[Federal Register Volume 62, Number 171 (Thursday, September 4, 1997)]
[Proposed Rules]
[Pages 46682-46686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23506]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / 
Proposed Rules

[[Page 46682]]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 404

[Regulations No. 4]
RIN 0960-AE35


Reduction of Disability Benefits--Workers' Compensation and 
Public Disability Benefits and Payments

AGENCY: Social Security Administration (SSA).

ACTION: Proposed rule.

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SUMMARY: We propose to revise our rules on reduction of Social Security 
benefits based on disability on account of receipt of workers' 
compensation and/or public disability benefits and payments provided 
under Federal (other than Social Security), State, or local laws or 
plans to clarify our existing policies. We also propose to adopt a 
uniform method for proration of workers' compensation and public 
disability benefit/payment settlements. In addition, we propose to 
incorporate into our rules certain policy interpretations established 
previously in relevant Social Security Rulings (SSRs). Finally, we 
propose to update provisions that have not been changed since 1984.

DATES: To be sure that your comments are considered, we must receive 
them no later than November 3, 1997.

ADDRESSES: Comments should be submitted in writing to the Commissioner 
of Social Security, P.O. Box 1585, Baltimore, MD 21235, sent by telefax 
to (410) 966-2830, sent by E-mail to <a href="/cdn-cgi/l/email-protection#6f0f0f1d0a081a030e1b0600011c2f1c1c0e41080019">``<span class="__cf_email__" data-cfemail="f6849391839a97829f999885b6858597d8919980">[email protected]</span></a>'', or 
delivered to the Division of Regulations and Rulings, Social Security 
Administration, 3-B-1 Operations Building, 6401 Security Boulevard, 
Baltimore, MD 21235-0001, between 8:00 a.m. and 4:30 p.m. on regular 
business days. Comments may be inspected during these same hours by 
making arrangements with the contact person shown below.

FOR FURTHER INFORMATION CONTACT: Daniel T. Bridgewater, Legal 
Assistant, Division of Regulations and Rulings, Social Security 
Administration, 6401 Security Boulevard, Baltimore, MD 21235, (410) 
965-3298 for information about these rules.

SUPPLEMENTARY INFORMATION:

Background

    Certain disabled workers may be eligible for cash benefits under 
both workers' compensation and/or other public disability benefit 
programs and the Social Security disability insurance (SSDI) program. 
Section 224 of the Social Security Act (the Act) provides for a 
reduction in SSDI benefits so that total benefits under both workers' 
compensation and/or other public disability benefit programs and SSDI 
do not exceed the higher of 80 percent of a worker's predisability 
earnings (``average current earnings'') or the total family benefit 
(i.e., the sum of the individual's Social Security disability benefits 
and the Social Security benefits payable to others based upon his work 
record) under Social Security before reduction.

Present Policy

    The policy interpreted in SSRs over the years has focused mainly on 
certain aspects of the law. First, some State workers' compensation 
laws prescribe specific benefit amounts for certain permanent 
impairments (e.g., loss of a bodily member) without regard to actual 
loss of wages. Some beneficiaries questioned whether Congress intended 
to exclude such benefits based on permanent impairments from the SSDI 
benefit reduction. This issue was resolved in the courts, and SSA 
developed two SSRs to reflect its policy that permanent impairment 
benefits, compensable under State workers' compensation laws, are 
subject to offset against SSDI benefits. (SSR 74-21c, based on Grant v. 
Weinberger, 482 F.2d 1290 (6th Cir. 1973), and SSR 92-6c, based on 
Davidson v. Sullivan, 942 F.2d 90 (1st Cir. 1991)). More recent cases, 
Krysztoforski v. Chater, 55 F.3d 857 (3rd Cir. 1995) and Hodge v. 
Shalala, 27 F.3d 430 (9th Cir. 1994), also uphold SSA's policy in this 
regard. We now propose to amend our regulatory language to reflect this 
policy interpretation.
    Second, some have questioned our policy that non-covered earnings 
(i.e., those earnings from employment not covered under the Act) cannot 
be used in determining the ``average current earnings'' for an 
individual. This policy, which is described in SSR 92-2a, is based on 
section 224(a) of the Act, which provides that ``average current 
earnings'' are to be computed by reference to the average monthly wage 
under section 215(b) of the Act and to wage and self-employment income 
totals under sections 209(a)(1) and 211(b)(1) of the Act. These 
statutory sections are concerned strictly with wages and self-
employment income covered under the Act, and, thus, we cannot count 
non-covered earnings.
    Judicial precedent strongly supports the Social Security 
Administration's (SSA) position: Prather v. Shalala, 844 F. Supp. 239 
(D. Md. 1993), aff'd w/o opinion, 14 F.3d 595 (4th Cir. 1994); Smith v. 
Sullivan, 982 F.2d 308 (8th Cir. 1992); Sousa v. Shalala, No. C-92-2796 
MHP (N.D. Cal. Jan. 19, 1995); Everette v. Chater, No. 92-C-714 (E.D. 
Wis. Aug. 8, 1995). Accordingly, we propose to clarify the regulatory 
language to express this policy in a more direct manner.

Proposed Policy--Proration of Lump-Sum Awards

    In many cases, an individual may receive some or all of his or her 
workers' compensation in a lump-sum. Because a lump-sum award is a 
substitute for periodic payments, the Act requires that we look to 
State law to see what rate would have been paid had the workers' 
compensation payment been made on a periodic basis, and that we prorate 
and offset at the rate that most closely approximates State law.
    State workers' compensation laws clearly define how to compute the 
periodic rate. States base the weekly rate on a specified percentage of 
the worker's average weekly wage subject to a maximum amount set by 
law. Forty-two States use sixty-six and two-thirds percent.
    SSA has been using three methods to establish the rate of offset. 
In order of priority, they are as follows:
    1. The rate specified in the award. (If the award specifies a rate 
based on life expectancy, we use that rate and list the case for future 
reference.)
    2. The periodic rate paid prior to the lump-sum award (if no rate 
was specified in the award).
    3. The State's workers' compensation maximum weekly rate in effect 
at the time of the injury (if no rate was

[[Page 46683]]

specified in the award and if no periodic payments were made).
    For years, lump-sum awards were rare, and they were prorated using 
method 1 or 2. Method 3 was added later.
    Our experience in determining rates has been that, in almost every 
case, because of the worker's actual earnings, the specified percentage 
of the average weekly wage would have exceeded the State's maximum 
rate. Thus, the worker would have received the State's maximum periodic 
rate. Likewise, the prior periodic rate would have been paid at the 
maximum rate.
    Although we believed that this policy would closely approximate the 
monthly rate that would have been paid in the absence of a lump-sum 
settlement, we have witnessed an ever-increasing number of cases 
nationwide where attorneys are requesting insurers to specify an 
artificially low rate in the lump-sum award. For example, some awards 
purport to set a proration rate based on the worker's life expectancy. 
This rate, often lower than the State's minimum rate, results in little 
or no offset under our present method of proration.
    We do not believe that the use of a life expectancy rate in the 
lump sum award is a bona fide representation of the periodic rate that 
would have otherwise been paid. We do not believe that disabled workers 
would, in fact, accept such low rates if the lump-sum award were paid 
periodically. Also, we do not believe that these low rates are 
specified when SSA disability benefits and offset are not an issue.
    Life expectancy can be based on subjective factors, such as health, 
life style, age, job, etc. Given the fact that these workers are 
disabled, it does not appear to be reasonable to utilize life 
expectancies to age 75 or older as these awards specify.
    We conducted a survey in States where this practice started. One of 
the questions we asked of the States was whether a low rate based on 
life expectancy was a bona fide representation of the lump-sum award 
and in accordance with State law. Six of the eight States said, ``No.'' 
(One State said the question did not apply and one did not return the 
survey.)
    It is clear that while State law may not provide life expectancy as 
the basis for a lump-sum award or as the basis for periodic benefits 
that the lump-sum represents, the actual awards do contain such 
language. Once a lump-sum award has been agreed upon, it is of no 
consequence to the insurer how the award is portrayed (i.e., whether 
the proration rate of the lump-sum award is based on the worker's life 
expectancy or the State's maximum weekly rate).
    When our order of priority for setting the rate of offset was 
established, lump-sum awards were quite straightforward, even rare. 
Currently, lump-sum awards are being structured individually in order 
to best circumvent the offset required by section 224 of the Act. 
Attorneys have even called SSA personnel to seek guidance in 
structuring lump-sums to avoid offset.
    In short, our policy on the proration of lump-sum awards has become 
a tool by which people avoid the offsets intended by Congress, rather 
than a means of approximating, as nearly as practicable, the offset 
that would have occurred had benefits been paid periodically. It thus 
can be viewed as no longer satisfying the requirements of section 
224(b) of the Act.
    In order to prorate and offset a lump-sum award using a rate that 
is more representative of the periodic rate that would have otherwise 
been paid under State law and in order to ensure a more uniform policy 
for all lump-sum cases nationwide, we propose a change in the order of 
priority for determining the weekly rate used. Specifically, we propose 
that lump-sum awards be prorated based on:
    1. The rate specified in the award; but only if that rate is based 
on the percentage of the worker's average weekly wage required by State 
law;
    2. The periodic rate paid prior to the lump-sum award (if method 1 
does not apply); or
    3. The State's maximum weekly rate in effect at the time of the 
injury (if methods 1 and 2 do not apply).
    We believe this proposed change is needed to better implement 
section 224 of the Act more effectively.

Proposed Policy--Exclusion of Legal and Medical Expenses

    Our present policy is that when workers incur legal, medical, and 
related expenses in connection with the claim for workers' compensation 
payments or related injury, those expenses are excluded from the lump-
sum award for purposes of the offset computation to the extent 
consonant with applicable law. Any deductions from the workers' 
compensation payment such as tax withholdings, life insurance, medical 
premiums, etc., are included in the amount used in the offset 
computations, as are amounts garnished or attached to satisfy legal 
obligations.
    There are three methods which we use in prorating a lump-sum award 
with excludable expenses:
    Method A--Delays imposition of offset because it allows SSA to take 
the excludable expenses from the beginning of the proration. This is 
advantageous to the worker who is approaching age 62 or 65 years of age 
or when a closed period of disability is involved.
    Method B--Divides the lump-sum award, minus the expenses by the 
total lump-sum award. This percentage is then multiplied by the weekly 
rate, resulting in a reduced weekly rate. This method reduces the 
weekly workers' compensation rate so the offset amount is lowered 
during the entire proration period.
    Method C--Reduces the lump-sum award by the amount of the 
excludable expenses prior to the proration. This method removes offset 
at the earliest possible time and could even end the proration prior to 
the first possible month of offset.
    Until 1971, only Method C was used. Since then, we have used the 
method most advantageous to the claimant, unless the lump-sum award 
specifies the manner in which expenses are to be deducted.
    We propose to return to our pre-1971 policy for prorating a lump-
sum award with excludable expenses. Using only Method C would provide 
uniformity and consistency for all claimants. Since the Act and the 
regulations do not require a specific method of proration, we believe 
Methods A and B can be discontinued.
    Lastly, the meaning of the term ``related'' expenses has caused 
unnecessary confusion. We have received several questions as to whether 
items such as new homes, patios, ramps, costs of vans and vacations, 
moving expenses to a milder climate, etc., may be ``related'' expenses. 
Because we are aware of no expenses, other than medical or legal 
expenses, that should be excluded from offset, we propose to remove the 
category of ``related'' expenses and offset only medical and legal 
expenses.

Miscellaneous Proposed Changes

    We propose to change the language in section 404.408(a)(1) 
regarding the application of the offset to certain individuals who 
first became entitled to SSDI after 1965 but before September 1981 
based on a period of disability that began after June 1, 1965, and 
before March 1981. We wish to delete the word, ``first,'' as it is not 
required by the law. Also, we wish to delete the dates ``September 
1981'' and ``March 1981'' to remove an anomaly that affects claims with 
a month of entitlement of September 1981 or later with disability 
onsets prior to March 1981.


[[Page 46684]]


    Example: A claim is filed September 1982 establishing a 
disability onset date of January 10, 1980. The month of entitlement 
is determined to be September 1981. This example would not be 
covered by the current regulatory language.

    We also propose to change the language in section 404.408(a)(1)(i) 
and elsewhere to refer to ``benefits or payments'' under a workers' 
compensation law or plan, rather than simply ``benefits,'' as many 
attorneys have claimed that certain workers' compensation is not a 
``benefit'' but is in fact a ``payment.''
    We propose to change the language in section 404.408(a)(2)(i) 
regarding individuals entitled to SSDI who also are concurrently 
entitled to certain other payments based on disability. We believe 
``concurrently'' is redundant.
    In addition, we propose to make revisions throughout Sec. 404.408 
to add the language ``workers' compensation,'' where appropriate, to 
current references to ``public disability benefits'' because ``workers' 
compensation'' is the designation given for the majority of public 
disability benefits other than SSDI or Supplemental Security Income 
benefits. Using this language makes explicit that section 404.408 
applies to ``workers' compensation'' laws.
    Finally, in Sec. 404.408 (h), (i), (j), (k), and (l), we propose to 
remove outdated, unnecessary computation examples, leaving one basic 
example in paragraph (h) of this section. We believe that the removal 
of outdated, unnecessary examples will clarify this rule.

Electronic Version

    The electronic file of this document is available on the Federal 
Bulletin Board (FBB) at 9:00 a.m. on the date of publication in the 
Federal Register. To download the file, modem dial (202) 512-1387. The 
FBB instructions will explain how to download the file and the fee. 
This file is in WordPerfect and will remain on the FBB during the 
comment period.

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these proposed rules do not meet the criteria for a 
significant regulatory action under Executive Order 12866. Thus, they 
are not subject to OMB review.

Regulatory Flexibility Act

    We certify that these proposed rules will not have a significant 
economic impact on a substantial number of small entities since these 
rules affect only individuals. Therefore, a regulatory flexibility 
analysis as provided in Public Law 96-354, the Regulatory Flexibility 
Act, is not required.

Paperwork Reduction Act

    These proposed rules impose no additional reporting or 
recordkeeping requirements necessitating clearance by OMB.


(Catalog of Federal Domestic Assistance Program No. 96.001 Social 
Security--Disability Insurance)

List of Subjects in 20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-Age, Survivors, and Disability Insurance, Reporting and 
recordkeeping requirements, Social Security.

    Dated: August 26, 1997.
John J. Callahan,
Acting Commissioner of Social Security.

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE 
(1950-    )

    For the reasons set out in the preamble, subpart E of part 404 of 
chapter III of title 20 of the Code of Federal Regulations is amended 
as follows:
    1. The authority citation for subpart E of part 404 continues to 
read as follows:


    Authority: Secs. 202, 203, 204 (a) and (e), 205 (a) and (c), 
222(b), 223(e), 224, 225, and 702(a)(5) of the Social Security Act 
(42 U.S.C. 402, 403, 404 (a) and (e), 405 (a) and (c), 422(b), 
423(e), 424a, 425, and 902(a)(5)).

    2. Section 404.408 is amended by removing Example 2 from paragraph 
(h)(2) and by removing the examples from paragraphs (i), (j), (k), and 
(l)(3) and by revising the section heading and the headings and texts 
of the following paragraphs: (a)(1) introductory text, (a)(1)(i), 
(a)(1)(ii), (a)(2)(i), (b)(1), (b)(2)(ii), (c)(1) introductory text, 
(c)(1)(i), (c)(3), (c)(5), (d)--introductory text, (d)(1), (d)(2), (e), 
(f), (g), (h)(2)--Example 1, (j), (k), (l)(1), and (l)(2)(i). They read 
as follows:


Sec. 404.408  Reduction of benefits based on disability on account of 
receipt of certain other disability benefits or payments provided under 
Federal, State, or local laws or plans.

    (a) * * *
    (1) The individual became entitled to disability insurance benefits 
after 1965 based on a period of disability that began after June 1, 
1965 (but see paragraph (a)(2) of this section), and
    (i) The individual entitled to the disability insurance benefit is 
also entitled to periodic benefits or payments under a workers' 
compensation law or plan of the United States or a State for that month 
for an injury or illness, and
    (ii) The Commissioner has, in a month before that month, received a 
notice of the entitlement, and
* * * * *
    (2) * * *
    (i) The individual entitled to the disability insurance benefit is 
also, for that month, entitled to a periodic benefit (including 
workers' compensation or any other payments) on account of a total or 
partial disability (whether or not permanent) under a law or plan of 
the United States, a State, a political subdivision, or an 
instrumentality of two or more of these entities, and
* * * * *
    (b) When reduction not made. (1) The reduction of a benefit 
otherwise required by paragraph (a)(1) of this section is not made if 
the workers' compensation law or plan under which the periodic benefit 
or payment is payable provides for the reduction of such periodic 
benefit or payment when anyone is entitled to a benefit under title II 
of the Act on the basis of the earnings record of an individual 
entitled to a disability insurance benefit under section 223 of the 
Act.
    (2) * * *
    (ii) The benefit or payment is a Veterans' Administration benefit, 
a public disability benefit (except workers' compensation) payable to 
an employee based on employment covered under Social Security, a 
benefit based on need, or a wholly private pension or private insurance 
benefit.
    (c) Amount of reduction--(1) General. The total of benefits for a 
month under sections 223 and 202 of the Act to which paragraph (a) of 
this section applies is reduced monthly (but not below zero) by the 
amount by which the sum of the monthly disability insurance benefits 
payable on the disabled individual's earnings record and benefits or 
payments under a workers' compensation law or plan payable for that 
month exceeds the higher of:
    (i) Eighty percent of the individual's average current earnings, as 
defined in paragraph (c)(3) of this section; or
* * * * *
    (3) Average current earnings defined.
    (i) Beginning January 1, 1979, for purposes of this section, an 
individual's average current earnings is the largest amount computed 
under either paragraph (c)(3)(i)(A), (B), or (C) of this section (after 
reducing the amount to the next lower multiple of $1 when the amount is 
not a multiple of $1):
    (A) The average monthly wage (determined under section 215(b) of 
the Act as in effect prior to January 1979) used for purposes of 
computing the individual's disability insurance benefit under section 
223 of the Act;

[[Page 46685]]

    (B) One-sixtieth of the total of the individual's wages and 
earnings from self-employment covered under the Act, without the 
limitations under sections 209(a) and 211(b)(1) of the Act (see 
paragraph (c)(3)(ii) of this section), for the 5 consecutive calendar 
years after 1950 for which the wages and earnings from self-employment 
covered under the Act (see subpart K of this part) were highest; or
    (C) One-twelfth of the total of the individual's wages and earnings 
from self-employment covered under the Act, without the limitations 
under sections 209(a) and 211(b)(1) of the Act (see paragraph 
(c)(3)(ii) of this section), for the calendar year in which the 
individual had the highest wages and earnings from self-employment 
during the period consisting of the calendar year in which the 
individual became disabled and the 5 years immediately preceding that 
year.
    (ii) Method of determining calendar year earnings in excess of the 
limitations under sections 209(a) and 211(b)(1) of the Act. For the 
purposes of paragraph (c)(3)(i) of this section, the extent by which 
the wages or earnings from self-employment of an individual exceed the 
maximum amount of earnings creditable under sections 209(a) and 
211(b)(1) of the Act in any calendar year after 1950 and before 1978 
will ordinarily be estimated on the basis of the earnings information 
available in the records of the Social Security Administration. (See 
subpart I of this part.) If an individual provides satisfactory 
evidence of the actual earnings in any year, the extent, if any, by 
which the earnings exceed the limitations under sections 209(a) and 
211(b)(1) of the Act shall be determined by the use of such evidence 
instead of by the use of estimates.
* * * * *
    (5) Computing disability insurance benefits. When reduction is 
required, the total monthly Social Security disability insurance 
benefits payable after reduction can be more easily computed by 
subtracting the monthly amount of the other workers' compensation/
public disability benefits or payments from the higher of paragraph 
(c)(1)(i) or (ii) of this section. This is the method employed in the 
example used in this section.
    (d) Items not counted for reduction. Amounts paid or incurred and/
or a reasonable estimate of amounts to be incurred, by the individual 
for medical and/or legal expenses in connection with the claim for 
workers' compensation/public disability benefits or payments (see 
Sec. 404.408 (a) and (b)) or the injury or occupational disease on 
which the workers' compensation/public disability award or settlement 
agreement is based, are excluded in computing the reduction under 
paragraph (a) of this section to the extent they are consonant with the 
applicable Federal, State, or local law or plan. The reduction must 
reflect either the actual amount of expenses already paid or incurred 
and/or a reasonable estimate of amounts to be incurred, given the 
circumstances in the individual's case, of future medical and/or legal 
expenses. The total of such expenses will be subtracted from the total 
of a settlement agreement prior to the proration of the reduction. Any 
expenses not established by evidence required by the Commissioner or 
not reflecting a reasonable estimate of the individual's actual future 
expenses will not be excluded. These medical and/or legal expenses may 
be evidenced by the workers' compensation/public disability award, 
compromise agreement, a court order, or by other evidence as the 
Commissioner may require. This other evidence may consist of:
    (1) A detailed statement by the individual's physician or the 
employer's insurance carrier; or
    (2) Bills, receipts, or canceled checks; or
* * * * *
    (e) Certification by individual concerning eligibility for workers' 
compensation/public disability benefits or payments. Where it appears 
that an individual may be eligible for a workers' compensation/public 
disability benefit or payment which would give rise to a reduction 
under paragraph (a) of this section, the individual may be required, as 
a condition of certification for payment of any benefit under section 
223 of the Act to any individual for any month, and of any benefit 
under section 202 of the Act for any month based on such individual's 
earnings record, to furnish evidence as requested by the Commissioner 
and to certify as to:
    (1) Whether he or she has filed or intends to file any claim for a 
workers' compensation/public disability benefit or payment; and
    (2) If he or she has so filed, whether there has been a decision on 
the claim. The Commissioner may rely, in the absence of evidence to the 
contrary, upon a certification that he or she has not filed and does 
not intend to file such a claim, or that he or she has filed and no 
decision has been made, in certifying any benefit for payment pursuant 
to section 205(i) of the Act.
    (f) Verification of eligibility or entitlement to a workers' 
compensation/public disability benefit or payment under paragraph (a). 
Section 224 of the Act requires the head of any Federal agency to 
furnish the Commissioner information from the Federal agency's records 
that is needed to determine the reduction amount, if any, or verify 
other information to carry out the provisions of this section. The 
Commissioner is authorized to enter into agreements with States, 
political subdivisions, and other organizations that administer a law 
or plan of workers' compensation/public disability benefits in order to 
obtain information that may be required to carry out the provisions of 
this section.
    (g) Workers' compensation/public disability benefit or payment 
payable on other than a monthly basis. (1) Where workers' compensation/
public disability benefits or payments are paid periodically but not 
monthly, or are paid in a lump-sum as a commutation of or a substitute 
for periodic benefits or payments, the reduction under this section is 
made at the time or times and in the amounts that the Commissioner 
determines will approximate, as nearly as practicable the reduction 
required under paragraph (a) of this section.
    (2) The rate at which to prorate the benefits or payments is the 
rate in the award if that rate is based on the percentage of the 
worker's average weekly wage required by Federal or State law. 
Otherwise, the rate to be used is the prior periodic rate or the 
State's maximum weekly rate in effect at the time of the injury.
    (3) All lump-sum awards, whether for total or partial disability, 
for temporary or permanent disability, or for scheduled or unscheduled 
disabilities, including loss of body function, will be offset against 
Social Security disability insurance benefits as provided in paragraph 
(a) of this section.
    (h) * * *
    (2) * * *

    Example: Effective September 1995, Harold is entitled to a 
monthly disability primary insurance amount of $507.90 and a monthly 
public disability benefit of $410.00 from the State. Eighty percent 
of Harold's average current earnings is $800.00. Because this amount 
($800.00) is higher than Harold's disability insurance benefit 
($507.90), we subtract Harold's monthly public disability benefit 
($410.00) from eighty percent of his average current earnings 
($800.00). This leaves Harold a reduced monthly disability benefit 
of $390.00.

    (j) Effect of social security disability insurance benefit or 
payment increases. Any increase in benefits due to a recomputation or a 
statutory increase in benefit rates is not subject to the reduction for 
workers' compensation/public disability benefits or payments

[[Page 46686]]

under paragraph (a) of this section and does not change the amount to 
be deducted from the family benefit or payment. The increase is simply 
added to what amount, if any, is payable. If a new beneficiary becomes 
entitled to monthly benefits on the same earnings record after the 
increase, the amount of the reduction is redistributed among the new 
beneficiaries entitled under section 202 of the Act and deducted from 
their current benefit rate.
    (k) Effect of changes in the amount of the workers' compensation/
public disability benefit or payment. Any change in the amount of the 
workers' compensation/public disability benefit or payment received 
will result in a recalculation of the reduction under paragraph (a) of 
this section and, potentially, an adjustment in the amount of such 
reduction. For those individuals described in paragraph (a)(1) of this 
section who do not meet the conditions specified in paragraph (a)(2) of 
this section, any increased reduction will be imposed effective with 
the month after the month the Commissioner received notice of the 
increase in the workers' compensation benefit or payment (it should be 
noted that only workers' compensation can cause this reduction). 
Adjustments due to a decrease in the amount of the workers' 
compensation/public disability benefit or payment will be effective 
with the actual date the decreased amount was effective. For 
individuals described in paragraph (a)(2) of this section, any increase 
or decrease in the reduction will be imposed effective with the actual 
date of entitlement to the new amount of the workers' compensation/
public disability benefit or payment.
    (l) Redetermination of benefits--(1) General. In the second 
calendar year after the year in which reduction under this section in 
the total of an individual's benefits under section 223 of the Act and 
any benefits under section 202 of the Act based on his or her wages and 
self-employment income was first required (in a continuous period of 
months), and in each third year thereafter, the amount of those 
benefits which are still subject to reduction under this section are 
redetermined. The redetermination will be made unless it results in any 
decrease in the total amount of benefits payable under title II of the 
Act on the basis of the workers' wages and self-employment income. The 
redetermined benefit is effective with the January following the year 
in which the redetermination is made.
    (2) * * *
    (i) The ratio of the average of the total wages (as defined in 
Sec. 404.1048(c)) of all persons for whom wages were reported to the 
Secretary of the Treasury or his delegate for the calendar year before 
the year in which the redetermination is made, to the average of the 
total wages of all persons reported to the Secretary of the Treasury or 
his delegate for calendar year 1977 or, if later, the calendar year 
before the year in which the reduction was first computed (but not 
counting any reduction made in benefits for a previous period of 
disability); and
* * * * *
[FR Doc. 97-23506 Filed 9-3-97; 8:45 am]
BILLING CODE 4190-29-P


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