AR 99-2(8): Kerns v. Apfel , 160 F.3d 464 (8th Cir. 1998) -- Definition of Highly Marketable Skills for Individuals Close to Retirement Age -- Titles II and XVI of the Social Security Act. [1]

AR 99-2(8) (Rescinded 5/8/2000)

EFFECTIVE/PUBLICATION DATE: 3/11/99

Acquiescence Ruling 99-2 (8)

Issue:

Whether the Social Security Administration (SSA) is required to find that

a claimant close to retirement age (60-64) and limited to sedentary or

light work has "highly marketable" skills before determining that the

claimant has transferable skills and, therefore, is not disabled.

Statute/Regulation/Ruling Citation:

Sections 223(d)(2)(A) and 1614(a)(3)(B) of the Social Security Act (42

U.S.C. 423(d)(2)(A) and 1382c(a)(3)(B));

20 CFR 404.1520(f)(1), 404.1563(d), 404.1566(c), 416.920(f)(1),

416.963(d), 416.966(c); 20 CFR Part 404, Subpart P, Appendix 2, sections

201.00(f) and 202.00(f);

Social Security Ruling 82-41 .

Circuit:

Eighth (Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South

Dakota).

Kerns v. Apfel , 160 F.3d 464 (8th Cir. 1998).

Applicability of Ruling:

This Ruling applies to determinations or decisions at all administrative

levels (i.e., initial, reconsideration, Administrative Law Judge (ALJ)

hearing and Appeals Council).

Description of Case:

In February 1994, the claimant, Danny C. Kerns, applied for disability

insurance benefits claiming he became disabled because he suffered from

Paget's disease of the right hip. Following the denial of his application

for benefits at both the initial and reconsideration steps of the

administrative review process, the claimant requested and received a

hearing before an ALJ. Mr. Kerns, who was 61 years old at the time of the

hearing, testified that he had a high school education plus two years of

college and had worked as an embalmer and funeral director for the last 15

to 30 years. He testified that since 1985 he worked at a funeral home

where he conducted funerals, lifted caskets, and handled accounts payable

and accounts receivable. He also stated that his only formal bookkeeping

training was from an accounting class he took in high school. Mr

chool education plus two years of

college and had worked as an embalmer and funeral director for the last 15

to 30 years. He testified that since 1985 he worked at a funeral home

where he conducted funerals, lifted caskets, and handled accounts payable

and accounts receivable. He also stated that his only formal bookkeeping

training was from an accounting class he took in high school. Mr. Kerns

alleged that the disease rendered him unable to work because it caused

constant pain, interfered with sleep and his ability to concentrate,

caused irritability, and prevented him from sitting or standing for long

periods of time.

The evidence provided at the hearing also included the testimony of a

vocational expert who testified that Mr. Kerns' skills in accounts

receivable and accounts payable were transferable to a variety of

sedentary accounting clerk positions. The vocational expert stated that

Mr. Kerns' skills could be transferred to such positions without

significant vocational adjustment because the work settings, tools and

processes involved in accounting clerk positions would be similar to those

of his former position.

The ALJ issued a decision finding that Mr. Kerns was not disabled and

denied his claim for disability benefits. The ALJ found that, although Mr.

Kerns was unable to return to his past relevant work as a funeral

director, he possessed transferable skills and retained the residual

functional capacity to perform sedentary work. Mr. Kerns requested Appeals

Council review of the ALJ's decision and the Appeals Council issued a

decision finding that Mr. Kerns retained the residual functional capacity

for sedentary work. In addressing the transferability of Mr. Kerns'

skills, the Appeals Council rejected the need to determine whether Mr.

Kerns' accounting skills were "highly marketable," stating that Mr. Kerns'

skills were transferable because "no significant vocational adjustment

would be required" for Mr

d a

decision finding that Mr. Kerns retained the residual functional capacity

for sedentary work. In addressing the transferability of Mr. Kerns'

skills, the Appeals Council rejected the need to determine whether Mr.

Kerns' accounting skills were "highly marketable," stating that Mr. Kerns'

skills were transferable because "no significant vocational adjustment

would be required" for Mr. Kerns to perform accounting clerk positions.

After finding that the claimant's skills were transferable, the Appeals

Council applied Rule 201.07 of 20 CFR Part 404, Subpart P, Appendix 2,

Table No. 1, which directed a finding that Mr. Kerns was not disabled. The

claimant sought judicial review of SSA's decision in district court. The

district court found substantial evidence on the record as a whole to

support the finding by SSA that Mr. Kerns had the residual functional

capacity to perform sedentary positions and affirmed SSA's denial of

disability benefits. Mr. Kerns appealed to the Court of Appeals for the

Eighth Circuit. On appeal, the claimant contended, among other things,

that SSA was required under its regulations to determine whether his

accounting skills were "highly marketable" before deciding that they were

transferable and that he was not disabled.

Holding:

The Eighth Circuit noted that Mr. Kerns had satisfied his burden of

proving at step four of the five-step sequential analysis that his

impairment prevented him from performing his past work as a funeral

director, and the burden thus shifted to SSA at step five to show the

existence of other work in the national economy that the claimant could

perform, considering the claimant's residual functional capacity, age,

education and work experience. The court observed that the way in which a

claimant's age affects the determination at this step is set forth in 20

CFR 404.1563 of the regulations

irector, and the burden thus shifted to SSA at step five to show the

existence of other work in the national economy that the claimant could

perform, considering the claimant's residual functional capacity, age,

education and work experience. The court observed that the way in which a

claimant's age affects the determination at this step is set forth in 20

CFR 404.1563 of the regulations. The court stated that, as claimants

become older, this regulation "imposes a progressively more stringent

burden" on SSA before disability benefits can be

denied. [2] Section 404.1563(d)

states that if a claimant is of advanced age (55 and over), has a severe

impairment, and cannot do medium work, such claimant may not be able to

work unless he or she has skills that can be transferred to less demanding

jobs which exist in significant numbers in the national economy. In

addition, section 404.1563(d) states that "[i]f you are close to

retirement age (60-64) and have a severe impairment, we will not consider

you able to adjust to sedentary or light work unless you have skills which

are highly marketable."

The court of appeals found that in determining that Mr. Kerns was not

disabled, SSA considered the transferability of his accounting skills by

applying the standard set forth in section 201.00(f) of 20 CFR Part 404,

Subpart P, Appendix 2. That section provides: In order to find

transferability of skills to skilled sedentary work for individuals who

are of advanced age (55 and over), there must be very little, if any,

vocational adjustment required in terms of tools, work processes, work

settings, or the industry.

ng skills by

applying the standard set forth in section 201.00(f) of 20 CFR Part 404,

Subpart P, Appendix 2. That section provides: In order to find

transferability of skills to skilled sedentary work for individuals who

are of advanced age (55 and over), there must be very little, if any,

vocational adjustment required in terms of tools, work processes, work

settings, or the industry.

The court of appeals indicated that section 404.1563(d) of the regulations

"requires something more than a mere determination of transferability" for

a claimant close to retirement age. Although the court of appeals noted

that section 223(d)(2)(A) of the Act and section 404.1566(c) of the

regulations provide that disability is to be evaluated in terms of a

claimant's ability to perform jobs rather than on his or her ability to

obtain them, the court found that "the regulations [section 404.1563(a)]

also recognize the effect that age has on a person's ability to compete

with other job applicants." Section 404.1563(a) states:

Age refers to how old you are (your chronological age) and the

extent to which your age affects your ability to adapt to a new work

situation and to do work in competition with others.

The Eighth Circuit determined that the language of section 404.1563(d)

places a higher burden on SSA to show that a claimant with a severe

impairment who is close to retirement age (age 60-64) can perform other

work that exists in the national economy. The court indicated that under

the regulations, "[s]uch claimants will not be considered 'able to adjust

to sedentary or light work unless [they] have skills which are highly

marketable.'" The court held that "[i]n the absence of a finding that the

skills of a claimant close to retirement age are highly marketable, those

skills cannot be found transferable." Because Mr. Kerns was close to

retirement age at the time of the ALJ hearing, the court of appeals

concluded that SSA was required to find that Mr

or light work unless [they] have skills which are highly

marketable.'" The court held that "[i]n the absence of a finding that the

skills of a claimant close to retirement age are highly marketable, those

skills cannot be found transferable." Because Mr. Kerns was close to

retirement age at the time of the ALJ hearing, the court of appeals

concluded that SSA was required to find that Mr. Kerns' skills were

"highly marketable" before it could find that Mr. Kerns had transferable

skills and deny disability benefits. The Eighth Circuit thereupon reversed

the judgment of the district court with instructions to remand the case to

SSA to determine whether Mr. Kerns' skills were "highly marketable."

Statement as to How Kerns Differs From SSA's

Interpretation of the Regulations

At step five of the sequential evaluation process, SSA considers a

claimant's chronological age in conjunction with residual functional

capacity, education and work experience to determine whether a claimant

can do work other than past relevant work. SSA takes into account how age

affects a claimant's ability to adapt to new work situations and do work

in competition with others in the workplace.

To this end, SSA's regulations provide that in order to find that a

claimant whose sustained work capability is limited to light work or less

and who is close to retirement age (60-64) possesses skills that can be

used in (transferred to) other work, "there must be very little, if any,

vocational adjustment required in terms of tools, work processes, work

settings, or the industry." 20 CFR Part 404, Subpart P, Appendix 2,

section 202.00(f). SSA's regulations provide the same rule for a claimant

whose sustained work capability is limited to sedentary work and who is of

advanced age (55 and over). 20 CFR Part 404, Subpart P, Appendix 2,

section 201.00(f)

ittle, if any,

vocational adjustment required in terms of tools, work processes, work

settings, or the industry." 20 CFR Part 404, Subpart P, Appendix 2,

section 202.00(f). SSA's regulations provide the same rule for a claimant

whose sustained work capability is limited to sedentary work and who is of

advanced age (55 and over). 20 CFR Part 404, Subpart P, Appendix 2,

section 201.00(f). If the claimant's skills are transferable to other work

under this standard, SSA will consider such skills "highly marketable"

under 20 CFR 404.1563(d) and 416.963(d). SSA's regulations do not require

a specific, separate and distinct finding that a claimant's skills are

"highly marketable" in reaching a conclusion that the claimant has

transferable skills.

The Eighth Circuit interpreted 20 CFR 404.1563(d) to require SSA to make

an additional finding regarding the marketability of a claimant's skills

in order to determine whether the skills of a claimant close to retirement

age are transferable to sedentary or light work. The court held that in

the absence of a finding by SSA that the skills of such a claimant are

"highly marketable," SSA may not conclude that the claimant possesses

transferable skills.

Explanation of How SSA Will Apply The Kerns Decision

Within the Circuit

This Ruling applies only to cases in which the claimant resides in

Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota or South

Dakota at the time of the determination or decision at any level of

administrative review, i.e., initial, reconsideration, ALJ hearing or

Appeals Council review.

ansferable skills.

Explanation of How SSA Will Apply The Kerns Decision

Within the Circuit

This Ruling applies only to cases in which the claimant resides in

Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota or South

Dakota at the time of the determination or decision at any level of

administrative review, i.e., initial, reconsideration, ALJ hearing or

Appeals Council review.

In the case of a claimant whose sustained work capability is limited to

sedentary or light work as a result of a severe impairment, who is close

to retirement age (age 60-64), and who has skills, an adjudicator will

make a separate finding regarding the marketability of the claimant's

skills when determining whether the claimant's skills are transferable to

other work under the standard specified in section 201.00(f) or 202.00(f)

of 20 CFR Part 404, Subpart P, Appendix 2. Unless the adjudicator finds

that the claimant's skills are "highly marketable," the adjudicator will

conclude that the claimant's skills are not transferable to other work

even if the standard for finding transferability of skills specified in

section 201.00(f) or 202.00(f) is otherwise met. For purposes of this

Ruling, an adjudicator will consider the claimant's skills to be "highly

marketable" only if the skills are sufficiently specialized and coveted by

employers as to make the claimant's age irrelevant in the hiring process

and enable the claimant to obtain employment with little difficulty. In

determining whether a claimant's skills meet this definition of "highly

marketable," an adjudicator will consider: (1) whether the skills were

acquired through specialized or extensive education, training or

experience; and (2) whether the skills give the claimant a competitive

edge over other, younger, potential employees with whom the claimant would

compete for jobs requiring those skills, giving consideration to the

number of such jobs available and the number of individuals competing for

such jobs. [3]

her the skills were

acquired through specialized or extensive education, training or

experience; and (2) whether the skills give the claimant a competitive

edge over other, younger, potential employees with whom the claimant would

compete for jobs requiring those skills, giving consideration to the

number of such jobs available and the number of individuals competing for

such jobs. [3]

SSA intends to clarify the regulations at issue in this case, 20 CFR

404.1563 and 416.963, through the rule making process and may rescind this

Ruling once such clarification is made.

1 Although the court of appeals'

decision in Kerns concerned the interpretation of certain

provisions of the title II disability program regulations, the title XVI

disability program regulations contain provisions identical to those at

issue in Kerns . Therefore, this Ruling extends to both title

II and title XVI disability claims.

2 Section 404.1563 and the

corresponding title XVI regulation, section 416.963, are entitled "Your

age as a vocational factor." Sections 404.1563(b)-(d) and 416.963(b)-(d)

specify three age categories: "Younger person" (under age 50); "Person

approaching advanced age" (age 50-54); and "Person of advanced age" (age

55 or over). The last category includes a subcategory -- a person close to

retirement age (age 60-64).

3 Although rejecting SSA's

interpretation of "highly marketable" skills, the Eighth Circuit in Kerns did not set forth specific, alternative criteria for

determining when a claimant's skills may be considered "highly

marketable." Therefore, in the absence of a statement by the Eighth

Circuit of a specific definition, we have adopted, for purposes of this

Ruling, the standard articulated in Preslar v. Secretary of Health

and Human Services , 14 F.3d 1107 (6th Cir

Eighth Circuit in Kerns did not set forth specific, alternative criteria for

determining when a claimant's skills may be considered "highly

marketable." Therefore, in the absence of a statement by the Eighth

Circuit of a specific definition, we have adopted, for purposes of this

Ruling, the standard articulated in Preslar v. Secretary of Health

and Human Services , 14 F.3d 1107 (6th Cir. 1994), for which we

published Acquiescence Ruling

95-1(6) , for determining when the skills of a claimant close to

retirement age may be considered "highly marketable." Although this

standard was not specifically adopted or discussed by the court in Kerns , the court did cite portions of the Preslar decision in support of its holding in Kerns .