Old-Age, Survivors, and Disability Insurance and Supplemental Security Income for the Aged, Blind, and Disabled; Substantial Gainful Activity Amounts

Federal RegisterApr 15, 1999

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SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

[Regulations No. 4 and 16]

RIN 0960-AE98

Old-Age, Survivors, and Disability Insurance and Supplemental

Security Income for the Aged, Blind, and Disabled; Substantial Gainful

Activity Amounts

AGENCY: Social Security Administration.

[[Page 18567]]

ACTION: Final rules.

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SUMMARY: We are revising the rules for determining when earnings

demonstrate the ability to engage in substantial gainful activity

(SGA). This rule change applies to Social Security disability benefits

provided under title II of the Social Security Act (the Act) and

Supplemental Security Income (SSI) benefits based on disability under

title XVI of the Act. (Eligibility for benefits under titles II and XVI

also confers eligibility for related Medicare and Medicaid benefits

under titles XVIII and XIX of the Act.) Specifically, we are raising

from $500 to $700 the average monthly earnings guidelines used to

determine whether work done by persons with impairments other than

blindness is SGA. We are raising this level as part of efforts to

encourage individuals with disabilities to attempt to work, and to

provide an updated indicator of when earnings demonstrate the ability

to engage in SGA. This increase reflects our assessment of the amount

that roughly corresponds to wage growth since the last increase in

1990.

EFFECTIVE DATE: These rules are effective July 1, 1999.

FOR FURTHER INFORMATION CONTACT: Jack Baumel, Office of Employment

Support Programs, Social Security Administration, 6401 Security

Boulevard, Baltimore, Maryland 21235-6401, (410) 965-9834 or TTY (410)

966-6210. For information about eligibility or filing for benefits,

call our national toll-free number, 1-800-772-1213 or TTY 1-800-325-

0778, or visit our Internet web site, SSA Online, www.ssa.gov.

SUPPLEMENTARY INFORMATION:

Background

Under 20 CFR 404.1572 and 416.972, the term ``substantial gainful

activity'' means work activity that involves significant physical or

mental effort and that is done for pay or profit. Work activity is

gainful if it is the kind of work usually performed for pay or profit,

whether or not a profit is realized. Sections 223(d)(4)(A) and

1614(a)(3)(E) of the Act require the Commissioner to prescribe by

regulations the criteria for determining when earnings demonstrate

ability to engage in SGA for a person with an impairment other than

blindness.

The amount of average monthly earnings that ordinarily demonstrates

SGA for people with an impairment other than blindness has not been

increased since January 1, 1990. We are revising this level now after

reassessing the current guidelines as part of our effort to improve

incentives to encourage individuals with disabilities to attempt to

work. We believe that the increase in the amount of earnings that

constitutes SGA provides an updated indicator of when earnings

demonstrate the ability to engage in SGA and is a significant

improvement to the existing work incentive provisions.

Proposed Rules

We published a notice of proposed rulemaking (NPRM) in the Federal

rules to increase the amount in the monthly earnings guidelines used in

determining whether the work activities of a person with an impairment

other than blindness demonstrate that he or she is able to perform SGA.

These guidelines in Secs. 404.1574 and 416.974 deal with persons

claiming title II or title XVI benefits or receiving title II benefits

based on disability. Under our prior rules, if such a person had

earnings from work activities as an employee (including as an employee

of a sheltered workshop or comparable facility) that averaged more than

$500 a month, we would ordinarily consider that the person had engaged

in SGA. Under these new rules, the $500 amount is raised to $700 per

month.

While these rules make specific increases to the amount of earnings

that will ordinarily show that a person has engaged in SGA, we will, at

a future point, consider making other changes in the work incentive

rules. Therefore, the NPRM invited the public to provide us with

general suggestions for changes which might be desirable in related

provisions (such as the trial work period services amount, and the

earnings level that ordinarily demonstrates that an individual has not

engaged in SGA) and the SGA guidelines in the future. We will consider

those general suggestions not addressed below regarding possible future

changes.

Public Comments

We received over 3000 sets of comments in response to the proposal.

Commenters included many advocates for people with disabilities, State

and local government entities, attorneys, employees from one SSA field

office, one Administrative Law Judge, one member of Congress, and a

large number of private citizens. With few exceptions, the comments we

received were substantive assessments of the proposal and/or related

suggestions. We have summarized these substantive comments, grouped

them by subject, and discuss them below.

Comment: All but five of the comments received expressing an

opinion about the proposed increase in the SGA guidelines were in

favor. One was opposed and four expressed doubt that the increase in

the SGA guidelines would achieve improvement. Many of the commenters in

favor also believed that we should make further changes.

Response: We appreciate that all but a few commenters agreed with

our assessment that an increase in the SGA guidelines is warranted. We

have addressed the additional comments below.

Comment: Many of the comments expressing support for an increase

also stated the general opinion that the proposed increase to $700 was

not enough. Several commenters suggested that geographic differences in

the cost-of-living or poverty level be taken into account in setting

the SGA amount. Many expressed the view that the $700 amount is below

the amount SGA would have attained had its growth kept pace with

increases in average wages since its inception. Many also noted that

the new $700 amount is significantly lower than a month's full-time

earnings at the minimum wage level. Many also criticized us regarding

the nine years lapse since the last increase.

Response: The historical relationship between the SGA amount and

average wage growth was roughly consistent between 1961 (when the SGA

guideline was first issued by regulation) and 1980. Since 1980,

however, the SGA level has been kept constant for two long periods of

time during which wages were experiencing growth. By 1989, the actual

SGA level for the non-blind lagged behind average wage growth since the

amount had stayed at $300 for a decade. In 1990, we raised the SGA

amount to $500.

The Act does not spell out the definition of SGA for people with

impairments other than blindness and the legislative record neither

expresses nor implies a connection with average wages or prices. The

Act provides that the Commissioner is to prescribe by regulation the

criteria for determining when earnings demonstrate the ability to

engage in SGA. We designed the SGA guidelines as a way of measuring an

individual's ability to work and not as a measure of an individual's

need for income. We decided on the amounts being implemented based on

our experience with the disability programs and beneficiaries' work

efforts and the need to maintain fiscal responsibility. In any event,

the increase we are implementing now approximately corresponds to wage

growth since 1990.

[[Page 18568]]

Comment: Many comments noted that the SGA amount for people who are

blind is $1110 for calendar year 1999. These comments expressed

dissatisfaction with the discrepancy and generally considered it

unjustified discrimination. Most of these commenters recommended that

we increase the SGA amount for people with impairments other than

blindness in a similar manner or to the same level as for people who

are blind.

Response: Before 1977, Section 223(d) of the Act authorized the

Commissioner to prescribe the level of earnings that demonstrate SGA

for all title II applicants and recipients and all title XVI

applicants. In 1977, Congress amended that section of the Act to

provide a different criterion for setting the SGA level for people who

are blind (i.e., annual adjustment based on the national average wage

index). Congress consciously made this distinction between people who

are blind and those with impairments other than blindness. The House

and Senate conference report accompanying the Social Security

Amendments of 1977 clearly stated that a different SGA amount was being

established for blind persons, and that the conferees did not intend

that the amount be applied to people with impairments other than

blindness.

Comment: Many comments suggested either annual review of the SGA

amount or that future increases be linked to increases in a generally

recognized economic benchmark, e.g., average wage, cost-of-living,

poverty level. They contend that annual review or indexing the SGA

level would provide a consistent relationship with wages and/or prices,

and prevent erosion of the work component of the definition of

disability over time as these factors increase.

Response: As stated in a previous response, we designed the SGA

guidelines as a way of measuring an individual's ability to work and

not as a measure of an individual's need for income. We decided on the

amounts we are implementing based on our experience with the disability

programs and beneficiaries' work efforts and the need to maintain

fiscal responsibility. The increase we are implementing now

approximately corresponds to wage growth since 1990. However, we

recognize that increasing program factors on a regular and predictable

basis allows us to avoid making adjustments on an ad hoc basis. We may

consider, in the future, if the SGA amounts should be indexed.

Comment: Several comments suggested that we stop using SGA to

evaluate the work component of disability. They recommended that, in

its place, we use an earnings offset formula to reduce cash benefits

gradually as earnings rise (similar to the earned income exclusion

currently under title XVI). One suggested that there should be no

earnings limits placed on eligibility for people with disabilities.

Response: These suggested changes require new legislation and we

can not implement them by regulation alone. Several legislative

proposals to test the earnings offset approach under title II are

pending before the current session of Congress.

Comment: Many commenters suggested that we also increase the

monthly earnings amount that we consider being services for purposes of

the Trial Work Period (TWP). Many of these also suggested that the TWP

and SGA amounts should be the same. Many of these also suggested that

we index TWP increases to an economic benchmark. One suggested that we

apply the TWP earnings amount on an annual basis rather than monthly.

Response: The TWP is a work incentive. During the TWP, a title II

beneficiary may test his or her ability to work and still be considered

disabled. We will not consider services performed during the TWP as

showing that disability has ended until services have been performed in

at least 9 months (not necessarily consecutive). Services means any

activity, even though it is not SGA, which is done by a person in

employment or self-employment for pay or profit, or is the kind

normally done for pay or profit. As established in Sec. 404.1592(b), if

you are an employee, we currently consider your work to be services if

you earn more than $200 a month. As a result of public comments, we

will consider whether, in the future, to propose raising the monthly

earnings guideline for services under the trial work period and related

changes.

Comment: One commenter recommended raising the average monthly

earnings amount that will ordinarily show that an employee did NOT

engage in SGA (currently, earnings of less than $300).

Response: The effect of this provision is to create a range where

monthly earnings are neither high enough nor low enough to show whether

an employee engaged in SGA. If an employee's earnings fall into this

range, we generally consider other information in addition to the

employee's earnings to reach a determination. In practice, this

provision affects a relatively small number of people. As a result of

public comments, we will consider whether, in the future, to propose

raising the amount and/or make other modification(s) to this provision.

Comment: Many comments expressed general support for the

recognition of the special medical needs and medical insurance needs of

people with disabilities. Several comments expressed support for

recognition of the special needs of young people with disabilities who

are in transition from education to work. Several comments advocated

liberalization of other existing work incentive provisions and included

suggestions for changes to these provisions.

Response: The issues addressed by these comments are outside the

scope of this specific rules change. However, as we stated in the

February 16, 1999 NPRM, we will consider these comments regarding

possible future changes.

Comment: A few commenters suggested that a January 1, 1999

effective date for the SGA increase would be easier for us to

administer and seem less arbitrary to the public.

Response: This rules change increases the number of people eligible

for disability benefits under Old-Age, Survivors and Disability

Insurance and the SSI program, as well as for related Medicare and

Medicaid benefits. We believe it is in the public interest to proceed

quickly with its implementation. However, we believe that an effective

date of July 1, 1999 represents the earliest date practicable for these

final rules to be effective.

Final Regulations

We are revising Secs. 404.1574(b)(2) and (4), and 416.974(b)(2) and

(4) to increase from $500 to $700 the earnings guidelines that we use

to determine whether a non-blind employee is engaging in SGA. (This

standard also applies to the self-employed in certain circumstances by

cross-references that have been and continue to be present in

Secs. 404.1575 and 416.975.) We have not raised the SGA earnings amount

for approximately nine years. We are raising the SGA level now to $700,

which roughly corresponds to wage growth since the last increase in

1990.

In order to comply with the President's June 1, 1998 memorandum

directing the use of plain language for all proposed and final

rulemaking, we are rewriting the regulatory paragraphs affected by the

above rule changes and the intervening paragraph ((b)(3)) into plain

language. We intend this rewrite to have no substantive effect other

than those substantive changes described in this preamble to these

final rules.

[[Page 18569]]

Electronic Version

The electronic file of this document is available on the Internet

at www.access.gpo.gov/nara. This document is also available on our

Internet web site, SSA Online, www.ssa.gov.

Regulatory Procedures

Paperwork Reduction Act

These regulations impose no new reporting/record-keeping

requirements necessitating clearance by the Office of Management and

Budget (OMB).

Executive Order 12866

Regulatory Impact Analysis

Introduction--Based on the costs associated with these final rules,

the Social Security Administration has determined that they require an

assessment of costs and benefits to society per Executive Order 12866

because they meet the definition of a ``significant regulatory

action.'' These final rules also meet the definition of a ``major

rule'' under 5 U.S.C. 801ff., and this assessment also fulfills the

requirements of those provisions as well. In addition, SSA has

determined, as required under the aforementioned statute, that these

final rules do not create any unfunded mandates for State or local

entities pursuant to sections 202-205 of the Unfunded Mandates Act of

1995. OMB has reviewed these final rules.

Executive Order 12866 includes in its definition of a ``significant

regulatory action'' one which generates a major increase in costs for

the Federal government. Accordingly, a discussion follows of the effect

of the regulations and general information on estimated costs and

benefits to society.

Nature of the Program--Benefits to disabled and blind individuals

are provided under title II and title XVI of the Act. Disability is

defined under both programs as, ``* * * inability to engage in any

substantial gainful activity by reason of any medically determinable

physical or mental impairment * * *.'' Related medical benefits to

disabled and blind individuals are provided under title XVIII and title

XIX of the Act.

We use earnings guidelines to evaluate a person's work activity to

determine whether the work activity is SGA and therefore whether that

person may be considered disabled under the law. While this is only one

of the tests used to determine disability, it is a critical threshold

in disability evaluation. We evaluate the work activity of persons

claiming or receiving disability benefits under title II of the Act and

that of persons claiming benefits because of a disability under title

XVI of the Act. These new regulations increase the amounts of those

earnings guidelines. We have not raised the SGA earnings amount for

approximately nine years. We are raising it now to approximate wage

growth during that time.

Intended Effect--We expect that the increase in the amount of

earnings that constitute SGA will provide a greater incentive for many

people with disabilities to attempt to work or, if already working, to

continue to work or increase their work effort. Hundreds of thousands

of people with disabilities already work and the new revisions will be

of advantage to many. For these individuals, as well as those not now

working, the new revisions will enhance their potential to participate

in the workforce, and, consequently, improve their economic well being

by increasing their income through earnings.

In addition, the increase will permit some individuals with

disabilities who have earnings in excess of the prior regulatory limit

($500) but less than the amount in these new rules ($700), to receive

benefits. We estimate that by Fiscal Year (FY) 2004, an additional

27,000 individuals will receive benefits because of these changes. This

estimate is based on analyses of the earnings distributions of a

representative sample of disabled individuals.

The following chart provides the estimated increases in Old-age,

Survivors and Disability Insurance payments, Federal SSI payments,

Medicare benefits, and Federal share of Medicaid benefits due to the

increase in the SGA amount to $700 in 1999, for fiscal years 1999-2004.

(Amounts are in millions.)

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Fiscal year

------------------------------------------------------------------------------ Total 1999-

1999 2000 2001 2002 2003 2004 2004

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OASDI........................................................ 10 30 55 75 100 120 390

SSI.......................................................... 15 20 25 25 30 30 145

Medicare..................................................... 10 20 30 50 60 80 250

Medicaid..................................................... 40 60 70 75 90 100 435

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Subtotal, all programs................................... 75 130 180 225 280 330 1220

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Notes:

\1\ Totals may not equal sum of rounded components.

\2\ Above estimates based on the assumptions underlying the President's FY 2000 Budget, including the SSA Office of the Actuary's normal assumption of

an SGA amount increasing with average wages.

\3\ Estimates for Medicare and Medicaid provided by the Office of the Actuary in the Health Care Financing Administration (HCFA).

In addition, since States share in the costs of financing Medicaid,

States will have some costs associated with the increase in the SGA

amount as well. These costs are estimated by HCFA to be (in millions):

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Fiscal year

Medicaid ------------------------------------------------------------------------------------ Total 1999-

1999 2000 2001 2002 2003 2004 2004

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State Share........................................... 30 45 55 55 70 75 330

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Although the costs are significant, we consider these changes as

necessary improvements to the work incentives. The costs of these

regulations will be paid through programmatic and regulatory changes.

Regulatory Flexibility Act

We certify that these regulations do not have a significant

economic impact

[[Page 18570]]

on a substantial number of small entities because they primarily affect

individuals who are applying for or receiving title II, or applying for

title XVI, benefits because of disability, and States which administer

the Medicaid program.

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

Security-Disability Insurance; 96.002, Social Security-Retirement

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

Supplemental Security Income)

List of Subjects

20 CFR Part 404

Administrative practice and procedure, Death benefits, Disability

benefits, Old-Age, Survivors and Disability Insurance, Reporting and

record keeping requirements, Social Security.

20 CFR Part 416

Administrative practice and procedure, Aged, Blind, Disability

benefits, Public assistance programs, Reporting and record keeping

requirements, Supplemental Security Income (SSI).

Dated: April 7, 1999.

Kenneth S. Apfel,

Commissioner of Social Security.

For the reasons stated in the preamble, the Social Security

Administration is amending parts 404 and 416 of chapter III of title 20

of the Code of Federal Regulations as follows:

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

(1950- )

1. 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 702(a)(5) 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 902(a)(5)); sec. 211(b), Pub. L. 104-193, 110

Stat. 2105, 2189.

2. Section 404.1574 is amended by revising paragraphs (b)(2),

(b)(3), and (b)(4) to read as follows:

Sec. 404.1574 Evaluation guides if you are an employee.

* * * * *

(b) * * *

(2) Earnings that will ordinarily show that you have engaged in

substantial gainful activity. We will consider that your earnings from

your work activity as an employee show that you have engaged in

substantial gainful activity if--

------------------------------------------------------------------------

Your

monthly

For months earnings

averaged

more than

------------------------------------------------------------------------

In calendar years before 1976.............................. $200

In calendar year 1976...................................... 230

In calendar year 1977...................................... 240

In calendar year 1978...................................... 260

In calendar year 1979...................................... 280

In calendar years 1980-1989................................ 300

In January 1990-June 1999.................................. 500

After June 1999............................................ 700

------------------------------------------------------------------------

(3) Earnings that will ordinarily show that you have not engaged in

substantial gainful activity. We will generally consider that the

earnings from your work as an employee will show that you have not

engaged in substantial gainful activity if--

------------------------------------------------------------------------

Your

monthly

For months earnings

averaged

more than

------------------------------------------------------------------------

In calendar years before 1976.............................. $130

In calendar year 1976...................................... 150

In calendar year 1977...................................... 160

In calendar year 1978...................................... 170

In calendar year 1979...................................... 180

In calendar years 1980-1989................................ 190

After December 1989........................................ 300

------------------------------------------------------------------------

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

sheltered workshop or a comparable facility especially set up for

severely impaired persons, your earnings and activities will ordinarily

establish that you have not done substantial gainful activity if--

------------------------------------------------------------------------

Your

average

monthly

For months earnings

are not

greater

than