SSR 89-7c: SECTION 203(f)(4)(A), 203(h)(3), 205(c)(2)(A), AND 205(c)(4)(C) OF THE SOCIAL SECURITY ACT (42 U.S.C. 403(f)(4)(A), 403(h)(3), 405(c)(2)(A), AND 405(c)(4)(C)) WORK DEDUCTIONS — SUBSTANTIAL SERVICES IN SELF-EMPLOYMENT — EVIDENTIARY REQUIREMENTS

SSR 89-7c

EFFECTIVE/PUBLICATION DATE: 10/23/89

20 CFR 404.435(e) , 404.446(c) , 404.705 , AND 404.803(c)(3)

Ciccone v. Sec. of HHS, 861 F.2d 14 (2nd Cir. 1988)

The claimant, who was self-employed, applied for old-age insurance

benefits, contending that he had retired at the end of June 1983. He

submitted a portion of his tax return for 1983, which showed $12,000

self-employment income. The Secretary asked the claimant for more

information regarding his occupation and work practices to determine

whether the claimant had retired and, if so, when. He refused to supply

the information, and the Secretary decided to withhold benefits for work

deductions. After the District Court affirmed the Secretary's decision,

the claimant appealed to the U.S. Court of Appeals for the Second Circuit.

The Court of Appeals held that the Secretary's determination was

proper and found that 20 CFR

404.446(c) did not violate the claimant's Fifth Amendment rights. The

Court of Appeals rejected the claimant's first argument that, because he

last filed a self-employment tax return for 1983, he had proven

conclusively under 42 U.S.C. 405(c)(4)(C) that he had retired. Subject to

few exceptions, 42 U.S.C. 405(c)(4)(C) provides that, after the expiration

of the 3-year, 3-month, and 15-day time limitation following the year in

which wages were paid or self-employment income was received, the absence

of an entry in the Secretary's records as to an individual's

self-employment income for that year is conclusive evidence that the

individual did not receive self-employment income in that year. The Court

found that the conclusive presumption in 42 U.S.C. 405(c)(4)(C) applies

only to situations when self-employed individuals attempt, after the time

limitation, to establish earnings for coverage purposes and that 42 U.S.C.

403(f)(4)(A) is controlling for deduction purposes

or that year is conclusive evidence that the

individual did not receive self-employment income in that year. The Court

found that the conclusive presumption in 42 U.S.C. 405(c)(4)(C) applies

only to situations when self-employed individuals attempt, after the time

limitation, to establish earnings for coverage purposes and that 42 U.S.C.

403(f)(4)(A) is controlling for deduction purposes. Section 403(f)(4)(A)

specifies that the Secretary will presume a self-employed individual is

rendering substantial services in his or her trade(s) or business(es),

unless the individual shows to the satisfaction of the Secretary,

according to methods and criteria which the regulations prescribe, that he

or she is not doing so. The Court noted that the implementing regulations, 20 CFR 404.435(e) and 404.446(c) , require

individuals to submit detailed information regarding their trades or

businesses to prove that they are not rendering substantial services. The

Court concluded that such a requirement is "a legitimate prerequisite to

an applicant's receipt of benefits." The Court also rejected the

claimant's second argument that 20 CFR 404.446(c) violated

his Fifth Amendment right against self-incrimination. The Court found that

such a right applies only when the information being requested is

compelled, testimonial, and incriminating, and reasoned that the

Government had not compelled the claimant to file his application because

applying for Social Security benefits is purely voluntary.

MESKILL, Circuit Judge:

Plaintiff-appellant Anthony Ciccone appeals from an order entered in the

United States District Court for the Eastern District of New York,

Nickerson, J., dismissing his appeal from a decision of the Secretary of

the Department of Health and Human Services (Secretary). Ciccone claims

that the Secretary improperly denied his application for retirement

benefits in violation of statute and the Fifth Amendment to the United

States Constitution.

r entered in the

United States District Court for the Eastern District of New York,

Nickerson, J., dismissing his appeal from a decision of the Secretary of

the Department of Health and Human Services (Secretary). Ciccone claims

that the Secretary improperly denied his application for retirement

benefits in violation of statute and the Fifth Amendment to the United

States Constitution.

The district court concluded that Ciccone's refusal to state his former

occupation constituted a valid reason to deny his claim and that the Fifth

Amendment cannot be used to "frustrate the collection of highly relevant

information the submission of which is a fair prerequisite to receipt of

benefits." Ciccone v. Bowen, No. 86 Civ. 795, slip op. at 4 (E.D.N.Y. Mar.

3, 1988) [available on WESTLAW, 1988 WL23537], App. of Appellant at 89. We

affirm the decision of the district court.

BACKGROUND

Appellant Ciccone, a self-employed individual, filed for old age insurance

benefits under the Social Security Act, 42 U.S.C. § 402(a) (1982 &

Supp. IV 1986), on August 18, 1983, claiming that he had retired at the

end of June 1983. App. of Appellant at 45-48. In support of his

application, Ciccone filed a copy of his 1983 federal tax return with the

Secretary. Id. at 62-65. Appellant has not filed a tax return since

1983. [1] Neither his application

nor his 1983 tax return revealed Ciccone's occupation, id. at 62-65, and

when requested by the Secretary's to supply this information, Ciccone

refused. Id. at 37-40, 49, 52-54. Although there was no evidence that

Ciccone had not retired and he had stated, under oath, that he had

retired, id. at 42-43, the Secretary claimed he needed to know what

appellant's occupation had been to determine whether appellant had stopped

working.

occupation, id. at 62-65, and

when requested by the Secretary's to supply this information, Ciccone

refused. Id. at 37-40, 49, 52-54. Although there was no evidence that

Ciccone had not retired and he had stated, under oath, that he had

retired, id. at 42-43, the Secretary claimed he needed to know what

appellant's occupation had been to determine whether appellant had stopped

working.

Because appellant failed to furnish the requested information, the

Secretary ruled that he could not receive benefits. Id. at 53. This ruling

was affirmed by the Secretary on reconsideration, id. at 55-58, by an

Administrative Law Judge, id. at 19-23, and by the district court, Ciccone

v. Bowen, No. 86 Civ. 795 (E.D.N.Y. Mar. 3, 1988), App. of Appellant at

86-90.

On appeal, Ciccone claims that he has proved his retirement and therefore

is entitled to receive social security benefits. Second, he claims that

his Fifth Amendment right not to incriminate himself allows him to refuse

to provide the information requested by the Secretary and still be

eligible for benefits.

DISCUSSION

The Social Security Act provides for benefits to be paid to retirees in an

amount based, in part, on prior and current wages. 42 U.S.C. §§ 402(a),

415(a)(1)(A) (1982), 415(f)(2) (1982 & Supp. IV 1986). The Secretary

is empowered to make regulations concerning proof of entitlement, 42

U.S.C. § 405(a) (1982), and is required to keep records of past wages of

self-employed individuals, 52 U.S.C. § 405(c)(2)(A). If the Secretary's

records contain no evidence of self-employment wages for a certain period,

and if no tax return has been filed for that period, then the records are

"conclusive" as to the absence of earnings for that period after a

limitations period of three years, three months and fifteen days has

expired. 42 U.S.C. §§ 405(c)(1)(B), 405(c)(4)(C). See Yoder v. Harris, 650

F.2d 1170, 1171-73 (10th Cir. 1981); Shore v. Califano, 589 F.2d 1232,

1233 (3d Cir. 1978); Taylor v

d,

and if no tax return has been filed for that period, then the records are

"conclusive" as to the absence of earnings for that period after a

limitations period of three years, three months and fifteen days has

expired. 42 U.S.C. §§ 405(c)(1)(B), 405(c)(4)(C). See Yoder v. Harris, 650

F.2d 1170, 1171-73 (10th Cir. 1981); Shore v. Califano, 589 F.2d 1232,

1233 (3d Cir. 1978); Taylor v. Weinberger, 528 F.2d 1153, 1155 (4th Cir.

1975); Singer v. Weinberger,513 F.2d 176, 177-78 (9th Cir. 1975). If an

individual earns wages during a period in which he or she otherwise is

entitled to benefits, i.e., after "retirement," deductions will be taken

against the amount to which the individual is entitled. 42 U.S.C. § 403

(1982 & Supp. IV 1986). In the case of a self-employed individual,

these deductions will be taken unless the individual proves to the

Secretary that he or she received no outside income. 42 U.S.C. §

403(f)(4)(A). Section 403(f)(4)(A) provides that

[a]n individual will be presumed, with respect to any month, to have been

engaged in self-employment in such month until it is shown to the

satisfaction of the Secretary that such individual rendered no substantial

services in such month.... The Secretary shall by regulations prescribe

the methods and criteria for determining whether or not an individual has

rendered substantial services with respect to any trade or business.

Id. Nevertheless, appellant argues that section 405(c)(4)(C) is

controlling, and that his failure to file tax returns subsequent to 1983

is conclusive evidence of retirement. We disagree.

We begin by noting that at the time the Secretary denied appellant's

claim, the "conclusive" presumption of section 405(c)(4)(C) did not apply

to any year for which Ciccone claimed benefits because the limitations

period had not yet expired. Even if we were to find that it did apply,

Ciccone's argument would fail.

rns subsequent to 1983

is conclusive evidence of retirement. We disagree.

We begin by noting that at the time the Secretary denied appellant's

claim, the "conclusive" presumption of section 405(c)(4)(C) did not apply

to any year for which Ciccone claimed benefits because the limitations

period had not yet expired. Even if we were to find that it did apply,

Ciccone's argument would fail.

The purpose of the self-employment provisions of section 405 was to

provide a mechanism for self-employed individuals to record their wages

with the Secretary, so that they can show that they meet minimum length of

employment requirements and therefore become eligible for benefits. See

Jabbar v. Secretary of Health and Human Services, 855 F.2d 295, 298 (6th

Cir. 1988) (Congress viewed a "timely filed tax return . . . as sufficient

to bring self-employed persons into the social security system") (per

curiam); Weisbraut v. Secretary of the Department of Health and Human

Services, 757 F.2d 83, 85 (3d Cir.) (Congress had been concerned with

claims of earnings of which there was no record), cert. denied, 474 U.S.

852, 106 S.Ct. 152, 88 L.Ed.2d 125 (1985). As we have stated, section

405(c)(4)(C) "addresses the situation . . . where a claimant wishes to

create a social security self-employment earnings record after the . . .

time limit." Hollman v. Department of Health and Human Services, 696 F.2d

13, 16-17 (2d Cir. 1982).

h

claims of earnings of which there was no record), cert. denied, 474 U.S.

852, 106 S.Ct. 152, 88 L.Ed.2d 125 (1985). As we have stated, section

405(c)(4)(C) "addresses the situation . . . where a claimant wishes to

create a social security self-employment earnings record after the . . .

time limit." Hollman v. Department of Health and Human Services, 696 F.2d

13, 16-17 (2d Cir. 1982).

Appellant, however, is not attempting to prove that this earnings are

sufficient to entitle him to benefits. Rather, he is trying to prove that

he is retired. Section 405(c)(4)(C) cannot be read in this circumstance to

require that a conclusive effect be given to Ciccone's failure to file a

tax return after 1983. That section's "conclusive" presumption applies

only to situations where a self-employed individual has waited too long to

attempt to prove that he or she has had past earnings. Where an applicant

attempts to prove the converse — that there have been no earnings

— a lack of evidence in the Secretary's records is insufficient

proof. Congress has specifically provided for this situation in section

403(f)(4)(A), which requires the applicant to present more detailed

information than appellant has done here.

We cannot disregard the express provisions of section 403(f)(4)(A). It has

been held that section 405(c)(4)(C) cannot be read alone, but should be

interpreted in light of other relevant statutory provisions. Hendrickson

v. Secretary of Health and Human Services, 765 F.2d 747, 750 (8th Cir.)

(citing Grigg v. Finch, 418 F.2d 661, 664 (6th Cir. 1969)), vacated as

moot, 774 F.2d 1355 (8th Cir. 1985). When read in conjunction with section

403(f)(4)(A), a more specific section of the Social Security Act, it is

clear that Congress did not intend the absence of a tax return to prove

that an individual is retired and therefore entitled to benefits. To the

contrary, such a result would encourage the very kind of spurious claims

that Congress intended to discourage

.2d 1355 (8th Cir. 1985). When read in conjunction with section

403(f)(4)(A), a more specific section of the Social Security Act, it is

clear that Congress did not intend the absence of a tax return to prove

that an individual is retired and therefore entitled to benefits. To the

contrary, such a result would encourage the very kind of spurious claims

that Congress intended to discourage. See Hollman, 696 F.2d at 17.

Appellant must comply with section 403(f)(4)(A) to be eligible for

benefits.

The regulations implementing section 403(f)(4)(A) require individuals to

submit detailed information regarding their trade or business to prove

that they are retired. 20

C.F.R. § 404.446(c) (1988). Requirements such as these ar a legitimate

prerequisite to an applicant's receipt of benefits. See Schweiker v.

Hansen, 450 U.S. 785, 786, 788 790, 101 S.Ct. 1468, 1469, 1470, 1471, 67

L.Ed.2d 685 (1981) (regulations requiring written application not

impermissible; courts must observe congressional conditions for spending

public funds through Social Security Administration programs) (per

curiam). Ciccone admittedly did not furnish evidence regarding the nature

of his business to the Secretary; this is a sufficient ground for a

"determination that the [appellant] rendered substantial services in

self-employment" after June 1983, 20 C.F.R. § 404.446(c) .

Thus, appellant's application was properly denied.

public funds through Social Security Administration programs) (per

curiam). Ciccone admittedly did not furnish evidence regarding the nature

of his business to the Secretary; this is a sufficient ground for a

"determination that the [appellant] rendered substantial services in

self-employment" after June 1983, 20 C.F.R. § 404.446(c) .

Thus, appellant's application was properly denied.

Appellant Ciccone's second contention is that the regulations requiring

him to state his occupation violate his constitutional right not to

incriminate himself. This argument is without merit. It is only when the

required information is compelled, testimonial and incriminating that the

Fifth Amendment privilege protects an individual's right to refuse to give

information. See Doe v. United States, _____ U.S. _____, _____, 108 S.Ct

2341, 2345, 101 L.Ed. 2d 184 (1988). Applying for benefits is a voluntary

action. It is in no way compelled by the government. In Selective Service

System v. Minnesota Public Interest Research Group, 468 U.S. 841, 104

S.Ct. 3348, 82 L.Ed.2d 632 (1984), the Supreme Court examined the Military

Selective Service Act, which requires males between the ages of eighteen

and twenty-six to comply with draft registration laws in order to be

eligible for federal financial aid for education. The Court stated that

a person who has not registered [for the draft] clearly is under no

compulsion to seek financial aid [for education]; if he has not

registered, he is simply ineligible for aid. Since a nonregistrant is

bound to know that his application for federal aid would be denied, he is

in no sense under any "compulsion" to seek that aid.

for federal financial aid for education. The Court stated that

a person who has not registered [for the draft] clearly is under no

compulsion to seek financial aid [for education]; if he has not

registered, he is simply ineligible for aid. Since a nonregistrant is

bound to know that his application for federal aid would be denied, he is

in no sense under any "compulsion" to seek that aid.

Id. at 856-57, 104 S.Ct. at 3357. The situations in Selective Service and

in the case at bar are analogous. Ciccone was not compelled to file for

social security benefits, nor are they a constitutionally protected

entitlement, see United States Railroad Retirement Board v. Fritz, 449

U.S. 166, 174, 101 S.Ct. 453, 459, 66 L.Ed.2d 368 (1980) ("railroad

benefits, like social security benefits, are not contractual and may be

altered or even eliminated at any time"); Califano v. Goldfarb, 430 U.S.

199, 210, 97 S.Ct. 1021, 1028, 51 L.Ed.2d 270 (1977) (Brennan J.)

(plurality opinion) ("Congress has wide latitude to create classifications

that allocate noncontractual benefits under a social welfare program");

Richardson v. Belcher, 404 U.S. 78, 80, 92 S.Ct. 254, 257, 30 L.Ed.2d 231

(1971) ("The fact that social security benefits are financed in part by

taxes on an employee's wages does not in itself limit the power of

Congress to fix the levels of benefits under the Act or the conditions

upon which they may be paid."); Flemming v. Nestor, 363 U.S. 603, 608-10

S.Ct. 1367, 1371-72, 4 L.Ed.2d 1435 (1960) ("eligibility for benefits . .

. do[es] not in any true sense depend on contribution to the program

through the payment of taxes. . . . [T]he noncontractual interest of an

employee covered by the Act cannot be soundly analogized to that of the

holder of an annuity, whose right to benefits is bottomed on his

contractual premium payments."); see also Pineman v. Oechslin, 637 F.2d

601, 605 (2d Cir. 1981) (citing Flemming).

do[es] not in any true sense depend on contribution to the program

through the payment of taxes. . . . [T]he noncontractual interest of an

employee covered by the Act cannot be soundly analogized to that of the

holder of an annuity, whose right to benefits is bottomed on his

contractual premium payments."); see also Pineman v. Oechslin, 637 F.2d

601, 605 (2d Cir. 1981) (citing Flemming).

Thus, simply because the government provides benefits to those who qualify

and who comply with its regulations, does not mean that it must give

benefits to all those who apply regardless of their compliance with those

regulations. Nor does it mean that one who has relied on the promise of

benefits to come is compelled to file for them upon retirement. Mr.

Ciccone fails to meet the first test for claiming the protection of the

privilege of the Fifth Amendment: his application was not compelled.

Because Ciccone was not compelled to file for social security benefits,

his situation is distinguishable from those cases where the Supreme Court

has hinted that compelled responses to specific questions on certain forms

or reports required to be filed with the government may be

unconstitutional. See, e.g., Garner v. United States, 424 U.S. 648, 650,

662 n. 16, 96 S.Ct. 1178, 1180, 1186 n. 16, 47 L.Ed.2d 370 (1976) (Fifth

Amendment not defense to failure to file income tax return) (citing United

States v. Sullivan, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037 (1927));

California v. Byers,402 U.S. 424, 434 n. 6, 91 S.Ct. 1535, 1541 n. 6, 29

L.Ed.2d 9 (1971) (plurality opinion) (statute requiring drivers involved

in accidents to furnish their names and addresses does not violate Fifth

Amendment). The Fifth Amendment does not protect appellant from having to

reveal the nature of his business in this case.

74 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037 (1927));

California v. Byers,402 U.S. 424, 434 n. 6, 91 S.Ct. 1535, 1541 n. 6, 29

L.Ed.2d 9 (1971) (plurality opinion) (statute requiring drivers involved

in accidents to furnish their names and addresses does not violate Fifth

Amendment). The Fifth Amendment does not protect appellant from having to

reveal the nature of his business in this case.

For the foregoing reasons, we hold that the Secretary properly denied

Ciccone's claim and that it did not violate his Fifth Amendment rights to

require information concerning the nature of his business before awarding

him retirement benefits. We therefore affirm the order of the district

court.

[1] Appellant died after this

action was begun. Br. of Appellant at 1. Although no motion for

substitution of parties has been made, see Fed.R.Civ.P. 25(a)(1), this

defect is not fatal since no suggestion of death was made to the district

court. See Coffee v. Cutter Biological , 809 F.2d 191, 193 n. 1 (2d

Cir. 1987). Similarly, although no motion for substitution has been filed

in this Court, see Fed.R.App.P. 43(a), we may proceed to decide Ciccone's

appeal. See Hardie v. Cotter and Co ., 849 F.2d 1097, 1098 n. 2 (8th

Cir. 1988); Wright v. Commercial Union Insurance Co. , 818 F.2d 832,

834 n. 1 (11th Cir. 1987).