Supplemental Security Income for the Aged, Blind, and Disabled; Charging Administration Fees for Making State Supplementary Payments; Interest Charging on State Supplementary Payment Funds

SOCIAL SECURITY ADMINISTRATION

20 CFR Part 416

[Regulations No. 16]

RIN 0960-AD75

Supplemental Security Income for the Aged, Blind, and Disabled;

Charging Administration Fees for Making State Supplementary Payments;

Interest Charging on State Supplementary Payment Funds

AGENCY: Social Security Administration (SSA).

ACTION: Final rule.

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SUMMARY: We are revising our rules to bring them into accord with

statutory changes which require the Social Security Administration

(SSA) to charge the States an administration fee for making

supplementary payments on behalf of States and authorize SSA to charge

the States an additional services fee for performing services not

customarily provided at the request of States. We also are conforming

our regulations to reflect the requirements of the law regarding the

transfer of funds

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from States to SSA for use in making supplementary payments.

EFFECTIVE DATE: These rules are effective February 3, 1997.

FOR FURTHER INFORMATION CONTACT: Henry D. Lerner, Legal Assistant,

Division of Regulations and Rulings, Social Security Administration,

6401 Security Blvd., Baltimore, MD 21235, (410) 965-1762 for

information about these rules. For information on eligibility or

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

SUPPLEMENTARY INFORMATION

Background

These regulations reflect the provisions of section 13731 of Pub.

L. 103-66 (the Omnibus Budget Reconciliation Act (OBRA) of 1993) and

Pub. L. 101-453 (the Cash Management Improvement Act (CMIA) of 1990) as

amended by Pub. L. 102-589 (the Cash Management Improvement Act

Amendments of 1992). From the inception of the supplemental security

income (SSI) program in January 1974 through September 1993, SSA did

not have the authority to charge States for the costs it incurred in

administering mandatory and optional State supplementary payment

programs. During that same period of time, SSA did not have specific

authority to charge States for the costs it incurred in performing, at

the request of the States, services not customarily provided in the

administration of State supplementary payment programs.

Section 13731 of Public Law 103-66, effective for supplementary

payments made for any month beginning on or after October 1, 1993,

requires SSA to charge the States an administration fee for making

supplementary payments on behalf of States and authorizes SSA to charge

the States an additional services fee for performing services at the

request of States not customarily provided.

The CMIA requires that transfers of funds from the States to SSA

for the payment of supplementary payments be timed to coincide as

closely as possible with disbursements of those funds to eligible

individuals. In the case of certain States, transfers which do not

occur on due dates and/or which are not in appropriate amounts will

cause the imposition of an interest liability on either the States or

on the Federal Government in accordance with the regulations of the

United States Department of the Treasury implementing the CMIA. The

provisions of the CMIA were effective on the later of July 1, 1993, or

the first day of the State's fiscal year beginning in 1993. Prior to

the effective date of the CMIA, no interest liability was incurred by

either the States or the Federal Government on the transfer of funds to

SSA for use in making State supplementary payments.

At the outset of the SSI program, States were encouraged to

supplement the Federal benefit. As an incentive to provide a

supplement, States that agreed to make optional supplementary payments

and signed an agreement to have those payments administered by the

Federal Government would not be charged a fee for Federal

administration. States required to pay mandatory supplementary payments

could also enter into agreements providing for Federal administration

of those payments at no cost to the States. States electing Federal

administration were required to periodically transfer to SSA only

amounts equal to the expenditures made by SSA for supplementary

payments.

On October 1, 1993, pursuant to amendments made to the Social

Security Act (the Act) and to section 212(b)(3) of Public Law 93-66 by

section 13731 of Public Law 103-66, SSA began charging States that had

elected Federal administration of optional and/or mandatory State

supplementary payments a fee for administering those payments. The

administration fee is charged monthly and is derived by multiplying the

number of State supplementary payments made by SSA on behalf of a State

for a month by the applicable dollar rate for the fiscal year (FY), as

prescribed in section 13731 of Public Law 103-66. The dollar rates are

as follows: for FY 1994, $1.67; for FY 95, $3.33; for FY 96, $5.00;

and, for FY 1997 and each succeeding FY, $5.00 or such different rate

as determined by SSA to be appropriate for any particular State, taking

into account the complexity of administering the State's supplementary

payment program. The number of supplementary payments made by SSA in a

month is the total number of checks issued, and direct deposits made,

to recipients in that month, that are composed in whole or in part of

State supplementary funds. The number of supplementary payments

include, for example, recurring monthly payments (ongoing monthly

payments to individuals who maintain eligibility from the previous

month); supplemental payments (payments certified after the date

established for the regular transfer of payment data to the United

States Department of the Treasury); daily payments (non-recurring

initial claims or post-entitlement payments including one-time payments

such as those made to correct underpayments); erroneous payments

(overpayments and payments to ineligibles); unnegotiated check payments

(payments by check not presented for payment by the recipient within

180 days of issuance); replacement checks (duplicate checks issued when

recipients allege nonreceipt of original check issuances); and,

installment payments of large past-due amounts (payments made over a

period of months, the sum of which is equal to amounts due recipients).

Section 13731 of Public Law 103-66 also authorizes SSA to charge a

State an additional services fee if, at the request of the State, SSA

agrees to provide the State with additional services beyond the level

customarily provided in the administration of State supplementary

payments. SSA is not required to perform any additional services

requested by a State and may, at its sole discretion, refuse to perform

those additional services. An additional services fee charged a State

may be a one-time charge or, if the furnished services result in

ongoing costs to the Federal Government, a monthly or less frequent

charge to the State for providing such services. Section 13731 of

Public Law 103-66 requires that the additional services fee be in an

amount that SSA determines is necessary to cover all costs (including

indirect costs) incurred by the Federal Government in furnishing the

additional services. Prior to the effective date of section 13731 of

Pub. L. 103-66, SSA had no specific authority to impose additional

services fees.

The CMIA was enacted to ensure greater efficiency, effectiveness

and equity in the exchange of funds between the Federal Government and

the States. For purposes of Federal administration of State

supplementary payments, the CMIA requires that the transfer of funds

from the States to SSA for use in making supplementary payments be

timed to coincide as closely as possible with the actual payment of

those funds to recipients. While all States are required to comply with

the funding techniques of the CMIA, pursuant to the implementing

regulations of the United States Department of the Treasury at 31 CFR

Part 205, only those States whose State supplementary payment programs

meet the requirements of a major Federal assistance program in their

respective States are subject to the interest liability provisions of

the CMIA. For those States, transfers of supplementary payment funds to

SSA which are not made on due dates and/or are not made in appropriate

amounts will cause the imposition of an interest liability on either

the State, or the

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Federal Government. Currently, SSA administers the supplementary

payment programs of 25 States and the District of Columbia. The

supplementary payment programs of 11 of those States and the District

of Columbia meet the requirements of a major Federal assistance program

and, thus, are subject to the interest liability provisions of the

CMIA.

Each month, States are notified of the amount of funds they must

transfer to SSA to be used in the succeeding month to make

supplementary payments and to pay administration fees. Notification is

made, generally, 7 work days before the end of the month. For purposes

of complying with the funding technique requirements of the CMIA and

its implementing regulations, all State funds must be received by SSA

by the fifth Federal business day following the day the regularly

recurring monthly supplementary payments are issued. This date is the

State supplementary payment transfer date and represents the dollar-

weighted average day of clearance of all SSI/State supplementary

payment checks and direct deposits made to individuals in a month.

Section 1616(d) of the Act and section 212(b)(3) of Public Law 93-66,

as amended by section 13731 of Public Law 103-66, require that the

States pay administration fees on the same day they transfer to SSA the

amounts necessary to make State supplementary payments. However, the

provisions of the CMIA apply only to the amounts transferred to SSA for

use in making supplementary payments. Therefore, the interest

provisions of the CMIA are inapplicable to the payment of

administration fees not made on transfer dates and/or not made in

appropriate amounts. However, administration fee payment delinquencies

by States are subject to the provisions of the claims collection

regulations at 45 CFR Part 30, which include the imposition of interest

on amounts due SSA. These Department of Health and Human Services

regulations remain applicable after March 30, 1995, to the assessment

of interest on delinquent administration fees by SSA pursuant to

section 106(b) of Public Law 103-296, the Social Security Independence

and Program Improvements Act of 1994.

It is not possible for SSA to forecast the precise amount of State

expenditures that will be made in the subsequent month. Therefore, the

amounts transferred on the State supplementary payment transfer date

are based on estimates made by SSA. After the close of the month for

which the amounts are transferred, when final expenditure figures

become available, those amounts will be revealed to be either more or

less than actually expended, therefore triggering an interest liability

on either the State or the Federal Government. Prior to the amendments

being made by these final rules, SSA's regulations did not reflect the

CMIA requirement that supplementary payment funds be transferred to SSA

on the date of average clearance of SSI/supplementary payments, nor did

they authorize the charging or payment of interest by either SSA or the

States with regard to the transfer of State supplementary payment

funds.

Regulations Changes

We are amending the regulations at Secs. 416.2010(b) and 416.2090

to reflect the provisions of section 13731 of Public Law 103-66 that

require SSA to charge States an administrative fee for administering

their State supplementary payments and authorize SSA to charge States

an additional services fee for services not customarily performed.

Examples of services not customarily provided States and thus, for

which an additional fee will be charged if SSA agrees to perform them,

are presented below. The list is not intended to be inclusive. Any and

all additional services performed by SSA at the request of a State will

be subject to the services fee, including:

The collection and/or verification of additional

information in the claims or redetermination process which SSA does not

now typically or usually collect and/or verify;

The modification of a supplementary payment level

variation or replacement of a supplementary payment level variation,

resulting in a variation more labor intensive or otherwise more costly

to administer than variations normally administered by SSA;

The modification or expansion of the existing SSI Quality

Assurance sample that would increase the level of reporting usually

performed by SSA;

The development and issuance of notices to SSI/State

supplementary payment recipients in the State beyond those normally

provided;

The revision of State supplementary payment amounts which

requires software changes in the SSI payment system not otherwise

necessary. Such revisions would be other than the customary revisions

associated with annual cost-of-living adjustments to the Federal

benefit rate;

The provision of more detailed or frequent accounting data

or reports; and

A service that would require SSA to engage in software

development or modification and/or reprogramming efforts not normally

undertaken.

We also are amending the regulations at Sec. 416.2090(a)(2) to

provide, consistent with our present procedure, that all State funds to

be used by SSA to make monthly supplementary payments and to pay

administration fees for that month, as estimated by SSA, must be on

deposit with SSA by the fifth Federal business day following the day

the regularly recurring monthly supplementary payments are issued. This

paragraph also provides that any additional services fees are to be on

deposit with SSA on the date specified by SSA. In addition, we are

amending Sec. 416.2090(b) to clarify that administration and additional

services fees are included in SSA's accounting of State funds and to

reflect the fact that SSA and the States may now incur interest charges

with respect to the adjustment and accounting of State supplementary

payment funds in accordance with the CMIA and implementing regulations

of the United States Department of the Treasury.

We also are making technical revisions to the regulations in

Subpart T that are unrelated to the provisions of OBRA of 1993 and the

CMIA. Section 184 of Public Law 97-248, enacted September 3, 1982,

phased-out the hold-harmless provisions of the Social Security Act. In

order to reflect the fact that these provisions are now obsolete, we

are deleting the hold-harmless regulations at Secs. 416.2010(b) (except

for the last sentence which is unrelated to the hold-harmless

protection and which will be inserted at the end of Secs. 416.2005(d)),

416.2080, 416.2082, and 416.2085 per SSA's June 1, 1995, report to

President Clinton on Eliminating and Improving Regulations, and are

amending the regulations at Sec. 416.2050(b)(1) and Sec. 416.2090

(a)(2) and (d). Section 416.2010(d) is being redesignated as

Sec. 416.2010(c) and is being revised to indicate that agreements will

renew automatically one year after the date they are signed for a

period of one year unless the State or SSA gives written notice not to

renew at least 90 days before the beginning of the new period. The

regulations previously provided that the agreements run until June 30,

the Federal government's former end of a fiscal year. This change takes

into consideration the fact that States have not signed their

agreements on one uniform date. Finally, these rules, in the sections

being amended, replace all references to the Secretary of Health and

Human Services with references to SSA to reflect Public Law 103-296

which, effective March 31, 1995, established

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SSA as an independent agency separate from the Department of Health and

Human Services.

Comments on Notice of Proposed Rulemaking

These regulations were published in the Federal Register (61 FR

18529) as a notice of proposed rulemaking (NPRM) on April 26, 1996.

Interested parties were given 60 days to submit comments. Public

comments were received from a State's Governor's office which raised

concerns about interest charging on State supplementary funds. We

address these concerns in our responses to the comments by elaborating

on certain statements we made in the NPRM. We are, therefore,

publishing the final rules with no substantive changes from the

proposed rules.

Comment: The commenter believes it is contrary to the spirit of

CMIA to assess interest when a State timely transmits to SSA the amount

of SSI funds requested for a month's disbursements. The NPRM indicates

that such interest results because ``[i]t is not possible for SSA to

forecast the precise amount of State expenditures that will be made in

the subsequent month . . .,'' (61 FR 18529, 18530) which the commenter

sees as an explicit admission that SSA procedures require improvement.

The commenter stated that in conversations with SSA on this

subject, it was explained that necessary adjustments occurring

subsequent to the payment due date affect the final monthly figures.

This could and does result in differences between the amounts estimated

by SSA and amounts actually paid out, leading to a calculation of

interest due to or from the Federal Government. According to the

commenter, a fairer solution to the problem would be for SSA to record

the later adjustments and apply them, plus or minus, to the estimates

for the succeeding month. These estimates, when timely transmitted by

the State, would result in no interest calculation and would be in

keeping with the spirit of CMIA.

Response: Pursuant to CMIA, interest has been and will be

calculated on the difference between the amount of the State's monthly

payment to SSA and the actual amount of monthly outlays for State

supplementary payments made by SSA on behalf of the State. The monthly

funds requests are developed nearly two months before the actual

current month's expenditures are available. SSA does take adjustments

into consideration when developing the monthly estimates. However,

State supplementary payments are not processed only on the first of

each month. Payments and recoveries are processed daily and the volume

is unpredictable. By including as many monthly adjustments and payments

as possible in the monthly funds request, interest charges to either

party are kept to a minimum. The greatest cause of interest to either

party is the early or late transfer of State payment funds not the

adjustments included in the funds requests.

Comment: The same commenter also addresses the rate of interest SSA

uses in calculating a ``penalty'' for untimely delivery of the

processing fees. According to the commenter, SSI is by its nature not a

``Federal Assistance Program,'' which defines the scope of CMIA.

However, since the program is specifically covered by CMIA regulations,

the commenter accepts its inclusion under CMIA.

The commenter states that CMIA defines the interest rate applicable

to programs covered by CMIA, and does not reserve to SSA or any Federal

agency the right to charge interest rates other than those calculated

in accordance with CMIA; therefore, any interest charged for delinquent

payment of processing fees should be subject to CMIA interest rules.

The commenter believes that in terms of equity and fairness, SSA cannot

have it both ways: either SSI and related fees are subject to CMIA or

they are not. If they are subject to CMIA, as it appears, then only one

interest rate should apply--that specified by CMIA regulations.

Response: The CMIA is only applicable to funds representing benefit

payments to recipients. The administration fees are not covered by

CMIA. However, the fees are covered by the claims collection

regulations, set forth at Subpart B of 45 C.F.R. Part 30. These

regulations require that the Commissioner of Social Security take

action to collect debts and reduce delinquencies and generally require

the imposition of interest on debts. The interest rate is set by the

Secretary of the Treasury after taking into consideration the

prevailing private consumer rates of interest. The State is immediately

notified of any interest due as a result of a failure to make timely

payment of its administrative fee.

Regulatory Procedures

Executive Order 12866

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

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

significant regulatory action under Executive Order 12866. Thus, they

were not subject to OMB review.

Regulatory Flexibility Act

We certify that these rules will not have a significant economic

impact on a substantial number of small entities. Therefore, a

regulatory flexibility analysis as provided in Public Law 96-354, the

Regulatory Flexibility Act, is not required.

Paperwork Reduction Act

These rules impose no reporting/recordkeeping requirements subject

to OMB 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.

Dated: December 19, 1996.

Shirley S. Chater,

Commissioner of Social Security.

Subpart T of part 416 of chapter III of title 20 of the Code of

Federal Regulations is amended as follows:

PART 416--[AMENDED]

Subpart T--[Amended]

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

read as follows:

Authority: Secs. 702(a)(5), 1616, 1618, and 1631 of the Social

Security Act (42 U.S.C. 902(a)(5), 1382e, 1382g, and 1383); sec.

212, Pub. L. 93-66, 87 Stat. 155 (42 U.S.C. 1382 note); sec. 8(a),

(b)(1)-(b)(3), Pub. L. 93-233, 87 Stat. 956 (7 U.S.C. 612c note,

1431 note and 42 U.S.C. 1382e note); secs. 1 (a)-(c) and 2(a),

2(b)(1), 2(b)(2), Pub. L. 93-335, 88 Stat. 291 (42 U.S.C. 1382 note,

1382e note).

2. Section 416.2005 is amended by revising paragraph (a), removing

``the Secretary'' and adding ``SSA'' in the heading and each time it

appears in paragraphs (b)-(d) and adding a sentence to the end of

paragraph (d) to read as follows:

Sec. 416.2005 Administration agreements with SSA.

(a) Agreement-mandatory only. Subject to the provisions of

paragraph (d) of this section, any State having an agreement with the

Social Security Administration (SSA) under Sec. 416.2001(c) may enter

into an administration agreement with SSA under which SSA will make the

mandatory minimum supplementary payments on behalf of such State. An

agreement under Sec. 416.2001(c) and an

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administration agreement under this paragraph may be consolidated into

one agreement.

* * * * *

(d) * * * If the State elects options available under this subpart

(specified in Secs. 416.2015-416.2035), such options must be specified

in the administration agreement.

3. Section 416.2010 is amended by removing paragraph (b),

redesignating paragraphs (c) through (f) as paragraphs (b) through (e),

removing ``the Secretary'' and adding ``SSA'' each time it appears in

paragraphs (a), (d) and (e), and by revising redesignated paragraphs

(b) and (c) to read as follows:

Sec. 416.2010 Essentials of the administration agreements.

* * * * *

(b) Administrative costs. (1) SSA shall assess each State that had

elected Federal administration of optional and/or mandatory State

supplementary payments an administration fee for administering those

payments. The administration fee is assessed and paid monthly and is

derived by multiplying the number of State supplementary payments made

by SSA on behalf of a State for any month in a fiscal year by the

applicable dollar rate for the fiscal year. The number of supplementary

payments made by SSA in a month is the total number of checks issued,

and direct deposits made, to recipients in that month, that are

composed in whole or in part of State supplementary funds. The dollar

rates are as follows:

(i) For fiscal year 1994, $1.67;

(ii) For fiscal year 1995, $3.33;

(iii) For fiscal year 1996, $5.00; and

(iv) For fiscal year 1997 and each succeeding fiscal year, $5.00,

or such different rate as determined by SSA to be appropriate for any

particular State, taking into account the complexity of administering

the State's supplementary payment program.

(2) SSA shall charge a State an additional services fee if, at the

request of the State, SSA agrees to provide the State with additional

services beyond the level customarily provided in the administration of

State supplementary payments. The additional services fee shall be in

an amount that SSA determines is necessary to cover all costs,

including indirect costs, incurred by the Federal Government in

furnishing the additional services. SSA is not required to perform any

additional services requested by a State and may, at its sole

discretion, refuse to perform those additional services. An additional

services fee charged a State may be a one-time charge or, if the

furnished services result in ongoing costs to the Federal Government, a

monthly or less frequent charge to the State for providing such

services.

(c) Agreement period. The agreement period for a State which has

elected Federal administration of its supplementary payments will

extend for one year from the date the agreement was signed unless

otherwise designated. The agreement will be automatically renewed for a

period of one year unless either the State or SSA gives written notice

not to renew, at least 90 days before the beginning of the new period.

For a State to elect Federal administration, it must notify SSA of its

intent to enter into an agreement, furnishing the necessary payment

specifications, at least 120 days before the first day of the month for

which it wishes Federal administration to begin, and have executed such

agreement at least 30 days before such day.

* * * * *

Sec. 416.2050 [Amended]

4. Paragraph (b)(1) of section 416.2050 is amended by removing the

phrase ``(as defined in Sec. 416.2085(e))'' and removing ``the

Secretary'' and adding ``SSA'' each time it appears.

Sec. 416.2080 [Removed]

5. Section 416.2080 is removed.

Sec. 416.2082 [Removed]

6. Section 416.2082 is removed.

Sec. 416.2085 [Removed]

7. Section 416.2085 is removed.

8. Section 416.2090 is amended by removing ``the Secretary'' and

adding ``SSA'' each time it appears in paragraph (c), by removing the

phrase ``for purposes of Sec. 416.2080'' at the end of paragraph (d),

and by revising the section heading and paragraphs (a) and (b) to read

as follows:

Sec. 416.2090 State funds transferred for supplementary payments.

(a) Payment transfer and adjustment. (1) Any State which has

entered into an agreement with SSA which provides for Federal

administration of such State's supplementary payments shall transfer to

SSA:

(i) An amount of funds equal to SSA's estimate of State

supplementary payments for any month which shall be made by SSA on

behalf of such State; and

(ii) An amount of funds equal to SSA's estimate of administration

fees for any such month determined in the manner described in

Sec. 416.2010(b)(1); and

(iii) If applicable, an amount of funds equal to SSA's

determination of the costs incurred by the Federal government in

furnishing additional services for the State as described in

Sec. 416.2010(b)(2).

(2) In order for SSA to make State supplementary payments on behalf

of a State for any month as provided by the agreement, the estimated

amount of State funds referred to in paragraph (a)(1)(i) of this

section, necessary to make those payments for the month, together with

the estimated amount of administration fees referred to in paragraph

(a)(1)(ii) of this section, for that month, must be on deposit with SSA

on the State supplementary payment transfer date, which is the fifth

Federal business day following the day in the month that the regularly

recurring monthly supplemental security income payments are issued. The

additional services fee referred to in paragraph (a)(1)(iii) of this

section shall be on deposit with SSA on the date specified by SSA. The

amount of State funds paid to SSA for State supplementary payments and

the amount paid for administration fees will be adjusted as necessary

to maintain the balance with State supplementary payments paid out by

SSA on behalf of the State, and administration fees owed to SSA,

respectively.

(b) Accounting of State funds. (1) As soon as feasible, after the

end of each calendar month, SSA will provide the State with a statement

showing, cumulatively, the total amounts paid by SSA on behalf of the

State during the current Federal fiscal year; the fees charged by SSA

to administer such supplementary payments; any additional services fees

charged the State; the State's total liability therefore; and the end-

of-month balance of the State's cash on deposit with SSA.

(2) SSA shall provide an accounting of State funds received as

State supplementary payments, administration fees, and additional

services fees, within three calendar months following the termination

of an agreement under Sec. 416.2005.

(3) Adjustments will be made because of State funds due and payable

or amounts of State funds recovered for calendar months for which the

agreement was in effect. Interest will be incurred by SSA and the

States with respect to the adjustment and accounting of State

supplementary payments funds in accordance with applicable laws and

regulations of the United States Department of the Treasury.

* * * * *

[FR Doc. 97-39 Filed 1-2-97; 8:45 am]

BILLING CODE 4190-29-P