AR 93-2(2): Conley v. Bowen , 859 F.2d 261 (2d Cir. 1988)--Determination of Whether an Individual With a Disabling Impairment Has Engaged in Substantial Gainful Activity Following a Reentitlement Period--Title II of the Social Security Act.

AR 93-2(2) (Rescinded 8/10/2000)

EFFECTIVE DATE: 5/17/93

Issue

Whether, in making a determination following an individual's

reentitlement period that an individual with a disabling impairment has

engaged in substantial gainful activity (SGA), the Secretary may consider

work and earnings by the individual in a single month rather than an

average of work and earnings over a period of months.

Statute/Regulation/Ruling Citation

Sections 216(i)(2)(D), 223(a)(1) and 223(e) of the Social Security Act

(42 U.S.C. 416(i)(2)(D), 423(a)(1) and 423(e)); 20 CFR 404.316(d),

404.321(c), 404.325, 404.337(d), 404.352(d), 404.401a,

404.1571-404.1576, 404.1579, 404.1592a and 404.1594; and SSR 83-33 , 83-34 and 83-35 .

Circuit

Second (Connecticut, New York, Vermont)

Conley v. Bowen , 859 F.2d 261 (2d Cir. 1988)

Applicability of Ruling

This Ruling applies to determinations or decisions at all administrative

levels (i.e., initial, reconsideration, Administrative Law Judge hearing

and Appeals Council).

Description of Case

In May 1977, the plaintiff, Edith Conley, filed an application for

disability insurance benefits under Title II of the Social Security Act

(the Act). In May 1978, she was awarded benefits effective February

1977.

In 1982 the plaintiff submitted a work activity report to the Social

Security Administration (SSA), indicating that she had worked for several

months in 1978 and on two occasions in 1979 and 1980. SSA investigated the

plaintiff's work activity and determined that she was still disabled.

In June 1983, SSA investigated additional work activity by the plaintiff

and in January 1984 notified her that, unless she presented evidence to

the contrary, SSA intended to find that she had demonstrated her ability

to engage in SGA and that her benefits should have ceased effective

December 1982. The plaintiff submitted a work activity report reflecting

various employment between November 1980 and September 1983.

d additional work activity by the plaintiff

and in January 1984 notified her that, unless she presented evidence to

the contrary, SSA intended to find that she had demonstrated her ability

to engage in SGA and that her benefits should have ceased effective

December 1982. The plaintiff submitted a work activity report reflecting

various employment between November 1980 and September 1983.

Ultimately, SSA determined initially and on reconsideration that the

plaintiff had demonstrated her ability to engage in SGA despite a

disabling impairment and that her benefits should have ceased in December

1982. She requested and was granted a hearing before an Administrative Law

Judge (ALJ). The ALJ determined that: 1) she had completed her 9-month

trial work period in November 1980; 2) her reentitlement period had

commenced in December 1980 and ended in March 1982; 3) during her

reentitlement period, the plaintiff had engaged in SGA from December 1980

through May 1981, in August 1981, and from October through December 1981;

4) December 1982 was the first month following her reentitlement period in

which she had performed SGA, because that was the first month in which she

had earned more than $300 [1] ;

and 5) as a result of her earnings of $338.54 in December 1982, the

plaintiff's entitlement to disability insurance benefits had terminated

that month. The plaintiff requested that the Appeals Council review the

ALJ's decision. The Appeals Council denied her request.

The plaintiff sought judicial review of the Secretary's decision,

alleging that: 1) the Secretary was required by his own regulations

defining SGA, which are set forth at 20 CFR 404.1571 through 404.1576, to

average her earnings over a period of months, rather than look at a single

month's earnings, in determining whether she had performed SGA; and 2) the

Secretary erred in applying 20 CFR 404.1592a, which governs SGA during the

reentitlement period.

alleging that: 1) the Secretary was required by his own regulations

defining SGA, which are set forth at 20 CFR 404.1571 through 404.1576, to

average her earnings over a period of months, rather than look at a single

month's earnings, in determining whether she had performed SGA; and 2) the

Secretary erred in applying 20 CFR 404.1592a, which governs SGA during the

reentitlement period.

The district court found that the Secretary properly applied section

404.1592a in determining whether the plaintiff had engaged in SGA in

December 1982 and dismissed the complaint. The plaintiff then appealed to

the United States Court of Appeals for the Second Circuit.

Holding

Because it found that 20 CFR 404.1592a did not govern the work period at

issue, the court of appeals reversed the judgment of the district court

with directions to remand for further proceedings before the ALJ.

The court of appeals concluded that a straightforward reading of 20 CFR

404.1592a reveals that this regulation applies only to eligibility for,

and the method of calculation of, benefits during the reentitlement

period. As explained by the court of appeals:

The court of appeals thus held that section 404.1592a is limited in scope

to the duration of the reentitlement period, and it had no application to

the period of work activity at issue (December 1982) which was after the

plaintiff's reentitlement period had expired. The court stated that the

only other regulations that define SGA are set forth at 20 CFR 404.1571

through 404.1576. It stated further that, while the Secretary contended

that these regulations were applicable only to initial determinations of

disability, there is nothing in the language of these regulations that

limits the definition of, and criteria for, determining "substantial

gainful activity" to initial determinations of disability.

Statement as to How Conley Differs From Social Security

Policy

It stated further that, while the Secretary contended

that these regulations were applicable only to initial determinations of

disability, there is nothing in the language of these regulations that

limits the definition of, and criteria for, determining "substantial

gainful activity" to initial determinations of disability.

Statement as to How Conley Differs From Social Security

Policy

Beginning with the month following a completed trial work period, an

individual is entitled to a reentitlement period, during which he or she

may continue to test his or her ability to work despite a disabling

impairment. [2] At any time

during or after this reentitlement period, the individual's work may be

evaluated by the Agency to determine whether his or her work activity

warrants a cessation of disability status and benefits. In determining

whether disability has ceased due to the performance of SGA, SSA will, if

necessary, average the individual's work and earnings over the actual

period of time in which work was performed, which may include work

performed during the trial work period or during or after the

reentitlement period. [3]

If it is determined that disability ceased on the basis that an

individual is engaging or has engaged in SGA, then the individual's

entitlement to disability payments will terminate as of the third month

following the month that the individual engaged in SGA, but in no event

earlier than the first month after the reentitlement period. All work

activity during the reentitlement period which occurs in or after the

third month following the month of the disability cessation determination

is evaluated on a month-by-month basis. This means that an individual is

not paid benefits for any month in which he or she engages in SGA, but

benefits are paid for months during the reentitlement period in which he

or she does not engage in SGA

activity during the reentitlement period which occurs in or after the

third month following the month of the disability cessation determination

is evaluated on a month-by-month basis. This means that an individual is

not paid benefits for any month in which he or she engages in SGA, but

benefits are paid for months during the reentitlement period in which he

or she does not engage in SGA. Therefore, when determining whether to pay

benefits for any month after the month disability ceased due to SGA, SSA

does not average earnings. Likewise, after the reentitlement period has

ended, SSA determines SGA based on work and earnings in each month

individually, rather than by averaging work and earnings over a period of

months. Benefits which were reinstated during the reentitlement period are

terminated effective with the first month of SGA-level earnings after the

reentitlement period. This policy is consistent with the language of

section 223(a)(1) of the Act, inasmuch as Congress, by prescribing a set

period of months for the reentitlement period and a set termination month,

did not intend for an individual to be given an additional period of time,

beyond the reentitlement period, to test his or her ability to perform

SGA.

The Second Circuit's holding is inconsistent with the above- referenced

policy, in that it would require SSA, in cases where a cessation

determination based on SGA has been made, to average work and earnings

after the reentitlement period has ended for the purposes of payment or

nonpayment of benefits.

Explanation of How SSA Will Apply This Decision Within the Circuit

y to perform

SGA.

The Second Circuit's holding is inconsistent with the above- referenced

policy, in that it would require SSA, in cases where a cessation

determination based on SGA has been made, to average work and earnings

after the reentitlement period has ended for the purposes of payment or

nonpayment of benefits.

Explanation of How SSA Will Apply This Decision Within the Circuit

This Ruling applies only to cases involving the termination of Title II

disability insurance benefits of recipients who (1) have completed a

9-month trial work period and performed SGA despite their disabling

impairment(s), and (2) reside in Connecticut, New York or Vermont at the

time of the determination or decision at any administrative level, i.e. , initial, reconsideration, Administrative Law Judge hearing or

Appeals Council.

In such cases, when making a determination of whether an individual has

performed SGA following that individual's reentitlement period, SSA must

consider the individual's average monthly earnings and amount of work (in

accordance with procedures outlined in 20 CFR 404.1571 through 404.1576

and SSR 83-35 ), rather than

his or her work in and earnings for a single month. SSA intends to clarify

the regulation at issue in this case, 20 CFR 404.1592a, through the

rulemaking process. SSA will continue to apply this Ruling until such

clarification is made. At that time, pursuant to 20 CFR 404.985(e)(4), SSA

may rescind this Ruling.

[1] SSA regulations, at 20 CFR

404.1574(b), define what level of earnings ordinarily is considered SGA.

At the time of the Conley decision, earnings in excess of $300.00

per month ordinarily would be considered SGA. The SGA monthly threshold is

currently $500.00.

this Ruling until such

clarification is made. At that time, pursuant to 20 CFR 404.985(e)(4), SSA

may rescind this Ruling.

[1] SSA regulations, at 20 CFR

404.1574(b), define what level of earnings ordinarily is considered SGA.

At the time of the Conley decision, earnings in excess of $300.00

per month ordinarily would be considered SGA. The SGA monthly threshold is

currently $500.00.

[2] At the time of the ALJ's

decision, the Act provided for a fifteen-month reentitlement period. As of

January 1988, the Act provides for a thirty-six month reentitlement

period, so long as the individual's condition continues to be disabling.

During the reentitlement period, cash benefits will be reinstated for any

month(s) that an individual's earnings drop below SGA after disability has

been ceased due to demonstrated ability to perform SGA.

[3] It is not always necessary

or appropriate to average earnings in every case, e.g. , where the

earnings from month-to-month or job-to-job remain constant and uniform.

Averaging would be required, however, in the case of a fluctuation of

earnings from month-to-month, or where the individual performs two or more

different types of work which are not representative of one another. See Social Security

Ruling 83-35 for further explanation of the averaging concept.