Income Exclusions in the Supplemental Security Income Program

SOCIAL SECURITY ADMINISTRATION

20 CFR Part 416

[Regulations No. 16]

RIN 0960-AE22

Income Exclusions in the Supplemental Security Income Program

AGENCY: Social Security Administration.

ACTION: Final rules.

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SUMMARY: These supplemental security income (SSI) regulations update

existing regulations to reflect the statutory amendment of the

exclusion from income of Alaska Longevity Bonus (ALB) payments. They

also update existing regulations to reflect the statutory exclusion

from income of hostile fire pay received by an SSI claimant or

recipient and reflect the current operating procedure of excluding

hostile fire pay when determining the countable income of an ineligible

spouse or ineligible parent. In addition, they update existing

regulations to reflect the current operating procedure of excluding

impairment-related work expenses, interest on excluded burial funds,

appreciation in the value of excluded burial arrangements, and interest

on the value of excluded burial space purchase agreements, when

determining the countable income of an ineligible spouse or ineligible

parent.

EFFECTIVE DATE: These regulations are effective October 24, 1996.

FOR FURTHER INFORMATION CONTACT: Regarding this Federal Register

document--Henry D. Lerner, Legal Assistant, Division of Regulations and

Rulings, Social Security Administration, 6401 Security Boulevard,

Baltimore, MD 21235, (410) 965-1762; regarding eligibility or filing

for benefits--our national toll-free number, 1-800-772-1213.

SUPPLEMENTARY INFORMATION: For purposes of the SSI program, income is

defined in our regulations to mean anything that is received in cash or

in kind which can be used to meet an individual's needs for food,

clothing, or shelter. These regulations include certain provisions

which address items that are excluded from income.

Alaska Longevity Bonus Payments

Under section 1612(b)(2)(B) of the Social Security Act (the Act),

ALB payments are excluded from income under certain circumstances.

Originally, the ALB program made monthly payments to residents of

Alaska who had attained age 65 and had lived in the State continuously

for at least 25 years. The SSI income exclusion applied to such

payments if made under a program established before July 1, 1973.

However, following a decision by the Alaska State Supreme Court that

the 25-year residency requirement was unconstitutional, in 1984 the

State legislature changed the residency requirement to 1 year.

Concerns were raised that since the revised (1984) ALB program was

established after July 1, 1973, the controlling date of the original

section 1612(b)(2)(B) provision, payments made under the revised ALB

program could no longer be excluded for SSI purposes. Section 2616 of

Public Law (Pub. L.) 98-369 was enacted on July 18, 1984 to address

those concerns. Section 2616 amended section 1612(b)(2)(B) of the Act

in such a way as to:

Continue the ALB exclusion for persons who, prior to

October 1985, became eligible for SSI and satisfied the 25-year

residence requirement of the program as in effect prior to January 1,

1983; and

Preclude extending the ALB exclusion to ALB payments

based on the 1-year residency requirement.

Current regulations at Secs. 416.1124(c)(7) and 416.1161(a)(12)

follow the wording of the original statutory exclusion in section

1612(b)(2)(B) of the Act. Regulations at Sec. 416.1124(c)(7) presently

provide for excluding from the income of a claimant or recipient

``[p]eriodic payments made by a State under a program established

before July 1, 1973, and based solely on your length of residence and

attainment of age 65 * * *.'' Regulations at Sec. 416.1161(a)(12)

presently provide for excluding from the income of an ineligible spouse

or ineligible parent ``[p]eriodic payments made by a State under a

program established before July 1, 1973, and based solely on duration

of residence and attainment of age 65 * * *.''

These regulations change the wording of the above referenced

regulations so that they conform to the 1984 legislation. The

regulatory language will not change current operating procedures since

those procedures already conform to the 1984 legislation.

Hostile Fire Pay

Although it is unlikely that an active member of the uniformed

services would apply or be eligible for SSI benefits, some military

service members have spouses and children who apply for and receive SSI

benefits.

Under section 209(d) of the Act, basic pay is the only form of

compensation to members of the uniformed services that is treated as

wages for title II purposes. Under section 1612(a)(1) of the Act,

earned income in the form of wages for SSI purposes is the same as

wages for the title II annual earnings test.

Therefore, basic pay is the only form of military compensation that

is treated as wages, and hence, as earned income, for SSI purposes.

All other forms of compensation to members of the uniformed

services are considered unearned income. These other forms of

compensation include allowances paid in cash for food, clothing, and

shelter; free food, clothing, and shelter; and special and incentive

pay.

One form of special pay is hostile fire pay, which is authorized

under 37 U.S.C. 310. Hostile fire pay is a type of special pay to a

service member who, for any month he/she is entitled to basic pay, is:

Subject to hostile fire or explosion of hostile mines; or

On duty in an area in which he/she is in imminent danger

of being exposed to hostile fire or explosion of hostile mines, and

While on duty in that area, other service members in the same area

are subject to hostile fire or explosion of hostile mines; or

Killed, injured, or wounded by hostile fire, explosion of

a hostile mine, or any other hostile action.

Section 13733(b) of the Omnibus Budget Reconciliation Act of 1993

(OBRA), Public Law 103-66, amended section 1612(b) of the Act to

exclude from income any hostile fire pay received in or after October

1993.

Current regulations do not reflect the exclusion from income of

hostile fire pay for eligible individuals, but hostile fire pay has

been excluded under SSI operating procedure since October 1, 1993.

Moreover, under these

[[Page 49963]]

instructions, such pay has been excluded in determining the income of

ineligible spouses and parents whose income is deemed to eligible

individuals.

In addition to adding to the regulations the statutorily required

exclusion of hostile fire pay from an eligible individual's income, we

have included the current operating procedure of excluding hostile fire

pay when determining the countable income of an ineligible spouse or

ineligible parent. The new inclusion reflects the statutory authority

granted the Commissioner of Social Security under section 1614(f) (1)

and (2) of the Act to waive the deeming of income from an ineligible

spouse or parent to an eligible individual when such deeming is

determined by the Commissioner of Social Security to be inequitable

under the circumstances. By specifically singling out hostile fire pay

for exclusion from an eligible individual's income, Congress expressed

its intent that receipt of these monies should not have an adverse

effect on an individual's SSI eligibility or payment amount. This

intent would not be realized if these monies were deemed to an eligible

individual. The statutory exclusion of hostile fire pay would have

little meaning if not applied to ineligible spouses and parents since,

as noted above, it is unlikely that an active member of the uniformed

services would be eligible for SSI.

Impairment-Related Work Expenses

Impairment-related work expenses (IRWE) are expenses for items or

services which are directly related to enabling a person with a

disability to work and which are necessarily incurred by that

individual because of a physical or mental impairment as explained at

regulations Secs. 404.1576 and 416.976.

Prior to December 1, 1990, in determining countable income, an

individual's IRWE were deducted from his/her earned income once

eligibility was established without using this exclusion. Effective

December 1, 1990, section 5033 of Public Law 101-508 amended section

1612(b)(4)(B)(ii) of the Act and liberalized the IRWE exclusion. The

legislation allows an individual to use the IRWE exclusion to establish

eligibility.

Regulations at Sec. 416.1112(c)(6) have been revised to implement

changes enacted by section 5033 of Public Law 101-508.

These regulatory revisions were published in the Federal Register

on August 12, 1994, at 59 FR 41400-41405.

Regulations at Sec. 416.1161(a) list the types of income that are

excluded from the income of an ineligible spouse and ineligible parent

for deeming purposes. IRWE are not included in this list, but IRWE have

been excluded from the income of ineligible spouses and ineligible

parents under SSI operating procedures since 1990.

We have added to the regulations the current operating procedure

which is to exclude IRWE when determining the countable income of an

ineligible spouse or ineligible parent for deeming purposes. By

specifically singling out IRWE for exclusion from an eligible

individual's income, Congress expressed its intent that receipt of

these monies should not have an adverse effect on an individual's SSI

eligibility or payment amount. This intent would not be realized if

these monies were deemed to an eligible individual. These regulations

reflect the statutory authority granted the Commissioner of Social

Security under section 1614(f) (1) and (2) of the Act to waive the

deeming of income from an ineligible spouse or parent to an eligible

individual when such deeming is determined by the Commissioner of

Social Security to be inequitable under the circumstances.

Interest and Appreciation in Value of Excluded Burial Funds and Burial

Space Purchase Agreements

Effective November 1, 1982, section 185 of Public Law 97-248

amended the Act to provide that any interest earned on excluded burial

funds and any appreciation in the value of excluded burial arrangements

left to accumulate, may be excluded from income by regulation.

Effective April 1, 1990, section 8013 of Public Law 101-239 amended the

Act to provide that interest earned on the value of agreements

representing the purchase of excluded burial spaces is excluded from

income if left to accumulate.

Regulations at Sec. 416.1124(c)(9) implement the exclusion of

interest earned on excluded burial funds and appreciation in the value

of excluded burial arrangements, effective November 1, 1982.

Regulations at Sec. 416.1124(c)(15) implement the exclusion of any

interest earned on the value of agreements representing the purchase of

excluded burial spaces, effective April 1, 1990.

Regulations at Sec. 416.1161(a) (relating to the treatment of

income of an ineligible spouse or ineligible parent) do not apply these

exclusions for purposes of deeming income, but both types of interest

and appreciation have been excluded from the income of ineligible

spouses and ineligible parents under SSI operating procedure.

We have added to the regulations the current operating procedure

which is to exclude interest on burial funds, appreciation in the value

of burial arrangements, and interest on the value of burial space

purchase agreements, that are excluded from resources, when determining

the countable income of an ineligible spouse or ineligible parent.

These regulations reflect the statutory authority granted the

Commissioner of Social Security under section 1614(f) (1) and (2) of

the Act to waive the deeming of income from an ineligible spouse or

parent to an eligible individual when such deeming is determined by the

Commissioner of Social Security to be inequitable under the

circumstances. By specifically singling out these monies for exclusion

from an eligible individual's income, Congress expressed its intent

that receipt of these monies should not have an adverse effect on an

individual's SSI eligibility or payment amount. This intent would not

be realized if these monies were deemed to an eligible individual.

We have made a technical change to conform the language of

Sec. 416.1124(c)(9) to a prior policy change. Effective July 11, 1990,

changes related to the SSI burial fund exclusion were published in the

Federal Register at 55 FR 28373-28377. As a result of these changes,

regulations at Sec. 416.1231(b)(1) were amended to require that

excluded burial funds be kept separate from all other resources not

intended for the burial of the individual or spouse. Furthermore,

Sec. 416.1231(b)(7) was revised to provide that interest earned on

excluded burial funds and appreciation in the value of excluded burial

arrangements are excluded from resources if left to accumulate and

become part of the separate burial fund.

Current regulations at Sec. 416.1124(c)(9) provide that we will not

count as income interest earned on excluded burial funds and any

appreciation in the value of an excluded burial arrangement which are

left to accumulate and become part of the separately identifiable

burial fund. We have conformed this regulation to the prior regulatory

change requiring the burial fund to be separate from other nonburial-

related assets and not merely separately identifiable.

These regulations were published in the Federal Register (60 FR

62356) as a notice of proposed rulemaking (NPRM) on December 6, 1995.

Interested parties were given 60 days to submit comments. Public

comments were received from an association of funeral directors which

supported the proposed regulations. We are, therefore, adopting the

regulations essentially as proposed.

[[Page 49964]]

Regulatory Procedures

Executive Order 12866

We have consulted with the Office of Management and Budget and

determined that these rules do not meet the criteria for a significant

regulatory action under Executive Order 12866.

Regulatory Flexibility Act

We certify that these rules will not have a significant economic

impact on a substantial number of small entities since these rules

affect only individuals. Therefore, a regulatory flexibility analysis

as provided in Public Law 96-354, the Regulatory Flexibility Act, is

not required.

Paperwork Reduction Act

These regulations will impose no additional reporting and

recordkeeping requirements subject to Office of Management and Budget

clearance.

(Catalog of Federal Domestic Assistance: Program No. 96.006-

Supplemental Security Income)

List of Subjects in 20 CFR Part 416

Administrative practice and procedure, Aged, Blind, Disability

benefits, Public assistance programs, Reporting and Recordkeeping

Requirements, Supplemental Security Income (SSI).

Approved: September 6, 1996.

Shirley S. Chater,

Commissioner of Social Security.

For the reasons set out in the preamble, part 416, subpart K, of

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

as follows:

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

DISABLED

Subpart K--[Amended]

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

read as follows:

Authority: Secs. 702(a)(5), 1602, 1611, 1612, 1613, 1614(f),

1621, and 1631 of the Social Security Act (42 U.S.C. 902(a)(5),

1381a, 1382, 1382a, 1382b, 1382c(f), 1382j, and 1383); sec. 211,

Pub. L. 93-66, 87 Stat. 154 (42 U.S.C. 1382 note).

2. Section 416.1124 is amended by removing the ``and'' at the end

of paragraph (c)(17) and the period at the end of paragraph (c)(18), by

adding ``; and'' at the end of paragraph (c)(18), by revising

paragraphs (c)(7) and (c)(9) and adding new paragraph (c)(19) to read

as follows:

Sec. 416.1124 Unearned income we do not count.

* * * * *

(c) * * *

(7) Alaska Longevity Bonus payments made to an individual who is a

resident of Alaska and who, prior to October 1, 1985: met the 25-year

residency requirement for receipt of such payments in effect prior to

January 1, 1983; and was eligible for SSI;

* * * * *

(9) Any interest earned on excluded burial funds and any

appreciation in the value of an excluded burial arrangement which are

left to accumulate and become a part of the separate burial fund. (See

Sec. 416.1231 for an explanation of the exclusion of burial assets.)

This exclusion from income applies to interest earned on burial funds

or appreciation in the value of excluded burial arrangements which

occur beginning November 1, 1982, or the date you first become eligible

for SSI benefits, if later;

* * * * *

(19) Hostile fire pay received from one of the uniformed services

pursuant to 37 U.S.C. 310.

3. Section 416.1161 is amended by removing the ``and'' at the end

of paragraph (a)(21), and removing the period at the end of paragraph

(a)(22) and adding a semi-colon in its place, and by revising paragraph

(a)(12) and adding new paragraphs (a)(23), (a)(24) and (a)(25) to read

as follows:

Sec. 416.1161 Income of an ineligible spouse, ineligible parent, and

essential person for deeming purposes.

* * * * *

(a) * * *

(12) Alaska Longevity Bonus payments made to an individual who is a

resident of Alaska and who, prior to October 1, 1985: met the 25-year

residency requirement for receipt of such payments in effect prior to

January 1, 1983; and was eligible for SSI;

* * * * *

(23) Hostile fire pay received from one of the uniformed services

pursuant to 37 U.S.C. 310;

(24) Impairment-related work expenses, as described in 20 CFR

404.1576, incurred and paid by an ineligible spouse or parent, if the

ineligible spouse or parent receives disability benefits under title II

of the Act; and

(25) Interest earned on excluded burial funds and appreciation in

the value of excluded burial arrangements which are left to accumulate

and become part of separate burial funds, and interest accrued on and

left to accumulate as part of the value of agreements representing the

purchase of excluded burial spaces (see Sec. 416.1124(c) (9) and (15)).

[FR Doc. 96-24277 Filed 9-23-96; 8:45 am]

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