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.

Proposed Rules Federal Register

46682

Vol. 62, No. 171

Thursday, September 4, 1997

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.

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 ‘‘regulations@ssa.gov’’, 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 LumpSum 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. Fortytwo 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
Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / Proposed Rules 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, lumpsum 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 lumpsum 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 lumpsum 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.
46684 Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / Proposed Rules

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 § 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 § 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:

§ 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;
Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / Proposed Rules 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 § 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
46686 Federal Register / Vol. 62, No. 171 / Thursday, September 4, 1997 / Proposed Rules

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 selfemployment 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 § 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

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 884

[Docket No. 97N–0335]

Obstetric and Gynecologic Devices:

Reclassification of Medical Devices

Used for In Vitro Fertilization and

Related Assisted Reproduction

Procedures

AGENCY: Food and Drug Administration,

HHS.

ACTION: Proposed rule.

SUMMARY: The Food and Drug

Administration (FDA) is proposing to

reclassify instrumentation intended for

use in in vitro fertilization (IVF) and

related assisted reproduction

procedures from class III to class II. FDA

is also proposing to reclassify assisted

reproduction microscopes and

microscope accessories from class III to

class I and to exempt this device from

the requirement of premarket

notification. This reclassification is

being proposed on the Secretary of

Health and Human Services’ own

initiative, based on new information.

This action is being taken under the

Federal Food, Drug, and Cosmetic Act

(the act), as amended by the Medical

Device Amendments of 1976 (the 1976

amendments) and the Safe Medical

Devices Act of 1990 (the SMDA).

DATES: Written comments by December

3, 1997. FDA proposes that any final

regulation based on this proposal

become effective 30 days after its date

of publication in the Federal Register.

ADDRESSES: Submit written comments

to the Dockets Management Branch

(HFA–305), Food and Drug

Administration, 12420 Parklawn Dr.,

rm. 1–23, Rockville, MD 20857.

FOR FURTHER INFORMATION CONTACT:

Elisa D. Harvey, Center for Devices and

Radiological Health (HFZ–470), Food

and Drug Administration, 9200

Corporate Blvd., Rockville, MD 20850,

301–594–1180.

SUPPLEMENTARY INFORMATION:

I. Background

A. Regulatory Authorities

The act (21 U.S.C. 201 et seq.), as

amended by the 1976 amendments (Pub.

L. 94–295) and the SMDA (Pub. L. 101–

629), established a comprehensive

system for the regulation of medical

devices intended for human use.

Section 513 of the act (21 U.S.C. 360c)

established three categories (classes) of

devices, depending on the regulatory

controls needed to provide reasonable

assurance of their safety and

effectiveness. The three categories of

devices are: Class I (general controls),

class II (special controls), and class III

(premarket approval).

Under section 513 of the act, devices

that were in commercial distribution

before May 28, 1976 (the date of

enactment of the amendments),

generally referred to as preamendments

devices, are classified after FDA has: (1)

Received a recommendation from a

device classification panel (an FDA

advisory committee); (2) published the

panel’s recommendation for comment,

along with a proposed regulation

classifying the device; and (3) published

a final regulation classifying the device.

FDA has classified most

preamendments devices under these

procedures.

Devices that were not in commercial

distribution prior to May 28, 1976,

generally referred to as postamendments

devices, are classified automatically by

statute (section 513(f) of the act) into

class III without any FDA rulemaking

process. Those devices remain in class

III and require premarket approval,

unless and until FDA issues an order

finding the device to be substantially

equivalent, under section 513(i) of the

act, to a predicate device that does not

require premarket approval. The agency

determines whether new devices are

substantially equivalent to previously

offered devices by means of premarket

notification procedures in section 510(k)

of the act (21 U.S.C. 360(k)) and part 807

(21 CFR part 807).

Section 513(f)(2) of the act provides

that FDA may initiate the

reclassification of a device classified

into class III under section 513(f)(1) of

the act, or the manufacturer or importer

of a device may petition the agency to

reclassify the device into class I or class

II. FDA’s regulations in § 860.134 (21