36560 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

64See Chervenka, 497, 3 (publisher of Antique &

Collectors Reproduction News) and Antique Week,

499, attachments.

In addition to legal remedies, the

record indicates that there are non-legal

resources available to educate

consumers about antiques and

collectibles and thus reduce consumers’

susceptibility to the practice of passing

off. For example, several newsletters

and hobby newspapers regularly warn

and advise buyers of antiques and

collectibles about reproductions of

specific items and classes of items 64

Many comments also indicate that there

are collector clubs for many categories

of collectibles that provide members

with similar information. Commission

staff will explore whether there is a role

for the Commission in these efforts to

increase consumer awareness.

IV. Conclusion

The comments uniformly favor

retention of the Rule and state that there

is a continuing need for the Rule with

regard to currently covered products,

i.e., imitation numismatic and political

items; that the Rule provides benefits to

consumers and industry; that the Rule

does not impose substantial economic

burdens; and that the benefits of the

Rule outweigh the minimal costs it

imposes. Although the comments

addressing the impact of the Rule on

small entities were minimal, these

comments, including comments from

major national associations in the

numismatic and political items trade,

indicate that the Rule does not place

significant burdens on small entities.

Accordingly, the Commission certifies

that the Rule has not had a significant

impact on a substantial number of small

entities.

Although many comments

recommended that the Act and Rule be

expanded to cover all antiques and

collectibles, the Commission does not

have the authority under the Act to

expand the Rule in this manner. In

addition, there are a variety of legal and

non-legal resources that address many

of the issues raised by the commenters

favoring expansion of the Act’s

coverage. Accordingly, the Commission

has determined to retain the current

Rule and is terminating this review.

List of Subjects in 16 CFR Part 304

Hobbies, Labeling, Trade practices.

Authority: The Federal Trade Commission

Act, 15 U.S.C. 41–58 and the Regulatory

Flexibility Act, 5 U.S.C. 601.

By direction of the Commission.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 98–17929 Filed 7–6–98; 8:45 am]

BILLING CODE 6750–01–M

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

RIN 0960–AE53

Administrative Review Process;

Identification and Referral of Cases for

Quality Review Under the Appeals

Council’s Authority To Review Cases

on Its Own Motion

AGENCY: Social Security Administration

(SSA).

ACTION: Final rule.

SUMMARY: We are amending our

regulations to include rules under

which a decision or order of dismissal

that is issued after the filing of a request

for a hearing by an administrative law

judge (ALJ) may be referred to the

Appeals Council for possible review

under the Appeals Council’s existing

authority to review cases on its own

motion. These final rules codify

identification and referral procedures

that we currently use to ensure the

accuracy of decisions that ALJs and

other adjudicators make at the ALJhearing step (hearing level) of the

administrative review process. The rules

also codify new quality assurance

procedures to ensure the quality of

dispositions at the hearing level.

DATES: This rule is effective August 6,

1998.

FOR FURTHER INFORMATION CONTACT:

Harry J. Short, Legal Assistant, Office of

Process and Innovation Management,

Social Security Administration, 6401

Security Boulevard, Baltimore, MD

21235, (410) 965–6243 for information

about this notice. For information on

eligibility or claiming benefits, call our

national toll-free number, 1–800–772–

1213.

SUPPLEMENTARY INFORMATION:

Background

Under procedures set forth in

§§ 404.967 ff. and 416.1467 ff., and

pursuant to a direct delegation of

authority from the Commissioner of

Social Security, the Appeals Council, a

component in our Office of Hearings

and Appeals (OHA), reviews hearing

decisions and orders of dismissal issued

by ALJs and decisions issued by certain

other adjudicators. The Appeals Council

may review an ALJ’s decision or

dismissal of a hearing request at the

request of a party to the action or,

pursuant to §§ 404.969 and 416.1469, on

its own motion. Through the exercise of

its authority to review cases, the

Appeals Council is responsible for

ensuring that the final decisions of the

Commissioner of Social Security in

claims arising under titles II and XVI of

the Social Security Act (the Act), as

amended, are proper and in accordance

with the law, regulations, and rulings.

The Appeals Council’s authority to

review cases on its own motion also

applies, at present, to two types of

hearing-level cases that do not result in

decisions by ALJs. Under §§ 404.942

and 416.1442, attorney advisors in OHA

are authorized until July 1, 1998, to

conduct certain prehearing proceedings

and to issue, where warranted by the

documentary evidence, wholly

favorable decisions. Under the

provisions of §§ 404.942 (e)(2) and (f)(3)

and 416.1442 (e)(2) and (f)(3), such

decisions are subject to review under

the own-motion authority of the

Appeals Council established in

§§ 404.969 and 416.1469. In addition,

under §§ 404.943 and 416.1443,

adjudication officers are authorized, for

test purposes, to conduct certain

prehearing proceedings and to issue,

where warranted by the documentary

evidence, wholly favorable decisions.

Under the provisions of

§§ 404.943(c)(2)(ii) and

416.1443(c)(2)(ii), such decisions are

also subject to review on the Appeals

Council’s own motion.

Under our regulations on the Appeals

Council’s procedures, if the Appeals

Council decides to review a case in

response to a request for review or on

its own motion, it may issue a decision

or remand the case to an ALJ. The

Appeals Council may also dismiss a

request for hearing for any reason that

the ALJ could have dismissed the

request.

A decision by the Appeals Council

‘‘to review’’ a hearing-level decision

means that the Appeals Council

assumes jurisdiction and causes that

decision not to be the final decision of

the Commissioner of Social Security. A

decision that the Appeals Council

‘‘reviews’’ will be replaced by a new

final decision or dismissal order of the

Appeals Council or, if a hearing or other

hearing-level proceedings are required,

by a decision or dismissal order issued

following remand of the case from the

Council to an ALJ.

A decision by the Appeals Council to

review a case is made when, following

a consideration of the case to determine

if review is appropriate, the Council

issues a notice of its decision to review.

The Council’s standard notice of review
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36561

advises the parties of the reasons for the

review and (unless the Council issues a

wholly favorable decision upon taking

review) the issues to be considered in

proceedings before the Council or before

an ALJ on remand. In instances in

which the Council reviews a hearing

level decision that has been issued

based on the documentary evidence

without the holding of an oral hearing

by an ALJ, the parties have the right to

such a hearing, except where the parties

waive that right in writing.

The existing provisions in §§ 404.969

and 416.1469 on the Appeals Council’s

authority to review cases on its own

motion provide that the Appeals

Council itself may decide to review a

case within 60 days after the date of the

hearing decision or dismissal and that,

if the Council does review a case under

this authority, it will provide notice to

the parties to the hearing decision or

dismissal action. Sections 404.969 and

416.1469 do not currently address the

procedures used in identifying and

referring cases to the Appeals Council

for it to consider for possible review on

its own motion.

The Appeals Council may review any

case on its own motion pursuant to

§§ 404.969 and 416.1469. The

conditions under which the Appeals

Council will review a case, on request

for review or on its own motion, are set

forth in §§ 404.970 and 416.1470. Those

sections provide that the Council will

review a case if: (1) There appears to be

an abuse of discretion by the ALJ; (2)

there is an error of law; (3) the action,

findings or conclusions of the ALJ are

not supported by substantial evidence;

or (4) there is a broad policy or

procedural issue that may affect the

general public interest. Sections 404.970

and 416.1470 further provide that the

Council will also review a case if new

and material evidence is submitted that

relates to the period on or before the

date of the ALJ’s decision and the

Council finds, upon evaluating the

evidence of record and the additional

evidence, that an action, a finding or a

conclusion of the ALJ is contrary to the

weight of the evidence currently of

record as a whole.

In fiscal year 1996 (FY ’96), the

Appeals Council received 99,735

requests for review. In FY ’97, the

number of requests for review received

by the Appeals Council rose to 112,528.

Most of these requests were for review

of unfavorable decisions and dismissal

actions; some concerned partially

favorable decisions; and a few

concerned decisions that were wholly

favorable regarding the benefits claimed,

but were found by a party to the

decision to be less than fully satisfactory

for some other reason.

In FY ’96, the Appeals Council

considered 8,502 cases for possible

review under its own-motion authority;

in FY ’97, the Council considered 8,012

cases for possible review under that

authority. Almost all of these cases

involved favorable hearing-level

decisions that were referred to the

Appeals Council under one of two types

of identification and referral procedures

we currently use—random sample

procedures, which generated the

majority of this workload, and ‘‘protest’’

procedures.

Existing Identification and Referral

Procedures

The Appeals Council considers, for

possible review on its own motion, a

national random sample of favorable

ALJ decisions that have not been

implemented, and, as resources permit,

a random sample of unappealed denial

decisions and dismissals. We conduct

these random sample procedures

pursuant to sections 205(a), 702(a)(4)

and 1631(d) of the Act, which give the

Commissioner of Social Security general

responsibility and authority for program

administration and oversight.

The Appeals Council also considers,

for possible review on its own motion,

a random sample of wholly favorable

decisions issued by attorney advisors

under the provisions of §§ 404.942 and

416.1442. Wholly favorable decisions

issued by adjudication officers under

the provisions of §§ 404.943 and

416.1443 are also identified by random

sampling for referral to the Appeals

Council for possible own-motion

review. These procedures have been

established in accordance with

commitments we made, in publishing

the final rules for the attorney advisor

and adjudication officer provisions, to

assess carefully the quality of the

decisions issued by the attorney

advisors and the adjudication officers

(see 60 FR 34126, 34127 (1995) and 60

FR 47469, 47471 (1995), respectively).

Our existing identification and

referral procedures also include those

under which the SSA components

responsible for effectuating hearinglevel decisions—SSA Processing

Centers (PCs) and Field Offices (FOs)—

refer (‘‘protest’’) certain cases to the

Appeals Council for possible review

under its own motion authority. The

PCs, which include our Program Service

Centers and the Office of Disability and

International Operations, refer cases

directly to the Appeals Council; FOs

forward cases to a PC or an SSA

Regional Office, which decides if the PC

or the Regional Commissioner should

make a referral to the Council.

Decisions by ALJs, attorney advisors

and adjudication officers are all subject

to referral to the Appeals Council under

our protest procedures. Almost all

protested decisions are favorable

decisions because almost all of the ALJ

decisions that require implementation

are wholly or partially favorable

decisions under which benefit payments

are to be effectuated (initiated or

continued), and because all decisions

issued by attorney advisors and

adjudication officers are wholly

favorable. In protesting a decision, an

effectuating component may

recommend that the decision be made

more or less favorable or unfavorable.

The Appeals Council, however, will

decide whether to review such a case,

and the appropriate disposition if it

decides to review a case, based on its

consideration of the record and the

hearing-level decision.

Effectuating components refer a case

if they believe the need for referral is

clear (not dependent on a judgment

factor) because: (1) the decision contains

a clerical error which affects the

outcome of the claim; (2) the decision is

contrary to the Act, regulations or

rulings; or (3) the decision cannot be

effectuated because its intent is unclear

as to an issue affecting the claim’s

outcome.

Effectuating components refer cases to

the Appeals Council by written

memoranda. If the Council decides to

review a referred case, it provides the

parties a copy of the effectuating

component’s referral memorandum with

the notice by which it advises the

parties that it will review the case.

We are amending our regulations to

include rules on the existing random

sample and protest procedures

discussed above. We have decided to

codify these procedures in connection

with the decision we made, in

furtherance of the Plan for a New

Disability Claim Process (59 FR 47887

(1994) (henceforth, the Disability

Redesign Plan)), to strengthen the

Appeals Council’s own-motion

functions by establishing a new process

for identifying and referring cases for

possible review under the Council’s

existing own-motion authority.

New Identification and Referral

Procedures

The Appeals Council currently

considers only a small percentage of all

favorable decisions issued at the hearing

level for possible review under its ownmotion authority. (The Council’s

workload in this area represented fewer

than 3 percent of such decisions in FY
36562 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

’96 and FY ’97.) In addition, the

processes currently used to select

decisions for possible review on the

Appeals Council’s own motion are

generally not designed to identify, in

any systematic way, hearing-level

decisions that are more likely to be

incorrect. The random sample processes

bringing cases before the Appeals

Council do not identify cases other than

by techniques designed to assure

randomness of selection within broadly

identified categories (i.e., allowances,

unappealed denials, and dismissals).

The identification of ‘‘protest’’ cases

that occurs in the effectuation process is

a secondary function of a process that is

principally focused on the prompt

payment of benefits.

Based on the above considerations,

we are establishing procedures under

which our Office of Quality Assurance

and Performance Assessment (OQA),

the SSA component that oversees SSA’s

quality assurance function, will

examine certain allowance decisions at

the hearing level that have been selected

through statistical sampling techniques.

OQA will refer to the Appeals Council

for possible review the decisions it

believes meet the criteria for review by

the Council. Decisions that have been

issued at the hearing level will initially

be included in this examination process

by random sampling. As we develop the

computer systems and other technical

capacities needed to support this

function, we will use selective sampling

techniques that rely on case profiling

and other sampling methods that can

identify cases which involve

problematic issues or fact patterns that

increase the likelihood of error.

Under the new process, upon referral

of a case by OQA, the Appeals Council

will consider the case and OQA’s

reasons for believing that the decision

should be reviewed. The Appeals

Council will decide whether to review

the case in accordance with §§ 404.969–

404.970 and/or 416.1469–416.1470. If it

decides to review the case, the Appeals

Council will provide the parties a copy

of OQA’s referral, which will be in

writing, with its notice of review. The

60-day time limit for the Appeals

Council to initiate review of a case

under the authority and standards

provided in §§ 404.969–404.970 and

416.1469–416.1470 will apply to cases

the Council considers for review in

response to referrals from OQA.

The Act does not specify how SSA

should review hearing-level decisions.

We believe that the new procedures we

are establishing, in combination with

the existing identification and referral

procedures that we are including in our

regulations, are appropriate procedures

for carrying out the program oversight

responsibilities of the Commissioner of

Social Security.

An important purpose of the new

procedures is to increase our ability to

identify policy issues that should be

clarified through publication of

regulations or rulings. We plan to

monitor how our policies are

understood and implemented through a

post-adjudicative evaluation process in

which we will analyze differences of

view between the Appeals Council and

OQA concerning cases referred under

the new procedures. We believe this

post-adjudicative process, in

conjunction with the new OQA referral

process, will increase our ability to

identify needed policy clarifications.

Regulatory Provisions

As revised in these final rules,

§§ 404.969 and 416.1469 set forth the

Appeals Council’s own-motion

authority and state that we refer cases to

the Appeals Council for it to consider

reviewing under that authority. Sections

404.969 and 416.1469 also describe the

identification and referral procedures

we will follow and the actions the

Appeals Council will take in cases it

considers for possible review on its own

motion. These sections apply to all

cases that our regulations make subject

to own-motion review by the Council.

Sections 404.969(b) and 416.1469(b)

specify that we will identify a case for

referral to the Appeals Council for

possible review under its own-motion

authority before we effectuate a decision

in the case. These sections provide that

we will identify cases for referral

through random and selective sampling

techniques, that we may examine cases

identified by sampling to assess whether

the criteria for review by the Appeals

Council are met, and that we will also

identify cases for referral through the

evaluation of cases we conduct in order

to effectuate decisions.

Under §§ 404.969(b)(1) and

416.1469(b)(1), we may conduct random

and selective sampling of cases

involving all types of actions that occur

at the hearing level of the administrative

review process (i.e., wholly or partially

favorable decisions, unfavorable

decisions, or dismissals) and any type of

title II or title XVI benefits (i.e., different

types of benefits based on disability and

benefits not based on disability). Our

decision to adopt these rules rests on

our conclusion that we should increase

the number of favorable disability

decisions the Appeals Council considers

for possible review on its own motion

to better balance the Council’s review of

favorable and unfavorable decisions.

However, the Council’s existing

authority to review cases on its own

motion covers all types of title II and

title XVI cases adjudicated at the

hearing level, and these final rules will

allow use of the identification and

referral procedures being set forth with

respect to all such cases.

Sections 404.969(b)(1) and

416.1469(b)(1) specify that we will use

selective sampling to identify cases that

exhibit problematic issues or fact

patterns that may increase the

likelihood of error. Under these

provisions, the factors considered in

random and selective sampling shall not

include the identity of the

decisionmaker or the identity of the

office issuing the decision.

Sections 404.969(b)(1) and

416.1469(b)(1) also authorize, but do not

require, that we examine cases that have

been identified through random or

selective sampling. Cases may be

identified for referral by random or

selective sampling. The purpose of the

examination of cases that we may

conduct is to refine the identification of

cases in which one or more of the

criteria for own-motion review by the

Appeals Council may be met.

Sections 404.969(b)(2) and

416.1469(b)(2) provide that effectuating

components will identify cases for

referral under criteria they presently use

to identify cases that they believe

exhibit clear error and other

circumstances preventing effectuation of

a decision. Any type of decision

requiring effectuation may be identified

for referral under these provisions.

Under §§ 404.969(c) and 416.1469(c),

we will make referrals that occur as the

result of a case examination or the

effectuation process in writing. The

written referral will state the referring

component’s reasons for believing that

the Appeals Council should review the

case on its own motion. Sections

404.969(c) and 416.1469(c) also provide

that referrals resulting from selective

sampling without a case examination

may be accompanied by a written

statement identifying the issue(s) or fact

pattern that caused the referral, and that

referrals resulting from random

sampling without a case examination

will only identify the case as a random

sample case. A statement of the issue(s)

or fact pattern identified in selective

sampling may be computer generated.

Sections 404.969(d) and 416.1469(d)

specify that the Appeals Council’s

notice of review will include a copy of

any written referral provided to the

Appeals Council. These provisions also

include language clearly stating our

long-standing policy that issuance of the

notice of review establishes when a

decision to conduct a review occurs (see
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36563

Hearings and Appeals Litigation Law

Manual (HALLEX), section I–3–301).

Sections 404.969(d) and 416.1469(d)

also state our policy that when the

Appeals Council is unable to decide

whether to review a case on its own

motion within the 60-day period in

which it may do so, it may consider

whether the decision should be

reopened under the provisions of

§§ 404.987 and/or 416.1487, which

authorize the Council to reopen a

decision that has become

administratively final on its own

initiative or at the request of a party to

the decision, if a condition for

reopening stated in §§ 404.988 or

416.1488 is present. Inclusion of this

statement in the regulations clarifies our

long-standing policy that the Appeals

Council may also reopen final decisions

in accordance with §§ 404.987, 404.988,

416.1487, and 416.1488 after the 60

days for initiating review under

§§ 404.969 and 416.1469 have expired

(see Social Security Acquiescence

Ruling (AR) 87–2(11)).

Sections 404.969(d) and 416.1469(d)

also state, finally, that if the Appeals

Council decides to review a decision on

its own motion or to reopen a decision

as provided in these rules, the notice of

review or the notice of reopening issued

by the Appeals Council will include,

where appropriate, information

concerning the interim benefit

provisions of section 223(h) or section

1631(a)(8) of the Act, as appropriate.

This provision reflects existing practices

we follow under these statutory

provisions.

Public Comments

These regulatory provisions were

published in the Federal Register as a

notice of proposed rulemaking (NPRM)

on September 25, 1997 (62 FR 50266).

We received statements in response to

the NPRM from 15 individuals and

organizations. The individuals

responding included ALJs employed by

SSA and attorneys who represent

individuals claiming rights under the

Social Security and supplemental

security income (SSI) programs. The

organizations responding included a

number of legal aid groups and four

professional associations: The

Association of Administrative Law

Judges, Inc., the National Association of

Disability Examiners, the National

Council of Disability Determination

Directors, and the National Organization

of Social Security Claimants’

Representatives.

Some commenters endorsed the

proposed rules, with or without

recommending changes in the rules;

others opposed the rules, with or

without recommending changes in the

event of their adoption. Other

commenters accepted the general

appropriateness of rules like those

proposed while also recommending

changes in the final rules or requesting

assurances about how the rules would

be applied. Generally, the commenters

who opposed the rules raised issues

about the bases for the proposed rules

and contended that they were intended

to intimidate ALJs and would be unfair

to claimants in general and to

individuals whose cases were included

in the new procedures. Comments

favoring adoption of the rules generally

emphasized the appropriateness of

better balancing the review of favorable

and unfavorable decisions issued at the

ALJ-hearing step of the administrative

review process.

The NPRM referred to the component

that would perform the case

examinations included in the proposed

new quality assurance procedures as the

‘‘Office of Program and Integrity

Reviews.’’ (See 62 FR 50266, 50268.)

Since publication of the NPRM, this

component’s name has been changed to

the ‘‘Office of Quality Assurance and

Performance Assessment.’’ We have

used the new name and its acronym,

‘‘OQA,’’ in the above discussion of these

final rules and in the following

discussion of the public comments and

our responses.

Because some of the comments were

detailed, we have condensed,

summarized or paraphrased them. We

have, however, tried to summarize the

commenters’ views accurately and to

respond to all of the significant issues

raised by the commenters that are

within the scope of the proposed rules.

For the reasons explained below in our

responses to specific comments, we

have not adopted the recommendations

against promulgating these final rules or

some of the specific recommendations

we received for changing the rules as

proposed. However, in response to the

comments, as discussed below, we are

clarifying the intent of the rules in

several respects and making five

clarifying changes in the regulatory

language. For reasons discussed

following the discussion of the

comments and our responses, we are

also making one editorial change in the

regulatory language that is not in

response to a specific comment.

Comment: One commenter thought

that the proposed rules would blur the

roles of the Appeals Council and OQA

and shift to the Appeals Council trendspotting and policymaking functions

that should be performed by OQA.

Response: The Appeals Council has

traditionally used its adjudicative

experience as a basis for providing

comments and recommendations in

SSA’s policymaking processes. An

important purpose of the new

procedures is to make better use of the

Council’s adjudicative experience for

policymaking purposes. If the case

disposition the Appeals Council makes

in response to a referral from OQA

indicates that the case may pose a

significant policy or program issue, a

post-adjudicative evaluation will be

performed. OHA will participate in such

evaluations to assure that the Council’s

adjudicative experience is reflected in

the assessment of the policy and

program issues the cases present. These

procedures represent a new way to

make use of the Appeals Council’s

experience in our policymaking

processes; the procedures do not, in our

judgment, blur the Council’s role as an

adjudicative body.

Comment: One commenter stated that

we should specify, as we have already

done with respect to our selective

sampling procedures, that the identity

of the decisionmaker or the office

issuing a decision will also not be a

factor in our random sampling and

‘‘protest’’ procedures.

Response: Because the random

sampling procedures we are adopting

may be applied to variously defined

categories of cases (e.g., unfavorable

decisions issued between given dates),

we believe it would be appropriate to

specify, in accordance with our intent,

that the identity of the decisionmaker or

of the office issuing the decision will

not be a factor in either our random or

our selective sampling procedures.

Accordingly, we have modified the

provisions of §§ 404.969(b)(1) and

416.1469(b)(1), and the description of

these regulatory provisions set forth

above, to make this point clear.

We believe that the identity of the

decisionmaker or office would clearly

not be a factor that might be

encompassed within the criteria stated

in §§ 404.969(b)(2) and 416.1469(b)(2)

for identifying cases for referral as a

result of the effectuation process.

Therefore, we are not modifying the

language of those provisions in response

to this comment.

Comment: Several commenters were

concerned about the proposed

provisions of §§ 404.969(d) and

416.1469(d) that stated: ‘‘If it is unable

to decide within the applicable 60-day

period whether to review a decision or

dismissal, the Appeals Council may

consider the case to determine if the

decision or dismissal should be

reopened pursuant to § 404.987

[416.1487].’’ These commenters

expressed views to the effect that these
36564 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

provisions would effectively do away

with the 60-day limit on own-motion

review and make the grounds for ownmotion review applicable for reopening

purposes.

Response: As we discussed in the

preamble to the NPRM and in the above

description of the regulatory provisions,

the language in question in this

comment is intended to allow the

Appeals Council to ‘‘consider whether

the decision should be reopened under

the provisions of §§ 404.987 and/or

416.1487, which authorize the Council

to reopen a final decision on its own

initiative or at the request of a party to

a decision, if a condition for reopening

stated in §§ 404.988 and/or 416.1488 is

present.’’ The regulatory provisions as

proposed reflected that intent by stating

that the Council will consider if it

should reopen the decision or dismissal

action ‘‘pursuant to § 404.987

[416.1487]’’, because those sections

make reopening contingent on

satisfaction of the requirements set forth

in §§ 404.988 and 416.1488. However, to

make it unmistakably clear that we

intend this provision to allow a decision

to be reopened only if a condition for

reopening described in §§ 404.988 or

416.1488 is present and the time limits

established in those sections are also

satisfied, we have modified the

regulatory language to provide that the

Appeals Council may determine if a

decision or dismissal received under

§§ 404.969 or 416.1469 ‘‘should be

reopened pursuant to §§ 404.987 and

404.988 [416.1487 and 416.1488].’’

Comment: Several commenters

thought that the intent of the proposed

provisions concerning reopening in

§§ 404.969(d) and 416.1469(d) should be

clarified relative to the decision of the

United States Court of Appeals for the

Eleventh Circuit in Butterworth v.

Bowen, 796 F.2d 1379 (11th Cir. 1986).

Response: In Butterworth, the Court of

Appeals for the Eleventh Circuit held

that the Appeals Council could reopen

an ALJ’s decision only if the case is

‘‘properly before’’ the Council, and that

the circumstances in which the Council

would have an ALJ’s decision properly

before it did not include those in which

it had considered, but not timely taken,

own-motion review. The court

concluded that: ‘‘[W]e have not held

that the Secretary is precluded from

initiating the reopening and revising of

cases. We have only given section

404.969 its necessary force and

recognized that it limits somewhat the

reopening jurisdiction of the Appeals

Council.’’

We acquiesced in the holding in

Butterworth by publishing AR 87–2(11).

We issued this ruling because we

determined that the court’s holding

conflicted with our longstanding

policies that the Appeals Council may

reopen any ALJ decision if the

requirements in §§ 404.987 and 404.988

or 416.1487 and 416.1488 are met, and

that such reopening actions are subject

only to the time limits set forth in those

regulations and not to time limits in any

other regulations, including the 60-day

time limit in §§ 404.969 and 416.1469.

In accordance with the provisions of

20 CFR § 404.985(e)(4) and

416.1485(e)(4), we are rescinding AR

87–2(11). Sections 404.985(e)(4) and

416.1485(e)(4) provide that an AR may

be rescinded as obsolete if we

subsequently clarify, modify or revoke

the regulation or ruling that was the

subject of the circuit court holding for

which the AR was issued. As explained

in a notice of the rescission of AR 87–

2 that we are publishing concurrently

with these final rules (see the notices

section of this Federal Register), we are

rescinding this AR as obsolete based on

the language that we are including in

§§ 404.969(d) and 416.1469(d) in these

final rules to clearly state our policy that

the Appeals Council has authority to

reopen, in accordance with the

requirements of §§ 404.987, 404.988,

416.1487, and 416.1488, ALJ decisions

that come before it for possible ownmotion review. This language

establishes that a case that has come

before the Appeals Council under the

provisions of §§ 404.969 or 416.1469,

and for which the 60-day period for

taking own-motion review has lapsed, is

properly before the Council for the

purpose of considering reopening under

the existing regulations on reopening.

This language also establishes that it is

our intent that the Appeals Council’s

authority to reopen an ALJ’s decision in

accordance with the provisions of those

regulations, which establish conditions

for reopening that differ from the

conditions for own-motion review,

should not be subject to the 60-day time

limit in §§ 404.969 and 416.1469.

Comment: Several commenters

believed that fundamental fairness

requires the Agency to accord ALJ

decisions such finality as to preclude

the Appeals Council from reopening

ALJ decisions referred to it for possible

own-motion review.

Response: Our regulations on

reopening and revising determinations

and decisions allow us to reopen final,

favorable and unfavorable

determinations and decisions under

stated conditions, on our initiative and

at the request of claimants. These

regulations enable us to provide relief to

individuals whose claims should not

have been denied and to protect the

integrity of the Social Security and SSI

programs by reopening favorable

determinations and decisions that

should not have been made. If an

individual is dissatisfied with a revised

determination or decision made after

reopening, the individual may request

further administrative or judicial

review, as appropriate. We believe that

our rules on reopening are

fundamentally fair and that they do not

deny appropriate finality to ALJ

decisions or to any of our final

dispositions, all of which are subject to

the same rules of reopening.

Comment: Two commenters thought

that, since these rules contemplate that

the number of favorable decisions

reviewed by the Appeals Council will

increase, the rules should provide for

informing claimants of their rights to

interim benefits under sections 223(h)

and 1631(a)(8) of the Act.

Response: Sections 223(h) and

1631(a)(8) of the Act provide that, where

an ALJ has determined after a hearing

that an individual is entitled to Social

Security benefits based on disability or

is eligible for SSI benefits based on

disability or blindness, and the

Commissioner of Social Security has not

issued a final decision within 110 days

after the date of the ALJ’s decision, such

benefits shall be currently paid for the

months during the period specified in

section 223(h) or section 1631(a)(8), as

appropriate. Any benefits paid under

these sections will not be considered

overpayments unless the benefits were

fraudulently obtained. We have

implemented sections 223(h) and

1631(a)(8) through guidance provided in

our Program Operations Manual System

(POMS), sections DI 42010.205 ff. and SI

02007.001 ff., and in our HALLEX,

section I–3–655. We pay interim

benefits under our procedures if an ALJ

has issued a favorable decision in a

claim for initial or continuing benefits

based on disability or blindness, the

Appeals Council has either initiated

review of the decision under its ownmotion authority or reopened the

decision pursuant to our reopening

regulations, 110 days have elapsed since

the date of the ALJ’s decision, and the

Commissioner has not issued a final

decision.

The notice the Appeals Council issues

upon initiating own-motion review or

reopening of a decision covered by

section 223(h) or section 1631(a)(8)

advises claimants of the interim benefit

provisions of those sections. However,

we believe it would be appropriate, in

response to this comment, to include

language in §§ 404.969(d) and

416.1469(d) to inform claimants that

they will be advised of the interim
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36565

benefit provisions of section 223(h) or

section 1631(a)(8), if appropriate, where

the Appeals Council reviews a favorable

ALJ decision on its own motion or

reopens such a decision as provided in

the regulations. Accordingly, we have

added such language and modified the

description of these regulatory

provisions set forth above to reflect this

addition.

Comment: One commenter stated that

the proposed rule changes were being

made ‘‘pursuant to’’ section 304(g) of

Pub. Law 96–265, the provision of the

Social Security Disability Amendments

of 1980 commonly referred to as the

Bellmon Amendment. Two other

commenters also thought that the

proposed rules relied on this statutory

provision for their basis or authority.

Response: As discussed above and in

the preamble to the NPRM, we are

amending our regulations to include

these new quality assurance procedures

to further the goals of the Disability

Redesign Plan. More specifically, we are

including these procedures to better

balance the Appeals Council’s review of

favorable and unfavorable decisions and

to increase our ability to identify policy

issues that should be clarified through

publication of regulations or rulings.

The statutory authority under which

we are adopting these rules includes

sections 205(a), 702(a)(5), and 1631(d) of

the Act, which give the Commissioner

of Social Security broad authority to

establish rules and procedures

governing the process for determining

claims for benefits under titles II and

XVI. We are also proceeding under

sections 205(b) and 1631(c)(1) of the

Act, which, in addition to directing the

Commissioner to hold hearings and

render decisions on the basis of

evidence adduced at the hearing, also

provide that: ‘‘[t]he Commissioner

* * * is further authorized, on the

Commissioner’s own motion, to hold

such hearings and to conduct such

investigations and other proceedings as

the Commissioner may deem necessary

or proper for the administration of this

title.’’

These rules are not being promulgated

to carry out the provisions of section

304(g) of Pub. Law 96–265 although this

provision remains in effect and supports

the general proposition that SSA should

conduct some form of own-motion

review of disability decisions issued by

ALJs. Because authority beyond that

provided in the Act is not required for

the purposes of these rules, we have

decided not to revise the authority

citations for Subpart J, Part 404, and

Subpart N, Part 416, to include

references to section 304.

Comment: One commenter thought

that the new quality assurance

procedures would misinterpret section

304(g) of Pub. Law 96–265 to justify

focusing exclusively on allowance

decisions.

Response: In promulgating these

rules, we are interpreting section 304(g)

of Pub. Law 96–265 to be consistent

with the Commissioner of Social

Security exercising his discretion to

design and implement a program, like

that established in these rules, for

having the Appeals Council consider for

review, on its own motion, disability

decisions issued by ALJs. We believe

this interpretation comports with the

intent of section 304(g).

As discussed above and in the NPRM,

these rules are intended to achieve a

better balance in the Appeals Council’s

review of favorable and unfavorable

decisions. While more than half of the

unfavorable decisions issued by ALJs in

recent years have been made subject to

possible review by the Appeals Council

as a result of claimant appeals, the

number of favorable decisions the

Council considers for possible review

has represented less than three percent

of the favorable decisions of ALJs (see

above). We believe that we can achieve

a better balance in the review of

favorable and unfavorable decisions by

including in the workload of favorable

decisions the Council considers a

relatively small number of cases that

have been referred to the Council

because they involve problematic issues

or fact patterns that may increase the

likelihood of error. As previously

discussed, we believe that postadjudicative evaluation of such cases

can increase our ability to identify

significant policy and program issues

and to make appropriate improvements

in our policies. Under these new rules,

the Council’s review functions should

be better balanced in the sense that the

amount of meaningful information they

generate concerning issues and fact

patterns that cause erroneous

allowances will more nearly balance the

extensive information that is already

available, as a result of the request for

review process and judicial review,

about issues and fact patterns that cause

erroneous disallowances.

The preambles to the NPRM and these

final rules specify that the Appeals

Council’s existing authority to review

cases on its own motion covers all types

of title II and title XVI cases. These rules

will allow use of the identification and

referral procedures they set forth with

respect to all such cases. Sections

404.969(b)(1) and 416.1469(b)(1), as

proposed and as adopted, state: ‘‘We

may use random and selective sampling

to identify cases involving any type of

action (i.e., wholly or partially favorable

decisions, unfavorable decisions, or

dismissals) and any type of benefits (i.e.,

benefits based on disability and benefits

not based on disability).’’ Thus, while

we currently see a need to better balance

the review of favorable disability

decisions by ALJs with the review of

unfavorable disability decisions by

ALJs, we are not preoccupied with the

review of the former type of cases and

are, instead, mindful of the need to

ensure that we will have the flexibility

in the future to use these new random

and selective sampling techniques to

bring to the Council’s attention any mix

of cases that it needs to consider to

contribute in the most meaningful

manner possible to our ability to assure

the quality of our decisionmaking.

Comment: One commenter referred to

the proposed procedures as the

‘‘Bellmon Review Program II’’ and

contended that the ‘‘selective sampling’’

procedures proposed in the NPRM were

actually ‘‘targeting’’ procedures.

Response: The issues and

controversies that arose concerning the

Bellmon Review Program of the 1980s

are beyond the scope of the NPRM by

which we proposed these new quality

assurance procedures. However, for the

reasons discussed below, we believe

that it is important to distinguish these

new procedures from that earlier

program.

In Association of Administrative Law

Judges v. Heckler, 594 F.Supp. 1132,

1143 (D.D.C. 1984), the court concluded

that an incautiousness which it

perceived in the Agency’s use of terms

such as ‘‘targeting’’ could have ‘‘tended

to corrupt’’ the ability of the ALJs to

decide cases impartially. It is our intent,

in promulgating these new procedures,

to use terminology that properly reflects

the appropriate purpose of these rules

and to avoid using terms, such as

‘‘targeting,’’ that could incorrectly cause

the procedures to seem intimidating.

Given the controversy that came to be

associated with the Bellmon Review

Program, the new program we are

establishing could also be made

incorrectly to seem intimidating by

referring to it as the ‘‘Bellmon Review

Program II.’’

Comment: One commenter contended

that the distinction between ‘‘targeting’’

ALJs and ‘‘targeting’’ profile cases is

immaterial because selective sampling

is necessarily ‘‘chilling’’ if it is

associated with allowance rates or

‘‘targeting’’ of any sort, especially in the

‘‘close’’ cases that ALJs are called on to

decide.

Response: We believe that there are

multiple, meaningful differences
36566 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

between case-selection procedures that

identify case samples based on case

profiles, while also excluding the

identity of the ALJ or the hearing office

as factors that may be considered in the

selection of cases, and case-selection

procedures that use the identity of the

ALJ or the hearing office in the selection

of cases. We also believe that the caseselection procedures we are establishing

will have no chilling effect on the

ability of ALJs to decide cases

impartially, free from Agency influence.

In the Bellmon Review Program of the

1980s, favorable decisions of individual

ALJs were initially included in the

program based on the rate at which the

ALJ allowed cases. The rate at which the

Appeals Council reviewed an ALJ’s

decisions on its own motion was

thereafter used to determine both the

percentage of the ALJ’s decisions

included in the ongoing program and

the time during which the ALJ’s

decisions would continue to be subject

to possible review under the program.

By contrast, under the program we are

now establishing, no case will be

included in the program based on the

ALJ’s allowance rate, or any other

characteristic of the ALJ or of his or her

record in deciding cases, because this

program excludes the identity of the ALJ

as a selection factor. These final rules

will not cause the favorable decisions of

any ALJ to be included in our random

or selective sampling procedures, either

at the start of the program or through its

operation, at a higher rate than are the

favorable decisions of any other ALJ,

except as chance in random selection or

in the distribution of cases presenting

problematic issues or fact patterns

causes minor variations.

Under the new program, we will not

advise adjudicators of the particular

case profiles that we are using at any

given time to identify cases for possible

inclusion in the selective sampling

portion of the new procedures. Our

selective sampling of cases will also

typically involve one or more random

elements as a result of the techniques

used in gathering and controlling the

size of samples. For example, from all

the cases that exhibit a profile, we might

actually select only those in which the

final digit of the Social Security number

is odd and/or the decision is issued

between certain dates. Thus, even if an

ALJ becomes aware of the use of a

particular profile, the ALJ will not

necessarily know that a decision fitting

that profile will be included in the

sample we gather concerning it. The ALJ

will also not know whether a case that

is included in a selective sample will be

referred by OQA to the Appeals Council

for possible own-motion review. By

contrast, under the Bellmon Review

Program of the early 1980s, an ALJ

could know that 100%, 75%, 50%, or

25% of his or her favorable decisions

would be subject to consideration for

possible own-motion review by the

Appeals Council. To appreciate the

contrast between the new procedures

we are establishing and past practices,

it should also be noted that, prior to

1975, the Appeals Council, through its

staff, routinely considered all ALJ

favorable decisions for possible review

on the Council’s own motion.

Under the current process, the

unfavorable decisions of ALJs are

substantially more likely than their

favorable decisions to be reviewed (by

the Appeals Council or a Federal court).

Our decision to better balance the

Appeals Council’s review of favorable

and unfavorable decisions by

establishing these new procedures will

lessen this existing imbalance in a nonthreatening way and, we believe,

promote independence and impartiality

in decisionmaking.

Comment: One commenter thought

the proposed procedures would be

‘‘chilling’’ based on the view that no

need exists to affect actual cases and

that the Agency could improve

decisionmaking sufficiently through

education, training and improved

policymaking.

Response: We believe it is necessary

to have the Appeals Council review and

act on cases referred to it under these

procedures, where a condition

warranting review is present. The

Appeals Council’s issuance of decisions

reversing an adjudicator’s decision and

orders of remand serves to correct error

in individual cases. The Council’s

actions also instruct individual

adjudicators in the correct application

of Agency policy. We believe we cannot

commit resources to increasing the

Appeals Council’s consideration of

favorable decisions without also making

the fullest possible use of its review

functions to improve decisionmaking.

While we also intend to use knowledge

and information gained through the new

procedures to improve policymaking

(and to train adjudicators in the

resulting policy improvements), that

intent does not obviate the need to use

the Appeals Council’s review functions

in all appropriate ways.

We do not believe the independence

of ALJs to issue favorable decisions will

be ‘‘chilled’’ by subjecting such

decisions to possible change as a

consequence of these identification and

referral procedures. The Commissioner’s

responsibility to administer the Social

Security and SSI programs and to make

final decisions determining eligibility

for benefits imposes on the

Commissioner a duty to ensure

consistency and impartiality in the

decisionmaking process. The

decisionmaking authority of ALJs is an

authority to decide cases impartially in

a manner consistent with Agency

policy; that authority is not such that it

should be ‘‘chilled’’ by any appropriate

action the Commissioner may take to

ensure that his final decisions, favorable

as well as unfavorable, comply with the

law, regulations and rulings.

Establishing quality assurance

procedures that make it possible for the

Appeals Council to better balance its

review of favorable and unfavorable

decisions is an appropriate action by the

Commissioner of Social Security.

Comment: Citing a memorandum that

the Appeals Council recently issued in

connection with a specific case, one

commenter contended that SSA intends

to pressure ALJs through feedback

mechanisms reminiscent of a feedback

system associated with the Bellmon

Review Program.

Response: In addition to providing

feedback to ALJs through decisions and

remand orders of the Appeals Council,

the Bellmon Review Program of the

early 1980s included, as a controversial

element that was never fully

implemented, a companion, multi-stage

system that was intended to provide

individualized, extra-adjudicative

feedback and counseling on the results

of own-motion review under the

program and, thereby, to promote long

term improvement in the

decisionmaking of the affected ALJs. We

have not proposed, either in the

Disability Redesign Plan or in the NPRM

for these rules, to establish any ongoing,

systematic process for providing ALJs

extra-adjudicative, individualized

feedback in which we would try to use

the results of own-motion review by the

Appeals Council to change an ALJ’s

decisionmaking practices. These final

rules intend that the quality of ALJ

decisionmaking should be improved

principally through the instructional

effect of the remand orders and reversal

decisions that the Appeals Council will

issue to individual ALJs under its ownmotion authority, and through the

publication of clarifying regulations and

rulings that we will develop based on

these new quality assurance procedures

and make available to all adjudicators,

with additional training as appropriate.

These rules establish no program for

providing individualized feedback and

contemplate no feedback activities that

could properly be viewed as threatening

by individual ALJs or the Corps of ALJs

as a whole. The memorandum cited in

this comment was issued in a trial-run
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36567

we conducted of these new procedures

in which the Appeals Council did not

actually exercise its own-motion

authority. The memorandum was issued

to provide some feedback in a situation

in which the Appeals Council had not

exercised its own-motion authority and,

thus, could not provide feedback in the

form of an order of remand or a reversal

decision.

Comment: One commenter contended

that the elimination of the request for

Appeals Council review step in the

administrative review process

contemplated in the Disability Redesign

Plan will greatly reduce the number of

appealed denial decisions, and that

SSA’s past practices provide a

convincing basis for concluding that the

vast majority of decisions subject to

selective sampling will be allowance

decisions.

Response: The Disability Redesign

Plan contemplates that favorable and

unfavorable decisions would be subject

to review on the Appeals Council’s own

motion in a redesigned disability claims

process in which the request for review

step is eliminated. We have recently

begun testing elimination of that step of

the existing process in a limited number

of disability claims in which an ALJ

issues a decision that is less than fully

favorable (62 FR 49598 (1997)). If we

eliminated the request for review step as

it is presently constituted in the

disability claims process (as we would

do only after we have completed the

above test, evaluated the test results,

consulted with key stakeholders, and

promulgated the necessary regulations

through public notice and comment

procedures), we would seek to refer to

the Appeals Council, for possible review

on its own motion, that mix of favorable

and unfavorable decisions that would

best ensure, through their consideration

by the Council, the overall quality of

ALJ decisionmaking. Considering our

responsibility to assure the accuracy of

unfavorable as well as favorable

decisions, and the adverse effects on our

ability to manage the Social Security

and SSI programs effectively that could

be expected to arise if we did not assure

the quality of the unfavorable decisions

subject to judicial review, we would

have important reasons to refer to the

Appeals Council a sufficient number of

unfavorable decisions to permit us to

provide meaningful Agency feedback to

the ALJs and to identify policy issues

that should be clarified through

publication of regulations or rulings.

Comment: Pointing out that the time

the Appeals Council currently requires

to process its large request-for-review

workload is high, several commenters

expressed the view that it would be

unconscionable to devote limited

resources to the Council’s own-motion

workloads and thereby subject

claimants who have requested review to

additional delays.

Response: We recognized in the

Disability Redesign Plan (59 FR 47889–

47890) that placing additional resources

into the existing disability claim process

is not a viable alternative for increasing

our ability to provide high-quality,

responsible service to the public, and

that we need to undertake longer-term

strategies to address the service delivery

problems affecting the disability

process. We are adopting these final

rules to take a step in accomplishing the

goals of the disability redesign, the

effectuation of which will inevitably

entail acceptance of some temporary

reductions in some aspects of service

delivery in exchange for achieving longterm improvements. However, it should

also be noted that the rules we are

adopting give us substantial flexibility

to determine the number of cases the

Appeals Council considers for possible

own-motion review as a result of

random and selective sampling, and that

we expect the rules to result in no

change in the number of cases that are

‘‘protested’’ to the Council by

effectuating components. Therefore, we

anticipate that we will be able to

manage the implementation of the new

procedures in a way which minimizes

any temporary reductions in service.

Comment: One commenter stated that

use of statistical case profiles in

selecting cases to be brought before the

Appeals Council is not within the

Appeals Council’s ‘‘own-motion

jurisdiction,’’ that the ‘‘mindset’’

associated with use of such a procedure

is one that easily allows for disregarding

the established administrative review

process.

Response: Under section 702(a)(7) of

the Act, which accords the

Commissioner of Social Security full

authority to assign duties and delegate

authority to officers and employees of

SSA, the Commissioner has delegated to

the Appeals Council exclusive authority

to decide to conduct and to perform

own-motion review of hearing-level

decisions. However, there are other

functions that must be accomplished for

SSA to carry out head-of-agency, ownmotion review of hearing-level

decisions issued nationwide. Such other

functions include identifying and

referring to the Appeals Council cases

that the Council may consider for

possible review under its own-motion

authority. SSA has heretofore assigned

identification and referral functions to

various components, including those

that perform random sampling and

those that ‘‘protest’’ ALJ decisions.

Under these final rules, the

responsibility for identifying and

referring cases to the Council is

expanded to include OQA and the

components that will perform

operational-support functions in our

new selective sampling and

examination procedures.

The use of case profiles in selective

sampling is a function within the

Agency’s authority that may properly be

assigned to the Appeals Council, OHA,

and other SSA components.

Promulgating regulations to include

such procedures in the set of procedures

SSA uses to exercise the

Commissioner’s own-motion authority

does not denote a mindset prone to

disregard the administrative appeals

process. Instead, that action constitutes

an appropriate initiative to improve the

disability claims process through

rulemaking.

Comment: One commenter stated that

the proposed quality review program

would likely ignore the substantial

evidence rule as related to the findings

and conclusions of ALJs, and that the

proposed program will allow the

Appeals Council to ‘‘second guess’’ the

ALJ’s findings and conclusions

concerning the credibility of evidence

based on ‘‘factors outside the record.’’

Another commenter stated that we must

make it clear that the standard for

review will be the substantial evidence

standard.

Response: The Appeals Council

retains authority under §§ 404.969,

404.970, 416.1469 and 416.1470 to

review a case, on request for review or

on its own motion, for any reason. It is

the practice of the Appeals Council,

generally, to deny a request for review,

or to decline to review a case on its own

motion, if the case does not meet at least

one of the criteria for review stated in

§§ 404.970 and 416.1470, which set

forth the reasons for which the Appeals

Council ‘‘will’’ review a case. (See

HALLEX sections I–3–301–I–3–307.)

Under the provisions of §§ 404.970(a)

and 416.1470(a), the Appeals Council

will review a case if the ALJ’s decision

is not supported by substantial evidence

or if another of the criteria for review

stated in those sections is met. Under

the provisions of §§ 404.970(b) and

416.1470(b), if new and material

evidence is submitted to the Appeals

Council that relates to the period on or

before the date of the hearing-level

decision, the Appeals Council will

consider the ‘‘entire record’’, including

the new and material evidence

submitted, and will decide to review the

case if ‘‘it finds that the [ALJ’s] action,

findings, or conclusion is contrary to the
36568 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

weight of the evidence currently of

record.’’

The additional evidence that the

Appeals Council considers under

§§ 404.970(b) and 416.1470(b) (if the

evidence is new and material and

relevant to the period at issue) is

typically submitted by claimants or

their representatives. In addition, under

our existing ‘‘protest’’ procedures,

effectuating components sometimes

attach to their memoranda to the

Appeals Council potential evidentiary

items encountered in the activities these

components conduct to effectuate

decisions. Thus, for example, if an

updated earnings report that has been

secured to determine benefit amounts

appears to show that the claimant

engaged in substantial gainful activity

after the date on which the hearing-level

decision found that disability began, the

effectuating component may submit the

earnings report to the Appeals Council

as an attachment to a protest

memorandum. Under these final rules,

effectuating components will attach

such items to the written referrals they

make under §§ 404.969(c) and

416.1469(c).

Evidence that the Appeals Council

considers under §§ 404.970(b) and

416.1470(b) to determine whether to

review a case is not part of the record

of the decision that has been made at

the hearing level, of course, but it is part

of the administrative record in any

further proceedings that may occur in

the case. If the Council reviews the case

and a new decision is issued, any

evidentiary items received under these

provisions are made part of the record

for decision that is established, either by

an ALJ following remand or, if the

Appeals Council is able to issue a fully

favorable decision, by the Council.

When a case-examination is

conducted by OQA under the new

quality assurance procedures

established by these final rules, the

OQA analyst who conducts the

examination may consult with a

medical or psychological consultant to

gain insight into whether the decision at

the hearing level was supported by the

record upon which it was based.

Insights gained through such

consultations may be reflected in the

written referrals that OQA will prepare,

as provided in §§ 404.969(c) and

416.1469(c), to state its reasons for

believing that the Appeals Council

should review the decision on its own

motion. However, the written referrals

made by OQA will attach no statement

or writing by a consultant that could

activate the additional-evidence

provisions of § 404.970(b) or

§ 416.1470(b). Those provisions will

also not be activated by the written

referral itself, which will document the

procedural history of the case and

express OQA’s reasons for believing the

case should be reviewed. The written

referral will not constitute an

evidentiary item to be weighed in

decisionmaking. In deciding whether to

review cases referred by OQA, the

Appeals Council will apply the criteria

set forth in §§ 404.970(a) and

416.1470(a). If the Council reviews the

case, OQA’s written referral will be

included in the procedural portion of

the overall administrative record of the

case, but will not be part of the

evidentiary record upon which any

subsequent decision is based.

Comment: Several commenters

thought that the selective sampling of

allowance decisions would be unfair to

individuals whose cases meet an

applicable case profile. The reasons

given for this view included that such

individuals would effectively face a

higher standard of proof than other

individuals (as a result of the chilling

effect on ALJ readiness to reach a

favorable decision and the existence of

a pre-judgment in favor of denial), and

that the decisions of these individuals

would be placed at special risk by being

subjected to procedures that other

favorable decisions do not face.

Response: We have already discussed

our reasons for believing that these new

procedures will not intimidate ALJs or

chill their decisional independence. We

further note here that use of selective

sampling to identify cases based on the

presence of problematic issues or fact

patterns involves, not a pre-judgment

that these cases should be denied, but

a judgment that the chance of error in

the cases so identified is elevated as

compared to the chance of error in cases

that do not involve such issues and

patterns, and that consideration of the

cases presenting such issues and

patterns provides an increased

opportunity to identify error and policy

issues that should be clarified through

publication of regulations or rulings.

It is true, of course, that the cases of

claimants whose allowance decisions

are selected for consideration for ownmotion review will be subjected to an

examination not given to other cases

and/or possible review by the Appeals

Council. However, for the reasons

discussed below, we believe that these

rules minimize the number of cases we

need to expose to possible review on the

Council’s own motion.

Cases selected for possible ownmotion review will be equally affected

whether chosen by random or selective

sampling procedures. The effects of

own-motion procedures (which can

include providing some individuals

who receive unfavorable decisions

additional administrative consideration

through no action of their own) could

not be wholly eliminated except by

subjecting all cases to own-motion

consideration or by eliminating ownmotion functions altogether. The first of

these options is not currently feasible,

and the second would be inconsistent

with the responsibility of the

Commissioner of Social Security to

ensure consistency and uniformity in

the allocation of benefits through his

final decisions.

Our decision to promulgate these

rules rests on the judgment that use of

selective sampling procedures, together

with our existing random sampling and

‘‘protest’’ procedures, represents the

best way to minimize the number of

cases we need to subject to possible

own-motion review while also

maximizing the use we can make of our

own-motion capacities to identify

erroneous decisions and to monitor

operation of the claims process

effectively. Use of case examinations by

OQA in conjunction with selective

sampling refines the identification of

cases that should be subjected to

consideration by the Appeals Council

for own-motion review and reduces the

number of cases that we need to subject

to such consideration.

In our judgment, the procedures we

are adopting in these final rules to

improve the disability claims process

are in accord with the following views

the United States Supreme Court

expressed in Califano v. Boles, 443 U.S.

282, 285 (1979), concerning how

fairness can best be assured to

individuals seeking Social Security

benefits:

* * * the Court has been sensitive to the

special difficulties presented by the mass

administration of the social security system.

After the legislative task of classification is

completed, the administrative goal is

accuracy and promptness in the actual

allocation of benefits pursuant to those

classifications. The magnitude of that task is

not amenable to the full trappings of the

adversary process lest again benefit levels be

threatened by the costs of administration.

Mathews v. Eldridge, 424 U.S. 319, 343–349,

96 S.Ct. 893, 906–910, 47 L.Ed.2d. 18 (1976);

Richardson v. Perales, 402 U.S. 389, 406, 91

S.Ct. 1420, 1430, 28 L.Ed.2d. 842 (1971).

Fairness can best be assured by Congress and

the Social Security Administration through

sound managerial techniques and quality

control designed to achieve an acceptable

rate of error.

Comment: Several commenters

expressed concern that SSA has not

specified the case profiles that will be

used in selective sampling. One

commenter contended that this
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36569

omission violated the principle that

regulations should not be vague and

indefinite. Another commenter

contended that SSA would expose ALJs

to claims of bias by not identifying

through notice and comment procedures

the types of cases to be ‘‘targeted.’’

Response: We are not specifying the

problematic issues or fact patterns that

will be used in defining the case profiles

to be employed in selective sampling

because these issues and fact patterns

will change over time and we will need

flexibility to address such changes. In

addition, as we explained above in

discussing the distinctions between

‘‘targeting’’ and the selective sampling

procedures we are establishing, we do

not plan to advise adjudicators of the

particular case profiles we are using at

any given time. Considering that it will

also always be clear that neither the

identity of the decisionmaker nor the

identity of the office issuing the

decision has been a factor in the

selection of a case, we believe that these

rules will not in any way expose

decisionmakers to charges of bias.

Comment: One commenter believed

that the proposed rules would create

‘‘internal procedures’’ and a new layer

of administrative ‘‘review’’ without

providing claimants the right to

participate in those procedures/review

and to understand the criteria that the

examining component and the Appeals

Council apply, until a determination to

review the favorable decision has been

made.

Response: These final rules add no

new layer of administrative review. The

only ‘‘review’’ of an ALJ’s decision that

can occur under our regulations, as

currently established and as amended

by these rules, is the ‘‘review’’ that

occurs if and when, following its

preliminary consideration of a case, the

Appeals Council decides to review a

case and announces its decision to

review in a notice of review. For the

purposes of the Social Security and SSI

claims process, ‘‘own motion’’ review

means a review that is initiated absent

any motion/appeal or input by the

claimant. The activities SSA conducts to

decide whether to exercise its ownmotion authority (i.e., identification and

referral procedures and the preliminary

consideration of cases that the Appeals

Council conducts, with the assistance of

its staff) are internal functions; they

constitute the way this large Agency

decides whether to exercise its authority

to initiate review of cases unilaterally.

Where the claimant has not requested

review, the proceedings in which the

claimant has a due process right of

participation are limited to those that

occur if the Appeals Council decides,

for the Agency, to review the case.

Under these final rules, the Appeals

Council retains exclusive authority to

decide to review a hearing-level case.

The criteria the Council will apply in

deciding whether to review cases will

remain, as discussed above, those it

currently applies under §§ 404.969,

404.970, 416.1469, and 416.1470. In

addition, the examination of cases that

OQA conducts under these final rules

will be for the purpose of assessing

whether the criteria for review by the

Appeals Council may be met (or, in

OQA’a view, are met). To make this

point clear, we have modified the

provisions of §§ 404.969(b)(1) and

416.1469(b)(1) that state the purpose of

the case examinations. We have also

modified the explanation of the case

examination set forth above.

Comment: Two commenters likened

the procedures proposed in the NPRM

to the procedures of the SSA

Representation Project, a test project of

the 1980s in which an SSA

representative could participate in

certain ALJ hearings and refer cases to

the Appeals Council for possible ownmotion review. It was contended that

OQA’s function in the new procedures

would be like that of the SSA

representative and would involve the

kind of advocacy that was criticized in

Salling v. Bowen, 641 F. Supp. 1046

(W.D.Va. 1986).

Response: Under these final rules,

OQA will examine cases that have been

initially identified through random and

selective sampling procedures to

determine if a case should be the subject

of a referral and, if that issue is resolved

in the affirmative, to state its reasons for

believing that the decision is not

supported and should be considered by

the Appeals Council for possible review

under its own-motion authority. OQA,

as the SSA component responsible for

SSA’s quality assurance functions, will

examine cases with no prior

involvement in those cases that might,

even arguably, affect its ability to

impartially assess whether a referral is

warranted under the applicable law,

regulations and rulings. The Appeals

Council, which will decide if ownmotion review is appropriate, has, like

ALJs and all other SSA decisionmakers,

no adjudicative duty other than to

assure that cases are decided impartially

in accordance with Agency policy as

established through law, regulations,

and rulings.

Based on the above considerations,

we see no significant similarity between

the SSA Representation Project and the

quality assurance procedures we are

establishing in these final rules. We also

believe that these procedures support

our ability to continue to provide

informal, nonadversarial adjudication of

cases in a high-volume process.

Comment: One commenter indicated

that, if SSA did not abandon the

proposed rules, it should amend the

rules to provide that SSA will not use

the data gathered to keep records on

ALJs or individual hearing offices

regarding allowance or own-motion

rates or any similar information, to

prohibit the instituting of any form of

continuing education for ‘‘targeted’’

ALJs, and to provide for publishing any

data gathered in the program to all ALJs

without mention of the name of any ALJ

or hearing office.

Response: As we discussed above,

there will be no ‘‘targeting’’ of ALJs

under these rules, which preclude

consideration of the identity of a

decisionmaker or of a decisionmaking

office and of any data concerning

matters such as a decisionmaker’s

allowance or own-motion rate, in the

random sampling, selective sampling,

and case-effectuation procedures we are

establishing in these final rules. We

intend that these rules should improve

decisional quality principally through

the instructional effects of the Appeals

Council’s adjudicative actions and

through the policy clarifications we will

develop based on these new quality

assurance procedures. The rules

establish no program for providing

individualized feedback, contemplate

no feedback activities that should be

threatening to individual ALJs or the

Corps of ALJs as a whole, and do not

authorize or contemplate publishing

data on named ALJs or hearing offices.

We are not adopting the

recommendation of this commenter that

we should modify these final rules to

prescribe the uses that will be made of

data gathered as a result of the quality

assurance procedures we are

establishing by these rules. The uses of

management information is not a matter

within the scope of these rules.

Comment: One commenter believed

that the new process would be subject

to the same harsh criticism as the

‘‘targeted’’ reviews of the early 1980s

absent satisfaction of the following

requirements: ‘‘Both the process for

selecting decisions to review and the

criteria used in the review must be

scrupulously fair and free from bias.

Selection of cases must be made

randomly. Individual ALJs cannot

become targets. Allowance and denial

rates have no part in the selection

process. Reviewers must be clear that

their standard for review is one of

substantial evidence supporting the

ALJ’s decision.’’
36570 Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations

Response: For reasons discussed

above generally in response to other

comments, and as we further explain

below specifically, we believe that the

new quality assurance procedures we

are establishing in these final rules

exhibit each of the characteristics urged

by this commenter. We note that while

the new procedures provide for

selective as well as random sampling,

our selective sampling of cases will

typically involve random elements and

will be scrupulously fair and free from

bias.

Individual ALJs cannot become

targets under those procedures and

allowance and denial rates have no part

in the selection process. The new

procedures and these rules cause no

change in the criteria for reviewing

hearing level decisions and orders of

dismissal, or in the practices the Appeal

Council follows in applying the

substantial evidence standard and other

criteria in deciding whether to review a

case.

Other Changes

We have modified the provisions of

§§ 404.969(b)(2) and 416.1469(b)(2), and

the explanation of those provisions set

forth above, to emphasize that a referral

resulting from the effectuating process

rests on the belief of an effectuating

component that a decision cannot be

effectuated (for a reason stated in those

provisions) and does not represent a

pre-judgement by the Agency that

review of the decision is appropriate.

The Appeals Council retains exclusive

authority under these final rules to

decide for the Agency whether a

hearing-level decision should be

reviewed.

Regulatory Procedures

Executive Order 12866

We have consulted with the Office of

Management and Budget (OMB) and

determined that these rules do meet the

criteria for a significant regulatory

action under Executive Order 12866.

They were therefore submitted to OMB

for review. These rules do not adversely

affect State, local or tribal governments.

The rules are expected to result in

administrative costs of less than $5

million annually and to have no

significant impact on program costs.

Therefore, we have not prepared a cost

benefit analysis under Executive Order

12866.

Regulatory Flexibility Act

We certify that these regulations will

not have a significant economic impact

on a substantial number of small entities

because these rules affect only

individuals. Therefore, a regulatory

flexibility analysis as provided in the

Regulatory Flexibility Act, as amended,

is not required.

Paperwork Reduction Act

These regulations impose no new

reporting or record keeping

requirements requiring OMB clearance.

(Catalog of Federal Domestic Assistance

Program Nos. 96.001, Social SecurityDisability Insurance; 96.002, Social SecurityRetirement Insurance; 96.003, Social

Security-Special Benefits for Persons Aged 72

and Over; 96.004, Social Security-Survivors

Insurance; 96.006, Supplemental Security

Income)

List of Subjects

20 CFR Part 404

Administrative practice and

procedure, Death benefits, Disability

benefits, Old-Age, Survivors and

Disability Insurance, Reporting and

recordkeeping requirements, Social

Security.

20 CFR Part 416

Administrative practice and

procedure, Aged, Blind, Disability

benefits, Public assistance programs,

Supplemental Security Income (SSI),

Reporting and recordkeeping

requirements.

Dated: May 27, 1998.

Kenneth S. Apfel,

Commissioner of Social Security.

For the reasons set out in the

preamble, subpart J of part 404 and

subpart N of part 416 of chapter III of

title 20 of the Code of Federal

Regulations are amended as set forth

below.

PART 404—FEDERAL OLD-AGE,

SURVIVORS AND DISABILITY

INSURANCE (1950- )

20 CFR part 404, Subpart J, is

amended as follows:

1. The authority citation for subpart J

of part 404 continues to read as follows:

Authority: Secs. 201(j), 205(a), (b), (d)–(h),

and (j), 221, 225, and 702(a)(5) of the Social

Security Act (42 U.S.C. 401(j), 405(a), (b),

(d)–(h), and (j), 421, 425, and 902(a)(5)); 31

U.S.C. 3720A; sec. 5, Pub. L. 97–455, 96 Stat.

2500 (42 U.S.C. 405 note); secs. 5, 6(c)–(e),

and 15, Pub. L. 98–460, 98 Stat. 1802 (42

U.S.C. 421 note).

2. Section 404.969 is revised to read

as follows:

§ 404.969 Appeals Council initiates review.

(a) General. Anytime within 60 days

after the date of a decision or dismissal

that is subject to review under this

section, the Appeals Council may

decide on its own motion to review the

action that was taken in your case. We

may refer your case to the Appeals

Council for it to consider reviewing

under this authority.

(b) Identification of cases. We will

identify a case for referral to the

Appeals Council for possible review

under its own-motion authority before

we effectuate a decision in the case. We

will identify cases for referral to the

Appeals Council through random and

selective sampling techniques, which

we may use in association with

examination of the cases identified by

sampling. We will also identify cases for

referral to the Appeals Council through

the evaluation of cases we conduct in

order to effectuate decisions.

(1) Random and selective sampling

and case examinations. We may use

random and selective sampling to

identify cases involving any type of

action (i.e., wholly or partially favorable

decisions, unfavorable decisions, or

dismissals) and any type of benefits (i.e.,

benefits based on disability and benefits

not based on disability). We will use

selective sampling to identify cases that

exhibit problematic issues or fact

patterns that increase the likelihood of

error. Neither our random sampling

procedures nor our selective sampling

procedures will identify cases based on

the identity of the decisionmaker or the

identity of the office issuing the

decision. We may examine cases that

have been identified through random or

selective sampling to refine the

identification of cases that may meet the

criteria for review by the Appeals

Council.

(2) Identification as a result of the

effectuation process. We may refer a

case requiring effectuation to the

Appeals Council if, in the view of the

effectuating component, the decision

cannot be effectuated because it

contains a clerical error affecting the

outcome of the claim; the decision is

clearly inconsistent with the Social

Security Act, the regulations, or a

published ruling; or the decision is

unclear regarding a matter that affects

the claim’s outcome.

(c) Referral of cases. We will make

referrals that occur as the result of a case

examination or the effectuation process

in writing. The written referral based on

the results of such a case examination

or the effectuation process will state the

referring component’s reasons for

believing that the Appeals Council

should review the case on its own

motion. Referrals that result from

selective sampling without a case

examination may be accompanied by a

written statement identifying the

issue(s) or fact pattern that caused the

referral. Referrals that result from
Federal Register / Vol. 63, No. 129 /Tuesday, July 7, 1998 /Rules and Regulations 36571

random sampling without a case

examination will only identify the case

as a random sample case.

(d) Appeals Council’s action. If the

Appeals Council decides to review a

decision or dismissal on its own motion,

it will mail a notice of review to all the

parties as provided in § 404.973. The

Appeals Council will include with that

notice a copy of any written referral it

has received under paragraph (c) of this

section. The Appeals Council’s decision

to review a case is established by its

issuance of the notice of review. If it is

unable to decide within the applicable

60-day period whether to review a

decision or dismissal, the Appeals

Council may consider the case to

determine if the decision or dismissal

should be reopened pursuant to

§§ 404.987 and 404.988. If the Appeals

Council decides to review a decision on

its own motion or to reopen a decision

as provided in §§ 404.987 and 404.988,

the notice of review or the notice of

reopening issued by the Appeals

Council will advise, where appropriate,

that interim benefits will be payable if

a final decision has not been issued

within 110 days after the date of the

decision that is reviewed or reopened,

and that any interim benefits paid will

not be considered overpayments unless

the benefits are fraudulently obtained.

PART 416—SUPPLEMENTAL

SECURITY INCOME FOR THE AGED,

BLIND, AND DISABLED

20 CFR Part 416, Subpart N, is

amended as follows:

1. The authority citation for subpart N

continues to read as follows:

Authority: Sec. 702(a)(5), 1631, and 1633

of the Social Security Act (42 U.S.C.

902(a)(5), 1383, and 1383b).

2. Section 416.1469 is revised to read

as follows:

§ 416.1469 Appeals Council initiates

review.

(a) General. Anytime within 60 days

after the date of a decision or dismissal

that is subject to review under this

section, the Appeals Council may

decide on its own motion to review the

action that was taken in your case. We

may refer your case to the Appeals

Council for it to consider reviewing

under this authority.

(b) Identification of cases. We will

identify a case for referral to the

Appeals Council for possible review

under its own-motion authority before

we effectuate a decision in the case. We

will identify cases for referral to the

Appeals Council through random and

selective sampling techniques, which

we may use in association with

examination of the cases identified by

sampling. We will also identify cases for

referral to the Appeals Council through

the evaluation of cases we conduct in

order to effectuate decisions.

(1) Random and selective sampling

and case examinations. We may use

random and selective sampling to

identify cases involving any type of

action (i.e., wholly or partially favorable

decisions, unfavorable decisions, or

dismissals) and any type of benefits (i.e.,

benefits based on disability and benefits

not based on disability). We will use

selective sampling to identify cases that

exhibit problematic issues or fact

patterns that increase the likelihood of

error. Neither our random sampling

procedures nor our selective sampling

procedures will identify cases based on

the identity of the decisionmaker or the

identity of the office issuing the

decision. We may examine cases that

have been identified through random or

selective sampling to refine the

identification of cases that may meet the

criteria for review by the Appeals

Council.

(2) Identification as a result of the

effectuation process. We may refer a

case requiring effectuation to the

Appeals Council if, in the view of the

effectuating component, the decision

cannot be effectuated because it

contains a clerical error affecting the

outcome of the claim; the decision is

clearly inconsistent with the Social

Security Act, the regulations, or a

published ruling; or the decision is

unclear regarding a matter that affects

the claim’s outcome.

(c) Referral of cases. We will make

referrals that occur as the result of a case

examination or the effectuation process

in writing. The written referral based on

the results of such a case examination

or the effectuation process will state the

referring component’s reasons for

believing that the Appeals Council

should review the case on its own

motion. Referrals that result from

selective sampling without a case

examination may be accompanied by a

written statement identifying the

issue(s) or fact pattern that caused the

referral. Referrals that result from

random sampling without a case

examination will only identify the case

as a random sample case.

(d) Appeals Council’s action. If the

Appeals Council decides to review a

decision or dismissal on its own motion,

it will mail a notice of review to all the

parties as provided in § 416.1473. The

Appeals Council will include with that

notice a copy of any written referral it

has received under paragraph (c) of this

section. The Appeals Council’s decision

to review a case is established by its

issuance of the notice of review. If it is

unable to decide within the applicable

60-day period whether to review a

decision or dismissal, the Appeals

Council may consider the case to

determine if the decision or dismissal

should be reopened pursuant to

§§ 416.1487 and 416.1488. If the

Appeals Council decides to review a

decision on its own motion or to reopen

a decision as provided in §§ 416.1487

and 416.1488, the notice of review or

the notice of reopening issued by the

Appeals Council will advise, where

appropriate, that interim benefits will be

payable if a final decision has not been

issued within 110 days after the date of

the decision that is reviewed or

reopened, and that any interim benefits

paid will not be considered

overpayments unless the benefits are

fraudulently obtained.

[FR Doc. 98–17633 Filed 7–6–98; 8:45 am]

BILLING CODE 4190–29–P

DEPARTMENT OF STATE

22 CFR Part 140

[Public Notice 2840]

Bureau for International Narcotics and

Law Enforcement Affairs; Prohibition

on Assistance to Drug Traffickers

AGENCY: Department of State (Bureau for

International Narcotics and Law

Enforcement Affairs).

ACTION: Final rule.

SUMMARY: The Department of State

issues these regulations to implement

Section 487 of the Foreign Assistance

Act of 1961, as amended (‘‘FAA’’) (22

U.S.C. 2291f).

Section 487(a) directs the President to

take all reasonable steps to ensure that

assistance provided under the Foreign

Assistance Act or the Arms Export

Control Act is not provided to or

through any individual or entity that the

President knows or has reason to believe

has been convicted of a violation of, or

a conspiracy to violate, any law or

regulation of the United States, a State

or the District of Columbia, or a foreign

country relating to narcotic or

psychotropic drugs or other controlled

substances; or is or has been an illicit

trafficker in any such controlled

substance or is or has been a knowing

assistor, abettor, conspirator, or colluder

with others in the illicit trafficking of

any such substance. This rule

establishes a single government-wide

enforcement mechanism for Section

487. The regulations seek to achieve

rigorous statutory enforcement in a