Cycling Payment of Social Security Benefits

SUMMARY: Historically, social security benefits generally have been

paid on the 3rd of each month. As a result of our ongoing efforts to

improve service to our customers, we now propose to establish

additional days throughout the month on which social security benefits

will be paid.

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

them no later than March 26, 1996.

ADDRESSES: Comments should be submitted in writing to the Commissioner

of Social Security, P.O. Box 1585, Baltimore, MD 21235, sent by telefax

to (410) 966-2830, sent by E-Mail to ``[email protected],'' or

delivered to the Division of Regulations and Rulings, Social Security

Administration, 3-B-1 Operations Building, 6401 Security Boulevard,

Baltimore, MD 21235, between 8:00 a.m. and 4:30 p.m. on regular

business days. Comments received may be inspected during these same

hours by making arrangements with the contact person shown below.

FOR FURTHER INFORMATION CONTACT: Lois Berg, Legal Assistant, Division

of Regulations and Rulings, Social Security Administration, 6401

Security Boulevard, Baltimore, MD 21235, (410) 965-1713.

SSA plans to host an informational briefing on payment cycling for

representatives of groups and organizations, and any others, that are

interested in the initiative. The session will be designed to provide

details and to answer questions on how SSA intends to implement payment

cycling. It will not be designed to take public comments on the

proposal. Those who would like to be invited to the session, which will

be held in February, can request an invitation from SSA's Office of

Communications. To reach the office, call (410) 965-1720 or fax (410)

965-3903.

SUPPLEMENTARY INFORMATION:

Background

The second phase of the National Performance Review (NPR), the

Federal Reinventing Government effort, was announced by the President

and Vice President on December 19, 1994. It was designed to focus

attention on what each agency does, examining our mission and looking

at our programs and functions to see if there are ways we can provide

better service to the public and, at the same time, do our business in

a more cost-effective manner, i.e., ``make government work better and

cost less.'' All agencies were asked to assemble a team to review the

programs and functions of their own agency. SSA's team worked closely

with a team of representatives from NPR and the Office of Management

and Budget (OMB) to develop recommendations for the Vice President's

consideration.

On April 11, 1995, the White House formally approved SSA's

reinvention proposals and officially announced them the next day. One

of these proposals was to cycle the payment of benefits.

Recipients of Old-Age, Survivors and Disability Insurance (OASDI)

benefits and Supplemental Security Income (SSI) payments currently are

paid in the first few days of each month. While these payment days have

never been required by the Social Security Act (the Act), which in

Secs. 205(i) and 1631(a)(1) commits the time for making benefit

payments to the discretion of the Commissioner of Social Security, it

has been our longstanding administrative practice to make payment on

these days. Monthly benefits are paid to all OASDI beneficiaries on the

same day (generally the 3rd day of each month for the preceding month)

and to all SSI beneficiaries on the same day (generally the 1st day of

each month for which the payment is due).

Over the years, a trend has developed that has resulted in

deterioration of services we provide face-to-face or over the telephone

on and around our payment days. This phenomenon is described fully

below and is of particular concern to us in light of the Agency's

commitment to provide ``world class'' service to our beneficiaries and

customers.

Executive Order (E.O.) 12862, issued on September 11, 1993 mandates

that the standard of quality for services provided to the public for

all government agencies shall be ``customer service equal to the best

in the business.'' This standard has been incorporated into SSA's goal

of providing ``world class'' public service. For example, when you

conduct business with us, we have set as goals that:

When you make an appointment to talk with someone at one of

our field offices, we will serve you within 10 minutes of the scheduled

time.

When you call our toll-free 800 number, you will get through

to it within 5 minutes of your first try.

SSA's current practice of paying 47 million beneficiaries within

the first 3 days of each month results in a large surge of work during

the first week of each month. This surge includes a large number of

visitors to field offices and calls to our toll-free 800 number to

report nonreceipt of a check, question the amount paid, or ask about

other payment-related issues. Approximately 9 percent of all calls

during check week concern nonreceipt, compared to 3 percent during the

rest of the month. As an example of the surge that occurs around the

current payment days, on April 3, 1995, 1,091,282 calls were placed to

SSA's 800 number. On April 14, 1995, the number of calls placed to our

800 number decreased to 229,022.

It is important to beneficiaries and customers to be able to reach

SSA with fewer busy signals, and we have pledged to enable callers to

get through to the 800 number within 5 minutes of their original

attempt. However, in fiscal year (FY) 1994, during peak periods,

customers encountered busy signals on SSA's 800 number 40-63 percent of

the time and had to wait more than 5 minutes to get through about 30

percent of the time. This delay often occurs at a time when it may be

the most critical for the individual to reach us, to report a lost

check, for example. Anyone who experiences a delay in reaching us to

report a lost check also faces a delay in receiving a replacement

check. Since many beneficiaries rely solely on their social security

benefits, this can be a real hardship for them.

Our goal is for our customers to have minimal waits for service

when visiting a social security field office. Today, SSA does not

always meet this goal. In FY 1994 there were 24 million visitors to our

field offices. While the average wait during check week for individuals

with an appointment was 8 minutes, some individuals with appointments

had to wait over 2 hours. Thirty-two percent of the visitors to our

offices without appointments in FY 1994 (typically people who have

questions related to their payments or who want to report payment

delivery problems) had to wait more than 30 minutes after arriving to

be served. The average wait during check week for individuals without

appointments was 16 minutes, although some individuals without

appointments had to wait over 3 hours. This can be a particular

hardship to those who are elderly or disabled, as well as to people who

might take off from work to come to our offices.

[[Page 2655]]

The demographic and resource challenges we will face over the next

25 years will make it even more difficult for us to meet our service-

delivery objectives. Currently, we pay 47 million OASDI and SSI

beneficiaries within the first three days of each month. Due to the

aging of the ``baby boom'' generation, by the year 2020, we will be

paying about 75 million beneficiaries, a 60 percent increase over

today's beneficiary population. This will place an unprecedented demand

on our benefit delivery system.

We are concerned that, in the next 25 years, with the prospect of

about 75 million beneficiaries all receiving their payments on single

days, there will be a serious deterioration in our service to the

public, and we will not be able to provide the kind of service to which

we are committed. The growth in beneficiary population is expected to

place an even greater strain on SSA's resources at the beginning of the

month. At the same time that the number of SSA customers is growing,

SSA's resources are being reduced. Public Law 103-226 mandates an

overall 12 percent reduction of Federal staffing levels by 1999, and

this will impact SSA's resources. As a result, we are particularly

concerned that we will not be able to cope with the monthly workload

peaks and still maintain our goal of being readily accessible to the

public unless we make significant changes in the way in which we

deliver service.

In the future, the increased number of beneficiaries and customers

plus the mandated reduction of Federal staffing levels will have a real

impact on the public's ability to contact us. This will be especially

hard on individuals during check week (currently the first week in each

month that benefits are paid) when the system will be overloaded. Check

week is the time that beneficiaries often have the most urgent need to

reach us to report nonreceipt or other problems related to their

payment, and to request a replacement check.

Each attempted phone contact by an SSA beneficiary, whether over or

under age 65, may represent a personal crisis due, for example, to

nonreceipt of benefits. Social security benefits affect, in particular,

nearly all individuals age 65 and over in the United States (U.S.). For

a significant proportion of individuals over age 65, the benefits

represent 90 percent or more of their total income. For these

beneficiaries, nonreceipt is not an abstract concept or statistic. It

may represent the difference between paying rent or mortgage payments

on time or late. It may mean the ability to purchase food. It may

represent lack of gasoline or busfare to get to a medical appointment.

A phone contact or visit may be by a recent widow(er) who is reporting

the death of her/his spouse. One successful telephone call may be all

that is necessary to enable SSA to convert retirement benefits as a

spouse into higher widow(er)'s benefits. An unsuccessful phone contact

could prevent us from holding back payments to the deceased individual

and scheduling benefits to the newly widowed beneficiary. When

individuals are unsuccessful at reaching us by telephone, either they,

or a friend or family member, may take time off from work to come into

a field office. Any additional delay waiting in the field office causes

them to lose even more time from work.

Today, we are attempting to cope with the uneven workload pattern

in order to maintain our level of service through a series of

administrative and management initiatives. For example, at the

beginning of the month, we redeploy staff from other work to handle the

increase in telephone inquiries which sometimes exceeds two million

calls a day. While this practice has been generally successful so far,

it will not continue to be as effective in the future when the number

of beneficiaries increases substantially and our staffing decreases.

We are considering all our options in preparing for this increase

in SSA's workloads and staff reductions and, accordingly, are looking

for ways to reengineer our various processes to allow us to achieve our

world class customer service goals and, at the same time, increase

efficiency and productivity to the maximum extent possible. It is

clear, though, that SSA's goal to achieve a level of world class

customer service cannot be realized unless our workloads are evened

out. This is critical to providing better access to SSA's services for

our beneficiaries and customers.

The release of all OASDI and SSI payments on single days also has

an adverse effect on certain sectors of the economy. Based on meetings

we held with representatives of the banking and business community, the

Department of the Treasury (DT), the Federal Reserve System (FRS) and

the U.S. Postal Service (USPS), it is clear that the large, once-a-

month OASDI and SSI payment files are creating many problems. The

banking and business community, the DT, FRS and the USPS all have to

bear the expense of providing sufficient resources and processing

capacity to deal with OASDI and SSI payments as they flow through the

national payment system at the beginning of the month. This capacity is

not needed throughout the remainder of the month.

Equally significant is the growing operational risk that is

associated with SSA's current payment pattern. Representatives from

several large financial institutions made it clear that when the social

security direct deposit payment file becomes available for processing

from FRS, they stop all other business and devote their entire

operation to ensuring the file is processed quickly and accurately.

Because of the inordinately large number of payments involved, these

institutions must ensure that nothing goes wrong as the file passes

through the national payment system and is deposited into individual

customers' accounts. Any event that adversely affects the operational

capacity of DT, FRS or a large financial institution in the 1 to 4 day

window prior to the 3rd of the month may result in the delay or

nonreceipt of literally millions of social security benefit payments

which could create hardship for SSA beneficiaries. Leveling the social

security payment files through cycling will help prevent this

operational risk and resulting hardship.

In order to improve our service to the public, both now and in the

future, we propose to spread the payment of OASDI benefits throughout

the month, rather than continue to make all benefit payments on single

days at the beginning of the month. That is, we will establish several

additional payment days for each month, and pay the full monthly

benefit to some beneficiaries on the first of those payment days, to

other beneficiaries on the second of those payment days, and so forth.

The payment day, or cycle, on which a beneficiary is paid generally

will not be changed, so that if you are paid on the second payment day

in one month you will be paid on the second payment day in each

succeeding month as well. This approach, which we call ``cycling of

payments,'' will level the workload peaks associated with our current

practice of paying all benefits on the same day. Since calls and visits

associated with receipt of the monthly benefit payment will be

distributed throughout the month, rather than concentrated in a few

days, there will be shorter waiting times for assistance and we will be

able to achieve or sustain our world class service to the public.

It is important to note that payment cycling will not change the

way benefits are computed. We will continue to follow the same rules in

determining month of entitlement and the payment amount. People whose

benefits are

[[Page 2656]]

cycled will receive the same amount they would receive if they were

paid on the 3rd of the month.

The benefits to society of implementing payment cycling are

potentially significant but extremely difficult to estimate. Cycling

will benefit members of the public in that they will have better access

to SSA services, including shorter waiting times in field offices and

when calling the 800 number, as SSA's workloads increase in the future.

Cycling will benefit the business and banking communities in that they

will be better able to utilize their resources throughout the month,

processing social security payments on a weekly basis. Cycling will

also reduce the risk involved in processing large once-a-month files.

If we continue to pay all beneficiaries on single days once-a-month,

SSA's service to the public will deteriorate, and the adverse impact

that the once-a-month payments have on the business and financial

community will continue, as will the growing operational risk that goes

along with processing all benefit payments at one time.

After considering how best to implement the proposal to cycle the

timing of benefit payments, we are proposing the following:

1. We will establish three additional payment days throughout the

month (i.e., the second, third and fourth Wednesdays of the month) on

which individuals may be paid. This schedule will alleviate to the

maximum extent possible the current Monday workload peak which is also

now being experienced by SSA's toll-free 800 number and field offices

when the payment day falls on Friday, Saturday, Sunday or Monday, which

occurs more than half of the time.

2. We will implement payment cycling prospectively only for new

OASDI beneficiaries whose claims are filed on or after the effective

date of the final rule for payment cycling. We propose to implement

payment cycling by January 1997. Payments to current beneficiaries will

not be cycled, as they are already in the established pattern of

receiving their benefits on the third of the month.

3. We will assign one of the newly established payment days to each

new OASDI beneficiary based on the date of birth of the person on whose

record entitlement is established (the insured individual). Generally,

new OASDI beneficiaries who receive auxiliary or survivors benefits on

an insured individual's record will be assigned to the payment day

based on the insured individual's date of birth. Insured individuals

who are already being paid auxiliary or survivor benefits on the 3rd of

the month when payment cycling is implemented and who subsequently

become entitled on their own record after payment cycling is

implemented will continue to receive all benefits on the 3rd. However,

all other insured individuals who become entitled on their own record

and on another record after payment cycling is implemented will be paid

all benefits to which they are entitled on the payment day assigned

based on their own date of birth. Insured individuals born on the 1st

through the 10th of the month will be paid on the second Wednesday of

each month. Insured individuals born on the 11th through the 20th of

the month will be paid on the third Wednesday of each month. Insured

individuals born after the 20th of the month will be paid on the fourth

Wednesday of each month. With only a few exceptions described below, no

new OASDI beneficiaries will receive payments on the 3rd of the month.

4. We may accommodate some beneficiaries currently being paid on

the 3rd of the month who voluntarily wish to change to the payment day

that would be selected by the date of birth criteria described above,

in order to accelerate the workload leveling effect of cycling. For

example, we plan to allow them to volunteer to switch if only one

person is being paid on the record or, if there are other beneficiaries

being paid on the same record, all others agree, in writing, to the

change. However, once a volunteer is assigned to a new payment day,

that day will be permanent and the person will not be allowed to change

back to the 3rd of the month. We will not allow beneficiaries being

paid on one of the three new days to switch to a different payment day.

5. We will not include persons receiving SSI payments, and persons

concurrently entitled to both OASDI and SSI benefits, in payment

cycling. Since SSI is a needs-based program, we believe we should

continue to pay these individuals as early in the month as possible.

Concurrently entitled individuals who lose eligibility for SSI will

continue to be paid on the 3rd.

6. We will not apply payment cycling to OASDI beneficiaries whose

income is deemed to SSI beneficiaries. The reason is that most deeming

cases involve family members who receive Federal income maintenance

benefits. Those family units should continue to receive payments as

early in the month as possible. Likewise, payment cycling will not

apply to OASDI beneficiaries who, due to their income and/or resources,

are not entitled to SSI but who are covered by the State in which they

live for Medicaid and the State covers their Medicare premium. The

Health Care Financing Administration requested that these OASDI

beneficiaries be paid early in the month.

7. Payment cycling will not apply to beneficiaries living in a

foreign country. For those beneficiaries being paid by check, foreign

check delivery is often unreliable. However, with one delivery day on

the 3rd of the month it is easier to target when checks should be

received than if they were sent four times throughout the month. Also,

since foreign beneficiaries do not have access to the 800 number or to

SSA's field offices in the country where they reside, these facilities

will not be adversely affected if we continue to pay foreign

beneficiaries on the 3rd of the month. The presence of a foreign

address for any beneficiary on a social security record will mean that

all beneficiaries on that record will be paid on the 3rd of the month.

The reason is that, for operational purposes, we are assigning a single

payment day for all individuals who receive benefits on the earnings

record of a particular individual. Once a beneficiary has reported a

foreign address and all individuals receiving benefits on that account

are changed to the 3rd of the month, the payment day for all of them

will remain the 3rd of the month even if the person with the foreign

address returns to the U.S. This is to prevent potential confusion

caused by beneficiaries frequently leaving and entering the U.S.

8. We will notify affected beneficiaries in writing of the

particular monthly payment day that is assigned to them. However, the

assignment of a payment day is not an initial determination and is not

appealable. Beneficiaries have never been able to choose their payment

day and will not be able to choose a payment day under payment cycling.

Early Consultations

We conducted 10 focus group meetings at 5 locations around the

country to solicit comments and obtain reaction from the public to

cycling payments throughout the month. Two meetings were held in each

location: one with current beneficiaries age 21 and over and one with

future beneficiaries age 21 and over. After we described our future

workload projections and resultant service delivery deterioration, the

vast majority of future beneficiaries with whom we met said they would

not mind being paid later in the month.

We also conducted a series of separate meetings with stakeholders

including representatives from the business

[[Page 2657]]

community, financial community, other government agencies and advocacy

groups. The overwhelming consensus of opinion among all stakeholders

who participated was that SSA should implement some form of payment

cycling.

Request for Information From the Public

SSA is interested in receiving comments from the public. We are

interested in your views about the importance of improved service and

access to SSA personnel and the use of payment cycling as one means to

achieve better service.

Request for Information From Business and Financial Community

SSA is particularly interested in the incremental cost or savings

to the business and financial community of changing to the proposed

payment schedule. Therefore, we invite commenters from the business and

financial community to provide data and analysis quantifying these

effects. The more specific the data, the more they will help us to

assess the cost or savings or any other effect of this proposed

regulation.

Explanation of Revisions

We propose to add a new Sec. 404.1807 and to amend Sec. 404.1805 to

reflect the policies described above. We propose to add a new

Sec. 404.1807(f) to reflect Sec. 708 of the Act, which provides that

payment will be moved to the prior business day if the scheduled day

for payment falls on a Saturday, Sunday, or Federal legal holiday. We

also propose to add a new paragraph (s) to existing Sec. 404.903 to

show that assignment of a monthly payment day is not an initial

determination and, therefore, it is not subject to the administrative

review process provided in subpart J of our regulations or to judicial

review.

Electronic Versions

The electronic file of this document is available on the Federal

Bulletin Board (FBB) at 9 a.m. on the date of publication in the

Federal Register. To download the file, modem dial (202) 512-1387. The

FBB instructions will explain how to download the file and the fee.

This file is in WordPerfect and will remain on the FBB during the

comment period.

Regulatory Procedures

E.O. 12866

We have determined that these proposed regulations meet the

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

Therefore, we prepared and submitted to OMB an assessment of the

potential costs and benefits of this regulatory action. This assessment

also contains an analysis of alternative policies we considered and

chose not to adopt. It is available for review by members of the public

by contacting SSA.

Regulatory Flexibility Act

These regulations affect when social security recipients receive

their payments. Recipients are not small entities within the definition

of the Regulatory Flexibility Act. Therefore, these regulations will

not have a significant impact on a substantial number of small

entities.

Paperwork Reduction Act

These proposed regulations impose no reporting/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; 96.003 Social Security-Special Benefits for Persons Aged

72 and Over; 96.004 Social Security-Survivors Insurance.)

List of Subjects in 20 CFR Part 404

Administrative Practice and Procedure, Blind benefits, Old-Age,

Survivors and Disability Benefits; Reporting and recordkeeping

requirements; Social Security.

Dated: November 30, 1995.

Shirley S. Chater,

Commissioner of Social Security.

For the reasons set forth in the preamble, subparts J and S of part

404 of chapter III of title 20 of the Code of Federal Regulations is

proposed to be amended as set forth below.

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

(1950- )

1. The authority citation for subpart J of part 404 is revised to

read as follows:

Authority: Secs. 201(j), 205(a), (b), (d)-(h), and (j), 221,

225, and 702(a)(5) of the Social Security Act (42 U.S.C. 401(j),

405(a), (b), (d)-(h), and (j), 421, 425 and 902(a)(5)); 31 U.S.C.

3720A; sec. 5, Pub. L. 97-455, 96 Stat. 2500 (42 U.S.C. 405 note);

sec. 6(a), (b), and (c)-(e), Pub. L. 98-460, 98 Stat. 1802 (42

U.S.C. 1383b, 421 note).

2. Section 404.903 is amended by removing the word ``and'' at the

end of paragraph (q), and by removing the period at the end of

paragraph (r) and adding a semicolon and the word ``and'' in its place,

and adding paragraph (s) to read as follows:

Sec. 404.903 Administrative actions that are not initial

determinations.

* * * * *

(s) The assignment of a monthly payment day (see Sec. 404.1807).

3. The authority citation for subpart S of part 404 is revised to

read as follows:

Authority: Secs. 205(a) and (n), 207, and 702(a)(5) of the

Social Security Act (42 U.S.C. 405(a) and (n), 407, and 902(a)(5)).

4. Section 404.1805 is amended by revising paragraph (a)(3) to read

as follows:

Sec. 404.1805 Paying benefits.

(a) * * *

(3) The time at which the payment or payments should be made in

accordance with Sec. 404.1807.

* * * * *

5. Section 404.1807 is added to read as follows:

Sec. 404.1807 Monthly payment day.

(a) General. Once we have made a determination or decision that you

are entitled to recurring monthly benefits, you will be assigned a

monthly payment day. Thereafter, any recurring monthly benefits which

are payable to you will be certified to the Managing Trustee for

delivery on or before that day of the month as part of our

certification under Sec. 404.1805(a)(3). Except as provided in

paragraphs (c)(2) through (c)(6), once you have been assigned a monthly

payment day, that day will not be changed.

(b) Assignment of Payment Day. (1) We will assign the same payment

day for all individuals who receive benefits on the earnings record of

a particular insured individual. See paragraph (c)(5) for exception.

(2) The payment day will be selected based on the day of the month

on which the insured individual was born. Insured individuals born on

the 1st through the 10th of the month will be paid on the second

Wednesday of each month. Insured individuals born on the 11th through

the 20th of the month will be paid on the third Wednesday of each

month. Insured individuals born after the 20th of the month will be

paid on the fourth Wednesday of each month. See paragraph (c) for

exceptions.

(3) We will notify you in writing of the particular monthly payment

day that is assigned to you.

(c) Exceptions. (1) If you or any other person became entitled to

benefits on the earnings record of the insured individual based on an

application filed before (effective date of cycling), you will continue

to receive your benefits on the 3rd day of the month (but see paragraph

(c)(6) of this section). All

[[Page 2658]]

persons who subsequently become entitled to benefits on that earnings

record will be assigned to the 3rd day of the month as the monthly

payment day.

(2) If you or any other person became entitled to benefits on the

earnings record of the insured individual based on an application filed

after (effective date of cycling) and also become entitled to

Supplemental Security Income (SSI) benefits or have income which is

deemed to an SSI beneficiary (per Sec. 416.1160), all persons who are

or become entitled to benefits on that earnings record will be assigned

to the 3rd day of the month as the monthly payment day. We will notify

you in writing if your monthly payment day is being changed to the 3rd

of the month due to this provision.

(3) If you or any other person became entitled to benefits on the

earnings record of the insured individual based on an application filed

after (effective date of cycling) and also reside in a foreign country,

all persons who are or become entitled to benefits on that earnings

record will be assigned to the 3rd day of the month as the monthly

payment day. We will notify you in writing if your monthly payment day

is being changed to the 3rd of the month due to this provision.

(4) If you or any other person became entitled on the earnings

record of the insured individual based on an application filed after

(effective date of cycling) and are not entitled to SSI but are or

become covered by the State where you live for Medicaid and the State

covers your Medicare premium, all persons who are or become entitled to

benefits on that earnings record will be assigned to the 3rd day of the

month as the monthly payment day. We will notify you in writing if your

monthly payment day is being changed to the 3rd of the month due to

this provision.

(5) Insured individuals who are already being paid auxiliary or

survivor benefits on the 3rd of the month and who become entitled on

their own record after (effective date of cycling) will continue to

receive all benefits on the 3rd of the month. However, all other

insured individuals entitled on their own record and on another record

after (effective date of cycling), will be paid all benefits to which

they are entitled on the payment day assigned based on their own date

of birth.

(6) If the day regularly scheduled for the delivery of your benefit

payment falls on a Saturday, Sunday, or Federal legal holiday, you will

be paid on the first preceding day that is not a Saturday, Sunday, or

Federal legal holiday.

[FR Doc. 96-1508 Filed 1-25-96; 8:45 am]

BILLING CODE 4190-29-P