[Federal Register Document 99-9427 Filed 4-14-99]


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.
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 Register
on February 16, 1999 (64 FR 7559). In the NPRM, we proposed 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.
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.
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.)
Fiscal year

Total
1999-
1999 2000 2001 2002 2003 2004 2004

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

Subtotal, all programs 75 130 180 225 280 330 1220

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):
Fiscal year

Total
1999-
Medicaid 1999 2000 2001 2002 2003 2004 2004

State Share 30 45 55 55 70 75 330

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
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
earnings
averaged
more
For months 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
earnings
averaged
more
For months 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
earnings
are not
greater
For months 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

* * * * *
PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND AND DISABLED

1. The authority citation for subpart I of part 416 continues to read as
follows:

Authority: Secs. 702(a)(5), 1611, 1614, 1619, 1631(a), (c) and (d)(1), and
1633 of the Social Security Act (42 U.S.C. 902(a)(5), 1382, 1382c, 1382h,
1383(a), (c) and (d)(1), and 1383b); secs. 4(c) and 5, 6(c)-(e), 14(a) and
15, Pub. L. 98-460, 98 Stat. 1794, 1801, 1802, and 1808 (42 U.S.C. 421 note,
423 note, 1382h note).

2. Section 416.974 is amended by revising paragraphs (b)(2), (b)(3), and
(b)(4) to read as follows:
Sec. 416.974 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
earnings
averaged
more
For months 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
earnings
averaged
less
For months 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
monthly
earnings
averaged
more
For months 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

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