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[Federal Register Volume 80, Number 73 (Thursday, April 16, 2015)]
[Proposed Rules]
[Pages 21059-21146]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-05538]

Federal Register / Vol. 80 , No. 73 / Thursday, April 16, 2015 / 
Proposed Rules

[[Page 21059]]

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DEPARTMENT OF EDUCATION

34 CFR Parts 361, 363, and 397

RIN 1820-AB70
[Docket ID ED-2015-OSERS-OOO1]

State Vocational Rehabilitation Services Program; State Supported 
Employment Services Program; Limitations on Use of Subminimum Wage

AGENCY: Office of Special Education and Rehabilitative Services, 
Department of Education.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Secretary proposes to amend the regulations governing the 
State Vocational Rehabilitation Services program and the State 
Supported Employment Services program in order to implement changes to 
the Rehabilitation Act of 1973, as amended by the Workforce Innovation 
and Opportunity Act (WIOA) enacted on July 22, 2014. The Secretary also 
proposes to update, clarify, and improve the current regulations.
    Finally, the Secretary proposes to issue new regulations regarding 
limitations on the use of subminimum wages that are added by WIOA and 
under the purview of the Department.

DATES: We must receive your comments on or before June 15, 2015.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``Are you new to the site?''
     Postal Mail, Commercial Delivery, or Hand Delivery: If you 
mail or deliver your comments about these proposed regulations, address 
them to Janet LaBreck, U.S. Department of Education, 400 Maryland 
Avenue SW., Room 5086, Potomac Center Plaza (PCP), Washington, DC 
20202-2800.
    Privacy Note: The Department's policy is to make all comments 
received from members of the public available for public viewing in 
their entirety on the Federal eRulemaking Portal at 
www.regulations.gov. Therefore, commenters should be careful to include 
in their comments only information that they wish to make publicly 
available.

FOR FURTHER INFORMATION CONTACT: Janet LaBreck, U.S. Department of 
Education, 400 Maryland Avenue SW., Room 5086, PCP, Washington, DC 
20202-2800. Telephone: (202) 245-7488 or by email: 
Janet.LaBreck@ed.gov.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION:

Executive Summary

    Purpose of This Regulatory Action: The Secretary proposes to amend 
the regulations governing the State Vocational Rehabilitation Services 
program (VR program) (34 CFR part 361) and State Supported Employment 
Services program) (Supported Employment program) (34 CFR part 363), 
administered by the Rehabilitation Services Administration (RSA), to 
implement changes to the Act made by WIOA (P.L. 113-128), enacted on 
July 22, 2014. In so doing, the Secretary also proposes to update and 
clarify current regulations to improve program function. Finally, the 
Secretary proposes to promulgate regulations in 34 CFR part 397 that 
implement the limitations on the payment of subminimum wages to 
individuals with disabilities in section 511 of the Act that fall under 
the purview of the Secretary.
    For a more detailed description of the purpose of these proposed 
regulatory actions, see the Background section in this notice of 
proposed rulemaking (NPRM).
    Summary of the Major Provisions of This Regulatory Action: We 
summarize here those proposed regulatory changes needed to implement 
the amendments to the Act made by WIOA. Under the Proposed Changes 
section of this NPRM, we provide a more complete summary of these 
changes and a detailed description of the substantive proposed 
regulations for each part in the order it appears in the Code of 
Federal Regulations (CFR). We also describe in detail under the 
Proposed Changes section the amendments to each part to update, 
clarify, and improve the regulations.
    The Secretary proposes to implement the following changes to the VR 
program and Supported Employment program made by WIOA.

State Vocational Rehabilitation Services Program

    People with disabilities represent a vital and integral part of our 
society, and we are committed to ensuring that individuals with 
disabilities have opportunities to compete for and enjoy high quality 
employment in the 21st century global economy. Some individuals with 
disabilities face particular barriers to high quality employment. 
Giving workers with disabilities the supports and the opportunity to 
acquire the skills that they need to pursue in-demand jobs and careers 
is critical to growing our economy, ensuring that everyone who works 
hard is rewarded, and building a strong middle class. To help achieve 
this priority for individuals with disabilities, the Rehabilitation Act 
of 1973, as amended by WIOA, seeks to empower individuals with 
disabilities to maximize employment, economic self-sufficiency, 
independence, and inclusion and integration into society.
    The VR program is authorized by title I of the Act, as amended by 
WIOA (29 U.S.C. 720 et seq.), to provide support to each State to 
assist in operating a statewide comprehensive, coordinated, effective, 
efficient, and accountable State program as an integral part of a 
statewide workforce development system; and to assess, plan, and 
provide vocational rehabilitation (VR) services to individuals with 
disabilities so that those individuals may prepare for and engage in 
competitive integrated employment consistent with their unique 
strengths, priorities, concerns, abilities, capabilities, interests, 
and informed choice. The Department last published regulations for this 
program in part 361 on January 17, 2001 (66 FR 4382), to implement 
amendments made by the Workforce Investment Act of 1998.
    WIOA makes significant changes to title I of the Act that affect 
the VR program. First, WIOA strengthens the alignment of the VR program 
with other components of the workforce development system by imposing 
unified strategic planning requirements, common performance 
accountability measures, and requirements governing the one-stop 
delivery system. This alignment brings together entities responsible 
for administering separate workforce and employment, educational, and 
other human resource programs and funding streams to collaborate in the 
creation of a seamless custom-focused service delivery network that 
integrates service delivery across programs, enhances access to the 
program's services, and improves long-

[[Page 21060]]

term employment outcomes for individuals receiving assistance. In so 
doing, WIOA places heightened emphasis on coordination and 
collaboration at the Federal, State, and local levels to ensure a 
streamlined and coordinated service delivery system for job-seekers, 
including those with disabilities, and employers. Therefore, the 
Departments of Education and Labor propose to issue a joint NPRM to 
implement jointly administered activities under title I of WIOA (e.g., 
those related to Unified or Combined State Plans, performance 
accountability, and the one-stop delivery system), applicable to the 
workforce development system's core programs (Adult, Dislocated Worker 
and Youth programs; Adult Education and Literacy programs; Wagner-
Peyser Employment Service program and the Vocational Rehabilitation 
program). These joint proposed regulations are set forth in a separate 
NPRM published elsewhere in this issue of the Federal Register.
    WIOA also makes corresponding changes to title I of the Act. 
Consequently, we propose to make conforming changes throughout part 361 
and align the VR program-specific regulations with the joint proposed 
regulations to ensure consistency among all core programs.
    Second, WIOA places heightened emphasis throughout the Act on the 
achievement of competitive integrated employment. The foundation of the 
VR program is the principle that individuals with disabilities, 
including those with the most significant disabilities, are capable of 
achieving high quality, competitive integrated employment when provided 
the necessary skills and supports. To increase the employment of 
individuals with disabilities in the competitive labor market, the 
workforce system must provide the opportunity for such individuals to 
participate in job-driven training and pursue high-quality employment 
outcomes. The amendments to the Act--from the stated purpose of the 
Act, to the expansion of services designed to maximize the potential of 
individuals with disabilities, including those with the most 
significant disabilities, to achieve competitive integrated employment, 
and, finally, to the inclusion of limitations on the payment of 
subminimum wages to individuals with disabilities--reinforce the 
congressional intent that individuals with disabilities, with 
appropriate supports and services, are able to achieve the same kinds 
of competitive integrated employment as non-disabled individuals.
    As a result, we propose to amend part 361 throughout to emphasize 
the key role that the VR program plays in employment outcomes and 
preparing individuals with disabilities to achieve competitive 
integrated employment in the community. We propose, among other things, 
to amend the definition of ``employment outcome'' to include only those 
outcomes in competitive integrated employment or supported employment, 
thereby eliminating uncompensated employment from the scope of 
employment outcomes for purposes of the VR program. We also propose to 
amend numerous other provisions throughout part 361 to address the 
expansion of available services, requirements related to the 
development of the individualized plan for employment, and order of 
selection for services, all of which are intended to maximize the 
potential for individuals with disabilities to prepare for, obtain, 
retain, and advance in the same high-quality jobs, and high demand 
careers as persons without disabilities.
    Third, WIOA places heightened emphasis on the provision of services 
to students and youth with disabilities to ensure that they have 
meaningful opportunities to receive the training and other services 
they need to achieve employment outcomes in competitive integrated 
employment. The Act, as amended by WIOA, expands not only the 
population of students with disabilities who may receive services but 
also the kinds of services that the VR agencies may provide to youth 
and students with disabilities who are transitioning from school to 
postsecondary education and employment.
    Most notably, the Act, as amended by WIOA, requires States to 
reserve 15 percent of their VR allotment to provide pre-employment 
transition services to students with disabilities who are eligible or 
potentially eligible for VR services. These pre-employment transition 
services are designed to provide job exploration and other services, 
such as counseling and self-advocacy training, in the early stages of 
the transition process.
    With the addition of these early pre-employment transition 
services, the VR program can be characterized as providing a continuum 
of VR services, especially for students and youth with disabilities. To 
that end, we propose to amend numerous sections of part 361 to 
implement new definitions for the terms ``student with a disability'' 
and ``youth with a disability'' and new requirements related to pre-
employment transition services and the provision of transition services 
to students and youth with disabilities. All of the proposed changes 
demonstrate the continuum of services available to students and youth 
with disabilities under the VR program to maximize their potential to 
transition from school to postsecondary education and employment.

Supported Employment Program

    WIOA makes several significant changes to title VI of the Act, 
which governs the Supported Employment program. All of the amendments 
to title VI are consistent with those made throughout the Act, namely 
to maximize the potential of individuals with disabilities, especially 
those with the most significant disabilities, to achieve competitive 
integrated employment and to expand services for youth with the most 
significant disabilities.
    First, WIOA amends the definition of ``supported employment'' to 
make clear that supported employment outcomes must be in competitive 
integrated employment or, if in an integrated setting that is not 
competitive integrated employment, then in an integrated setting in 
which the individual is working on a short-term basis toward 
competitive integrated employment. By adding a timeframe to this 
definition, Congress reinforces its intention that individuals with 
disabilities should not be allowed to languish in subminimum wage jobs 
under the Supported Employment program. Thus, the Secretary proposes to 
amend part 363 to implement the revised definition of ``supported 
employment.'' The Secretary proposes to define ``short-term basis'' in 
this context to mean no longer than six months. We believe this 
proposed change is consistent with the Act, as amended by WIOA, in its 
entirety as well as the stated congressional intent.
    Second, WIOA requires States to reserve at least 50 percent of 
their supported employment program allotment for the provision of 
supported employment services to youth with the most significant 
disabilities. With these reserved funds, States may provide extended 
services, for a period up to four years, to youth with the most 
significant disabilities. Prior to the enactment of WIOA, extended 
services were not permitted under either the VR program or the 
Supported Employment program. In addition, States must provide a non-
Federal share of 10 percent of the funds reserved for the provision of 
supported employment services to youth with the most significant 
disabilities. By requiring that States use half of their supported 
employment program funds and provide a match for these reserved funds,

[[Page 21061]]

Congress reinforces the heightened emphasis on the provision of 
services to youth with disabilities. Congress makes clear that youth 
with significant disabilities must be given every opportunity to 
receive the services necessary to ensure the maximum potential to 
achieve competitive integrated employment. Accordingly, the Secretary 
proposes to amend part 363 to implement new requirements regarding the 
reservation of funds, and the services to be provided with those funds, 
to youth with the most significant disabilities.

Limitations on the Payment of Subminimum Wages

    Section 511 of the Act, as added by WIOA, imposes requirements on 
employers who hold special wage certificates under the Fair Labor 
Standards Act (FLSA) that must be satisfied before the employers may 
hire youth with disabilities at subminimum wage or continue to employ 
individuals with disabilities of any age at the subminimum wage level. 
Section 511 also establishes the roles and responsibilities of the 
designated State units (DSU) for the VR program and State and local 
educational agencies in assisting individuals with disabilities, 
including youth with disabilities, to maximize opportunities to achieve 
competitive integrated employment through services provided by VR and 
the local educational agencies.
    The addition of section 511 to the Act is consistent with all other 
amendments to the Act made by WIOA. Throughout the Act, Congress makes 
clear that individuals with disabilities, including those with the most 
significant disabilities, can achieve competitive integrated employment 
if provided the necessary supports and services. The limitations 
imposed by section 511 reinforce this belief by requiring individuals 
with disabilities, including youth with disabilities, to satisfy 
certain service-related requirements in order to start or maintain, as 
applicable, subminimum wage employment. To that end, the Secretary 
proposes to develop new regulations at part 397 that would implement 
requirements of section 511 that fall under the purview of the 
Department.
    Costs and Benefits: The potential costs associated with this 
regulatory action are those resulting from statutory requirements and 
those we have determined as necessary for administering the 
Department's programs and activities. Further information related to 
costs and benefits may be found in the Regulatory Impact Analysis 
section later in this NPRM.
    Invitation to Comment: We invite you to submit comments regarding 
these proposed regulations. To ensure that your comments have maximum 
effect in developing the final regulations, we urge you to identify 
clearly the specific section or sections of the proposed regulations 
that each of your comments addresses and to arrange your comments in 
the same order as the proposed regulations.
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866 and 13563 and their overall 
requirement of reducing regulatory burden that might result from these 
proposed regulations. Please let us know of any further ways we could 
reduce potential costs or increase potential benefits while preserving 
the effective and efficient administration of the Department's programs 
and activities.
    During and after the comment period, you may inspect all public 
comments about these proposed regulations by accessing Regulations.gov. 
You may also inspect the comments in person in room 5093, Potomac 
Center Plaza, 550 12th Street SW., Washington, DC, between 8:30 a.m. 
and 4:00 p.m., Washington, DC time, Monday through Friday of each week 
except Federal holidays. Please contact the person listed under FOR 
FURTHER INFORMATION CONTACT.
    Assistance to Individuals with Disabilities in Reviewing the 
Rulemaking Record: On request we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public rulemaking record for these proposed regulations. If you want to 
schedule an appointment for this type of accommodation or auxiliary 
aid, please contact the person listed under FOR FURTHER INFORMATION 
CONTACT.

Background

    The Workforce Innovation and Opportunity Act (WIOA) (Pub L. 113-
128), enacted July 22, 2014, made significant changes to the 
Rehabilitation Act of 1973 (hereafter referred to as the Act). As a 
result, the Secretary proposes to amend parts 361 and 363 of title 34 
of the CFR. These parts, respectively, implement the:
     State Vocational Rehabilitation (VR) Services program; and
     State Supported Employment Services program.
    In addition, WIOA added section 511 to title V of the Act. Section 
511 limits the payment of subminimum wages to individuals with 
disabilities by employers holding special wage certificates under the 
FLSA. Although the Department of Labor administers the FLSA, some 
requirements of section 511 fall under the purview of the Secretary. 
Therefore, the Secretary proposes to add a new part 397 to title 34 of 
the CFR to implement those particular provisions.
    These proposed changes are further described under the Summary of 
Proposed Changes and Significant Proposed Regulations sections of this 
NPRM. WIOA also makes changes to other programs authorized under title 
I of the Act, including the Client Assistance Program and the American 
Indian Vocational Rehabilitation Services (AIVRS) program, as well as 
discretionary grant programs authorized under title III, the Protection 
and Advocacy of Individual Rights program under title V, and the 
Independent Living Services for Older Individuals Who are Blind program 
under title VII. The Secretary proposes regulatory changes to implement 
the amendments to these programs and projects made by WIOA through a 
separate, but related, NPRM published elsewhere in this issue of the 
Federal Register.

Summary of Proposed Changes

    The Secretary proposes to implement the following changes to the VR 
program and Supported Employment program made by WIOA.

State Vocational Rehabilitation Services Program

    The VR program is authorized by title I of the Act, as amended by 
WIOA (29 U.S.C. 720 through 731, and 733), to provide support to each 
State to assist in operating a statewide comprehensive, coordinated, 
effective, efficient, and accountable State VR program as an integral 
part of a statewide workforce development system; and to assess, plan, 
and provide VR services to individuals with disabilities so that those 
individuals may prepare for and engage in competitive integrated 
employment consistent with their unique strengths, priorities, 
concerns, abilities, capabilities, interests, and informed choice.
    The Department last published regulations for this program in part 
361 on January 17, 2001 (66 FR 4382), to implement amendments made by 
the Workforce Investment Act of 1998 (WIA).
    In implementing the amendments to the VR program made by WIOA, the 
numerous proposed regulatory changes to part 361 improve employment 
outcomes for individuals with disabilities by: (1) Strengthening the 
alignment of the VR program with other components of the workforce

[[Page 21062]]

development system through unified strategic planning requirements, 
common performance accountability measures, and requirements governing 
the one-stop delivery system; (2) emphasizing the achievement of 
competitive integrated employment by individuals with disabilities, 
including individuals with the most significant disabilities; and (3) 
expanding services to support the transition of students and youth with 
disabilities to postsecondary education and employment.
    To implement jointly administered activities under title I of WIOA 
(e.g., those related to Unified or Combined State Plans, performance 
accountability and the one-stop delivery system), the U.S. Departments 
of Labor and Education are proposing a set of joint regulations 
applicable to the workforce development system's core programs, 
including the VR program. Through these proposed joint regulations, we 
lay the foundation for establishing a comprehensive, accessible, and 
high quality workforce development system that serves all individuals 
in need of employment services, including individuals with 
disabilities, and employers in a manner that is customer-focused and 
that supports an integrated service design and delivery model. These 
joint proposed regulations are in a separate NPRM published elsewhere 
in this issue of the Federal Register.
    WIOA makes corresponding changes to title I of the Act regarding 
the submission, approval, and disapproval of the VR services portion of 
the Unified or Combined State Plan; the standards and indicators used 
to assess VR program performance; and the involvement of the VR program 
in the one-stop delivery system. Consequently, we propose to amend 
current Sec.  361.10 to require that all assurance and descriptive 
information previously submitted through the VR State plan and 
supported employment supplement be submitted through the VR services 
portion of the Unified or Combined State Plan under sections 102 and 
103 of the Act, respectively, of WIOA. We also propose to implement 
changes specific to the content of the VR services portion of the 
Unified or Combined State Plan by amending current Sec.  361.29(a) to 
require that the comprehensive statewide needs assessment include the 
results of the needs of students and youth with disabilities for VR 
services, including pre-employment transition services. Additionally, 
we propose to clarify in current Sec.  361.29 that States will report 
to the Secretary updates to the statewide needs assessment and goals 
and priorities, estimates of the numbers of individuals with 
disabilities served through the VR program and the costs of serving 
them, and reports of progress on goals and priorities at such time and 
in such manner determined by the Secretary, thereby resolving 
inconsistencies in reporting requirements within section 101(a) of the 
Act. Finally, we clarify in proposed Sec.  361.20 when designated State 
agencies must conduct public hearings to obtain comment on substantive 
changes to policies and procedures governing the VR program.
    We propose to implement the changes to section 106 of the Act made 
by WIOA through proposed Sec.  361.40, by replacing the current 
standards and indicators used to assess the performance of the VR 
program under current Sec.  361.80 through Sec.  361.89 with a cross-
reference to the joint regulations for the common performance 
accountability measures for the core programs of the workforce 
development system. Similarly, we propose to provide a cross-reference 
in current Sec.  361.23, regarding the roles and responsibilities of 
the VR program in the one-stop delivery system, to the joint 
regulations implementing requirements for the one-stop delivery system.
    WIOA makes extensive changes to title I of the Act to improve the 
VR services provided to, and the employment outcomes achieved by, 
individuals with disabilities, including those with the most 
significant disabilities. Embedded throughout the provisions of WIOA 
and the amendments to the Act is the principle that individuals with 
disabilities, including those with the most significant disabilities, 
are capable of achieving competitive integrated employment when 
provided the necessary skills and supports. As a result, we propose to 
adopt a definition of ``competitive integrated employment'' in Sec.  
361.5(c)(9) that combines, clarifies, and enhances the two separate 
definitions of ``competitive employment'' and ``integrated setting'' 
for the purpose of employment in current Sec.  361.5(b)(11) and 
(b)(33)(ii).
    We propose to incorporate this principle throughout part 361, from 
the statement of program purpose in proposed Sec.  361.1, to a 
requirement in proposed Sec.  361.46(a) that the individualized plan 
for employment include a specific employment goal consistent with the 
general goal of competitive integrated employment. This principle is 
most evident in the definition of ``employment outcome'' in proposed 
Sec.  361.5(c)(15), which specifically identifies customized employment 
as an employment outcome under the VR program, and requires that all 
employment outcomes achieved through the VR program be in competitive 
integrated employment or supported employment, thereby eliminating 
uncompensated outcomes, such as homemakers and unpaid family workers, 
from the scope of the definition for purposes of the VR program. We 
will provide guidance and technical assistance to VR agencies to assist 
them in implementing this proposed change.
    We propose additional regulatory changes to ensure that individuals 
with disabilities are provided a full opportunity through the VR 
program to participate in job-driven training and pursue high-quality 
employment outcomes. Proposed Sec.  361.42(a)(1)(iii) would clarify 
that an applicant meeting all other eligibility criteria may be 
determined eligible if he or she requires services to advance in 
employment, not just obtain or maintain employment. We also propose to 
clarify in proposed Sec. Sec.  361.48(b)(6)and 361.49, that VR services 
are available to assist individuals with disabilities to obtain 
graduate level education needed for this purpose. We clarify in 
proposed Sec.  361.42(c)(1) the prohibition against a duration of 
residency requirement and in Sec.  361.42(c)(2) those factors that 
cannot be considered when determining the eligibility of VR program 
applicants. We propose removing the option to use extended evaluations, 
as a limited exception to trial work experiences, to explore an 
individual's abilities, capabilities, and capacity to perform in work 
situations by deleting paragraph (f) from current Sec.  361.42. To 
enable individuals with disabilities, including students and youth with 
disabilities, to receive VR services in a timely manner, proposed Sec.  
361.45(e) would require the individualized plan for employment of each 
individual to be developed within 90 days following the determination 
of eligibility. Finally, if a State VR agency is operating under an 
order of selection for services, it would have the option under 
proposed Sec.  361.36 to indicate in its portion of the Unified or 
Combined State Plan that it will serve eligible individuals with 
disabilities outside that order who have an immediate need for 
equipment or services to maintain employment.
    WIOA enhances the VR agency's focus on coordination and 
collaboration with other entities by emphasizing coordination with 
employers, non-educational agencies working with youth, AIVRS programs, 
and other agencies and programs providing services to individuals with 
disabilities to support the achievement of competitive integrated 
employment.

[[Page 21063]]

Proposed Sec.  361.24 reflects the enhancements. The collaboration with 
employers is essential to the success of VR program participants and 
proposed Sec.  361.32 would describe the training and technical 
assistance services that can be provided to employers hiring, or 
interested in hiring, individuals with disabilities.
    We propose to implement the emphasis on serving students and youth 
with disabilities contained in the amendments to the Act made by WIOA 
in many regulatory changes to part 361. We propose new definitions of 
``student with a disability'' and ``youth with a disability'' in Sec.  
361.5(c)(51) and (c)(59), respectively. These definitions would assist 
VR agencies to determine the appropriate transition and other services 
that may be provided to each group. We propose in Sec.  361.48(a) to 
implement the requirements of new sections 110(d) and 113 of the Act 
requiring VR agencies to reserve at least 15 percent of the Federal 
allotment, to provide and arrange, in coordination with local 
educational agencies, for the provision of pre-employment transition 
services to students with disabilities. We propose in Sec.  361.49 to 
clarify the technical assistance VR agencies can provide to educational 
agencies and to permit the provision of transition services for the 
benefit of groups of students and youth with disabilities. To enable VR 
agencies and local educational agencies to better determine their 
respective responsibilities for the provision of transition services, 
including pre-employment transition services, through greater 
interagency collaboration, we propose in Sec.  361.22(c) to clarify 
that nothing in this part is to be construed as reducing the 
responsibility of the local educational agencies or any other agencies 
under the Individuals with Disabilities Education Act to provide or pay 
for transition services that are also considered to be special 
education or related services necessary for the provision of a free 
appropriate public education to students with disabilities.
    So that VR agencies can recruit the qualified personnel needed to 
provide the services and engage in the activities summarized here, we 
propose in Sec.  361.18 changes to the requirements for a comprehensive 
system of personnel development. The proposed regulations would 
establish minimum educational requirements and experience and eliminate 
the requirement to retrain staff not meeting the VR agency's personnel 
standard for qualified staff.
    Finally, we propose changes to part 361 to improve the fiscal 
administration of the VR program. Proposed Sec.  361.5(b) would make 
applicable to the VR program the definitions contained in 2 CFR part 
200, Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements. We also propose to make numerous conforming changes to 
align with 2 CFR 200 to ensure consistency.
    We propose three changes to current Sec.  361.65 regarding the 
allotment of VR program funds. First, we propose adding a new paragraph 
(a)(3) to Sec.  361.65 that would require the State to reserve not less 
than 15 percent of its allotment for the provision of pre-employment 
transition services described in proposed Sec.  361.48(a). Second, we 
propose to amend current Sec.  361.65(b)(2) to clarify that reallotment 
occurs in the fiscal year the funds were appropriated; however, the 
funds may be obligated or expended during the period of performance, 
provided that matching requirements are met. Finally, we propose to add 
a new paragraph (b)(3) to Sec.  361.65 that would describe the 
Secretary's authority to determine the criteria to be used to reallot 
funds when the amount requested exceeds the amount of funds 
relinquished. We provide a full discussion of these and other changes 
to part 361 in the Significant Proposed Regulations section of this 
notice.

State Supported Employment Services Program

    Under the Supported Employment program authorized under title VI of 
the Act (29 U.S.C. 795g et seq.), the Secretary provides grants to 
assist States in developing and implementing collaborative programs 
with appropriate entities to provide supported employment services for 
individuals with the most significant disabilities, including youth 
with the most significant disabilities, to enable them to achieve 
supported employment outcomes in competitive integrated employment. 
Grants made under the Supported Employment program supplement grants 
issued to States under the VR program (34 CFR part 361).
    The regulations in 34 CFR part 363, governing the Supported 
Employment program, were last updated February 18, 1993 (59 FR 8331). 
Therefore, the changes proposed in part 363 would incorporate statutory 
changes made by WIOA, as well as update the regulations to improve the 
program and ensure consistency with changes proposed for part 361 
governing the VR program.
    The changes made to the Supported Employment program by WIOA are 
intended to ensure that individuals with the most significant 
disabilities, especially youth with the most significant disabilities, 
are afforded a full opportunity to prepare for, obtain, maintain, 
advance in, or re-enter competitive integrated employment, including 
supported or customized employment. Proposed Sec.  363.1 would require 
that supported employment be in competitive integrated employment or, 
if not, in an integrated setting in which the individual is working 
toward competitive integrated employment on a short-term basis not to 
exceed six months. Proposed Sec.  363.50(b)(1) would extend the time 
from 18 months to 24 months for the provision of supported employment 
services. Proposed Sec.  363.22 would require a reservation of 50 
percent of a State's allotment under this part for the provision of 
supported employment services, including extended services, to youth 
with the most significant disabilities. Proposed Sec.  363.23 would 
require not less than a 10 percent match for the amount of funds 
reserved to serve youth with the most significant disabilities. 
Proposed Sec.  363.51 would reduce the amount of funds that may be 
spent on administrative costs.

Limitation on Use of Subminimum Wages

    The Secretary proposes to promulgate new regulations in part 397 to 
implement new requirements for designated State units (DSUs) and 
educational agencies under the purview of the Department that are 
imposed by section 511 of the Act, which was added by WIOA. Section 511 
imposes limitations on employers who hold special wage certificates, 
commonly known as 14(c) certificates, under the FLSA (29 U.S.C. 214(c)) 
that must be satisfied before the employers may hire youth with 
disabilities at subminimum wage or continue to employ individuals with 
disabilities of any age at the subminimum wage level. The proposed 
regulations in part 397 focus exclusively on the related roles and 
responsibilities of educational agencies and DSUs for the VR program. 
The proposed regulations in part 397 are consistent with the changes 
proposed for parts 361 and 363, which govern the VR program and 
Supported Employment program, respectively.
    Through amendments to the Act, WIOA prioritizes, and places 
heightened emphasis upon, the provision of services that maximize 
opportunities for competitive integrated employment for individuals 
with disabilities, including those with the most significant 
disabilities, consistent with their unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed

[[Page 21064]]

choice. WIOA also places heightened emphasis on the provision of 
services necessary to assist youth with disabilities to achieve 
competitive integrated employment in the community, including supported 
or customized employment. To that end, amendments to the Act require 
DSUs to reserve specified percentages of their VR or supported 
employment allotments for the provision of services to students or 
youth with disabilities, as applicable. These amendments, along with 
the addition of section 511, demonstrate the intent that individuals 
with disabilities, especially youth with disabilities, must be afforded 
a full opportunity to prepare for, obtain, maintain, advance in, or re-
enter competitive integrated employment.
    Section 511 places limitations on the payment of subminimum wages 
by entities (e.g., employers) holding special wage certificates under 
the FLSA. In particular, such employers are prohibited from hiring 
youth with disabilities at a subminimum wage level unless the youth are 
afforded meaningful opportunities to access services, including 
transition services under the Act or IDEA, so they may achieve 
competitive integrated employment in the community. For the purposes of 
these requirements, a ``youth with a disability'' is anyone who is 24 
years or younger. This age range is consistent with the definition of a 
``youth with a disability'' in section 7(42) of the Act. Additionally, 
employers are prohibited from continuing to employ individuals with 
disabilities, regardless of age, at the subminimum wage level unless 
other requirements are satisfied. Specifically, the individual with a 
disability, or the individual's parent or guardian if applicable, must 
receive certain information and career counseling-related services from 
the DSU every six months during the first year of such employment and 
annually thereafter for as long as the individual receives compensation 
at the subminimum wage level.
    In addition to the requirements imposed on employers holding 
special wage certificates, section 511 of the Act requires DSUs to 
provide certain career counseling services. Further, educational 
agencies and the DSUs must develop a process, or use an existing 
process, for the timely provision of documentation necessary to 
demonstrate completion of required activities, as appropriate, to youth 
seeking employment, at a subminimum wage level. Finally, DSUs must 
provide documentation of the provision of career counseling and 
information and referral services to individuals with disabilities, 
regardless of age, who are currently employed at a subminimum wage 
level.
    The proposed regulations in this part focus exclusively on those 
requirements under the purview of the Department of Education. To that 
end, we propose in part 397: (1) Documentation requirements that local 
educational agencies and DSUs would be required to satisfy; and (2) 
information and career counseling-related services DSUs would be 
required to provide. Requirements imposed on employers are under the 
purview of the Department of Labor, which administers the FLSA.

Significant Proposed Regulations

    The Secretary proposes to amend the implementing regulations for 
the VR program (part 361) and the Supported Employment program (part 
363). The Secretary also proposes to issue new regulations in part 397 
to implement limitations on the payment of subminimum wages to 
individuals with disabilities. We discuss substantive issues within 
each subpart, by section or subject.
    Generally, we do not address proposed changes that are technical or 
otherwise minor in effect, such as changes to the authority cited in 
the Act.

Part 361--State Vocational Rehabilitation Services Program

Organizational Changes

    Although the proposed regulations maintain the current structure of 
subparts A, B, and C, we propose organizational changes to other 
subparts within this part. First, we propose to reserve subparts within 
part 361 where we plan to incorporate the three subparts we are 
proposing in a separate, but related, NPRM (the joint regulations 
proposed by the Departments of Education and Labor implementing changes 
to title I of WIOA) published elsewhere in this issue of the Federal 
Register. Please see that NPRM for more information about how these 
subparts will be incorporated into part 361. Second, we propose to 
remove Sec. Sec.  361.80 through 361.89, since the VR-specific 
standards and indicators are no longer applicable given amendments made 
by WIOA. Finally, we propose to eliminate Appendix A to current part 
361--Questions and Responses. We will consider issuing guidance after 
the publication of the final regulations.

Purpose (Sec.  361.1)

    Statute: Section 100(a)(1)(C) of the Act, as amended by WIOA (29 
U.S.C. 720(a)(1)(C)), highlights competitive integrated employment as 
the type of employment that individuals with disabilities, including 
individuals with the most significant disabilities, are capable of 
achieving if appropriate supports and services are provided. This 
section, as revised, also incorporates economic self-sufficiency as a 
criterion to consider when providing VR services to an individual. The 
focus on competitive integrated employment is also reflected in changes 
made to section 100(a)(3)(B) of the Act.
    Current Regulations: Current Sec.  361.1(b) refers only to gainful 
employment, not competitive integrated employment. It also does not 
include economic self-sufficiency as a criterion to consider when 
providing VR services.
    Proposed Regulations: We propose to amend current Sec.  361.1(b) 
by: (1) Replacing the term ``gainful employment'' with ``competitive 
integrated employment''; and (2) incorporating ``economic self-
sufficiency'' as a new criterion that must be considered to ensure that 
the VR services provided are consistent with the individual's unique 
circumstances.
    Reasons: The regulatory changes are necessary to implement 
statutory amendments to section 100 of the Act that emphasize the 
ability of individuals with disabilities, including individuals with 
the most significant disabilities, to achieve competitive integrated 
employment, not ``gainful employment,'' the term previously used under 
the Act, as amended by WIA. We believe this change is significant given 
that section 7(5) of the Act, as amended by WIOA, includes a new term, 
``competitive integrated employment,'' that includes mandatory criteria 
related to, among other things, compensation, advancement, and the 
integrated nature of the workplace. We also believe it is significant 
that Congress added economic self-sufficiency to the list of areas that 
must be considered when providing VR services to an individual because 
it reinforces a key element of ``competitive integrated employment,'' 
namely requirements related to compensation and benefits.
    See the discussion of the term ``competitive integrated 
employment'' in this Significant Proposed Regulations section of the 
notice for a full explanation of this term for purposes of the VR 
program.

Applicable Definitions (Sec.  361.5)

Definitions in 34 CFR 77.1

    Statute: None.

[[Page 21065]]

    Current Regulations: Current regulations highlight only a few terms 
contained in 34 CFR 77.1.
    Proposed Regulations: In paragraph (a) of Sec.  361.5, we propose 
to incorporate by reference all definitions contained in 34 CFR 77.1.
    Reasons: This change is necessary to clarify that all definitions 
in 34 CFR 77.1 are applicable to part 361.

Adoption of 2 CFR Part 200

    Statute: None.
    Current Regulations: Current Sec.  361.5, which contains 
definitions relevant to the VR program and was last updated in 2001, 
does not include definitions from 2 CFR part 200 since those 
regulations were promulgated in 2014.
    Proposed Regulations: We propose redesignating current paragraph 
(b) as paragraph (c) and adding a new paragraph (b) that incorporates 
by reference all definitions in 2 CFR part 200, subpart A (Uniform 
Administrative Requirements, Cost Principles, and Audit Requirements). 
Proposed substantive changes to paragraph (c) will be discussed 
throughout this NPRM in conjunction with the relevant topical 
discussion.
    Reasons: OMB issued the Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards on January 1, 
2014. The new regulations supersede and streamline requirements from 
OMB Circulars A-21, A-87, A-89, A-102, A-110, A-122, and A-133, as well 
as the guidance in Circular A-50 on Single Audit Act follow-up. These 
regulations, codified in 2 CFR part 200, have been adopted by the 
Secretary in 2 CFR part 3474, which took effect on December 26, 2014. 
Consequently, terms and definitions that previously were not used in 
the VR program, such as ``subaward'' (2 CFR 200.92), will be applicable 
given the Department's adoption of 2 CFR part 200.

Administrative Cost

    Statute: Section 7(1) of the Act, which defines ``administrative 
costs,'' remains unchanged by WIOA.
    Current Regulations: The current definition in Sec.  361.5(b)(2) 
mirrors the statute and defines ``administrative costs'' as including, 
among other things, the costs of operating and maintaining DSU 
facilities, equipment, and grounds.
    Proposed Regulations: We propose to amend Sec.  361.5(c)(2)(viii), 
as redesignated by other changes made in this part, by clarifying that 
operating and maintenance expenses, for purposes of the definition of 
``administrative costs'' for the VR program, do not include capital 
expenditures, as defined in 2 CFR 200.13.
    Reasons: The proposed change is necessary to clarify the scope of 
administrative costs, with regard to operating and maintenance 
expenditures, thereby ensuring consistency with 2 CFR part 200. There 
has been confusion among VR grantees as to whether operating or 
maintenance expenses, in the context of administrative costs, include 
capital expenditures. Operating or maintenance expenses in the context 
of administrative costs under the VR program are those costs incurred 
to maintain facilities, equipment, and grounds in good working order; 
whereas, capital expenditures, as defined in 2 CFR 200.13, are those 
expenditures that ``materially increase their value or useful life.'' 
We want to make clear that capital expenditures are permitted under the 
VR program in accordance with 2 CFR 200.439, but not as an 
administrative cost.

Assessment for Determining Eligibility and Vocational Rehabilitation 
Needs

    Statute: Section 7(2)(B)(v) of the Act, as amended by WIOA (29 
U.S.C. 705(2)), adds a new requirement that VR agencies must, to the 
maximum extent possible, rely on information from the individual's 
experiences obtained in an integrated employment setting in the 
community or in other integrated community settings when using existing 
information or conducting a comprehensive assessment for determining 
eligibility and the need for VR services for an individual with a 
disability.
    Current Regulations: Current Sec.  361.5(b)(6) defines ``assessment 
for determining eligibility and vocational rehabilitation needs,'' but 
does not include the requirement related to reliance on information 
about the individual's experiences in integrated settings because this 
is a new statutory requirement.
    Proposed Regulations: We propose to amend the current regulations 
to conform to the statute in section 7(2)(B) of the Act by adding 
language to the definition of ``assessment for determining eligibility 
and vocational rehabilitation needs'' in proposed Sec.  
361.5(c)(5)(ii)(E) that would make clear that a comprehensive 
assessment, to the maximum extent possible, relies on information 
obtained from the eligible individual's experiences in integrated 
employment settings in the community and other integrated settings in 
the community.
    Reasons: WIOA places a heightened emphasis on the achievement of 
competitive integrated employment by individuals with disabilities. To 
that end, amendments made by WIOA require that assessments for 
determining eligibility and VR needs of individuals with disabilities 
must rely on information about the individual's experiences in 
integrated employment and in other integrated community settings. The 
Act clearly places an emphasis on integrated settings by requiring that 
VR agencies rely on information learned from the individual's 
experiences in these settings, to the maximum extent possible, when 
conducting an assessment. Nonetheless a DSU is not precluded from 
determining an individual's eligibility for VR services based on other 
information obtained through the assessment process when the individual 
cannot participate in integrated community-based work experiences.

Assistive Technology Terms

    Statute: Section 7(3) of the Act, as amended by WIOA (29 U.S.C. 
705(3)), adds a new definition of ``assistive technology'' and combines 
the previous definitions of ``assistive technology device'' and 
``assistive technology service'' under the heading ``assistive 
technology terms.''
    Current Regulations: Current Sec.  361.5(b)(7) defines ``assistive 
technology device'' and current Sec.  361.5(b)(8) defines ``assistive 
technology service.'' There is no definition for ``assistive 
technology'' since this is a new statutory term.
    Proposed Regulations: We propose to add the heading ``assistive 
technology terms'' in proposed Sec.  361.5(c)(6), under which we would 
incorporate definitions for the new term ``assistive technology'' and 
for the existing terms ``assistive technology device'' and ``assistive 
technology service.'' We also propose to delete current Sec.  
361.5(b)(7) and (b)(8), as these separate definitions would no longer 
be necessary.
    Reasons: The proposed changes are necessary to implement the new 
statutory definition in section 7(3) of the Act, as amended by WIOA. 
The proposed definition streamlines the definitions of the various 
terms by referencing the Assistive Technology Act of 1998.

Competitive Integrated Employment

    Statute: WIOA adds a new term, ``competitive integrated 
employment,'' in section 7(5) of the Act (29 U.S.C. 705(5)). Although 
this is a new statutory term, the term and its definition generally 
represent a consolidation of two separate definitions and their terms

[[Page 21066]]

in current regulations--``competitive employment'' and ``integrated 
setting.'' In addition, the new statutory definition incorporates a 
criterion related to advancement in employment that is not included in 
either of the two current regulatory definitions.
    Current Regulations: Current Sec.  361.5(b)(11) defines 
``competitive employment'' and current Sec.  361.5(b)(33) defines 
``integrated setting.'' Current regulations do not define ``competitive 
integrated employment'' since this is a new statutory term.
    Proposed Regulations: We propose to replace the term ``competitive 
employment'' in current Sec.  361.5(b)(11) with the new term 
``competitive integrated employment'' in proposed Sec.  361.5(c)(9). 
The proposed definition of ``competitive integrated employment'' would 
mirror the statutory definition in section 7(5) of the Act, as amended 
by WIOA, as well as provide two clarifications with respect to the 
criteria for integrated work locations.
    First, proposed Sec.  361.5(c)(9)(ii)(A) would clarify that the 
employment location must be in ``a setting typically found in the 
community.'' Second, proposed Sec.  361.5(c)(9)(ii)(B) would clarify 
that the employee with a disability's interaction with other employees 
and others, as appropriate (e.g., customers and vendors), who are not 
persons with disabilities (other than supervisors and service 
providers) must be to the same extent that employees without 
disabilities in similar positions interact with these same persons. 
This interaction must occur as part of the individual's performance of 
work duties and must occur both in the particular work unit and the 
entire work site, as applicable. We further propose to amend the 
definition of ``integrated setting'' in proposed Sec.  361.5(c)(32)(ii) 
to conform to the clarifications provided in the proposed definition of 
``competitive integrated employment'' in proposed Sec.  361.5(c)(9)(ii) 
to ensure consistency between the two terms.
    Finally, we propose to replace the terms ``competitive employment'' 
and ``employment in an integrated setting,'' as appropriate, with 
``competitive integrated employment'' throughout this part.
    Reasons: These proposed changes are necessary to implement and to 
clarify statutory amendments made by WIOA. Because the proposed 
definition of ``competitive integrated employment'' reflects, for the 
most part, a consolidation of two existing regulatory definitions, the 
substance of this proposed definition is familiar to DSUs and does not 
represent a divergence from current regulations, long-standing 
Department policy, practice, and the heightened emphasis on competitive 
integrated employment throughout the Act, as amended by WIOA.
    In implementing these proposed regulations and determining whether 
an individual with a disability has achieved an employment outcome in 
``competitive integrated employment,'' a DSU must consider, on a case-
by case-basis, each of the criteria described in the proposed 
definition of ``competitive integrated employment.'' While most of the 
criteria are familiar and self-explanatory, we believe additional 
guidance is warranted here to explain those few new criteria contained 
in the statutory and proposed regulatory definitions, especially with 
regard to the criteria for an integrated employment setting. As a 
result, we further explain these criteria, highlighting those aspects 
that historically have raised the most questions from DSUs.
    Competitive Earnings: The compensation criteria of the proposed 
definition of ``competitive integrated employment,'' which mirror the 
statutory definition, are consistent with those found in the current 
regulatory definition of ``competitive employment'' in Sec.  
361.5(b)(11). Proposed Sec.  361.5(c)(9)(i)(A) would continue to 
require that, to be considered ``competitive integrated employment,'' 
the individual must perform full- or part-time work in which he or she 
earns at least the higher of the minimum wage rate established by 
Federal or applicable State law. Because several jurisdictions have 
established minimum wage rates substantially higher than those provided 
for under Federal or State law, the statutory definition and proposed 
Sec.  361.5(c)(9)(i)(A) would require that the individual's earnings be 
at least equal to the legally established local minimum wage rate if 
that rate is higher than both the Federal and State rates. Also, as has 
been the case under the current definition of ``competitive 
employment,'' section 7(5) of the Act requires and proposed Sec.  
361.5(c)(9)(i)(D) would require that the individual with the disability 
must be eligible for the same level of benefits provided to employees 
without disabilities in similar positions. In implementing the statute, 
the proposed definition would establish additional criteria with 
respect to competitive earnings. First, proposed Sec.  
361.5(c)(9)(i)(B) would require that the DSU take into account the 
training, experience, and level of skills possessed by the employees 
without disabilities in similar positions. Second, the proposed 
definition recognizes that individuals, with or without disabilities, 
in self-employment may not receive an income from the business equal to 
or exceeding applicable minimum wage rates, particularly in the early 
stages of operation. Hence, proposed Sec.  361.5(c)(9)(i)(C) would 
clarify that self-employed individuals with disabilities can be 
considered to be receiving competitive compensation if their income is 
comparable to that of individuals without disabilities in similar 
occupations or performing similar tasks who possess the same level of 
training, experience, and skills. Finally, to ensure consistency with 
the American Indian Vocational Rehabilitation Services program under 
part 371, we interpret subsistence employment as a form of self-
employment common to cultures of many American Indian tribes.
    Integrated Location: While the integrated setting criteria of the 
proposed definition of ``competitive integrated employment'' are 
consistent with the statutory definition in section 7(5)(B) of the Act, 
as amended by WIOA, and the current definition of ``integrated 
setting'' in Sec.  361.5(b)(33)(ii), the proposed definition would 
provide important clarifications that are necessary to ensure 
consistency with expressed congressional intent and current 
Departmental guidance.
    First, we propose to require that the work location be in ``a 
setting typically found in the community'' as required by current Sec.  
361.5(b)(33)(ii), meaning that an integrated setting must be one that 
is typically found in the competitive labor market. This particular 
criterion is included in the current definition of ``integrated 
setting'' and, thus, its incorporation in the proposed definition of 
``competitive integrated employment'' would ensure consistency between 
the two terms. Furthermore, this long-standing Department 
interpretation is consistent with the expressed congressional intent 
throughout the Act, as well as with past legislative history. 
Specifically, integrated setting ``. . . is intended to mean a work 
setting in a typical labor market site where people with disabilities 
engage in typical daily work patterns with co-workers who do not have 
disabilities; and where workers with disabilities are not congregated . 
. .'' (Senate Report 105-166, page 10, March 2, 1998). Therefore, we 
continue to maintain the long-standing Department policy that settings 
established by community rehabilitation programs specifically for the 
purpose of employing individuals with disabilities (e.g., sheltered 
workshops) do not constitute integrated settings because these settings 
are not typically found in the competitive labor market. We believe 
this criterion of the integrated

[[Page 21067]]

setting component of the proposed definition of competitive integrated 
employment is the first of two thresholds that must be satisfied.
    Second, once the first threshold is met, we believe it is 
essential, consistent with the current definition of ``integrated 
setting,'' that individuals with disabilities have the opportunity to 
interact with non-disabled co-workers during the course of performing 
their work duties to the same extent that their non-disabled co-workers 
have to interact with each other when performing the same work. To that 
end, proposed Sec.  361.5(c)(9)(ii)(B) would clarify that ``other 
persons'' as used in the statutory definition means other employees 
without disabilities with whom the employee with the disability works 
within the specific work unit and from across the entire work site. We 
want to make clear that this proposed clarification is contained, more 
generally, in the current definition of ``integrated setting.'' 
Furthermore, we believe this clarification is consistent with 
congressional intent, past legislative history, current Departmental 
guidance, and current regulations.
    Historically, this element regarding integrated settings has raised 
many questions; therefore, we provide specific clarity with regard to 
certain job settings in which employees primarily interact with persons 
from outside the work unit, such as vendors and customers, rather than 
each other, while performing their job duties. We believe the focus of 
whether the setting is integrated should be on the interaction between 
employees with and without disabilities, and not solely on the 
interaction of employees with disabilities with people outside of the 
work unit. For example, the interaction of individuals with 
disabilities employed in a customer service center with other persons 
over the telephone, regardless of whether these persons have 
disabilities, would be insufficient by itself to satisfy the 
definition. Instead, the interaction of primary consideration should be 
that between the employee with the disability and his or her colleagues 
without disabilities in similar positions.
    Nonetheless, we recognize that individuals who are self-employed or 
who telecommute may interact more frequently with persons such as 
vendors and customers than with other employees. Since these persons 
often work alone from their own homes rather than together in a single 
location, and may have little contact with fellow employees, we have 
long maintained that self-employment and telecommuting are considered 
to meet the criteria for an integrated location, so long as the 
employee with the disability interacts with employees in similar 
positions and other persons without disabilities to the same extent 
that these persons without disabilities interact with others, though 
this interaction need not be face-to-face.
    The proposed definition of ``competitive integrated employment'' 
would further clarify, consistent with the general principles contained 
in the current definition of ``integrated setting,'' that the DSU is to 
consider the interaction between employees with disabilities and those 
without disabilities that is specific to the performance of the 
employee's job duties, and not the casual, conversational, and social 
interaction that takes place in the workplace. As a result, it would 
not be pertinent to its determination of an integrated setting for a 
DSU to consider interactions in the lunchrooms and other common areas 
of the work site in which employees with disabilities and those without 
disabilities are not engaged in performing work responsibilities. This 
determination, particularly with regard to the level of interaction, 
would be applicable regardless of whether the individual with a 
disability is an employee of the work site or a community 
rehabilitation program hires the individual with a disability under a 
service contract for that work site. Specifically, individuals with 
disabilities hired by community rehabilitation programs to perform work 
under service contracts, either alone or in groups (e.g., landscaping 
or janitorial crews), whose interaction with persons without 
disabilities (other than their supervisors and service providers) is 
with persons working in or visiting the work locations (and not with 
employees of the community rehabilitation programs without disabilities 
in similar positions) would not be performing work in an integrated 
setting. In summary, the DSU must determine, on a case-by-case basis, 
that a work location is in an integrated setting if it both is 
typically found in the community, and is one in which the employee with 
the disability interacts with employees and other persons, as 
appropriate to the position, who do not have disabilities to the same 
extent that employees without disabilities interact with these persons. 
Finally, the DSU is to consider the interaction between the employee 
with the disabilities and these other persons that takes place for the 
purpose of performing his or her job duties, not mere casual and social 
interaction.
    Opportunities for Advancement: To ensure that the employment of 
persons with disabilities is equivalent in all respects to that of 
persons without disabilities, section 7(5) of the Act, as amended by 
WIOA, establishes a new criterion not contained in current regulations. 
Proposed Sec.  361.5(c)(9)(iii) mirrors the language in section 7(5) of 
the Act and would require that the employee with the disability have 
the same opportunities for advancement as employees without 
disabilities in similar positions. We believe this new criterion is 
consistent with current definitions of ``competitive employment'' and 
``integrated settings'' and should pose no hardship on DSUs to 
implement.
    As explained here, the definition of ``competitive integrated 
employment'' in section 7(5) of the Act, as amended by WIOA, and as 
proposed in Sec.  361.5(c)(9) establishes three essential criteria of 
employment--income (earnings and benefits), integration, and 
advancement--thereby ensuring that individuals with disabilities are 
provided through the VR program the full opportunity to participate in 
the same jobs available to persons without disabilities in the public.
    Again, we want to make clear that two of the criteria--those 
related to compensation and the integrated nature of the worksite--are 
similar, if not identical, to criteria contained in the current 
definitions of ``competitive employment'' and ``integrated setting.'' 
Thus, the substance of this definition is familiar to the DSUs and 
should pose no hardship to implement.

Customized Employment

    Statute: Section 7(7) of the Act, as amended by WIOA (29 U.S.C. 705 
(7)), adds and defines the term ``customized employment,'' which means, 
in general, competitive integrated employment designed to meet both the 
specific abilities of the individual with a significant disability and 
the business needs of an employer.
    Current Regulations: None.
    Proposed Regulations: We propose to add Sec.  361.5(c)(11), to 
define ``customized employment'' to mirror the statute.
    Reasons: The proposed regulation is necessary to implement the new 
statutory term and definition because the Act, as amended by WIOA, uses 
the term in a variety of contexts, including incorporating it into 
definitions of employment outcome and supported employment, and 
incorporating it into the list of individualized services permissible 
under the VR program. Customized employment provides

[[Page 21068]]

flexibility in developing individualized and customized strategies that 
are specific to an individual with a significant disability's unique 
needs, interests, and capabilities, through the use of flexible 
strategies that meet the needs of both the individual and the employer.

Employment Outcome

    Statute: Section 7(11) of the Act, as amended by WIOA, revises the 
definition of ``employment outcome'' to include customized employment 
within its scope.
    Current Regulations: Current Sec.  361.5(b)(16) defines 
``employment outcome,'' but does not include customized employment 
since this is a new statutory requirement.
    Proposed Regulations: We propose to amend the definition of 
``employment outcome'' in Sec.  361.5(c)(15), as redesignated by other 
changes made in this part, to specifically identify customized 
employment as an employment outcome under the VR program. We also 
propose to amend the definition to require that all employment outcomes 
achieved through the VR program be in competitive integrated employment 
or supported employment, thereby eliminating uncompensated outcomes 
from the scope of the definition for purposes of the VR program.
    Furthermore, we propose to amend current Sec.  361.37(b) to expand 
the scope of those circumstances when the DSU must provide referrals to 
other programs and service providers for individuals who choose not to 
pursue an employment outcome under the VR program. Similarly, we 
propose to amend current Sec.  361.43(d) to expand the requirement for 
the referral of individuals found ineligible for VR services or 
determined ineligible subsequent to the receipt of services to also 
include appropriate State, Federal, and local programs, and community 
service providers better suited to meet their needs.
    Reasons: The proposed changes are necessary, in part, to implement 
statutory changes to the definition of ``employment outcome'' that 
include reference to ``customized employment.'' See the discussion of 
``customized employment'' earlier in this preamble for further 
information regarding this type of employment outcome.
    The proposed change that would limit the scope of employment 
outcomes under the VR program to competitive integrated employment or 
supported employment is necessary to implement the heightened emphasis 
of the Act on the achievement of competitive integrated employment. The 
Act, as amended by WIOA, makes clear--from the stated purpose of the 
Act, the addition of new requirements governing the development of 
individualized plans for employment and the transition of students and 
youth from school to post-school activities, and new limitations on the 
payment of subminimum wages--that individuals with disabilities, 
particularly those with significant disabilities, are able to achieve 
the same high-quality jobs in the competitive integrated labor market 
as persons without disabilities if they are provided appropriate 
services and supports. The amendments made by WIOA are consistent with 
and further other changes made over the past four decades, with each 
reauthorization, that have placed increasing emphasis on the 
achievement of competitive employment in an integrated setting through 
the VR program. See the discussion regarding ``competitive integrated 
employment'' earlier in this preamble.
    It is in this context that we propose to amend the definition of 
``employment outcome,'' for purposes of the VR program, to include only 
those outcomes that meet the requirements of competitive integrated 
employment (including customized employment, self-employment, 
telecommuting or business ownership), or supported employment, thereby 
eliminating from the scope of the definition, under the VR program, 
uncompensated outcomes, such as homemakers and unpaid family workers. 
We believe this proposed change is consistent with the statutory 
definition of ``employment outcome'' in section 7(11) of the Act, as 
well as the pervasive emphasis in the Act on the achievement of 
competitive integrated employment by individuals with disabilities, 
including those with the most significant disabilities. Given this 
emphasis, we believe the proposed change, not to include, within the 
scope of employment outcomes, uncompensated outcomes, such as 
homemakers and unpaid family workers, is consistent with the provisions 
of the Act.
    We believe the proposed changes to the definition, while essential 
to fulfilling the expectation in the Act that individuals with 
disabilities, particularly individuals with significant disabilities, 
are capable of pursuing competitive integrated employment, should not 
cause significant difficulty for most State VR units in their 
administration of the VR program. Nationally, only a relatively small 
number of individuals currently exit the VR program as homemakers or 
unpaid family workers. Over the past 35 years the percentage of such 
outcomes has steadily and significantly decreased. For example, in FY 
1980 homemaker outcomes as a percentage of all employment outcomes 
reported nationally to the Department by VR agencies through the VR 
program Case Service Report for the years FY 1980 through FY 2013 
approximated 15 percent. This percentage dropped to 5.2 percent in FY 
1999, and to 3.4 percent in FY 2004. By FY 2013, the most recent year 
for which data is available, this percentage had declined to 1.9 
percent. There has been a similar decline in reported unpaid family 
workers. According to data reported by VR agencies through the VR 
program Case Service Report, in FY 2000, 642 individuals were reported 
in the category of unpaid family worker. By FY 2013, the most recent 
year for which we have data, only 135 individuals were reported to have 
obtained an unpaid family worker outcome. National data indicates that 
approximately 0.2 percent or less of all the outcomes reported annually 
by DSUs are unpaid family worker outcomes.
    While we recognize that some VR agencies have a greater percentage 
of homemaker and unpaid family worker outcomes than others, 
particularly those agencies serving individuals who are blind and 
visually impaired, it is also evident that the majority of DSUs have 
been placing increased importance and emphasis on competitive 
employment outcomes, in their policies and procedures, as the optimal 
employment outcome and deemphasizing uncompensated outcomes. This shift 
in practice has been the product of the DSUs responding to the intent 
of the Act and translating that intent into their administration of the 
VR program. Nevertheless, we recognize that this proposed change could 
represent a significant shift in practice for a few VR agencies, 
particularly those with high percentages of individuals achieving 
employment outcomes as homemakers or unpaid family workers. These 
agencies may be providing services to assist individuals to obtain 
homemaker and unpaid family worker outcomes at the time the final 
regulations become effective. To allow these agencies to complete the 
VR process for these individuals, we are considering a transition 
period of six months following the effective date of the final 
regulations for the implementation of this proposed change. We are 
interested in receiving comments about providing such a transition 
period.
    Since FY 2004, through monitoring of the VR program, we have 
reviewed the

[[Page 21069]]

attainment of homemaker outcomes and have found that VR agencies 
sometimes assist individuals to exit the program as homemakers to 
provide an alternate resource for the provision of independent living 
services that are otherwise available from the State Independent Living 
Services, Centers for Independent Living, and Independent Living 
Services for Older Individuals Who Are Blind programs. To ensure that 
individuals who choose to pursue homemaker and unpaid family worker 
outcomes, or who are determined ineligible for VR services either at 
the time of application or following the provision of services, are 
able to access independent living and other rehabilitation services, we 
propose to expand the scope of Sec. Sec.  361.37(b) and 361.43(d) so 
that these circumstances would be among those when DSUs must refer 
these individuals to public and private agencies better suited to meet 
their needs. These current regulatory provisions are limited to those 
individuals who choose to pursue extended employment, which does not 
constitute an employment outcome under the VR program. As proposed, 
Sec. Sec.  361.37(b) and 361.43(d) would be more broad, thus 
encompassing those individuals who choose to pursue uncompensated 
employment, such as homemakers and unpaid family workers, as well as 
those who choose to pursue extended employment.
    The resources available through the independent living programs 
have expanded exponentially since FY 1992. Specifically, the number of 
Part C-funded centers for independent living has tripled since FY 1993, 
from 120 to 356 presently, including 20 new centers for independent 
living established in FY 2010 through funding under the American 
Recovery and Reinvestment Act of 2009. In addition, funding for the 
Independent Living Services for Older Individuals Who Are Blind program 
has increased since FY 1992, from $6,500,000 to approximately 
$33,000,000 in FY 2014. While we recognize that this proposed change 
would place the responsibility for making these referrals on DSUs, we 
believe that any burden associated with these requirements is 
outweighed by the benefit that individuals with disabilities would gain 
by having access to programs and services that can more appropriately 
meet their individualized needs.

Extended Services

    Statute: Section 604(b) of the Act, as amended by WIOA, permits the 
expenditure of supported employment funds authorized under title VI, 
and the VR funds authorized under title I, on the provision of extended 
services to youth with the most significant disabilities for a period 
not to exceed four years.
    Current Regulation: Current Sec.  361.5(b)(20) defines ``extended 
services,'' but does not mention that these services may be provided to 
youth with the most significant disabilities since this is a new 
statutory requirement.
    Proposed Regulations: We propose to amend the definition in Sec.  
361.5(c)(19), as redesignated by other changes made in this part, to 
make clear that extended services may be provided to youth with the 
most significant disabilities for a period not to exceed four years. 
The changes proposed herein are consistent with those proposed for the 
Supported Employment program in part 363.
    Reasons: The revisions are necessary to implement statutory changes 
to the Supported Employment program made by WIOA that also relate to 
the VR program since VR funds may be used to pay for allowable 
supported employment services. These proposed changes are consistent 
with those proposed in part 363 and discussed in more detail later in 
this NPRM.

Indian; American Indian; Indian American and Indian Tribe

    Statute: Section 7(19) of the Act, as amended by WIOA, revises the 
definition of ``Indian,'' ``American Indian,'' ``Indian American,'' and 
``Indian tribe'' to further clarify those terms.
    Current Regulations: Current Sec.  361.5(b)(3) defines ``American 
Indian'' to mean an individual who is a member of an Indian tribe. 
Current Sec.  361.5(b)(26) defines ``Indian tribe'' to mean any Federal 
or State Indian tribe, band, rancheria, pueblo, colony, or community, 
including any Alaskan native village or regional village corporation 
(as defined in or established pursuant to the Alaska Native Claims 
Settlement Act).
    Proposed Regulations: We propose to combine the definitions of 
``American Indian'' and ``Indian tribe'' currently in Sec.  361.5(b)(3) 
and (b)(26), respectively, to be consistent with the definition in 
section 7(19) of the Act, as amended by WIOA. To that end, the proposed 
definition in Sec.  361.5(c)(25) would make clear that the term 
``American Indian'' includes a Native and a descendant of a Native, as 
defined in the Alaska Native Claims Settlement Act (43 U.S.C. 1602), 
and expands the term ``Indian tribe'' to include a tribal organization, 
as defined in the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450(b)(1)).
    Reasons: These changes are necessary to implement the revised 
statutory definition in section 7(19) of the Act. These changes also 
are necessary to ensure consistency with changes proposed to part 371, 
implementing the American Indian Vocational Rehabilitation Services 
program, contained in a separate, but related, NPRM published elsewhere 
in this issue of the Federal Register.

Local Workforce Development Board and Other Workforce Development Terms

    Statute: Sections 7(25), 7(35), and 7(36) of the Act, as amended by 
WIOA, define the terms ``Local workforce development board,'' ``State 
workforce development board,'' and ``Statewide workforce development 
system,'' respectively.
    Current Regulations: Current Sec. Sec.  361.5(b)(34), (b)(49), and 
(b)(50) define ``Local workforce investment board,'' ``State workforce 
investment board,'' and ``Statewide workforce investment system,'' 
respectively.
    Proposed Regulations: We propose to amend part 361 throughout, 
including the definitions for ``Local workforce development board'' in 
Sec.  361.5(c)(33), ``State workforce development board'' in Sec.  
361.5(c)(49), and ``Statewide workforce development system'' in Sec.  
361.5(c)(50), to substitute the word ``development'' for ``investment'' 
wherever those terms appear.
    Reasons: These changes are necessary to implement revised terms 
used throughout WIOA. The amendments are technical in nature and do not 
represent a substantive change to the definitions themselves.

Supported Employment

    Statute: Section 7(38) of the Act, as amended by WIOA, revises the 
definition of supported employment to, among other things, reference 
competitive integrated employment and customized employment, and 
requires that an individual who is employed in an integrated setting, 
but not in competitive integrated employment, must be working toward 
such an outcome on a short-term basis for such work to qualify as 
supported employment.
    Current Regulation: Current Sec.  361.5(b)(53) defines ``supported 
employment'' as the term was defined prior to the enactment of WIOA. 
There is no reference to ``competitive integrated employment'' or 
``customized employment'' since these are new statutory requirements.
    Proposed Regulation: We propose to amend the definition in Sec.  
361.5(c)(53),

[[Page 21070]]

as redesignated by other changes made in this part, to require that 
supported employment means competitive integrated employment, including 
customized employment, or employment in an integrated setting in which 
the individual is working on a short-term basis toward competitive 
integrated employment. We also propose, in this context, that an 
individual be considered to be working on a ``short-term basis'' toward 
competitive integrated employment if the individual reasonably expects 
achieving a competitive integrated employment outcome within six months 
of achieving an employment outcome of supported employment. These 
proposed changes are consistent with those proposed in part 363 for the 
Supported Employment program, discussed later in this NPRM.
    Reasons: The revisions are necessary to implement the new statutory 
definition in section 7(38) of the Act, as amended by WIOA, which 
reflects the heightened emphasis on the achievement of competitive 
integrated employment.
    We also propose to include a definition of ``short-term basis,'' in 
the context of supported employment, to give meaning to the phrase and 
ensure congressional intent. By limiting the timeframe, we ensure that 
individuals do not remain in subminimum wage employment for the purpose 
of achieving supported employment outcomes. The proposed changes also 
ensure consistency with the amendments proposed in part 363, 
implementing the Supported Employment program, discussed later in this 
NPRM.

Supported Employment Services

    Statute: Section 7(39) of the Act, as amended by WIOA, revises the 
definition of ``supported employment services'' to extend the allowable 
timeframe for the provision of these services from 18 months to 24 
months. The statute also makes other technical changes to the 
definition.
    Current Regulation: Current Sec.  361.5(b)(54) defines ``supported 
employment services'' to include a timeframe of 18 months.
    Proposed Regulations: We propose to revise the definition in Sec.  
361.5(c)(54), as redesignated due to other changes made in this part, 
to extend the allowable timeframe for the delivery of these services 
from 18 months to 24 months. We also propose to make changes that 
clarify the individualized and customized nature of supported 
employment services.
    Reasons: The revisions are necessary to implement the new 
definition of ``supported employment services'' in section 7(39) of the 
Act, as amended by WIOA. Most importantly, the proposed definition 
extends the allowable timeframe for the provision of supported 
employment services from 18 to 24 months. The proposed changes also 
ensure consistency with revisions proposed in part 363, implementing 
the Supported Employment program, discussed later in this NPRM.

Submission, Approval, and Disapproval of the State Plan (Sec.  361.10)

    Statute: Section 101(a)(1) of the Act, as amended by WIOA, requires 
that, a ``vocational rehabilitation services portion'' be included in a 
State's Unified State Plan in accordance with section 102, or a 
Combined State Plan in accordance with section 103, of WIOA. The 
``vocational rehabilitation services portion'' must contain all State 
plan requirements under section 101(a) of the Act.
    Section 101(b) of the Act, as amended by WIOA, makes conforming 
changes with regard to the submission, approval, and modification 
process for the VR services portion of the Unified or Combined State 
Plan.
    Current Regulations: Current Sec.  361.10 includes requirements for 
the submission and approval process for the VR State plan. Although 
current Sec.  361.10(c) permits States to submit the VR State plan as 
part of the Unified State Plan, there is no requirement to do so.
    Proposed Regulations: First, we propose to amend current Sec.  
361.10(a) to require the State to submit a VR services portion of a 
Unified or Combined State Plan in accordance with sections 102 or 103, 
respectively, of WIOA to be eligible to receive its VR allotment.
    Second, we propose to clarify that the VR services portion of the 
Unified or Combined State Plan includes all information required under 
section 101(a) of the Act.
    Third, we propose to amend Sec.  361.10(d) by providing a cross-
reference to subpart D of part 361, which is reserved for the joint 
regulations implementing requirements for the Unified and Combined 
State Plan proposed jointly by the Departments of Education and Labor. 
The proposed joint regulations that would implement jointly-
administered activities under title I of WIOA are published elsewhere 
in this issue of the Federal Register. We also propose to remove 
current paragraph (e) and redesignate current paragraph (f)(3) as 
paragraph (e), and we propose to remove the remainder of current 
paragraph (f) and current paragraph (g). We propose to redesignate 
current paragraph (h) as paragraph (f) and rename it ``Due Process.''
    Finally, we propose to make other conforming changes throughout 
Sec.  361.10.
    Reasons: The proposed revisions to Sec.  361.10 are necessary to: 
(1) Implement the VR-specific amendments to sections 101(a)(1) and (b) 
of the Act made by WIOA; and (2) align VR-specific requirements with 
those contained in the joint regulations, developed by the Departments 
of Education and Labor, regarding the submission, approval, and 
modification of Unified or Combined State Plans. Taken together, these 
statutory amendments and proposed regulatory changes recognize that the 
VR services portion of the Unified or Combined State Plan is to be an 
integral part of the Unified or Combined State Plan, and provide the 
foundation for the seamless, effective, and efficient delivery of 
services through the collaboration and combined funding, to the extent 
allowable under relevant program requirements, of the workforce 
development system that will enable individuals with disabilities to 
obtain the skills necessary to participate in the high-demand jobs of 
today's economy. To further the integrated nature of the VR services 
portion of the Unified or Combined State Plan, we request that comments 
to proposed revisions to Sec.  361.10 be limited to VR-specific 
requirements and that more general comments about the Unified or 
Combined State Plan be submitted in response to the proposed joint 
regulations published elsewhere in this issue of this Federal Register.

Requirements for a State Rehabilitation Council (Sec.  361.17)

    Statute: Section 105(b)(1) of the Act, as amended by WIOA, makes a 
technical amendment to the composition requirement of the State 
Rehabilitation Council (SRC) related to section 121 projects. WIOA also 
amends section 105(b)(6) by requiring the SRC to include programs 
authorized under the Assistive Technology Act of 1998 among those 
agencies and organizations with which it must coordinate.
    Current Regulations: Current Sec.  361.17(b)(1)(ix) requires that, 
in a State with projects carried out under section 121 of the Act, a 
representative of the directors of these projects must serve on the 
SRC, but it does not use the new statutory term ``funded'' in place of 
``carried out.'' Current Sec.  361.17(h)(6) requires the SRC to 
collaborate with various other entities, but does not

[[Page 21071]]

include programs authorized under the Assistive Technology Act of 1998 
since this is a new statutory requirement. Current Sec.  361.17(h)(3) 
also requires the SRC to partner with the VR agency in establishing 
State goals and priorities and to assist in the preparation of the 
State plan.
    Proposed Regulations: We propose to amend current Sec.  
361.17(b)(1)(ix) to substitute ``funded'' for ``carried out'' in the 
State to mirror the statute. Additionally, we propose to amend current 
Sec.  361.17(h)(6) to include programs established under the Assistive 
Technology Act of 1998 in the list of entities with which the SRC must 
coordinate its activities. Finally, we propose to clarify in Sec.  
361.17(h)(3) that the SRC is only required to assist in the preparation 
of the VR services portion of the Unified or Combined State Plan, not 
the entire Unified or Combined State Plan.
    Reasons: The proposed changes are necessary to implement statutory 
amendments to section 105 of the Act made by WIOA. We believe the 
proposed change in Sec.  361.17(b)(1)(ix) is more technical than 
substantive in the context of the American Indian Vocational 
Rehabilitation Services program. Unlike most programs in which funds 
are awarded to a State or an entity in a State, the Department awards 
section 121 grant funds to tribes, whose reservations may cross State 
lines. In that context, the distinctions between ``funded,'' as used in 
WIOA, and ``carried out,'' as had been used previously, provides no 
substantive differences in practical meaning. For that reason, we 
believe this proposed change is primarily technical in nature.
    The proposed inclusion in Sec.  361.17(h)(6) of the programs 
authorized under the Assistive Technology Act of 1998 among the 
entities with which the SRC must coordinate its activities would 
underscore the integral role that assistive technology plays in the 
ability of individuals with disabilities to obtain and maintain 
employment. Through the coordination of SRC and assistive technology 
program activities, SRC members would be better informed of the 
resources and services available in the State for the provision of 
assistive technology devices and training, enabling the members to more 
effectively advise the DSU in the State.
    Finally, as discussed in proposed Sec.  361.10, title I of WIOA 
requires the VR program in each State to participate in a Unified or 
Combined State Plan with the other core programs or partner programs 
within the workforce development system. By replacing the term ``State 
plan'' with the ``vocational rehabilitation services portion of the 
Unified or Combined State Plan,'' we believe that members of the SRC 
would be responsible only for participating in the development of the 
goals and strategies contained in, and providing input on, the VR 
services portion of the Unified or Combined State Plan in accordance 
with the mandated activities of the SRC as set forth in proposed Sec.  
361.17(h).

Comprehensive System of Personnel Development (Sec.  361.18)

    Statute: Section 101(a)(7) of the Act, as amended by WIOA, makes 
several changes to the comprehensive system of personnel development 
(CSPD) that each DSU must establish to ensure its personnel are 
adequately trained. In particular, the amendments add specific 
educational and experiential criteria that must be met by VR personnel. 
The statute also makes other technical changes throughout this section.
    Current Regulations: Current Sec.  361.18 requires a DSU to 
establish a CSPD that is based on either a national or State licensing 
or certification standard. Current regulations do not specify specific 
educational or experiential criteria since these are new statutory 
requirements.
    Proposed Regulations: We propose to revise Sec.  361.18(c)(1)(ii) 
to mirror the statute with regard to education and experience 
requirements for VR personnel. Accordingly, we would ensure that 
personnel have a 21st-century understanding of the evolving labor force 
and needs of individuals with disabilities. In addition, we propose to 
add a new Sec.  361.18(c)(2)(ii) in which we would describe what we 
mean by personnel having a 21st-century understanding of the evolving 
labor force and needs of individuals with disabilities. We would 
provide examples of the skills that would demonstrate that personnel 
hired are appropriately qualified.
    Further, we propose to amend Sec.  361.18(d)(1)(i) to require that 
the CSPD include training implemented in coordination with entities 
carrying out State programs under section 4 of the Assistive Technology 
Act of 1998. Finally, we propose to delete those provisions that are no 
longer applicable given statutory changes, such as those related to 
steps the State will take when personnel do not meet the highest 
standard in a State.
    Reasons: The proposed changes are necessary to implement statutory 
changes made by WIOA. The changes we propose in Sec.  361.18(c)(1)(ii) 
would ensure that DSU staff are well-qualified to assist individuals 
with disabilities to achieve competitive integrated employment in 
today's demanding labor market. The proposed regulations would describe 
education and experience, as applicable, requirements at the 
bachelor's, master's, and doctoral level, in fields related to 
rehabilitation that prepare the individual to work with individuals 
with disabilities and employers. For individuals hired at the 
bachelor's level, there also would be a requirement for at least one 
year of paid or unpaid experience. These proposed CSPD requirements 
would further the heightened emphasis throughout the Act on employer 
engagement and affording individuals with disabilities every 
opportunity to achieve competitive integrated employment.
    In order to further clarify what types of skills we intend for 
personnel to demonstrate, we propose some illustrative examples in 
Sec.  361.18(c)(2)(ii), which are by no means all-inclusive but which 
are typically required of rehabilitation professionals hired by the 
DSU. Finally, in proposing to amend current Sec.  361.18(d)(1)(i) to 
require that the CSPD include training implemented in coordination with 
entities carrying out State programs under section 4 of the Assistive 
Technology Act of 1998, we are reflecting a new statutory requirement 
that is consistent with the emphasis on coordination throughout the 
Act.

Public Participation Requirements (Sec.  361.20)

    Statute: Section 101(a)(16)(A) of the Act requires that the State 
plan provide that the designated State agency, prior to the adoption or 
amendment of any policies or procedures governing the provision of VR 
services under the State plan, must conduct public meetings throughout 
the State to provide the public, including individuals with 
disabilities, an opportunity to comment on the policies or procedures, 
and actively consult with agencies and organizations involved in the 
vocational rehabilitation of individuals with disabilities. This 
requirement remains unchanged by WIOA.
    Current Regulations: Current Sec.  361.20 implements section 
101(a)(16)(A) of the Act.
    Proposed Regulations: We propose to clarify that the public 
participation requirements under current Sec.  361.20 pertain to the VR 
services portion of the Unified or Combined State Plan. We also propose 
to add paragraphs (a)(1) and (a)(2) to clarify through descriptive 
examples the distinction between substantive changes that would require 
the designated State agency to conduct

[[Page 21072]]

a public hearing, and administrative changes for which a public hearing 
need not be conducted. All other requirements for public participation 
as described in current Sec.  361.20(b) through (e), to the extent they 
are consistent with public participation requirements proposed in the 
joint regulations, remain unchanged in the proposed regulations, except 
for technical modifications to the language required by WIOA. Public 
participation requirements related to Unified or Combined State Plans 
generally are addressed through the NPRM jointly published by the 
Departments of Labor and Education elsewhere in this issue of the 
Federal Register.
    Reasons: These proposed changes to current Sec.  361.20 are 
necessary to reflect statutory changes that require what previously was 
a stand-alone VR State plan to be submitted as a VR services portion of 
the Unified or Combined State Plan under WIOA. Additionally, by 
clarifying what is meant by a substantive change--that is, a change 
that would have a direct impact on the nature and scope of the VR 
services provided to individuals with disabilities or the manner in 
which these individuals interact with the State VR program, as opposed 
to a change that is purely administrative or technical in nature--State 
VR agencies would better understand when they must conduct a public 
hearing, specific to the VR program. The ability to provide comments 
and input at public hearings is an important mechanism for 
strengthening the voice of community stakeholders and ensuring that any 
changes to the implementation of the VR services portion of the Unified 
or Combined State Plan reflect concerns and interests of those whom the 
program serves.

Requirements Related to the Statewide Workforce Development System 
(Sec.  361.23)

    Statute: Section 121(b)(1)(B)(iv) of WIOA includes the VR program 
as a core partner of the workforce development system.
    Current Regulations: Current Sec.  361.23 outlines a VR program's 
roles and responsibilities in the workforce investment system, as 
required under WIA.
    Proposed Regulations: We propose to amend current Sec.  361.23(a) 
by cross-referencing to subpart F of part 361. We also propose to 
remove the remainder of this section because the substance of these 
requirements is contained in joint regulations developed by the 
Departments of Education and Labor.
    Reasons: The changes are necessary to implement amendments to title 
I of WIOA and ensure consistency with joint regulations proposed by the 
Departments of Education and Labor, which are published elsewhere in 
this issue of the Federal Register. We ask that you submit any comments 
regarding the VR program's role in the one-stop delivery system in 
conjunction with related provisions contained in the joint proposed 
regulations, rather than in connection with this particular section of 
the proposed VR program-specific regulations.

Cooperation and Coordination With Other Entities (Sec.  361.24)

    Statute: WIOA amends section 101(a)(11) of the Act by expanding the 
scope of entities with which the DSU must collaborate and coordinate 
its activities under the VR program. The new entities include, among 
others, employers, non-educational agencies serving out-of-school 
youth, programs authorized under the Assistive Technology Act of 1998, 
the State agency administering the State Medicaid plan, the agency 
responsible for serving individuals with intellectual and/or 
developmental disabilities, agencies responsible for providing mental 
health services, and other agencies serving as employment networks 
under the Ticket to Work and Self-Sufficiency program.
    Current Regulations: Current Sec.  361.24 requires that the State 
plan include assurances and descriptions, as applicable, of the DSU's 
interagency cooperation with various entities, but does not include the 
new entities required by the WIOA amendments since these are new 
statutory requirements.
    Proposed Regulations: We propose to amend Sec.  361.24 to include 
the additional agencies and entities with which the DSU must coordinate 
its activities under the VR program, as required by section 101(a)(11) 
of the Act, as amended by WIOA.
    Reasons: The proposed changes are necessary to implement new 
statutory requirements regarding the DSU's coordination with other 
entities. The changes are designed to ensure DSU collaboration and 
coordination with employers and State and Federal agencies to increase 
access by individuals with disabilities, especially youth and 
individuals with the most significant disabilities, to services and 
supports to assist them in achieving competitive integrated employment.

Third-Party Cooperative Arrangement Requirements (Sec.  361.28)

    Statute: None.
    Current Regulations: Current Sec.  361.28 includes requirements 
related to third-party cooperative arrangements, a mechanism by which a 
DSU may work with another public agency to provide VR services.
    Proposed Regulations: We propose to amend Sec.  361.28(a) by 
removing the words ``administering'' and ``furnishing'' and providing 
more accurate descriptions of the cooperating agency's 
responsibilities. Proposed Sec.  361.28(a) also would clarify that the 
non-Federal share provided by the cooperating agency must be consistent 
with the requirements in proposed Sec.  361.28(c). Proposed Sec.  
361.28(a)(4) and 361.28(b) change references to ``cooperative 
programs'' and ``cooperative agreements'' to ``cooperative 
arrangements'' to make the language consistent throughout this section. 
We propose to insert a new paragraph (c) to clarify the manner in which 
other public agencies may contribute toward the non-Federal share under 
a third-party cooperative arrangement.
    Reasons: With the exception of Sec.  361.28(c), the changes to this 
section are editorial and the minor clarifications would ensure 
consistent language and interpretation. Proposed Sec.  361.28(c) would 
list the manner in which a State agency or a local public agency could 
provide part or all of the non-Federal share under a third-party 
cooperative arrangement. Under the proposed Sec.  361.28(c) the DSU 
could utilize cash transfers or certified personnel expenditures for 
the time cooperating agency staff spent providing direct VR services 
pursuant to a third-party cooperative arrangement to meet part or all 
of the non-Federal share. Given the prohibition in Sec.  361.60(b)(2) 
against using third-party in-kind contributions for match purposes 
under the VR program, we have not included certified expenditures for 
equipment and supplies as an allowable source of match under the VR 
program. In so doing, we avoid potential third-party in-kind 
contributions that could arise with such certified expenditures.

Statewide Assessment; Estimates; State Goals and Priorities; 
Strategies; and Progress Reports (Sec.  361.29)

    Statute: Section 101(a)(15) of the Act, as amended by WIOA, makes 
several technical and conforming changes, as well as expands the scope 
of estimates that the DSUs must report and the areas of focus the 
States must consider in

[[Page 21073]]

conducting their triennial needs assessment.
    Section 101(a)(23) requires DSUs to assure that the State will 
submit to the Secretary reports required by section 101(a)(15) at such 
time and in such manner as the Secretary may determine to be 
appropriate. This statutory requirement remains unchanged by WIOA.
    Current Regulations: Current Sec.  361.29 implements the 
requirements of section 101(a)(15) of the Act, but does not include the 
new statutory requirements. The current regulations also require that 
the State submit reports regarding goals, strategies, and estimates 
annually.
    Proposed Regulations: We propose to amend current Sec.  361.29 by 
requiring that reports and updates related to assessment, estimates, 
goals and priorities, and reports of progress, be submitted to the 
Secretary, in such time and such manner as determined by the Secretary, 
rather than annually. We also propose to amend the regulations to 
require DSUs to report estimates of the number of individuals not 
receiving services because of the implementation of an order of 
selection. We also propose to make several technical and conforming 
changes throughout. See related discussion of this section in the 
context of transition services later in this NPRM, for proposed changes 
related to students and youth in transition.
    Reasons: The proposed changes are necessary, in part, to implement 
the statutory amendments to section 101(a)(15) of the Act made by WIOA. 
The proposed changes also would ensure consistency in the reporting 
requirements imposed throughout section 101(a) of the Act, as well as 
in title I of WIOA since the VR State plan will be incorporated into 
the State's Unified or Combined State Plan as a portion of that plan.
    To date, we have collected the required information through the 
annual submission of the VR State plan (now known as the VR services 
portion of the Unified or Combined State Plan), rather than through the 
submission of separate reports. Because the VR services portion will be 
submitted with all other components of the Unified or Combined State 
Plan every four years with modifications submitted every two years, 
there would be no vehicle for the submission of these annual reports 
without imposing additional reporting requirements on the State 
separate from the State plan.
    By permitting the submission of the required information at a time 
and in a manner determined by the Secretary, rather than annually, the 
Secretary exercises the statutory flexibility to establish reporting 
requirements consistent with those for the VR services portion of the 
Unified or Combined State Plan under section 101(a)(1) of the Act, as 
amended by WIOA, and section 102(c) of WIOA, and avoid any additional 
burden that would be imposed on DSUs through the submission of separate 
reports.

Provision of Training and Services for Employers (Sec.  361.32)

    Statute: Section 109 of the Act, as amended by WIOA, expands the 
types of training, technical assistance, and other services DSUs may 
provide under the VR program, to employers, who have hired or are 
interested in hiring individuals with disabilities. In addition, WIOA 
repealed the Projects with Industry program, previously authorized at 
title VI, part A of the Act.
    Current Regulations: Current Sec.  361.32 implements requirements 
regarding coordination between the VR program and the Projects with 
Industry program. There are no current regulations that implement 
section 109 of the Act.
    Proposed Regulations: We propose to amend Sec.  361.32 in its 
entirety by eliminating all requirements related to the Projects with 
Industry program since those requirements are no longer applicable. In 
its place, we propose to implement requirements regarding the types of 
activities DSUs may engage in with employers, pursuant to section 109 
of the Act.
    Reasons: The changes are necessary to implement new statutory 
requirements in section 109 of the Act, as amended by WIOA, as well as 
remove requirements that are no longer applicable to the VR program due 
to the repeal of the Projects with Industry program. Section 109 of the 
Act, as amended by WIOA, authorizes the DSU to expend VR funds for 
training and services for employers who are interested in hiring 
individuals with disabilities, thereby assisting those individuals in 
achieving competitive integrated employment. This training could assist 
employers in providing opportunities for work-based learning 
experiences; training employees who are individuals with disabilities; 
and promoting awareness of disability-related obstacles to continued 
employment.
    The amendments made throughout WIOA place heightened emphasis on 
the collaboration between DSUs and employers to improve and maximize 
opportunities for individuals with disabilities, including those with 
the most significant disabilities, to achieve competitive integrated 
employment.

Innovation and Expansion Activities (Sec.  361.35)

    Statute: Section 101(a)(18) of the Act sets forth requirements 
regarding innovation and expansion activities for DSUs. This statutory 
provision remains unchanged by WIOA.
    Current Regulations: Current Sec.  361.35 requires the State plan 
to assure that the State will reserve and use a portion of its VR funds 
to support, among other things, the resource plans for the State 
Rehabilitation Council and the Statewide Independent Living Council.
    Proposed Regulations: Proposed Sec.  361.35 would clarify that the 
State must reserve a portion of its VR program funds to support the 
resource plan for the Statewide Independent Living Council, but it may 
choose not to use these funds if the Statewide Independent Living 
Council and the State decide to use other available resources to fund 
the resource plan for the Statewide Independent Living Council.
    Reasons: This proposed change is consistent with the Department's 
longstanding interpretation of section 101(a)(18) of the Act and 
current Sec.  361.35. In the case of the State Rehabilitation Council, 
there is no other funding source available under the Act to support its 
resource plan. The funds for the State Rehabilitation Council must come 
from this section. On the other hand, the Statewide Independent Living 
Council has multiple funding sources that may be used to support the 
resource plan, including independent living funds under title VII, part 
B, of the Act; State-appropriated independent living funds; and other 
public and private sources, to the extent allowable by those sources. 
Therefore, our interpretation of the requirement has been that the 
State and the Statewide Independent Living Council may decide in the 
resource plan of the Statewide Independent Living Council to use funds 
under this section, but do not have to use these funds. They can use 
other sources of available funding to fund the Statewide Independent 
Living Council resource plan. This interpretation would have minimal 
impact on States since not all States use innovation and expansion 
funds to support the resource plan of the Statewide Independent Living 
Council.

Ability To Serve All Eligible Individuals; Order of Selection for 
Services (Sec.  361.36)

    Statute: Section 101(a)(5) of the Act, as amended by WIOA, permits 
DSUs to serve eligible individuals who require specific services or 
equipment to maintain employment, regardless of

[[Page 21074]]

whether they are currently receiving VR services. The DSUs may serve 
these individuals regardless of any order of selection the State has 
established.
    Current Regulations: Although current Sec.  361.36(a)(3) sets forth 
criteria a State must follow in establishing an order of selection, 
there is no mention of this particular discretionary exemption because 
this is a new statutory requirement.
    Proposed Regulations: We propose to amend current Sec.  
361.36(a)(3) by adding a new paragraph (v) that would require DSUs 
implementing an order of selection to indicate in the VR services 
portion of the Unified or Combined State Plan if they have elected to 
serve eligible individuals in need of specific services or equipment 
for the purpose of maintaining employment, regardless of their 
assignment to a priority category in the State's order of selection.
    Reasons: This change is necessary to implement the amendments to 
the Act. Prior to the enactment of WIOA, DSUs who were on an order of 
selection were not permitted to serve eligible individuals who did not 
meet the criteria of that order, which was designed to ensure that 
individuals with the most significant disabilities received a priority 
for services when resources were limited. Section 101(a)(5) of the Act, 
as amended by WIOA, allows greater flexibility by permitting DSUs to 
serve eligible individuals, regardless of any order of selection that 
has been established by the State, if those individuals require 
specific services or equipment to maintain employment (e.g., because 
the individual's disability has progressed or the individual's job 
duties have changed).
    This statutory change, as well as the proposed regulatory change, 
is significant because, in effect, it creates an exemption from order 
of selection for eligible individuals who need a specific service or 
equipment in order to maintain employment. Prior to the passage of 
WIOA, these individuals would have been placed in the order, depending 
on the severity of their disability, which could have resulted in a 
placement on a waiting list. With the proposed regulatory change, DSUs 
may, at their discretion, elect to serve these individuals outside of 
the order of selection criteria that are otherwise in place in order to 
serve these individuals who could be at risk of losing employment if 
such services or equipment is not received. In this way, DSUs could 
assist these individuals, including those with significant 
disabilities, to maintain economic self-sufficiency, thereby reducing 
their potential need for publicly-funded services or benefits.
    We want to make four points clear. First, proposed Sec.  
361.36(a)(3)(v) is discretionary. DSUs would have the ability to serve 
these individuals outside of the established order and should consider 
doing so if financial and staff resources are sufficient. Second, if a 
DSU elects to do so, it must, in accordance with proposed Sec.  
361.36(a)(3)(v), its plans in the VR services portion of the Unified or 
Combined State Plan before implementing this authority. Third, the 
services and equipment provided under this authority must be consistent 
with an individual's individualized plan for employment, in the same 
manner as any other service or equipment provided under the VR program. 
Finally, proposed Sec.  361.36(a)(3)(v) would apply to those specific 
services or equipment that the individual needs to maintain employment, 
not to other services the individual may need for other purposes.

Reports; Evaluation Standards and Performance Indicators (Sec.  361.40)

    Statute: Section 101(a)(10)(C) of the Act, as amended by WIOA, 
expands the data that DSUs must report to include data about: Students 
with disabilities who are receiving pre-employment transition services; 
individuals with open service records and the types of services they 
are receiving; individuals referred to the VR program by one-stop 
operators; and individuals referred to these one-stop operators by 
DSUs. In addition, section 106 of the Act, as amended by WIOA, requires 
the VR program to be subject to the common performance accountability 
measures, established in section 116 of WIOA, applicable to core 
programs of the workforce development system.
    Current Regulations: Current Sec.  361.40 addresses the data that a 
DSU must report, but does not include the new data elements since these 
are new statutory requirements. Current Sec. Sec.  361.81 through 
361.89 implement current evaluation standards and performance 
indicators applicable to the VR program. These standards and indicators 
do not incorporate the common performance measures since these are new 
statutory requirements.
    Proposed Regulations: We propose to reorganize current Sec.  361.40 
into two paragraphs. Proposed paragraph (a) would retain all existing 
provisions in current Sec.  361.40, as well as incorporate requirements 
regarding new VR-specific data related to individuals with open service 
records and the types of services they are receiving; students with 
disabilities receiving pre-employment transition services; and 
individuals referred to the State VR program by one-stop operators and 
those referred to these one-stop operators by the State VR program.
    In proposed paragraph (b), we provide a cross-reference to subpart 
E of this part, which will include the joint regulations implementing 
common performance measures. In so doing, we also propose to remove 
current Sec. Sec.  361.80 through 361.89, as the current standards and 
indicators are no longer applicable to the VR program.
    Reasons: The proposed changes to current Sec.  361.40 are necessary 
to implement amendments to the Act made by WIOA. Specifically, we 
include VR-specific data regarding, among others, individuals with open 
service records and the types of services they are receiving, as well 
as students with disabilities who are receiving pre-employment 
transition services, to ensure that the Secretary has the information 
needed to assess the performance of the VR program.
    It is significant to note that the VR program will no longer be 
subject to its own set of performance standards and indicators 
established by the Department. Section 106 of the Act requires that the 
VR program comply with the common performance accountability measures 
established under section 116 of WIOA, which apply to all core programs 
of the workforce development system. To that end, the Departments of 
Labor and Education have developed proposed joint regulations to 
implement these requirements. The proposed joint regulations regarding 
the performance accountability system, which will be incorporated in 
subpart E of this part, will be presented in a separate NPRM published 
elsewhere in this issue of the Federal Register. Given this significant 
statutory change in section 106 of the Act, we have determined that 
most of the provisions we had in current Sec. Sec.  361.80 through 
361.89 are no longer applicable and, therefore, we propose to remove 
them. We ask that you provide only comments specific to the VR program 
with respect to this section. Any comments regarding the common 
performance measures or data requirement, applicable to all core 
programs, should be provided in connection with the relevant provisions 
of the joint proposed regulations.

Assessment for Determining Eligibility and Priority for Services (Sec.  
361.42)

Eligibility Criteria

    Statute: Section 102(a)(1) of the Act, as amended by WIOA, makes 
clear that

[[Page 21075]]

an individual with a disability, whose physical or mental impairment 
constitutes a substantial impediment to employment, may be determined 
eligible for VR services if he or she requires services to advance in 
employment.
    Current Regulations: Current Sec.  361.42(a)(1)(iii) specifies that 
the applicant may be determined eligible if he or she meets all other 
eligibility criteria and requires VR services to prepare for, secure, 
retain, or regain employment. Current regulations do not reference 
advancing in employment since this is a new statutory requirement.
    Proposed Regulations: We propose to amend current Sec.  
361.42(a)(1)(iii) to clarify that an applicant, who meets all other 
eligibility criteria, may be determined eligible if he or she requires 
VR services to advance in employment.
    We also propose to clarify in current Sec.  361.42(c)(2) that a DSU 
must not consider an applicant's employment history, current employment 
status, level of education or educational credentials when determining 
eligibility for services.
    Reasons: The proposed changes are necessary, in part, to implement 
statutory amendments to section 102(a)(1) of the Act made by WIOA. The 
proposed changes also would ensure that individuals with disabilities 
are able to obtain through the VR program the skills necessary to 
engage in the high demand jobs available in today's economy. It has 
been the Department's long-standing policy that the VR program is not 
intended solely to place individuals with disabilities in entry-level 
jobs, but rather to assist them to obtain employment that is 
appropriate given their unique strengths, resources, priorities, 
concerns, abilities, capabilities, and informed choice. The extent to 
which DSUs should assist eligible individuals to advance in their 
careers through the provision of VR services depends upon whether the 
individual has achieved employment that is consistent with this 
standard.
    Furthermore, the proposed additional factors that a DSU must not 
consider when determining an applicant's eligibility for VR services in 
proposed Sec.  361.42(c)(2) would be consistent with longstanding 
policy. By specifically proposing the additional factors related to 
employment and education history in the regulation, we reinforce the 
requirement in section 102(a)(1)(iii) of the Act and proposed Sec.  
361.42(a)(1)(iii).

Residency

    Statute: Section 101(a)(12) of the Act requires that the State plan 
will include an assurance that the State will not impose a residence 
requirement that excludes from services provided under the plan any 
individual who is present in the State. This provision remains 
unchanged by WIOA.
    Current Regulations: Current Sec.  361.42(c)(1) requires that the 
State plan must assure that the State unit will not impose, as part of 
determining an applicant's eligibility for VR services, a duration of 
residence requirement that excludes from services any applicant who is 
present in the State.
    Proposed Regulations: We propose to amend current Sec.  
361.42(c)(1) to clarify that a DSU must not require the applicant to 
demonstrate a presence in the State by the production of documentation 
that would, under State or local law, or practical circumstances, 
result in a duration of residency.
    Reasons: The proposed clarification in Sec.  361.42(c)(1) is 
consistent with our long-standing interpretation of this statutory 
requirement, as expressed in monitoring reports and other guidance. 
Many State VR agencies require individuals applying for VR services to 
provide documents that substantiate that the individual is present in 
the State and, hence, available to participate in the eligibility 
determination process and to receive VR services. Some forms of 
documentation, however, such as a driver's license or voter 
registration card, may require a significant amount of time to obtain. 
Moreover, States or local jurisdictions may impose durational 
requirements prior to the issuance of some forms of documentation or 
identification. By proposing these changes, we would clarify that the 
requirement of such forms of documentation to demonstrate presence in 
the State constitutes a de facto duration requirement, which is 
prohibited by the Act. Although documents that take time to obtain may 
be accepted as proof of an applicant's presence in the State if 
available at the time of application, the DSU must permit the use of 
other documentation that includes sufficient information to demonstrate 
presence in the State, such as documentation that includes a 
residential address in the State.

Extended Evaluation

    Statute: WIOA amends section 102(a)(2)(B) of the Act by removing 
the limited exception to trial work experiences, whereby VR agencies 
made extended evaluations available to applicants, prior to determining 
that an individual is unable to benefit from VR services due to the 
severity of the individual's disability and, thus, is ineligible for VR 
services. Although the term ``extended evaluation'' was not referenced 
in the Act, this is the term used in current regulation to describe the 
process by which the DSUs assess an individual's ability to benefit 
from VR services due to the severity of disability, when the 
individual, under limited circumstances, is unable to participate in 
trial work experiences.
    Current Regulations: Current Sec.  361.42(f) permits, in limited 
circumstances, the provision of extended evaluations to individuals 
with disabilities who cannot take advantage of trial work experiences, 
or for whom trial work experiences have been exhausted.
    Current Sec.  361.41(b)(1)(ii) permits the exploration of an 
individual's abilities, capabilities, and capacity to perform in work 
situations in accordance with Sec.  361.42(e) or, if appropriate, an 
extended evaluation in accordance with Sec.  361.42(f).
    Proposed Regulations: We propose to remove paragraph (f) from 
current Sec.  361.42 and redesignate (g) as (f).
    Proposed Sec.  361.41(b)(1)(ii) would remove reference to extended 
evaluation and only permit an exploration of the individual's 
abilities, capabilities, and capacity to perform in work situations 
carried out in accordance with current Sec.  361.42(e).
    Reasons: These changes are necessary to implement the amendments to 
section 102(a)(2)(B) of the Act made by WIOA. The proposed changes also 
would ensure that before a DSU make an ineligibility determination, it 
must conduct a full assessment of the capacity of the applicant to 
perform in realistic work settings, without the exception of extended 
evaluations.

Development of the Individualized Plan for Employment (Sec.  361.45)

Timeframe for Completing the Individualized Plan for Employment

    Statute: Section 102(b)(3)(F) of the Act, as amended by WIOA, 
mandates that the individualized plan for employment be developed as 
soon as possible but no later than 90 days after the date of 
determination of eligibility, unless the DSU and the eligible 
individual agree to an extension of that timeframe.
    Current Regulations: Current Sec.  361.45(e) requires the DSU to 
establish and implement standards for the prompt development of 
individualized plans for employment for eligible individuals; however, 
the 90-day timeframe is not included because this is a new statutory 
requirement.
    Proposed Regulations: We propose to amend current Sec.  361.45(e) 
to require

[[Page 21076]]

that the DSU develop the individualized plan for employment for each 
eligible individual as soon as possible, but no later than 90 days 
following determination of eligibility, unless the DSU and the 
individual agree to a specific extension of that timeframe.
    Reasons: This change is necessary to implement the statutory 
requirement made by WIOA that VR agencies develop the individualized 
plan for employment within 90 days following determination of 
eligibility. The intent is to move all eligible individuals through the 
VR process with minimal delay in order to efficiently and effectively 
serve these individuals, resulting in the achievement of employment 
outcomes in competitive integrated employment. While the majority of 
DSUs have already adopted the 90-day timeframe, some DSUs have adopted 
extended timeframes that impede the efficient and effective movement of 
individuals through the VR process, therefore, resulting in the delay 
of services, and ultimately delaying the achievement of employment 
outcomes. Additionally, some DSUs have established interim steps or 
plans prior to the development of the individualized plan for 
employment or have adopted longer timeframes for transition-age youth 
or other specific populations. The establishment of a 90-day timeframe 
by WIOA ensures consistency across the VR program nationally and sets 
the expectation that all eligible individuals receive timely services 
through an effective and efficient VR program with an outcome of 
improved VR agency performance and resulting in employment outcomes for 
individuals with disabilities.

Options for Developing the Individualized Plan for Employment

    Statute: WIOA amends section 102(b)(1)(A) of the Act by clarifying 
that the DSU must provide eligible individuals with information 
regarding the availability of assistance in developing all or part of 
the individualized plan for employment from disability advocacy 
organizations. In addition, WIOA amends section 102(b) to require a DSU 
to provide to eligible individuals entitled to Social Security benefits 
under titles II or XVI of the Social Security Act, general information 
on additional supports, such as assistance with benefits planning.
    Current Regulations: Current Sec.  361.45(c)(1) requires that the 
DSU provide eligible individuals information regarding the options for 
developing the individualized plan for employment, but does not 
reference disability advocacy organizations since this is a new 
statutory requirement. Current Sec.  361.45(c)(2) requires the DSU to 
provide additional information to eligible individuals relevant to the 
development of the individualized plan for employment, but does not 
mention benefits planning or other information specific to Social 
Security beneficiaries with disabilities since this is a new statutory 
requirement.
    Proposed Regulations: We propose to amend current Sec.  
361.45(c)(1) by requiring a DSU to provide eligible individuals 
information about the option of requesting assistance from a disability 
advocacy organization when developing the individualized plan for 
employment. We also propose to amend current Sec.  361.45(c)(2) by 
adding a new paragraph (v) that would require a DSU to provide eligible 
individuals entitled to Social Security benefits under titles II or XVI 
of the Social Security Act information on assistance and supports 
available to individuals desiring to enter the workforce, including 
benefits planning.
    Reasons: The proposed changes are necessary to implement the 
amendments to section 102(b) of the Act made by WIOA. The inclusion of 
disability advocacy groups as a specific source of assistance, as 
appropriate, for eligible individuals in the development of the 
individualized plan for employment supports, and acknowledges the 
important role that these groups may play in mentoring an eligible 
individual through the VR process and in designing the plan of services 
that will successfully lead to an employment outcome. In coordination 
with the expertise of the qualified rehabilitation counselor, the 
experience of advocacy groups may lend a perspective and understanding 
of the disability-related needs, responsibilities, and services that 
are required to achieve the individual's employment goal. The inclusion 
of advocacy groups as a resource also recognizes and emphasizes the 
importance of self-determination, empowerment, and self-advocacy as 
cornerstones in rehabilitation.
    By requiring that a DSU provide eligible individuals entitled to 
Social Security benefits under titles II or XVI of the Social Security 
Act with information on benefits planning, we intend that the 
individuals understand the implications of employment for continued 
receipt of their benefits so that they can make a fully informed choice 
of an employment goal.

Content of the Individualized Plan for Employment (Sec.  361.46)

    Statute: WIOA amends section 102(b)(4) of the Act to require that 
the description of the specific employment goal chosen by the eligible 
individual, required as a mandatory component of the individualized 
plan for employment, be consistent with the general goal of competitive 
integrated employment.
    Current Regulations: Current Sec.  361.46(a)(1) establishes the 
content requirements for the individualized plan for employment and 
requires that the plan include a specific employment goal based upon 
the unique strengths, resources, priorities, concerns, abilities, 
capabilities, interests, and informed choice of the eligible 
individual. The regulation does not contain the new statutory 
requirement.
    Proposed Regulations: We propose to amend current Sec.  
361.46(a)(1) to require that the vocational goal selected by the 
individual in accordance with this section be consistent with the 
general goal of competitive integrated employment.
    Reasons: The proposed revision to current Sec.  361.46(a)(1) is 
necessary to implement the statutory requirements under WIOA, and is 
consistent with the purpose of the VR program, which is to assist 
individuals with disabilities, including those with significant 
disabilities, to prepare for and engage in competitive integrated 
employment.

Transition of Students and Youth With Disabilities

    The Act, as amended by WIOA, places heightened emphasis on the 
provision of services to students and youth with disabilities to ensure 
that they have meaningful opportunities to receive the training and 
other services they need to achieve employment outcomes in competitive 
integrated employment. To that end, the Act expands not only the 
population of students with disabilities who may receive services but 
also the kinds of services that the VR agencies may provide to youth 
and students with disabilities who are transitioning from secondary 
school to postsecondary education and employment.
    Most notably, section 110(d) of the Act, as amended by WIOA, 
requires States to reserve 15 percent of their VR allotment to provide 
pre-employment transition services to students with disabilities who 
are eligible or potentially eligible for VR services. Section 113 of 
the Act, as added by WIOA, outlines the services that must be provided 
with these reserved funds. These services are designed to be an early 
start at job exploration.

[[Page 21077]]

    With the addition of these pre-employment transition services, and 
expansion of services to youth, the VR program can be characterized as 
providing a continuum of VR services, especially for students and youth 
with disabilities. Specifically, it can provide pre-employment 
transition services to any student with a disability who needs these 
services, regardless of whether the student has applied for or been 
determined eligible for VR services. In addition, section 103(b) of the 
Act permits the VR agency to provide transition services to groups of 
youth with disabilities, regardless of whether they have applied for or 
been determined eligible for services. If either a student or youth 
with a disability requires more intensive services, he or she would 
apply for VR services. Once determined eligible, an individualized plan 
for employment would be developed, which would outline the specific 
services that he or she may need in order to achieve an employment 
outcome. In sum, the VR program provides a range of services, from most 
basic to the most individualized and intensive service, thereby meeting 
the evolving needs of a student or a youth with a disability who is 
transitioning from school to post-school life.
    This portion of the NPRM will describe the key regulatory changes 
we propose to implement statutory amendments related to transition 
services. The major substantive changes relate to certain key 
definitions and the provision of pre-employment transition services and 
transition services to groups of youth with disabilities. Throughout 
this section of the NPRM, we will provide additional guidance for those 
areas that we expect will generate significant comments. The proposed 
changes are presented by relevant section of the regulations.

Transition-Related Definitions (Sec.  361.5(c))

    Statute: Section 7 of the Act includes several new definitions 
related to transition services. In particular, section 7 adds new 
definitions for the terms: ``pre-employment transition services'' in 
section 7(30); ``student with a disability'' in section 7(37); and 
``youth with a disability'' in section 7(42). WIOA also deleted the 
term, ``transition services,'' which had been defined previously in 
section 7(37).
    Current Regulations: Current Sec.  361.5(b) contains definitions 
for terms relevant to the VR program, but does not define ``pre-
employment transition services,'' student with a disability, or youth 
with a disability since these are new statutory terms.
    Proposed Regulations: We propose to add new definitions to current 
Sec.  361.5(c), as redesignated elsewhere in this NPRM, for ``pre-
employment transition services'' in proposed Sec.  361.5(c)(42); 
``student with a disability'' in proposed Sec.  361.5(c)(51); and 
``youth with a disability'' in proposed Sec.  361.5(c)(59). We also 
propose to retain the current definition for ``transition services'' in 
Sec.  361.5(c)(55), despite its removal from the statute as a defined 
term, since it is still used throughout the Act and the regulations in 
part 361. In retaining this definition, we propose to clarify that this 
particular service is available to both students and youth with 
disabilities.
    Reasons: These changes are necessary to implement the amendments to 
the Act. Given the heightened emphasis throughout the Act on students 
and youth with disabilities, especially with regard to the provision of 
pre-employment transition services and other transition-related 
services, it is essential that stakeholders understand the definitions 
for these terms and how they can be distinguished from other terms 
commonly used.
    For example, pre-employment transition services are those specific 
services specified in section 113 of the Act and implemented in 
proposed Sec.  361.48(a). These services, paid for with a percentage of 
funds reserved from the State's VR allotment, are available only to 
those individuals who meet the definition of a student with a 
disability. On the other hand, other transition-related services, 
including those that could be similar to pre-employment transition 
services, may be provided to students or youth with disabilities and do 
not require a specific reservation of funds (e.g., either as an 
individualized VR service pursuant to section 103(a) or as a service to 
groups pursuant to section 103(b) of the Act).
    It also is important to distinguish between the terms ``student 
with a disability'' and ``youth with a disability'' because, as just 
described, different services are available for different populations. 
A student with a disability is an individual with a disability in 
school who is (1) 16 years old, or younger, if determined appropriate 
under the Individuals with Disabilities Education Act (IDEA), unless 
the State elects to provide pre-employment transition services at a 
younger age, and no older than 21, unless the State provides transition 
services under IDEA at an older age; and (2) receiving transition 
services pursuant to IDEA, or is a student who is an individual with a 
disability for the purposes of section 504 of the Act (29 U.S.C. 794). 
However, it is important to note that we have interpreted a student 
with a disability, given the plain meaning of the statutory definition, 
as not including an individual with a disability in postsecondary 
education. A youth with a disability, on the other hand, is anyone who 
has a disability as defined in section 7(20) of the Act and is aged 14 
to 24, regardless of whether they are in school. The terms ``student 
with a disability'' and ``youth with a disability'' do not affect 
coverage under section 504. All individuals with disabilities 
regardless of whether they meet the definition of ``student with a 
disability'' and ``youth with a disability'' continue to be covered 
under section 504.
    Therefore, all students with disabilities would meet the definition 
of a youth with a disability, but not all youth with disabilities would 
satisfy the definition of a student with a disability. For example, an 
18-year-old individual with a disability who is in secondary school and 
receiving services under IDEA meets both the definition of a student 
with a disability as well as the definition of a youth with a 
disability. However, an 18-year-old with a disability who is not in 
school would meet only the definition of a youth with a disability.
    The distinctions between these two terms are critical for purposes 
of the various authorities for providing transition-related services. 
For example, pre-employment transition services provided under proposed 
Sec.  361.48(a) are only available to students with disabilities; 
whereas transition services provided for the benefit of a group of 
individuals may be provided to both students and youth with 
disabilities under proposed Sec.  361.49(a).
    Despite the removal of the definition of ``transition services'' 
from the Act, we believe it is important to retain this definition in 
part 361 given that the term continues to be used throughout the Act 
and these regulations. Therefore, we propose to retain the definition 
of ``transition services.'' However, we propose to clarify that this 
service is available to both students and youth with disabilities in 
order to be consistent with proposed regulations in Sec. Sec.  
361.48(b) and 361.49(a) governing the provision of transition services.
    Specific guidance about these terms and how they relate to various 
transition-related services will be provided in this NPRM in 
conjunction with the relevant proposed regulation.

[[Page 21078]]

Coordination With Education Officials (Sec.  361.22)

    Statute: Section 101(a)(11)(D) of the Act, as amended by WIOA, 
clarifies two points: (1) Interagency coordination between the DSUs and 
educational agencies must include coordination regarding the provision 
of pre-employment transition services; and (2) DSUs may provide 
consultation and technical assistance to education officials through 
alternative means, such as conference calls and video conferences. This 
section also includes other technical changes.
    In addition, WIOA adds a new section 101(c) to the Act that makes 
clear that nothing in the Act is to be construed as reducing the 
responsibility of the local educational agencies or any other agencies 
under IDEA to provide or pay for any transition services that are also 
considered to be special education or related services necessary for 
providing a free appropriate public education to students with 
disabilities.
    Finally, section 511 of the Act, as amended by WIOA, imposes 
several requirements, particularly related to documentation of services 
for DSUs and State and local educational agencies with regard to youth 
with disabilities seeking subminimum wage employment. Unlike the rest 
of the Act, which took effect upon enactment, section 511 does not take 
effect until July 22, 2016.
    Current Regulations: Current Sec.  361.22 requires VR agencies to 
develop policies and procedures for coordinating with education 
officials to facilitate the transition of students with disabilities 
from education services to the provision of VR services. However, 
current regulations do not reference pre-employment transition services 
or the option of providing consultation services through alternative 
means since these are new statutory requirements. Current regulations 
also do not reference the statutory construction clause or the 
statutory requirements contained in section 511, as these are new 
statutory requirements.
    Proposed Regulations: We propose to amend current Sec.  361.22(a) 
to incorporate reference to pre-employment transition services as an 
area that must be included during inter-agency coordination of 
transition services.
    We propose to amend current Sec.  361.22(b)(1) to clarify that VR 
agencies may use alternative means, such as video conferences and 
conference calls, for providing consultation and technical assistance 
to education officials. We also propose to amend current Sec.  
361.22(b) by adding new clauses (5) and (6) to incorporate, by 
reference, certain requirements from section 511 into the formal 
interagency agreement between the DSU and the State educational agency.
    Finally, we propose to add a new paragraph (c) under Sec.  361.22 
to incorporate the construction clause in section 101(c) of the Act.
    We also propose other technical or conforming changes throughout 
this section.
    Reasons: The proposed changes to current Sec.  361.22 are necessary 
to implement the amendments to the Act made by WIOA. While most of the 
proposed changes are self-explanatory, we believe additional guidance 
is necessary to clarify a few of the proposed provisions.
    First, section 511 of the Act, as added by WIOA, imposes certain 
requirements on DSUs and State and local educational agencies with 
regard to youth with disabilities seeking subminimum wage employment. 
Specifically, DSUs and local educational agencies must provide these 
youth with disabilities documentation demonstrating that the youth 
completed certain activities, such as receipt of transition services 
under IDEA and pre-employment transition services under the VR program, 
as applicable. Section 511 also requires the DSU, in consultation with 
the State educational agency, to develop a process, or utilize an 
existing process, to document completion by youth with disabilities of 
the required activities, as applicable, under section 511. We believe 
the formal interagency agreement that is required by section 
101(a)(11)(D) of the Act, and current Sec.  361.22(b) is the 
appropriate mechanism for ensuring the consultation necessary to 
develop and implement the documentation process required by section 511 
and 34 CFR 397.10.
    Second, section 511(b)(2) of the Act prohibits a State or local 
educational agency from entering into a contract or other arrangement 
with an entity for purposes of operating a program in which youth with 
disabilities are employed at subminimum wage. Again, we believe the 
formal interagency agreement, required by section 101(a)(11)(D) of the 
Act, and current Sec.  361.22(b), between the State educational agency 
and the DSU, is the appropriate mechanism whereby State and local 
educational agencies will assure that they will comply with the 
prohibition imposed by section 511(b)(2) of the Act and proposed 34 CFR 
397.31. We believe that incorporating both of these requirements from 
section 511, and proposed part 397, into an existing formal interagency 
agreement will reduce burden on the States so new mechanisms for 
requirements are unnecessary.
    Third, we want to provide additional clarification regarding 
proposed Sec.  361.22(c) given questions that have arisen over the 
years as to which entity, the local educational agency or DSU, is 
responsible for providing transition services to students with 
disabilities (who are also VR consumers) when such services fall under 
the purview of both entities. The following examples illustrate the 
types of scenarios that have been at the heart of questions posed by 
DSUs in the past:
    1. A VR-eligible student who is blind is participating in a work-
experience placement after school hours as part of her individualized 
education program. Because that activity takes place in a location 
outside of school, the student needs travel training in order to travel 
independently from school to work and then home.
    2. A VR-eligible student is enrolled in an apprenticeship program 
in construction trades as part of his individualized education program 
under IDEA. The program requires the student to have special gloves, 
clothing, equipment, and footwear to attend the program.
    3. A VR-eligible student is participating in a work experience 
activity during school hours as part of her individualized education 
program. The school has arranged for several IDEA-eligible students to 
participate in this same work activity and is providing a school bus to 
transport the IDEA-eligible students to and from the worksite. The VR-
eligible student needs transportation to the worksite and a uniform.
    While neither the Act nor IDEA is explicit as to which entity, the 
VR agency or the local education agency, is financially responsible for 
providing transition services, which are not considered solely special 
education or related services under IDEA, both proposed Sec.  361.22(c) 
and current 34 CFR 300.324(c)(2)) make clear that neither the local 
educational agency nor the VR agency may shift the burden for providing 
a service, for which it otherwise would be responsible, to the other 
entity. We want to make clear that the Act and IDEA, along with their 
implementing regulations in proposed Sec.  361.22(c) and 34 CFR 
300.324(c)(2), are to be read in concert.
    Therefore, we believe decisions related to which entity will be 
responsible for providing transition or pre-employment transition 
services that

[[Page 21079]]

can be considered both a special education and a VR service must be 
made at the State and local level as part of the collaboration between 
the VR agencies, State educational agencies, and local educational 
agencies. This coordination and collaboration is crucial to successful 
transition planning and service delivery. Both the IDEA and the 
Rehabilitation Act require State educational agencies and VR agencies 
to plan and coordinate transition services for students with 
disabilities. This occurs through an interagency agreement or other 
mechanism for interagency coordination, such as described in section 
612(a)(12) of IDEA (20 U.S.C. 1412(a)(12))). Coordination, including 
clearly articulated roles and responsibilities for the provision of 
transition services and for activities under section 511 of the Act, as 
well as mechanisms to resolve disputes between the State educational 
agencies and the VR agencies ensures a seamless delivery of transition 
services that enable eligible students with disabilities to make a 
smooth transition from school to post-school education and employment. 
Moreover, under IDEA, this interagency coordination may be necessary to 
ensure the provision of transition services that are necessary for the 
provision of a free appropriate public education to students with 
disabilities (see section 612(a)(12) of IDEA and 34 CFR 300.154). 
States have the flexibility to include local educational agencies as 
parties to the State-level agreement.
    Since the ultimate decisions related to financial responsibility 
for the provision of transition services must be established at the 
State and local level during the collaboration and coordination of 
transition and pre-employment transition services, a State's formal 
interagency agreement or other mechanism for interagency coordination 
can provide a foundation for addressing these issues by including 
criteria to be used by the VR agencies and local educational agencies 
when considering and assigning the financial responsibility of each 
agency for the provision of transition services to students with 
disabilities on an individualized basis. For example, the criteria 
could include:
    1. The purpose of the service--Is it related more to an employment 
outcome or education (i.e., is it considered a special education or 
related service (e.g., rehabilitation counseling that is necessary for 
the provision of a free appropriate public education))?
    2. Customary Services--Is the service one that the school 
customarily provides under IDEA part B? For example, if the school 
ordinarily provides job exploration counseling to its eligible students 
with disabilities, the mere fact that such a service is now authorized 
under the Rehabilitation Act as a pre-employment transition service 
does not mean the school should cease providing that service and refer 
those students to the VR program.
    3. Eligibility--Is the student with a disability eligible for 
transition services under IDEA? As stated earlier, the definition of a 
``student with a disability,'' for purposes of the VR program, is 
broader than that under IDEA because the definition in the 
Rehabilitation Act includes those students who are individuals with a 
disability under section 504 of the Rehabilitation Act. It is possible 
that these students do not have an individualized education program 
under IDEA and, therefore, would not be eligible for or receiving 
special education and related services under IDEA. As a result, VR 
agencies are authorized to provide transition services under the VR 
program to a broader population than local educational agencies are 
authorized to provide under IDEA.
    We believe that criteria such as these could be beneficial as DSUs 
and local educational agencies and State educational agencies 
collaborate and coordinate the provision of transition services, 
including pre-employment transition services to students with 
disabilities, and resolve disputes related to the provision of these 
services.

Cooperation and Coordination With Other Entities (Sec.  361.24)

    Statute: Section 101(a)(11) of the Act makes several changes that 
highlight the importance of transition and other matters affecting 
students and youth with disabilities with regard to the coordination of 
services between the VR program and other non-educational programs.
    Current Regulations: Current regulations in Sec.  361.24 address 
only the cooperation and coordination between the State VR agency and 
Federal, State and local agencies that are not carrying out activities 
through the workforce development system. Current regulations do not 
address the coordination that must occur with the section 121 projects 
in a State, if applicable, with regard to the provision of pre-
employment transition services or non-educational agencies serving out-
of-school youth because these are new statutory requirements.
    Proposed Regulations: Proposed Sec.  361.24(a) would incorporate 
non-educational agencies serving out-of-school youth as another entity 
with which the VR agency must coordinate.
    We also propose to amend current Sec.  361.24(c) and (d), which 
govern coordination between the DSUs and employers and section 121 
projects, respectively, to include transition services among the 
matters that must be included in coordination efforts.
    Reasons: These changes are necessary to implement the amendments to 
the Act made by WIOA, all of which are designed to improve 
relationships and coordination between the VR agencies, employers, and 
all other agencies (e.g., workforce development, child welfare and 
juvenile justice agencies) serving individuals with disabilities, 
especially youth with disabilities, to ensure they have meaningful 
opportunities to achieve employment outcomes in competitive integrated 
employment. While DSUs have been required to coordinate with American 
Indian Vocational Rehabilitation Services projects in the State, if 
any, the coordination now must also include pre-employment transition 
services.

Statewide Assessment; Estimates; State Goals and Priorities; 
Strategies; and Progress Reports (Sec.  361.29)

    Statute: Section 101(a)(15) of the Act, as amended by WIOA, 
requires the comprehensive needs assessments to include: a review of 
the needs of youth and students, especially with regard to pre-
employment transition services and the coordination of services with 
educational agencies; and the methods used to improve the provision of 
VR services, especially transition services.
    Current Regulations: Current Sec.  361.29 requires that the State 
plan include the results of a statewide assessment, but does not 
contain new statutory requirements related to transition and pre-
employment transition services.
    Proposed Regulations: Proposed Sec.  361.29(a)(1)(i)(D) reflects 
the addition of the new statutory requirement for the statewide needs 
assessment to identify the vocational rehabilitation needs of youth and 
students with disabilities, including their need for pre-employment 
transition services as defined under proposed Sec.  361.5(c)(42) or 
other transition services. Proposed Sec.  361.29(a)(1)(i)(D)(2) would 
require that the State plan include an assessment of the needs for 
transition services and pre-employment transition services and the 
extent to which VR services are coordinated with services provided 
under IDEA in order to meet the needs of individuals with disabilities. 
The proposed Sec.  361.29(d)(4) would require that the State plan 
include strategies to

[[Page 21080]]

provide pre-employment transition services.
    Reasons: These proposed changes are necessary to implement the 
amendments to the Act made by WIOA. These proposed changes reflect the 
Act's emphasis on transition-related issues affecting students and 
youth with disabilities.

Development of the Individualized Plan for Employment (Sec.  361.45)

    Statute: None.
    Current Regulations: Current Sec.  361.45(d)(9) requires that an 
individualized plan for employment be developed in consideration of a 
student with a disability's individualized education program under 
IDEA. There is no reference to 504 services in this context.
    Proposed Regulations: We propose to amend current Sec.  
361.45(d)(9)(i) to incorporate consideration of a student's section 504 
services.
    Reasons: This proposed change is necessary to implement the 
amendments to the Act made by WIOA with regard to the addition of a 
definition of ``student with a disability.'' Because a student with a 
disability could be an individual who is receiving services under 
section 504 rather than under an individualized education program 
pursuant to IDEA, we believe this proposed change is essential to 
ensure consistent implementation of all requirements affecting students 
with disabilities.

Content of the Individualized Plan for Employment (Sec.  361.46)

    Statute: As amended by WIOA, section 102(b)(4)(A) of the Act 
permits an individualized plan for employment to contain a specific 
post-school employment outcome or a more general, projected outcome. 
Section 102(b)(4)(B) requires the individualized plan for employment 
for a student with a disability to include the specific transition 
services needed by the student for the achievement of the employment 
goal.
    Current Regulations: Current Sec.  361.46 outlines the components 
of an individualized plan for employment, but does not contain specific 
requirements related to transition since these are new statutory 
requirements.
    Proposed Regulations: We propose to revise current Sec.  
361.46(a)(1) to permit, in lieu of a specific employment goal, a 
description of an eligible student's or youth's projected post-school 
employment outcome.
    Proposed Sec.  361.46(a)(2)(ii) would require that the description 
of the specific VR services under proposed Sec.  361.48 include the 
specific transition services and supports needed for an eligible 
student with a disability or youth with disability to achieve an 
employment outcome or projected post-school employment outcome.
    Reasons: These changes are necessary to implement the amendments 
made to the Act by WIOA. By permitting the individualized plan for 
employment for a student or youth with a disability to include a 
projected, or generally described, rather than a specific employment 
goal, we recognize that some students and youth with disabilities, 
particularly those of a younger age, may not have formulated a specific 
employment goal when they begin the VR process. As a result, VR 
agencies may find it necessary to amend the individualized plan for 
employment to reflect career exploration consistent with vocational 
growth and development and the resulting evolution in the student's or 
youth's employment goal. However, VR agencies should continue to work 
with students and youth who have identified a specific employment goal, 
especially those who are older, to develop individualized plans for 
employment that contain a specific goal. For students and youth who 
have yet to identify a specific employment goal, this change would 
remove the need for these frequent amendments. However, the inclusion 
of a projected employment goal in the individualized plan for 
employment would not eliminate the responsibility of the VR counselor 
and student to amend the individualized plan for employment and the VR 
services needed to achieve that goal as the employment goal changes.

Scope of Vocational Rehabilitation Services for Individuals With 
Disabilities (Sec.  361.48)

Pre-Employment Transition Services

    Statute: WIOA amends the Act by including a new section 113 that 
requires VR agencies to coordinate with local educational agencies in 
providing, or arranging for the provision of, pre-employment transition 
services to students with disabilities who are eligible or potentially 
eligible for VR services and in need of such services. Section 110(d) 
requires States to reserve 15 percent of their VR allotment to provide 
these services.
    Current Regulations: None.
    Proposed Regulations: We propose to add regulations implementing 
the provision of pre-employment transition services in a new paragraph 
in proposed Sec.  361.48(a). The current regulations will be moved to a 
new paragraph (b) in Sec.  361.48.
    Proposed Sec.  361.48(a)(1) would permit pre-employment transition 
services to be provided to all students with disabilities regardless of 
whether they have applied for VR services and would clarify that 
similar transition services are available to youth with disabilities 
under proposed Sec.  361.48(b) when specified in an individualized plan 
for employment.
    Proposed Sec.  361.48(a)(2) would specify the required pre-
employment transition services that are provided directly to students 
with disabilities.
    Proposed Sec.  361.48(a)(3) would describe the authorized 
activities that the State may provide, if sufficient funds are 
available, to improve the transition of students with disabilities from 
school to postsecondary education or an employment outcome.
    Proposed Sec.  361.48(a)(4) would describe the responsibilities for 
pre-employment transition coordination to be carried out by VR 
agencies.
    Finally, proposed Sec.  361.48(a)(5) would support DSUs in 
providing pre-employment transition services, consulting with other 
Federal agencies, and identifying best practices of the States for the 
provision of transition services to students with a variety of 
disabilities.
    Reasons: The proposed regulations in Sec.  361.48(a) would 
implement the requirements of section 113 of the Act, which were added 
by WIOA. This new section presents an innovative approach to providing 
pre-employment transition services to students with disabilities.
    The services required by this section are those that would be most 
beneficial to an individual in the early stages of employment 
exploration. These services are designed to provide job exploration and 
other services, such as counseling and self-advocacy training, in the 
early stages of the transition process. To that end, we believe 
Congress intended these services be provided to the broadest population 
of students with disabilities to ensure that as many students with 
disabilities as possible are given the opportunity to receive the 
services necessary in order to achieve an employment outcome. 
Therefore, the proposed regulation clarifies that pre-employment 
transition services would be available to all students with 
disabilities. However, it is important to note that a student with a 
disability in this instance does not mean an individual with a 
disability in postsecondary education. We believe this interpretation 
is consistent with the statutory language ``all students with 
disabilities who are eligible or

[[Page 21081]]

potentially eligible'' for VR services and intent, as well as the 
definition of a ``student with a disability.'' As an individual with a 
disability, every student with a disability satisfies at least one of 
the eligibility criteria for VR services in current Sec.  361.42(a)(1).
    In so doing, we would ensure that the broadest possible group of 
students with disabilities is able to receive the services they need to 
better identify and prepare for post-school activities, including 
postsecondary education and competitive integrated employment. We do 
not believe that a student with a disability would have to apply for, 
or be determined eligible for, VR services prior to receiving pre-
employment transition services under proposed Sec.  361.48(a). However, 
if the student does apply for VR services, he or she would be subject 
to all relevant requirements for eligibility and order of selection, as 
applicable, for purposes of receiving other VR services.
    It is important to point out, in this context, that the definition 
in proposed Sec.  361.5(c)(51) of a ``student with a disability,'' for 
purposes of the VR program, is broader than the definition used under 
IDEA. For that reason, the VR agency may provide pre-employment 
transition services under this section to a broader group of students 
than could receive such services under IDEA since VR agencies may 
provide these services to students eligible for or receiving section 
504 services, not all of whom may be eligible for or receiving special 
education or related services under IDEA.
    We are particularly interested in receiving comments and 
alternative suggestions about the interpretation of ``potentially 
eligible'' as used in section 113(a) of the Act to mean all students 
with disabilities as defined under proposed Sec.  361.5(c)(51).
    In providing pre-employment transition services, a DSU may consider 
providing these services to students with disabilities in group 
settings or on an individual basis. When provided in group settings, 
these services are general in nature and are not typically customized 
to an individual student's disability-related or vocational needs. For 
example, job exploration counseling provided in group settings may 
include the presentation of general local labor market composition and 
information, administration of vocational interest inventories, and 
instruction regarding self-advocacy and self-determination. On the 
other hand, job exploration counseling provided on an individual basis 
might include discussion of the student's vocational interest inventory 
results and discussion of local labor market information that applies 
to those interests.
    The manner in which pre-employment transition services are 
delivered (e.g., either in a group setting or on an individual basis) 
will most likely depend on the amount of information the DSU has 
available regarding the student with a disability at the time services 
are provided. As a student progresses through the VR process by 
applying, and being determined eligible, for VR services, the DSU would 
obtain the information necessary to provide individually tailored 
services that address the student's particular disability-related and 
vocational needs. This aspect of pre-employment transition services, 
the fact that they can be either generalized or individualized, further 
highlights the continuum of services available under the VR program.
    We want to make clear that if a student with a disability requires 
services that are beyond the limited scope of pre-employment transition 
services, the student would have to apply for and be determined 
eligible for VR services and develop an individualized plan for 
employment for the receipt of those services as would be true for any 
other applicant. To that end, we encourage DSUs to work with the local 
educational agencies and State educational agencies to develop a 
process whereby individuals expressing interest in VR services are able 
to access the program and apply for services in a timely manner. VR 
agencies are encouraged to develop a referral process that is simple 
and engaging, especially for students with disabilities and their 
families who could become discouraged or disinterested in VR services 
by needlessly complex and prolonged procedures. An individual may 
initiate the application process by requesting individualized pre-
employment transition services and other VR services. Current Sec.  
361.41(b)(2) permits a student or the student's representative, as 
appropriate, to apply for VR services through a variety of means, 
including a simple request for VR services, such as submitting a form 
consenting to the provision of VR services or even a telephone call, so 
long as the request contains the limited demographic and other 
information necessary to begin an assessment for the determination of 
eligibility and the student is available to participate in the 
assessment.

Services for Individuals Who Have Applied for or Been Determined 
Eligible for VR Services (Sec.  361.48(b))

    Statute: Section 103(a)(15) of the Act, as amended by WIOA, adds 
pre-employment transition services among the scope of VR services that 
may be provided in accordance with an individual's individualized plan 
for employment.
    Current Regulations: Current Sec.  361.48 includes transition 
services among the list of authorized activities. Pre-employment 
transition services are not specifically mentioned because this is a 
result of statutory changes.
    Proposed Regulations: As discussed earlier, we propose to 
reorganize current Sec.  361.48 so that all current provisions are 
retained in proposed Sec.  361.48(b). We also propose to incorporate 
along with those transition services already provided for, pre-
employment transition services among the authorized list of 
individualized services a VR agency may provide under proposed Sec.  
361.48(b)(18).
    Reasons: This change is necessary to implement the amendments to 
the Act made by WIOA. Under the VR program, any allowable service may 
be provided as a transition service to an individual transitioning from 
secondary school to postsecondary education or employment, who has been 
determined eligible and for whom an individualized plan for employment 
has been developed and approved. Services most commonly provided as 
transition services to students with disabilities under an 
individualized plan for employment include, but are not limited to, 
assessments, counseling and guidance, assistive technology, job 
coaching, orientation and mobility training, vocational counseling and 
guidance, and vocational and other training services, such as personal 
and vocational adjustment training.
    It is important to note that many of the services described as pre-
employment transition services in proposed Sec.  361.48(a) were 
previously provided as transition services, as defined in proposed 
Sec.  361.5(c)(55), or other individualized services, including 
community-based work experiences and other career exploration services, 
even though no specific category of pre-employment transition services 
was mentioned in the Act or current Sec.  361.48.

Scope of Vocational Rehabilitation Services for Groups of Individuals 
With Disabilities (Sec.  361.49)

    Statute: Section 103(b)(7) of the Act expands the scope of 
allowable services

[[Page 21082]]

for the benefit of groups of individuals with disabilities to include 
transition services for youth and students with disabilities. Other 
technical changes were made in section 103(b)(6).
    Current Regulations: Current Sec.  361.49(a) includes allowable 
services for the benefit of groups of individuals with disabilities, 
but does not include transition services since this is a new statutory 
requirement.
    Proposed Regulations: We propose to amend current Sec.  
361.49(a)(6) to clarify that educational agencies referenced in current 
regulations mean State or local educational agencies.
    We also propose to add a new Sec.  361.49(a)(7) to incorporate 
transition services to students and youth with disabilities as a 
permissible service for the benefit of groups of individuals with 
disabilities. This service would be provided in coordination with other 
relevant agencies and providers.
    Reasons: These changes are necessary to implement the amendments to 
the Act made by WIOA. Under this new provision, VR agencies would be 
able to engage in transition activities with some entities that have 
not typically been involved in transition planning. As a service to 
groups, these transition services would be provided in group settings 
in a manner that benefits a group of students or youth with 
disabilities, rather than being customized for any one individual. 
Individualized transition services are provided under proposed Sec.  
361.48(b).
    Examples of group transition services may include, but are not 
limited to, class tours of universities and vocational training 
programs, employer or business site visits to learn about career 
opportunities, career fairs coordinated with workforce development 
systems and employers where students and youth participate in resume 
writing classes and mock interviews. Additionally, these services are 
not limited to those individuals who are still in school since section 
103(b)(7) of the Act includes youth with disabilities between the ages 
of 14-24 who may or may not be enrolled in secondary education.
    DSUs will need to be mindful of the authority they are using when 
providing these services since requirements differ for those transition 
services provided under services to groups (see proposed Sec.  361.49) 
or pursuant to an individualized plan for employment (see proposed 
Sec.  361.48(b)) or as a pre-employment transition service under 
proposed Sec.  361.48(a).

Services for Individuals Who Have Applied for and Been Determined 
Eligible for Vocational Rehabilitation Services (Sec.  361.48(b))

Scope of Vocational Rehabilitation Services for Individuals With 
Disabilities

    Statute: WIOA amends section 103(a) of the Act by adding customized 
employment to the list of VR services that may be provided to eligible 
individuals under an individualized plan for employment. The amendments 
also encourage qualified individuals who are eligible for VR services 
to pursue advanced training in specified fields.
    Current Regulations: Current Sec.  361.48 provides a non-exhaustive 
list of VR services available to assist an individual with a disability 
in preparing for, securing, retaining, or regaining an employment 
outcome. Neither customized employment nor advanced training is 
specified in this list because these are new statutory requirements.
    Proposed Regulations: We propose to reorganize current Sec.  
361.48. Proposed Sec.  361.48(a) incorporates new regulations governing 
pre-employment transition services to students with disabilities, which 
are required by section 113 of the Act. Proposed Sec.  361.48(b) 
contains all of the services that are listed in current Sec.  361.48 
and that are available to an eligible individual under an 
individualized plan for employment.
    Proposed Sec.  361.48(b)(6) would specify that advanced training in 
a field of science, technology, engineering, or mathematics (including 
computer science), medicine, law, or business may be provided to an 
eligible individual receiving vocational and other training services 
under an individualized plan for employment.
    Finally, we propose to include customized employment as an 
available VR service in proposed Sec.  361.48(b)(20).
    We also propose to make other conforming changes throughout this 
section.
    Reasons: These changes are necessary to implement amendments to 
section 103(a) of the Act made by WIOA. It has been our long-standing 
policy that VR services are available to individuals with disabilities 
to enable them to advance in employment and that financial support for 
the graduate-level degrees specified in proposed Sec.  361.48(b)(6), 
may be provided to eligible individuals when necessary to achieve 
employment. The specific mention of this service in section 103(a) of 
the Act and the proposed regulation underscores the importance of 
advanced training when preparing individuals with disabilities for high 
demand careers in today's economy.
    Prior to enactment of WIOA, customized employment was an available 
service under the VR program when necessary to assist the eligible 
individual to achieve an employment outcome. See the discussion of 
customized employment in the Applicable Definitions section for further 
information.

Scope of Vocational Rehabilitation Services for Groups of Individuals 
With Disabilities (Sec.  361.49(a))

    Statute: Section 103(b) of the Act makes several changes with 
regard to the services to groups that VR agencies may provide, 
including those related to technical assistance to businesses, 
assistive technology, and advanced training in specific fields of 
study.
    Current Regulations: Current Sec.  361.49(a) describes the services 
that VR agencies may provide for the benefit of groups, but they do not 
specifically address services related to assistive technology or 
advanced training, or other changes made by WIOA.
    Proposed Regulations: We propose to amend current Sec.  
361.49(a)(1), regarding the establishment, development, or improvement 
of a community rehabilitation program, to clarify that services 
provided under this authority must be used to promote competitive 
integrated employment, including customized and supported employment.
    We propose to amend current Sec.  361.49(a)(4) to incorporate 
statutory changes that expand a VR agency's authority to provide 
technical assistance to all businesses who are considering hiring 
individuals with disabilities.
    We propose to add new Sec.  361.49(a)(8) and (9) regarding services 
related to assistive technology and advanced training, respectively, to 
reflect new statutory authorities for these services.
    We also propose to make other conforming changes throughout this 
section.
    Reasons: These changes are necessary to implement statutory 
changes, which both expand the types of services that a VR agency may 
provide for the benefit of groups of individuals with disabilities and 
provide clarification as needed.
    The proposed changes in Sec.  361.49(a)(1) regarding the 
establishment, development, or improvement of a community 
rehabilitation program are primarily for clarification purposes. 
Services provided under this authority have always been for the purpose 
of promoting integration into the community with respect to

[[Page 21083]]

employment. However, the proposed changes highlight the statute's 
heightened emphasis on competitive integrated employment, supported 
employment, and customized employment.
    Proposed changes to current Sec.  361.49(a)(4) would permit VR 
agencies to provide technical assistance to all businesses who are 
considering hiring individuals with disabilities. This technical 
assistance could assist businesses with recruitment, hiring, 
employment, and retention, including resources and tools to help with 
accessing and use of assistive technology, workplace accessibility, and 
accommodations for individuals with disabilities. VR agencies can work 
with businesses to develop systems for the matching and training of 
qualified workers with job requirements. Previously, a VR agency could 
provide such services only to those businesses that are not subject to 
title I of the Americans with Disabilities Act of 1990. This proposed 
change is also consistent with the heightened emphasis throughout WIOA 
on employer engagement, especially with regard to assisting individuals 
with disabilities to enter competitive integrated employment.
    Proposed new Sec.  361.49(a)(8) would incorporate a new statutory 
authority for VR agencies to provide assistive technology-related 
services for the benefit of groups of individuals with disabilities. VR 
agencies may now establish, develop, or improve assistive technology 
programs. This new authority would expand access to assistive 
technology for individuals with disabilities and employers in 
recognition of the critical role it plays in the vocational 
rehabilitation and employment of individuals with disabilities. 
However, we believe that this authority should be implemented in a 
manner that is consistent with the authority to establish, develop, or 
improve a community rehabilitation program in proposed Sec.  
361.49(a)(1) in that the services provided under this authority should 
be limited to applicants and eligible individuals receiving VR 
services. In so doing, this authority would be used in coordination 
with, rather than to supplant, the activities otherwise provided under 
the Assistive Technology Act.
    We also want to make clear that the assistive technology services 
provided under this authority would be distinguished from those 
provided under proposed Sec.  361.48(b), which are individualized and 
provided pursuant to an individual's plan for employment. The assistive 
technology services provided under proposed Sec.  361.49(a)(8) are for 
the benefit of a group of individuals and are not tied to the 
individualized plan for employment of any one individual. For example, 
a DSU may, in coordination with the State's assistive technology grant 
program, use VR funds to support an assistive technology lending 
library in proportion to the benefit received by applicants and 
eligible individuals. Once an eligible individual needs a specific 
assistive technology device to participate in VR services or the 
employment outcome, the DSU could provide the device as an 
individualized service under an individualized plan for employment 
pursuant to proposed Sec.  361.48(b).
    Proposed Sec.  361.49(a)(9) would implement a new authority for VR 
agencies to provide support for advanced training in a manner that 
benefits groups of eligible individuals. Before WIOA was enacted, a DSU 
could provide this service only on an individualized basis, pursuant to 
an individual's individualized plan for employment, in accordance with 
proposed Sec.  361.48(b), which remains unchanged in this context. This 
new authority is in addition to that provided under proposed Sec.  
361.48(b) and is not intended to replace such services as being 
provided on an individualized basis.
    Under this new authority, VR agencies may provide support services 
to eligible individuals who meet specific criteria and are pursuing 
advanced training in specific fields, as a service for the benefit of a 
group of individuals with disabilities. Examples of when a DSU may 
consider providing such support services, not directly related to an 
individualized plan for employment, could include the enrollment of 
multiple students determined eligible for VR services in the same 
training, or the development and implementation of specific programming 
for eligible individuals with an institution of higher education or 
community provider. Furthermore, VR agencies could consider 
establishing a scholarship fund for advanced training in science, 
technology, engineering or mathematics (STEM) or other fields as 
described in section 103(b)(9) of the Act. These funds may support the 
costs of graduate level training not covered by any other source for 
those services, including support provided by the VR program under 
proposed Sec.  361.48(b). If a DSU establishes such scholarships, it 
should consider establishing criteria governing the receipt of such 
support, including merit and other competitive criteria.
    We want to make clear that DSUs should continue to provide any 
individualized advanced training support that an eligible individual 
requires in order to achieve an employment outcome in competitive 
integrated employment, and that is consistent with the individual's 
plan for employment, under proposed Sec.  361.48(b), not under the 
services to groups authority discussed here. For that reason, we 
believe there would only be limited circumstances in which it would be 
appropriate for a DSU to provide support for advanced training under 
proposed Sec.  361.49(a)(9). Given that this service may be provided as 
either an individualized service under proposed Sec. Sec.  361.48(b) or 
361.49(a)(9), DSUs would have to keep in mind the distinctions between 
the two different authorities to ensure proper implementation and 
record-keeping for reporting purposes.

Comparable Services and Benefits (Sec.  361.53)

    Statute: Section 101(a)(8) of the Act clarifies that accommodations 
and auxiliary aids and services are included in the requirement to 
determine whether comparable services and benefits are available prior 
to the DSU providing most VR services. In addition, section 
101(a)(8)(B) is amended to clarify that interagency agreements for 
coordination of services between the DSU and other public entities in 
the State, including institutions of higher education, should 
specifically address accommodations and auxiliary aids and services 
among the services to be coordinated.
    Current Regulations: Current Sec.  361.53 sets forth the 
requirements related to comparable services and benefits, as well as 
requirements related to interagency agreements, without specifically 
identifying accommodations and auxiliary aids and services.
    Proposed Regulations: We propose to add language to Sec. Sec.  
361.53(a) and 361.53(d)(1) and (3) that would include accommodations 
and auxiliary aids and services among the VR services that would 
require the determination of the availability of comparable services 
and benefits prior to the provision of such services to an eligible 
individual. The proposed changes also would address interagency 
coordination of the provision of these services.
    Reasons: The proposed changes reflect the clarifications in section 
101(a)(8) of the Act made by WIOA. WIOA reinforces the Department's 
longstanding position that accommodations and auxiliary aids and 
services are considered to be part of the

[[Page 21084]]

determination of the availability of comparable services and benefits 
and the services to be coordinated through the required interagency 
agreements with public entities should include accommodations and 
auxiliary aids and services. The changes to section 101(a)(8) of the 
Act and proposed Sec.  361.53 make this interpretation explicit.
    The need for the DSU to coordinate the provision of accommodations 
and auxiliary aids and services often occurs when serving eligible 
individuals attending institutions of higher education for 
postsecondary training and education. Both DSUs and public institutions 
of higher education must adhere to the requirements of title II of the 
Americans with Disabilities Act and section 504 of the Rehabilitation 
Act to ensure access to their services for individuals with 
disabilities. Additionally, private institutions of higher education 
must adhere to requirements of section 504 of the Act to ensure access 
to their services for individuals with disabilities. Accordingly, the 
responsibilities of each entity for the provision of accommodations and 
auxiliary aids and services to individuals served by each must be 
determined at the State level. Therefore, the interagency agreement 
under proposed Sec.  361.53(d) would ensure interagency coordination 
and describe the responsibilities of the DSU and the institutions of 
higher education for the provision of VR services, including 
accommodations and auxiliary aids and services, and would provide a 
vehicle for resolving interagency disputes. To that end, Governors 
could assist the DSUs and institutions of higher education, in 
accordance with section 101(a)(8)(B) of the Act, to develop these 
agreements to ensure they are sufficient for ensuring individuals with 
disabilities receive the services they need, including accommodations 
and auxiliary aids and services, to enable them to achieve competitive 
integrated employment. The Rehabilitation Act requires DSUs to enter 
into interagency agreements for coordination of services (including 
each agency's financial responsibilities) with institutions of higher 
education, as well as other public entities. DSUs have experienced 
difficulty engaging with institutions of higher education, and other 
public agencies, for the purpose of developing the required interagency 
agreements. In addition, DSUs and institutions of higher education have 
often executed interagency agreements that do not clearly describe the 
manner in which services will be coordinated, particularly the 
accommodations and auxiliary aids and services that each agency will be 
responsible to provide. The lack of specificity in these agreements, in 
turn, does not provide adequate guidance to higher education or VR 
personnel responsible for carrying out their responsibilities to 
provide such aids and devices to assist individual students with 
disabilities. Such guidance is crucial when a particular service could 
be provided by either the DSU or institution of higher education in 
accordance with their mutual obligations under the Americans with 
Disabilities Act and section 504 of the Act to ensure the ability of 
individuals with disabilities to participate in educational programs 
and activities, and the timely delivery of VR services.
    We believe that the terms of the interagency agreement should take 
into account State laws and the resources of each party. For example, 
an interagency agreement could include a term that could require 
institutions of higher education to provide auxiliary aids and services 
(e.g., interpreters) to VR eligible individuals in the classroom and 
the DSUs could provide these aids and services during educational 
activities outside the classroom. In States where students who are deaf 
or blind and attend a State university tuition-free, the interagency 
agreement could specify that the DSU provide auxiliary aids and 
services, such as reader and interpreter services, both in and out of 
the classroom, since the school is responsible for the full cost of 
tuition. Greater specificity in the terms of the interagency agreements 
at the State level will promote consistency across the State in the 
coordination of services and in the provision of accommodations and 
auxiliary aids and services to eligible individuals attending 
institutions of higher education.
    Finally, we want to make clear that accommodations and auxiliary 
aids and services, for purposes of implementing the requirements of 
section 101(a)(8) and these proposed regulations, do not include 
personally prescribed devices, such as eye glasses, hearing aids, 
wheelchairs, or other such individually-prescribed devices and 
services.

Semi-Annual Review of Individuals in Extended Employment and Other 
Employment Under Special Certificate Provisions of the Fair Labor 
Standards Act (Sec.  361.55)

    Statute: Section 101(a)(14) of the Act, as amended by WIOA, 
increases the frequency of reviews that the DSUs must conduct when 
individuals with disabilities, who have been served by the VR program, 
obtain subminimum wage employment or extended employment.
    Current Regulations: Current Sec.  361.55 requires the DSU to 
conduct an annual review and re-evaluation annually for the first two 
years after an individual obtains subminimum wage employment or 
extended employment.
    Proposed Regulations: We propose to amend Sec.  361.55 to 
incorporate the new statutory requirement that these reviews be 
conducted semi-annually for the first two years of the individual's 
employment and annually thereafter. We also propose to make other 
technical and conforming changes throughout.
    Reasons: The proposed changes are necessary to implement new 
statutory requirements and ensure individuals with disabilities do not 
languish in subminimum wage employment or extended employment. Prior to 
the passage of WIOA, DSUs conducted these reviews annually for two 
years. With the amendments made by WIOA, DSUs must conduct these 
reviews twice a year for two years and then annually thereafter for as 
long as the individual remains employed at the subminimum wage level or 
in extended employment. These changes are consistent with the 
heightened emphasis throughout WIOA that individuals with disabilities, 
including those with the most significant disabilities, be given every 
opportunity to achieve competitive integrated employment.

Matching Requirements (Sec.  361.60)

    Statute: Section 101(a)(3) of the Act requires the State to pay a 
non-Federal share in carrying out the VR program. Section 7(14) of the 
Act defines ``Federal share'' as 78.7 percent. These statutory 
provisions remain unchanged by WIOA.
    Current Regulations: Current regulations in Sec.  361.60(b) outline 
the requirements for satisfying the non-Federal share requirement under 
the VR program.
    Proposed Regulations: We propose to amend current (b)(3) to clarify 
that non-Federal expenditures, for match purposes under the VR program, 
from private contributions must be made from cash contributions that 
have been deposited in the VR agency's account prior to their use for 
this purpose. We also propose to make conforming changes throughout 
current Sec.  361.60 to refer to 2 CFR part 200, as applicable and to 
new terms, such as the ``vocational rehabilitation services portion of 
the Unified or Combined State Plan'' and ``subaward.''
    Reasons: Proposed Sec.  361.60(b)(3) makes no substantive changes 
but

[[Page 21085]]

would clarify existing regulatory requirements pertaining to 
expenditures made from private contributions and used for match 
purposes under the VR program. Specifically, we would clarify that 
contributions by private entities must be in cash and that the funds 
must be deposited into the State agency's account before they are used 
for match purposes under the VR program. In so doing, we make two 
points clear: (1) Certified expenditures made by private entities or 
individuals may not be used by the VR agency for match purposes under 
the VR program; and (2) a contract, budgeted projection, or any other 
promise by a private entity or individual to make a contribution may 
not be used, on its face, by the VR agency for satisfying its match 
requirement. The VR agency must actually receive the cash contribution 
before it may be used for match purposes under the VR program. We 
believe these clarifications are necessary to ensure VR agencies have a 
better understanding of, and comply with these existing requirements. 
Finally, other revisions proposed throughout this section are necessary 
to conform to other changes proposed throughout part 361.

Maintenance of Effort Requirements (Sec.  361.62)

    Statute: Section 111(a)(2)(B) of the Act, as amended by WIOA, 
requires the Secretary to reduce a grant in a fiscal year for any prior 
fiscal year's Maintenance of Effort (MOE) shortfall.
    Current Regulations: Current Sec.  361.62(a) requires the Secretary 
to reduce the grant in the fiscal year immediately following the fiscal 
year with the MOE deficit. In the event that the MOE deficit is 
discovered after the next fiscal year's grant was awarded, the 
Secretary is required to seek a remedy for the MOE violation pursuant 
to the disallowance process.
    Proposed Regulations: We propose to amend current Sec.  361.62(a) 
in four ways: (1) By amending current Sec.  361.62(a)(1) to require the 
Secretary to reduce a grant in any fiscal year by the amount of any 
prior fiscal year's MOE shortfall; (2) by removing the example in 
current Sec.  361.62(a)(1) as it is no longer applicable, given 
statutory amendments; (3) by removing current Sec.  361.62(a)(2) since 
it is no longer necessary given new statutory requirements t; and (4) 
by redesignating current Sec.  361.62(a) to reflect the removal of 
current Sec.  361.62(a)(2).
    We propose to amend current Sec.  361.62(b) by removing the 
requirement for the Secretary to recover the MOE deficit through an 
audit disallowance process.
    We propose to amend the current Sec.  361.62(d)(3) to clarify that 
a request for a waiver or modification of the MOE requirement must be 
submitted as soon as the State has determined that it has failed to 
satisfy the requirement due to an exceptional or uncontrollable 
circumstance. Finally, we propose to make conforming changes throughout 
current Sec.  361.62 to reflect the restructuring of paragraph (a).
    Reasons: The proposed changes to current Sec.  361.62(a) are 
necessary to implement the amendments to the Act made by WIOA. 
Previously, the Secretary could reduce the State's VR award to satisfy 
a MOE deficit only in the fiscal year immediately following the fiscal 
year in which the MOE deficit occurred. In the event the MOE deficit 
was discovered after the next fiscal year's grant was awarded, the 
Secretary was required to seek recovery for the MOE deficit pursuant to 
a disallowance process, whereby, the State was required to make payment 
for that recovery action with non-Federal funds. Under the proposed 
regulations the Secretary would no longer be limited to reducing only 
the next fiscal year's grant, but rather could reduce any subsequent 
fiscal year's grant to satisfy the MOE deficit. Therefore, in the event 
that a MOE shortfall is revealed after the next fiscal year's grant has 
been awarded, the Secretary would reduce the Federal grant in another 
subsequent fiscal year. Consequently, it is no longer necessary for the 
Secretary to seek recovery through a disallowance process and for a 
State to use non-Federal funds to satisfy the deficit. The proposed 
change to current Sec.  361.62(b) is necessary to ensure consistency 
with paragraph (a) for purposes of satisfying a MOE deficit.
    The change in proposed Sec.  361.62(d)(3) is necessary for 
clarification purposes. The proposed change would not substantively 
revise the requirements related to submitting a request for a MOE 
waiver or modification, but rather would add clarifying language to 
existing requirements. Some States have interpreted the existing 
regulation as meaning that the request should be submitted as soon as 
they anticipate that they would be unable to satisfy the MOE 
requirement, even if that was years in advance. We have always 
interpreted paragraph (d)(3) as meaning that the request should be 
submitted as soon as the State has determined it has not satisfied the 
MOE requirement. The proposed change provides further clarification.

Program Income (Sec.  361.63)

    Statute: None.
    Current Regulations: Current Sec.  361.63 defines program income 
and lists potential sources of program income and uses for purposes of 
the VR program.
    Proposed Regulations: We propose to amend current Sec.  361.63(a) 
to make the definition of program income consistent with 2 CFR 200.80.
    We propose to amend current Sec.  361.63(b) by providing additional 
examples of common sources of program income generated by the VR 
program.
    We propose to amend current Sec.  361.63(c)(1) to clarify that 
program income must be disbursed during the period of performance of 
the award to be consistent with 2 CFR 200.77, which defines the period 
of performance of the award as the time during which the non-Federal 
entity may incur new obligations to carry out the work authorized under 
the Federal award.
    We propose to amend current Sec.  361.63(c)(2) to reflect statutory 
restructuring of title VI of the Act.
    Finally, we propose to amend current Sec.  361.63(c)(3) to be 
consistent with 2 CFR 200.307(e)(1) and (2).
    Reasons: The proposed changes to current Sec.  361.63 are necessary 
for clarification purposes and to ensure consistency with other 
relevant requirements, especially those contained in 2 CFR part 200.

Allotment and Payment of Federal Funds for Vocational Rehabilitation 
Services (Sec.  361.65)

    Statute: Section 110(d) of the Act, as amended by WIOA, requires VR 
agencies to reserve not less than 15 percent of the State's VR 
allotment for the provision of pre-employment transition services, in 
accordance with section 113 of the Act. Section 110(d)(2) of the Act 
prohibits a State from using these reserved funds to pay for 
administrative costs or any other VR service.
    Current Regulations: Current Sec.  361.65 specifies the process the 
Secretary uses to allot and reallot Federal funds, but does not address 
the reservation by States of funds for the provision of pre-employment 
transition services since this is a new statutory requirement.
    Proposed Regulations: We propose to amend current Sec.  361.65(a) 
by adding a new paragraph (3) to implement the new statutory 
requirement for a State to reserve not less than 15 percent of its VR 
allotment for the provision of pre-employment transition services. The 
proposed provision would make clear

[[Page 21086]]

that such reserved funds must be used only for services authorized in 
proposed Sec.  361.48(a), and must not be used to pay for 
administrative costs associated with the provision of such services or 
for any other VR service.
    We propose to amend current Sec.  361.65(b)(2) by revising the 
language to clarify that reallotment would occur in the fiscal year the 
funds were appropriated; however, the funds may be obligated or 
expended during the period of performance, provided matching 
requirements are met. We propose to add a new paragraph (b)(3) to 
current Sec.  361.65 that would give the Secretary the authority to 
determine the criteria to be used to reallot funds when the amount 
requested exceeds the amount of funds relinquished.
    Finally, we propose other technical and conforming changes 
throughout this section.
    Reasons: The proposed changes to current Sec.  361.65(a) are 
necessary to implement new statutory requirements related to the 
reservation of Federal funds for the provision of pre-employment 
transition services. We make clear that the funds to be reserved are 
those awarded to the State pursuant to section 110 of the Act and do 
not refer to an allotment of State funds awarded by the State.
    None of the funds reserved for the provision of pre-employment 
transition services in accordance with section 110(d) may be used to 
pay for administrative costs or any other VR service. These funds must 
be used solely for the provision of services described in Sec.  
361.48(a) of this part. We want to make clear that States must use the 
entire amount reserved solely for the provision of pre-employment 
transition services in accordance with section 113 of the Act and Sec.  
361.48(a) of this part.
    The proposed change to current Sec.  361.65(b)(2) is necessary to 
ensure consistency with 2 CFR 200.77.
    The change in proposed Sec.  361.65(b) is necessary to inform 
grantees about the reallotment process in the event there are more 
requests for reallotment funds than are available to satisfy those 
requests.

Part 363--The State Supported Employment Services Program

    Proposed substantive changes to part 363 are presented in a format 
that highlights topical areas in the order that the relevant sections 
appear in this part.

Competitive Integrated Employment (Sec.  363.1)

    Statute: Section 7(38) of the Act, as amended by WIOA, revises the 
definition of ``supported employment'' to mean, in pertinent part, 
employment with supports in competitive integrated employment or, if 
not in competitive integrated employment, employment in an integrated 
setting in which the individual is working toward competitive 
integrated employment on a short-term basis, not to exceed six months. 
Other key relevant statutory provisions include section 7(5), which 
defines competitive integrated employment; section 602, which makes 
clear the purpose of the Supported Employment program is to enable 
individuals with the most significant disabilities, including youth 
with the most significant disabilities, to achieve supported employment 
in competitive integrated employment; and section 604, which authorizes 
the services to be provided under the Supported Employment program to 
enable individuals to achieve supported employment in competitive 
integrated employment. Title VI contains references to this requirement 
throughout.
    Current Regulations: Current Sec.  363.1 sets out the purpose of 
the Supported Employment program, which is to assist States in 
developing and implementing collaborative programs with entities to 
provide supported employment services for individuals with the most 
severe disabilities who require such services to enter or retain 
competitive employment. Current regulations do not reference 
competitive integrated employment or working towards competitive 
integrated employment since these are new statutory requirements.
    Proposed Regulations: We propose to amend current Sec.  363.1 to 
reflect the revised statutory definition of ``supported employment,'' 
namely that the employment be in competitive integrated employment or, 
if it is not, that the employment be in an integrated setting in which 
the individual with a most significant disability is working toward 
competitive integrated employment on a short-term basis.
    As proposed, the regulations would make clear that the purpose of 
the Supported Employment program is to enable individuals with the most 
significant disabilities, with on-going supports, to achieve 
competitive integrated employment (i.e., employment in an integrated 
setting that is compensated at or above the minimum wage).
    The proposed definition of ``supported employment'' would take into 
account that under some circumstances an individual's employment, which 
must always be in an integrated setting, may not meet all of the 
criteria for competitive integrated employment initially. In those 
circumstances, an individual with a most significant disability would 
be considered to have achieved an employment outcome of supported 
employment if he or she is working in an integrated setting, on a 
short-term basis, toward competitive integrated employment. In the 
proposed definition, we would interpret ``short-term basis'' in this 
context to mean within six months of the individual entering supported 
employment.
    We also propose to amend current Sec.  363.50(b)(3) and (b)(4) to 
state that the collaborative agreements developed with other relevant 
entities for providing supported employment services and extended 
services may include efforts to increase opportunities for competitive 
integrated employment for individuals with the most significant 
disabilities, including youth with the most significant disabilities.
    Finally, we propose to amend the balance of current Sec.  363.50 to 
reflect in the States' required collaborative agreements the new scope 
and purpose of supported employment, as well as the new time limits for 
providing services that are discussed in detail under the sections 
``Services to Youth with the Most Significant Disabilities'' and 
``Extension of Time for the Provision of Supported Employment 
Services.''
    Reasons: The proposed revisions are necessary to implement in part 
363 the statutory changes made by WIOA. We believe these proposed 
changes are consistent with the purpose of the Supported Employment 
program, as expressed throughout title VI of the Act. The proposed 
changes are also consistent with proposed changes to part 361, which 
governs the vocational rehabilitation (VR) program, since the supported 
employment program is supplemental to that program. In particular, we 
propose to establish a specific time frame--e.g., six months--for 
``short term basis'' in the context of ``supported employment,'' 
because we believe it is necessary to limit the time allowed for 
individuals to work in non-competitive employment in order to be 
consistent with the clear intention of the Act, as amended by WIOA, 
which places heightened emphasis on competitive integrated employment 
throughout.

Services to Youth With the Most Significant Disabilities (Sec. Sec.  
363.6 and 363.54)

    Statute: Section 603(d) of the Act, as amended by WIOA, requires 
each State to reserve and use 50 percent of its allotment under the 
Supported

[[Page 21087]]

Employment program to provide supported employment services, including 
extended services, to youth with the most significant disabilities. 
Other relevant statutory provisions are found in section 602, which 
highlights services to youth with the most significant disabilities in 
the purpose section of title VI; section 604, which authorizes services 
specifically for youth with the most significant disabilities; section 
605, which identifies youth with the most significant disabilities as 
eligible for supported employment services; and section 606, which 
establishes certain State plan requirements specific for services to 
youth with the most significant disabilities.
    Current Regulations: None.
    Proposed Regulations: We propose to amend multiple sections in part 
363 to incorporate these new requirements for providing supported 
employment services, including extended services, to youth with the 
most significant disabilities.
    We propose to amend current Sec.  363.1 to state that a purpose of 
the Supported Employment program is to provide individualized supported 
employment services, including extended services in an integrated 
setting, to youth with the most significant disabilities in order to 
assist them in achieving supported employment in competitive integrated 
employment.
    We propose to amend current Sec.  363.3 to clarify that youth with 
the most significant disabilities are eligible to receive supported 
employment services. It is important to note that youth have always 
been eligible to receive supported employment services; however, 
amendments made by WIOA emphasize this population in the context of the 
Supported Employment program.
    In proposed Sec.  363.4(a) and (b), we would implement new 
statutory provisions permitting the expenditure of supported employment 
program funds, reserved for the provision of supported employment 
services to youth with the most significant disabilities on extended 
services to youth with the most significant disabilities for up to four 
years following the transition from support from the designated State 
unit (DSU). We propose to amend current Sec.  363.4(c) to clarify that 
nothing in this part is to be construed as prohibiting the VR program 
from providing extended services to youth with the most significant 
disabilities with funds allotted under part 361.
    In proposed Sec.  363.4(d), we would set out the statutory 
requirement that a State must coordinate its supported employment 
services with its VR services provided under part 361 in order to avoid 
duplication.
    We propose to amend current Sec.  363.11 to incorporate supported 
employment services, including extended services, for youth with the 
most significant disabilities into the existing requirements for the VR 
services portion of the Unified or Combined State Plan supplement.
    We propose a new Sec.  363.22, which would implement the new 
statutory requirement that a State must reserve and use half of its 
allotment under the supported employment program for the provision of 
supported employment services, including extended services, to youth 
with the most significant disabilities.
    We propose changes throughout part 363 to conform to new statutory 
nomenclature, such as referring to ``the vocational rehabilitation 
services portion of the Unified or Combined State Plans'' in Sec. Sec.  
363.10 and 363.11, instead of just ``the State plan,'' and ``the most 
significant disabilities'' instead of ``severe disabilities.''
    Reasons: The proposed revisions are necessary to implement in part 
363 statutory changes made by WIOA. The proposed changes are also 
consistent with proposed changes to part 361, which governs the VR 
program, since the Supported Employment program is supplemental to that 
program. Specifically, the proposed changes are consistent with the 
heightened emphasis throughout the Act, as amended by WIOA on the 
provision of services to youth with disabilities, especially those with 
the most significant disabilities, to ensure they receive the services 
and supports necessary to achieve competitive integrated employment. 
Accordingly, the proposed changes would implement the statutory 
requirement that States must reserve half of their supported employment 
allotment for the provision of supported employment services, including 
extended services, to youth with the most significant disabilities. 
This new statutory requirement reflects the fact that this particular 
population may need more intensive services for a longer period of time 
in order to achieve competitive integrated employment. It is important 
to note that, prior to the passage of WIOA, States were not permitted 
to use supported employment and/or VR program funds to provide extended 
services under any circumstance. States still are prohibited from 
providing extended services to individuals who are not youth with the 
most significant disabilities.

Extension of Time for the Provision of Supported Employment Services 
(Sec. Sec.  363.6 and 363.54)

    Statute: Section 7(39) of the Act, as amended by WIOA, revises the 
definition of ``supported employment services'' to mean those on-going 
supports provided for a period of time not to exceed 24 months.
    Current Regulations: Current Sec.  363.6 defines ``supported 
employment services'' as ongoing services provided by the DSU for a 
limited period of time to achieve job stabilization and assist an 
individual with the most severe disability before the transition to 
extended services. The current regulations do not reference the 24-
month time limit for the provision of services since this is a new 
statutory requirement.
    Proposed Regulations: We propose to amend the definition of 
``supported employment services'' in part 361, which will be 
incorporated by reference throughout part 363. The proposed definition 
would extend the time allowed for the provision of supported employment 
services from 18 months to 24 months.
    We also propose to update and streamline current Sec.  363.6 by 
removing the current set of definitions and inserting, instead, cross-
references to relevant definitions from other parts of the Department's 
regulations.
    We propose to amend current Sec.  363.53 to require that an 
individual must transition to extended services within 24 months of 
starting to receive supported employment services unless a longer time 
period is agreed to in the individualized plan for employment. The 
proposed regulation would specify conditions that must be met before a 
DSU assists an individual in transitioning to extended services, such 
as ensuring the individual is engaged in supported employment that is 
in competitive integrated employment, or in an integrated work setting 
in which the individual is working on a short-term basis toward 
competitive integrated employment, and the employment is customized for 
the individual consistent with his or her strengths, abilities, 
interests, and informed choice. Administratively, the State unit would 
also have to identify the source of extended services and meet all 
requirements for case closure.
    Reasons: The proposed revisions are necessary to implement in part 
363 statutory changes made by WIOA. The proposed changes are also 
consistent with proposed changes to part 361, which governs the VR 
program, since

[[Page 21088]]

the Supported Employment program is supplemental to that program.

Match Requirements for Funds Reserved for Serving Youth With the Most 
Significant Disabilities (Sec.  363.23)

    Statute: Section 606(b)(7)(I) of the Act, as amended by WIOA, 
requires that a State provide non-Federal contributions in an amount 
not less than 10 percent of the costs of providing supported employment 
services, including extended services, to youth with the most 
significant disabilities. States are also authorized to leverage public 
and private funds.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  363.23 to 
implement these new statutory requirements. In the event that a 
designated State agency uses more than 50 percent of its allotment to 
provide supported employment services to youth with the most 
significant disabilities as required by Sec.  363.22, there is no 
requirement that a designated State agency provide non-Federal 
expenditures to match the excess Federal funds spent for this purpose. 
In this proposed new section, we would clarify, to ensure consistency 
with part 361, that third-party in-kind contributions are not 
permitted, but contributions by private entities are permitted, for 
match purposes under the Supported Employment program.
    We propose to amend Sec.  363.4(a)(3) to implement the new 
statutory provision authorizing States to use funds reserved for youth 
with the most significant disabilities to leverage other public and 
private funds to increase resources for extended services and expand 
supported employment opportunities for youth with the most significant 
disabilities.
    We also propose to amend Sec.  363.11(g)(9) to incorporate both the 
new match requirement and the description of the activities surrounding 
how the State will leverage funds reserved for youth with the most 
significant disabilities into the assurances that a State must submit 
as part of its supported employment State plan supplement.
    Reasons: The proposed revisions are necessary to implement in part 
363 statutory changes made by WIOA. The proposed changes are also 
consistent with proposed changes to part 361 governing the VR program 
since the Supported Employment program is supplemental to that program. 
Given the new statutory requirement that States provide a 10 percent 
match on the funds reserved for providing supported employment services 
to youth with the most significant disabilities, coupled with the fact 
that States may use VR funds to supplement the provision of supported 
employment services, we believe it is important to ensure the match 
requirements under the Supported Employment program are consistent with 
those under the VR program. To that end, we propose that third-party 
in-kind contributions would not be a permissible source of match under 
the Supported Employment program, since it is not permitted under the 
VR program. In so doing, we reduce the administrative burden on States 
from having to distinguish whether a match source is applicable to the 
supported employment funds verses the VR funds.

Program Income (Sec.  363.24)

    Statute: Section 19 of the Act governs the carryover of funds, 
including program income, received by the Supported Employment program. 
In addition, section 108 of the Act permits the VR program to transfer 
payments received by the Social Security Administration under part 361 
to the Supported Employment program. These statutory provisions 
remained substantively unchanged by WIOA.
    Current Regulations: None.
    Proposed Regulations: We propose to create a new Sec.  363.24 that 
would define program income, identify its uses, and clarify that 
program income may be treated as either an addition or deduction to the 
award.
    In addition, we propose including requirements related to the 
carry-over of program income in proposed Sec.  363.25. This provision 
would clarify that program income may be carried over into the 
succeeding fiscal year.
    Reasons: These regulations are necessary to govern the use and 
treatment of program income, consistent with sections 19 and 108 of the 
Act. Although statutory requirements governing program income have 
always applied to the Supported Employment program, we have found, 
through monitoring, that confusion exists among States as to how and 
when program income should be reported under the Supported Employment 
program as opposed to under the VR program. We believe this proposed 
change would minimize such confusion and result in more accurate 
reporting of program income. Furthermore, these proposed changes are 
consistent with those proposed in part 361, which governs the VR 
program, since the Supported Employment program is supplemental to that 
program.

Carryover (Sec.  363.25)

    Statute: Section 19 of the Act permits States to carry funds over 
to a succeeding fiscal year to the extent the State has satisfied any 
applicable match requirements.
    Current Regulations: None.
    Proposed Regulations: We propose to add a new Sec.  363.25 that 
mirrors the carryover requirements under part 361, which governs the VR 
program. Although section 19 of the Act has always applied to the 
Supported Employment program, the amendments made by WIOA change the 
effect of this requirement since States, for the first time, have a 
match requirement under this program. Therefore, a State would be 
permitted to carry over the 50 percent of the allotment reserved for 
serving youth with the most significant disabilities only if it has met 
the 10 percent match for those funds in the fiscal year in which the 
funds were awarded. A State would be able to continue to carry over the 
other half of the allotment, to serve all other individuals, without 
having to satisfy a match requirement since the statute does not impose 
a match requirement on that portion of the supported employment 
allotment.
    Reasons: The proposed revisions are necessary to implement in part 
363 statutory changes made by WIOA. The proposed changes are also 
consistent with proposed changes to part 361, which governs the VR 
program, since the Supported Employment program is supplemental to that 
program.

Limitations on Administrative Costs (Sec.  363.51)

    Statute: Section 603(c) of the Act, as amended by WIOA, reduces the 
limit allowed for administrative costs from 5 percent of the allotment 
to 2.5 percent. In addition, section 606(b)(7)(H) requires the State to 
assure in its State plan supplement for the Supported Employment 
program within the VR section of the Unified or Combined State Plan, 
that it will not expend more than 2.5 percent of the allotment for 
administrative costs.
    Current Regulations: Current Sec.  363.51(b) contains a 5 percent 
limit. The current regulations do not reference the 2.5 percent limit 
since this is a new statutory requirement.
    Proposed Regulations: We propose to amend Sec.  363.51(b) to 
implement the reduced administrative cost limit of 2.5 percent. We also 
propose to amend the State plan requirements in Sec.  363.11 
accordingly.
    Reasons: The proposed revisions are necessary to implement in part 
363 statutory changes made by WIOA.

[[Page 21089]]

Miscellaneous Changes for Clarity

    Statute: Section 603 of the Act, as redesignated by WIOA, sets 
forth the procedures for allotting and reallocating funds under the 
Supported Employment program. This statutory provision remained 
substantively unchanged by WIOA.
    Current Regulations: Current Sec. Sec.  363.20 and 363.21 merely 
cross-reference to statutory provisions regarding procedures for 
allocating and reallocating funds that are obsolete given revisions 
made to title VI of the Act by WIOA.
    Proposed Regulations: We propose to amend Sec. Sec.  363.20 and 
363.21 to mirror the statutory text regarding procedures for allocating 
and reallocating supported employment funds.
    Reasons: The proposed changes are necessary to conform to statutory 
amendments made by WIOA that restructure title VI. The proposed changes 
would also outline the procedures for allocating and reallocating 
funds, rather than merely cross-referencing the Act, thereby making the 
proposed sections more user-friendly.

Limitation on Use of Subminimum Wages (Proposed 34 Part 397)

    Our discussion of part 397 is presented by subject in the order in 
which relevant sections appear in this part.

Purpose and the Department's Jurisdiction

    Statute: Section 511 of the Act, as added by WIOA, imposes 
limitations on employers who hold special wage certificates under the 
Fair Labor Standards Act (FLSA) that must be satisfied before the 
employers may hire youth with disabilities at subminimum wage or 
continue to employ individuals with disabilities of any age at 
subminimum wage. Section 511 of the Act also establishes the roles and 
responsibilities of the designated State units (DSU) for the vocational 
rehabilitation (VR) program and State and local educational agencies, 
in assisting individuals with disabilities, including youth with 
disabilities, who are considering employment, or who are already 
employed, at a subminimum wage, to maximize opportunities to achieve 
competitive integrated employment through services provided by VR and 
the local educational agencies.
    Current Regulations: None.
    Proposed Regulations: Proposed Sec.  397.1 establishes the purpose 
of the regulations in this part, which is to set forth requirements the 
DSUs and State and local educational agencies must satisfy to ensure 
that individuals with disabilities, especially youth with disabilities, 
have a meaningful opportunity to prepare for, obtain, maintain, advance 
in, or regain competitive integrated employment, including supported or 
customized employment.
    This proposed section also states that these regulations should be 
read in concert with: Part 300, which implements requirements under 
part B of the Individuals with Disabilities Education Act; part 361, 
which implements requirements for the VR program; and part 363, which 
implements the State Supported Employment Services program. We believe 
this clarification is necessary to ensure all stakeholders understand 
that nothing in this part is to be construed as altering any 
requirement under parts 300, 361, or 363.
    Other relevant proposed regulations in this part include: Sec.  
397.2, regarding the Department's jurisdiction; Sec.  397.3, regarding 
rules of construction; Sec.  397.4, regarding other applicable 
regulations; and Sec.  397.5, regarding applicable definitions.
    Reasons: These proposed regulations are necessary to ensure 
stakeholders understand the purpose of section 511 of the Act, as added 
by WIOA, and the Department's authority and jurisdiction under this 
section, as well as the inter-relationship of these requirements with 
those under the Individuals with Disabilities Education Act and the VR 
program and Supported Employment program.

Coordinated Documentation Process

    Statute: Section 511(d) of the Act, as added by WIOA, requires the 
DSU and the State educational agency to develop a coordinated process, 
or use an existing process, for providing youth with disabilities 
documentation demonstrating completion of the various actions required 
by section 511 of the Act. Other relevant statutory provisions include 
section 511(a) of the Act, regarding the actions that a youth must 
complete prior to beginning subminimum wage employment, and section 
511(c) of the Act, regarding the actions that individuals with 
disabilities of any age must complete in order to continue employment 
at subminimum wage.
    Current Regulations: None.
    Proposed Regulations: Proposed Sec.  397.10 would require the DSU, 
in consultation with the State educational agency, to develop a process 
that ensures individuals with disabilities, including youth with 
disabilities, receive documentation demonstrating completion of the 
various activities required by section 511 of the Act, such as, to name 
a few, the receipt of transition services by eligible children with 
disabilities under the Individuals with Disabilities Education Act and 
pre-employment transition services under section 113 of the Act, as 
appropriate.
    Proposed Sec. Sec.  397.20 and 397.30 would establish the 
documentation that the DSUs and local educational agencies, as 
appropriate, must provide to demonstrate completion of the various 
activities, required by section 511(a)(2) of the Act, by a youth with a 
disability. These would include completing pre-employment transition 
services under proposed Sec.  361.48(a) and the determination of 
eligibility or ineligibility for VR services under proposed Sec.  
361.42 and Sec.  361.43.
    Proposed Sec.  397.40 would establish the documentation that the 
DSUs must provide to individuals with disabilities of any age who are 
employed at a subminimum wage upon the completion of certain 
information and career counseling-related services, as required by 
section 511(c) of the Act.
    Reasons: These proposed regulations are necessary to implement new 
statutory requirements. In so doing, these proposed regulations would 
inform DSUs, State, and local educational agencies of their specific 
responsibilities related to documentation required under section 511 of 
the Act and would ensure that individuals with disabilities have 
sufficient information available to make informed choices.

Contracting Prohibition

    Statute: Section 511(b)(2) of the Act, as added by WIOA, prohibits 
a local or State educational agency (as defined in section 9101 of the 
Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801)) from 
entering into a contract or other arrangement with an entity, which 
holds a special wage certificate under 14(c) of the FLSA for the 
purpose of operating a program for a youth under which work is 
compensated at a subminimum wage.
    Current Regulations: None.
    Proposed Regulations: Proposed Sec.  397.31 would prohibit a local 
educational agency or a State educational agency from entering into a 
contract with an entity that employs individuals at subminimum wage for 
the purpose of operating a program under which a youth with a 
disability is engaged in subminimum wage employment. Although section 
511(b)(2) of the Act refers to youth in general, the

[[Page 21090]]

proposed regulation is limited to youth with disabilities in order to 
be consistent with all other provisions of section 511 of the Act.
    Reasons: This proposed section is necessary to implement new 
statutory requirements. In so doing, this proposed regulation is 
consistent with the heightened emphasis in the Act, as amended by WIOA, 
on ensuring that individuals with disabilities, especially youth with 
disabilities, are given the opportunity to train for and obtain work in 
competitive integrated employment. While some State and local 
educational agencies contract with employers who hold special wage 
certificates under FLSA, others contract with employers who pay minimum 
wage, to create job training and other work experiences for students 
with disabilities. Through these training and work experience programs, 
students with disabilities gain knowledge and skills that transfer into 
eventual jobs similar to those in which they receive their training, 
not only with regard to the type of duties performed, but also the 
wages earned. In the context of this proposed regulation, State and 
local educational agencies are not employers, but rather partners that 
facilitate entry of students with disabilities into training programs 
that are implemented by employers holding special wage certificates 
under the FLSA. We believe this statutory prohibition, which is 
contained in the proposed regulations, will result in fewer students 
with disabilities, participating in training programs at the subminimum 
wage level. As a result, we believe more students with disabilities, 
especially those with the most significant disabilities, will have the 
opportunity to gain work experiences in competitive integrated 
employment settings which, in turn, will lead to eventual employment 
outcomes in those settings rather than at the subminimum wage level. 
With regard to this proposed provision, the Secretary specifically 
seeks comments regarding the Department's role and jurisdiction with 
respect to these provisions.

Review of Documentation Process

    Statute: Section 511(e)(2)(B) of the Act, as added by WIOA, permits 
DSUs, along with the Department of Labor, to review individual 
documentation held by entities holding special wage certificates under 
the FLSA to ensure the required documentation for individuals with 
disabilities, including youth with disabilities, who are employed at 
the subminimum wage level, is maintained.
    Current Regulations: None.
    Proposed Regulations: Proposed Sec.  397.50 would authorize a DSU 
to review individual documentation, required by this part, for all 
individuals with disabilities who are employed at the subminimum wage 
level, that is maintained by employers, who hold special wage 
certificates under the FSLA.
    Reasons: This proposed provision is necessary to implement new 
statutory requirements. In this context, the DSU's role is one of 
review not enforcement. The Department of Labor retains enforcement 
authority with respect to these employers under the FLSA.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by the 
OMB. Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action likely to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This proposed regulatory action is a significant regulatory action 
subject to review by OMB under section 3(f) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We also have determined that this regulatory action would not 
unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.
    We have assessed the potential costs and benefits of this 
regulatory action. The potential costs associated with the proposed 
regulations are those resulting from statutory requirements and those 
we have determined as necessary for administering these programs 
effectively and efficiently. Elsewhere in this section under Paperwork 
Reduction Act of 1995, we identify and explain burdens specifically 
associated with information collection requirements.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these proposed regulations, we have determined that 
the benefits would justify the costs.

Need for Regulatory Action

    Executive Order 12866 emphasizes that ``Federal agencies should 
promulgate only such regulations as are required by law, are necessary 
to interpret the law, or are made necessary by compelling public need, 
such as material failures of private markets to protect or improve the 
health and safety of the public, the environment, or the well-being of 
the American people.'' The Department's goal in regulating is to

[[Page 21091]]

incorporate the provisions of the Act, as amended by WIOA, into the 
Department's regulations governing the VR program and Supported 
Employment program at parts 361 and 363, respectively, as well as to 
clarify, update and improve these regulations. This regulatory action 
is also necessary to establish a new part 397 to implement specific the 
provisions of section 511 of the Act, as added by WIOA, which places 
limitations on the use of subminimum wages for individuals with 
disabilities.

Summary of Potential Costs and Benefits

    The Secretary believes that the proposed changes would 
substantially improve the programs covered in this NPRM, and would 
yield substantial benefits in terms of program management, efficiency, 
and effectiveness. The Secretary believes that the proposed regulations 
represent the least burdensome way to implement the amendments to the 
Act made by WIOA. Due to the number of proposed regulatory changes, our 
analysis focuses solely on new requirements imposed by WIOA, organized 
in the following manner. First, we discuss the potential costs and 
benefits related to the VR program under section A that specifically 
address: competitive integrated employment and employment outcomes, 
pre-employment transition services and transition services, and 
additional VR program provisions. Second, we discuss the potential 
costs and benefits related to the Supported Employment program under 
section B. Finally, we discuss the costs and benefits pertaining to the 
establishment of proposed part 397 under section C.
    Where possible The Department derived estimates by comparing the 
existing program regulations against the benefits and costs associated 
with implementation of provisions contained in this WIOA-required NPRM. 
The Department also made an effort, when feasible, to quantify and 
monetize the benefits and costs of the NPRM. When we were unable to 
quantify them--for example, due to data limitations--we describe the 
benefits and costs qualitatively. In accordance with the regulatory 
analysis guidance contained in OMB Circular A-4 and consistent with the 
Department's practices in previous rulemakings, this regulatory 
analysis focuses on the likely consequences (benefits and costs that 
accrue to individuals with disabilities) of the WIOA-required NPRM. In 
this analysis, the Department also considers the transfer of benefits 
from one group to another that do not affect total resources available 
to the VR program and Supported Employment program. However, in a 
number of service records the Department is unable to quantify these 
transfers due to limitations of the data it currently collects. In 
estimating costs, we used wage rates from the Bureau of Labor 
Statistics' Mean Hourly Wage Rate for State employees.

A. Vocational Rehabilitation Program Competitive Integrated Employment 
and Employment Outcomes

    The Act, as amended by WIOA, places heightened emphasis on the 
achievement of competitive integrated employment by individuals with 
disabilities, including those with the most significant disabilities. 
In so doing, Congress added a new term and accompanying definition to 
the Act--``competitive integrated employment.'' While this is a new 
statutory term, it represents, in general, a consolidation of two 
existing regulatory definitions--``competitive employment'' and 
``integrated setting.'' As a result of the statutory amendments, we 
propose to replace the existing regulatory definition of ``competitive 
employment,'' with the new term ``competitive integrated employment,'' 
by mirroring the statute and incorporating critical criteria from the 
existing regulatory definition of ``integrated setting.'' Because this 
proposed change is more technical than substantive, and given that the 
substance of the proposed definition already exists in two separate 
definitions, we believe this particular change will have no significant 
impact on the VR program.
    In addition to proposing to implement the new definition of 
``competitive integrated employment,'' we also believe it is necessary 
to propose changes to the current regulatory definition of ``employment 
outcome.'' While the Act, as amended by WIOA, made only technical 
changes to the statutory definition of ``employment outcome,'' we 
believe a regulatory change is necessary in light of the heightened 
emphasis throughout the Act on the achievement of competitive 
integrated employment under the VR program and Supported Employment 
program. To that end, we propose to define ``employment outcome'' as an 
outcome in competitive integrated employment or supported employment, 
thereby eliminating uncompensated employment (e.g., homemakers and 
unpaid family workers) from the scope of employment outcomes for 
purposes of the VR program.
    To date, the Department has exercised the Secretary's statutory 
discretion to permit types of employment not specified in the Act as 
``employment outcomes'' under the VR program. In so doing, the 
Department has permitted uncompensated employment, such as work as 
homemakers and unpaid family workers, to constitute as an employment 
outcome under the VR program. However, given the heightened emphasis on 
competitive integrated employment in the Act, as amended by WIOA--from 
the purpose of the Act to the addition of section 511, the Secretary 
proposes to amend the current regulatory definition of ``employment 
outcome'' to include only compensated employment within its scope for 
purposes of the VR program. Thus, the Secretary intends to ensure that 
VR funds are no longer diverted for the provision of services that can 
be appropriately provided, in many cases, by independent living and 
other programs.
    It is difficult to quantify the extent to which the proposed change 
to the definition of ``employment outcome,'' which has the effect of 
eliminating homemakers and unpaid family workers from its scope, will 
affect VR program costs nationally due to a number of highly variable 
factors. For example, it is not known whether individuals who 
previously achieved homemaker outcomes will choose to pursue 
competitive integrated employment through the VR program in the future, 
or seek out other resources, such as those available from independent 
living programs. Based on data reported by VR agencies through the VR 
Case Service Report (RSA-911) for the period beginning in FY 1980 and 
ending in FY 2013, the percentage of individuals exiting the VR program 
as homemakers nationally declined significantly from 15 percent of all 
individuals achieving an employment outcome in fiscal year (FY) 1980 to 
1.9 percent in FY 2013 (representing 3,467 of the 182,696 total 
employment outcomes that year). While the national percentage of 
homemaker outcomes compared to all employment outcomes is small, some 
designated State units (DSU) have a greater percentage of homemaker 
outcomes than others, particularly those serving only individuals who 
are blind and visually impaired. In FY 2013, the 24 DSUs that only 
provided services to individuals who are blind and visually impaired 
reported that 10.5 percent of the 6,121 employment outcomes in that 
year were homemaker outcomes (or 645 outcomes). DSUs that serve 
individuals with disabilities other than those with

[[Page 21092]]

blindness and visual impairments reported 656 homemaker outcomes in 
that year, or 0.8 percent of the 84,238 employment outcomes. In 
addition, the 32 DSUs that serve individuals with all disabilities 
reported 2,166 homemaker outcomes in FY 2013, representing 2.3 percent 
of their total 92,337 employment outcomes.
    The average cost per employment outcome, including the average cost 
per homemaker outcome, can be calculated based on data reported by DSUs 
in the RSA-911 on the cost of purchased services for individuals 
exiting the VR program with an employment outcome. In FY 2013, the 
average cost per homemaker outcome for the VR program was $6,626, while 
the comparable average cost per employment outcome for all individuals 
exiting the VR program with an employment outcome that year was $5,672. 
It is possible that this higher average cost is because individuals 
obtaining a homemaker outcome generally require more intensive services 
or costly equipment because the nature or severity of their 
disabilities have prevented them from pursuing competitive integrated 
employment. However, there may be other factors that drive up the 
average cost of these outcomes. For example, it may be that some of 
these individuals originally had a goal of competitive employment, but 
after receiving services for an intensive or long period of time 
without obtaining such an outcome, they may have chosen to change their 
goal. Further analysis is needed to identify the factors that 
contribute to the average higher cost of homemaker closures.
    Given current information reported to the Department by DSUs, we 
are not able to predict how many individuals who would have possibly 
had a homemaker outcome might now choose to seek competitive 
employment. However, for the purpose of providing a gross estimate of 
these costs, we assume that approximately one-fourth (867) of the 
number of individuals who exited the VR program with a homemaker 
outcome will choose a goal of competitive integrated employment and 
continue to seek services through the VR program. We also assume that 
obtaining competitive integrated employment for these individuals may 
be more expensive than the current cost for obtaining a homemaker 
outcome, but also assume it is unlikely that the average costs for 
providing services to these individuals would exceed more than 150 
percent of their current costs (or approximately 175 percent of the 
average cost per employment outcome for all agencies in FY 2013). As 
such, we estimate the additional cost to DSUs to provide VR services to 
those individuals who previously would have exited the program with a 
homemaker outcomes would not exceed $3,313 per outcome, or about 
$2,872,370 per year. Alternatively, assuming that about 75 percent of 
the number of individuals who would have otherwise attained a homemaker 
outcome no longer seek services from DSUs (2,600) at an average cost of 
$6,626, there would be a net savings of $17,227,600 to the VR program. 
Based on these assumptions, we estimate an overall savings to the VR 
program of approximately $14,355,230.
    We recognize that the proposed change in the definition of 
employment outcome could potentially increase the demand for services 
from independent living and other programs that can provide services 
similar to those that such individuals would have previously sought 
from the VR program and that some of these savings for the VR program 
could result in a cost transfer to other Federal, State, and local 
programs. The Department plans to provide guidance and technical 
assistance to: (1) Facilitate the transition to the new definition of 
employment outcome; and (2) minimize the potential disruption of 
services to current VR program consumers who do not currently have a 
competitive integrated employment or supported employment goal 
reflected in their individualized plan for employment. The Department 
also plans to provide guidance and technical assistance to assist both 
VR agencies and potential service providers in the referral and 
acquisition of services for individuals with disabilities seeking 
services for outcomes other than those covered under the proposed 
revised definition of employment outcome.
    Finally the Department plans to work with other Federal agencies, 
such as the Administration for Community Living at the Department of 
Health and Human Services, in identifying any impact of the proposed 
change on independent living and other related programs and developing 
strategies to address potential problems.

Pre-Employment Transition Services and Transition Services

    The Act, as amended by WIOA, places heightened emphasis on the 
provision of pre-employment transition services and other transition 
services to students and youth with disabilities, as applicable. As a 
result, the Secretary proposes to make numerous amendments to the VR 
program regulations to implement new statutory requirements. A few of 
those proposed changes are relevant to this regulatory impact analysis 
discussion.
    Foremost among these proposed changes is the requirement that DSUs 
reserve at least 15 percent of the State's VR allotment for the 
provision of pre-employment transition services to students with 
disabilities who are eligible or potentially eligible for VR services. 
Additionally, States may not include administrative costs associated 
with the provision of pre-employment transition services in the 
calculation of that 15 percent.
    The proposed regulation would require DSUs to dedicate resources 
to: (1) Ensure that the 15 percent is reserved from the State's VR 
allotment; (2) track the provision of pre-employment transition 
services to ensure funds were spent solely on authorized services and 
not on administrative costs; and (3) provide for administrative costs 
related to pre-employment transition services with non-reserved VR 
funds.
    Second, section 113 of the Act, as added by WIOA, requires VR 
agencies to provide pre-employment transition services to students with 
disabilities who are eligible or potentially eligible for VR services. 
We propose to interpret the term ``potentially eligible'' to mean all 
students with disabilities, as defined in proposed Sec.  361.5(c)(51). 
Prior to the enactment of WIOA, VR agencies were only permitted to 
provide pre-employment transition services or any other transition 
services to individuals who had been determined eligible for the VR 
program and who had an approved individualized plan for employment. In 
developing the proposed regulation, the Department considered limiting 
the provision of pre-employment transition services to those students 
with disabilities who have applied for VR services. However, this 
alternative interpretation is not proposed because we believe that 
Congress intended these services to reach a broader group of 
individuals than those who are eligible under current VR program 
regulations. The Department's proposed interpretation, which is the 
broadest possible given the plain meaning of the statute, is consistent 
with Congressional intent and the stated desires of some VR agencies 
and other stakeholders.
    Although pre-employment transition services are a new category of 
services identified in the Act, many of these services historically 
were provided under a more general category of transition services. 
Therefore, the provision of these services is not new to VR agencies. 
However, until the enactment of WIOA, all such services

[[Page 21093]]

were provided only to those students with disabilities who had been 
determined eligible for the VR program. Consequently, providing pre-
employment transition services to all students with disabilities could 
increase staff time and resources spent on the provision of these 
services.
    We are unable to estimate the potential increase in DSU 
administrative costs that may arise from implementation of new section 
113 of the Act or the required 15 percent reservation of funds at this 
time. However, we have attempted to estimate the impact that this 15 
percent reservation could have on the VR program as a whole.
    Assuming that States are able to match all of the funds provided 
for the VR program in the FY 2015 VR appropriation, $3,052,453,598, the 
total aggregate amount of VR funds that would be required to be 
reserved for pre-employment transition services from all 80 State VR 
agencies would be $457,868,040. Because each State VR agency must 
reserve a portion of its allotment, it will now have fewer funds 
available to use for all other authorized activities, thereby reducing 
the available resources for services other than pre-employment 
transition services. The extent of the impact of the reservation on a 
particular State will depend largely on the extent to which it has been 
providing transition services to students with disabilities that are 
now specified under section 113 as pre-employment transition services. 
States that currently provide extensive transition services to students 
with disabilities, including services that would meet the definition of 
pre-employment transition services, are likely to see less transfer of 
benefits among eligible individuals served by their agency. For States 
that have not provided such services or have only provided such 
services to this population to a small extent, there may be more 
extensive transfers of services and benefits of the VR program among 
individuals (i.e., to students with disabilities and away from other 
individuals who otherwise would have been served).
    Ultimately, the total value of the benefits transfer is equivalent 
to the difference between the amount reserved by States under this 
provision (we assume here $457,868,040) and the cost of providing pre-
employment transition services to students with disabilities who have 
such services outlined in their individualized plan for employment 
(i.e., those who would receive such services in the absence of the 
mandated reservation).
    Based on data reported through the RSA-911 for FY 2013, the service 
records for 206,050 transition-age youth (individuals ages 14 to 24 at 
the time of application) were closed, of which 123,119 received 
services. A portion of those served may qualify as students with a 
disability that would be able to receive pre-employment transition 
services. In FY 2013, of the 123,119 transition-age individuals who 
received services, 98,212 were aged 16 through 21, and most closely 
represent the population of ``students with a disability'' as defined 
under proposed regulations. DSUs expended a total of $503,208,438 on 
the purchase of VR services for these individuals, for an average cost 
of $5,124 per individual. Recognizing that the 98,212 students include 
only those who have applied for VR services and that under proposed 
regulations DSUs would provide pre-employment transition services to 
students with disabilities prior to their application for VR services, 
we anticipate that DSUs will be providing these services to a 
potentially larger number of students with disabilities with the 
reserved funds.
    We emphasize that this is an estimate based on assumptions and that 
we cannot more definitively project the transfer of benefits across the 
VR program related to the provision of pre-employment transition 
services due to both the unknown number of students in each State and 
nationally who may receive these services and the specific services 
that will be provided.
    Third, section 103(b)(7) of the Act, as added by WIOA, permits VR 
agencies to provide transition services to groups of youth and students 
with disabilities. To that end, we propose to add Sec.  361.49(a)(7) to 
implement this requirement. In so doing, DSUs would be permitted to 
provide transition services to groups of students and youth with 
disabilities, who may not have applied, or been determined eligible, 
for VR services.
    The proposed regulation benefits VR agencies in two significant 
ways: (1) It would give them the ability to serve groups of youth and 
students with disabilities simultaneously, who may need only basic 
generalized services, thereby reducing the amount of cost expended per 
individual; and (2) it would reduce administrative burden on the VR 
agencies, as well as the burden on students or youth with disabilities 
and their families, by not having to engage in processes for 
determining eligibility, conducting assessments, and developing 
individualized plans for employment. However, we have not attempted to 
quantify the impact of this provision due to the variability in the 
number of individuals that may seek out these services nationally, the 
degree to which individuals would require these services within each 
State, and the services that would be provided in each State.

Additional Vocational Rehabilitation Program Provisions

VR Services Portion of the Unified or Combined State Plan

    WIOA requires the VR State plan, which has been a stand-alone State 
plan, to be submitted as a VR services portion of a State's Unified or 
Combined State Plan for all six core programs of the workforce 
development system. Requirements related to the submission of Unified 
or Combined State Plans do not take effect until July 2016.
    In preparing for the transition to the submission of Unified or 
Combined State Plans every four years, with modifications submitted 
every two years, we propose to amend regulations governing the annual 
submissions of certain reports and updates. In so doing, we would no 
longer require the submission of these particular reports and updates 
annually, but rather, they would be included in the VR services portion 
of the Unified or Combined State Plan and would be submitted at such 
time and in such manner as determined by the Secretary. This 
flexibility would allow for VR program-specific reporting to be done in 
a manner consistent with those for the Unified or Combined State Plan 
under sections 102 or 103 of WIOA, thus avoiding additional burden or 
costs to DSUs through the submission of separate reports annually or 
whenever updates are made.
    Section 101(a) of the Act, as amended by WIOA, requires DSUs to 
include additional descriptive information in the VR services portion 
of the Unified or Combined State Plan. Therefore, we propose to amend 
part 361 by requiring that DSUs describe in the VR services portion of 
the Unified or Combined State Plan the results of the comprehensive 
statewide needs assessment with respect to the needs of students and 
youth with disabilities for pre-employment transition services and 
other transition services, as appropriate; to identify goals and 
priorities to address these needs; and to describe strategies for the 
achievement of these goals. We also propose that the VR services 
portion of the Unified or Combined State Plan include a description of 
how the DSU will work with employers to identify competitive integrated 
employment opportunities

[[Page 21094]]

and career exploration opportunities, in order to facilitate the 
provision of VR services, and transition services for youth with 
disabilities and students with disabilities, such as pre-employment 
transition services. We also propose that the VR services portion of 
the Unified or Combined State Plan contain a description of 
collaboration with the State agency responsible for administering the 
State Medicaid plan under title XIX of the Social Security Act, the 
State agency responsible for providing services for individuals with 
developmental disabilities, and the State agency responsible for 
providing mental health services, to develop opportunities for 
community-based employment in integrated settings, to the greatest 
extent practicable. As a result, DSUs would be required to expend 
additional effort in the development of these descriptions beyond the 
25 hours currently estimated for the development and submission of the 
entire State plan, now the VR services portion of the Unified or 
Combined State Plan. We estimate that DSUs will require an additional 
five hours for the development of these descriptions, for a total of 30 
hours per agency. At an average hourly rate of $39.78 (based on data 
obtained from the Bureau of Labor Statistics for State government 
management occupations), a rate more consistent with State rates of pay 
than the $22.00 per hour used to calculate current costs, each DSU 
would expend $1,193 in the development of and submission of the VR 
services portion of the Unified or Combined State Plan, resulting in a 
total of $95,472 for all 80 DSUs. Although these costs are 
significantly higher than the current estimate of $2,000 incurred by 
all 80 DSUs in the development and submission of the State plan, we 
believe that the additional burden is more accurate and outweighed by 
the benefit to the public through a more comprehensive understanding of 
the activities DSUs engage in to assist individuals with disabilities 
to obtain the skills necessary to achieve competitive integrated 
employment in job-driven careers.

Order of Selection

    Section 101(a)(5) of the Act, as amended by WIOA, permits DSUs, at 
their discretion, to serve eligible individuals who require specific 
services or equipment to maintain employment, regardless of whether 
they are receiving VR services under an order of selection or their 
assignment to a priority category. Therefore, we propose to amend part 
361 to implement this new statutory requirement. It is important to 
note that DSUs implementing an order of selection are not required to 
use this authority; rather, they may choose to do so based upon agency 
policy, or the availability of financial and staff resources. DSUs 
implementing an order of selection would be required to state in the VR 
services portion of the Unified or Combined State Plan whether they 
have elected to exercise this discretion, thereby signaling a decision 
to serve eligible individuals who otherwise might have been placed on a 
waiting list under the State's order of selection, and who are at risk 
of losing their employment. This proposed change would increase 
flexibility for a State managing its resources. If a State were to 
implement this flexibility, it could prevent an individual from losing 
employment by avoiding a delay in services. On the other hand, DSUs 
that elect to implement this option would potentially need to 
reallocate resources to cover expenditures for services or equipment 
for individuals who meet the qualifications of this provision, and fall 
outside the open priority category of a DSU's order of selection.
    For FY 2015, the State Plans of 34 of the 80 DSUs documented that 
the agency had established an order of selection, one agency more than 
in FY 2014. This total includes 8 percent of the 24 DSUs serving only 
individuals who are blind and visually impaired and 57 percent of the 
56 other DSUs. Based on data reported through the RSA-911 in FY 2013, 
17 percent of the individuals whose service records were closed and who 
received services were employed at application, with an average cost of 
purchased services $4,744. In addition, according to data reported 
through the VR program Cumulative Caseload (RSA-113) report, 33,856 
individuals were on a waiting list for VR services at the close of FY 
2013 due to the implementation of an order of selection. Assuming that 
17 percent of the 33,856 individuals on the waiting list could 
potentially benefit from the provision of services and equipment to 
maintain employment, a possible 5,756 individuals could benefit from 
the proposed regulatory change for a total cost of $27,306,464. This 
figure represents the potential reallocation of resources to cover the 
cost of services for individuals who, prior to enactment of WIOA, may 
have not received them, and away from eligible individuals who would 
have received services based on a VR agency's order of selection 
policy.
    However, the implementation of an order of selection by individual 
DSUs may differ from year to year, as well as within a given fiscal 
year. In fact, not all DSUs that indicate they have established an 
order of selection as part of their State Plan actually implement that 
order or report that they had individuals on a waiting list during the 
year. In addition, we are unable to predict which DSUs on an order of 
selection would choose this option. The degree to which individuals 
will be referred for this service will also vary widely, as will the 
level of services or equipment that an individual could need to 
maintain employment.

Reports, Standards, and Indicators

    As a result of amendments to the Act made by WIOA, we propose to 
revise Sec.  361.40 to reflect changes to reporting requirements in 
section 116(b) in title I of WIOA and amendments to section 101(a)(10) 
of the Act. Section 361.40, as proposed, does not list the actual data 
to be reported, but rather requires the collection and reporting of the 
information specified in sections 13, 14, and 101(a)(10) of the Act. 
New requirements under section 101(a)(10) include the reporting of data 
on the number of: Individuals with open service records and the types 
of services these individuals are receiving (including supported 
employment); students with disabilities receiving pre-employment 
transition services; and individuals referred to State VR programs by 
one-stop operators and individuals referred to such one-stop operators 
by State VR programs. The RSA-911 would be revised as described in the 
information collection published for comment elsewhere in this issue of 
the Federal Register, consistent with the requirements in proposed 
Sec.  361.40.
    Proposed 361.40 also would require States to report the data 
necessary to assess VR agency performance on the standards and 
indicators subject to the performance accountability provisions 
described in section 116 of WIOA. The common performance accountability 
measures apply to all core programs of the workforce development system 
and will be implemented in joint regulations set forth in subpart E of 
part 361. The impact analysis of these regulations are addressed in the 
joint regulations.
    We estimate that each DSU will need an additional 15 minutes per VR 
counselor to collect the new VR-specific data required by Section 
101(a)(10) of the Act. Estimating an average of 125 counselors per DSU, 
the number of hours per DSU would increase by 31.25 for a total 
increase of 2,500 hours for all 80 DSUs. The estimated cost per DSU, 
using an hourly wage of $22.27 (based on data from the Bureau of Labor 
Statistics for State-employed VR counselors), would result in an 
increase

[[Page 21095]]

of $695.94 per DSU and a total increase of $55,675 for all 80 DSUs.
    In addition, we estimate the burden hours for submission of the 
entire RSA-911 data file per DSU would increase from 50 hours per 
agency to 100 hours per agency, representing an increase of 50 hours 
due to the need to report all open case data on a quarterly basis 
(rather than only data for closed service records on an annual basis). 
The total number of hours needed for the submission of the data file 
for 80 agencies would increase from 4,000 to 8,000 hours. Using an 
average hourly wage rate of $33.63 (based on data from the Bureau of 
Labor Statistics State-employed database administrators), the estimated 
cost per DSU would be $3,363, and the estimated cost for all 80 DSUs 
would be $269,040. The total burden hours for both collection and 
submission would be 131.25 hours per DSU or a total of 10,500 hours for 
all 80 DSUs. The estimated total burden cost for both collection and 
submission per DSU would be $4,059, with a total burden cost of 
$324,715 for all 80 DSUs.
    Finally, DSUs will incur expenses related to programming and 
modifications of data retrieval systems as a result of the revisions to 
the RSA-911 and its instructions due to the new VR-specific data 
required under section 101(a)(10) of the Act. The costs are one-time, 
first-year costs. The burden on the DSUs related to the programming of 
their case management systems as a result of the redesigned RSA-911 
will vary widely because agencies themselves range in size and the 
sophistication of their information technology systems. Roughly half of 
the 80 DSUs use case management and reporting systems purchased from 
software providers who are responsible for maintaining and updating 
software. We estimate those DSUs would experience no or minimal 
increases in cost burden. The remaining DSUs have developed their own 
case management systems for which changes will be made by their 
information technology staff or outside contractors. Approximately, 
half of these DSUs would make the changes internally and half would 
contract for the changes to be made.
    We estimate those 20 DSUs that own, maintain, and update internal 
case management and reporting systems will expend an average of 240 
hours at $44.72 (based on data from the Bureau of Labor Statistics for 
State-employed computer and information systems managers), for a total 
of $10,732.80 per DSU. The estimated total burden hours for all 20 DSUs 
would be 4,800 hours and at a cost of $214,656. We estimate that 
contractors who provide maintenance and system updates to the 20 DSUs 
with internal case management systems would need 500 hours per DSU to 
accomplish the reprogramming of these systems, for a total of 10,000 
hours, as a result of the proposed changes to the RSA-911 data file. 
Using an average hourly wage rate of $39.21 x 100 hours for private 
sector computer programmers, and a wage rate $67.32 x 400 hours for 
private sector computer and information system managers (based on 
Bureau Labor Statistics data for 2013), we estimate these 20 DSUs will 
incur expenses of $30,849.00 per DSU, or a total cost of $616,980.00.
    We believe that these costs are outweighed by the benefits to the 
VR program because the new information to be reported and having access 
to more timely information on individuals currently participating in 
the VR program will better enable the Department and its partners to 
assess the performance of the program and monitor the implementation of 
WIOA, particularly as it relates to key policy changes, such as pre-
employment transition services and its integration in the workforce 
development system.

Extended Evaluation

    In implementing amendments to the Act made by WIOA, we propose to 
amend current Sec. Sec.  361.41 and 361.42 by removing requirements 
related to extended evaluation. Instead, a DSU would be required to use 
trial work experiences when conducting an exploration of an individual 
with a significant disability's abilities, capabilities, and capacity 
to perform in work situations. These proposed revisions would 
streamline the eligibility or ineligibility determination process for 
all applicants whose ability to benefit from VR services is in 
question.
    VR program data collected by the Department do not distinguish 
between individuals who had a trial work experience and those that had 
an extended evaluation. However, data show that 5,205 individuals 
exited from the VR program during or after trial work experiences or 
extended evaluations in FY 2013. DSUs expended a total of $4,385,963 on 
the provision of services to these individuals for an average cost of 
$843 per individual. Because we are unable to estimate how many of the 
5,205 individuals were in extended evaluation, we cannot quantify 
either the current or the potential change in costs for this specific 
group of individuals. Based on the monitoring of VR agencies, it should 
be noted that the use of these services varies among DSUs, mainly due 
to variations in opportunities for individuals to participate in trial 
work experiences, and the extent to which DSUs historically utilized 
extended evaluation. We believe that the benefits of streamlining the 
eligibility determination process for applicants whose ability to 
benefit from VR services is in question and ensuring that ineligibility 
determinations are based on a full assessment of the capacity of an 
applicant to perform in realistic work settings outweighs the costs of 
removing the limited exception to trial work experiences.

Timeframe for Completing the Individualized Plan for Employment

    Section 102(b) of the Act, as amended by WIOA, requires DSUs to 
develop individualized plans for employment within 90 days of date of 
eligibility determination. Consequently, we propose to amend Sec.  
361.45 to implement this 90-day requirement. Due to variations in 
current DSU timelines for the development of the individualized plan 
for employment, the establishment of a 90-day timeframe by WIOA would 
ensure consistency across the VR program nationally and the timely 
delivery of services, thereby improving DSU performance and successful 
employment outcomes for individuals with disabilities.
    We are unable to quantify potential additional costs to DSUs 
nationwide due to the variance in timelines currently in place. It is 
likely that States with prolonged timelines beyond 90 days could 
experience an increase in outlays. For example, an increase in outlays 
could occur as a result of larger numbers of individuals, with approved 
individualized plans for employment, beginning to receive VR services 
at an earlier time than had historically been the case. However, while 
the overall cost per individual served are not likely to be affected by 
this proposed provision, the average time before some DSUs incur 
expenses related to the development of, and provision of services 
under, individualized plans for employment may be shortened, resulting 
in a shift of VR program outlays for services sooner than has been 
experienced. Therefore, in any given fiscal year outlays for these DSUs 
could be higher. While costs over the life of the service record should 
not be affected, some VR agencies could find it necessary to implement 
an order of selection due to the shifting of cost that would have been 
incurred in a subsequent fiscal year to a prior fiscal year as the 
result of a larger number of individuals with individualized plans for 
employment developed within 90

[[Page 21096]]

days. As always, DSUs are encouraged to conduct planning that 
incorporates programmatic and fiscal elements to make projections and 
assessments of VR program resources and the number of individuals 
served, utilizing management tools including order of selection, as 
appropriate.

Services to Groups of Individuals With Disabilities

    Section 103(b)(8) of the Act, as added by WIOA, permits a DSU to 
establish, develop, or improve assistive technology demonstration, 
loan, reutilization, or financing programs designed to promote access 
to assistive technology. To that end, we propose to amend Sec.  361.49 
to implement this new authority. In so doing, we propose to limit the 
population to be served to individuals with disabilities who have 
applied, or been determined eligible, for VR services, thereby 
maintaining consistency with the authority to establish, develop, or 
improve a community rehabilitation program. We anticipate that this 
provision will benefit individuals with disabilities and employers 
through expanded access to assistive technology, reflecting the 
integral role assistive technology plays in the vocational 
rehabilitation and employment of individuals with disabilities. 
However, by limiting the use of this authority to services and 
activities that benefit applicants and eligible individuals, we ensure 
that this authority is used in coordination with, rather than to 
supplant, services and activities provided under the Assistive 
Technology Act. We have not attempted to quantify additional costs 
associated with this provision due to the variable nature of the 
specific assistive technology needs of VR program participants, and the 
availability of assistive technology demonstration, loan, 
reutilization, or financing programs within each State.

Maintenance of Effort Requirements

    Section 111(a) of the Act, as amended by WIOA, requires the 
Secretary to reduce any subsequent fiscal year VR award to satisfy a 
maintenance of effort (MOE) deficit in a prior year. As a result, we 
propose to amend Sec.  361.62 to implement this new requirement. Prior 
to the enactment of WIOA, the Secretary could only reduce the 
subsequent year's grant to satisfy an MOE deficit from the preceding 
fiscal year. If a MOE deficit was discovered after it was too late to 
reduce the succeeding years grant, the Secretary was required to seek 
recovery through an audit disallowance, whereby the State repaid the 
deficit amount with non-Federal funds.
    Because the Secretary is now able to reduce any subsequent year's 
VR grant for any prior year's MOE deficit, DSUs benefit as they are no 
longer required to repay MOE shortfalls with non-Federal funds, thereby 
increasing the availability of non-Federal funds, in those instances, 
for obligation as match under the VR program. Since FY 2010, two States 
were required to pay a total of $791,342 in non-Federal funds related 
to MOE penalties because their MOE shortfall was not known at the time 
the reduction in Federal funds would have been authorized. As a result, 
these funds were unavailable to be used as matching funds for the VR 
program in the year they were paid. On the other hand, the new 
authority could have resulted in the deduction of the $791,342 MOE 
penalties from a future Federal award.

B. The Supported Employment Program Services To Youth With the Most 
Significant Disabilities in Supported Employment

    Section 603(d) of the Act, as amended by WIOA, requires DSUs to 
reserve 50 percent of their supported employment State grant allotment 
to provide supported employment services, including extended services, 
to youth with the most significant disabilities. This new statutory 
requirement is consistent with the heightened emphasis throughout the 
Act on the provision of services to youth with disabilities, especially 
those with the most significant disabilities. To that end, we propose 
to amend part 363 to implement this new requirement. The proposed 
changes are consistent with proposed changes to the VR program 
regulations, since the Supported Employment program is supplemental to 
that program.
    After setting aside funds to assist in carrying out section 21 of 
the Act, the FY 2015 Federal appropriation provides $27,272,520 for 
distribution to DSUs under the Supported Employment State Grants. 
Assuming that States are able to provide the required 10 percent non-
Federal match for the available Supported Employment formula grant 
funds in FY 2015, the 50 percent reservation would result in the 
dedication of $13,636,260 for supported employment services to youth 
with the most significant disabilities. Conversely, the reserved funds 
would not be available for the provision of supported employment 
services to individuals who are not youth with the most significant 
disabilities.

Match Requirements for Funds Reserved for Serving Youth With the Most 
Significant Disabilities in Supported Employment

    Section 606(b) of the Act, as amended by WIOA, requires States to 
provide a ten percent match for the 50 percent of the supported 
employment allotment reserved for providing supported employment 
services, including extended services, to youth with the most 
significant disabilities. We propose to implement this requirement in 
part 363. To date, the supported program has not had a match 
requirement.
    As stated above, $27,272,520 is available for formula grants to 
States under the Supported Employment program for FY 2015. The 10 
percent match requirement would generate $1,515,140 in non-Federal 
funds for supported employment services that will benefit youth with 
the most significant disabilities. In addition, if the appropriation 
increases in future years, the match requirement would result in 
additional supported employment resources for youth with the most 
significant disabilities. However, States will have to identify 
additional non-Federal resources in order to match the Federal funds 
reserved for this purpose.

Extended Services

    Title VI of the Act, as amended by WIOA, permits DSUs to provide 
extended services to youth with the most significant disabilities, 
using the funds reserved for the provision of supported employment 
services to this population. These services may be provided for a 
period up to four years. To that end, we propose to amend part 363 to 
implement this requirement. Prior to the enactment of WIOA, DSUs were 
not permitted to provide extended services to individuals of any age. 
Under the Act, as amended by WIOA, DSUs still may not provide extended 
services to individuals with the most significant disabilities who are 
not youth with the most significant disabilities. Since extended 
services have not previously been an authorized activity with the use 
of VR or supported employment funds, this proposed change could have 
significant impacts on States.
    Nonetheless, we want to make clear that DSUs are not required to 
provide extended services to youth with the most significant 
disabilities, but rather are permitted to do so, thereby creating a 
funding source for the services that previously was not available.

[[Page 21097]]

Extension of Time for the Provision of Supported Employment Services

    We propose to amend the definition of supported employment services 
in Sec.  361.5(c)(54) to implement the statutory change made by WIOA 
that extends the provision of supported employment services from 18 to 
24 months. The definition of supported employment services applies to 
both the VR program and Supported Employment program. In addition, 
under both current and proposed regulations, DSUs have the authority to 
exceed this time period under special circumstances if jointly agreed 
to by the individual and the rehabilitation counselor.
    The statutory change implemented in these proposed regulations 
would benefit individuals with the most significant disabilities who 
require ongoing support services for a longer period of time to achieve 
stability in the employment setting, prior to full transition to 
extended services. This provision could result in DSUs using more 
resources under both the VR program and Supported Employment program to 
provide ongoing services.
    DSUs typically have not provided ongoing support services for a 
full 18 months. In FY 2013, 15,458 individuals achieved supported 
employment outcomes within 21 months following the development of the 
individualized plans for employment, which period we assume could 
include the provision of supported employment services for a full 18 
months and a minimum period of 90 days prior to case closure. Of these 
individuals, 10,608, or approximately 69 percent, achieve supported 
employment outcomes within 12 months. While we anticipate that most 
individuals may not need supported employment services for the full 
period of 24 months, in FY 2013, 1,759 individuals achieved supported 
employment outcomes within a period ranging from 21 months to 27 months 
of the development of the individualized plan for employment. DSUs 
expended $13,257, 816 on purchased services for these individuals, or 
an average of $7,537 per individual. Assuming this period includes the 
provision of supported employment services for a full 24 months and a 
minimum period of 90 days prior to case closure we estimate that an 
approximate number of individuals would benefit from the provision of 
supported employment services for an additional six months and that 
DSUs would incur similar costs for the provision of these services as a 
result of the proposed regulatory change.

Limitations on Supported Employment Administrative Costs

    We propose to amend part 363 to implement a new requirement in the 
Act, as amended by WIOA, that reduces the maximum amount of a State's 
grant allotment under the Supported Employment program that can be used 
for administrative costs from 5 percent of the State's grant allotment 
to 2.5 percent. As a result, a larger portion of Federal supported 
employment funds must be spent on the provision of supported employment 
services, including extended services to youth with the most 
significant disabilities, rather than administrative costs. However, 
any administrative costs incurred beyond the 2.5 percent limit on the 
use of Supported Employment funds may be paid for with VR program 
funds.
    Based upon the $27,272,520 available for formula grants to States 
under the Supported Employment program in FY 2015, the total allowable 
amount of these Federal funds that can be used to support 
administrative costs would be reduced by half, from $1,363,626 to 
$681,813. Thus, for those DSUs that have typically used more than 2.5 
percent of their allotment to cover program administrative costs, the 
new requirement would provide a small increase in the amount of funds 
available for the provision of services to individuals with the most 
significant disabilities pursuing a supported employment outcome. DSUs 
will be able to shift these excess costs to the VR State grants program 
since it does not have a cap on the amount of administrative funds that 
can be spent under that program.

C. Limitations on the Use of Subminimum Wage

    The Act, as amended by WIOA, imposes limitations on the payment of 
subminimum wages by employers who hold special wage certificates under 
the Fair Labor Standards Act. The requirements imposed by section 511 
and thus proposed in part 397, do not take effect until July 22, 2016.
    Pursuant to statutory requirements contained in section 511 of the 
Act, as added by WIOA, we propose to create a new Sec.  397.10 that 
would require the DSU, in consultation with the State educational 
agency, to develop a process, or utilize an existing process, that 
ensures individuals with disabilities, including youth with 
disabilities, receive documentation demonstrating completion of the 
various activities required by section 511. Proposed Sec. Sec.  397.20 
and 397.30 would establish the documentation that the DSUs and local 
educational agencies, as appropriate, must provide to demonstrate an 
individual's completion of the various activities required by section 
511(a)(2) of the Act. These include completing pre-employment 
transition services under proposed Sec.  361.48(a) and the 
determination under an application for VR services under proposed 
Sec. Sec.  361.42 and 361.43. Proposed Sec.  397.40 would establish the 
documentation that the DSUs must provide to individuals with 
disabilities upon the completion of certain information and career 
counseling-related services, as required by section 511(c) of the Act. 
We have not attempted to quantify the costs to the DSUs related to the 
provision of this required documentation because the number of youth 
and other individuals who potentially could receive services under 
proposed part 397 will vary widely from State to State. In addition, 
there exists no reliable national data on which to base a calculation 
of costs. However, DSUs generate documentation throughout the 
vocational rehabilitation process that may meet the requirements of 
Sec. Sec.  397.20 and 397.30, including written notification of a 
consumer's eligibility or ineligibility, copies of individualized plans 
for employment and subsequent amendments, and written notification when 
the consumer's case record is closed. As a result, the utilization of 
this documentation to meet section 511 requirements should not result 
in significant additional burden to DSUs.

Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum ``Plain 
Language in Government Writing'' require each agency to write 
regulations that are easy to understand. The Secretary invites comments 
on how to make these proposed regulations easier to understand, 
including answers to questions such as the following:
     Are the requirements in the proposed regulations clearly 
stated?
     Do the proposed regulations contain technical terms or 
other wording that interferes with their clarity?
     Does the format of the proposed regulations (grouping and 
order of sections, use of headings, paragraphing, etc.) aid or reduce 
their clarity?
     Would the proposed regulations be easier to understand if 
we divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec.  '' and a numbered heading: For example, 
Sec.  361.1 Purpose.)
     Could the description of the proposed regulations in the 
SUPPLEMENTARY INFORMATION section of

[[Page 21098]]

this preamble be more helpful in making the proposed regulations easier 
to understand? If so, how?
     What else could we do to make the proposed regulations 
easier to understand?
    To send any comments that concern how the Department could make 
these proposed regulations easier to understand, see the instructions 
in the ADDRESSES section.

Regulatory Flexibility Act Certification

    The Secretary certifies that these proposed regulations would not 
have a significant economic impact on a substantial number of small 
entities. The 80 entities that administer the VR program and Supported 
Employment program are State agencies, including those in the 50 
States, the District of Columbia, the Commonwealth of Puerto Rico, the 
United States Virgin Islands, Guam, American Samoa, and the 
Commonwealth of the Northern Mariana Islands. States and State agencies 
are not defined as ``small entities'' in the Regulatory Flexibility 
Act.

Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public 
understands the Department's collection instructions, respondents can 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    The following sections contain information collection requirements:
     Sections 361.10, 361.12, 361.13, 361.15, 361.16, 361.17, 
361.18, 361.19, 361.20, 361.21, 361.22, 361.23, 361.24, 361.25, 361.26, 
361.27, 361.29, 361.30, 361.31, 361.32, 361.34, 361.35, 361.36, 361.37, 
361.40, 361.46, 361.51, 361.52, 361.53, and 361.55, as well as 
Sec. Sec.  363.10 and 363.11, pertaining to the VR services portion of 
the Unified or Combined State Plan and Supplement for Supported 
Employment Services; and
     Sections 361.40 and 363.52, related to the VR program Case 
Service Report.
    As a result of the amendments to the Act made by WIOA, we propose 
changes to some of these sections and their corresponding information 
collection requirements. Under the PRA the Department has submitted a 
copy of these sections to OMB for its review.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number. Notwithstanding any other provision of law, 
no person is required to comply with, or is subject to penalty for 
failure to comply with, a collection of information if the collection 
instrument does not display a currently valid OMB control number. In 
the final regulations, we will display the OMB control numbers assigned 
by OMB to any information collection requirement proposed in this NPRM 
and adopted in the final regulations, including: 1820-0013 (Cumulative 
Case Report), 1820-0017 (Annual Vocational Rehabilitation Program/Cost 
Report), 1820-0500 (VR State Plan), 1820-0508 (VR Case Service Report), 
1820-0563 (Annual Report of Appeals), 1820-0693 (Program Improvement 
Plan), and 1820-0694 (VR Program Corrective Action Plan).

VR Services Portion of the Unified or Combined State Plan and 
Supplement for Supported Employment Services (1820-0500)

    Section 101(a) of the Act, as amended by WIOA, adds new content 
requirements to the State plan, which is now to be submitted as the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan under section 102 or 103 of title I of WIOA. As a result, 
proposed Sec. Sec.  361.10, 361.18, 361.24, 361.29, and 361.36, along 
with proposed Sec. Sec.  363.10 and 363.11, would cause substantive 
changes to the active and OMB-approved data collection under 1820-0500 
(VR State Plan). In addition, the VR State Plan form includes 
previously approved information collection requirements related to a 
number of current regulations that remain unchanged as a result of the 
amendments to the Act. There are also several proposed regulations 
related to this data collection that necessitate primarily conforming 
or technical changes to the form.
    These current and proposed sections that contain already approved 
information collection requirements or that do not cause substantive 
changes to the form include: Sec. Sec.  361.12, 361.13, 361.15, 361.16, 
361.17, 361.19, 361.20, 361.21, 361.22, 361.23, 361.25, 361.26, 361.27, 
361.30, 361.31, 361.34, 361.35, 361.37, 361.40, 361.46, 361.51, 361.52, 
361.53, and 361.55. The proposed regulations and other adjustments 
described here would change the current OMB-approved annual aggregate 
burden of 1,002,000 hours at $22.00 per hour and estimated total annual 
costs of $22,044,000.00 for all 80 respondents.
    The currently OMB-approved estimated annual burden of 1,002,000 
hours for all 80 VR agencies includes a total of 2,000 hours (25 hours 
per agency) for the preparation and submission of the VR State Plan and 
a total of 1,000,000 hours (12,500 hours per agency) for record keeping 
associated with the case management of the individuals who apply for 
and receive services from the VR program, and Supported Employment 
program. However, we have determined that the time associated with this 
record keeping (1,000,000 hours annually for all 80 respondents) is 
part of the customary and usual business practices carried out by VR 
agencies, and thus, should not be included in the estimated annual 
burden for this form.
    As previously stated there are a number of proposed regulations in 
parts 361 and 363 that necessitate substantive changes to the State 
plan. The most significant of these changes is in proposed Sec.  361.10 
and would require VR agencies to submit the VR services portion of the 
Unified or Combined State Plan to be eligible to receive Federal VR 
program funds. Proposed Sec.  361.18 would require the VR services 
portion of the Unified or Combined State Plan to describe the 
procedures and activities the State agency will take to ensure it 
employs qualified rehabilitation personnel, including the minimum 
academic and experience requirements as amended by WIOA. Proposed Sec.  
361.24 would require VR agencies to describe their coordination with 
employers to increase awareness and employment opportunities for 
individuals with disabilities, as well as coordination with non-
educational agencies serving out-of-school youth, and the lead agency 
and implementing entity for the coordination of activities available 
under section 4 of the Assistive Technology Act of 1998. Proposed Sec.  
361.24 also would require VR agencies to describe in the plan their 
collaboration, to develop opportunities for community-based employment 
in integrated settings, to the greatest extent practicable, with the 
State agency responsible for administering the State Medicaid plan 
under title XIX of the Social Security Act, agencies providing services 
and supports for individuals with developmental disabilities, and the 
State agency responsible for providing mental health services. Proposed 
Sec.  361.29 would require VR agencies to include in the VR services 
portion of the Unified or Combined State Plan the

[[Page 21099]]

results of the comprehensive statewide assessment regarding the needs 
of students and youth with disabilities for pre-employment transition 
services and other transition services. In addition, proposed Sec.  
361.29 would require the plan to include an estimate of the number of 
eligible individuals who are not receiving VR services due to the 
implementation of an order of selection. This proposed section also 
would require the plan to contain strategies to improve VR services for 
students and youth with disabilities, to address their needs as 
identified through the statewide needs assessment, and to provide pre-
employment transition services. Proposed Sec.  361.36 would require VR 
agencies implementing an order of selection to indicate in the plan if 
they elect to provide services or equipment to individuals with 
disabilities to enable them to maintain employment, regardless of 
whether these individuals are receiving services under the order.
    There are also proposed regulations in part 363 governing the State 
Supported Employment Services program that necessitate changes to the 
VR State Plan form. Proposed Sec.  363.10 would require the State to 
submit with the VR services portion of the Unified or Combined State 
Plan a supplement that meets the requirements of Sec.  363.11 to 
receive a grant under the State Supported Employment Services program. 
Proposed Sec.  363.11 would require the VR services portion of the 
Unified or Combined State Plan to describe the quality, scope, and 
extent of supported employment services to eligible individuals 
(including youth with the most significant disabilities), the State's 
goals and priorities with respect to the distribution of funds received 
under this section, the provision of extended services for a period not 
to exceed four years, and an assurance to expend no more than 2.5 
percent of the award under this part for administrative costs.
    The regulations proposed under these sections of parts 361 and 363 
would increase the time needed by each VR agency to prepare and submit 
the VR services portion of the Unified or Combined State Plan and its 
supported employment supplement from 25 to 30 hours annually.
    In addition, the total cost of this data collection may increase 
due to the proposed adjustment to the average hourly wage rate of State 
personnel used to estimate the annual burden for this data collection 
from $22.00 to $39.78, so that wage rates are consistent with data 
reported by the Bureau of Labor Statistics.
    In summary, our new information collection estimate for the VR 
State plan reflects the removal of the burden associated with the 
maintenance of case management records for individuals served through 
the VR program and Supported Employment program, adjustment of the 
average hourly wage rate for State VR personnel responsible for 
preparing the VR State plan form, and the increase in the estimated 
number of hours needed to prepare and submit this data collection due 
to proposed regulatory changes. As a result of these changes, we 
estimate a total annual burden of 2,400 hours (30 hours for each of the 
80 respondents), at $39.78 per hour, for a total annual cost of 
$95,472.00.

VR Case Service Report 1820-0508

    The VR Case Service Report is used to collect annual individual 
level data on the individuals that have exited the VR program, 
including individuals receiving services with funds provided under the 
Supported Employment program. Sections 101(a)(10) and 606 of the Act 
contain data reporting requirements under the VR program and Supported 
Employment program, respectively. WIOA amends these sections to require 
States to report additional data describing the individuals served and 
the services provided through these programs. In addition, WIOA amends 
section 106 of the Act by eliminating the current VR evaluation 
standards and indicators and requiring that the standards and 
indicators used to assess the performance of the VR program be 
consistent with the performance accountability measures for the core 
programs of the workforce development system established under section 
116 of WIOA. Consequently, we propose changes to Sec. Sec.  361.40 and 
363.52 that would cause substantive changes to the active and OMB-
approved data collection under 1820-0508--the VR Case Service Report 
(RSA-911). Specifically the proposed regulations described here would 
change the current OMB-approved annual aggregate burden of 4,000 hours 
at $40.00 per hour and estimated total annual costs of $160,000.00 for 
all 80 respondents.
    The most significant proposed change to this data collection 
affects the time at which data is collected as well as the frequency 
with which data is collected. Under the current approved form, VR 
agencies annually report data on each individual whose case file is 
closed after exiting the VR program in that fiscal year. However, new 
statutory requirements would necessitate the reporting of data for both 
current program participants (open service records), as well as 
individuals who have exited the program (closed records) on a quarterly 
basis. Specifically, proposed Sec.  361.40 would require a State to 
ensure in the VR services portion of the Unified or Combined State Plan 
that it will submit reports, including reports required under sections 
13, 14, and 101(a)(10) of the Act. New reporting requirements under 
section 101(a)(10)(C) of the Act include data on the number of: 
Individuals currently receiving services (open records) and the types 
of services they are receiving, students with disabilities receiving 
pre-employment transition services, and individuals referred to the 
State VR program by one-stop operators and those referred to such one-
stop operators by the State VR program. In addition, proposed Sec.  
363.52 would require States to report separately data regarding 
eligible youth receiving supported employment services under parts 361 
and 363.
    Proposed Sec.  361.40 also would require States to report the data 
necessary to assess VR agency performance on the standards and 
indicators subject to the performance accountability provisions 
described in section 116 of WIOA. The common performance accountability 
measures established under section 116 of WIOA apply to all core 
programs of the workforce development system and will be implemented in 
joint regulations set forth in subpart E of part 361.
    Because these new requirements would necessitate the reporting of 
data for both current program participants (open service records) as 
well as individuals who have exited the program (closed service 
records) on a quarterly basis, estimated data collection and reporting 
burden will increase. However, we propose to reduce the burden to 
respondents by eliminating redundant elements and reorganizing some 
existing elements of the form. The regulations proposed under this 
section will increase the total annual burden for the 80 respondents by 
4,000 hours. We estimate the total annual reporting burden to be 8,000 
hours at $33.63 per hour (a rate more consistent with the rate reported 
through the Bureau of Labor Statistics for State-employed database 
administrators), for a total annual cost of $269,040.00.

Related OMB-Approved Data Collections That Remain Unchanged

    The regulations proposed through this NPRM do not cause substantive 
changes to the OMB-approved annual burden, respondents, or costs for 
the following OMB-approved data collections:

[[Page 21100]]

1820-0013 Cumulative Caseload Report

    In the Cumulative Caseload Report State VR agencies report 
cumulative aggregate data on individuals served in the various stages 
of the VR process and services provided. Proposed regulations related 
to this data collection would not cause substantive changes to the 
current OMB-approved annual burden of 320 annual burden hours at $30.00 
per hour with 80 respondents reporting quarterly for a total of 320 
responses, and total annual costs of $9,600.00.

1820-0017 Annual Vocational Rehabilitation Program/Cost Report

    Proposed regulations related to this data collection would not 
cause substantive changes to the current OMB-approved annual burden of 
320 annual burden hours at $30.00 per hour with 80 respondents and 
annual costs of $9,600.00.

1820-0563 Annual Report of Appeals

    In this report, State VR agencies submit data on the number of 
individuals who have requested appeals for decisions made by the DSU 
pertaining to the provision of services, the types of dispute 
resolutions used to resolve these appeals, and the outcomes of these 
appeals. Proposed regulations related to this data collection would not 
cause substantive changes to the current OMB-approved annual burden of 
160 annual burden hours at $30.00 per hour with 80 respondents and 
annual costs of $4,800.00.

1820-0693 Performance Improvement Plan (PIP)

    A Performance Improvement Plan is developed when a VR agency has 
failed to achieve the required performance level for the evaluation 
standards and indicators established under section 106 of the Act. 
Proposed regulations related to this data collection would not cause 
substantive changes to the current OMB-approved annual burden of 125 
annual burden hours at $30.00 per hour with 5 respondents reporting 
quarterly for a total of 20 responses, and annual costs of $3,750.00.

1820-0694 VR Program Corrective Action Plan

    A Corrective Action Plan is required when a DSU is found to be out 
of compliance with the Federal requirements governing the 
administration of the VR program through monitoring activities engaged 
in pursuant to section 107 of the Act. Proposed regulations related to 
this data collection would not cause substantive changes to the current 
OMB-approved annual burden of 975 annual burden hours at $30.00 per 
hour with 15 respondents reporting quarterly for a total of 60 
responses, and annual costs of $29,250.00.
    Note that in accordance with the Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards published at 2 CFR 200, we require an authorized certifying 
official for each data collection to certify that the data is true, 
accurate and complete to the best of his or her knowledge or belief. 
This requirement does not cause any change to the estimated annual 
burden related to the preparation and submission of the data 
collections described in this section of the NPRM.
    We have prepared an Information Collection Request (ICR) for these 
collections. If you want to review and comment on the ICR please follow 
the instructions listed under the ADDRESSES section of this notice. 
Please note the Office of Information and Regulatory Affairs (OMB) and 
the Department review all comments on an ICR that are posted at 
www.regulations.gov. In preparing your comments you may want to review 
the ICR in www.regulations.gov or in www.reginfo.gov. The comment 
period will run concurrently with the comment period of the NPRM. When 
commenting on the information collection requirements, we consider your 
comments on these collections of information in--
     Deciding whether the collections are necessary for the 
proper performance of our functions, including whether the information 
will have practical use;
     Evaluating the accuracy of our estimate of the burden of 
the collections, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond.
    This includes exploring the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques.
    OMB is required to make a decision concerning the collections of 
information contained in these regulations between 30 and 60 days after 
publication of this document in the Federal Register. Therefore, to 
ensure that OMB gives your comments full consideration, it is important 
that OMB receives your comments by May 18, 2015. This does not affect 
the deadline for your comments to us on the proposed regulations.

ADDRESSES: Comments submitted in response to this notice should be 
submitted electronically through the Federal eRulemaking Portal at 
www.regulations.gov by selecting Docket ID ED-2015-OSERS-0001 or via 
postal mail commercial delivery, or hand delivery. Please specify the 
Docket ID number and indicate ``Information Collection Comments'' on 
the top of your comments if your comment relates to the information 
collection for this rule. Written requests for information or comments 
submitted by postal mail or delivery should be addressed to the 
Director of the Information Collection Clearance Division, U.S. 
Department of Education, 400 Maryland Avenue SW., Mailstop L-OM-2-
2E319LBJ, Room 2E115, Washington, DC 20202-4537. Comments submitted by 
fax or email and those submitted after the comment period will not be 
accepted. FOR FURTHER INFORMATION CONTACT: Electronically mail 
ICDocketMgr@ed.gov. Please do not send comments here.

Intergovernmental Review

    These programs are subject to Executive Order 12372 and the 
regulations in 34 CFR part 79. One of the objectives of the Executive 
order is to foster an intergovernmental partnership and a strengthened 
federalism. The Executive order relies on processes developed by State 
and local governments for coordination and review of proposed Federal 
financial assistance.
    This document provides early notification of our specific plans and 
actions for these programs.

Assessment of Educational Impact

    In accordance with section 411 of the General Education Provisions 
Act, 20 U.S.C. 1221e-4, the Secretary particularly requests comments on 
whether these proposed regulations would require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Federalism

    Executive Order 13132 requires us to ensure meaningful and timely 
input by State and local elected officials in the development of 
regulatory policies that have federalism implications. ``Federalism 
implications'' means substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. The proposed regulations in Sec. Sec.  361, 363, and 397 
may

[[Page 21101]]

have federalism implications. We encourage State and local elected 
officials to review and provide comments on these proposed regulations.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the person listed under FOR 
FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Adobe Portable Document Format (PDF). To use PDF 
you must have Adobe Acrobat Reader, which is available free at the 
site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department. (Catalog of Federal Domestic Assistance Numbers: 
84.126A State Vocational Rehabilitation Services program; and 84.187 
State Supported Employment Services program)

List of Subjects

34 CFR Part 361

    Administrative practice and procedure, Grant programs-education, 
Grant programs-social programs, Reporting and recordkeeping 
requirements, Vocational rehabilitation.

34 CFR Part 363

    Grant programs-education, Grant programs-social programs, Manpower 
training programs, Reporting and recordkeeping requirements, and 
Vocational rehabilitation.

34 CFR Part 397

    Individuals with disabilities, Reporting and recordkeeping 
requirements, Students, Vocational rehabilitation, Youth.

    Dated: March 6, 2015.
Arne Duncan,
Secretary of Education.
    For the reasons discussed in the preamble, the Secretary of 
Education proposes to amend title 34 of the Code of Federal Regulations 
as follows:

0
1. Part 361 is revised to read as follows:

PART 361--STATE VOCATIONAL REHABILITATION SERVICES PROGRAM

Subpart A--General
Sec.
361.1 Purpose.
361.2 Eligibility for a grant.
361.3 Authorized activities.
361.4 Applicable regulations.
361.5 Applicable definitions.
Subpart B--State Plan and Other Requirements for Vocational 
Rehabilitation Services
361.10 Submission, approval, and disapproval of the State plan.
361.11 Withholding of funds.

Administration

361.12 Methods of administration.
361.13 State agency for administration.
361.14 Substitute State agency.
361.15 Local administration.
361.16 Establishment of an independent commission or a State 
Rehabilitation Council.
361.17 Requirements for a State Rehabilitation Council.
361.18 Comprehensive system of personnel development.
361.19 Affirmative action for individuals with disabilities.
361.20 Public participation requirements.
361.21 Consultations regarding the administration of the vocational 
rehabilitation services portion of the Unified or Combined State 
Plan.
361.22 Coordination with education officials.
361.23 Requirements related to the statewide workforce development 
system.
361.24 Cooperation and coordination with other entities.
361.25 Statewideness.
361.26 Waiver of statewideness.
361.27 Shared funding and administration of joint programs.
361.28 Third-party cooperative arrangements involving funds from 
other public agencies.
361.29 Statewide assessment; annual estimates; annual State goals 
and priorities; strategies; and progress reports.
361.30 Services to American Indians.
361.31 Cooperative agreements with private nonprofit organizations.
361.32 Provision of training and services for employers.
361.33 [Reserved]
361.34 Supported employment State plan supplement.
361.35 Innovation and expansion activities.
361.36 Ability to serve all eligible individuals; order of selection 
for services.
361.37 Information and referral programs.
361.38 Protection, use, and release of personal information.
361.39 State-imposed requirements.
361.40 Reports; Evaluation standards and performance indicators.

Provision and Scope of Services

361.41 Processing referrals and applications.
361.42 Assessment for determining eligibility and priority for 
services.
361.43 Procedures for ineligibility determination.
361.44 Closure without eligibility determination.
361.45 Development of the individualized plan for employment.
361.46 Content of the individualized plan for employment.
361.47 Record of services.
361.48 Scope of vocational rehabilitation services for individuals 
with disabilities.
361.49 Scope of vocational rehabilitation services for groups of 
individuals with disabilities.
361.50 Written policies governing the provision of services for 
individuals with disabilities.
361.51 Standards for facilities and providers of services.
361.52 Informed choice.
361.53 Comparable services and benefits.
361.54 Participation of individuals in cost of services based on 
financial need.
361.55 Annual review of individuals in extended employment and other 
employment under special certificate provisions of the Fair Labor 
Standards Act.
361.56 Requirements for closing the record of services of an 
individual who has achieved an employment outcome.
361.57 Review of determinations made by designated State unit 
personnel.
Subpart C--Financing of State Vocational Rehabilitation Programs
361.60 Matching requirements.
361.61 Limitation on use of funds for construction expenditures.
361.62 Maintenance of effort requirements.
361.63 Program income.
361.64 Obligation of Federal funds.
361.65 Allotment and payment of Federal funds for vocational 
rehabilitation services.
Subpart D--[Reserved]
Subpart E--[Reserved]
Subpart F--[Reserved]

    Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c), unless otherwise noted.

Subpart A--General

Sec.  361.1  Purpose.

    Under the State Vocational Rehabilitation Services Program, the 
Secretary provides grants to assist States in operating statewide 
comprehensive, coordinated, effective, efficient, and accountable 
vocational rehabilitation programs, each of which is--
    (a) An integral part of a statewide workforce development system; 
and
    (b) Designed to assess, plan, develop, and provide vocational 
rehabilitation services for individuals with

[[Page 21102]]

disabilities, consistent with their unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed 
choice so that they may prepare for and engage in competitive 
integrated employment and achieve economic self-sufficiency.

(Authority: Section 100(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 720(a))

Sec.  361.2  Eligibility for a grant.

    Any State that submits to the Secretary a vocational rehabilitation 
services portion of the Unified or Combined State Plan that meets the 
requirements of section 101(a) of the Act and this part is eligible for 
a grant under this program.

(Authority: Section 101(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a))

Sec.  361.3  Authorized activities.

    The Secretary makes payments to a State to assist in--
    (a) The costs of providing vocational rehabilitation services under 
the vocational rehabilitation services portion of the Unified or 
Combined State Plan; and
    (b) Administrative costs under the vocational rehabilitation 
services portion of the Unified or Combined State Plan.

(Authority: Section 111(a)(1) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 731(a)(1))

Sec.  361.4  Applicable regulations.

    The following regulations apply to this program:
    (a) The Education Department General Administrative Regulations 
(EDGAR) as follows:
    (1) 34 CFR part 76 (State-Administered Programs).
    (2) 34 CFR part 77 (Definitions that Apply to Department 
Regulations).
    (3) 34 CFR part 79 (Intergovernmental Review of Department of 
Education Programs and Activities).
    (4) 34 CFR part 81 (General Education Provisions Act--Enforcement).
    (5) 34 CFR part 82 (New Restrictions on Lobbying).
    (b) The regulations in this part 361.
    (c) 2 CFR part 190 (OMB Guidelines to Agencies on Governmentwide 
Debarment and Suspension (Nonprocurement)) as adopted in 2 CFR part 
3485.
    (d) 2 CFR part 200 (Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards) as adopted in 2 
CFR part 3474.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.5  Applicable definitions.

    The following definitions apply to this part:
    (a) Definitions in EDGAR 77.1.
    (b) Definitions in 2 CFR part 200 subpart A.
    (c) The following definitions:
    (1) Act means the Rehabilitation Act of 1973, as amended (29 U.S.C. 
701 et seq.).
    (2) Administrative costs under the vocational rehabilitation 
services portion of the Unified or Combined State Plan means 
expenditures incurred in the performance of administrative functions 
under the vocational rehabilitation program carried out under this 
part, including expenses related to program planning, development, 
monitoring, and evaluation, including, but not limited to, expenses 
for--
    (i) Quality assurance;
    (ii) Budgeting, accounting, financial management, information 
systems, and related data processing;
    (iii) Providing information about the program to the public;
    (iv) Technical assistance and support services to other State 
agencies, private nonprofit organizations, and businesses and 
industries, except for technical assistance and support services 
described in Sec.  361.49(a)(4);
    (v) The State Rehabilitation Council and other advisory committees;
    (vi) Professional organization membership dues for designated State 
unit employees;
    (vii) The removal of architectural barriers in State vocational 
rehabilitation agency offices and State-operated rehabilitation 
facilities;
    (viii) Operating and maintaining designated State unit facilities, 
equipment, and grounds, but not including capital expenditures as 
defined in 2 CFR 200.13;
    (ix) Supplies;
    (x) Administration of the comprehensive system of personnel 
development described in Sec.  361.18, including personnel 
administration, administration of affirmative action plans, and 
training and staff development;
    (xi) Administrative salaries, including clerical and other support 
staff salaries, in support of these administrative functions;
    (xii) Travel costs related to carrying out the program, other than 
travel costs related to the provision of services;
    (xiii) Costs incurred in conducting reviews of determinations made 
by personnel of the designated State unit, including costs associated 
with mediation and impartial due process hearings under Sec.  361.57; 
and
    (xiv) Legal expenses required in the administration of the program.

(Authority: Sections 7(1) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(1) and 709(c))

    (3) Applicant means an individual who submits an application for 
vocational rehabilitation services in accordance with Sec.  
361.41(b)(2).

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

    (4) Appropriate modes of communication means specialized aids and 
supports that enable an individual with a disability to comprehend and 
respond to information that is being communicated. Appropriate modes of 
communication include, but are not limited to, the use of interpreters, 
open and closed captioned videos, specialized telecommunications 
services and audio recordings, Brailled and large print materials, 
materials in electronic formats, augmentative communication devices, 
graphic presentations, and simple language materials.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

    (5) Assessment for determining eligibility and vocational 
rehabilitation needs means, as appropriate in each case--
    (i)(A) A review of existing data--
    (1) To determine if an individual is eligible for vocational 
rehabilitation services; and
    (2) To assign priority for an order of selection described in Sec.  
361.36 in the States that use an order of selection; and
    (B) To the extent necessary, the provision of appropriate 
assessment activities to obtain necessary additional data to make the 
eligibility determination and assignment;
    (ii) To the extent additional data are necessary to make a 
determination of the employment outcomes and the nature and scope of 
vocational rehabilitation services to be included in the individualized 
plan for employment of an eligible individual, a comprehensive 
assessment to determine the unique strengths, resources, priorities, 
concerns, abilities, capabilities, interests, and informed choice, 
including the need for supported employment, of the eligible 
individual. This comprehensive assessment--
    (A) Is limited to information that is necessary to identify the 
rehabilitation needs of the individual and to develop the 
individualized plan of employment of the eligible individual;
    (B) Uses as a primary source of information, to the maximum extent 
possible and appropriate and in

[[Page 21103]]

accordance with confidentiality requirements--
    (1) Existing information obtained for the purposes of determining 
the eligibility of the individual and assigning priority for an order 
of selection described in Sec.  361.36 for the individual; and
    (2) Information that can be provided by the individual and, if 
appropriate, by the family of the individual;
    (C) May include, to the degree needed to make such a determination, 
an assessment of the personality, interests, interpersonal skills, 
intelligence and related functional capacities, educational 
achievements, work experience, vocational aptitudes, personal and 
social adjustments, and employment opportunities of the individual and 
the medical, psychiatric, psychological, and other pertinent 
vocational, educational, cultural, social, recreational, and 
environmental factors that affect the employment and rehabilitation 
needs of the individual;
    (D) May include, to the degree needed, an appraisal of the patterns 
of work behavior of the individual and services needed for the 
individual to acquire occupational skills and to develop work 
attitudes, work habits, work tolerance, and social and behavior 
patterns necessary for successful job performance, including the use of 
work in real job situations to assess and develop the capacities of the 
individual to perform adequately in a work environment; and
    (E) To the maximum extent possible, relies on information obtained 
from experiences in integrated employment settings in the community and 
in other integrated community settings;
    (iii) Referral, for the provision of rehabilitation technology 
services to the individual, to assess and develop the capacities of the 
individual to perform in a work environment; and
    (iv) An exploration of the individual's abilities, capabilities, 
and capacity to perform in work situations, which must be assessed 
periodically during trial work experiences, including experiences in 
which the individual is provided appropriate supports and training.

(Authority: Sections 7(2) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(2) and 709(c))

    (6) Assistive technology terms.
    (i) Assistive technology has the meaning given such term in section 
3 of the Assistive Technology Act of 1998 (29 U.S.C. 3002).
    (ii) Assistive technology device has the meaning given such term in 
section 3 of the Assistive Technology Act of 1998, except that the 
reference in such section to the term individuals with disabilities 
will be deemed to mean more than one individual with a disability as 
defined in paragraph (20)(A) of the Act.
    (iii) Assistive technology service has the meaning given such term 
in section 3 of the Assistive Technology Act of 1998, except that the 
reference in such section to the term--
    (A) Individual with a disability will be deemed to mean an 
individual with a disability, as defined in paragraph (20)(A) of the 
Act; and
    (B) Individuals with disabilities will be deemed to mean more than 
one such individual.

(Authority: Sections 7(3) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(3) and 709(c))

    (7) Community rehabilitation program (i) Community rehabilitation 
program means a program that provides directly or facilitates the 
provision of one or more of the following vocational rehabilitation 
services to individuals with disabilities to enable those individuals 
to maximize their opportunities for employment, including career 
advancement:
    (A) Medical, psychiatric, psychological, social, and vocational 
services that are provided under one management.
    (B) Testing, fitting, or training in the use of prosthetic and 
orthotic devices.
    (C) Recreational therapy.
    (D) Physical and occupational therapy.
    (E) Speech, language, and hearing therapy.
    (F) Psychiatric, psychological, and social services, including 
positive behavior management.
    (G) Assessment for determining eligibility and vocational 
rehabilitation needs.
    (H) Rehabilitation technology.
    (I) Job development, placement, and retention services.
    (J) Evaluation or control of specific disabilities.
    (K) Orientation and mobility services for individuals who are 
blind.
    (L) Extended employment.
    (M) Psychosocial rehabilitation services.
    (N) Supported employment services and extended services.
    (O) Customized employment.
    (P) Services to family members if necessary to enable the applicant 
or eligible individual to achieve an employment outcome.
    (Q) Personal assistance services.
    (R) Services similar to the services described in paragraphs (A) 
through (Q) of this definition.
    (ii) For the purposes of this definition, program means an agency, 
organization, or institution, or unit of an agency, organization, or 
institution, that provides directly or facilitates the provision of 
vocational rehabilitation services as one of its major functions.

(Authority: Section 7(4) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(4))

    (8) Comparable services and benefits. (i) Comparable services and 
benefits means services and benefits, including accommodations and 
auxiliary aids and services, that are--
    (A) Provided or paid for, in whole or in part, by other Federal, 
State, or local public agencies, by health insurance, or by employee 
benefits;
    (B) Available to the individual at the time needed to ensure the 
progress of the individual toward achieving the employment outcome in 
the individual's individualized plan for employment in accordance with 
Sec.  361.53; and
    (C) Commensurate to the services that the individual would 
otherwise receive from the designated State vocational rehabilitation 
agency.
    (ii) For the purposes of this definition, comparable services and 
benefits do not include awards and scholarships based on merit.

(Authority: Sections 12(c) and 101(a)(8) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(8))

    (9) Competitive integrated employment means work that--
    (i) Is performed on a full-time or part-time basis (including self-
employment) and for which an individual is compensated at a rate that--
    (A) Is not less than the higher of the rate specified in section 
6(a)(1) of the Fair Labor Standards Act of 1938 (29 U.S.C. 206(a)(1)) 
or the rate required under in the applicable State or local minimum 
wage law;
    (B) Is not less than the customary rate paid by the employer for 
the same or similar work performed by other employees who are not 
individuals with disabilities and who are similarly situated in similar 
occupations by the same employer and who have similar training, 
experience, and skills; and
    (C) In the case of an individual who is self-employed, yields an 
income that is comparable to the income received by other individuals 
who are not individuals with disabilities and who are self-employed in 
similar occupations or on similar tasks and who have similar training, 
experience, and skills; and
    (D) Is eligible for the level of benefits provided to other 
employees; and
    (ii) Is at a location--

[[Page 21104]]

    (A) Typically found in the community; and
    (B) Where the employee with a disability interacts for the purpose 
of performing the duties of the position with other employees within 
the particular work unit and the entire work site, and, as appropriate 
to the work performed, other persons (e.g., customers and vendors), who 
are not individuals with disabilities (not including supervisory 
personnel or individuals who are providing services to such employee) 
to the same extent that employees who are not individuals with 
disabilities and who are in comparable positions interact with these 
persons; and
    (iii) Presents, as appropriate, opportunities for advancement that 
are similar to those for other employees who are not individuals with 
disabilities and who have similar positions.

(Authority: Sections 7(5) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(5) and 709(c))

    (10) Construction of a facility for a public or nonprofit community 
rehabilitation program means--
    (i) The acquisition of land in connection with the construction of 
a new building for a community rehabilitation program;
    (ii) The construction of new buildings;
    (iii) The acquisition of existing buildings;
    (iv) The expansion, remodeling, alteration, or renovation of 
existing buildings;
    (v) Architect's fees, site surveys, and soil investigation, if 
necessary, in connection with the acquisition of land or existing 
buildings, or the and construction, expansion, remodeling, or 
alteration of community rehabilitation facilities;
    (vi) The acquisition of initial fixed or movable equipment of any 
new, newly acquired, newly expanded, newly remodeled, newly altered, or 
newly renovated buildings that are to be used for community 
rehabilitation program purposes; and
    (vii) Other direct expenditures appropriate to the construction 
project, except costs of off-site improvements.

(Authority: Sections 7(6) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(6) and 709(c))

    (11) Customized employment means competitive integrated employment, 
for an individual with a significant disability, that is--
    (i) Based on an individualized determination of the unique 
strengths, needs, and interests of the individual with a significant 
disability;
    (ii) Designed to meet the specific abilities of the individual with 
a significant disability and the business needs of the employer; and
    (iii) Carried out through flexible strategies, such as--
    (A) Job exploration by the individual; and
    (B) Working with an employer to facilitate placement, including--
    (1) Customizing a job description based on current employer needs 
or on previously unidentified and unmet employer needs;
    (2) Developing a set of job duties, a work schedule and job 
arrangement, and specifics of supervision (including performance 
evaluation and review), and determining a job location;
    (3) Using a professional representative chosen by the individual, 
or if elected self-representation, to work with an employer to 
facilitate placement; and
    (4) Providing services and supports at the job location.

(Authority: Section 7(7) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(7) and 709(c))

    (12) Designated State agency or State agency means the sole State 
agency, designated, in accordance with Sec.  361.13(a), to administer, 
or supervise the local administration of, the vocational rehabilitation 
services portion of the Unified or Combined State Plan. The term 
includes the State agency for individuals who are blind, if designated 
as the sole State agency with respect to that part of the Unified or 
Combined State Plan relating to the vocational rehabilitation of 
individuals who are blind.

(Authority: Sections 7(8)(A) and 101(a)(2)(A) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(8)(A) and 721(a)(2)(A))

    (13) Designated State unit or State unit means either--
    (i) The State vocational rehabilitation bureau, division, or other 
organizational unit that is primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities and that is responsible for the administration of the 
vocational rehabilitation program of the State agency, as required 
under Sec.  361.13(b); or
    (ii) The State agency that is primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities.

(Authority: Sections 7(8)(B) and 101(a)(2)(B) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(8)(B) and 721(a)(2)(B))

    (14) Eligible individual means an applicant for vocational 
rehabilitation services who meets the eligibility requirements of Sec.  
361.42(a).

(Authority: Sections 7(20)(A) and 102(a)(1) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(20)(A) and 722(a)(1))

    (15) Employment outcome means, with respect to an individual, 
entering, advancing in, or retaining full-time or, if appropriate, 
part-time competitive integrated employment, as defined in Sec.  
361.5(c)(9) (including customized employment, self-employment, 
telecommuting, or business ownership), or supported employment, that is 
consistent with an individual's unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed 
choice.

(Authority: Sections 7(11), 12(c), 100(a), and 102(b)(3)(A) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(11), 709(c), 
720(a), and 722(b)(4)(A))

    (16) Establishment, development, or improvement of a public or 
nonprofit community rehabilitation program means--
    (i) The establishment of a facility for a public or nonprofit 
community rehabilitation program, as defined in paragraph (c)(17) of 
this section, to provide vocational rehabilitation services to 
applicants or eligible individuals;
    (ii) Staffing, if necessary to establish, develop, or improve a 
public or nonprofit community rehabilitation program for the purpose of 
providing vocational rehabilitation services to applicants or eligible 
individuals, for a maximum period of four years, with Federal financial 
participation available at the applicable matching rate for the 
following levels of staffing costs:
    (A) 100 percent of staffing costs for the first year;
    (B) 75 percent of staffing costs for the second year;
    (C) 60 percent of staffing costs for the third year; and
    (D) 45 percent of staffing costs for the fourth year; and
    (iii) Other expenditures and activities related to the 
establishment, development, or improvement of a public or nonprofit 
community rehabilitation program that are necessary to make the program 
functional or increase its effectiveness in providing vocational 
rehabilitation services to applicants or eligible individuals, but are 
not ongoing operating expenses of the program.

(Authority: Sections 7(12) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(12) and 709(c))

[[Page 21105]]

    (17) Establishment of a facility for a public or nonprofit 
community rehabilitation program means--
    (i) The acquisition of an existing building and, if necessary, the 
land in connection with the acquisition, if the building has been 
completed in all respects for at least one year prior to the date of 
acquisition and the Federal share of the cost of acquisition is not 
more than $300,000;
    (ii) The remodeling or alteration of an existing building, provided 
the estimated cost of remodeling or alteration does not exceed the 
appraised value of the existing building;
    (iii) The expansion of an existing building, provided that--
    (A) The existing building is complete in all respects;
    (B) The total size in square footage of the expanded building, 
notwithstanding the number of expansions, is not greater than twice the 
size of the existing building;
    (C) The expansion is joined structurally to the existing building 
and does not constitute a separate building; and
    (D) The costs of the expansion do not exceed the appraised value of 
the existing building;
    (iv) Architect's fees, site survey, and soil investigation, if 
necessary in connection with the acquisition, remodeling, alteration, 
or expansion of an existing building; and
    (v) The acquisition of fixed or movable equipment, including the 
costs of installation of the equipment, if necessary to establish, 
develop, or improve a community rehabilitation program.

(Authority: Sections 7(12) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(12) and 709(c))

    (18) Extended employment means work in a non-integrated or 
sheltered setting for a public or private nonprofit agency or 
organization that provides compensation in accordance with the Fair 
Labor Standards Act.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

    (19) Extended services means ongoing support services and other 
appropriate services that are--
    (i) Needed to support and maintain an individual with a most 
significant disability including a youth with a most significant 
disability, in supported employment;
    (ii) Organized or made available, singly or in combination, in such 
a way as to assist an eligible individual in maintaining supported 
employment;
    (iii) Based on the needs of an eligible individual, as specified in 
an individualized plan for employment;
    (iv) Provided by a State agency, a private nonprofit organization, 
employer, or any other appropriate resource, after an individual has 
made the transition from support from the designated State unit; and
    (v) Provided to youth with the most significant disabilities by the 
designated State unit in accordance with requirements set forth in this 
part and part 363 for a period not to exceed 4 years. The designated 
State unit may not provide extended services to individuals with the 
most significant disabilities who are not youth with the most 
significant disabilities.

(Authority: Sections 7(13), 12(c), and 604(b) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(13), 709(c) and 795i)

    (20) Extreme medical risk means a probability of substantially 
increasing functional impairment or death if medical services, 
including mental health services, are not provided expeditiously.

(Authority: Sections 12(c) and 101(a)(8)(A)(i)(III) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
721(a)(8)(A)(i)(III))

    (21) Fair hearing board means a committee, body, or group of 
persons established by a State prior to January 1, 1985, that--
    (i) Is authorized under State law to review determinations made by 
personnel of the designated State unit that affect the provision of 
vocational rehabilitation services; and
    (ii) Carries out the responsibilities of the impartial hearing 
officer in accordance with the requirements in Sec.  361.57(j).

(Authority: Sections 12(c) and 102(c)(6) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 722(c)(6))

    (22) Family member, for purposes of receiving vocational 
rehabilitation services in accordance with Sec.  361.48(b)(9), means an 
individual--
    (i) Who either--
    (A) Is a relative or guardian of an applicant or eligible 
individual; or
    (B) Lives in the same household as an applicant or eligible 
individual;
    (ii) Who has a substantial interest in the well-being of that 
individual; and
    (iii) Whose receipt of vocational rehabilitation services is 
necessary to enable the applicant or eligible individual to achieve an 
employment outcome.

(Authority: Sections 12(c) and 103(a)(19) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(19))

    (23) Governor means a chief executive officer of a State.

(Authority: Section 7(15) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(15))

    (24) Impartial hearing officer. (i) Impartial hearing officer means 
an individual who--
    (A) Is not an employee of a public agency (other than an 
administrative law judge, hearing examiner, or employee of an 
institution of higher education);
    (B) Is not a member of the State Rehabilitation Council for the 
designated State unit;
    (C) Has not been involved previously in the vocational 
rehabilitation of the applicant or eligible individual;
    (D) Has knowledge of the delivery of vocational rehabilitation 
services, the vocational rehabilitation services portion of the Unified 
or Combined State Plan, and the Federal and State regulations governing 
the provision of services;
    (E) Has received training with respect to the performance of 
official duties; and
    (F) Has no personal, professional, or financial interest that could 
affect the objectivity of the individual.
    (ii) An individual is not considered to be an employee of a public 
agency for the purposes of this definition solely because the 
individual is paid by the agency to serve as a hearing officer.

(Authority: Section 7(16) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(16))

    (25) Indian; American Indian; Indian American; Indian Tribe.
    (i) In general. The terms ``Indian'', ``American Indian'', and 
``Indian American'' mean an individual who is a member of an Indian 
tribe and include a Native and a descendant of a Native, as such terms 
are defined in subsections (b) and (c) of section 3 of the Alaska 
Native Claims Settlement Act (43 U.S.C. 1602).
    (ii) Indian tribe. The term ``Indian tribe'' means any Federal or 
State Indian tribe, band, rancheria, pueblo, colony, or community, 
including any Alaskan native village or regional village corporation 
(as defined in or established pursuant to the Alaska Native Claims 
Settlement Act) and a tribal organization (as defined in section 4(1) 
of the Indian Self-Determination and Education Assistance Act (25 
U.S.C. 450(b)(1)).

(Authority: Section 7(19) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(19))

    (26) Individual who is blind means a person who is blind within the 
meaning of applicable State law.

[[Page 21106]]

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

    (27) Individual with a disability, except as provided in paragraph 
(c)(28)of this section, means an individual--
    (i) Who has a physical or mental impairment;
    (ii) Whose impairment constitutes or results in a substantial 
impediment to employment; and
    (iii) Who can benefit in terms of an employment outcome from the 
provision of vocational rehabilitation services.

(Authority: Section 7(20)(A) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(20)(A))

    (28) Individual with a disability, for purposes of Sec. Sec.  
361.5(c)(13), 361.13(a), 361.13(b)(1), 361.17(a), (b), (c), and (j), 
361.18(b), 361.19, 361.20, 361.23(b)(2), 361.29(a) and (d)(8), and 
361.51(b), means an individual--
    (i) Who has a physical or mental impairment that substantially 
limits one or more major life activities;
    (ii) Who has a record of such an impairment; or
    (iii) Who is regarded as having such an impairment.

(Authority: Section 7(20)(B) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(20)(B))

    (29) Individual with a most significant disability means an 
individual with a significant disability who meets the designated State 
unit's criteria for an individual with a most significant disability. 
These criteria must be consistent with the requirements in Sec.  
361.36(d)(1) and (2).

(Authority: Sections 7(21)(E) and 101(a)(5)(C) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(21)(E) and 721(a)(5)(C))

    (30) Individual with a significant disability means an individual 
with a disability--
    (i) Who has a severe physical or mental impairment that seriously 
limits one or more functional capacities (such as mobility, 
communication, self-care, self-direction, interpersonal skills, work 
tolerance, or work skills) in terms of an employment outcome;
    (ii) Whose vocational rehabilitation can be expected to require 
multiple vocational rehabilitation services over an extended period of 
time; and
    (iii) Who has one or more physical or mental disabilities resulting 
from amputation, arthritis, autism, blindness, burn injury, cancer, 
cerebral palsy, cystic fibrosis, deafness, head injury, heart disease, 
hemiplegia, hemophilia, respiratory or pulmonary dysfunction, mental 
illness, multiple sclerosis, muscular dystrophy, musculo-skeletal 
disorders, neurological disorders (including stroke and epilepsy), 
spinal cord conditions (including paraplegia and quadriplegia), sickle 
cell anemia, intellectual disability, specific learning disability, 
end-stage renal disease, or another disability or combination of 
disabilities determined on the basis of an assessment for determining 
eligibility and vocational rehabilitation needs to cause comparable 
substantial functional limitation.

(Authority: Section 7(21)(A) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(21)(A))

    (31) Individual's representative means any representative chosen by 
an applicant or eligible individual, as appropriate, including a 
parent, guardian, other family member, or advocate, unless a 
representative has been appointed by a court to represent the 
individual, in which case the court-appointed representative is the 
individual's representative.

(Authority: Sections 7(22) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(22) and 709(c))

    (32) Integrated setting means--
    (i) With respect to the provision of services, a setting typically 
found in the community in which applicants or eligible individuals 
interact with non-disabled individuals other than non-disabled 
individuals who are providing services to those applicants or eligible 
individuals; and
    (ii) With respect to an employment outcome, means a setting--
    (A) Typically found in the community; and
    (B) Where the employee with a disability interacts, for the purpose 
of performing the duties of the position, with other employees within 
the particular work unit and the entire work site, and, as appropriate 
to the work performed, other persons (e.g., customers and vendors) who 
are not individuals with disabilities (not including supervisory 
personnel or individuals who are providing services to such employee) 
to the same extent that employees who are not individuals with 
disabilities and who are in comparable positions interact with these 
persons.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

    (33) Local workforce development board means a local board, as 
defined in section 3 of the Workforce Innovation and Opportunity Act.

(Authority: Section 7(25) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(25))

    (34) Maintenance means monetary support provided to an individual 
for expenses, such as food, shelter, and clothing, that are in excess 
of the normal expenses of the individual and that are necessitated by 
the individual's participation in an assessment for determining 
eligibility and vocational rehabilitation needs or the individual's 
receipt of vocational rehabilitation services under an individualized 
plan for employment.

(Authority: Sections 12(c) and 103(a)(7) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(7))

    (i)Examples: The following are examples of expenses that would meet 
the definition of maintenance. The examples are illustrative, do not 
address all possible circumstances, and are not intended to substitute 
for individual counselor judgment.
    Example 1: The cost of a uniform or other suitable clothing that is 
required for an individual's job placement or job-seeking activities.
    Example 2: The cost of short-term shelter that is required in order 
for an individual to participate in assessment activities or vocational 
training at a site that is not within commuting distance of an 
individual's home.
    Example 3: The initial one-time costs, such as a security deposit 
or charges for the initiation of utilities, that are required in order 
for an individual to relocate for a job placement.
    (ii) [Reserved]
    (35) Mediation means the act or process of using an independent 
third party to act as a mediator, intermediary, or conciliator to 
assist persons or parties in settling differences or disputes prior to 
pursuing formal administrative or other legal remedies. Mediation under 
the program must be conducted in accordance with the requirements in 
Sec.  361.57(d) by a qualified and impartial mediator as defined in 
Sec.  361.5(c)(43).

(Authority: Sections 12(c) and 102(c)(4) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 722(c)(4))

    (36) Nonprofit, with respect to a community rehabilitation program, 
means a community rehabilitation program carried out by a corporation 
or association, no part of the net earnings of which inures, or may 
lawfully inure, to the benefit of any private shareholder or individual 
and the income of which is exempt from taxation under section 501(c)(3) 
of the Internal Revenue Code of 1986.

[[Page 21107]]

(Authority: Section 7(26) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(26))

    (37) Ongoing support services, as used in the definition of 
supported employment, means services that--
    (i) Are needed to support and maintain an individual with a most 
significant disability, including a youth with a most significant 
disability, in supported employment;
    (ii) Are identified based on a determination by the designated 
State unit of the individual's need as specified in an individualized 
plan for employment;
    (iii) Are furnished by the designated State unit from the time of 
job placement until transition to extended services, unless post-
employment services are provided following transition, and thereafter 
by one or more extended services providers throughout the individual's 
term of employment in a particular job placement or multiple placements 
if those placements are being provided under a program of transitional 
employment;
    (iv) Include an assessment of employment stability and provision of 
specific services or the coordination of services at or away from the 
worksite that are needed to maintain stability based on--
    (A) At a minimum, twice-monthly monitoring at the worksite of each 
individual in supported employment; or
    (B) If under specific circumstances, especially at the request of 
the individual, the individualized plan for employment provides for 
off-site monitoring, twice monthly meetings with the individual;
    (v) Consist of--
    (A) Any particularized assessment supplementary to the 
comprehensive assessment of rehabilitation needs described in paragraph 
(c)(5)(ii) of this section;
    (B) The provision of skilled job trainers who accompany the 
individual for intensive job skill training at the work site;
    (C) Job development and training;
    (D) Social skills training;
    (E) Regular observation or supervision of the individual;
    (F) Follow-up services including regular contact with the 
employers, the individuals, the parents, family members, guardians, 
advocates or authorized representatives of the individuals, and other 
suitable professional and informed advisors, in order to reinforce and 
stabilize the job placement;
    (G) Facilitation of natural supports at the worksite;
    (H) Any other service identified in the scope of vocational 
rehabilitation services for individuals, described in Sec.  361.48; or
    (I) Any service similar to the foregoing services.

(Authority: Sections 7(27) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(27) and 709(c))

    (38) Personal assistance services means a range of services, 
including, among other things, training in managing, supervising, and 
directing personal assistance services, provided by one or more 
persons, that are--
    (i) Designed to assist an individual with a disability to perform 
daily living activities on or off the job that the individual would 
typically perform without assistance if the individual did not have a 
disability;
    (ii) Designed to increase the individual's control in life and 
ability to perform everyday activities on or off the job;
    (iii) Necessary to the achievement of an employment outcome; and
    (iv) Provided only while the individual is receiving other 
vocational rehabilitation services. The services may include training 
in managing, supervising, and directing personal assistance services.

(Authority: Sections 7(28), 12(c), 102(b)(4)(B)(i)(I)(bb), and 
103(a)(9) of the Rehabilitation Act of 1973, as amended; 29 U.S.C. 
705(28), 709(c), 722(b)(4)(B)(i)(I)(bb), and 723(a)(9))

    (39) Physical and mental restoration services means--
    (i) Corrective surgery or therapeutic treatment that is likely, 
within a reasonable period of time, to correct or modify substantially 
a stable or slowly progressive physical or mental impairment that 
constitutes a substantial impediment to employment;
    (ii) Diagnosis of and treatment for mental or emotional disorders 
by qualified personnel in accordance with State licensure laws;
    (iii) Dentistry;
    (iv) Nursing services;
    (v) Necessary hospitalization (either inpatient or outpatient care) 
in connection with surgery or treatment and clinic services;
    (vi) Drugs and supplies;
    (vii) Prosthetic and orthotic devices;
    (viii) Eyeglasses and visual services, including visual training, 
and the examination and services necessary for the prescription and 
provision of eyeglasses, contact lenses, microscopic lenses, telescopic 
lenses, and other special visual aids prescribed by personnel who are 
qualified in accordance with State licensure laws;
    (ix) Podiatry;
    (x) Physical therapy;
    (xi) Occupational therapy;
    (xii) Speech or hearing therapy;
    (xiii) Mental health services;
    (xiv) Treatment of either acute or chronic medical complications 
and emergencies that are associated with or arise out of the provision 
of physical and mental restoration services, or that are inherent in 
the condition under treatment;
    (xv) Special services for the treatment of individuals with end-
stage renal disease, including transplantation, dialysis, artificial 
kidneys, and supplies; and
    (xvi) Other medical or medically related rehabilitation services.

(Authority: Sections 12(c) and 103(a)(6) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(6))

    (40) Physical or mental impairment means--
    (i) Any physiological disorder or condition, cosmetic 
disfigurement, or anatomical loss affecting one or more of the 
following body systems: Neurological, musculo-skeletal, special sense 
organs, respiratory (including speech organs), cardiovascular, 
reproductive, digestive, genitourinary, hemic and lymphatic, skin, and 
endocrine; or
    (ii) Any mental or psychological disorder such as intellectual 
disability, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities.

(Authority: Sections 7(20)(A) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(20)(A) and 709(c))

    (41) Post-employment services means one or more of the services 
identified in Sec.  361.48 that are provided subsequent to the 
achievement of an employment outcome and that are necessary for an 
individual to maintain, regain, or advance in employment, consistent 
with the individual's unique strengths, resources, priorities, 
concerns, abilities, capabilities, interests, and informed choice.

(Authority: Sections 12(c) and 103(a)(20) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(20))

    Note to paragraph(c)(41): Post-employment services are intended to 
ensure that the employment outcome remains consistent with the 
individual's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interests, and informed choice. These services 
are available to meet rehabilitation needs that do not require a 
complex and comprehensive provision of services and, thus, should be 
limited

[[Page 21108]]

in scope and duration. If more comprehensive services are required, 
then a new rehabilitation effort should be considered. Post-employment 
services are to be provided under an amended individualized plan for 
employment; thus, a re-determination of eligibility is not required. 
The provision of post-employment services is subject to the same 
requirements in this part as the provision of any other vocational 
rehabilitation service. Post-employment services are available to 
assist an individual to maintain employment, e.g., the individual's 
employment is jeopardized because of conflicts with supervisors or co-
workers, and the individual needs mental health services and counseling 
to maintain the employment, or the individual requires assistive 
technology to maintain the employment; to regain employment, e.g., the 
individual's job is eliminated through reorganization and new placement 
services are needed; and to advance in employment, e.g., the employment 
is no longer consistent with the individual's unique strengths, 
resources, priorities, concerns, abilities, capabilities, interests, 
and informed choice.
    (42) Pre-employment transition services means the required 
activities and authorized activities specified in Sec.  361.48(a).

(Authority: Sections 7(30) and 113 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 7(30) and 733)

    (43) Qualified and impartial mediator. (i) Qualified and impartial 
mediator means an individual who--
    (A) Is not an employee of a public agency (other than an 
administrative law judge, hearing examiner, employee of a State office 
of mediators, or employee of an institution of higher education);
    (B) Is not a member of the State Rehabilitation Council for the 
designated State unit;
    (C) Has not been involved previously in the vocational 
rehabilitation of the applicant or eligible individual;
    (D) Is knowledgeable of the vocational rehabilitation program and 
the applicable Federal and State laws, regulations, and policies 
governing the provision of vocational rehabilitation services;
    (E) Has been trained in effective mediation techniques consistent 
with any State-approved or -recognized certification, licensing, 
registration, or other requirements; and
    (F) Has no personal, professional, or financial interest that could 
affect the individual's objectivity during the mediation proceedings.
    (ii) An individual is not considered to be an employee of the 
designated State agency or designated State unit for the purposes of 
this definition solely because the individual is paid by the designated 
State agency or designated State unit to serve as a mediator.

(Authority: Sections 12(c) and 102(c)(4) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 722(c)(4))

    (44) Rehabilitation engineering means the systematic application of 
engineering sciences to design, develop, adapt, test, evaluate, apply, 
and distribute technological solutions to problems confronted by 
individuals with disabilities in functional areas, such as mobility, 
communications, hearing, vision, and cognition, and in activities 
associated with employment, independent living, education, and 
integration into the community.

(Authority: Sections 7(32) and (12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(32) and 709(c))

    (45) Rehabilitation technology means the systematic application of 
technologies, engineering methodologies, or scientific principles to 
meet the needs of, and address the barriers confronted by, individuals 
with disabilities in areas that include education, rehabilitation, 
employment, transportation, independent living, and recreation. The 
term includes rehabilitation engineering, assistive technology devices, 
and assistive technology services.

(Authority: Section 7(32) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(32))

    (46) Reservation means a Federal or State Indian reservation, a 
public domain Indian allotment, a former Indian reservation in 
Oklahoma, and land held by incorporated Native groups, regional 
corporations, and village corporations under the provisions of the 
Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.); or a 
defined area of land recognized by a State or the Federal Government 
where there is a concentration of tribal members and on which the 
tribal government is providing structured activities and services.

(Authority: Section 121(e) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 741(e))

    (47) Sole local agency means a unit or combination of units of 
general local government or one or more Indian tribes that has the sole 
responsibility under an agreement with, and the supervision of, the 
State agency to conduct a local or tribal vocational rehabilitation 
program, in accordance with the vocational rehabilitation services 
portion of the Unified or Combined State Plan.

(Authority: Section 7(24) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(24))

    (48) State means any of the 50 States, the District of Columbia, 
the Commonwealth of Puerto Rico, the United States Virgin Islands, 
Guam, American Samoa, and the Commonwealth of the Northern Mariana 
Islands.

(Authority: Section 7(34) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(34))

    (49) State workforce development board means a State workforce 
development board, as defined in section 3 of the Workforce Innovation 
and Opportunity Act (29 U.S.C. 3102).

(Authority: Section 7(35) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(35))

    (50) Statewide workforce development system means a workforce 
development system, as defined in section 3 of the Workforce Innovation 
and Opportunity Act (29 U.S.C. 3102).

(Authority: Section 7(36) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(36))

    (51) Student with a disability. (i) Student with a disability 
means, in general, an individual with a disability who--
    (A)(1) Is not younger than the earliest age for the provision of 
transition services under section 614(d)(1)(A)(i)(VIII) of the 
Individuals with Disabilities Education Act (20 U.S.C. 
1414(d)(1)(A)(i)(VIII)); or
    (2) If the State involved elects to use a lower minimum age for 
receipt of pre-employment transition services under this Act, is not 
younger than that minimum age; and
    (B)(1) Is not older than 21 years of age; or
    (2) If the State law for the State provides for a higher maximum 
age for receipt of services under the Individuals with Disabilities 
Education Act (20 U.S.C. 1400 et seq.), is not older than that maximum 
age; and
    (C)(1) Is eligible for, and receiving, special education or related 
services under Part B of the Individuals with Disabilities Education 
Act (20 U.S.C. 1411 et seq.); or
    (2) Is a student who is an individual with a disability, for 
purposes of section 504.
    (ii) Students with disabilities means more than one student with a 
disability.

(Authority: Section 7(37) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(37))

[[Page 21109]]

    (52) Substantial impediment to employment means that a physical or 
mental impairment (in light of attendant medical, psychological, 
vocational, educational, communication, and other related factors) 
hinders an individual from preparing for, entering into, engaging in, 
advancing in, or retaining employment consistent with the individual's 
abilities and capabilities.

(Authority: Sections 7(20)(A) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(20)(A) and 709(c))

    (53) Supported employment. (i) Supported employment means--
    (A) Competitive integrated employment, including customized 
employment, or employment in an integrated work setting in which an 
individual with a most significant disability, including a youth with a 
most significant disability, is working on a short-term basis toward 
competitive integrated employment that is individualized, consistent 
with the unique strengths, abilities, interests, and informed choice of 
the individual, including with ongoing support services for individuals 
with the most significant disabilities--
    (1) For whom competitive integrated employment has not historically 
occurred, or for whom competitive integrated employment has been 
interrupted or intermittent as a result of a significant disability; 
and
    (2) Who, because of the nature and severity of their disability, 
need intensive supported employment services and extended services 
after the transition from support provided by the designated State 
unit, in order to perform this work; or
    (B) Transitional employment, as defined in paragraph (c)(56) of 
this section, for individuals with the most significant disabilities 
due to mental illness, including youth with the most significant 
disabilities, constitutes supported employment.
    (ii) For purposes of this part, an individual with the most 
significant disabilities, whose supported employment in an integrated 
setting does not satisfy the criteria of competitive integrated 
employment, as defined in paragraph (c)(9) of this section, is 
considered to be working on a short-term basis toward competitive 
integrated employment so long as the individual can reasonably 
anticipate achieving competitive integrated employment within six 
months of achieving an employment outcome of supported employment.

(Authority: Sections 7(38), 12(c), and 602 of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 705(38), 709(c), and 795g)

    (54) Supported employment services means ongoing support services, 
including customized employment, and other appropriate services needed 
to support and maintain an individual with a most significant 
disability, including a youth with a most significant disability, in 
supported employment that are--
    (i) Organized and made available, singly or in combination, in such 
a way as to assist an eligible individual to achieve competitive 
integrated employment;
    (ii) Based on a determination of the needs of an eligible 
individual, as specified in an individualized plan for employment;
    (iii) Provided by the designated State unit for a period of time 
not to exceed 24 months, unless under special circumstances the 
eligible individual and the rehabilitation counselor or coordinator 
jointly agree to extend the time to achieve the employment outcome 
identified in the individualized plan for employment; and
    (iv) Following transition, as post-employment services that are 
unavailable from an extended services provider and that are necessary 
to maintain or regain the job placement or advance in employment.

(Authority: Sections 7(39), 12(c), and 103(a)(16) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(39), 709(c), 
and 723(a)(16))

    (55) Transition services means a coordinated set of activities for 
a student or youth with a disability--
    (i) Designed within an outcome-oriented process that promotes 
movement from school to post-school activities, including postsecondary 
education, vocational training, integrated employment (including 
supported employment), continuing and adult education, adult services, 
independent living, or community participation;
    (ii) Based upon the individual student's needs, taking into account 
the student's preferences and interests;
    (iii) That includes instruction, community experiences, the 
development of employment and other post-school adult living 
objectives, and, if appropriate, acquisition of daily living skills and 
functional vocational evaluation; and
    (iv) That promotes or facilitates the achievement of the employment 
outcome identified in the student's individualized plan for employment.

(Authority: Sections 12(c) and 103(a)(15) and (b)(7) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
723(a)(15) and (b)(7))

    (56) Transitional employment, as used in the definition of 
supported employment, means a series of temporary job placements in 
competitive integrated employment with ongoing support services for 
individuals with the most significant disabilities due to mental 
illness. In transitional employment, the provision of ongoing support 
services must include continuing sequential job placements until job 
permanency is achieved.

(Authority: Sections 7(38)(B) and 12(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(38)(B) and 709(c))

    (57) Transportation means travel and related expenses that are 
necessary to enable an applicant or eligible individual to participate 
in a vocational rehabilitation service, including expenses for training 
in the use of public transportation vehicles and systems.

(Authority: Sections 12(c) and 103(a)(8) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 723(a)(8))

    (i) Examples. The following are examples of expenses that would 
meet the definition of transportation. The examples are purely 
illustrative, do not address all possible circumstances, and are not 
intended as substitutes for individual counselor judgment.
    Example 1: Travel and related expenses for a personal care 
attendant or aide if the services of that person are necessary to 
enable the applicant or eligible individual to travel to participate in 
any vocational rehabilitation service.
    Example 2: The purchase and repair of vehicles, including vans, but 
not the modification of these vehicles, as modification would be 
considered a rehabilitation technology service.
    Example 3: Relocation expenses incurred by an eligible individual 
in connection with a job placement that is a significant distance from 
the eligible individual's current residence.
    (ii) [Reserved]
    (58) Vocational rehabilitation services--
    (i) If provided to an individual, means those services listed in 
Sec.  361.48; and
    (ii) If provided for the benefit of groups of individuals, means 
those services listed in Sec.  361.49.

(Authority: Sections 7(40) and 103 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(40) and 723)

    (59) Youth with a disability. (i) Youth with a disability means an 
individual with a disability who is not--
    (A) Younger than 14 years of age; and
    (B) Older than 24 years of age.

[[Page 21110]]

    (ii) Youth with disabilities means more than one youth with a 
disability.

(Authority: Section 7(42) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(42))

Subpart B--State Plan and Other Requirements for Vocational 
Rehabilitation Services

Sec.  361.10  Submission, approval, and disapproval of the State plan.

    (a) Purpose. (1) To be eligible to receive funds under this part 
for a fiscal year, a State must submit, and have approved, a vocational 
rehabilitation services portion of a Unified or Combined State Plan in 
accordance with sections 102 or 103 of the Workforce Innovation and 
Opportunity Act.
    (2) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must satisfy all requirements set forth in this 
part.
    (b) Separate part relating to the vocational rehabilitation of 
individuals who are blind. If a separate State agency administers or 
supervises the administration of a separate part of the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
relating to the vocational rehabilitation of individuals who are blind, 
that part of the vocational rehabilitation services portion of the 
Unified or Combined State Plan must separately conform to all 
applicable requirements under this part.
    (c) Public participation. Prior to the adoption of any substantive 
policies or procedures specific to the provision of vocational 
rehabilitation services under the vocational rehabilitation services 
portion of the Unified or Combined State Plan, including making any 
substantive amendment to those policies and procedures, the designated 
State agency must conduct public meetings throughout the State, in 
accordance with the requirements of Sec.  361.20.
    (d) Submission, approval, disapproval, and duration. All 
requirements regarding the submission, approval, disapproval, and 
duration of the vocational rehabilitation services portion of the 
Unified or Combined State Plan are governed by joint regulations set 
forth in subpart D of this part.
    (e) Submission of policies and procedures. The State is not 
required to submit policies, procedures, or descriptions required under 
this part that have been previously submitted to the Secretary and that 
demonstrate that the State meets the requirements of this part, 
including any policies, procedures, or descriptions submitted under 
this part that are in effect on July 22, 2014.
    (f) Due process. If the Secretary disapproves the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
the Secretary will follow these procedures:
    (1) Informal resolution. Prior to disapproving the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
the Secretary attempts to resolve disputes informally with State 
officials.
    (2) Notice. If, after reasonable effort has been made to resolve 
the dispute, no resolution has been reached, the Secretary provides 
notice to the State agency of the intention to disapprove the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan and of the opportunity for a hearing.
    (3) State plan hearing. If the State agency requests a hearing, the 
Secretary designates one or more individuals, either from the 
Department or elsewhere, not responsible for or connected with the 
administration of this program, to conduct a hearing in accordance with 
the provisions of 34 CFR part 81, subpart A.
    (4) Initial decision. The hearing officer issues an initial 
decision in accordance with 34 CFR 81.41.
    (5) Petition for review of an initial decision. The State agency 
may seek the Secretary's review of the initial decision in accordance 
with 34 CFR part 81.
    (6) Review by the Secretary. The Secretary reviews the initial 
decision in accordance with 34 CFR 81.43.
    (7) Final decision of the Department. The final decision of the 
Department is made in accordance with 34 CFR 81.44.
    (8) Judicial review. A State may appeal the Secretary's decision to 
disapprove the vocational rehabilitation services portion of the 
Unified or Combined State Plan by filing a petition for review with the 
United States Court of Appeals for the circuit in which the State is 
located, in accordance with section 107(d) of the Act.

(Authority: Sections 101(a) and (b) and 107(d) of the Rehabilitation 
Act of 1973, as amended; 20 U.S.C. 1231g(a); and 29 U.S.C. 721(a) 
and (b) and 727(d))

Sec.  361.11  Withholding of funds.

    (a) Basis for withholding. The Secretary may withhold or limit 
payments under section 111 or 603(a) of the Act, as provided by section 
107(c) of the Act, if the Secretary determines that--
    (1) The vocational rehabilitation services portion of the Unified 
or Combined State Plan, including the supported employment supplement, 
has been so changed that it no longer conforms with the requirements of 
this part or part 363; or
    (2) In the administration of the vocational rehabilitation services 
portion of the Unified or Combined State Plan there is a failure to 
comply substantially with any provision of such plan or with an 
evaluation standard or performance indicator established under section 
106 of the Act.
    (b) Informal resolution. Prior to withholding or limiting payments 
in accordance with this section, the Secretary attempts to resolve 
disputed issues informally with State officials.
    (c) Notice. If, after reasonable effort has been made to resolve 
the dispute, no resolution has been reached, the Secretary provides 
notice to the State agency of the intention to withhold or limit 
payments and of the opportunity for a hearing.
    (d) Withholding hearing. If the State agency requests a hearing, 
the Secretary designates one or more individuals, either from the 
Department or elsewhere, not responsible for or connected with the 
administration of this program, to conduct a hearing in accordance with 
the provisions of 34 CFR part 81, subpart A.
    (e) Initial decision. The hearing officer issues an initial 
decision in accordance with 34 CFR 81.41.
    (f) Petition for review of an initial decision. The State agency 
may seek the Secretary's review of the initial decision in accordance 
with 34 CFR 81.42.
    (g) Review by the Secretary. The Secretary reviews the initial 
decision in accordance with 34 CFR 81.43.
    (h) Final decision of the Department. The final decision of the 
Department is made in accordance with 34 CFR 81.44.
    (i) Judicial review. A State may appeal the Secretary's decision to 
withhold or limit payments by filing a petition for review with the 
United States Court of Appeals for the circuit in which the State is 
located, in accordance with section 107(d) of the Act.

(Authority: Sections 12(c), 101(b), 107(c) and (d) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 721(b), 
727(c) and (d))

Administration

Sec.  361.12  Methods of administration.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that the State agency, and the 
designated State unit if applicable, employs methods of administration 
found necessary by the Secretary for the proper and efficient 
administration of the plan and for

[[Page 21111]]

carrying out all functions for which the State is responsible under the 
plan and this part. These methods must include procedures to ensure 
accurate data collection and financial accountability.

(Authority: Sections 12(c) and 101(a)(6) and (a)(10)(A) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
721(a)(6) and (a)(10)(A))

Sec.  361.13  State agency for administration.

    (a) Designation of State agency. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must designate a 
State agency as the sole State agency to administer the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
or to supervise its administration in a political subdivision of the 
State by a sole local agency, in accordance with the following 
requirements:
    (1) General. Except as provided in paragraphs (a)(2) and (a)(3) of 
this section, the vocational rehabilitation services portion of the 
Unified or Combined State Plan must provide that the designated State 
agency is one of the following types of agencies:
    (i) A State agency that is primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities; or
    (ii) A State agency that includes a vocational rehabilitation unit 
as provided in paragraph (b) of this section.
    (2) American Samoa. In the case of American Samoa, the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must designate the Governor.
    (3) Designated State agency for individuals who are blind. If a 
State commission or other agency that provides assistance or services 
to individuals who are blind is authorized under State law to provide 
vocational rehabilitation services to individuals who are blind, and 
this commission or agency is primarily concerned with vocational 
rehabilitation or includes a vocational rehabilitation unit as provided 
in paragraph (b) of this section, the vocational rehabilitation 
services portion of the Unified or Combined State Plan may designate 
that agency as the sole State agency to administer the part of the plan 
under which vocational rehabilitation services are provided for 
individuals who are blind or to supervise its administration in a 
political subdivision of the State by a sole local agency.
    (b) Designation of State unit. (1) General. If the designated State 
agency is not of the type specified in paragraph (a)(1)(i) of this 
section or if the designated State agency specified in paragraph (a)(3) 
of this section is not primarily concerned with vocational 
rehabilitation or vocational and other rehabilitation of individuals 
with disabilities, the vocational rehabilitation services portion of 
the Unified or Combined State Plan must assure that the agency (or each 
agency if two agencies are designated) includes a vocational 
rehabilitation bureau, division, or unit that--
    (i) Is primarily concerned with vocational rehabilitation or 
vocational and other rehabilitation of individuals with disabilities 
and is responsible for the administration of the State agency's 
vocational rehabilitation program under the vocational rehabilitation 
services portion of the Unified or Combined State Plan;
    (ii) Has a full-time director who is responsible for the day-to-day 
operations of the vocational rehabilitation program;
    (iii) Has a staff, at least 90 percent of whom are employed full 
time on the rehabilitation work of the organizational unit;
    (iv) Is located at an organizational level and has an 
organizational status within the State agency comparable to that of 
other major organizational units of the agency; and
    (v) Has the sole authority and responsibility described within the 
designated State agency in paragraph (a) of this section to expend 
funds made available under the Act in a manner that is consistent with 
the purpose of the Act.
    (2) In the case of a State that has not designated a separate State 
agency for individuals who are blind, as provided for in paragraph 
(a)(3) of this section, the State may assign responsibility for the 
part of the vocational rehabilitation services portion of the Unified 
or Combined State Plan under which vocational rehabilitation services 
are provided to individuals who are blind to one organizational unit of 
the designated State agency and may assign responsibility for the rest 
of the plan to another organizational unit of the designated State 
agency, with the provisions of paragraph (b)(1) of this section 
applying separately to each of these units.
    (c) Responsibility for administration. (1) Required activities. At 
a minimum, the following activities are the responsibility of the 
designated State unit or the sole local agency under the supervision of 
the State unit:
    (i) All decisions affecting eligibility for vocational 
rehabilitation services, the nature and scope of available services, 
and the provision of these services.
    (ii) The determination to close the record of services of an 
individual who has achieved an employment outcome in accordance with 
Sec.  361.56.
    (iii) Policy formulation and implementation.
    (iv) The allocation and expenditure of vocational rehabilitation 
funds.
    (v) Participation as a partner in the one-stop service delivery 
system established under title I of the Workforce Investment Act of 
1998, in accordance with 20 CFR part 662.
    (2) Non-delegable responsibility. The responsibility for the 
functions described in paragraph (c)(1) of this section may not be 
delegated to any other agency or individual.

(Authority: Section 101(a)(2) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a)(2))

Sec.  361.14  Substitute State agency.

    (a) General provisions. (1) If the Secretary has withheld all 
funding from a State under Sec.  361.11, the State may designate 
another agency to substitute for the designated State agency in 
carrying out the State's program of vocational rehabilitation services.
    (2) Any public or nonprofit private organization or agency within 
the State or any political subdivision of the State is eligible to be a 
substitute agency.
    (3) The substitute agency must submit a vocational rehabilitation 
services portion of the Unified or Combined State Plan that meets the 
requirements of this part.
    (4) The Secretary makes no grant to a substitute agency until the 
Secretary approves its plan.
    (b) Substitute agency matching share. The Secretary does not make 
any payment to a substitute agency unless it has provided assurances 
that it will contribute the same matching share as the State would have 
been required to contribute if the State agency were carrying out the 
vocational rehabilitation program.

(Authority: Section 107(c)(3) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 727(c)(3))

Sec.  361.15  Local administration.

    (a) If the vocational rehabilitation services portion of the 
Unified or Combined State Plan provides for the administration of the 
plan by a local agency, the designated State agency must--
    (1) Ensure that each local agency is under the supervision of the 
designated State unit and is the sole local agency as defined in Sec.  
361.5(c)(47) that is responsible for the administration of the

[[Page 21112]]

program within the political subdivision that it serves; and
    (2) Develop methods that each local agency will use to administer 
the vocational rehabilitation program, in accordance with the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan.
    (b) A separate local agency serving individuals who are blind may 
administer that part of the plan relating to vocational rehabilitation 
of individuals who are blind, under the supervision of the designated 
State unit for individuals who are blind.

(Authority: Sections 7(24) and 101(a)(2)(A) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(24) and 721(a)(2)(A))

Sec.  361.16  Establishment of an independent commission or a State 
Rehabilitation Council.

    (a) General requirement. Except as provided in paragraph (b) of 
this section, the vocational rehabilitation services portion of the 
Unified or Combined State Plan must contain one of the following two 
assurances:
    (1) An assurance that the designated State agency is an independent 
State commission that--
    (i) Is responsible under State law for operating, or overseeing the 
operation of, the vocational rehabilitation program in the State and is 
primarily concerned with vocational rehabilitation or vocational and 
other rehabilitation services, in accordance with Sec.  
361.13(a)(1)(i);
    (ii) Is consumer-controlled by persons who--
    (A) Are individuals with physical or mental impairments that 
substantially limit major life activities; and
    (B) Represent individuals with a broad range of disabilities, 
unless the designated State unit under the direction of the commission 
is the State agency for individuals who are blind;
    (iii) Includes family members, advocates, or other representatives 
of individuals with mental impairments; and
    (iv) Conducts the functions identified in Sec.  361.17(h)(4).
    (2) An assurance that--
    (i) The State has established a State Rehabilitation Council 
(Council) that meets the requirements of Sec.  361.17;
    (ii) The designated State unit, in accordance with Sec.  361.29, 
jointly develops, agrees to, and reviews annually State goals and 
priorities and jointly submits to the Secretary annual reports of 
progress with the Council;
    (iii) The designated State unit regularly consults with the Council 
regarding the development, implementation, and revision of State 
policies and procedures of general applicability pertaining to the 
provision of vocational rehabilitation services;
    (iv) The designated State unit transmits to the Council--
    (A) All plans, reports, and other information required under this 
part to be submitted to the Secretary;
    (B) All policies and information on all practices and procedures of 
general applicability provided to or used by rehabilitation personnel 
providing vocational rehabilitation services under this part; and
    (C) Copies of due process hearing decisions issued under this part 
and transmitted in a manner to ensure that the identity of the 
participants in the hearings is kept confidential; and
    (v) The vocational rehabilitation services portion of the Unified 
or Combined State Plan, and any revision to the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
includes a summary of input provided by the Council, including 
recommendations from the annual report of the Council, the review and 
analysis of consumer satisfaction described in Sec.  361.17(h)(4), and 
other reports prepared by the Council, and the designated State unit's 
response to the input and recommendations, including its reasons for 
rejecting any input or recommendation of the Council.
    (b) Exception for separate State agency for individuals who are 
blind. In the case of a State that designates a separate State agency 
under Sec.  361.13(a)(3) to administer the part of the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
under which vocational rehabilitation services are provided to 
individuals who are blind, the State must either establish a separate 
State Rehabilitation Council for each agency that does not meet the 
requirements in paragraph (a)(1) of this section or establish one State 
Rehabilitation Council for both agencies if neither agency meets the 
requirements of paragraph (a)(1) of this section.

(Authority: Sections 101(a)(21) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(21))

Sec.  361.17  Requirements for a State Rehabilitation Council.

    If the State has established a Council under Sec.  361.16(a)(2) or 
(b), the Council must meet the following requirements:
    (a) Appointment. (1) The members of the Council must be appointed 
by the Governor or, in the case of a State that, under State law, vests 
authority for the administration of the activities carried out under 
this part in an entity other than the Governor (such as one or more 
houses of the State legislature or an independent board), the chief 
officer of that entity.
    (2) The appointing authority must select members of the Council 
after soliciting recommendations from representatives of organizations 
representing a broad range of individuals with disabilities and 
organizations interested in individuals with disabilities. In selecting 
members, the appointing authority must consider, to the greatest extent 
practicable, the extent to which minority populations are represented 
on the Council.
    (b) Composition. (1) General. Except as provided in paragraph 
(b)(3) of this section, the Council must be composed of at least 15 
members, including--
    (i) At least one representative of the Statewide Independent Living 
Council, who must be the chairperson or other designee of the Statewide 
Independent Living Council;
    (ii) At least one representative of a parent training and 
information center established pursuant to section 682(a) of the 
Individuals with Disabilities Education Act;
    (iii) At least one representative of the Client Assistance Program 
established under part 370 of this chapter, who must be the director of 
or other individual recommended by the Client Assistance Program;
    (iv) At least one qualified vocational rehabilitation counselor 
with knowledge of and experience with vocational rehabilitation 
programs who serves as an ex officio, nonvoting member of the Council 
if employed by the designated State agency;
    (v) At least one representative of community rehabilitation program 
service providers;
    (vi) Four representatives of business, industry, and labor;
    (vii) Representatives of disability groups that include a cross 
section of--
    (A) Individuals with physical, cognitive, sensory, and mental 
disabilities; and
    (B) Representatives of individuals with disabilities who have 
difficulty representing themselves or are unable due to their 
disabilities to represent themselves;
    (viii) Current or former applicants for, or recipients of, 
vocational rehabilitation services;
    (ix) In a State in which one or more projects are funded under 
section 121 of the Act (American Indian Vocational Rehabilitation 
Services), at least one representative of the directors of the projects 
in such State;
    (x) At least one representative of the State educational agency 
responsible for the public education of students with

[[Page 21113]]

disabilities who are eligible to receive services under this part and 
part B of the Individuals with Disabilities Education Act;
    (xi) At least one representative of the State workforce development 
board; and
    (xii) The director of the designated State unit as an ex officio, 
nonvoting member of the Council.
    (2) Employees of the designated State agency. Employees of the 
designated State agency may serve only as nonvoting members of the 
Council. This provision does not apply to the representative appointed 
pursuant to paragraph (b)(1)(iii) of this section.
    (3) Composition of a separate Council for a separate State agency 
for individuals who are blind. Except as provided in paragraph (b)(4) 
of this section, if the State establishes a separate Council for a 
separate State agency for individuals who are blind, that Council 
must--
    (i) Conform with all of the composition requirements for a Council 
under paragraph (b)(1) of this section, except the requirements in 
paragraph (b)(1)(vii), unless the exception in paragraph (b)(4) of this 
section applies; and
    (ii) Include--
    (A) At least one representative of a disability advocacy group 
representing individuals who are blind; and
    (B) At least one representative of an individual who is blind, has 
multiple disabilities, and has difficulty representing himself or 
herself or is unable due to disabilities to represent himself or 
herself.
    (4) Exception. If State law in effect on October 29, 1992 requires 
a separate Council under paragraph (b)(3) of this section to have fewer 
than 15 members, the separate Council is in compliance with the 
composition requirements in paragraphs (b)(1)(vi) and (b)(1)(viii) of 
this section if it includes at least one representative who meets the 
requirements for each of those paragraphs.
    (c) Majority. (1) A majority of the Council members must be 
individuals with disabilities who meet the requirements of Sec.  
361.5(c)(28) and are not employed by the designated State unit.
    (2) In the case of a separate Council established under Sec.  
361.16(b), a majority of the Council members must be individuals who 
are blind and are not employed by the designated State unit.
    (d) Chairperson. (1) The chairperson must be selected by the 
members of the Council from among the voting members of the Council, 
subject to the veto power of the Governor; or
    (2) In States in which the Governor does not have veto power 
pursuant to State law, the appointing authority described in paragraph 
(a)(1) of this section must designate a member of the Council to serve 
as the chairperson of the Council or must require the Council to 
designate a member to serve as chairperson.
    (e) Terms of appointment. (1) Each member of the Council must be 
appointed for a term of no more than three years, and each member of 
the Council, other than a representative identified in paragraph 
(b)(1)(iii) or (ix) of this section, may serve for no more than two 
consecutive full terms.
    (2) A member appointed to fill a vacancy occurring prior to the end 
of the term for which the predecessor was appointed must be appointed 
for the remainder of the predecessor's term.
    (3) The terms of service of the members initially appointed must 
be, as specified by the appointing authority as described in paragraph 
(a)(1) of this section, for varied numbers of years to ensure that 
terms expire on a staggered basis.
    (f) Vacancies. (1) A vacancy in the membership of the Council must 
be filled in the same manner as the original appointment, except the 
appointing authority as described in paragraph (a)(1) of this section 
may delegate the authority to fill that vacancy to the remaining 
members of the Council after making the original appointment.
    (2) No vacancy affects the power of the remaining members to 
execute the duties of the Council.
    (g) Conflict of interest. No member of the Council may cast a vote 
on any matter that would provide direct financial benefit to the member 
or the member's organization or otherwise give the appearance of a 
conflict of interest under State law.
    (h) Functions. The Council must, after consulting with the State 
workforce development board--
    (1) Review, analyze, and advise the designated State unit regarding 
the performance of the State unit's responsibilities under this part, 
particularly responsibilities related to--
    (i) Eligibility, including order of selection;
    (ii) The extent, scope, and effectiveness of services provided; and
    (iii) Functions performed by State agencies that affect or 
potentially affect the ability of individuals with disabilities in 
achieving employment outcomes under this part;
    (2) In partnership with the designated State unit--
    (i) Develop, agree to, and review State goals and priorities in 
accordance with Sec.  361.29(c); and
    (ii) Evaluate the effectiveness of the vocational rehabilitation 
program and submit reports of progress to the Secretary in accordance 
with Sec.  361.29(e);
    (3) Advise the designated State agency and the designated State 
unit regarding activities carried out under this part and assist in the 
preparation of the vocational rehabilitation services portion of the 
Unified or Combined State Plan and amendments to the plan, 
applications, reports, needs assessments, and evaluations required by 
this part;
    (4) To the extent feasible, conduct a review and analysis of the 
effectiveness of, and consumer satisfaction with--
    (i) The functions performed by the designated State agency;
    (ii) The vocational rehabilitation services provided by State 
agencies and other public and private entities responsible for 
providing vocational rehabilitation services to individuals with 
disabilities under the Act; and
    (iii) The employment outcomes achieved by eligible individuals 
receiving services under this part, including the availability of 
health and other employment benefits in connection with those 
employment outcomes;
    (5) Prepare and submit to the Governor and to the Secretary no 
later than 90 days after the end of the Federal fiscal year an annual 
report on the status of vocational rehabilitation programs operated 
within the State and make the report available to the public through 
appropriate modes of communication;
    (6) To avoid duplication of efforts and enhance the number of 
individuals served, coordinate activities with the activities of other 
councils within the State, including the Statewide Independent Living 
Council established under chapter 1, title VII of the Act, the advisory 
panel established under section 612(a)(21) of the Individuals with 
Disabilities Education Act, the State Developmental Disabilities 
Planning Council described in section 124 of the Developmental 
Disabilities Assistance and Bill of Rights Act, the State mental health 
planning council established under section 1914(a) of the Public Health 
Service Act, and the State workforce development board, and with the 
activities of entities carrying out programs under the Assistive 
Technology Act of 1998;
    (7) Provide for coordination and the establishment of working 
relationships between the designated State agency and the Statewide 
Independent Living

[[Page 21114]]

Council and centers for independent living within the State; and
    (8) Perform other comparable functions, consistent with the purpose 
of this part, as the Council determines to be appropriate, that are 
comparable to the other functions performed by the Council.
    (i) Resources. (1) The Council, in conjunction with the designated 
State unit, must prepare a plan for the provision of resources, 
including staff and other personnel, that may be necessary and 
sufficient for the Council to carry out its functions under this part.
    (2) The resource plan must, to the maximum extent possible, rely on 
the use of resources in existence during the period of implementation 
of the plan.
    (3) Any disagreements between the designated State unit and the 
Council regarding the amount of resources necessary to carry out the 
functions of the Council must be resolved by the Governor, consistent 
with paragraphs (i)(1) and (2) of this section.
    (4) The Council must, consistent with State law, supervise and 
evaluate the staff and personnel that are necessary to carry out its 
functions.
    (5) Those staff and personnel that are assisting the Council in 
carrying out its functions may not be assigned duties by the designated 
State unit or any other agency or office of the State that would create 
a conflict of interest.
    (j) Meetings. The Council must--
    (1) Convene at least four meetings a year in locations determined 
by the Council to be necessary to conduct Council business. The 
meetings must be publicly announced, open, and accessible to the 
general public, including individuals with disabilities, unless there 
is a valid reason for an executive session; and
    (2) Conduct forums or hearings, as appropriate, that are publicly 
announced, open, and accessible to the public, including individuals 
with disabilities.
    (k) Compensation. Funds appropriated under title I of the Act, 
except funds to carry out sections 112 and 121 of the Act, may be used 
to compensate and reimburse the expenses of Council members in 
accordance with section 105(g) of the Act.

(Authority: Section 105 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 725)

Sec.  361.18  Comprehensive system of personnel development.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must describe the procedures and activities the 
State agency will undertake to establish and maintain a comprehensive 
system of personnel development designed to ensure an adequate supply 
of qualified rehabilitation personnel, including professionals and 
paraprofessionals, for the designated State unit. If the State agency 
has a State Rehabilitation Council, this description must, at a 
minimum, specify that the Council has an opportunity to review and 
comment on the development of plans, policies, and procedures necessary 
to meet the requirements of paragraphs (b) through (d) of this section. 
This description must also conform with the following requirements:
    (a) Personnel and personnel development data system. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must describe the development and maintenance of a system by the State 
agency for collecting and analyzing on an annual basis data on 
qualified personnel needs and personnel development, in accordance with 
the following requirements:
    (1) Data on qualified personnel needs must include--
    (i) The number of personnel who are employed by the State agency in 
the provision of vocational rehabilitation services in relation to the 
number of individuals served, broken down by personnel category;
    (ii) The number of personnel currently needed by the State agency 
to provide vocational rehabilitation services, broken down by personnel 
category; and
    (iii) Projections of the number of personnel, broken down by 
personnel category, who will be needed by the State agency to provide 
vocational rehabilitation services in the State in five years based on 
projections of the number of individuals to be served, including 
individuals with significant disabilities, the number of personnel 
expected to retire or leave the field, and other relevant factors.
    (2) Data on personnel development must include--
    (i) A list of the institutions of higher education in the State 
that are preparing vocational rehabilitation professionals, by type of 
program;
    (ii) The number of students enrolled at each of those institutions, 
broken down by type of program; and
    (iii) The number of students who graduated during the prior year 
from each of those institutions with certification or licensure, or 
with the credentials for certification or licensure, broken down by the 
personnel category for which they have received, or have the 
credentials to receive, certification or licensure.
    (b) Plan for recruitment, preparation, and retention of qualified 
personnel. The vocational rehabilitation services portion of the 
Unified or Combined State Plan must describe the development, updating, 
and implementation of a plan to address the current and projected needs 
for personnel who are qualified in accordance with paragraph (c) of 
this section. The plan must identify the personnel needs based on the 
data collection and analysis system described in paragraph (a) of this 
section and must provide for the coordination and facilitation of 
efforts between the designated State unit and institutions of higher 
education and professional associations to recruit, prepare, and retain 
personnel who are qualified in accordance with paragraph (c) of this 
section, including personnel from minority backgrounds and personnel 
who are individuals with disabilities.
    (c) Personnel standards. (1) The vocational rehabilitation services 
portion of the Unified or Combined State Plan must include the State 
agency's policies and describe--
    (i) Standards that are consistent with any national or State-
approved or recognized certification, licensing, or registration 
requirements, or, in the absence of these requirements, other 
comparable requirements (including State personnel requirements) that 
apply to the profession or discipline in which that category of 
personnel is providing vocational rehabilitation services; and
    (ii) The establishment and maintenance of education and experience 
requirements, to ensure that the personnel have a 21st-century 
understanding of the evolving labor force and the needs of individuals 
with disabilities, including requirements for--
    (A)(1) Attainment of a baccalaureate degree in a field of study 
reasonably related to vocational rehabilitation, to indicate a level of 
competency and skill demonstrating basic preparation in a field of 
study such as vocational rehabilitation counseling, social work, 
psychology, disability studies, business administration, human 
resources, special education, supported employment, customized 
employment, economics, or another field that reasonably prepares 
individuals to work with consumers and employers; and
    (2) Demonstrated paid or unpaid experience, for not less than one 
year, consisting of--
    (i) Direct work with individuals with disabilities in a setting 
such as an independent living center;

[[Page 21115]]

    (ii) Direct service or advocacy activities that provide such 
individual with experience and skills in working with individuals with 
disabilities; or
    (iii) Direct experience in competitive integrated employment 
environments as an employer, as a small business owner or operator, or 
in self-employment, or other experience in human resources or 
recruitment, or experience in supervising employees, training, or other 
activities; or
    (B) Attainment of a master's or doctoral degree in a field of study 
such as vocational rehabilitation counseling, law, social work, 
psychology, disability studies, business administration, human 
resources, special education, management, public administration, or 
another field that reasonably provides competence in the employment 
sector, in a disability field, or in both business-related and 
rehabilitation-related fields; and
    (2) As used in this section--
    (i) Profession or discipline means a specific occupational 
category, including any paraprofessional occupational category, that--
    (A) Provides rehabilitation services to individuals with 
disabilities;
    (B) Has been established or designated by the State unit; and
    (C) Has a specified scope of responsibility.
    (ii) Ensuring that personnel have a 21st-century understanding of 
the evolving labor force and the needs of individuals with disabilities 
means that personnel have specialized training and experience that 
enables them to work effectively with individuals with disabilities to 
assist them to achieve competitive integrated employment and with 
employers who hire such individuals. Relevant personnel skills include, 
but are not limited to--
    (A) Understanding the medical and psychosocial aspects of various 
disabilities;
    (B) Assessing an individual's skills and abilities to obtain and 
retain competitive integrated employment and establishing a plan to 
meet the individual's career goals;
    (C) Counseling, case management, and advocacy to modify 
environmental and attitudinal barriers;
    (D) Understanding the effective utilization of rehabilitation 
technology;
    (E) Developing effective relationships with employers in the public 
and private sectors and
    (F) Delivering job development and job placement services that 
respond to today's labor market.
    (d) Staff development. (1) The vocational rehabilitation services 
portion of the Unified or Combined State Plan must include the State 
agency's policies and describe the procedures and activities the State 
agency will undertake to ensure that all personnel employed by the 
State unit receive appropriate and adequate training, including a 
description of--
    (i) A system of staff development for rehabilitation professionals 
and paraprofessionals within the State unit, particularly with respect 
to assessment, vocational counseling, job placement, and rehabilitation 
technology, including training implemented in coordination with 
entities carrying out State programs under section 4 of the Assistive 
Technology Act of 1998 (29 U.S.C. 3003);
    (ii) Procedures for acquiring and disseminating to rehabilitation 
professionals and paraprofessionals within the designated State unit 
significant knowledge from research and other sources; and
    (iii) Policies and procedures relating to the establishment and 
maintenance of standards to ensure that personnel, including 
rehabilitation professionals and paraprofessionals, needed within the 
designated State unit to carry out this part are appropriately and 
adequately prepared and trained.
    (2) The specific training areas for staff development should be 
based on the needs of each State unit and may include, but are not 
limited to--
    (i) Training regarding the Workforce Innovation and Opportunity Act 
and the amendments it made to the Rehabilitation Act of 1973;
    (ii) Training with respect to the requirements of the Americans 
with Disabilities Act, the Individuals with Disabilities Education Act, 
and Social Security work incentive programs, including programs under 
the Ticket to Work and Work Incentives Improvement Act of 1999, 
training to facilitate informed choice under this program, and training 
to improve the provision of services to culturally diverse populations; 
and
    (iii) Activities related to--
    (A) Recruitment and retention of qualified rehabilitation 
personnel;
    (B) Succession planning; and
    (C) Leadership development and capacity building.
    (e) Personnel to address individual communication needs. The 
vocational rehabilitation services portion of the Unified or Combined 
State Plan must describe how the designated State unit includes among 
its personnel, or obtains the services of--
    (1) Individuals able to communicate in the native languages of 
applicants and eligible individuals who have limited English 
proficiency; and
    (2) Individuals able to communicate with applicants and eligible 
individuals in appropriate modes of communication.
    (f) Coordination with personnel development under the Individuals 
with Disabilities Education Act. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must describe the 
procedures and activities the State agency will undertake to coordinate 
its comprehensive system of personnel development under the Act with 
personnel development under the Individuals with Disabilities Education 
Act.

(Authority: Sections 12(c) and 101(a)(7) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(7))

Sec.  361.19  Affirmative action for individuals with disabilities.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that the State agency takes affirmative 
action to employ and advance in employment qualified individuals with 
disabilities covered under and on the same terms and conditions as 
stated in section 503 of the Act.

(Authority: Section 101(a)(6)(B) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(6)(B))

Sec.  361.20  Public participation requirements.

    (a) Conduct of public meetings. (1) The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
prior to the adoption of any substantive policies or procedures 
governing the provision of vocational rehabilitation services under the 
Unified or Combined State Plan, the designated State agency conducts 
public meetings throughout the State to provide the public, including 
individuals with disabilities, an opportunity to comment on the 
policies or procedures.
    (2) For purposes of this section, substantive changes to the 
policies or procedures governing the provision of vocational 
rehabilitation services that would require the conduct of public 
meetings are those that directly impact the nature and scope of the 
services provided to individuals with disabilities, or the manner in 
which individuals interact with the designated State agency or in 
matters related to the delivery of vocational rehabilitation services. 
Examples of substantive changes include, but are not limited to--
    (i) Any changes to policies or procedures that fundamentally alter 
the rights and responsibilities of individuals

[[Page 21116]]

with disabilities in the vocational rehabilitation process;
    (ii) Organizational changes to the designated State agency or unit 
that would likely affect the manner in which services are delivered;
    (iii) Any changes that affect the nature and scope of vocational 
rehabilitation services provided by the designated State agency or 
unit;
    (iv) Changes in formal or informal dispute procedures;
    (v) The adoption or amendment of policies instituting an order of 
selection; and
    (vi) Changes to policies and procedures regarding the financial 
participation of eligible individuals.
    (3) Non-substantive, e.g., administrative changes that would not 
require the need for public hearings include:
    (i) Internal procedures that do not directly affect individuals 
receiving vocational rehabilitation services, such as payment 
processing or personnel procedures;
    (ii) Changes to the case management system that only affect 
vocational rehabilitation personnel;
    (iii) Changes in indirect cost allocations, internal fiscal review 
procedures, or routine reporting requirements;
    (iv) Minor revisions to vocational rehabilitation procedures or 
policies to correct production errors, such as typographical and 
grammatical mistakes; and
    (v) Changes to contract procedures that do not affect the delivery 
of vocational rehabilitation services.
    (b) Notice requirements. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that the 
designated State agency, prior to conducting the public meetings, 
provides appropriate and sufficient notice throughout the State of the 
meetings in accordance with--
    (1) State law governing public meetings; or
    (2) In the absence of State law governing public meetings, 
procedures developed by the designated State agency in consultation 
with the State Rehabilitation Council.
    (c) Summary of input of the State Rehabilitation Council. The 
vocational rehabilitation services portion of the Unified or Combined 
State Plan must provide a summary of the input of the State 
Rehabilitation Council, if the State agency has a Council, into the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan and any amendment to that portion of the plan, in accordance 
with Sec.  361.16(a)(2)(v).
    (d) Special consultation requirements. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must assure that the State agency actively consults with the director 
of the Client Assistance Program, the State Rehabilitation Council, if 
the State agency has a Council, and, as appropriate, Indian tribes, 
tribal organizations, and native Hawaiian organizations on its policies 
and procedures governing the provision of vocational rehabilitation 
services under the vocational rehabilitation services portion of the 
Unified or Combined State Plan.
    (e) Appropriate modes of communication. The State unit must provide 
to the public, through appropriate modes of communication, notices of 
the public meetings, any materials furnished prior to or during the 
public meetings, and the policies and procedures governing the 
provision of vocational rehabilitation services under the vocational 
rehabilitation services portion of the Unified or Combined State Plan.

(Authority: Sections 12(c), 101(a)(16)(A) and 105(c)(3) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(16)(A) and 725(c)(3))

Sec.  361.21  Consultations regarding the administration of the 
vocational rehabilitation services portion of the Unified or Combined 
State plan.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that, in connection with matters of 
general policy arising in the administration of the vocational 
rehabilitation services portion of the Unified or Combined State Plan, 
the designated State agency takes into account the views of--
    (a) Individuals and groups of individuals who are recipients of 
vocational rehabilitation services or, as appropriate, the individuals' 
representatives;
    (b) Personnel working in programs that provide vocational 
rehabilitation services to individuals with disabilities;
    (c) Providers of vocational rehabilitation services to individuals 
with disabilities;
    (d) The director of the Client Assistance Program; and
    (e) The State Rehabilitation Council, if the State has a Council.

(Authority: Sections 101(a)(16)(B) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 721(a)(16)(B))

Sec.  361.22  Coordination with education officials.

    (a) Plans, policies, and procedures. (1) The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must contain plans, policies, and procedures for coordination between 
the designated State agency and education officials responsible for the 
public education of students with disabilities that are designed to 
facilitate the transition of students with disabilities from the 
receipt of educational services, including pre-employment transition 
services, in school to the receipt of vocational rehabilitation 
services under the responsibility of the designated State agency.
    (2) These plans, policies, and procedures in paragraph (a)(1) of 
this section must provide for the development and approval of an 
individualized plan for employment in accordance with Sec.  361.45 as 
early as possible during the transition planning process and not later 
than the time a student determined to be eligible for vocational 
rehabilitation services leaves the school setting or, if the designated 
State unit is operating under an order of selection, before each 
eligible student able to be served under the order leaves the school 
setting.
    (b) Formal interagency agreement. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must include 
information on a formal interagency agreement with the State 
educational agency that, at a minimum, provides for--
    (1) Consultation and technical assistance, which may be provided 
using alternative means for meeting participation (such as video 
conferences and conference calls), to assist educational agencies in 
planning for the transition of students with disabilities from school 
to post-school activities, including vocational rehabilitation 
services;
    (2) Transition planning by personnel of the designated State agency 
and educational agency personnel for students with disabilities that 
facilitates the development and implementation of their individualized 
education programs (IEPs) under section 614(d) of the Individuals with 
Disabilities Education Act;
    (3) The roles and responsibilities, including financial 
responsibilities, of each agency, including provisions for determining 
State lead agencies and qualified personnel responsible for transition 
services;
    (4) Procedures for outreach to and identification of students with 
disabilities who are in need of transition

[[Page 21117]]

services. Outreach to these students should occur as early as possible 
during the transition planning process and must include, at a minimum, 
a description of the purpose of the vocational rehabilitation program, 
eligibility requirements, application procedures, and scope of services 
that may be provided to eligible individuals;
    (5) Coordination necessary to satisfy documentation requirements 
set forth at 34 CFR part 397 with regard to students and youth with 
disabilities who are seeking subminimum wage employment; and
    (6) Assurance that, in accordance with 34 CFR 397.31, neither the 
State educational agency nor the local educational agency will enter 
into a contract or other arrangement with an entity, as defined in 34 
CFR 397.5(d), for the purpose of operating a program under which a 
youth with a disability is engaged in subminimum wage employment.
    (c) Construction. Nothing in this part will be construed to reduce 
the obligation under the Individuals with Disabilities Education Act 
(20 U.S.C. 1400 et seq.) of a local educational agency or any other 
agency to provide or pay for any transition services that are also 
considered special education or related services and that are necessary 
for ensuring a free appropriate public education to children with 
disabilities within the State involved.

(Authority: Sections 101(a)(11)(D), 101(c), and 511 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 721 (a)(11)(D), 
721(c), and 794g)

Sec.  361.23  Requirements related to the statewide workforce 
development system.

    As a required partner in the one-stop service delivery system 
(which is part of the statewide workforce development system under 
title I of the Workforce Innovation and Opportunity Act), the 
designated State unit must satisfy all requirements set forth in joint 
regulations in subpart F of this part.

(Authority: Section 101(a)(11)(A) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(11)(A); Section 121 (b)(1)(B)(iv) of 
the Workforce Innovation and Opportunity Act; 29 U.S.C. 3151)

Sec.  361.24  Cooperation and coordination with other entities.

    (a) Interagency cooperation. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must describe the 
designated State agency's cooperation with and use of the services and 
facilities of Federal, State, and local agencies and programs, 
including the State programs carried out under section 4 of the 
Assistive Technology Act of 1998 (29 U.S.C. 3003), programs carried out 
by the Under Secretary for Rural Development of the Department of 
Agriculture, noneducational agencies serving out-of-school youth, and 
State use contracting programs, to the extent that such Federal, State, 
and local agencies and programs are not carrying out activities through 
the statewide workforce development system.
    (b) Coordination with the Statewide Independent Living Council and 
independent living centers. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that the 
designated State unit, the Statewide Independent Living Council 
established under title VII, chapter 1, part B of the Act, and the 
independent living centers established under title VII, Chapter 1, Part 
C of the Act have developed working relationships and coordinate their 
activities.
    (c) Coordination with Employers. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must describe 
how the designated State unit will work with employers to identify 
competitive integrated employment opportunities and career exploration 
opportunities, in order to facilitate the provision of--
    (1) Vocational rehabilitation services; and
    (2) Transition services for youth with disabilities and students 
with disabilities, such as pre-employment transition services.
    (d) Cooperative agreement with recipients of grants for services to 
American Indians. (1) General. In applicable cases, the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must assure that the designated State agency has entered into a formal 
cooperative agreement with each grant recipient in the State that 
receives funds under part C of the Act (American Indian Vocational 
Rehabilitation Services).
    (2) Contents of formal cooperative agreement. The agreement 
required under paragraph (d)(1) of this section must describe 
strategies for collaboration and coordination in providing vocational 
rehabilitation services to American Indians who are individuals with 
disabilities, including--
    (i) Strategies for interagency referral and information sharing 
that will assist in eligibility determinations and the development of 
individualized plans for employment;
    (ii) Procedures for ensuring that American Indians who are 
individuals with disabilities and are living on or near a reservation 
or tribal service area are provided vocational rehabilitation services;
    (iii) Strategies for the provision of transition planning by 
personnel of the designated State unit, the State educational agency, 
and the recipient of funds under part C of the Act, that will 
facilitate the development and approval of the individualized plan for 
employment under Sec.  361.45; and
    (iv) Provisions for sharing resources in cooperative studies and 
assessments, joint training activities, and other collaborative 
activities designed to improve the provision of services to American 
Indians who are individuals with disabilities.
    (e) Reciprocal referral services between two designated State units 
in the same State. If there is a separate designated State unit for 
individuals who are blind, the two designated State units must 
establish reciprocal referral services, use each other's services and 
facilities to the extent feasible, jointly plan activities to improve 
services in the State for individuals with multiple impairments, 
including visual impairments, and otherwise cooperate to provide more 
effective services, including, if appropriate, entering into a written 
cooperative agreement.
    (f) Cooperative agreement regarding individuals eligible for home 
and community-based waiver programs. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must include an 
assurance that the designated State unit has entered into a formal 
cooperative agreement with the State agency responsible for 
administering the State Medicaid plan under title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) and the State agency with primary 
responsibility for providing services and supports for individuals with 
intellectual disabilities and individuals with developmental 
disabilities, with respect to the delivery of vocational rehabilitation 
services, including extended services, for individuals with the most 
significant disabilities who have been determined to be eligible for 
home and community-based services under a Medicaid waiver, Medicaid 
State plan amendment, or other authority related to a State Medicaid 
program.
    (g) Interagency cooperation. The vocational rehabilitation services 
portion of the Unified or Combined State Plan shall describe how the 
designated State agency will collaborate with the State agency 
responsible for administering the State Medicaid plan under title XIX 
of the Social Security Act (42 U.S.C. 1396 et seq.), the State

[[Page 21118]]

agency responsible for providing services with developmental 
disabilities, and the State agency responsible for providing mental 
health services, to develop opportunities for community-based 
employment in integrated settings, to the greatest extent practicable.
    (h) Coordination with assistive technology programs. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must include an assurance that the designated State unit, and the lead 
agency and implementing entity (if any) designated by the Governor of 
the State under section 4 of the Assistive Technology Act of 1998 (29 
U.S.C. 3003), have developed working relationships and will enter into 
agreements for the coordination of their activities, including the 
referral of individuals with disabilities to programs and activities 
described in that section.
    (i) Coordination with ticket to work and self-sufficiency program. 
The vocational rehabilitation services portion of the Unified or 
Combined State Plan must include an assurance that the designated State 
unit will coordinate activities with any other State agency that is 
functioning as an employment network under the Ticket to Work and Self-
Sufficiency Program established under section 1148 of the Social 
Security Act (42 U.S.C. 1320b-19).

(Authority: Sections 12(c) and 101(a)(11) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(11))

Sec.  361.25  Statewideness.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that services provided under the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan will be available in all political subdivisions of the 
State, unless a waiver of statewideness is requested and approved in 
accordance with Sec.  361.26.

(Authority: Section 101(a)(4) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a)(4))

Sec.  361.26  Waiver of statewideness.

    (a) Availability. The State unit may provide services in one or 
more political subdivisions of the State that increase services or 
expand the scope of services that are available statewide under the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan if--
    (1) The non-Federal share of the cost of these services is met from 
funds provided by a local public agency, including funds contributed to 
a local public agency by a private agency, organization, or individual;
    (2) The services are likely to promote the vocational 
rehabilitation of substantially larger numbers of individuals with 
disabilities or of individuals with disabilities with particular types 
of impairments; and
    (3) For purposes other than those specified in Sec.  
361.60(b)(3)(i) and consistent with the requirements in Sec.  
361.60(b)(3)(ii), the State includes in its vocational rehabilitation 
services portion of the Unified or Combined State Plan, and the 
Secretary approves, a waiver of the statewideness requirement, in 
accordance with the requirements of paragraph (b) of this section.
    (b) Request for waiver. The request for a waiver of statewideness 
must--
    (1) Identify the types of services to be provided;
    (2) Contain a written assurance from the local public agency that 
it will make available to the State unit the non-Federal share of 
funds;
    (3) Contain a written assurance that State unit approval will be 
obtained for each proposed service before it is put into effect; and
    (4) Contain a written assurance that all other requirements of the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan, including a State's order of selection requirements, will 
apply to all services approved under the waiver.

(Authority: Section 101(a)(4) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 721(a)(4))

Sec.  361.27  Shared funding and administration of joint programs.

    (a) If the vocational rehabilitation services portion of the 
Unified or Combined State Plan provides for the designated State agency 
to share funding and administrative responsibility with another State 
agency or local public agency to carry out a joint program to provide 
services to individuals with disabilities, the State must submit to the 
Secretary for approval a plan that describes its shared funding and 
administrative arrangement.
    (b) The plan under paragraph (a) of this section must include--
    (1) A description of the nature and scope of the joint program;
    (2) The services to be provided under the joint program;
    (3) The respective roles of each participating agency in the 
administration and provision of services; and
    (4) The share of the costs to be assumed by each agency.
    (c) If a proposed joint program does not comply with the 
statewideness requirement in Sec.  361.25, the State unit must obtain a 
waiver of statewideness, in accordance with Sec.  361.26.

(Authority: Section 101(a)(2)(A) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(2)(A))

Sec.  361.28  Third-party cooperative arrangements involving funds from 
other public agencies.

    (a) The designated State unit may enter into a third-party 
cooperative arrangement for providing or contracting for the provision 
of vocational rehabilitation services with another State agency or a 
local public agency that is providing part or all of the non-Federal 
share in accordance with paragraph (c) of this section, if the 
designated State unit ensures that--
    (1) The services provided by the cooperating agency are not the 
customary or typical services provided by that agency but are new 
services that have a vocational rehabilitation focus or existing 
services that have been modified, adapted, expanded, or reconfigured to 
have a vocational rehabilitation focus;
    (2) The services provided by the cooperating agency are only 
available to applicants for, or recipients of, services from the 
designated State unit;
    (3) Program expenditures and staff providing services under the 
cooperative arrangement are under the administrative supervision of the 
designated State unit; and
    (4) All requirements of the vocational rehabilitation services 
portion of the Unified or Combined State Plan, including a State's 
order of selection, will apply to all services provided under the 
cooperative arrangement.
    (b) If a third party cooperative arrangement does not comply with 
the statewideness requirement in Sec.  361.25, the State unit must 
obtain a waiver of statewideness, in accordance with Sec.  361.26.
    (c) The cooperating agency's contribution toward the non-Federal 
share required under the arrangement, as set forth in paragraph (a) of 
this section, may be made through:
    (1) Cash transfers to the designated State unit; and
    (2) Certified personnel expenditures for the time cooperating 
agency staff spent providing direct vocational rehabilitation services 
pursuant to a third-party cooperative arrangement that meets the 
requirements of this section. Certified personnel expenditures may 
include the allocable portion of staff salary and fringe benefits based 
upon the amount of time cooperating agency

[[Page 21119]]

staff spent providing services under the arrangement.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.29  Statewide assessment; annual estimates; annual State 
goals and priorities; strategies; and progress reports.

    (a) Comprehensive statewide assessment. (1) The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must include--
    (i) The results of a comprehensive, statewide assessment, jointly 
conducted by the designated State unit and the State Rehabilitation 
Council (if the State unit has a Council) every three years. Results of 
the assessment are to be included in the vocational rehabilitation 
portion of the Unified or Combined State Plan, submitted in accordance 
with the requirements of Sec.  361.10(a) and the joint regulations of 
this part. The comprehensive needs assessment must describe the 
rehabilitation needs of individuals with disabilities residing within 
the State, particularly the vocational rehabilitation services needs 
of--
    (A) Individuals with the most significant disabilities, including 
their need for supported employment services;
    (B) Individuals with disabilities who are minorities and 
individuals with disabilities who have been unserved or underserved by 
the vocational rehabilitation program carried out under this part;
    (C) Individuals with disabilities served through other components 
of the statewide workforce development system as identified by those 
individuals and personnel assisting those individuals through the 
components of the system; and
    (D) Youth with disabilities, and students with disabilities, 
including
    (1) Their need for pre-employment transition services or other 
transition services; and
    (2) An assessment of the needs of individuals with disabilities for 
transition services and pre-employment transition services, and the 
extent to which such services provided under this part are coordinated 
with transition services provided under the Individuals with 
Disabilities Education Act (20 U.S.C. 1400 et seq.) in order to meet 
the needs of individuals with disabilities.
    (ii) An assessment of the need to establish, develop, or improve 
community rehabilitation programs within the State.
    (2) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the State will submit to the 
Secretary a report containing information regarding updates to the 
assessments under paragraph (a) of this section for any year in which 
the State updates the assessments at such time and in such manner as 
the Secretary determines appropriate.
    (b) Annual estimates. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must include, and must 
assure that the State will submit a report to the Secretary (at such 
time and in such manner determined appropriate by the Secretary) that 
includes, State estimates of--
    (1) The number of individuals in the State who are eligible for 
services under this part;
    (2) The number of eligible individuals who will receive services 
provided with funds provided under this part and under part Sec.  363, 
including, if the designated State agency uses an order of selection in 
accordance with Sec.  361.36, estimates of the number of individuals to 
be served under each priority category within the order;
    (3) The number of individuals who are eligible for services under 
paragraph (b)(1) of this section, but are not receiving such services 
due to an order of selection; and
    (4) The costs of the services described in paragraph (b)(2) of this 
section, including, if the designated State agency uses an order of 
selection, the service costs for each priority category within the 
order.
    (c) Goals and priorities. (1) In general. The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must identify the goals and priorities of the State in carrying out the 
program.
    (2) Council. The goals and priorities must be jointly developed, 
agreed to, reviewed annually, and, as necessary, revised by the 
designated State unit and the State Rehabilitation Council, if the 
State unit has a Council.
    (3) Submission. The vocational rehabilitation services portion of 
the Unified or Combined State Plan must assure that the State will 
submit to the Secretary a report containing information regarding 
revisions in the goals and priorities for any year in which the State 
revises the goals and priorities at such time and in such manner as 
determined appropriate by the Secretary.
    (4) Basis for goals and priorities. The State goals and priorities 
must be based on an analysis of--
    (i) The comprehensive statewide assessment described in paragraph 
(a) of this section, including any updates to the assessment;
    (ii) The performance of the State on the standards and indicators 
established under section 106 of the Act; and
    (iii) Other available information on the operation and the 
effectiveness of the vocational rehabilitation program carried out in 
the State, including any reports received from the State Rehabilitation 
Council under Sec.  361.17(h) and the findings and recommendations from 
monitoring activities conducted under section 107 of the Act.
    (5) Service and outcome goals for categories in order of selection. 
If the designated State agency uses an order of selection in accordance 
with Sec.  361.36, the vocational rehabilitation services portion of 
the Unified or Combined State Plan must identify the State's service 
and outcome goals and the time within which these goals may be achieved 
for individuals in each priority category within the order.
    (d) Strategies. The vocational rehabilitation services portion of 
the Unified or Combined State Plan must describe the strategies the 
State will use to address the needs identified in the assessment 
conducted under paragraph (a) of this section and achieve the goals and 
priorities identified in paragraph (c) of this section, including--
    (1) The methods to be used to expand and improve services to 
individuals with disabilities, including how a broad range of assistive 
technology services and assistive technology devices will be provided 
to those individuals at each stage of the rehabilitation process and 
how those services and devices will be provided to individuals with 
disabilities on a statewide basis;
    (2) The methods to be used to improve and expand vocational 
rehabilitation services for students with disabilities, including the 
coordination of services designed to facilitate the transition of such 
students from the receipt of educational services in school to 
postsecondary life, including the receipt of vocational rehabilitation 
services under the Act, postsecondary education, employment, and pre-
employment transition services;
    (3) Strategies developed and implemented by the State to address 
the needs of students and youth with disabilities identified in the 
assessments described in paragraph (a) of this section and strategies 
to achieve the goals and priorities identified by the State to improve 
and expand vocational rehabilitation services for students and youth 
with disabilities on a statewide basis;

[[Page 21120]]

    (4) Strategies to provide pre-employment transition services.
    (5) Outreach procedures to identify and serve individuals with 
disabilities who are minorities and individuals with disabilities who 
have been unserved or underserved by the vocational rehabilitation 
program;
    (6) As applicable, the plan of the State for establishing, 
developing, or improving community rehabilitation programs;
    (7) Strategies to improve the performance of the State with respect 
to the evaluation standards and performance indicators established 
pursuant to section 106 of the Act and section 116 of Workforce 
Innovation and Opportunity Act; and
    (8) Strategies for assisting other components of the statewide 
workforce development system in assisting individuals with 
disabilities.
    (e) Evaluation and reports of progress. (1) The vocational 
rehabilitation services portion of the Unified or Combined State Plan 
must include--
    (i) The results of an evaluation of the effectiveness of the 
vocational rehabilitation program; and
    (ii) A joint report by the designated State unit and the State 
Rehabilitation Council, if the State unit has a Council, to the 
Secretary on the progress made in improving the effectiveness of the 
program from the previous year. This evaluation and joint report must 
include--
    (A) An evaluation of the extent to which the goals and priorities 
identified in paragraph (c) of this section were achieved;
    (B) A description of the strategies that contributed to the 
achievement of the goals and priorities;
    (C) To the extent to which the goals and priorities were not 
achieved, a description of the factors that impeded that achievement; 
and
    (D) An assessment of the performance of the State on the standards 
and indicators established pursuant to section 106 of the Act.
    (2) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the designated State unit and 
the State Rehabilitation Council, if the State unit has a Council, will 
jointly submit to the Secretary a report that contains the information 
described in paragraph (e)(1) of this section at such time and in such 
manner the Secretary determines appropriate.

(Authority: Section 101(a)(15) and (25) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 721(a)(15) and (25))

Sec.  361.30  Services to American Indians.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must assure that the designated State agency 
provides vocational rehabilitation services to American Indians who are 
individuals with disabilities residing in the State to the same extent 
as the designated State agency provides vocational rehabilitation 
services to other significant populations of individuals with 
disabilities residing in the State.

(Authority: Sections 101(a)(13) and 121(b)(3) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 721(a)(13) and 741(b)(3))

Sec.  361.31  Cooperative agreements with private nonprofit 
organizations.

    The vocational rehabilitation services portion of the Unified or 
Combined State Plan must describe the manner in which cooperative 
agreements with private nonprofit vocational rehabilitation service 
providers will be established.

(Authority: Section 101(a)(24)(B) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(24)(B))

Sec.  361.32  Provision of training and services for employers.

    The designated State unit may expend payments received under this 
part to educate and provide services to employers who have hired or are 
interested in hiring individuals with disabilities under the vocational 
rehabilitation program, including--
    (a) Providing training and technical assistance to employers 
regarding the employment of individuals with disabilities, including 
disability awareness, and the requirements of the Americans with 
Disabilities Act of 1990 (42 U.S.C. 12101 et seq.) and other 
employment-related laws;
    (b) Working with employers to--
    (1) Provide opportunities for work-based learning experiences 
(including internships, short-term employment, apprenticeships, and 
fellowships);
    (2) Provide opportunities for pre-employment transition services;
    (3) Recruit qualified applicants who are individuals with 
disabilities;
    (4) Train employees who are individuals with disabilities; and
    (5) Promote awareness of disability-related obstacles to continued 
employment.
    (c) Providing consultation, technical assistance, and support to 
employers on workplace accommodations, assistive technology, and 
facilities and workplace access through collaboration with community 
partners and employers, across States and nationally, to enable the 
employers to recruit, job match, hire, and retain qualified individuals 
with disabilities who are recipients of vocational rehabilitation 
services under this part, or who are applicants for such services; and
    (d) Assisting employers with utilizing available financial support 
for hiring or accommodating individuals with disabilities.

(Authority: Section 109 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 728A)

Sec.  361.33  [Reserved]

Sec.  361.34  Supported employment State plan supplement.

    (a) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the State has an acceptable 
plan under part 363 of this chapter that provides for the use of funds 
under that part to supplement funds under this part for the cost of 
services leading to supported employment.
    (b) The supported employment plan, including any needed revisions, 
must be submitted as a supplement to the vocational rehabilitation 
services portion of the Unified or Combined State Plan submitted under 
this part.

(Authority: Sections 101(a)(22) and 606 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 721(a)(22) and 795k)

Sec.  361.35  Innovation and expansion activities.

    (a) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the State will reserve and use 
a portion of the funds allotted to the State under section 110 of the 
Act--
    (1) For the development and implementation of innovative approaches 
to expand and improve the provision of vocational rehabilitation 
services to individuals with disabilities, particularly individuals 
with the most significant disabilities, including transition services 
for students and youth with disabilities and pre-employment transition 
services for students with disabilities, consistent with the findings 
of the comprehensive statewide assessment of the rehabilitation needs 
of individuals with disabilities under Sec.  361.29(a) and the State's 
goals and priorities under Sec.  361.29(c);
    (2) To support the funding of the State Rehabilitation Council, if 
the State has a Council, consistent with the resource plan identified 
in Sec.  361.17(i); and
    (3) To support the Statewide Independent Living Council, consistent 
with the Statewide Independent Living Council resource plan prepared 
under title VII, chapter 1 of the Act. The State

[[Page 21121]]

and the Statewide Independent Living Council may determine in the 
Statewide Independent Living Council resource plan that other sources 
of available funding may be used instead of funding under this section.
    (b) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must--
    (1) Describe how the reserved funds will be used; and
    (2) Include a report describing how the reserved funds were used.

(Authority: Sections 12(c) and 101(a)(18) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(18))

Sec.  361.36  Ability to serve all eligible individuals; order of 
selection for services.

    (a) General provisions. (1) The designated State unit either must 
be able to provide the full range of services listed in section 103(a) 
of the Act and Sec.  361.48, as appropriate, to all eligible 
individuals or, in the event that vocational rehabilitation services 
cannot be provided to all eligible individuals in the State who apply 
for the services, include in the vocational rehabilitation services 
portion of the Unified or Combined State Plan the order to be followed 
in selecting eligible individuals to be provided vocational 
rehabilitation services.
    (2) The ability of the designated State unit to provide the full 
range of vocational rehabilitation services to all eligible individuals 
must be supported by a determination that satisfies the requirements of 
paragraph (b) or (c) of this section and a determination that, on the 
basis of the designated State unit's projected fiscal and personnel 
resources and its assessment of the rehabilitation needs of individuals 
with significant disabilities within the State, it can--
    (i) Continue to provide services to all individuals currently 
receiving services;
    (ii) Provide assessment services to all individuals expected to 
apply for services in the next fiscal year;
    (iii) Provide services to all individuals who are expected to be 
determined eligible in the next fiscal year; and
    (iv) Meet all program requirements.
    (3) If the designated State unit is unable to provide the full 
range of vocational rehabilitation services to all eligible individuals 
in the State who apply for the services, the vocational rehabilitation 
services portion of the Unified or Combined State Plan must--
    (i) Show the order to be followed in selecting eligible individuals 
to be provided vocational rehabilitation services;
    (ii) Provide a justification for the order of selection;
    (iii) Identify service and outcome goals and the time within which 
the goals may be achieved for individuals in each priority category 
within the order, as required under Sec.  361.29(c)(5);
    (iv) Assure that--
    (A) In accordance with criteria established by the State for the 
order of selection, individuals with the most significant disabilities 
will be selected first for the provision of vocational rehabilitation 
services; and
    (B) Individuals who do not meet the order of selection criteria 
will have access to services provided through the information and 
referral system established under Sec.  361.37; and
    (v) State whether the designated State unit will elect to serve, in 
its discretion, eligible individuals (whether or not the individuals 
are receiving vocational rehabilitation services under the order of 
selection) who require specific services or equipment to maintain 
employment, notwithstanding the assurance provided pursuant to 
paragraph (3)(iv)(A) of this section.
    (b) Basis for assurance that services can be provided to all 
eligible individuals. (1) For a designated State unit that determined, 
for the current fiscal year and the preceding fiscal year, that it is 
able to provide the full range of services, as appropriate, to all 
eligible individuals, the State unit, during the current fiscal and 
preceding fiscal year, must have in fact--
    (i) Provided assessment services to all applicants and the full 
range of services, as appropriate, to all eligible individuals;
    (ii) Made referral forms widely available throughout the State;
    (iii) Conducted outreach efforts to identify and serve individuals 
with disabilities who have been unserved or underserved by the 
vocational rehabilitation system; and
    (iv) Not delayed, through waiting lists or other means, 
determinations of eligibility, the development of individualized plans 
for employment for individuals determined eligible for vocational 
rehabilitation services, or the provision of services for eligible 
individuals for whom individualized plans for employment have been 
developed.
    (2) For a designated State unit that was unable to provide the full 
range of services to all eligible individuals during the current or 
preceding fiscal year or that has not met the requirements in paragraph 
(b)(1) of this section, the determination that the designated State 
unit is able to provide the full range of vocational rehabilitation 
services to all eligible individuals in the next fiscal year must be 
based on--
    (i) A demonstration that circumstances have changed that will allow 
the designated State unit to meet the requirements of paragraph (a)(2) 
of this section in the next fiscal year, including--
    (A) An estimate of the number of and projected costs of serving, in 
the next fiscal year, individuals with existing individualized plans 
for employment;
    (B) The projected number of individuals with disabilities who will 
apply for services and will be determined eligible in the next fiscal 
year and the projected costs of serving those individuals;
    (C) The projected costs of administering the program in the next 
fiscal year, including, but not limited to, costs of staff salaries and 
benefits, outreach activities, and required statewide studies; and
    (D) The projected revenues and projected number of qualified 
personnel for the program in the next fiscal year.
    (ii) Comparable data, as relevant, for the current or preceding 
fiscal year, or for both years, of the costs listed in paragraphs 
(b)(2)(i)(A) through (C) of this section and the resources identified 
in paragraph (b)(2)(i)(D) of this section and an explanation of any 
projected increases or decreases in these costs and resources; and
    (iii) A determination that the projected revenues and the projected 
number of qualified personnel for the program in the next fiscal year 
are adequate to cover the costs identified in paragraphs (b)(2)(i)(A) 
through (C) of this section to ensure the provision of the full range 
of services, as appropriate, to all eligible individuals.
    (c) Determining need for establishing and implementing an order of 
selection. (1) The designated State unit must determine, prior to the 
beginning of each fiscal year, whether to establish and implement an 
order of selection.
    (2) If the designated State unit determines that it does not need 
to establish an order of selection, it must reevaluate this 
determination whenever changed circumstances during the course of a 
fiscal year, such as a decrease in its fiscal or personnel resources or 
an increase in its program costs, indicate that it may no longer be 
able to provide the full range of services, as appropriate, to all 
eligible individuals, as described in paragraph (a)(2) of this section.
    (3) If a designated State unit establishes an order of selection, 
but determines that it does not need to implement that order at the 
beginning of the fiscal year, it must continue to meet the requirements 
of paragraph (a)(2) of this section, or it must implement the

[[Page 21122]]

order of selection by closing one or more priority categories.
    (d) Establishing an order of selection. (1) Basis for order of 
selection. An order of selection must be based on a refinement of the 
three criteria in the definition of individual with a significant 
disability in section 7(21)(A) of the Act and Sec.  361.5(c)(29).
    (2) Factors that cannot be used in determining order of selection 
of eligible individuals. An order of selection may not be based on any 
other factors, including--
    (i) Any duration of residency requirement, provided the individual 
is present in the State;
    (ii) Type of disability;
    (iii) Age, sex, race, color, or national origin;
    (iv) Source of referral;
    (v) Type of expected employment outcome;
    (vi) The need for specific services or anticipated cost of services 
required by an individual; or
    (vii) The income level of an individual or an individual's family.
    (e) Administrative requirements. In administering the order of 
selection, the designated State unit must--
    (1) Implement the order of selection on a statewide basis;
    (2) Notify all eligible individuals of the priority categories in a 
State's order of selection, their assignment to a particular category, 
and their right to appeal their category assignment;
    (3) Continue to provide all needed services to any eligible 
individual who has begun to receive services under an individualized 
plan for employment prior to the effective date of the order of 
selection, irrespective of the severity of the individual's disability; 
and
    (4) Ensure that its funding arrangements for providing services 
under the vocational rehabilitation services portion of the Unified or 
Combined State Plan, including third-party arrangements and awards 
under the establishment authority, are consistent with the order of 
selection. If any funding arrangements are inconsistent with the order 
of selection, the designated State unit must renegotiate these funding 
arrangements so that they are consistent with the order of selection.
    (f) State Rehabilitation Council. The designated State unit must 
consult with the State Rehabilitation Council, if the State unit has a 
Council, regarding the--
    (1) Need to establish an order of selection, including any 
reevaluation of the need under paragraph (c)(2) of this section;
    (2) Priority categories of the particular order of selection;
    (3) Criteria for determining individuals with the most significant 
disabilities; and
    (4) Administration of the order of selection.

(Authority: Sections 12(d); 101(a)(5); 101(a)(12); 101(a)(15)(A), 
(B) and (C); 101(a)(21)(A)(ii); and 504(a) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(d), 721(a)(5), 721(a)(12), 
721(a)(15)(A), (B) and (C); 721(a)(21)(A)(ii), and 794(a))

Sec.  361.37  Information and referral programs.

    (a) General provisions. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that--
    (1) The designated State agency will implement an information and 
referral system adequate to ensure that individuals with disabilities, 
including eligible individuals who do not meet the agency's order of 
selection criteria for receiving vocational rehabilitation services if 
the agency is operating on an order of selection, are provided accurate 
vocational rehabilitation information and guidance (which may include 
counseling and referral for job placement) using appropriate modes of 
communication to assist them in preparing for, securing, retaining, 
advancing in, or regaining employment; and
    (2) The designated State agency will refer individuals with 
disabilities to other appropriate Federal and State programs, including 
other components of the statewide workforce development system.
    (b) The designated State unit must refer to appropriate programs 
and service providers best suited to address the specific 
rehabilitation, independent living and employment needs of an 
individual with a disability who makes an informed choice not to pursue 
an employment outcome under the vocational rehabilitation program, as 
defined in Sec.  361.5(c)(15). Before making the referral required by 
this paragraph, the State unit must--
    (1) Consistent with Sec.  361.42(a)(4)(i), explain to the 
individual that the purpose of the vocational rehabilitation program is 
to assist individuals to achieve an employment outcome as defined in 
Sec.  361.5(c)(15);
    (2) Consistent with Sec.  361.52, provide the individual with 
information concerning the availability of employment options, and of 
vocational rehabilitation services, to assist the individual to achieve 
an appropriate employment outcome;
    (3) Inform the individual that services under the vocational 
rehabilitation program can be provided to eligible individuals in an 
extended employment setting if necessary for purposes of training or 
otherwise preparing for employment in an integrated setting;
    (4) Inform the individual that, if he or she initially chooses not 
to pursue an employment outcome as defined in Sec.  361.5(c)(15), he or 
she can seek services from the designated State unit at a later date 
if, at that time, he or she chooses to pursue an employment outcome; 
and
    (5) Refer the individual, as appropriate, to the Social Security 
Administration in order to obtain information concerning the ability of 
individuals with disabilities to work while receiving benefits from the 
Social Security Administration.
    (c) Criteria for appropriate referrals. In making the referrals 
identified in paragraph (a)(2) of this section, the designated State 
unit must--
    (1) Refer the individual to Federal or State programs, including 
programs carried out by other components of the statewide workforce 
development system, best suited to address the specific employment 
needs of an individual with a disability; and
    (2) Provide the individual who is being referred--
    (i) A notice of the referral by the designated State agency to the 
agency carrying out the program;
    (ii) Information identifying a specific point of contact within the 
agency to which the individual is being referred; and
    (iii) Information and advice regarding the most suitable services 
to assist the individual to prepare for, secure, retain, or regain 
employment.
    (d) Order of selection. In providing the information and referral 
services under this section to eligible individuals who are not in the 
priority category or categories to receive vocational rehabilitation 
services under the State's order of selection, the State unit must 
identify, as part of its reporting under section 101(a)(10) of the Act 
and Sec.  361.40, the number of eligible individuals who did not meet 
the agency's order of selection criteria for receiving vocational 
rehabilitation services and did receive information and referral 
services under this section.

(Authority: Sections 7(11), 12(c), 101(a)(5)(D), 101(a)(10)(C)(ii), 
and 101(a)(20) of the Rehabilitation Act of 1973, as amended; 29 
U.S.C. 709(c), 721(a)(5)(D), 721(a)(10)(C)(ii), and 721(a)(20))

Sec.  361.38  Protection, use, and release of personal information.

    (a) General provisions. (1) The State agency and the State unit 
must adopt

[[Page 21123]]

and implement written policies and procedures to safeguard the 
confidentiality of all personal information, including photographs and 
lists of names. These policies and procedures must ensure that--
    (i) Specific safeguards are established to protect current and 
stored personal information;
    (ii) All applicants and eligible individuals and, as appropriate, 
those individuals' representatives, service providers, cooperating 
agencies, and interested persons are informed through appropriate modes 
of communication of the confidentiality of personal information and the 
conditions for accessing and releasing this information;
    (iii) All applicants or their representatives are informed about 
the State unit's need to collect personal information and the policies 
governing its use, including--
    (A) Identification of the authority under which information is 
collected;
    (B) Explanation of the principal purposes for which the State unit 
intends to use or release the information;
    (C) Explanation of whether providing requested information to the 
State unit is mandatory or voluntary and the effects of not providing 
requested information;
    (D) Identification of those situations in which the State unit 
requires or does not require informed written consent of the individual 
before information may be released; and
    (E) Identification of other agencies to which information is 
routinely released;
    (iv) An explanation of State policies and procedures affecting 
personal information will be provided to each individual in that 
individual's native language or through the appropriate mode of 
communication; and
    (v) These policies and procedures provide no fewer protections for 
individuals than State laws and regulations.
    (2) The State unit may establish reasonable fees to cover 
extraordinary costs of duplicating records or making extensive searches 
and must establish policies and procedures governing access to records.
    (b) State program use. All personal information in the possession 
of the State agency or the designated State unit must be used only for 
the purposes directly connected with the administration of the 
vocational rehabilitation program. Information containing identifiable 
personal information may not be shared with advisory or other bodies 
that do not have official responsibility for administration of the 
program. In the administration of the program, the State unit may 
obtain personal information from service providers and cooperating 
agencies under assurances that the information may not be further 
divulged, except as provided under paragraphs (c), (d), and (e) of this 
section.
    (c) Release to applicants and eligible individuals. (1) Except as 
provided in paragraphs (c)(2) and (c)(3) of this section, if requested 
in writing by an applicant or eligible individual, the State unit must 
make all requested information in that individual's record of services 
accessible to and must release the information to the individual or the 
individual's representative in a timely manner.
    (2) Medical, psychological, or other information that the State 
unit determines may be harmful to the individual may not be released 
directly to the individual, but must be provided to the individual 
through a third party chosen by the individual, which may include, 
among others, an advocate, a family member, or a qualified medical or 
mental health professional, unless a representative has been appointed 
by a court to represent the individual, in which case the information 
must be released to the court-appointed representative.
    (3) If personal information has been obtained from another agency 
or organization, it may be released only by, or under the conditions 
established by, the other agency or organization.
    (4) An applicant or eligible individual who believes that 
information in the individual's record of services is inaccurate or 
misleading may request that the designated State unit amend the 
information. If the information is not amended, the request for an 
amendment must be documented in the record of services, consistent with 
Sec.  361.47(a)(12).
    (d) Release for audit, evaluation, and research. Personal 
information may be released to an organization, agency, or individual 
engaged in audit, evaluation, or research only for purposes directly 
connected with the administration of the vocational rehabilitation 
program or for purposes that would significantly improve the quality of 
life for applicants and eligible individuals and only if the 
organization, agency, or individual assures that--
    (1) The information will be used only for the purposes for which it 
is being provided;
    (2) The information will be released only to persons officially 
connected with the audit, evaluation, or research;
    (3) The information will not be released to the involved 
individual;
    (4) The information will be managed in a manner to safeguard 
confidentiality; and
    (5) The final product will not reveal any personal identifying 
information without the informed written consent of the involved 
individual or the individual's representative.
    (e) Release to other programs or authorities. (1) Upon receiving 
the informed written consent of the individual or, if appropriate, the 
individual's representative, the State unit may release personal 
information to another agency or organization for its program purposes 
only to the extent that the information may be released to the involved 
individual or the individual's representative and only to the extent 
that the other agency or organization demonstrates that the information 
requested is necessary for its program.
    (2) Medical or psychological information that the State unit 
determines may be harmful to the individual may be released if the 
other agency or organization assures the State unit that the 
information will be used only for the purpose for which it is being 
provided and will not be further released to the individual.
    (3) The State unit must release personal information if required by 
Federal law or regulations.
    (4) The State unit must release personal information in response to 
investigations in connection with law enforcement, fraud, or abuse, 
unless expressly prohibited by Federal or State laws or regulations, 
and in response to an order issued by a judge, magistrate, or other 
authorized judicial officer.
    (5) The State unit also may release personal information in order 
to protect the individual or others if the individual poses a threat to 
his or her safety or to the safety of others.

(Authority: Sections 12(c) and 101(a)(6)(A) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(6)(A))

Sec.  361.39  State-imposed requirements.

    The designated State unit must, upon request, identify those 
regulations and policies relating to the administration or operation of 
its vocational rehabilitation program that are State-imposed, including 
any regulations or policy based on State interpretation of any Federal 
law, regulation, or guideline.

(Authority: Section 17 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 714)

Sec.  361.40  Reports; Evaluation standards and performance indicators.

    (a) Reports. (1) The vocational rehabilitation services portion of 
the Unified or Combined State Plan must assure that the designated 
State agency

[[Page 21124]]

will submit reports, including reports required under sections 13, 14, 
and 101(a)(10) of the Act--
    (i) In the form and level of detail and at the time required by the 
Secretary regarding applicants for and eligible individuals receiving 
services, including students receiving pre-employment transition 
services in accordance with Sec.  361.48(a); and
    (ii) In a manner that provides a complete count (other than the 
information obtained through sampling consistent with section 
101(a)(10)(E) of the Act) of the applicants and eligible individuals 
to--
    (A) Permit the greatest possible cross-classification of data; and
    (B) Protect the confidentiality of the identity of each individual.
    (2) The designated State agency must comply with any requirements 
necessary to ensure the accuracy and verification of those reports.
    (b) Evaluation standards and performance indicators.
    (1) Standards and indicators. The evaluation standards and 
performance indicators for the vocational rehabilitation program 
carried out under this part are subject to the performance 
accountability provisions described in section 116(b) of the Workforce 
Innovation and Opportunity Act and implemented in joint regulations set 
forth in subpart E of this part.
    (2) Compliance. A State's compliance with common performance 
measures and any necessary corrective actions will be determined in 
accordance with joint regulations set forth in subpart E of this part.

(Authority: Sections 12(c), 101(a)(10)(A) and (F), and 106 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(10)(A) and (F), and 726)

Provision and Scope of Services

Sec.  361.41  Processing referrals and applications.

    (a) Referrals. The designated State unit must establish and 
implement standards for the prompt and equitable handling of referrals 
of individuals for vocational rehabilitation services, including 
referrals of individuals made through the one-stop service delivery 
systems under section 121 of the Workforce Innovation and Opportunity 
Act. The standards must include timelines for making good faith efforts 
to inform these individuals of application requirements and to gather 
information necessary to initiate an assessment for determining 
eligibility and priority for services.
    (b) Applications. (1) Once an individual has submitted an 
application for vocational rehabilitation services, including 
applications made through common intake procedures in one-stop centers 
under section 121 of the Workforce Innovation and Opportunity Act, an 
eligibility determination must be made within 60 days, unless--
    (i) Exceptional and unforeseen circumstances beyond the control of 
the designated State unit preclude making an eligibility determination 
within 60 days and the designated State unit and the individual agree 
to a specific extension of time; or
    (ii) An exploration of the individual's abilities, capabilities, 
and capacity to perform in work situations is carried out in accordance 
with Sec.  361.42(e).
    (2) An individual is considered to have submitted an application 
when the individual or the individual's representative, as 
appropriate--
    (i)(A) Has completed and signed an agency application form;
    (B) Has completed a common intake application form in a one-stop 
center requesting vocational rehabilitation services; or
    (C) Has otherwise requested services from the designated State 
unit;
    (ii) Has provided to the designated State unit information 
necessary to initiate an assessment to determine eligibility and 
priority for services; and
    (iii) Is available to complete the assessment process.
    (3) The designated State unit must ensure that its application 
forms are widely available throughout the State, particularly in the 
one-stop centers under section 121 of the Workforce Innovation and 
Opportunity Act.

(Authority: Sections 12(c), 101(a)(6)(A) and 102(a)(6) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(6)(A) and 722(a)(6))

Sec.  361.42  Assessment for determining eligibility and priority for 
services.

    In order to determine whether an individual is eligible for 
vocational rehabilitation services and the individual's priority under 
an order of selection for services (if the State is operating under an 
order of selection), the designated State unit must conduct an 
assessment for determining eligibility and priority for services. The 
assessment must be conducted in the most integrated setting possible, 
consistent with the individual's needs and informed choice, and in 
accordance with the following provisions:
    (a) Eligibility requirements. (1) Basic requirements. The 
designated State unit's determination of an applicant's eligibility for 
vocational rehabilitation services must be based only on the following 
requirements:
    (i) A determination by qualified personnel that the applicant has a 
physical or mental impairment;
    (ii) A determination by qualified personnel that the applicant's 
physical or mental impairment constitutes or results in a substantial 
impediment to employment for the applicant; and
    (iii) A determination by a qualified vocational rehabilitation 
counselor employed by the designated State unit that the applicant 
requires vocational rehabilitation services to prepare for, secure, 
retain, advance in, or regain employment that is consistent with the 
individual's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interest, and informed choice. For purposes of 
an assessment for determining eligibility and vocational rehabilitation 
needs under this part, an individual is presumed to have a goal of an 
employment outcome.
    (2) Presumption of benefit. The designated State unit must presume 
that an applicant who meets the eligibility requirements in paragraphs 
(a)(1)(i) and (ii) of this section can benefit in terms of an 
employment outcome.
    (3) Presumption of eligibility for Social Security recipients and 
beneficiaries. (i) Any applicant who has been determined eligible for 
Social Security benefits under title II or title XVI of the Social 
Security Act is--
    (A) Presumed eligible for vocational rehabilitation services under 
paragraphs (a)(1) and (2) of this section; and
    (B) Considered an individual with a significant disability as 
defined in Sec.  361.5(c)(29).
    (ii) If an applicant for vocational rehabilitation services asserts 
that he or she is eligible for Social Security benefits under title II 
or title XVI of the Social Security Act (and, therefore, is presumed 
eligible for vocational rehabilitation services under paragraph 
(a)(3)(i)(A) of this section), but is unable to provide appropriate 
evidence, such as an award letter, to support that assertion, the State 
unit must verify the applicant's eligibility under title II or title 
XVI of the Social Security Act by contacting the Social Security 
Administration. This verification must be made within a reasonable 
period of time that enables the State unit to determine the applicant's 
eligibility for vocational rehabilitation services within 60 days of 
the individual submitting an application for services in accordance 
with Sec.  361.41(b)(2).
    (4) Achievement of an employment outcome. Any eligible individual, 
including an individual whose eligibility for vocational rehabilitation 
services is based on the individual being eligible for Social Security 
benefits

[[Page 21125]]

under title II or title XVI of the Social Security Act, must intend to 
achieve an employment outcome that is consistent with the applicant's 
unique strengths, resources, priorities, concerns, abilities, 
capabilities, interests, and informed choice.
    (i) The State unit is responsible for informing individuals, 
through its application process for vocational rehabilitation services, 
that individuals who receive services under the program must intend to 
achieve an employment outcome.
    (ii) The applicant's completion of the application process for 
vocational rehabilitation services is sufficient evidence of the 
individual's intent to achieve an employment outcome, and no additional 
demonstration on the part of the applicant is required for purposes of 
satisfying paragraph (a)(4) of this section.
    (5) Interpretation. Nothing in this section, including paragraph 
(a)(3)(i), is to be construed to create an entitlement to any 
vocational rehabilitation service.
    (b) Interim determination of eligibility. (1) The designated State 
unit may initiate the provision of vocational rehabilitation services 
for an applicant on the basis of an interim determination of 
eligibility prior to the 60-day period described in Sec.  361.41(b)(2).
    (2) If a State chooses to make interim determinations of 
eligibility, the designated State unit must--
    (i) Establish criteria and conditions for making those 
determinations;
    (ii) Develop and implement procedures for making the 
determinations; and
    (iii) Determine the scope of services that may be provided pending 
the final determination of eligibility.
    (3) If a State elects to use an interim eligibility determination, 
the designated State unit must make a final determination of 
eligibility within 60 days of the individual submitting an application 
for services in accordance with Sec.  361.41(b)(2).
    (c) Prohibited factors. (1) The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that the 
State unit will not impose, as part of determining eligibility under 
this section, a duration of residence requirement that excludes from 
services any applicant who is present in the State. The designated 
State unit may not require the applicant to demonstrate a presence in 
the State through the production of any documentation that under State 
or local law, or practical circumstances, results in a duration of 
residency.
    (2) In making a determination of eligibility under this section, 
the designated State unit also must ensure that--
    (i) No applicant or group of applicants is excluded or found 
ineligible solely on the basis of the type of disability; and
    (ii) The eligibility requirements are applied without regard to 
the--
    (A) Age, sex, race, color, or national origin of the applicant;
    (B) Type of expected employment outcome;
    (C) Source of referral for vocational rehabilitation services;
    (D) Particular service needs or anticipated cost of services 
required by an applicant or the income level of an applicant or 
applicant's family;
    (E) Applicants' employment history or current employment status; 
and
    (F) Applicants' educational status or current educational 
credential.
    (d) Review and assessment of data for eligibility determination. 
Except as provided in paragraph (e) of this section, the designated 
State unit--
    (1) Must base its determination of each of the basic eligibility 
requirements in paragraph (a) of this section on--
    (i) A review and assessment of existing data, including counselor 
observations, education records, information provided by the individual 
or the individual's family, particularly information used by education 
officials, and determinations made by officials of other agencies; and
    (ii) To the extent existing data do not describe the current 
functioning of the individual or are unavailable, insufficient, or 
inappropriate to make an eligibility determination, an assessment of 
additional data resulting from the provision of vocational 
rehabilitation services, including trial work experiences, assistive 
technology devices and services, personal assistance services, and any 
other support services that are necessary to determine whether an 
individual is eligible; and
    (2) Must base its presumption under paragraph (a)(3)(i) of this 
section that an applicant who has been determined eligible for Social 
Security benefits under title II or title XVI of the Social Security 
Act satisfies each of the basic eligibility requirements in paragraph 
(a) of this section on determinations made by the Social Security 
Administration.
    (e) Trial work experiences for individuals with significant 
disabilities. (1) Prior to any determination that an individual with a 
disability is unable to benefit from vocational rehabilitation services 
in terms of an employment outcome because of the severity of that 
individual's disability or that the individual is ineligible for 
vocational rehabilitation services, the designated State unit must 
conduct an exploration of the individual's abilities, capabilities, and 
capacity to perform in realistic work situations.
    (2)(i) The designated State unit must develop a written plan to 
assess periodically the individual's abilities, capabilities, and 
capacity to perform in competitive integrated work situations through 
the use of trial work experiences, which must be provided in 
competitive integrated employment settings to the maximum extent 
possible, consistent with the informed choice and rehabilitation needs 
of the individual.
    (ii) Trial work experiences include supported employment, on-the-
job training, and other experiences using realistic integrated work 
settings.
    (iii) Trial work experiences must be of sufficient variety and over 
a sufficient period of time for the designated State unit to determine 
that there is sufficient evidence to conclude that the individual 
cannot benefit from the provision of vocational rehabilitation services 
in terms of a competitive integrated employment outcome; and
    (iv) The designated State unit must provide appropriate supports, 
including assistive technology devices and services and personal 
assistance services, to accommodate the rehabilitation needs of the 
individual during the trial work experiences.
    (f) Data for determination of priority for services under an order 
of selection. If the designated State unit is operating under an order 
of selection for services, as provided in Sec.  361.36, the State unit 
must base its priority assignments on--
    (1) A review of the data that was developed under paragraphs (d) 
and (e) of this section to make the eligibility determination; and
    (2) An assessment of additional data, to the extent necessary.

(Authority: Sections 7(2), 12(c), 101(a)(12), 102(a), 103(a)(1), 
103(a)(9), 103(a)(10) and 103(a)(14) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 705(2), 709(c), 721(a)(12), 722(a), 
723(a)(1), 723(a)(9), 723(a)(10) and 723(a)(14))

    Note to Sec.  361.42: Clear and convincing evidence means that the 
designated State unit has a high degree of certainty before it can 
conclude that an individual is incapable of benefiting from services in 
terms of an employment outcome. The clear and convincing standard 
constitutes the highest standard used in our civil system of law and is 
to be individually applied on a case-by-case basis. The

[[Page 21126]]

term clear means unequivocal. For example, the use of an intelligence 
test result alone would not constitute clear and convincing evidence. 
Clear and convincing evidence might include a description of 
assessments, including situational assessments and supported employment 
assessments, from service providers who have concluded that they would 
be unable to meet the individual's needs due to the severity of the 
individual's disability. The demonstration of ``clear and convincing 
evidence'' must include, if appropriate, a functional assessment of 
skill development activities, with any necessary supports (including 
assistive technology), in real life settings. (S. Rep. No. 357, 102d 
Cong., 2d. Sess. 37-38 (1992))

Sec.  361.43  Procedures for ineligibility determination.

    If the State unit determines that an applicant is ineligible for 
vocational rehabilitation services or determines that an individual 
receiving services under an individualized plan for employment is no 
longer eligible for services, the State unit must--
    (a) Make the determination only after providing an opportunity for 
full consultation with the individual or, as appropriate, with the 
individual's representative;
    (b) Inform the individual in writing, supplemented as necessary by 
other appropriate modes of communication consistent with the informed 
choice of the individual, of the ineligibility determination, including 
the reasons for that determination, the requirements under this 
section, and the means by which the individual may express and seek 
remedy for any dissatisfaction, including the procedures for review of 
State unit personnel determinations in accordance with Sec.  361.57;
    (c) Provide the individual with a description of services available 
from a client assistance program established under 34 CFR part 370 and 
information on how to contact that program;
    (d) Refer the individual--
    (1) To other programs that are part of the one-stop service 
delivery system under the Workforce Investment Act that can address the 
individual's training or employment-related needs; or
    (2) To Federal, State, or local programs or service providers, 
including, as appropriate, independent living programs and extended 
employment providers, best suited to meet their rehabilitation needs, 
if the ineligibility determination is based on a finding that the 
individual has chosen not to pursue, or is incapable of achieving, an 
employment outcome as defined in Sec.  361.5(c)(15).
    (e) Review within 12 months and annually thereafter if requested by 
the individual or, if appropriate, by the individual's representative 
any ineligibility determination that is based on a finding that the 
individual is incapable of achieving an employment outcome. This review 
need not be conducted in situations in which the individual has refused 
it, the individual is no longer present in the State, the individual's 
whereabouts are unknown, or the individual's medical condition is 
rapidly progressive or terminal.

(Authority: Sections 12(c) and 102(a)(5) and (c) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
722(a)(5) and (c))

Sec.  361.44  Closure without eligibility determination.

    The designated State unit may not close an applicant's record of 
services prior to making an eligibility determination unless the 
applicant declines to participate in, or is unavailable to complete, an 
assessment for determining eligibility and priority for services, and 
the State unit has made a reasonable number of attempts to contact the 
applicant or, if appropriate, the applicant's representative to 
encourage the applicant's participation.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.45  Development of the individualized plan for employment.

    (a) General requirements. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that--
    (1) An individualized plan for employment meeting the requirements 
of this section and Sec.  361.46 is developed and implemented in a 
timely manner for each individual determined to be eligible for 
vocational rehabilitation services or, if the designated State unit is 
operating under an order of selection in accordance with Sec.  361.36, 
for each eligible individual to whom the State unit is able to provide 
services; and
    (2) Services will be provided in accordance with the provisions of 
the individualized plan for employment.
    (b) Purpose. (1) The designated State unit must conduct an 
assessment for determining vocational rehabilitation needs, if 
appropriate, for each eligible individual or, if the State is operating 
under an order of selection, for each eligible individual to whom the 
State is able to provide services. The purpose of this assessment is to 
determine the employment outcome, and the nature and scope of 
vocational rehabilitation services to be included in the individualized 
plan for employment.
    (2) The individualized plan for employment must be designed to 
achieve a specific employment outcome, as defined in Sec.  
361.5(c)(15), that is selected by the individual consistent with the 
individual's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interests, and informed choice.
    (c) Required information. The State unit must provide the following 
information to each eligible individual or, as appropriate, the 
individual's representative, in writing and, if appropriate, in the 
native language or mode of communication of the individual or the 
individual's representative:
    (1) Options for developing an individualized plan for employment. 
Information on the available options for developing the individualized 
plan for employment, including the option that an eligible individual 
or, as appropriate, the individual's representative may develop all or 
part of the individualized plan for employment--
    (i) Without assistance from the State unit or other entity; or
    (ii) With assistance from--
    (A) A qualified vocational rehabilitation counselor employed by the 
State unit;
    (B) A qualified vocational rehabilitation counselor who is not 
employed by the State unit;
    (C) A disability advocacy organization; or
    (D) Resources other than those in paragraph (c)(1)(ii)(A) through 
(C) of this section.
    (2) Additional information. Additional information to assist the 
eligible individual or, as appropriate, the individual's representative 
in developing the individualized plan for employment, including--
    (i) Information describing the full range of components that must 
be included in an individualized plan for employment;
    (ii) As appropriate to each eligible individual--
    (A) An explanation of agency guidelines and criteria for 
determining an eligible individual's financial commitments under an 
individualized plan for employment;
    (B) Information on the availability of assistance in completing 
State unit forms required as part of the individualized plan for 
employment; and
    (C) Additional information that the eligible individual requests or 
the State unit determines to be necessary to the

[[Page 21127]]

development of the individualized plan for employment;
    (iii) A description of the rights and remedies available to the 
individual, including, if appropriate, recourse to the processes 
described in Sec.  361.57; and
    (iv) A description of the availability of a client assistance 
program established under part 370 of this chapter and information on 
how to contact the client assistance program.
    (3) Individuals entitled to benefits under title II or XVI of the 
Social Security Act. For individuals entitled to benefits under title 
II or XVI of the Social Security Act on the basis of a disability or 
blindness, the State unit must provide to the individual general 
information on additional supports and assistance for individuals with 
disabilities desiring to enter the workforce, including assistance with 
benefits planning.
    (d) Mandatory procedures. The designated State unit must ensure 
that--
    (1) The individualized plan for employment is a written document 
prepared on forms provided by the State unit;
    (2) The individualized plan for employment is developed and 
implemented in a manner that gives eligible individuals the opportunity 
to exercise informed choice, consistent with Sec.  361.52, in 
selecting--
    (i) The employment outcome, including the employment setting;
    (ii) The specific vocational rehabilitation services needed to 
achieve the employment outcome, including the settings in which 
services will be provided;
    (iii) The entity or entities that will provide the vocational 
rehabilitation services; and
    (iv) The methods available for procuring the services;
    (3) The individualized plan for employment is--
    (i) Agreed to and signed by the eligible individual or, as 
appropriate, the individual's representative; and
    (ii) Approved and signed by a qualified vocational rehabilitation 
counselor employed by the designated State unit;
    (4) A copy of the individualized plan for employment and a copy of 
any amendments to the individualized plan for employment are provided 
to the eligible individual or, as appropriate, to the individual's 
representative, in writing and, if appropriate, in the native language 
or mode of communication of the individual or, as appropriate, the 
individual's representative;
    (5) The individualized plan for employment is reviewed at least 
annually by a qualified vocational rehabilitation counselor and the 
eligible individual or, as appropriate, the individual's representative 
to assess the eligible individual's progress in achieving the 
identified employment outcome;
    (6) The individualized plan for employment is amended, as 
necessary, by the individual or, as appropriate, the individual's 
representative, in collaboration with a representative of the State 
unit or a qualified vocational rehabilitation counselor (to the extent 
determined to be appropriate by the individual), if there are 
substantive changes in the employment outcome, the vocational 
rehabilitation services to be provided, or the providers of the 
vocational rehabilitation services;
    (7) Amendments to the individualized plan for employment do not 
take effect until agreed to and signed by the eligible individual or, 
as appropriate, the individual's representative and by a qualified 
vocational rehabilitation counselor employed by the designated State 
unit;
    (8) The individualized plan for employment is amended, as 
necessary, to include the postemployment services and service providers 
that are necessary for the individual to maintain, advance in or regain 
employment, consistent with the individual's unique strengths, 
resources, priorities, concerns, abilities, capabilities, interests, 
and informed choice; and
    (9) An individualized plan for employment for a student with a 
disability is developed--
    (i) In consideration of the student's individualized education 
program or 504 services, as applicable; and
    (ii) In accordance with the plans, policies, procedures, and terms 
of the interagency agreement required under Sec.  361.22.
    (e) Standards for developing the individualized plan for 
employment. The individualized plan for employment must be developed as 
soon as possible, but not later than 90 days after the date of 
determination of eligibility, unless the State unit and the eligible 
individual agree to the extension of that deadline to a specific date 
by which the individualized plan for employment must be completed.
    (f) Data for preparing the individualized plan for employment. (1) 
Preparation without comprehensive assessment. To the extent possible, 
the employment outcome and the nature and scope of rehabilitation 
services to be included in the individual's individualized plan for 
employment must be determined based on the data used for the assessment 
of eligibility and priority for services under Sec.  361.42.
    (2) Preparation based on comprehensive assessment.
    (i) If additional data are necessary to determine the employment 
outcome and the nature and scope of services to be included in the 
individualized plan for employment of an eligible individual, the State 
unit must conduct a comprehensive assessment of the unique strengths, 
resources, priorities, concerns, abilities, capabilities, interests, 
and informed choice, including the need for supported employment 
services, of the eligible individual, in the most integrated setting 
possible, consistent with the informed choice of the individual in 
accordance with the provisions of Sec.  361.5(c)(5)(ii).
    (ii) In preparing the comprehensive assessment, the State unit must 
use, to the maximum extent possible and appropriate and in accordance 
with confidentiality requirements, existing information that is current 
as of the date of the development of the individualized plan for 
employment, including information--
    (A) Available from other programs and providers, particularly 
information used by education officials and the Social Security 
Administration;
    (B) Provided by the individual and the individual's family; and
    (C) Obtained under the assessment for determining the individual's 
eligibility and vocational rehabilitation needs.

(Authority: Sections 7(2)(B), 101(a)(9), 102(b), and 103(a)(1) of 
the Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(2)(B), 
721(a)(9), 722(b), and 723(a)(1))

Sec.  361.46  Content of the individualized plan for employment.

    (a) Mandatory components. Regardless of the approach in Sec.  
361.45(c)(1) that an eligible individual selects for purposes of 
developing the individualized plan for employment, each individualized 
plan for employment must--
    (1) Include a description of the specific employment outcome, as 
defined in Sec.  361.5(c)(15), that is chosen by the eligible 
individual and is consistent with the individual's unique strengths, 
resources, priorities, concerns, abilities, capabilities, career 
interests, and informed choice consistent with the general goal of 
competitive integrated employment (except that in the case of an 
eligible individual who is a student or a youth with a disability, the 
description may be a description of the individual's projected post-
school employment outcome);
    (2) Include a description under Sec.  361.48 of--

[[Page 21128]]

    (i) These specific rehabilitation services needed to achieve the 
employment outcome, including, as appropriate, the provision of 
assistive technology devices, assistive technology services, and 
personal assistance services, including training in the management of 
those services; and
    (ii) In the case of a plan for an eligible individual that is a 
student or youth with a disability, the specific transition services 
and supports needed to achieve the individual's employment outcome or 
projected post-school employment outcome.
    (3) Provide for services in the most integrated setting that is 
appropriate for the services involved and is consistent with the 
informed choice of the eligible individual;
    (4) Include timelines for the achievement of the employment outcome 
and for the initiation of services;
    (5) Include a description of the entity or entities chosen by the 
eligible individual or, as appropriate, the individual's representative 
that will provide the vocational rehabilitation services and the 
methods used to procure those services;
    (6) Include a description of the criteria that will be used to 
evaluate progress toward achievement of the employment outcome; and
    (7) Include the terms and conditions of the individualized plan for 
employment, including, as appropriate, information describing--
    (i) The responsibilities of the designated State unit;
    (ii) The responsibilities of the eligible individual, including--
    (A) The responsibilities the individual will assume in relation to 
achieving the employment outcome;
    (B) If applicable, the extent of the individual's participation in 
paying for the cost of services; and
    (C) The responsibility of the individual with regard to applying 
for and securing comparable services and benefits as described in Sec.  
361.53; and
    (iii) The responsibilities of other entities as the result of 
arrangements made pursuant to the comparable services or benefits 
requirements in Sec.  361.53.
    (b) Supported employment requirements. An individualized plan for 
employment for an individual with a most significant disability for 
whom an employment outcome in a supported employment setting has been 
determined to be appropriate must--
    (1) Specify the supported employment services to be provided by the 
designated State unit;
    (2) Specify the expected extended services needed, which may 
include natural supports;
    (3) Identify the source of extended services or, to the extent that 
it is not possible to identify the source of extended services at the 
time the individualized plan for employment is developed, include a 
description of the basis for concluding that there is a reasonable 
expectation that those sources will become available;
    (4) Provide for periodic monitoring to ensure that the individual 
is making satisfactory progress toward meeting the weekly work 
requirement established in the individualized plan for employment by 
the time of transition to extended services;
    (5) Provide for the coordination of services provided under an 
individualized plan for employment with services provided under other 
individualized plans established under other Federal or State programs;
    (6) To the extent that job skills training is provided, identify 
that the training will be provided on site; and
    (7) Include placement in an integrated setting for the maximum 
number of hours possible based on the unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed 
choice of individuals with the most significant disabilities.
    (c) Post-employment services. The individualized plan for 
employment for each individual must contain, as determined to be 
necessary, statements concerning--
    (1) The expected need for post-employment services prior to closing 
the record of services of an individual who has achieved an employment 
outcome;
    (2) A description of the terms and conditions for the provision of 
any post-employment services; and
    (3) If appropriate, a statement of how post-employment services 
will be provided or arranged through other entities as the result of 
arrangements made pursuant to the comparable services or benefits 
requirements in Sec.  361.53.
    (d) Coordination of services for students with disabilities. The 
individualized plan for employment for a student with a disability must 
be coordinated with the individualized education program or 504 
services, as applicable, for that individual in terms of the goals, 
objectives, and services identified in the education program.

(Authority: Sections 101(a)(8), 101(a)(9), and 102(b)(4) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 721(a)(8), 
721(a)(9), and 722(b)(4))

Sec.  361.47  Record of services.

    (a) The designated State unit must maintain for each applicant and 
eligible individual a record of services that includes, to the extent 
pertinent, the following documentation:
    (1) If an applicant has been determined to be an eligible 
individual, documentation supporting that determination in accordance 
with the requirements under Sec.  361.42.
    (2) If an applicant or eligible individual receiving services under 
an individualized plan for employment has been determined to be 
ineligible, documentation supporting that determination in accordance 
with the requirements under Sec.  361.43.
    (3) Documentation that describes the justification for closing an 
applicant's or eligible individual's record of services if that closure 
is based on reasons other than ineligibility, including, as 
appropriate, documentation indicating that the State unit has satisfied 
the requirements in Sec.  361.44.
    (4) If an individual has been determined to be an individual with a 
significant disability or an individual with a most significant 
disability, documentation supporting that determination.
    (5) If an individual with a significant disability requires an 
exploration of abilities, capabilities, and capacity to perform in 
realistic work situations through the use of trial work experiences or, 
as appropriate, an extended evaluation to determine whether the 
individual is an eligible individual, documentation supporting the need 
for, and the plan relating to, that exploration or, as appropriate, 
extended evaluation and documentation regarding the periodic 
assessments carried out during the trial work experiences or, as 
appropriate, the extended evaluation, in accordance with the 
requirements under Sec.  361.42(e) and (f).
    (6) The individualized plan for employment, and any amendments to 
the individualized plan for employment, consistent with the 
requirements under Sec.  361.46.
    (7) Documentation describing the extent to which the applicant or 
eligible individual exercised informed choice regarding the provision 
of assessment services and the extent to which the eligible individual 
exercised informed choice in the development of the individualized plan 
for employment with respect to the selection of the specific employment 
outcome, the specific vocational rehabilitation services needed to 
achieve the employment outcome, the entity to provide the services, the 
employment

[[Page 21129]]

setting, the settings in which the services will be provided, and the 
methods to procure the services.
    (8) In the event that an individual's individualized plan for 
employment provides for vocational rehabilitation services in a non-
integrated setting, a justification to support the need for the non-
integrated setting.
    (9) In the event that an individual obtains competitive employment, 
verification that the individual is compensated at or above the minimum 
wage and that the individual's wage and level of benefits are not less 
than that customarily paid by the employer for the same or similar work 
performed by non-disabled individuals in accordance with Sec.  
361.5(c)(9)(i).
    (10) In the event an individual achieves an employment outcome in 
which the individual is compensated in accordance with section 14(c) of 
the Fair Labor Standards Act or the designated State unit closes the 
record of services of an individual in extended employment on the basis 
that the individual is unable to achieve an employment outcome 
consistent with Sec.  361.5(c)(15) or that an eligible individual 
through informed choice chooses to remain in extended employment, 
documentation of the results of the annual reviews required under Sec.  
361.55, of the individual's input into those reviews, and of the 
individual's or, if appropriate, the individual's representative's 
acknowledgment that those reviews were conducted.
    (11) Documentation concerning any action or decision resulting from 
a request by an individual under Sec.  361.57 for a review of 
determinations made by designated State unit personnel.
    (12) In the event that an applicant or eligible individual requests 
under Sec.  361.38(c)(4) that documentation in the record of services 
be amended and the documentation is not amended, documentation of the 
request.
    (13) In the event an individual is referred to another program 
through the State unit's information and referral system under Sec.  
361.37, including other components of the statewide workforce 
development system, documentation on the nature and scope of services 
provided by the designated State unit to the individual and on the 
referral itself, consistent with the requirements of Sec.  361.37.
    (14) In the event an individual's record of service is closed under 
Sec.  361.56, documentation that demonstrates the services provided 
under the individual's individualized plan for employment contributed 
to the achievement of the employment outcome.
    (15) In the event an individual's record of service is closed under 
Sec.  361.56, documentation verifying that the provisions of Sec.  
361.56 have been satisfied.
    (b) The State unit, in consultation with the State Rehabilitation 
Council if the State has a Council, must determine the type of 
documentation that the State unit must maintain for each applicant and 
eligible individual in order to meet the requirements in paragraph (a) 
of this section.

(Authority: Sections 12(c), 101(a)(6), (9), (14), and (20) and 
102(a), (b), and (d) of the Rehabilitation Act of 1973, as amended; 
29 U.S.C. 709(c), 721(a)(6), (9), (14), and (20) and 722(a), (b), 
and (d))

Sec.  361.48  Scope of vocational rehabilitation services for 
individuals with disabilities.

    (a) Pre-employment transition services. Each State must ensure that 
the designated State unit, in collaboration with the local educational 
agencies involved, provide, or arrange for the provision of, pre-
employment transition services for all students with disabilities, as 
defined in Sec.  361.5(c)(51), in need of such services, without regard 
to the type of disability, from funds reserved in accordance with Sec.  
361.65 and any funds made available from State, local, or private 
funding sources.
    (1) Availability of services. Pre-employment transition services 
may be provided to all students with disabilities, regardless of 
whether an application for services has been submitted.
    (2) Required activities. The designated State unit must provide the 
following pre-employment transition services:
    (i) Job exploration counseling;
    (ii) Work-based learning experiences, which may include in-school 
or after school opportunities, or experience outside the traditional 
school setting (including internships), that is provided in an 
integrated environment in the community to the maximum extent possible;
    (iii) Counseling on opportunities for enrollment in comprehensive 
transition or postsecondary educational programs at institutions of 
higher education;
    (iv) Workplace readiness training to develop social skills and 
independent living; and
    (v) Instruction in self-advocacy (including instruction in person-
centered planning), which may include peer mentoring (including peer 
mentoring from individuals with disabilities working in competitive 
integrated employment).
    (3) Authorized activities. Funds available and remaining after the 
provision of the required activities described in paragraph (a)(2) of 
this section may be used to improve the transition of students with 
disabilities from school to postsecondary education or an employment 
outcome by--
    (i) Implementing effective strategies to increase the likelihood of 
independent living and inclusion in communities and competitive 
integrated workplaces;
    (ii) Developing and improving strategies for individuals with 
intellectual disabilities and individuals with significant disabilities 
to live independently; participate in postsecondary education 
experiences; and obtain, advance in and retain competitive integrated 
employment;
    (iii) Providing instruction to vocational rehabilitation 
counselors, school transition personnel, and other persons supporting 
students with disabilities;
    (iv) Disseminating information about innovative, effective, and 
efficient approaches to achieve the goals of this section;
    (v) Coordinating activities with transition services provided by 
local educational agencies under the Individuals with Disabilities 
Education Act (20 U.S.C. 1400 et seq.);
    (vi) Applying evidence-based findings to improve policy, procedure, 
practice, and the preparation of personnel, in order to better achieve 
the goals of this section;
    (vii) Developing model transition demonstration projects;
    (viii) Establishing or supporting multistate or regional 
partnerships involving States, local educational agencies, designated 
State units, developmental disability agencies, private businesses, or 
other participants to achieve the goals of this section; and
    (ix) Disseminating information and strategies to improve the 
transition to postsecondary activities of individuals who are members 
of traditionally unserved and underserved populations.
    (4) Pre-employment transition coordination. Each local office of a 
designated State unit must carry out responsibilities consisting of--
    (i) Attending individualized education program meetings for 
students with disabilities, when invited;
    (ii) Working with the local workforce development boards, one-stop 
centers, and employers to develop work opportunities for students with 
disabilities, including internships, summer employment and other 
employment opportunities available throughout the school year, and 
apprenticeships;

[[Page 21130]]

    (iii) Working with schools, including those carrying out activities 
under section 614(d) of the IDEA, to coordinate and ensure the 
provision of pre-employment transition services under this section;
    (iv) When invited, attending person-centered planning meetings for 
individuals receiving services under title XIX of the Social Security 
Act (42 U.S.C. 1396 et seq.); and
    (b) Services for individuals who have applied for or been 
determined eligible for vocational rehabilitation services. As 
appropriate to the vocational rehabilitation needs of each individual 
and consistent with each individual's individualized plan for 
employment, the designated State unit must ensure that the following 
vocational rehabilitation services are available to assist the 
individual with a disability in preparing for, securing, retaining, 
advancing in or regaining an employment outcome that is consistent with 
the individual's unique strengths, resources, priorities, concerns, 
abilities, capabilities, interests, and informed choice:
    (1) Assessment for determining eligibility and priority for 
services by qualified personnel, including, if appropriate, an 
assessment by personnel skilled in rehabilitation technology, in 
accordance with Sec.  361.42.
    (2) Assessment for determining vocational rehabilitation needs by 
qualified personnel, including, if appropriate, an assessment by 
personnel skilled in rehabilitation technology, in accordance with 
Sec.  361.45.
    (3) Vocational rehabilitation counseling and guidance, including 
information and support services to assist an individual in exercising 
informed choice in accordance with Sec.  361.52.
    (4) Referral and other services necessary to assist applicants and 
eligible individuals to secure needed services from other agencies, 
including other components of the statewide workforce development 
system, in accordance with Sec. Sec.  361.23, 361.24, and 361.37, and 
to advise those individuals about client assistance programs 
established under 34 CFR part 370.
    (5) In accordance with the definition in Sec.  361.5(c)(40), 
physical and mental restoration services, to the extent that financial 
support is not readily available from a source other than the 
designated State unit (such as through health insurance or a comparable 
service or benefit as defined in Sec.  361.5(c)(10)).
    (6) Vocational and other training services, including personal and 
vocational adjustment training, advanced training in a field of 
science, technology, engineering, or mathematics (including computer 
science), medicine, law, or business; books, tools, and other training 
materials, except that no training or training services in an 
institution of higher education (universities, colleges, community or 
junior colleges, vocational schools, technical institutes, or hospital 
schools of nursing or any other postsecondary education institution) 
may be paid for with funds under this part unless maximum efforts have 
been made by the State unit and the individual to secure grant 
assistance in whole or in part from other sources to pay for that 
training.
    (7) Maintenance, in accordance with the definition of that term in 
Sec.  361.5(c)(35).
    (8) Transportation in connection with the provision of any 
vocational rehabilitation service and in accordance with the definition 
of that term in Sec.  361.5(c)(57).
    (9) Vocational rehabilitation services to family members, as 
defined in Sec.  361.5(c)(23), of an applicant or eligible individual 
if necessary to enable the applicant or eligible individual to achieve 
an employment outcome.
    (10) Interpreter services, including sign language and oral 
interpreter services, for individuals who are deaf or hard of hearing 
and tactile interpreting services for individuals who are deaf-blind 
provided by qualified personnel.
    (11) Reader services, rehabilitation teaching services, and 
orientation and mobility services for individuals who are blind.
    (12) Job-related services, including job search and placement 
assistance, job retention services, follow-up services, and follow-
along services.
    (13) Supported employment services in accordance with the 
definition of that term in Sec.  361.5(c)(54).
    (14) Personal assistance services in accordance with the definition 
of that term in Sec.  361.5(c)(39).
    (15) Post-employment services in accordance with the definition of 
that term in Sec.  361.5(c)(42).
    (16) Occupational licenses, tools, equipment, initial stocks, and 
supplies.
    (17) Rehabilitation technology in accordance with the definition of 
that term in Sec.  361.5(c)(45), including vehicular modification, 
telecommunications, sensory, and other technological aids and devices.
    (18) Transition services for students and youth with disabilities, 
that facilitate the transition from school to postsecondary life, such 
as achievement of an employment outcome in competitive integrated 
employment, or pre-employment transition services for students.
    (19) Technical assistance and other consultation services to 
conduct market analyses, develop business plans, and otherwise provide 
resources, to the extent those resources are authorized to be provided 
through the statewide workforce development system, to eligible 
individuals who are pursuing self-employment or telecommuting or 
establishing a small business operation as an employment outcome.
    (20) Customized employment in accordance with the definition of 
that term in Sec.  361.5(c)(11).
    (21) Other goods and services determined necessary for the 
individual with a disability to achieve an employment outcome.

(Authority: Sections 7(37), 103(a), and 113 of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 704(37), 723(a), and 733)

Sec.  361.49  Scope of vocational rehabilitation services for groups of 
individuals with disabilities.

    (a) The designated State unit may provide for the following 
vocational rehabilitation services for the benefit of groups of 
individuals with disabilities:
    (1) The establishment, development, or improvement of a public or 
other nonprofit community rehabilitation program that is used to 
provide vocational rehabilitation services that promote integration 
into the community and prepare individuals with disabilities for 
competitive integrated employment, including supported employment and 
customized employment, and under special circumstances, the 
construction of a facility for a public or nonprofit community 
rehabilitation program as defined in Sec. Sec.  361.5(c)(10), 
361.5(c)(16) and 361.5(c)(17). Examples of special circumstances 
include the destruction by natural disaster of the only available 
center serving an area or a State determination that construction is 
necessary in a rural area because no other public agencies or private 
nonprofit organizations are currently able to provide vocational 
rehabilitation services to individuals.
    (2) Telecommunications systems that have the potential for 
substantially improving vocational rehabilitation service delivery 
methods and developing appropriate programming to meet the particular 
needs of individuals with disabilities, including telephone, 
television, video description services, satellite, tactile-vibratory 
devices, and similar systems, as appropriate.
    (3) Special services to provide nonvisual access to information for 
individuals who are blind, including the use of telecommunications, 
Braille, sound recordings, or other appropriate

[[Page 21131]]

media; captioned television, films, or video cassettes for individuals 
who are deaf or hard of hearing; tactile materials for individuals who 
are deaf-blind; and other special services that provide information 
through tactile, vibratory, auditory, and visual media.
    (4) Technical assistance to businesses that are seeking to employ 
individuals with disabilities.
    (5) In the case of any small business enterprise operated by 
individuals with significant disabilities under the supervision of the 
designated State unit, including enterprises established under the 
Randolph-Sheppard program, management services and supervision provided 
by the State unit along with the acquisition by the State unit of 
vending facilities or other equipment, initial stocks and supplies, and 
initial operating expenses, in accordance with the following 
requirements:
    (i) Management services and supervision includes inspection, 
quality control, consultation, accounting, regulating, in-service 
training, and related services provided on a systematic basis to 
support and improve small business enterprises operated by individuals 
with significant disabilities. Management services and supervision may 
be provided throughout the operation of the small business enterprise.
    (ii) Initial stocks and supplies includes those items necessary to 
the establishment of a new business enterprise during the initial 
establishment period, which may not exceed six months.
    (iii) Costs of establishing a small business enterprise may include 
operational costs during the initial establishment period, which may 
not exceed six months.
    (iv) If the designated State unit provides for these services, it 
must ensure that only individuals with significant disabilities will be 
selected to participate in this supervised program.
    (v) If the designated State unit provides for these services and 
chooses to set aside funds from the proceeds of the operation of the 
small business enterprises, the State unit must maintain a description 
of the methods used in setting aside funds and the purposes for which 
funds are set aside. Funds may be used only for small business 
enterprises purposes, and benefits that are provided to operators from 
set-aside funds must be provided on an equitable basis.
    (6) Consultation and technical assistance services to assist State 
educational agencies and local educational agencies in planning for the 
transition of students and youth with disabilities from school to 
postsecondary life, including employment.
    (7) Transition services to youth with disabilities and students 
with disabilities who may not have yet applied or been determined 
eligible for vocational rehabilitation services, for which a vocational 
rehabilitation counselor works in concert with educational agencies, 
providers of job training programs, providers of services under the 
Medicaid program under title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.), entities designated by the State to provide services for 
individuals with developmental disabilities, centers for independent 
living (as defined in section 702 of the Act), housing and 
transportation authorities, workforce development systems, and 
businesses and employers. These specific transition services are to 
benefit a group of students with disabilities or youth with 
disabilities and are not individualized services directly related to an 
individualized plan for employment goal. Services may include, but are 
not limited to, group tours of universities and vocational training 
programs, employer or business site visits to learn about career 
opportunities, career fairs coordinated with workforce development and 
employers to facilitate mock interviews and resume writing, and other 
general services applicable to groups of students with disabilities and 
youth with disabilities.
    (8) The establishment, development, or improvement of assistive 
technology demonstration, loan, reutilization, or financing programs in 
coordination with activities authorized under the Assistive Technology 
Act of 1998 (29 U.S.C. 3001 et seq.) to promote access to assistive 
technology for individuals with disabilities who are applicants of or 
have been determined eligible for vocational rehabilitation services 
and employers.
    (9) Support (including, as appropriate, tuition) for advanced 
training in a field of science, technology, engineering, or mathematics 
(including computer science), medicine, law, or business, provided 
after an individual eligible to receive services under this title 
demonstrates--
    (i) Such Eligibility;
    (ii) Previous completion of a bachelor's degree program at an 
institution of higher education or scheduled completion of such a 
degree program prior to matriculating in the program for which the 
individual proposes to use the support; and
    (iii) Acceptance by a program at an institution of higher education 
in the United States that confers a master's degree in a field of 
science, technology, engineering, or mathematics (including computer 
science), a juris doctor degree, a master of business administration 
degree, or a doctor of medicine degree, except that--
    (A) No training provided at an institution of higher education may 
be paid for with funds under this program unless maximum efforts have 
been made by the designated State unit to secure grant assistance, in 
whole or in part, from other sources to pay for such training; and
    (B) Nothing in this paragraph prevents any designated State unit 
from providing similar support to individuals with disabilities within 
the State who are eligible to receive support under this title and who 
are not served under this section.
    (b) If the designated State unit provides for vocational 
rehabilitation services for groups of individuals, it must--
    (1) Develop and maintain written policies covering the nature and 
scope of each of the vocational rehabilitation services it provides and 
the criteria under which each service is provided; and
    (2) Maintain information to ensure the proper and efficient 
administration of those services in the form and detail and at the time 
required by the Secretary, including the types of services provided, 
the costs of those services, and, to the extent feasible, estimates of 
the numbers of individuals benefiting from those services.

(Authority: Sections 12(c), 101(a)(6)(A), and 103(b) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 721(a)(6), 
and 723(b))

Sec.  361.50  Written policies governing the provision of services for 
individuals with disabilities.

    (a) Policies. The State unit must develop and maintain written 
policies covering the nature and scope of each of the vocational 
rehabilitation services specified in Sec.  361.48 and the criteria 
under which each service is provided. The policies must ensure that the 
provision of services is based on the rehabilitation needs of each 
individual as identified in that individual's individualized plan for 
employment and is consistent with the individual's informed choice. The 
written policies may not establish any arbitrary limits on the nature 
and scope of vocational rehabilitation services to be provided to the 
individual to achieve an employment outcome. The policies must be 
developed in accordance with the following provisions:

[[Page 21132]]

    (b) Out-of-State services. (1) The State unit may establish a 
preference for in-State services, provided that the preference does not 
effectively deny an individual a necessary service. If the individual 
chooses an out-of-State service at a higher cost than an in-State 
service, if either service would meet the individual's rehabilitation 
needs, the designated State unit is not responsible for those costs in 
excess of the cost of the in-State service.
    (2) The State unit may not establish policies that effectively 
prohibit the provision of out-of-State services.
    (c) Payment for services. (1) The State unit must establish and 
maintain written policies to govern the rates of payment for all 
purchased vocational rehabilitation services.
    (2) The State unit may establish a fee schedule designed to ensure 
a reasonable cost to the program for each service, if the schedule is--
    (i) Not so low as to effectively deny an individual a necessary 
service; and
    (ii) Not absolute and permits exceptions so that individual needs 
can be addressed.
    (3) The State unit may not place absolute dollar limits on specific 
service categories or on the total services provided to an individual.
    (d) Duration of services. (1) The State unit may establish 
reasonable time periods for the provision of services provided that the 
time periods are--
    (i) Not so short as to effectively deny an individual a necessary 
service; and
    (ii) Not absolute and permit exceptions so that individual needs 
can be addressed.
    (2) The State unit may not establish absolute time limits on the 
provision of specific services or on the provision of services to an 
individual. The duration of each service needed by an individual must 
be determined on an individual basis and reflected in that individual's 
individualized plan for employment.
    (e) Authorization of services. The State unit must establish 
policies related to the timely authorization of services, including any 
conditions under which verbal authorization can be given.

(Authority: Sections 12(c) and 101(a)(6) of the Rehabilitation Act 
of 1973, as amended and 29 U.S.C. 709(c) and 721(a)(6))

Sec.  361.51  Standards for facilities and providers of services.

    (a) Accessibility of facilities. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
any facility used in connection with the delivery of vocational 
rehabilitation services under this part meets program accessibility 
requirements consistent with the requirements, as applicable, of the 
Architectural Barriers Act of 1968, the Americans with Disabilities Act 
of 1990, section 504 of the Act, and the regulations implementing these 
laws.
    (b) Affirmative action. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that 
community rehabilitation programs that receive assistance under part B 
of title I of the Act take affirmative action to employ and advance in 
employment qualified individuals with disabilities covered under and on 
the same terms and conditions as in section 503 of the Act.
    (c) Special communication needs personnel. The designated State 
unit must ensure that providers of vocational rehabilitation services 
are able to communicate--
    (1) In the native language of applicants and eligible individuals 
who have limited English proficiency; and
    (2) By using appropriate modes of communication used by applicants 
and eligible individuals.

(Authority: Sections 12(c) and 101(a)(6)(B) and (C) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c) and 
721(a)(6)(B) and (C))

Sec.  361.52  Informed choice.

    (a) General provision. The vocational rehabilitation services 
portion of the Unified or Combined State Plan must assure that 
applicants and eligible individuals or, as appropriate, their 
representatives are provided information and support services to assist 
applicants and eligible individuals in exercising informed choice 
throughout the rehabilitation process consistent with the provisions of 
section 102(d) of the Act and the requirements of this section.
    (b) Written policies and procedures. The designated State unit, in 
consultation with its State Rehabilitation Council, if it has a 
Council, must develop and implement written policies and procedures 
that enable an applicant or eligible individual to exercise informed 
choice throughout the vocational rehabilitation process. These policies 
and procedures must provide for--
    (1) Informing each applicant and eligible individual (including 
students with disabilities who are making the transition from programs 
under the responsibility of an educational agency to programs under the 
responsibility of the designated State unit and including youth with 
disabilities), through appropriate modes of communication, about the 
availability of and opportunities to exercise informed choice, 
including the availability of support services for individuals with 
cognitive or other disabilities who require assistance in exercising 
informed choice throughout the vocational rehabilitation process;
    (2) Assisting applicants and eligible individuals in exercising 
informed choice in decisions related to the provision of assessment 
services;
    (3) Developing and implementing flexible procurement policies and 
methods that facilitate the provision of vocational rehabilitation 
services and that afford eligible individuals meaningful choices among 
the methods used to procure vocational rehabilitation services;
    (4) Assisting eligible individuals or, as appropriate, the 
individuals' representatives, in acquiring information that enables 
them to exercise informed choice in the development of their 
individualized plans for employment with respect to the selection of 
the--
    (i) Employment outcome;
    (ii) Specific vocational rehabilitation services needed to achieve 
the employment outcome;
    (iii) Entity that will provide the services;
    (iv) Employment setting and the settings in which the services will 
be provided; and
    (v) Methods available for procuring the services; and
    (5) Ensuring that the availability and scope of informed choice is 
consistent with the obligations of the designated State agency under 
this part.
    (c) Information and assistance in the selection of vocational 
rehabilitation services and service providers. In assisting an 
applicant and eligible individual in exercising informed choice during 
the assessment for determining eligibility and vocational 
rehabilitation needs and during development of the individualized plan 
for employment, the designated State unit must provide the individual 
or the individual's representative, or assist the individual or the 
individual's representative in acquiring, information necessary to make 
an informed choice about the specific vocational rehabilitation 
services, including the providers of those services, that are needed to 
achieve the individual's employment outcome. This information must 
include, at a minimum, information relating to the--
    (1) Cost, accessibility, and duration of potential services;
    (2) Consumer satisfaction with those services to the extent that 
information relating to consumer satisfaction is available;

[[Page 21133]]

    (3) Qualifications of potential service providers;
    (4) Types of services offered by the potential providers;
    (5) Degree to which services are provided in integrated settings; 
and
    (6) Outcomes achieved by individuals working with service 
providers, to the extent that such information is available.
    (d) Methods or sources of information. In providing or assisting 
the individual or the individual's representative in acquiring the 
information required under paragraph (c) of this section, the State 
unit may use, but is not limited to, the following methods or sources 
of information:
    (1) Lists of services and service providers.
    (2) Periodic consumer satisfaction surveys and reports.
    (3) Referrals to other consumers, consumer groups, or disability 
advisory councils qualified to discuss the services or service 
providers.
    (4) Relevant accreditation, certification, or other information 
relating to the qualifications of service providers.
    (5) Opportunities for individuals to visit or experience various 
work and service provider settings.

(Authority: Sections 12(c), 101(a)(19); 102(b)(2)(B) and 102(d) of 
the Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
721(a)(19); 722(b)(2)(B) and 722(d))

Sec.  361.53  Comparable services and benefits.

    (a) Determination of availability. The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
prior to providing an accommodation or auxiliary aid or service or any 
vocational rehabilitation services, except those services listed in 
paragraph (b) of this section, to an eligible individual or to members 
of the individual's family, the State unit must determine whether 
comparable services and benefits, as defined in Sec.  361.5(c)(8), 
exist under any other program and whether those services and benefits 
are available to the individual unless such a determination would 
interrupt or delay--
    (1) The progress of the individual toward achieving the employment 
outcome identified in the individualized plan for employment;
    (2) An immediate job placement; or
    (3) The provision of vocational rehabilitation services to any 
individual who is determined to be at extreme medical risk, based on 
medical evidence provided by an appropriate qualified medical 
professional.
    (b) Exempt services. The following vocational rehabilitation 
services described in Sec.  361.48(a) are exempt from a determination 
of the availability of comparable services and benefits under paragraph 
(a) of this section:
    (1) Assessment for determining eligibility and vocational 
rehabilitation needs.
    (2) Counseling and guidance, including information and support 
services to assist an individual in exercising informed choice.
    (3) Referral and other services to secure needed services from 
other agencies, including other components of the statewide workforce 
development system, if those services are not available under this 
part.
    (4) Job-related services, including job search and placement 
assistance, job retention services, follow-up services, and follow-
along services.
    (5) Rehabilitation technology, including telecommunications, 
sensory, and other technological aids and devices.
    (6) Post-employment services consisting of the services listed 
under paragraphs (b)(1) through (5) of this section.
    (c) Provision of services. (1) If comparable services or benefits 
exist under any other program and are available to the individual at 
the time needed to ensure the progress of the individual toward 
achieving the employment outcome in the individual's individualized 
plan for employment, the designated State unit must use those 
comparable services or benefits to meet, in whole or part, the costs of 
the vocational rehabilitation services.
    (2) If comparable services or benefits exist under any other 
program, but are not available to the individual at the time needed to 
ensure the progress of the individual toward achieving the employment 
outcome specified in the individualized plan for employment, the 
designated State unit must provide vocational rehabilitation services 
until those comparable services and benefits become available.
    (d) Interagency coordination. (1) The vocational rehabilitation 
services portion of the Unified or Combined State Plan must assure that 
the Governor, in consultation with the entity in the State responsible 
for the vocational rehabilitation program and other appropriate 
agencies, will ensure that an interagency agreement or other mechanism 
for interagency coordination takes effect between the designated State 
vocational rehabilitation unit and any appropriate public entity, 
including the State entity responsible for administering the State 
Medicaid program, a public institution of higher education, and a 
component of the statewide workforce development system, to ensure the 
provision of vocational rehabilitation services, and, if appropriate, 
accommodations or auxiliary aids and services, (other than those 
services listed in paragraph (b) of this section) that are included in 
the individualized plan for employment of an eligible individual, 
including the provision of those vocational rehabilitation services 
(including, if appropriate, accommodations or auxiliary aids and 
services) during the pendency of any interagency dispute in accordance 
with the provisions of paragraph (d)(3)(iii) of this section.
    (2) The Governor may meet the requirements of paragraph (d)(1) of 
this section through--
    (i) A State statute or regulation;
    (ii) A signed agreement between the respective officials of the 
public entities that clearly identifies the responsibilities of each 
public entity for the provision of the services; or
    (iii) Another appropriate mechanism as determined by the designated 
State vocational rehabilitation unit.
    (3) The interagency agreement or other mechanism for interagency 
coordination must include the following:
    (i) Agency financial responsibility. An identification of, or 
description of a method for defining, the financial responsibility of 
the designated State unit and other public entities for the provision 
of vocational rehabilitation services, and, if appropriate, 
accommodations or auxiliary aids and services other than those listed 
in paragraph (b) of this section and a provision stating the financial 
responsibility of the public entity for providing those services.
    (ii) Conditions, terms, and procedures of reimbursement. 
Information specifying the conditions, terms, and procedures under 
which the designated State unit must be reimbursed by the other public 
entities for providing vocational rehabilitation services, and 
accommodations or auxiliary aids and services based on the terms of the 
interagency agreement or other mechanism for interagency coordination.
    (iii) Interagency disputes. Information specifying procedures for 
resolving interagency disputes under the interagency agreement or other 
mechanism for interagency coordination, including procedures under 
which the designated State unit may initiate proceedings to secure 
reimbursement from other public

[[Page 21134]]

entities or otherwise implement the provisions of the agreement or 
mechanism.
    (iv) Procedures for coordination of services. Information 
specifying policies and procedures for public entities to determine and 
identify interagency coordination responsibilities of each public 
entity to promote the coordination and timely delivery of vocational 
rehabilitation services, and accommodations or auxiliary aids and 
services, other than those listed in paragraph (b) of this section.
    (e) Responsibilities under other law. (1) If a public entity (other 
than the designated State unit) is obligated under Federal law (such as 
the Americans with Disabilities Act, section 504 of the Act, or section 
188 of the Workforce Innovation and Opportunity Act) or State law, or 
assigned responsibility under State policy or an interagency agreement 
established under this section, to provide or pay for any services 
considered to be vocational rehabilitation services (e.g., interpreter 
services under Sec.  361.48(j)), and, if appropriate, accommodations or 
auxiliary aids and services other than those services listed in 
paragraph (b) of this section, the public entity must fulfill that 
obligation or responsibility through--
    (i) The terms of the interagency agreement or other requirements of 
this section;
    (ii) Providing or paying for the service directly or by contract; 
or
    (iii) Other arrangement.
    (2) If a public entity other than the designated State unit fails 
to provide or pay for vocational rehabilitation services, and, if 
appropriate, accommodations or auxiliary aids and services for an 
eligible individual as established under this section, the designated 
State unit must provide or pay for those services to the individual and 
may claim reimbursement for the services from the public entity that 
failed to provide or pay for those services. The public entity must 
reimburse the designated State unit pursuant to the terms of the 
interagency agreement or other mechanism described in paragraph (d) of 
this section in accordance with the procedures established in the 
agreement or mechanism pursuant to paragraph (d)(3)(ii) of this 
section.

(Authority: Sections 12(c) and 101(a)(8) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(8))

Sec.  361.54  Participation of individuals in cost of services based on 
financial need.

    (a) No Federal requirement. There is no Federal requirement that 
the financial need of individuals be considered in the provision of 
vocational rehabilitation services.
    (b) State unit requirements. (1) The State unit may choose to 
consider the financial need of eligible individuals or individuals who 
are receiving services through trial work experiences under Sec.  
361.42(e) for purposes of determining the extent of their participation 
in the costs of vocational rehabilitation services, other than those 
services identified in paragraph (b)(3) of this section.
    (2) If the State unit chooses to consider financial need--
    (i) It must maintain written policies--
    (A) Explaining the method for determining the financial need of an 
eligible individual; and
    (B) Specifying the types of vocational rehabilitation services for 
which the unit has established a financial needs test;
    (ii) The policies must be applied uniformly to all individuals in 
similar circumstances;
    (iii) The policies may require different levels of need for 
different geographic regions in the State, but must be applied 
uniformly to all individuals within each geographic region; and
    (iv) The policies must ensure that the level of an individual's 
participation in the cost of vocational rehabilitation services is--
    (A) Reasonable;
    (B) Based on the individual's financial need, including 
consideration of any disability-related expenses paid by the 
individual; and
    (C) Not so high as to effectively deny the individual a necessary 
service.
    (3) The designated State unit may not apply a financial needs test, 
or require the financial participation of the individual--
    (i) As a condition for furnishing the following vocational 
rehabilitation services:
    (A) Assessment for determining eligibility and priority for 
services under Sec.  361.48(b)(1), except those non-assessment services 
that are provided to an individual with a significant disability during 
either an exploration of the individual's abilities, capabilities, and 
capacity to perform in work situations through the use of trial work 
experiences under Sec.  361.42(e).
    (B) Assessment for determining vocational rehabilitation needs 
under Sec.  361.48(b)(2).
    (C) Vocational rehabilitation counseling and guidance under Sec.  
361.48(b)(3).
    (D) Referral and other services under Sec.  361.48(b)(4).
    (E) Job-related services under Sec.  361.48(b)(12).
    (F) Personal assistance services under Sec.  361.48(b)(14).
    (G) Any auxiliary aid or service (e.g., interpreter services under 
Sec.  361.48(b)(10), reader services under Sec.  361.48(b)(11)) that an 
individual with a disability requires under section 504 of the Act (29 
U.S.C. 794) or the Americans with Disabilities Act (42 U.S.C. 12101, et 
seq.), or regulations implementing those laws, in order for the 
individual to participate in the vocational rehabilitation program as 
authorized under this part; or
    (ii) As a condition for furnishing any vocational rehabilitation 
service if the individual in need of the service has been determined 
eligible for Social Security benefits under titles II or XVI of the 
Social Security Act.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  361.55  Semi-annual review of individuals in extended employment 
and other employment under special certificate provisions of the Fair 
Labor Standards Act.

    (a) The vocational rehabilitation services portion of the Unified 
or Combined State Plan must assure that the designated State unit 
conducts a semi-annual review and reevaluation for the first two years 
of such employment and annually thereafter, in accordance with the 
requirements in paragraph (b) of this section for an individual with a 
disability served under this part--
    (1) Who has achieved an employment outcome in which the individual 
is compensated in accordance with section 14(c) of the Fair Labor 
Standards Act; or
    (2) Whose record of services is closed while the individual is in 
extended employment on the basis that the individual is unable to 
achieve an employment outcome consistent with Sec.  361.5(c)(15) or 
that the individual made an informed choice to remain in extended 
employment.
    (b) For each individual with a disability who meets the criteria in 
paragraph (a) of this section, the designated State unit must--
    (1) Semi-annually review and reevaluate the status of each 
individual for two years after the individual's record of services is 
closed (and annually thereafter) to determine the interests, 
priorities, and needs of the individual with respect to competitive 
integrated employment or training for competitive integrated 
employment;
    (2) Enable the individual or, if appropriate, the individual's 
representative to provide input into the review and reevaluation and 
must document that input in the record of services, consistent with 
Sec.  361.47(a)(10),

[[Page 21135]]

with the individual's or, as appropriate, the individual's 
representative's signed acknowledgment that the review and reevaluation 
have been conducted; and
    (3) Make maximum efforts, including identifying and providing 
vocational rehabilitation services, reasonable accommodations, and 
other necessary support services, to assist the individual in engaging 
in competitive integrated employment as defined in Sec.  361.5(c)(9).

(Authority: Sections 12(c) and 101(a)(14) of the Rehabilitation Act 
of 1973, as amended; 29 U.S.C. 709(c) and 721(a)(14))

Sec.  361.56  Requirements for closing the record of services of an 
individual who has achieved an employment outcome.

    The record of services of an individual who has achieved an 
employment outcome may be closed only if all of the following 
requirements are met:
    (a) Employment outcome achieved. The individual has achieved the 
employment outcome that is described in the individual's individualized 
plan for employment in accordance with Sec.  361.46(a)(1) and is 
consistent with the individual's unique strengths, resources, 
priorities, concerns, abilities, capabilities, interests, and informed 
choice.
    (b) Employment outcome maintained. The individual has maintained 
the employment outcome for an appropriate period of time, but not less 
than 90 days, necessary to ensure the stability of the employment 
outcome, and the individual no longer needs vocational rehabilitation 
services.
    (c) Satisfactory outcome. At the end of the appropriate period 
under paragraph (b) of this section, the individual and the qualified 
rehabilitation counselor employed by the designated State unit consider 
the employment outcome to be satisfactory and agree that the individual 
is performing well in the employment.
    (d) Post-employment services. The individual is informed through 
appropriate modes of communication of the availability of post-
employment services.

(Authority: Sections 12(c), 101(a)(6), and 106(a)(2) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 711(c), 721(a)(6), 
and 726(a)(2))

Sec.  361.57  Review of determinations made by designated State unit 
personnel.

    (a) Procedures. The designated State unit must develop and 
implement procedures to ensure that an applicant or eligible individual 
who is dissatisfied with any determination made by personnel of the 
designated State unit that affects the provision of vocational 
rehabilitation services may request, or, if appropriate, may request 
through the individual's representative, a timely review of that 
determination. The procedures must be in accordance with paragraphs (b) 
through (k) of this section:
    (b) General requirements. (1) Notification. Procedures established 
by the State unit under this section must provide an applicant or 
eligible individual or, as appropriate, the individual's representative 
notice of--
    (i) The right to obtain review of State unit determinations that 
affect the provision of vocational rehabilitation services through an 
impartial due process hearing under paragraph (e) of this section;
    (ii) The right to pursue mediation under paragraph (d) of this 
section with respect to determinations made by designated State unit 
personnel that affect the provision of vocational rehabilitation 
services to an applicant or eligible individual;
    (iii) The names and addresses of individuals with whom requests for 
mediation or due process hearings may be filed;
    (iv) The manner in which a mediator or impartial hearing officer 
may be selected consistent with the requirements of paragraphs (d) and 
(f) of this section; and
    (v) The availability of the client assistance program, established 
under 34 CFR part 370, to assist the applicant or eligible individual 
during mediation sessions or impartial due process hearings.
    (2) Timing. Notice described in paragraph (b)(1) of this section 
must be provided in writing--
    (i) At the time the individual applies for vocational 
rehabilitation services under this part;
    (ii) At the time the individual is assigned to a category in the 
State's order of selection, if the State has established an order of 
selection under Sec.  361.36;
    (iii) At the time the individualized plan for employment is 
developed; and
    (iv) Whenever vocational rehabilitation services for an individual 
are reduced, suspended, or terminated.
    (3) Evidence and representation. Procedures established under this 
section must--
    (i) Provide an applicant or eligible individual or, as appropriate, 
the individual's representative with an opportunity to submit during 
mediation sessions or due process hearings evidence and other 
information that supports the applicant's or eligible individual's 
position; and
    (ii) Allow an applicant or eligible individual to be represented 
during mediation sessions or due process hearings by counsel or other 
advocate selected by the applicant or eligible individual.
    (4) Impact on provision of services. The State unit may not 
institute a suspension, reduction, or termination of vocational 
rehabilitation services being provided to an applicant or eligible 
individual, including evaluation and assessment services and 
individualized plan for employment development, pending a resolution 
through mediation, pending a decision by a hearing officer or reviewing 
official, or pending informal resolution under this section unless--
    (i) The individual or, in appropriate cases, the individual's 
representative requests a suspension, reduction, or termination of 
services; or
    (ii) The State agency has evidence that the services have been 
obtained through misrepresentation, fraud, collusion, or criminal 
conduct on the part of the individual or the individual's 
representative.
    (5) Ineligibility. Applicants who are found ineligible for 
vocational rehabilitation services and previously eligible individuals 
who are determined to be no longer eligible for vocational 
rehabilitation services pursuant to Sec.  361.43 are permitted to 
challenge the determinations of ineligibility under the procedures 
described in this section.
    (c) Informal dispute resolution. The State unit may develop an 
informal process for resolving a request for review without conducting 
mediation or a formal hearing. A State's informal process must not be 
used to deny the right of an applicant or eligible individual to a 
hearing under paragraph (e) of this section or any other right provided 
under this part, including the right to pursue mediation under 
paragraph (d) of this section. If informal resolution under this 
paragraph or mediation under paragraph (d) of this section is not 
successful in resolving the dispute within the time period established 
under paragraph (e)(1) of this section, a formal hearing must be 
conducted within that same time period, unless the parties agree to a 
specific extension of time.
    (d) Mediation. (1) The State must establish and implement 
procedures, as required under paragraph (b)(1)(ii) of this section, to 
allow an applicant or eligible individual and the State unit to resolve 
disputes involving State unit determinations that affect the provision 
of vocational rehabilitation services through a mediation process that 
must be made available, at a minimum,

[[Page 21136]]

whenever an applicant or eligible individual or, as appropriate, the 
individual's representative requests an impartial due process hearing 
under this section.
    (2) Mediation procedures established by the State unit under 
paragraph (d) of this section must ensure that--
    (i) Participation in the mediation process is voluntary on the part 
of the applicant or eligible individual, as appropriate, and on the 
part of the State unit;
    (ii) Use of the mediation process is not used to deny or delay the 
applicant's or eligible individual's right to pursue resolution of the 
dispute through an impartial hearing held within the time period 
specified in paragraph (e)(1) of this section or any other rights 
provided under this part. At any point during the mediation process, 
either party or the mediator may elect to terminate the mediation. In 
the event mediation is terminated, either party may pursue resolution 
through an impartial hearing;
    (iii) The mediation process is conducted by a qualified and 
impartial mediator, as defined in Sec.  361.5(c)(43), who must be 
selected from a list of qualified and impartial mediators maintained by 
the State--
    (A) On a random basis;
    (B) By agreement between the director of the designated State unit 
and the applicant or eligible individual or, as appropriate, the 
individual's representative; or
    (C) In accordance with a procedure established in the State for 
assigning mediators, provided this procedure ensures the neutrality of 
the mediator assigned; and
    (iv) Mediation sessions are scheduled and conducted in a timely 
manner and are held in a location and manner that is convenient to the 
parties to the dispute.
    (3) Discussions that occur during the mediation process must be 
kept confidential and may not be used as evidence in any subsequent due 
process hearings or civil proceedings, and the parties to the mediation 
process may be required to sign a confidentiality pledge prior to the 
commencement of the process.
    (4) An agreement reached by the parties to the dispute in the 
mediation process must be described in a written mediation agreement 
that is developed by the parties with the assistance of the qualified 
and impartial mediator and signed by both parties. Copies of the 
agreement must be sent to both parties.
    (5) The costs of the mediation process must be paid by the State. 
The State is not required to pay for any costs related to the 
representation of an applicant or eligible individual authorized under 
paragraph (b)(3)(ii) of this section.
    (e) Impartial due process hearings. The State unit must establish 
and implement formal review procedures, as required under paragraph 
(b)(1)(i) of this section, that provide that--
    (1) hearing conducted by an impartial hearing officer, selected in 
accordance with paragraph (f) of this section, must be held within 60 
days of an applicant's or eligible individual's request for review of a 
determination made by personnel of the State unit that affects the 
provision of vocational rehabilitation services to the individual, 
unless informal resolution or a mediation agreement is achieved prior 
to the 60th day or the parties agree to a specific extension of time;
    (2) In addition to the rights described in paragraph (b)(3) of this 
section, the applicant or eligible individual or, if appropriate, the 
individual's representative must be given the opportunity to present 
witnesses during the hearing and to examine all witnesses and other 
relevant sources of information and evidence;
    (3) The impartial hearing officer must--
    (i) Make a decision based on the provisions of the approved 
vocational rehabilitation services portion of the Unified or Combined 
State Plan, the Act, Federal vocational rehabilitation regulations, and 
State regulations and policies that are consistent with Federal 
requirements; and
    (ii) Provide to the individual or, if appropriate, the individual's 
representative and to the State unit a full written report of the 
findings and grounds for the decision within 30 days of the completion 
of the hearing; and
    (4) The hearing officer's decision is final, except that a party 
may request an impartial review under paragraph (g)(1) of this section 
if the State has established procedures for that review, and a party 
involved in a hearing may bring a civil action under paragraph (i) of 
this section.
    (f) Selection of impartial hearing officers. The impartial hearing 
officer for a particular case must be selected--
    (1) From a list of qualified impartial hearing officers maintained 
by the State unit. Impartial hearing officers included on the list must 
be--
    (i) Identified by the State unit if the State unit is an 
independent commission; or
    (ii) Jointly identified by the State unit and the State 
Rehabilitation Council if the State has a Council; and
    (2)(i) On a random basis; or
    (ii) By agreement between the director of the designated State unit 
and the applicant or eligible individual or, as appropriate, the 
individual's representative.
    (g) Administrative review of hearing officer's decision. The State 
may establish procedures to enable a party who is dissatisfied with the 
decision of the impartial hearing officer to seek an impartial 
administrative review of the decision under paragraph (e)(3) of this 
section in accordance with the following requirements:
    (1) A request for administrative review under paragraph (g) of this 
section must be made within 20 days of the mailing of the impartial 
hearing officer's decision.
    (2) Administrative review of the hearing officer's decision must be 
conducted by--
    (i) The chief official of the designated State agency if the State 
has established both a designated State agency and a designated State 
unit under Sec.  361.13(b); or
    (ii) An official from the office of the Governor.
    (3) The reviewing official described in paragraph (g)(2)(i) of this 
section--
    (i) Provides both parties with an opportunity to submit additional 
evidence and information relevant to a final decision concerning the 
matter under review;
    (ii) May not overturn or modify the hearing officer's decision, or 
any part of that decision, that supports the position of the applicant 
or eligible individual unless the reviewing official concludes, based 
on clear and convincing evidence, that the decision of the impartial 
hearing officer is clearly erroneous on the basis of being contrary to 
the approved vocational rehabilitation services portion of the Unified 
or Combined State Plan, the Act, Federal vocational rehabilitation 
regulations, or State regulations and policies that are consistent with 
Federal requirements;
    (iii) Makes an independent, final decision following a review of 
the entire hearing record and provides the decision in writing, 
including a full report of the findings and the statutory, regulatory, 
or policy grounds for the decision, to the applicant or eligible 
individual or, as appropriate, the individual's representative and to 
the State unit within 30 days of the request for administrative review 
under paragraph (g)(1) of this section; and
    (iv) May not delegate the responsibility for making the final 
decision under paragraph (g) of this section to any officer or employee 
of the designated State unit.

[[Page 21137]]

    (4) The reviewing official's decision under paragraph (g) of this 
section is final unless either party brings a civil action under 
paragraph (i) of this section.
    (h) Implementation of final decisions. If a party brings a civil 
action under paragraph (h) of this section to challenge the final 
decision of a hearing officer under paragraph (e) of this section or to 
challenge the final decision of a State reviewing official under 
paragraph (g) of this section, the final decision of the hearing 
officer or State reviewing official must be implemented pending review 
by the court.
    (i) Civil action. (1) Any party who disagrees with the findings and 
decision of an impartial hearing officer under paragraph (e) of this 
section in a State that has not established administrative review 
procedures under paragraph (g) of this section and any party who 
disagrees with the findings and decision under paragraph (g)(3)(iii) of 
this section have a right to bring a civil action with respect to the 
matter in dispute. The action may be brought in any State court of 
competent jurisdiction or in a district court of the United States of 
competent jurisdiction without regard to the amount in controversy.
    (2) In any action brought under paragraph (i) of this section, the 
court--
    (i) Receives the records related to the impartial due process 
hearing and the records related to the administrative review process, 
if applicable;
    (ii) Hears additional evidence at the request of a party; and
    (iii) Basing its decision on the preponderance of the evidence, 
grants the relief that the court determines to be appropriate.
    (j) State fair hearing board. A fair hearing board as defined in 
Sec.  361.5(c)(21) is authorized to carry out the responsibilities of 
the impartial hearing officer under paragraph (e) of this section in 
accordance with the following criteria:
    (1) The fair hearing board may conduct due process hearings either 
collectively or by assigning responsibility for conducting the hearing 
to one or more members of the fair hearing board.
    (2) The final decision issued by the fair hearing board following a 
hearing under paragraph (j)(1) of this section must be made 
collectively by, or by a majority vote of, the fair hearing board.
    (3) The provisions of paragraphs (b)(1), (2), and (3) of this 
section that relate to due process hearings and of paragraphs (e), (f), 
(g), and (h) of this section do not apply to fair hearing boards under 
this paragraph (j).
    (k) Data collection. (1) The director of the designated State unit 
must collect and submit, at a minimum, the following data to the 
Secretary for inclusion each year in the annual report to Congress 
under section 13 of the Act:
    (i) A copy of the standards used by State reviewing officials for 
reviewing decisions made by impartial hearing officers under this 
section.
    (ii) The number of mediations held, including the number of 
mediation agreements reached.
    (iii) The number of hearings and reviews sought from impartial 
hearing officers and State reviewing officials, including the type of 
complaints and the issues involved.
    (iv) The number of hearing officer decisions that were not reviewed 
by administrative reviewing officials.
    (v) The number of hearing decisions that were reviewed by State 
reviewing officials and, based on these reviews, the number of hearing 
decisions that were--
    (A) Sustained in favor of an applicant or eligible individual;
    (B) Sustained in favor of the designated State unit;
    (C) Reversed in whole or in part in favor of the applicant or 
eligible individual; and
    (D) Reversed in whole or in part in favor of the State unit.
    (2) The State unit director also must collect and submit to the 
Secretary copies of all final decisions issued by impartial hearing 
officers under paragraph (e) of this section and by State review 
officials under paragraph (g) of this section.
    (3) The confidentiality of records of applicants and eligible 
individuals maintained by the State unit may not preclude the access of 
the Secretary to those records for the purposes described in this 
section.

(Authority: Section 102(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 722(c))

Subpart C--Financing of State Vocational Rehabilitation Programs

Sec.  361.60  Matching requirements.

    (a) Federal share. (1) General. Except as provided in paragraph 
(a)(2) of this section, the Federal share for expenditures made by the 
State under the vocational rehabilitation services portion of the 
Unified or Combined State Plan, including expenditures for the 
provision of vocational rehabilitation services and the administration 
of the vocational rehabilitation services portion of the Unified or 
Combined State Plan, is 78.7 percent.
    (2) Construction projects. The Federal share for expenditures made 
for the construction of a facility for community rehabilitation program 
purposes may not be more than 50 percent of the total cost of the 
project.
    (b) Non-Federal share. (1) General. Except as provided in paragraph 
(b)(2) and (b)(3) of this section, expenditures made under the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan to meet the non-Federal share under this section must be 
consistent with the provisions of 2 CFR 200.306(b).
    (2) Third party in-kind contributions. Third party in-kind 
contributions specified in 2 CFR 200.306(b) may not be used to meet the 
non-Federal share under this section.
    (3) Contributions by private entities. Expenditures made from those 
cash contributions provided by private organizations, agencies, or 
individuals and that are deposited in the State agency's account or, if 
applicable, sole local agency's account, in accordance with State law 
prior to their expenditure and that are earmarked, under a condition 
imposed by the contributor, may be used as part of the non-Federal 
share under this section if the funds are earmarked for--
    (i) Meeting in whole or in part the State's share for establishing 
a community rehabilitation program or constructing a particular 
facility for community rehabilitation program purposes;
    (ii) Particular geographic areas within the State for any purpose 
under the vocational rehabilitation services portion of the Unified or 
Combined State Plan, other than those described in paragraph (b)(3)(i) 
of this section, in accordance with the following criteria:
    (A) Before funds that are earmarked for a particular geographic 
area may be used as part of the non-Federal share, the State must 
notify the Secretary that the State cannot provide the full non-Federal 
share without using these funds.
    (B) Funds that are earmarked for a particular geographic area may 
be used as part of the non-Federal share without requesting a waiver of 
statewideness under Sec.  361.26.
    (C) Except as provided in paragraph (b)(3)(i) of this section, all 
Federal funds must be used on a statewide basis consistent with Sec.  
361.25, unless a waiver of statewideness is obtained under Sec.  
361.26; and
    (iii) Any other purpose under the vocational rehabilitation 
services portion of the Unified or Combined State Plan, provided the 
expenditures do not benefit in any way the donor, employee, officer, or 
agent, any member

[[Page 21138]]

of his or her immediate family, his or her partner, an individual with 
whom the donor has a close personal relationship, or an individual, 
entity, or organization with whom the donor shares a financial or other 
interest. The Secretary does not consider a donor's receipt from the 
State unit of a subaward or contract with funds allotted under this 
part to be a benefit for the purposes of this paragraph if the subaward 
or contract is awarded under the State's regular competitive 
procedures.

(Authority: Sections 7(14), 101(a)(3), 101(a)(4) and 104 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(14), 
721(a)(3), 721(a)(4) and 724)

    Example for paragraph (b)(3): Contributions may be earmarked in 
accordance with Sec.  361.60(b)(3)(iii) for providing particular 
services (e.g., rehabilitation technology services); serving 
individuals with certain types of disabilities (e.g., individuals who 
are blind), consistent with the State's order of selection, if 
applicable; providing services to special groups that State or Federal 
law permits to be targeted for services (e.g., students with 
disabilities who are receiving special education services), consistent 
with the State's order of selection, if applicable; or carrying out 
particular types of administrative activities permissible under State 
law. Contributions also may be restricted to particular geographic 
areas to increase services or expand the scope of services that are 
available statewide under the vocational rehabilitation services 
portion of the Unified or Combined State Plan in accordance with the 
requirements in Sec.  361.60(b)(3)(ii).

Sec.  361.61  Limitation on use of funds for construction expenditures.

    No more than 10 percent of a State's allotment for any fiscal year 
under section 110 of the Act may be spent on the construction of 
facilities for community rehabilitation program purposes.

(Authority: Section 101(a)(17)(A) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 721(a)(17)(A))

Sec.  361.62  Maintenance of effort requirements.

    (a) General requirements. The Secretary reduces the amount 
otherwise payable to a State for any fiscal year by the amount by which 
the total expenditures from non-Federal sources under the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
for any previous fiscal year were less than the total of those 
expenditures for the fiscal year two years prior to that previous 
fiscal year.
    (b) Specific requirements for construction of facilities. If the 
State provides for the construction of a facility for community 
rehabilitation program purposes, the amount of the State's share of 
expenditures for vocational rehabilitation services under the plan, 
other than for the construction of a facility for community 
rehabilitation program purposes or the establishment of a facility for 
community rehabilitation purposes, must be at least equal to the 
expenditures for those services for the second prior fiscal year.
    (c) Separate State agency for vocational rehabilitation services 
for individuals who are blind. If there is a separate part of the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan administered by a separate State agency to provide 
vocational rehabilitation services for individuals who are blind--
    (1) Satisfaction of the maintenance of effort requirements under 
paragraphs (a) and (b) of this section is determined based on the total 
amount of a State's non-Federal expenditures under both parts of the 
vocational rehabilitation services portion of the Unified or Combined 
State Plan; and
    (2) If a State fails to meet any maintenance of effort requirement, 
the Secretary reduces the amount otherwise payable to the State for any 
fiscal year under each part of the plan in direct proportion to the 
amount by which non-Federal expenditures under each part of the plan in 
any previous fiscal year were less than they were for that part of the 
plan for the fiscal year 2 years prior to that previous fiscal year.
    (d) Waiver or modification. (1) The Secretary may waive or modify 
the maintenance of effort requirement in paragraph (a) of this section 
if the Secretary determines that a waiver or modification is necessary 
to permit the State to respond to exceptional or uncontrollable 
circumstances, such as a major natural disaster or a serious economic 
downturn, that--
    (i) Cause significant unanticipated expenditures or reductions in 
revenue that result in a general reduction of programs within the 
State; or
    (ii) Require the State to make substantial expenditures in the 
vocational rehabilitation program for long-term purposes due to the 
one-time costs associated with the construction of a facility for 
community rehabilitation program purposes, the establishment of a 
facility for community rehabilitation program purposes, or the 
acquisition of equipment.
    (2) The Secretary may waive or modify the maintenance of effort 
requirement in paragraph (b) of this section or the 10 percent 
allotment limitation in Sec.  361.61 if the Secretary determines that a 
waiver or modification is necessary to permit the State to respond to 
exceptional or uncontrollable circumstances, such as a major natural 
disaster, that result in significant destruction of existing facilities 
and require the State to make substantial expenditures for the 
construction of a facility for community rehabilitation program 
purposes or the establishment of a facility for community 
rehabilitation program purposes in order to provide vocational 
rehabilitation services.
    (3) A written request for waiver or modification, including 
supporting justification, must be submitted to the Secretary for 
consideration as soon as the State has determined that it has failed to 
satisfy its maintenance of effort requirement due to an exceptional or 
uncontrollable circumstance, as described in paragraphs (d)(1) and (2) 
of this section.

(Authority: Sections 101(a)(17) and 111(a)(2) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 721(a)(17) and 731(a)(2))

Sec.  361.63  Program income.

    (a) Definition. For purposes of this section, program income means 
gross income received by the State that is directly generated by a 
supported activity under this part.
    (b) Sources. Sources of program income include, but are not limited 
to: Payments from the Social Security Administration for assisting 
Social Security beneficiaries and recipients to achieve employment 
outcomes; payments received from workers' compensation funds; payments 
received by the State agency from insurers, consumers, or others for 
services to defray part or all of the costs of services provided to 
particular individuals; and income generated by a State-operated 
community rehabilitation program for activities authorized under this 
part.
    (c) Use of program income. (1) Except as provided in paragraph 
(c)(2) of this section, program income, whenever earned, must be used 
for the provision of vocational rehabilitation services and the 
administration of the vocational rehabilitation services portion of the 
Unified or Combined State Plan. Program income--
    (i) Is considered earned in the fiscal year in which it is 
received; and
    (ii) Must be disbursed during the period of performance of the 
award, prior to requesting additional cash

[[Page 21139]]

payments, in accordance with 2 CFR 200.305(b)(5).
    (2) Payments provided to a State from the Social Security 
Administration for assisting Social Security beneficiaries and 
recipients to achieve employment outcomes may also be used to carry out 
programs under part B of title I of the Act (client assistance), title 
VI of the Act (supported employment), and title VII of the Act 
(independent living).
    (3) The State is authorized to treat program income using the 
deduction or addition alternative in accordance with 2 CFR 
200.307(e)(1) and (2).
    (4) Program income cannot be used to meet the non-Federal share 
requirement under Sec.  361.60.

(Authority: Sections 12(c) and 108 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 728; 2 CFR part 200)

Sec.  361.64  Obligation of Federal funds.

    (a) Except as provided in paragraph (b) of this section, any 
Federal award funds, including reallotted funds, that are appropriated 
for a fiscal year to carry out a program under this part that are not 
obligated by the State by the beginning of the succeeding fiscal year 
remain available for obligation by the State during that succeeding 
fiscal year.
    (b) Federal funds appropriated for a fiscal year remain available 
for obligation in the succeeding fiscal year only to the extent that 
the State met the matching requirement for those Federal funds by 
obligating, in accordance with 34 CFR 76.707, the non-Federal share in 
the fiscal year for which the funds were appropriated.

(Authority: Section 19 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 716)

Sec.  361.65  Allotment and payment of Federal funds for vocational 
rehabilitation services.

    (a) Allotment. (1) The allotment of Federal funds for vocational 
rehabilitation services for each State is computed in accordance with 
the requirements of section 110 of the Act, and payments are made to 
the State on a quarterly basis, unless some other period is established 
by the Secretary.
    (2) If the vocational rehabilitation services portion of the 
Unified or Combined State Plan designates one State agency to 
administer, or supervise the administration of, the part of the plan 
under which vocational rehabilitation services are provided for 
individuals who are blind and another State agency to administer the 
rest of the plan, the division of the State's allotment is a matter for 
State determination.
    (3) Reservation for pre-employment transition services. (i) 
Pursuant to section 110(d) of the Act, the State must reserve at least 
15 percent of the State's allotment, received in accordance with 
section 110(a) of the Act for the provision of pre-employment 
transition services, as described at Sec.  361.48(a) of this part.
    (ii) The funds reserved in accordance with paragraph (3)(i) of this 
section--
    (A) Must only be used for pre-employment transition services 
authorized in Sec.  361.48(a); and:
    (B) Must not be used to pay for administrative costs associated 
with the provision of such services or any other vocational 
rehabilitation services.
    (b) Reallotment. (1) The Secretary determines not later than 45 
days before the end of a fiscal year which States, if any, will not use 
their full allotment.
    (2) As soon as possible, but not later than the end of the fiscal 
year, the Secretary reallots these funds to other States that can use 
those additional funds during the period of performance of the award, 
provided the State can meet the matching requirement by obligating the 
non-Federal share of any reallotted funds in the fiscal year for which 
the funds were appropriated.
    (3) In the event more funds are requested by agencies than are 
available, the Secretary will determine the process for allocating 
funds available for reallotment.
    (4) Funds reallotted to another State are considered to be an 
increase in the recipient State's allotment for the fiscal year for 
which the funds were appropriated.

(Authority: Sections 12(c), 110 and 111 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c), 730, and 731)

Subpart D--[Reserved]

Subpart E--[Reserved]

Subpart F--[Reserved]

0
2. Part 363 is revised to read as follows:

PART 363--THE STATE SUPPORTED EMPLOYMENT SERVICES PROGRAM

Subpart A--General
Sec.
363.1 What is the State Supported Employment Services Program?
363.2 Who is eligible for an award?
363.3 Who is eligible for services?
363.4 What are the authorized activities under the State Supported 
Employment Services program?
363.5 What regulations apply?
363.6 What definitions apply?
Subpart B--How Does a State Apply for a Grant?
363.10 What documents must a State submit to receive a grant?
363.11 What are the vocational rehabilitation services portion of 
the Unified or Combined State Plan supplement requirements?
Subpart C--How Are State Supported Employment Services Programs 
Financed?
363.20 How does the Secretary allocate funds?
363.21 How does the Secretary reallocate funds?
363.22 How are funds reserved for youth with the most significant 
disabilities?
363.23 What are the matching requirements?
363.24 What is program income and how may it be used?
363.25 What is the period of availability of funds?
Subpart D--[Reserved]
Subpart E--[Reserved]
Subpart F--What Post-Award Conditions Must Be Met by a State?
363.50 What collaborative agreements must the State develop?
363.51 What are the allowable administrative costs?
363.52 What are the information collection and reporting 
requirements?
363.53 What requirements must a State meet before it provides for 
the transition of an individual to extended services?
363.54 When will an individual be considered to have achieved an 
employment outcome in supported employment?
363.55 What notice requirements apply to this program?

    Authority: Sections 602-608 of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 795g-795m, unless otherwise noted.

Subpart A--General

Sec.  363.1  What is the State Supported Employment Services Program?

    (a) Under the State supported employment services program, the 
Secretary provides grants to assist States in developing and 
implementing collaborative programs with appropriate entities to 
provide programs of supported employment services for individuals with 
the most significant disabilities, including youth with the most 
significant disabilities, to enable them to achieve an employment 
outcome of supported employment in competitive integrated employment. 
Grants made under the State supported employment services program 
supplement a State's vocational rehabilitation program grants under 34 
CFR part 361.
    (b) For purposes of this part, ``supported employment'' means 
competitive integrated employment, including customized employment, or 
employment in an integrated work setting in which individuals with the 
most significant disabilities are working

[[Page 21140]]

on a short-term basis toward competitive integrated employment, that is 
individualized and customized consistent with the unique strengths, 
abilities, interests, and informed choice of the individuals with 
ongoing support services for individuals with the most significant 
disabilities--
    (1)(i) For whom competitive integrated employment has not 
historically occurred; or
    (ii) For whom competitive integrated employment has been 
interrupted or intermittent as a result of a significant disability; 
and
    (2) Who, because of the nature and severity of the disability, need 
intensive supported employment services, and extended services after 
the transition from support provided by the designated State unit in 
order to perform the work.
    (c) For purposes of this part, an individual with the most 
significant disabilities, whose supported employment in an integrated 
setting does not satisfy the criteria of competitive integrated 
employment, as defined at 34 CFR 361.5(c)(9), is considered to be 
working on a short-term basis toward competitive integrated employment 
so long as the individual can reasonably anticipate achieving 
competitive integrated employment within six months of the individual 
entering supported employment.

(Authority: Sections 7(38), 7(39), 12(c), and 602 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C., 705(38), 705(39), 
709(c), and 795g)

Sec.  363.2  Who is eligible for an award?

    Any State that submits the documentation required by Sec.  363.10, 
as part of the vocational rehabilitation services portion of the 
Unified or Combined State Plan under 34 CFR part 361, is eligible for 
an award under this part.

(Authority: Section 606(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795k(a))

Sec.  363.3  Who is eligible for services?

    A State may provide services under this part to any individual, 
including a youth with a disability, if--
    (a) The individual has been determined to be--
    (1) Eligible for vocational rehabilitation services in accordance 
with 34 CFR 361.42; and
    (2) An individual with the most significant disabilities;
    (b) For purposes of activities carried out under Sec.  363.4(a)(2) 
of this part, the individual is a youth with a disability, as defined 
at 34 CFR 361.5(c)(59), who satisfies the requirements of this section; 
and
    (c) Supported employment has been identified as the appropriate 
employment outcome for the individual on the basis of a comprehensive 
assessment of rehabilitation needs, as defined at 34 CFR 361.5(c)(5), 
including an evaluation of rehabilitation, career, and job needs.

(Authority: Section 605 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795j)

Sec.  363.4  What are the authorized activities under the State 
Supported Employment Services program?

    (a) The State may use funds allotted under this part to--
    (1) Provide supported employment services, as defined at 34 CFR 
361.5(c)(54);
    (2) Provide extended services, as defined at 34 CFR 361.5(c)(19), 
to youth with the most significant disabilities, in accordance with 
Sec.  363.11(f), for a period of time not to exceed four years; and
    (3) With funds reserved, in accordance with Sec.  363.22 for the 
provision of supported employment services to youth with the most 
significant disabilities, leverage other public and private funds to 
increase resources for extended services and expand supported 
employment opportunities.
    (b) Except as provided in paragraph (a)(2) of this section, a State 
may not use funds under this part to provide extended services to 
individuals with the most significant disabilities.
    (c) Nothing in this part will be construed to prohibit a State from 
providing--
    (1) Supported employment services in accordance with the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
submitted under 34 CFR part 361 by using funds made available through a 
State allotment under that part.
    (2) Discrete postemployment services in accordance with 34 CFR 
361.48(b) by using funds made available under 34 CFR part 361 to an 
individual who is eligible under this part.
    (d) A State must coordinate with the entities described in Sec.  
363.50(a) regarding the services provided to individuals with the most 
significant disabilities, including youth with the most significant 
disabilities, under this part and under 34 CFR part 361 to ensure that 
the services are complementary and not duplicative.

(Authority: Sections 7(39), 12(c), 604, 606(b)(6), and 608 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(39), 709(c), 
795i, 795k(b)(6), and 795m)

Sec.  363.5  What regulations apply?

    The following regulations apply to the State supported employment 
services program:
    (a) The Education Department General Administrative Regulations 
(EDGAR) as follows:
    (1) 34 CFR part 76 (State-Administered Programs).
    (2) 34 CFR part 77 (Definitions that Apply to Department 
Regulations).
    (3) 34 CFR part 79 (Intergovernmental Review of Department of 
Education Programs and Activities).
    (4) 34 CFR part 81 (General Education Provisions Act--Enforcement).
    (5) 34 CFR part 82 (New Restrictions on Lobbying).
    (b) The regulations in this part 363.
    (c) The following regulations in 34 CFR part 361 (The State 
Vocational Rehabilitation Services Program): Sec. Sec.  361.5, 361.31, 
361.32, 361.34, 361.35, 361.39, 361.40, 361.41, 361.42, 361.47(a), 
361.48, 361.49, and 361.53.
    (d) 2 CFR part 200 (Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards), as adopted in 2 
CFR part 3474.
    (e) 2 CFR part 180 (OMB Guidelines to Agencies on Governmentwide 
Debarment and Suspension (Nonprocurement)), as adopted in 2 CFR part 
3485.

(Authority: Section 12(c) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 709(c))

Sec.  363.6  What definitions apply?

    The following definitions apply to this part;
    (a) Definitions in 34 CFR part 361.
    (b) Definitions in 34 CFR part 77.
    (c) Definitions in 2 CFR part 200, subpart A.

(Authority: Sections 7 and 12(c) of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 705 and 709(c))

Subpart B--How Does a State Apply for a Grant?

Sec.  363.10  What documents must a State submit to receive a grant?

    (a) To be eligible to receive a grant under this part, a State must 
submit to the Secretary, as part of the vocational rehabilitation 
services portion of the Unified or Combined State Plan under 34 CFR 
part 361, a State plan supplement that meets the requirements of Sec.  
363.11.
    (b) A State must submit revisions to the vocational rehabilitation 
services portion of the Unified or Combined State Plan supplement 
submitted under this part as may be necessary.

[[Page 21141]]

(Authority: Section 606(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795k(a))

Sec.  363.11  What are the vocational rehabilitation services portion 
of the Unified or Combined State Plan supplement requirements?

    Each State plan supplement, submitted in accordance with Sec.  
363.10, must--
    (a) Designate a designated State unit or, as applicable, units, as 
defined in 34 CFR 361.5(c)(13), as the State agency or agencies to 
administer the Supported Employment program under this part;
    (b) Summarize the results of the needs assessment of individuals 
with most significant disabilities, including youth with the most 
significant disabilities, conducted under 34 CFR 361.29(a), with 
respect to the rehabilitation and career needs of individuals with most 
significant disabilities and their need for supported employment 
services. The results of the needs assessment must also address needs 
relating to coordination;
    (c) Describe the quality, scope, and extent of supported employment 
services to be provided to eligible individuals with the most 
significant disabilities under this part, including youth with the most 
significant disabilities;
    (d) Describe the State's goals and plans with respect to the 
distribution of funds received under Sec.  363.20;
    (e) Demonstrate evidence of the designated State unit's efforts to 
identify and make arrangements, including entering into cooperative 
agreements, with--
    (1) Other State agencies and other appropriate entities to assist 
in the provision of supported employment services; and
    (2) Other public or non-profit agencies or organizations within the 
State, employers, natural supports, and other entities with respect to 
the provision of extended services;
    (f) Describe the activities to be conducted for youth with the most 
significant disabilities with the funds reserved in accordance with 
Sec.  363.22, including-
    (1) The provision of extended services to youth with the most 
significant disabilities for a period not to exceed four years, in 
accordance with Sec.  363.4(a)(2); and
    (2) How the State will use supported employment funds reserved 
under Sec.  363.22 to leverage other public and private funds to 
increase resources for extended services and expand supported 
employment opportunities for youth with the most significant 
disabilities;
    (g) Assure that--
    (1) Funds made available under this part will only be used to 
provide authorized supported employment services to individuals who are 
eligible under this part to receive such services;
    (2) The comprehensive assessments of individuals with significant 
disabilities, including youth with the most significant disabilities, 
conducted under 34 CFR part 361 will include consideration of supported 
employment as an appropriate employment outcome;
    (3) An individualized plan for employment, as described at 34 CFR 
361.45 and 361.46, will be developed and updated, using funds received 
under 34 CFR part 361, in order to--
    (i) Specify the supported employment services to be provided, 
including, as appropriate, transition services and pre-employment 
transition services to be provided for youth with the most significant 
disabilities;
    (ii) Specify the expected extended services needed, including the 
extended services that may be provided under this part to youth with 
the most significant disabilities in accordance with an approved 
individualized plan for employment for a period not to exceed four 
years; and
    (iii) Identify, as appropriate, the source of extended services, 
which may include natural supports, programs, or other entities, or an 
indication that it is not possible to identify the source of extended 
services at the time the individualized plan for employment is 
developed;
    (4) The State will use funds provided under this part only to 
supplement, and not supplant, the funds received under 34 CFR part 361, 
in providing supported employment services specified in the 
individualized plan for employment;
    (5) Services provided under an individualized plan for employment 
will be coordinated with services provided under other individualized 
plans established under other Federal or State programs;
    (6) To the extent job skills training is provided, the training 
will be provided onsite;
    (7) Supported employment services will include placement in an 
integrated setting based on the unique strengths, resources, interests, 
concerns, abilities, and capabilities of individuals with the most 
significant disabilities, including youth with the most significant 
disabilities;
    (8) The designated State agency or agencies, as described in 
paragraph (a) of this section, will expend no more than 2.5 percent of 
the State's allotment under this part for administrative costs of 
carrying out this program; and
    (9) The designated State agency or agencies will provide, directly 
or indirectly through public or private entities, non-Federal 
contributions in an amount that is not less than 10 percent of the 
costs of carrying out supported employment services provided to youth 
with the most significant disabilities with the funds reserved for such 
purpose under Sec.  363.22; and
    (h) Contain any other information and be submitted in the form and 
in accordance with the procedures that the Secretary may require.

(Authority: Section 606 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795k)

Subpart C--How Are State Supported Employment Services Programs 
Financed?

Sec.  363.20  How does the Secretary allocate funds?

    (a) States. The Secretary will allot the sums appropriated for each 
fiscal year to carry out the activities of this part among the States 
on the basis of relative population of each State, except that--
    (1) No State will receive less than $250,000, or 1/3 of 1 percent 
of the sums appropriated for the fiscal year for which the allotment is 
made, whichever amount is greater; and
    (2) If the sums appropriated to carry out this part for the fiscal 
year exceed the sums appropriated to carry out this part (as in effect 
on September 30, 1992) in fiscal year 1992 by $1,000,000 or more, no 
State will receive less than $300,000, or 1/3 of 1 percent of the sums 
appropriated for the fiscal year for which the allotment is made, 
whichever amount is greater.
    (b) Certain Territories. (1) For the purposes of this part, Guam, 
American Samoa, the United States Virgin Islands, and the Commonwealth 
of the Northern Mariana Islands are not considered to be States.
    (2) Each jurisdiction described in paragraph (b)(1) of this section 
will be allotted not less than 1/8 of 1 percent of the amounts 
appropriated for the fiscal year for which the allotment is made.

(Authority: Section 603(a) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795h(a))

Sec.  363.21  How does the Secretary reallocate funds?

    (a) Whenever the Secretary determines that any amount of an 
allotment to a State under Sec.  363.20 for any fiscal year will not be 
expended by such State for carrying out the provisions of this part, 
the Secretary will make such amount available for carrying out the 
provisions of this part to one or more of the States that the

[[Page 21142]]

Secretary determines will be able to use additional amounts during such 
year for carrying out such provisions.
    (b) Any amount made available to a State for any fiscal year in 
accordance with paragraph (a) will be regarded as an increase in the 
State's allotment under this part for such year.

(Authority: Section 603(b) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 795h(b))

Sec.  363.22  How are funds reserved for youth with the most 
significant disabilities?

    A State that receives an allotment under this part must reserve and 
expend 50 percent of such allotment for the provision of supported 
employment services, including extended services, to youth with the 
most significant disabilities in order to assist those youth in 
achieving an employment outcome in supported employment.

(Authority: Sections 12(c) and 603(d) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 795h(d))

Sec.  363.23  What are the matching requirements?

    (a) Non-Federal Share. (1) For funds allotted under Sec.  363.20 
and not reserved under Sec.  363.22 for the provision of supported 
employment services to youth with the most significant disabilities, 
there is no non-Federal share requirement.
    (2)(i) For funds allotted under Sec.  363.20 and reserved under 
Sec.  363.22 for the provision of supported employment services to 
youth with the most significant disabilities, a designated State agency 
must provide non-Federal expenditures in an amount that is not less 
than 10 percent of the total expenditures made with the reserved funds 
for the provision of supported employment services to youth with the 
most significant disabilities, including extended services.
    (ii) In the event that a designated State agency uses more than 50 
percent of its allotment under this part to provide supported 
employment services to youth with the most significant disabilities as 
required by Sec.  363.22, there is no requirement that a designated 
State agency provide non-Federal expenditures to match the excess 
Federal funds spent for this purpose.
    (2) Except as provided under paragraphs (b) and (c) of this 
section, non-Federal expenditures made under the vocational 
rehabilitation services portion of the Unified or Combined State Plan 
supplement to meet the non-Federal share requirement under this section 
must be consistent with the provision of 2 CFR 200.306.
    (b) Third-party in-kind contributions. Third-party in-kind 
contributions, as described in 2 CFR 200.306(b), may not be used to 
meet the non-Federal share under this section.
    (c)(1) Contributions by private entities. Expenditures made from 
contributions by private organizations, agencies, or individuals that 
are deposited into the sole account of the State agency, in accordance 
with State law may be used as part of the non-Federal share under this 
section, provided the expenditures under the vocational rehabilitation 
services portion of the Unified or Combined State Plan supplement, as 
described in Sec.  363.11, do not benefit in any way the donor, an 
individual to whom the donor is related by blood or marriage or with 
whom the donor shares a financial interest.
    (2) The Secretary does not consider a donor's receipt from the 
State unit of a contract or subaward with funds allotted under this 
part to be a benefit for the purpose of this paragraph if the contract 
or subaward is awarded under the State's regular competitive 
procedures.

(Authority: Sections 12(c) and 606(b)(7)(I) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 709(c) and 795k(b)(7)(I))

Sec.  363.24  What is program income and how may it be used?

    (a) Definition. (1) Program income means gross income earned by the 
State that is directly generated by authorized activities supported 
under this part.
    (2) Program income received through the transfer of Social Security 
Administration payments from the State Vocational Rehabilitation 
Services program, in accordance with 34 CFR 361.63(c)(2), will be 
treated as program income received under this part.
    (b) Use of program income. (1) Program income must be used for the 
provision of services authorized under Sec.  363.4. Program income 
earned or received during the fiscal year must be disbursed during the 
period of performance of the award, prior to requesting additional cash 
payments in accordance with 2 CFR 200.305(b)(5).
    (2) States are authorized to treat program income as--
    (i) A deduction from total allowable costs charged to a Federal 
grant, in accordance with 2 CFR 200.307(e)(1); or
    (ii) An addition to the grant funds to be used for additional 
allowable program expenditures, in accordance with 2 CFR 200.307(e)(2).

(Authority: Sections 12(c) and 108 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 728)

Sec.  363.25  What is the period of availability of funds?

    (a) Except as provided in paragraph (b) of this section, any 
Federal award funds, including reallotted funds, that are appropriated 
for a fiscal year to carry out a program under this part that are not 
obligated by the State by the beginning of the succeeding fiscal year, 
and any program income received during a fiscal year that is not 
obligated or expended by the State prior to the beginning of the 
succeeding fiscal year in which the program income was received, remain 
available for obligation by the State during that succeeding fiscal 
year.
    (b) Federal funds appropriated for a fiscal year and reserved for 
the provision of supported employment services to youth with the most 
significant disabilities, in accordance with Sec.  363.22 of this part, 
remain available for obligation in the succeeding fiscal year only to 
the extent that the State met the matching requirement, as described at 
Sec.  363.23, for those Federal funds by obligating, in accordance with 
34 CFR 76.707, the non-Federal share in the fiscal year for which the 
funds were appropriated.

(Authority: Sections 12(c) and 19 of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 709(c) and 716)

Subpart D--[Reserved]

Subpart E--[Reserved]

Subpart F--What Post-Award Conditions Must Be Met by a State?

Sec.  363.50  What collaborative agreements must the State develop?

    (a) A designated State unit must enter into one or more written 
collaborative agreements, memoranda of understanding, or other 
appropriate mechanisms with other public agencies, private nonprofit 
organizations, and other available funding sources, including employers 
and other natural supports, as appropriate, to assist with the 
provision of supported employment services and extended services to 
individuals with the most significant disabilities in the State, 
including youth with the most significant disabilities, to enable them 
to achieve an employment outcome of supported employment in competitive 
integrated employment.
    (b) These agreements provide the mechanism for collaboration at the 
State level that is necessary to ensure the smooth transition from 
supported employment services to extended services, the transition of 
which is inherent to the definition of ``supported employment'' in 
Sec.  363.1(b). To that end,

[[Page 21143]]

the agreement may contain information regarding the--
    (1) Supported employment services to be provided, for a period not 
to exceed 24 months, by the designated State unit with funds received 
under this part.
    (2) Extended services to be provided to youth with the most 
significant disabilities, for a period not to exceed four years, by the 
designated State unit with the funds reserved under Sec.  363.22 of 
this part;
    (3) Extended services to be provided by other public agencies, 
private nonprofit organizations, or other sources, including employers 
and other natural supports, following the provision of authorized 
supported employment services, or extended services as appropriate for 
youth with the most significant disabilities, under this part; and
    (4) Collaborative efforts that will be undertaken by all relevant 
entities to increase opportunities for competitive integrated 
employment in the State for individuals with the most significant 
disabilities, especially youth with the most significant disabilities.

(Authority: Sections 7(38), 7(39), 12(c), 602, and 606(b) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(38), 705(39), 
709(c), 795g, and 795k(b))

Sec.  363.51  What are the allowable administrative costs?

    (a) A State may use funds under this part to pay for expenditures 
incurred in the administration of activities carried out under this 
part, consistent with the definition of administrative costs in 34 CFR 
361.5(c)(2).
    (b) A designated State agency may not expend more than 2.5 percent 
of a State's allotment under this part for administrative costs for 
carrying out the State supported employment program.

(Authority: Sections 7(1), 12(c), and 603(c) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 705(1), 709(c), and 795h(c))

Sec.  363.52  What are the information collection and reporting 
requirements?

    Each State agency designated in Sec.  363.11(a) of this part must 
collect and report separately the information required under 34 CFR 
361.40 for--
    (a) Eligible individuals receiving supported employment services 
under this part;
    (b) Eligible individuals receiving supported employment services 
under 34 CFR part 361;
    (c) Eligible youth receiving supported employment services and 
extended services under this part; and
    (d) Eligible youth receiving supported employment services under 34 
CFR part 361 and extended services.

(Authority: Sections 13 and 607 of the Rehabilitation Act of 1973, 
as amended; 29 U.S.C. 710 and 795l)

Sec.  363.53  What requirements must a State meet before it provides 
for the transition of an individual to extended services?

    A designated State unit must provide for the transition of an 
individual with the most significant disabilities, including youth with 
the most significant disabilities, to extended services no later than 
24 months after the individual enters supported employment, unless a 
longer period is established in the individualized plan for employment. 
Before assisting the individual in transitioning from supported 
employment services to extended services, the designated State unit 
must ensure--
    (a) The supported employment is--
    (1) In competitive integrated employment, including customized 
employment; or
    (2) In an integrated work setting in which individuals are working 
on a short-term basis, as described in Sec.  363.1(c), toward 
competitive integrated employment;
    (3) Individualized and customized consistent with the strengths, 
abilities, interests, and informed choice of the individual; and
    (b) The source of extended services for the individual has been 
identified so there will be no interruption of services.

(Authority: Sections 7(13), 7(38), 7(39), 12(c), 602, and 606(b) of 
the Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(13), 
705(38), 705(39), 709(c), 795g, and 795k(b))

Sec.  363.54  When will an individual be considered to have achieved an 
employment outcome in supported employment?

    An individual with the most significant disabilities, including a 
youth with the most significant disabilities, who is receiving services 
under this part will be determined to have achieved an employment 
outcome of supported employment if the individual--
    (a) Maintains supported employment for at least 90 days after the 
individual has--
    (1) Completed all supported employment services provided under this 
part, as well as any other services listed on the individualized plan 
for employment and provided under 34 CFR part 361; and
    (2) Begun extended services provided by either the designated State 
unit, in the case of a youth with a most significant disabilities 
receiving services with the funds reserved under Sec.  363.22, or 
another provider for all other individuals with the most significant 
disabilities;
    (b) Satisfies requirements for case closure, as set forth in 34 CFR 
361.56; and
    (c) Satisfies the requirement at Sec.  363.1(c) if the individual's 
supported employment is in an integrated setting, but is not in 
competitive integrated employment, as defined in 34 CFR 361.5(c)(9).

(Authority: Sections 7(38), 7(39), 12(c), and 602 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705(38), 705(39), 
709(c), and 795g)

Sec.  363.55  What notice requirements apply to this program?

    Each grantee must advise applicants for or recipients of services 
under this part, or as appropriate, the parents, family members, 
guardians, advocates, or authorized representatives of those 
individuals, including youth with the most significant disabilities, of 
the availability and purposes of the Client Assistance Program, 
including information on seeking assistance from that program.

(Authority: Section 20 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 717)

0
3. Part 397 is added to read as follows:

PART 397--LIMITATIONS ON USE OF SUBMINIMUM WAGE

Subpart A--General Provisions
Sec.
397.1 Purpose.
397.2 What is the Department of Education's jurisdiction under this 
part?
397.3 What rules of construction apply to this part?
397.4 What regulations apply?
397.5 What definitions apply?
Subpart B--Coordinated Documentation Procedures Related To Youth With 
Disabilities
397.10 What documentation process must the designated State unit 
develop?
Subpart C--Designated State Unit Responsibilities Prior To Youth With 
Disabilities Starting Subminimum Wage Employment
397.20 What are the responsibilities of a designated State unit to 
youth with disabilities who are known to be considering subminimum 
wage employment?
Subpart D--Local Educational Agency Responsibilities Prior To Youth 
With Disabilities Starting Subminimum Wage Employment
397.30 What are the responsibilities of a local educational agency 
to youth with disabilities who are known to be considering 
subminimum wage employment?

[[Page 21144]]

397.31 Are there any contracting limitations on educational agencies 
under this part?
Subpart E--Designated State Unit Responsibilities To Individuals With 
Disabilities During Subminimum Wage Employment
397.40 What are the responsibilities of a designated State unit for 
individuals with disabilities, regardless of age, who are employed 
at subminimum wage?
Subpart F--Review Of Documentation Process
397.50 What is the role of the designated State unit in the review 
of documentation process under this part?

    Authority: Section 511 of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 794g, unless otherwise noted.

Subpart A--General Provisions

Sec.  397.1  Purpose.

    (a) The purpose of this part is to set forth requirements the 
designated State units and State and local educational agencies must 
satisfy to ensure that individuals with disabilities, especially youth 
with disabilities, have a meaningful opportunity to prepare for, 
obtain, maintain, advance in, or regain competitive integrated 
employment, including supported or customized employment.
    (b) This part requires--
    (1) A designated State unit to provide youth with disabilities 
documentation demonstrating that they have completed certain 
requirements, as described in this part, prior to starting subminimum 
wage employment with entities holding special wage certificates under 
section 14(c) of the Fair Labor Standards Act of 1938 (29 U.S.C. 
214(c)), as defined in 397.5(d);
    (2) A designated State unit to provide, at certain prescribed 
intervals, career counseling and information and referral services, 
designed to promote opportunities for competitive integrated 
employment, to individuals with disabilities, regardless of age, who 
are known to be employed at a subminimum wage level for the duration of 
such employment; and
    (3) A designated State unit, in consultation with the State 
educational agency, to develop a, or utilize an existing, process to 
document completion of required activities under this part by a youth 
with a disability.
    (c) The provisions in this part authorize a designated State unit, 
or a representative of a designated State unit, to engage in the review 
of individual documentation required to be maintained by these entities 
under this part.
    (d) The provisions in this part work in concert with requirements 
in 34 CFR part 300, 361, and 363, and do not alter any requirements 
under those parts.

(Authority: Sections 12(c) and 511 of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 794g)

Sec.  397.2  What is the Department of Education's jurisdiction under 
this part?

    (a) The Department of Education has jurisdiction under this part to 
implement guidelines for--
    (1) Documentation requirements imposed on designated State units 
and local educational agencies;
    (2) Requirements related to the services that designated State 
units must provide to individuals regardless of age who are employed at 
the subminimum wage level; and
    (3) Requirements under Sec.  397.31 of this part.
    (b) Nothing in this part will be construed to grant to the 
Department of Education, or its grantees, jurisdiction over 
requirements set forth in the Fair Labor Standards Act, including those 
imposed on entities holding special wage certificates under section 
14(c) of that Act, which is administered by the Department of Labor.

(Authority: Sections 12(c), 511(b)(3), and 511(c) and (d) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 
794g(b)(3), 794g(c), and 794g(d))

Sec.  397.3  What rules of construction apply to this part?

    Nothing in this part will be construed to--
    (a) Change the purpose of the Rehabilitation Act, which is to 
empower individuals with disabilities to maximize opportunities for 
achieving competitive integrated employment;
    (b) Promote subminimum wage employment as a vocational 
rehabilitation strategy or employment outcome, as defined in 34 CFR 
361.5(c)(15); and
    (c) Affect the provisions of the Fair Labor Standards Act, as 
amended before or after July 22, 2014.

(Authority: Sections 12(c) and 511(b) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 794g(b))

Sec.  397.4  What regulations apply?

    (a) The regulations in 34 CFR part 300 governing the definition of 
transition services, and the Individualized Education Program 
requirements related to the development of postsecondary goals and the 
transition services needed to assist the eligible child in reaching 
those goals (Sec. Sec.  300.320(b), 300.321(b), 300.324(c), and 
300.43).
    (b) The regulations at 34 CFR part 361 governing the vocational 
rehabilitation program, especially those regarding eligibility 
determinations Sec.  361.42; individualized plans for employment Sec.  
361.45 and Sec.  361.46; provision of vocational rehabilitation 
services, including pre-employment transition services, transition 
services, and supported employment services Sec.  361.48; ineligibility 
determinations Sec.  361.43; and case closures Sec.  361.56.
    (c) The regulations at 29 CFR part 525 governing the employment of 
individuals with disabilities at subminimum wage rates pursuant to a 
certificate issued by the Secretary of the Department of Labor.
    (d) The regulations in this part 387.

(Authority: Sections 12(c), 102(a) and (b), 103(a), and 113 of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 709(c), 722(a) and 
(b), 723(a), and 733; sections 601(34) and 614(d)(1)(A)(i)(VIII) of 
the Individuals with Disabilities Education Act (20 U.S.C. 1401(34) 
and 1414(d)); and section 14(c) of the Fair Labor Standards Act (29 
U.S.C. 214(c))

Sec.  397.5  What definitions apply?

    (a) The following terms have the meanings given to them in 34 CFR 
Sec.  361.5(c):
    (1) Act;
    (2) Competitive integrated employment;
    (3) Customized employment;
    (4) Designated State unit;
    (5) Extended services;
    (6) Individual with a disability;
    (7) Individual with a most significant disability;
    (8) Individual's representative;
    (9) Individualized plan for employment;
    (10) Pre-employment transition services;
    (11) Student with a disability;
    (12) Supported employment;
    (13) Vocational rehabilitation services; and
    (14) Youth with a disability.
    (b) The following terms have the meanings given to them in 34 CFR 
part 300:
    (1) Local educational agency (Sec.  300.28);
    (2) State educational agency (Sec.  300.41); and
    (3) Transition services (Sec.  300.43).
    (c) The following terms have the meaning given to them in 29 CFR 
525.3 and section 6(a)(1) of the Fair Labor Standards Act (29 U.S.C. 
206(a)(1)):
    (1) Federal minimum wage has the meaning given to that term in 
section 6(a)(1) of the Fair Labor Standards Act (29 U.S.C. 206(a)(1)); 
and
    (2) Special wage certificate means a certificate issued to an 
employer under section 14(c) of the Fair Labor Standards

[[Page 21145]]

Act (29 U.S.C. 214(c)) and 29 CFR part 525 that authorizes payment of 
subminimum wages, wages less than the statutory minimum wage, to 
workers with disabilities for the work being performed.
    (d) For purposes of this part, entity means an employer, or a 
contractor or subcontractor of that employer, that holds a special wage 
certificate described in section 14(c) of the Fair Labor Standards Act 
(29 U.S.C. 214(c)).

(Authority: Sections 7, 12(c), and 511(a) and (f) of the 
Rehabilitation Act of 1973, as amended; 29 U.S.C. 705, 709(c), and 
794g(a) and (f); sections 601 and 614(d) of the Individuals with 
Disabilities Education Act, 20 U.S.C. 1401 and 1414(d); section 901 
of the Elementary and Secondary Education Act of 1965, 20 U.S.C. 
7801; and sections 6(a)(1) and 14(c) of the Fair Labor Standards 
Act, 29 U.S.C. 206(a)(1) and 29 U.S.C. 214(c))

Subpart B--Coordinated Documentation Procedures Related to Youth 
With Disabilities

Sec.  397.10  What documentation process must the designated State unit 
develop?

    (a) The designated State unit, in consultation with the State 
educational agency, must develop a new process, or utilize an existing 
process, to document the completion of the actions described in Sec.  
397.20 and Sec.  397.30 by a youth with a disability.
    (b) The documentation process must ensure that--
    (1) A designated State unit provides a youth with a disability 
documentation of completion of appropriate pre-employment transition 
services, in accordance with Sec.  361.48(a) and as required by Sec.  
397.20(a)(1);
    (2) In the case of a student with a disability, for actions 
described in Sec.  397.30--
    (i) The designated State unit will receive from the appropriate 
school official, responsible for the provision of transition services, 
documentation of completion of appropriate transition services under 
the Individuals with Disabilities Education Act, including those 
provided under section 614(d)(1)(A)(i)(VIII) (20 U.S.C. 
1414(d)(1)(A)(i)(VIII));
    (ii) The designated State unit must provide documentation of 
completion of the transition services, as documented and provided by 
the appropriate school official in accordance with paragraph (b)(2) of 
this section, to the youth with a disability.
    (c) The designated State unit must provide--
    (1) Documentation required by this part in a form and manner 
consistent with this part and in an accessible format for the youth; 
and
    (2) Documentation required by this part to a youth as soon as 
possible upon the completion of each of the required actions, but no 
later than 90 days after completion of each of the required actions in 
Sec.  397.20 and Sec.  397.30.

(Authority: Sections 12(c) and 511(d) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 794g(d))

Subpart C--Designated State Unit Responsibilities Prior To Youth 
With Disabilities Starting Subminimum Wage Employment

Sec.  397.20  What are the responsibilities of a designated State unit 
to youth with disabilities who are known to be considering subminimum 
wage employment?

    (a) A designated State unit must provide youth with disabilities 
documentation upon the completion of the following actions:
    (1) Pre-employment transition services that are available to the 
individual under Sec.  34 CFR 361.48; and
    (2) Application for vocational rehabilitation services, in 
accordance with 34 CFR Sec.  361.41(b), with the result that the 
individual was determined--
    (i) Ineligible for vocational rehabilitation services, in 
accordance with 34 CFR Sec.  361.43; or
    (ii) Eligible for vocational rehabilitation services, in accordance 
with 34 CFR Sec.  361.42; and
    (A) The youth with a disability had an approved individualized plan 
for employment, in accordance with 34 CFR 361.46;
    (B) The youth with a disability was unable to achieve the 
employment outcome specified in the individualized plan for employment, 
as described in 34 CFR 361.5(c)(15) and 361.46, despite working toward 
the employment outcome with reasonable accommodations and appropriate 
supports and services, including supported employment services and 
customized employment services, for a reasonable period of time; and
    (C) The youth with a disability's case record, which meets all of 
the requirements of 34 CFR 361.47, is closed.
    (3)(i) Regardless of the determination made under paragraph (a)(2) 
of this section, the youth with a disability has received career 
counseling, and information and referrals to Federal and State programs 
and other resources in the individual's geographic area that offer 
employment-related services and supports designed to enable the 
individual to explore, discover, experience, and attain competitive 
integrated employment.
    (ii) The career counseling and information and referral services 
provided in accordance with paragraph (a)(3)(i) of this section must--
    (A) Be provided in a manner that facilitates informed choice and 
decision-making by the youth, or the youth's representative as 
appropriate; and
    (B) Not be for subminimum wage employment by an entity defined in 
Sec.  397.5(d), and such employment-related services are not 
compensated at a subminimum wage and do not directly result in 
employment compensated at a subminimum wage provided by such an entity.
    (b) The following special requirements apply--
    (1) For purposes of this part, all documentation provided by a 
designated State unit must satisfy the requirements for such 
documentation under 34 CFR part 361.
    (2) The individualized plan for employment, required in paragraph 
(a)(3)(i) of this section, must include a specific employment goal 
consistent with competitive integrated employment, including supported 
or customized employment.
    (3)(i) For purposes of paragraph (a)(2)(ii)(B) of this section, a 
determination as to what constitutes ``reasonable period of time'' must 
be consistent with the disability-related and vocational needs of the 
individual, as well as the anticipated length of time required to 
complete the services identified in the individualized plan for 
employment.
    (ii) For an individual whose specified employment goal is in 
supported employment, such reasonable period of time is up to 24 
months, unless under special circumstances the individual and the 
rehabilitation counselor jointly agree to extend the time to achieve 
the employment outcome identified in the individualized plan for 
employment.

(Authority: Sections 7(5), 7(39), 12(c), 102(a) and (b), 103(a), 
113, and 511(a) and (d) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 705(5), 705(39), 709(c), 722(a) and (b), 723(a), 
733, and 794g(a) and (d))

Subpart D--Local Educational Agency Responsibilities Prior To Youth 
With Disabilities Starting Subminimum Wage Employment

Sec.  397.30  What are the responsibilities of a local educational 
agency to youth with disabilities who are known to be seeking 
subminimum wage employment?

    Of the documentation to demonstrate a youth with a disability's 
completion of the actions described in Sec.  397.20(a) of this part, a 
local educational agency, as

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defined in Sec.  397.5(b)(1), can provide the youth with documentation 
that the youth has received transition services under the Individuals 
with Disabilities Education Act (20 U.S.C. 1400 et seq.), such as 
transition services available to the individual under section 614(d) of 
that act (20 U.S.C. 1414(d)).

(Authority: Sections 511(a)(2)(A) and 511(d) of the Rehabilitation 
Act of 1973, as amended; 29 U.S.C. 794g(a)(2)(A) and (d))

Sec.  397.31  Are there any contracting limitations on educational 
agencies under this part?

    Neither a local educational agency, as defined in Sec.  
397.5(b)(1), nor a State educational agency, as defined in Sec.  
397.5(b)(2), may enter into a contract or other arrangement with an 
entity, as defined in Sec.  397.5(d), for the purpose of operating a 
program under which a youth with a disability is engaged in subminimum 
wage employment.

(Authority: Section 511(b)(2) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 794g(b)(2))

Subpart E--Designated State Unit Responsibilities to Individuals 
With Disabilities During Subminimum Wage Employment

Sec.  397.40  What are the responsibilities of a designated State unit 
for individuals with disabilities, regardless of age, who are employed 
at a subminimum wage?

    (a) Counseling and information services. (1) A designated State 
unit must provide career counseling, and information and referral 
services, as described in Sec.  397.20(a)(4) to individuals with 
disabilities, regardless of age, or the individual's representative as 
appropriate, who are known by the designated State unit to be employed 
by an entity, as defined in Sec.  397.5(d), at a subminimum wage level.
    (2) A designated State unit may know the identification of 
individuals with disabilities described in this paragraph through the 
vocational rehabilitation process or by referral from the client 
assistance program, another agency, or an entity, as defined in Sec.  
397.5(d).
    (3) The career counseling and information and referral services 
must be provided in a manner that-
    (i) Is understandable to the individual with a disability; and
    (ii) Facilitates independent decision-making and informed choice as 
the individual makes decisions regarding opportunities for competitive 
integrated employment and career advancement, particularly with respect 
to supported employment, including customized employment.
    (b) Other services. (1) Upon a referral by an entity, as defined in 
397.5(d), that has fewer than 15 employees, of an individual with a 
disability who is employed at a subminimum wage by that entity, a 
designated State unit must also inform the individual of self-advocacy, 
self-determination, and peer mentoring training opportunities available 
in the community.
    (2) The services described in paragraph (c)(1) of this section must 
be provided by an entity that does not have a financial interest in the 
individual's employment outcome.
    (c) Required intervals. The services required by this section must 
be carried out once every six months for the first year of the 
individual's subminimum wage employment and annually thereafter for the 
duration of such employment.
    (d) Documentation. The designated State unit must provide timely 
documentation to the individual upon completion of the activities 
required under this section.
    (e) Provision of services. Nothing in this section will be 
construed as requiring a designated State unit to provide the services 
required by this section directly. A designated State unit may contract 
with other entities, i.e., other public and private service providers, 
as appropriate, to fulfill the requirements of this section.

(Authority: Sections 12(c) and 511(c) of the Rehabilitation Act of 
1973, as amended; 29 U.S.C. 709(c) and 794g(c))

Subpart F-Review of Documentation Process

Sec.  397.50  What is the role of the designated State unit in the 
review of documentation process under this part?

    The designated State unit, or a contractor working directly for the 
designated State unit is authorized to engage in the review of 
individual documentation required under this part that is maintained by 
entities, as defined at 397.5(d), under this part.

(Authority: Section 511(e) of the Rehabilitation Act of 1973, as 
amended; 29 U.S.C. 794g(e))

[FR Doc. 2015-05538 Filed 4-2-15; 4:15 pm]
 BILLING CODE 4000-01-P
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