(b)(2) and 404.1574(b)(3). See

Sec. 404.1574a for our rules on averaging of earnings. We will consider

this amount to be substantial if--

(1) It averages more than the amounts described in

Sec. 404.1574(b)(2); or

(2) It averages less than the amounts described in

Sec. 404.1574(b)(2) but it is either comparable to what it was before

you became severely impaired or is comparable to that of unimpaired

self-employed persons in your community who are in the same or a

similar business as their means of livelihood.

(d) The unsuccessful work attempt.--(1) General. Ordinarily, work

you have done will not show that you are able to do substantial gainful

activity if, after working for a period of 6 months or less, you were

forced by your impairment to stop working or to reduce the amount of

work you do so that you are no longer performing substantial gainful

activity and you meet the conditions described in paragraphs (d)(2),

(3), (4), and (5) of this section. The unsuccessful work attempt

criteria do not apply in determining whether payment should be made for

any month(s) during or after the reentitlement period that occurs after

the month disability has been determined to have ceased because of the

performance of substantial gainful activity. The reentitlement period

is explained in Sec. 404.1592a.

(2) Event that must precede an unsuccessful work attempt. There

must be a significant break in the continuity of your work before we

will consider you to have begun a work attempt that later proved

unsuccessful. Your work must have been discontinued or reduced below

substantial gainful activity because of your impairment or because of

the removal of special conditions related to the impairment which

permitted you to work. Examples of such special conditions may include

any significant amount of unpaid help furnished by your spouse,

children, or others, or unincurred business expenses, as described in

paragraph (c) of this section, paid for you by another individual or

agency. We will consider your prior work to be discontinued if you were

out of work at least 30 consecutive days, or if, because of your

impairment, you were forced to change to another type of work.

(3) If you worked 3 months or less. We will consider work of 3

months or less to be an unsuccessful work attempt if it ended, or was

reduced below substantial gainful activity, because of your impairment

or because of the removal of special conditions related to the

impairment which permitted you to work.

(4) If you worked between 3 and 6 months. We will consider work

that lasted longer than 3 months to be an unsuccessful work attempt if

it ended, or was reduced below substantial gainful activity, within 6

months because of your impairment or because of the removal of special

conditions related to the impairment which permitted you to work and--

(i) You were frequently unable to work because of your impairment;

[[Page 12173]]

(ii) Your work was unsatisfactory because of your impairment;

(iii) Your work was performed during a period of temporary

remission of your impairment; or

(iv) Your work was done under special conditions that were

essential to your performance and these conditions were removed.

(5) If you worked more than 6 months. We will not consider work you

performed at the substantial gainful activity level for more than 6

months an unsuccessful work attempt regardless of why it ended or was

reduced below substantial gainful activity.

9. Section 404.1584 is amended by revising paragraph (d) to read as

follows:

Sec. 404.1584 Evaluation of work activity of blind people.

* * * * *

(d) Evaluation of earnings. The law provides a different earnings

test for substantial gainful activity of people who are blind. We will

not consider that you are able to engage in substantial gainful

activity on the basis of earnings unless your monthly earnings average

more than $334 in 1978; $375 in 1979; $417 in 1980; $459 in 1981; $500

in 1982; $550 in 1983; $580 in 1984; $610 in 1985; $650 in 1986; $680

in 1987; $700 in 1988; $740 in 1989; $780 in 1990; $810 in 1991; $850

in 1992; $880 in 1993; and $930 in 1994. (Sections 404.1574(a)(2),

404.1575(c), and 404.1576 are applicable in determining the amount of

your earnings.) Thereafter, an increase in the substantial gainful

activity amount will depend on increases in the cost of living. For

work activity performed in taxable years before 1978, the earnings

considered enough to show an ability to do substantial gainful activity

are the same for blind people as for others.

10. Section 404.1592 is amended by revising the last sentence of

paragraph (b), adding a sentence to paragraph (b), and revising

paragraphs (d) and (e) to read as follows:

Sec. 404.1592 The trial work period.

(a) * * *

(b) * * * We generally do not consider work done without

remuneration to be ``services'' if it is done merely as therapy or

training or if it is work usually done in a daily routine around the

house or in self-care. Work as a volunteer in the Federal programs

described in Sec. 404.1574(d) is not considered in determining whether

you have performed services in the trial work period.

* * * * *

(d) Who is and is not entitled to a trial work period. (1) You are

generally entitled to a trial work period if you are receiving

disability insurance benefits, child's benefits based on disability, or

widow's or widower's or surviving divorced spouse's benefits based on

disability.

(2) You are not entitled to a trial work period if--

(i) You are entitled to a period of disability but not to

disability insurance benefits, child's benefits based on disability, or

widow's or widower's or surviving divorced spouse's benefits based on

disability; or

(ii) You perform work demonstrating the ability to engage in

substantial gainful activity during any required waiting period for

benefits; or

(iii) You perform work demonstrating the ability to engage in

substantial gainful activity within 12 months of the onset of the

impairment(s) which prevented you from performing substantial gainful

activity and before the date of the decision awarding you disability

benefits; or

(iv) You perform work demonstrating the ability to engage in

substantial gainful activity at any time after the onset of the

impairment(s) which prevented you from engaging in substantial gainful

activity but before the month you file your application for disability

benefits.

(e) When the trial work period begins and ends. The trial work

period begins with the month in which you become entitled to disability

insurance benefits, to child's benefits based on disability or to

widow's, widower's, or surviving divorced spouse's benefits based on

disability. It cannot begin before the month in which you file your

application for benefits and for widows, widowers, and surviving

divorced spouses, it cannot begin before December 1, 1980. It ends with

the close of whichever of the following calendar months is the earlier:

(1) The 9th month (whether or not the months have been consecutive)

in which you have performed services if that 9th month is prior to

January 1992; or

(2) The 9th month (whether or not the months have been consecutive

and whether or not the previous eight months of services were prior to

January 1992) in which you have performed services within a rolling 60-

month period if that 9th month is after December 1991; or

(3) The month in which new evidence, other than evidence relating

to any work you did during the trial work period, shows that you are

not disabled, even though you have not worked a full 9 months. We may

find that your disability has ended at any time during the trial work

period if the medical or other evidence shows that you are no longer

disabled. See Sec. 404.1594 for information on how we decide whether

your disability continues or ends.

11. Section 404.1592a is amended by revising paragraphs (a) and

(b)(2) to read as follows:

Sec. 404.1592a The reentitlement period.

(a) General. The reentitlement period is an additional period after

9 months of trial work during which you may continue to test your

ability to work if you have a disabling impairment. You will not be

paid benefits for any month after the second month following the month

disability ceased due to substantial gainful activity in this period in

which you do substantial gainful activity and you will be paid benefits

for months in which you do not do substantial gainful activity. (See

Secs. 404.316, 404.337, 404.352 and 404.401a.) If anyone else is

receiving monthly benefits based on your earnings record, that

individual will not be paid benefits for any month for which you cannot

be paid benefits during the reentitlement period. If your benefits are

stopped because you do substantial gainful activity they may be started

again without a new application and a new determination of disability

if you discontinue doing substantial gainful activity during this

period. In determining, for reentitlement benefit purposes, whether you

do substantial gainful activity in a month, we consider only your work

in or earnings for that month; we do not consider the average amount of

your work or earnings over a period of months. When disability has been

ceased because of the performance of substantial gainful activity, the

unsuccessful work attempt criteria and averaging concepts do not apply

in determining whether payments should be made for any particular month

during or after the reentitlement period that occurs after the month

disability ceased. The unsuccessful work attempt criteria and averaging

concepts do apply during and after the reentitlement period in

determining whether disability has ceased because of the performance of

substantial gainful activity.

(b) * * *

(1) * * *

(2)(i) The last day of the 15th month following the end of your

trial work period if you were not entitled to benefits after December

1987; or

(ii) The last day of the 36th month following the end of your trial

work [[Page 12174]] period if you were entitled to benefits after

December 1987 or if the 15-month period described in paragraph

(b)(2)(i) of this section had not elapsed as of January 1988. (See

Secs. 404.316, 404.337, and 404.352 for when your benefits end.)

* * * * *

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

DISABLED

1. The authority citation for subpart I of part 416 continues to

read as follows:

Authority: Secs. 1102, 1614(a), 1619, 1631(a), (c) and (d)(1),

and 1633 of the Social Security Act; 42 U.S.C. 1302, 1382c(a),

1382h, 1383(a), (c) and (d)(1), and 1383b; secs. 2, 5, 6, and 15 of

Pub. L. 98-460, 98 Stat. 1794, 1801, 1802, and 1808.

2. Section 416.901 is amended by revising paragraph (m) to read as

follows.

Sec. 416.901 Scope of subpart.

* * * * *

(m) Our rules on when disability or blindness continues and stops

are contained in Secs. 416.986 and 416.988 through 416.998. We explain

what your responsibilities are in telling us of any events that may

cause a change in your disability or blindness status and when we will

review to see if you are still disabled. We also explain how we

consider the issue of medical improvement (and the exceptions to

medical improvement) in determining whether you are still disabled.

3. Section 416.973 is amended by revising paragraph (c) and

removing paragraph (f) to read as follows:

Sec. 416.973 General information about work activity.