[Federal Register Volume 70, Number 195 (Tuesday, October 11, 2005)]
[Proposed Rules]
[Pages 58999-59015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20266]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

[Regulations Nos. 4 and 16]
RIN-0960-AE93


Exemption of Work Activity as a Basis for a Continuing Disability 
Review

AGENCY: Social Security Administration (SSA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: We are proposing to amend our regulations to include rules to 
carry out section 221(m) of the Social Security Act (the Act). Section 
221(m) affects our rules for when we will conduct a continuing 
disability review if you work and receive benefits under title II of 
the Act based on disability. (We interpret this section to include you 
if you receive both title II disability benefits and Supplemental 
Security Income (SSI) payments based on disability.) It also affects 
our rules on how we evaluate work activity when we decide if you have 
engaged in substantial gainful activity for purposes of determining 
whether your disability has ended. In addition, section 221(m) of the 
Act affects certain other standards we use when we determine whether 
your disability continues or ends. We are also proposing to make 
certain other revisions to our regulations for how we determine whether 
your disability continues or ends. These other proposed revisions would 
codify our existing operating instructions for how we consider certain 
work at the last two steps of our continuing disability review process. 
In addition, we are proposing to incorporate into our disability 
regulations some rules which are contained in another part of our 
regulations and which apply if you are using a ticket under the Ticket 
to Work and Self-Sufficiency program (the Ticket to Work program). 
Finally, we are proposing to amend our regulations to eliminate the 
secondary substantial gainful activity amount that we currently use to 
evaluate work you did as an employee before January 2001.

DATES: To be sure that your comments are considered, we must receive 
them by December 12, 2005.

ADDRESSES: You may give us your comments by: using our Internet 
facility (i.e., Social Security Online) at http://policy.ssa.gov/pnpublic.nsf/LawsRegs or the Federal eRulemaking Portal: http://www.regulations.gov; e-mail to <a href="/cdn-cgi/l/email-protection#1f6d7a786a737e6b7670716c5f6c6c7e31787069"><span class="__cf_email__" data-cfemail="6c1e090b19000d180503021f2c1f1f0d420b031a">[email protected]</span></a>; telefax to (410) 
966-2830; or letter to the Commissioner of Social Security, PO Box 
17703, Baltimore, MD 21235-7703. You may also deliver them to the 
Office of Regulations, Social Security Administration, 100 Altmeyer 
Building, 6401 Security Boulevard, Baltimore, MD 21235-6401, between 8 
a.m. and 4:30 p.m. on regular business days. Comments are posted on our 
Internet site, or you may inspect them physically on regular business 
days by making arrangements with the contact person shown in this 
preamble.
    Electronic Version: The electronic file of this document is 
available on the date of publication in the Federal Register at http://www.access.gpo.gov/su_docs/aces/aces140.html. It is also available on 
the Internet site for SSA (i.e., Social Security Online) at http://www.socialsecurity.gov/regulations/.

FOR FURTHER INFORMATION CONTACT: Kristine Erwin-Tribbitt, Policy 
Analyst, Office of Program Development and Research, Social Security 
Administration, 6401 Security Boulevard, Baltimore, Maryland 21235-
6401. Call (410) 965-3353 or TTY (410) 966-5609 for information about 
these proposed rules. For information on eligibility or filing for 
benefits, call our national toll-free number 1 (800) 772-1213 or TTY 1 
(800) 325-0778. You may also contact Social Security Online at http://www.socialsecurity.gov/.

SUPPLEMENTARY INFORMATION:

What is the purpose of this notice of proposed rulemaking (NPRM)?

    In this NPRM, we propose to amend our disability regulations to 
carry out section 221(m) of the Act. These proposed changes would apply 
to you if you are a working beneficiary who is entitled to Social 
Security disability benefits under title II of the Act and you have 
received such benefits for at least 24 months. If you are a person who 
meets these requirements, we propose to change our rules on when we 
will start a continuing disability review to decide whether you are 
still disabled. In addition, we propose to amend our rules to provide 
that, under the medical

[[Page 59000]]

improvement review standard sequential evaluation process, we will not 
consider the activities you perform in your work if they support a 
finding that you are no longer disabled. We also propose to amend our 
regulations to provide that we will not use the activities you perform 
in work to support a finding that you are no longer disabled when 
deciding if the work you do shows that you are able to perform 
substantial gainful activity. Specifically we will not compare your 
work activity to that of unimpaired people in your community who are 
doing the same or similar work as their means of livelihood. Also, if 
your earnings are less than the substantial gainful activity limit, we 
will not make a determination that your work is worth more than the 
substantial gainful activity amount.
    In this NPRM, we also propose to make certain other changes to our 
regulations that may apply to you even if you are not affected by 
section 221(m) of the Act. We are proposing to clarify our rules for 
how we consider work activity at the last two steps of the medical 
improvement review standard sequential evaluation process when we 
determine if you are still disabled. The proposed rules will codify in 
our regulations interpretations of our standards for determining 
whether disability continues under title II and title XVI that we have 
been using in operating instructions for some time. These proposed 
rules also provide that these interpretations apply when we determine 
whether you are entitled to expedited reinstatement of benefits under 
section 223(i) of the Act or eligible for expedited reinstatement of 
benefits under section 1631(p) of the Act. The proposed changes affect 
you if you are entitled to Social Security benefits based on disability 
under title II or you are an adult who is eligible for SSI payments 
based on disability under title XVI and you work during your current 
period of entitlement or eligibility based on disability. Also, the 
proposed rules affect you if you request reinstatement of benefits.
    We are also proposing to incorporate into our disability 
regulations some rules which are contained in another part of our 
regulations and which apply to you if you are using a ticket under the 
Ticket to Work program. In addition, we are proposing to revise our 
rules for evaluating work activity you performed as an employee prior 
to January 2001 to eliminate the use of the secondary substantial 
gainful activity amount. We are also proposing to make some minor 
clarifications and corrections of other rules.

Ticket to Work and Work Incentives Advisory Panel

    During the preparation of these proposed rules, we consulted with 
the Ticket to Work and Work Incentives Advisory Panel.

When will we start to use these rules?

    We will not use these rules until we evaluate the public comments 
we receive on them and issue final rules in the Federal Register. If we 
publish final rules, we will state in the notice the date on which they 
go into effect, explain in the preamble how we will apply them, and 
summarize and respond to the substantive public comments.

What are continuing disability reviews and when do we start them?

    After we find that you are disabled, we are required by the Act and 
our regulations to periodically reevaluate whether you continue to meet 
the disability requirements of the Act. (See sections 221(i) and 
1631(d)(1) and 1633 of the Act, and Sec. Sec.  404.1589 and 416.989 of 
our regulations.) We call this evaluation a continuing disability 
review. In Sec. Sec.  404.1590 and 416.990 of our regulations, we 
explain that, if you are entitled to or eligible for disability 
benefits, you must undergo regularly scheduled continuing disability 
reviews. We also explain that in some circumstances, we may start a 
continuing disability review before the time of your regularly 
scheduled continuing disability review.
    In Sec. Sec.  404.1590(b) and 416.990(b) of our regulations, we 
list circumstances in which we will start a continuing disability 
review. In most cases, we start a continuing disability review because, 
under the Act and our regulations, we must evaluate your impairment(s) 
from time to time to determine if you are still entitled to Social 
Security disability benefits or eligible for SSI payments based on 
disability or blindness. If you are entitled to or eligible for such 
benefits, you are subject to regularly scheduled continuing disability 
reviews at intervals ranging from 6 months to 7 years depending on 
whether, and the degree to which, we expect your impairment(s) to 
improve.
    We may also start a continuing disability review because you 
returned to work, and at other times when we receive information that 
raises questions about whether you are still under a disability, such 
as when you complete vocational rehabilitation services. For more 
information about how we decide the frequency of continuing disability 
reviews and when we may start a continuing disability review at other 
than scheduled times, see Sec. Sec.  404.1590 and 416.990 of our 
current regulations.

How do we determine whether your disability continues or ends?

    When we do a continuing disability review to determine whether your 
disability continues or ends, we use the rules in Sec.  404.1594 if you 
are a Social Security disability beneficiary and the rules in Sec.  
416.994 if you are an adult who is eligible for SSI payments based on 
disability. In general, these rules provide that we must determine if 
there has been any medical improvement in your impairment(s) and, if 
so, whether this medical improvement is related to your ability to 
work. The rules in these sections also provide some exceptions to this 
medical improvement review standard.
    In Sec.  404.1594(f), we provide an eight-step sequential 
evaluation process that we use when we determine whether you are still 
disabled under title II of the Act. We generally follow the steps in 
order. However, we may also find that your disability has ended because 
of one of several exceptions to the medical improvement review standard 
described in Sec. Sec.  404.1594(d) and (e). (Since the exceptions are 
in the statute and are not affected by section 221(m) or the proposals 
in this NPRM, we do not summarize them below.) The eight steps are as 
follows:
    1. Are you engaging in substantial gainful activity? If you are 
(and any applicable trial work period has been completed), we will find 
that your disability ended.
    2. If you are not, do you have an impairment or combination of 
impairments that meets or equals the severity of an impairment in our 
Listing of Impairments? If you do, we will generally find that your 
disability continues.
    3. If you do not, has there been medical improvement? If there has 
been medical improvement as shown by a decrease in the medical severity 
of your impairment(s), we go on to step 4. If there is no medical 
improvement in your impairment(s), we skip to step 5.
    4. If there has been medical improvement, we must determine whether 
it is related to your ability to do work. If medical improvement is not 
related to your ability to do work, we go on to step 5. If medical 
improvement is related to your ability to do work, we skip to step 6.
    5. If we found at step 3 that there has been no medical 
improvement, or if we found at step 4 that the medical improvement is 
not related to your ability to work, we consider whether one of the 
exceptions to medical

[[Page 59001]]

improvement applies in your case. If none of the exceptions to medical 
improvement applies, we find that your disability continues. However, 
if one of the exceptions applies, we will find either that your 
disability has ended or that we need to go on to step 6, depending on 
the exception that applies in your case.
    6. If medical improvement is related to your ability to do work, or 
if any one of certain exceptions to medical improvement applies, we 
will determine whether all of your current impairments in combination 
are ``severe'' (see Sec.  404.1521 of our regulations). If you do not 
have a ``severe'' impairment(s), we will find that your disability has 
ended.
    7. If your impairment(s) is ``severe,'' we will assess your 
residual functional capacity based on all your current impairments and 
consider whether you can still do work you have done in the past. If 
you can do such work, we will find that your disability has ended.
    8. If you are not able to do work you have done in the past, we 
will consider one final step. Given the residual functional capacity 
assessment and considering your age, education, and past work 
experience, can you do other work? If you can, disability will be found 
to have ended. If you cannot, disability will be found to continue.
    We also use this medical improvement review standard to review your 
continuing eligibility if you are an adult who receives SSI payments 
based on disability. The sequential evaluation process is in Sec.  
416.994(b)(5) of our regulations, but it has only seven steps instead 
of eight. The seven steps are the same as the second through eighth 
steps of Sec.  404.1594(f). We do not have a step for you if you are 
engaging in substantial gainful activity because of an SSI work 
incentive provision in section 1619 of the Act.

What is substantial gainful activity?

    The term ``substantial gainful activity'' means work activity that 
involves significant physical or mental activities and that is done for 
pay or profit. Work activity is gainful if it is the kind of work 
usually performed for pay or profit, whether or not a profit is 
realized.

When will your performance of substantial gainful activity affect 
whether you continue to be disabled?

    If you are entitled to Social Security benefits based on disability 
and you are working, the work you do may show that you are able to do 
substantial gainful activity and are, therefore, no longer disabled. If 
you are engaging in substantial gainful activity, before we determine 
whether you are no longer disabled because of your work activity, we 
will consider whether you are entitled to a trial work period under 
Sec.  404.1592. We will find that your disability has ceased in the 
month in which you demonstrated your ability to engage in substantial 
gainful activity following completion of any applicable trial work 
period. See Sec. Sec.  404.1594(d)(5) and (f)(1) of our regulations. 
Our determination that your disability has ceased because you 
demonstrated the ability to engage in substantial gainful activity is 
not a determination of whether you continue to have a disabling 
impairment (see Sec.  404.1511) for purposes of eligibility for a 
reentitlement period (see Sec.  404.1592a) following completion of a 
trial work period. If you work during your reentitlement period and we 
determine that your disability has ceased because your work is 
substantial gainful activity, we will stop your benefits. If you later 
stop engaging in substantial gainful activity and you are still within 
your reentitlement period, we will start paying your benefits again. In 
determining whether you do substantial gainful activity in a month for 
purposes of stopping or starting benefits during the reentitlement 
period, we will consider your work in, or earnings for, that month (see 
Sec.  404.1592a(a)(2)(i)).
    If you are receiving SSI benefits based on disability, your 
performance of substantial gainful activity does not affect your 
disability status for purposes of eligibility for SSI benefits. This is 
because of an SSI work incentive provision in section 1619 of the Act.

How do we evaluate your work as an employee to determine if you are 
engaging in substantial gainful activity?

    If you work as an employee, we generally use earnings guidelines to 
evaluate your work activity to decide whether the work you do is 
substantial gainful activity. If your average monthly earnings are more 
than the primary substantial gainful activity amount (i.e., $810 per 
month for non-blind individuals in 2004), we ordinarily consider that 
you have engaged in substantial gainful activity. If your average 
monthly earnings from your work activity are equal to or less than the 
primary substantial gainful activity amount for the year(s) in which 
you work, the way we evaluate your work activity will generally depend 
on whether the work occurred in or after January 2001 or before January 
2001.
    For work occurring between January 1, 1990 and January 1, 2001, if 
your average monthly earnings from your work activity were less than 
$300, we generally consider that your earnings show that you have not 
engaged in substantial gainful activity. With certain exceptions, we 
generally do not consider other information beyond your earnings. We 
refer to this $300 earnings guideline as the secondary substantial 
gainful activity amount to distinguish it from the primary substantial 
gainful activity amount. If your earnings were between the primary 
($700 per month for work occurring between July 1, 1999 and January 1, 
2001) and secondary substantial gainful activity levels, our rules 
provide that such earnings are neither high nor low enough to show 
whether you have engaged in substantial gainful activity. In these 
circumstances, we use separate criteria to evaluate your work as an 
employee to determine if you engaged in substantial gainful activity. 
If you worked in a sheltered workshop or comparable facility before 
January 1, 2001, earnings not greater than the primary substantial 
gainful activity amount ordinarily establish that the work was not 
substantial gainful activity.
    Beginning with January 2001, if your average monthly earnings are 
equal to or less than the primary substantial gainful activity amount, 
we generally consider that your earnings show that you have not engaged 
in substantial gainful activity. Except in certain circumstances, we 
generally do not consider other information in addition to your 
earnings.
    Therefore, if you worked from July 2000 through June 2001, with 
earnings of $600 per month, we use separate criteria to determine if 
you engaged in substantial gainful activity. For work activity from 
January 2001 through June 2001, your average monthly earnings are less 
than the primary substantial gainful activity amount ($740 per month 
for work occurring between January 1, 2001 and January 1, 2002), we 
will generally consider that your earnings show that you have not 
engaged in substantial gainful activity. For work activity from July 
2000 through December 2000, your earnings were between the primary 
($700 per month for work occurring between July 1, 1999 and January 1, 
2001) and secondary ($300 per month for work occurring between January 
1, 1990 and January 1, 2001) substantial gainful activity levels, your 
earnings are neither high nor low enough to show whether you have 
engaged in substantial gainful activity. We will use separate criteria, 
such as the work you did, the hours you worked, and the amount of 
assistance you received, to evaluate your work to determine if you 
engaged in substantial gainful activity.

[[Page 59002]]

Are earnings guidelines the only factor used to determine if your work 
as an employee is substantial gainful activity?

    As we have indicated above, in some instances, earnings guidelines 
are not the only factor we used to determine if the work you are 
performing is substantial gainful activity. In some cases we will 
consider other information if there is evidence which shows that you 
may have engaged in substantial gainful activity. In these instances, 
we evaluate your work activity under the criteria described below to 
determine if you have engaged in substantial gainful activity. We may 
determine that you have engaged in substantial gainful activity if your 
work activity satisfies either of the following set of criteria:
    <bullet> Your work is comparable to that of unimpaired people in 
your community who are doing the same or similar occupations as their 
means of livelihood, taking into account the time, energy, skill, and 
responsibility involved in the work; or
    <bullet> Your work, although significantly less than that done by 
unimpaired people, is clearly worth more than the substantial gainful 
activity amount, according to pay scales in your community.

What factors are used to determine if your work as a self-employed 
person is substantial gainful activity?

    We consider your activities and their value to your business to 
decide whether you have engaged in substantial gainful activity. To 
determine whether you have engaged in substantial gainful activity, we 
apply three tests. If you have not engaged in substantial gainful 
activity under test one, then we will consider tests two and three. The 
tests are as follows:
    (1) Test One: You have engaged in substantial gainful activity if 
you render services that are significant to the operation of the 
business and receive a substantial income from the business. (See Sec.  
404.1575(b) and (c) for an explanation of what we mean by significant 
services and substantial income for purposes of this test.)
    (2) Test Two: You have engaged in substantial gainful activity if 
your work activity, in terms of factors such as hours, skills, energy 
output, efficiency, duties, and responsibilities, is comparable to that 
of unimpaired individuals in your community who are in the same or 
similar businesses as their means of livelihood.
    (3) Test Three: You have engaged in substantial gainful activity if 
your work activity, although not comparable to that of unimpaired 
individuals, is clearly worth more than the substantial gainful 
activity amount when considered in terms of its value to the business, 
or when compared to the salary that an owner would pay to an employee 
to do the work you are doing.

What does section 221(m) of the Act provide?

    Section 221(m) contains two paragraphs. Paragraph (1) provides 
that, if you are entitled to disability insurance benefits under 
section 223 of the Act or to other monthly insurance benefits based on 
disability under section 202 of the Act,\1\ and you have received such 
benefits for at least 24 months:
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    \1\ The other monthly insurance benefits based on disability 
under section 202 of the Act are:
    <bullet> Child's insurance benfits based on disability under 
section 202(d);
    <bullet> Widow's insurance benefits based on disability under 
section 202(e); and
    <bullet> Widower's insurance benefits based on disability under 
section 202(f).
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    <bullet> We may not schedule a continuing disability review for you 
solely as a result of your work activity (section 221(m)(1)(A));
    <bullet> We may not use your work activity as evidence that you are 
no longer disabled (section 221(m)(1)(B)); and
    <bullet> If you stop working, we may not presume that you are 
unable to work just because you stopped working (section 221(m)(1)(C)).
    Paragraph (2) explains that, if you are an individual described in 
paragraph (1):
    <bullet> You are still subject to regularly scheduled continuing 
disability reviews that are not triggered by work (section 
221(m)(2)(A)); and
    <bullet> We may still terminate your benefits if you have earnings 
that exceed the level of earnings that represent substantial gainful 
activity (section 221(m)(2)(B)).

What revisions are we proposing to make, and why?

    We propose to revise several of our rules in subparts J and P of 
part 404 and subparts I and N of part 416 of our regulations:
    <bullet> To explain that we will not start a continuing disability 
review based solely on your work activity if you are covered by section 
221(m) of the Act;
    <bullet> To incorporate rules about not starting a continuing 
disability review that are contained in another part of our regulations 
and apply to you if you are using a ticket under the Ticket to Work 
program;
    <bullet> To explain how we consider activities from work in 
continuing disability reviews if you are covered by section 221(m);
    <bullet> To clarify how we determine continuing disability at the 
last two steps of the medical improvement review standard sequential 
evaluation process if you are not covered by section 221(m);
    <bullet> To explain how we evaluate your work when we decide 
whether you have engaged in substantial gainful activity for purposes 
of determining whether your disability has ceased, if you are covered 
by section 221(m);
    <bullet> To explain that our action to start or to discontinue a 
continuing disability review is not an initial determination; and
    <bullet> To eliminate the use of the secondary substantial gainful 
activity amount for evaluating work done by an employee before January 
2001.
    Although section 221(m) applies only if you receive disability 
benefits under title II of the Act, we are proposing changes in our 
title XVI regulations that would apply to you if:
    <bullet> You are entitled to Social Security disability benefits 
under title II of the Act;
    <bullet> You are subject to the provisions of section 221(m) 
because you have received the Social Security disability benefits for 
at least 24 months; and
    <bullet> You are also eligible for SSI benefits based on disability 
or blindness under title XVI of the Act.
    If you meet these criteria, we are proposing to use the same rules 
for starting continuing disability reviews under title XVI as we 
propose to use under title II. Also, when we do conduct a continuing 
disability review, we are proposing to use the same rules on how we 
consider the activities from your work in a continuing disability 
review under title XVI as we propose to use in a continuing disability 
review under title II. If we did not propose these changes to the title 
XVI regulations, we would have rules under which we could start a 
continuing disability review based solely on your work activity to 
determine whether your disability continues or ends under title XVI 
even though we could not start a continuing disability review on that 
basis to determine whether your disability continues or ends under 
title II. Also, when we do conduct continuing disability reviews for 
both title II and title XVI purposes, we would have different rules on 
how we consider the activities from your work for title II and title 
XVI purposes. As a result, we could determine that your disability 
continues under title II but that your disability has ended under title 
XVI. For these reasons, we are proposing the

[[Page 59003]]

aforementioned changes to the title XVI regulations that would apply to 
you if you are a recipient of SSI benefits based on disability or 
blindness and also are a Social Security disability beneficiary who is 
covered by section 221(m) of the Act. We concluded that this is a 
reasonable interpretation of the statute and the most logical, 
equitable, and administratively efficient way to implement section 
221(m) if you receive both types of benefits.
    We do not interpret section 221(m) of the Act to apply to you if 
you are a recipient of SSI benefits only. Section 221(m) provides that, 
for you to be covered by that section, you must be entitled to and have 
received Social Security disability benefits under title II. Therefore, 
these proposed rules do not extend the provisions of section 221(m) to 
you if you receive only SSI disability or blindness payments.
    We are also proposing to include in our disability regulations 
rules that are already in subpart C of part 411 of our regulations and 
that apply to you if you are in the Ticket to Work program and using 
your ticket. These rules provide that we will not start a continuing 
disability review for you during the period in which you are using a 
ticket. However, they also explain that we can still do a review to 
determine if your disability has ended under title II because you have 
demonstrated your ability to engage in substantial gainful activity, as 
defined in Sec. Sec.  404.1571-404.1576 of our regulations.
    In these proposed rules, we are also clarifying that if you are 
entitled to Social Security disability benefits under title II or 
eligible for SSI disability payments under title XVI, we will not 
consider the work that you are doing or have done during your current 
period of entitlement or eligibility based on disability to be past 
relevant work or past work experience at the last two steps of the 
applicable medical improvement review standard sequential evaluation 
process. We are also proposing to provide a comparable rule if you are 
requesting expedited reinstatement of benefits under section 223(i) or 
1631(p) of the Act. The proposed rule would apply at the last two steps 
to work you do during or after your previous period of entitlement or 
eligibility which terminated and which is the basis for your request 
for expedited reinstatement.
    The following is an explanation of the specific changes we are 
proposing and our reasons for making these proposals.
    Sections 404.903 and 416.1403 Administrative actions that are not 
initial determinations. We propose to add a new paragraph (x) to Sec.  
404.903 and a new paragraph (a)(22) to Sec.  416.1403 to explain that 
the action of starting or discontinuing a continuing disability review 
is not an initial determination. As explained in existing Sec. Sec.  
404.903 and 416.1403(a), administrative actions that are not initial 
determinations may be reviewed by us, but they are not subject to the 
administrative review process provided by subpart J of part 404 or 
subpart N of part 416 of our regulations, and they are not subject to 
judicial review. If we start a continuing disability review based 
solely on your work activity, we will provide an opportunity for you to 
request that we review that action if you believe that you are 
protected by the section 221(m)(1)(A) provision and that the medical 
review should not have been started. We will inform you of this 
opportunity when we send you a letter telling you that we are starting 
a medical continuing disability review. If we review the action and 
conclude that the initiation of the continuing disability review was in 
error because section 221(m)(1)(A) of the Act applies, we will 
discontinue processing the continuing disability review. In addition, 
as we explain later in this preamble, if we process the continuing 
disability review to completion and make a medical cessation 
determination, we are proposing rules in Sec. Sec.  404.1590 and 
416.990 to provide a procedure under which we will vacate the medical 
cessation determination if, within a prescribed time period, we receive 
evidence from you that establishes that the start of your continuing 
disability review was in error because of section 221(m)(1)(A) of the 
Act.
    Sections 404.1574 and 416.974 Evaluation guides if you are an 
employee. We propose to revise Sec. Sec.  404.1574(b) and 416.974(b) to 
remove the rules relating to the use of the secondary substantial 
gainful activity amount for evaluating work activity you performed as 
an employee prior to January 2001. This proposed change would eliminate 
the difference that exists between the way we evaluate work you 
performed as an employee before January 2001 and the way we evaluate 
work you performed as an employee in months beginning with January 2001 
in cases in which your average monthly earnings from your work are 
equal to or less than the applicable primary substantial gainful 
activity amount.
    On December 29, 2000, we published final rules in the Federal 
Register (65 FR 82905) to discontinue the use of a secondary 
substantial gainful activity amount effective for work activity in 
months beginning with January 2001. We made this change because, as we 
explained in the preamble to those final rules, ``our experience 
suggests that the secondary substantial gainful activity amount has not 
been as useful a tool as we would have liked'' (65 FR 82906). We 
indicated that our experience suggests that few applicants and 
beneficiaries would be affected by the change because few employees 
have been found to have performed substantial gainful activity on the 
basis of the secondary rules except in those circumstances that would 
otherwise warrant development of other information beyond earnings. We 
also explained that ``[d]iscontinuing these complex secondary 
guidelines will help simplify our rules and facilitate public 
understanding of the Social Security disability program as well as 
improve our work efficiency'' (65 FR 82906). For these same reasons, 
and to provide consistent rules for considering earnings from your work 
as an employee, without regard to whether the work was performed before 
January 2001 or in or after January 2001, we are proposing to 
discontinue the use of the secondary guidelines altogether.
    Under this proposed change, if your average monthly earnings from 
work you performed as an employee before January 2001 are equal to or 
less than the applicable primary substantial gainful activity amount, 
we will consider your earnings in the same way we consider earnings 
from work performed by an employee in or after January 2001 that do not 
average more than the applicable primary substantial gainful activity 
amount. That is, we will generally consider that your earnings from 
your work will show that you have not engaged in substantial gainful 
activity without considering other information beyond your earnings. We 
will perform additional development beyond looking at earnings only 
when circumstances indicate that you may have been engaging in 
substantial gainful activity or might have been in a position to 
control when earnings are paid to you or the amount of wages paid to 
you; (for example, if you are self-employed or work for a small 
corporation run by a relative). Therefore, if you worked from July 2000 
through June 2001, with earnings of $600 per month, your average 
monthly earnings are less than the primary substantial gainful activity 
amount ($740 per month for work occurring between January 1, 2001 and 
January 1, 2002 and $700 per month for work occurring between July 1, 
1999 and January 1, 2001), we will generally

[[Page 59004]]

consider that your earnings show that you have not engaged in 
substantial gainful activity.
    To make this change, we are proposing to eliminate the rules in 
Sec. Sec.  404.1574(b) and 416.974(b) relating to the use of the 
secondary substantial gainful activity amount and the distinction 
between work performed before January 2001 and work performed in or 
after January 2001. We propose to replace existing paragraphs (b)(3) 
through (b)(6) of Sec. Sec.  404.1574 and 416.974 with a new paragraph 
(b)(3), Earnings that will ordinarily show that you have not engaged in 
substantial gainful activity. In proposed new paragraph (b)(3), we 
propose to consolidate our existing rules that apply in cases in which 
average monthly earnings from work performed by an employee (including 
work performed in a sheltered workshop or comparable facility) in or 
after January 2001 are equal to or less than the applicable primary 
substantial gainful activity amount, and to extend the scope of these 
rules to cover work performed before January 2001 as well as work 
performed in or after January 2001.
    In proposed new paragraph (b)(3)(i), General, we state the general 
rule. We explain that if your average monthly earnings are equal to or 
less than the amount(s) determined under paragraph (b)(2) of Sec.  
404.1574 or Sec.  416.974 for the year(s) in which you work, we will 
generally consider that the earnings from your work activity as an 
employee (including earnings from work in a sheltered workshop or 
comparable facility) will show that you have not engaged in substantial 
gainful activity. We explain that we will generally not consider other 
information in addition to your earnings except in the circumstances 
described in proposed new paragraph (b)(3)(ii) of Sec. Sec.  404.1574 
and 416.974.
    In proposed new paragraph (b)(3)(ii), When we will consider other 
information in addition to your earnings, we describe those 
circumstances in which we will ordinarily consider other information 
beyond your earnings. We explain that we will generally consider other 
information in addition to your earnings if there is evidence 
indicating that you may be engaging in substantial gainful activity or 
that you are in a position to control when earnings are paid to you or 
the amount of wages paid to you; (for example, if you are self-employed 
or working for a small corporation owned by a relative).
    We also include provisions in proposed new paragraph (b)(3)(ii) 
that provide examples of other information we may consider. These 
latter provisions incorporate the provisions of existing paragraph 
(b)(6)(iii) of Sec. Sec.  404.1574 and 416.974. In proposed new 
paragraphs (b)(3)(ii)(A) and (B), we explain that other information we 
may consider includes, for example, whether; (A) your work is 
comparable to that of unimpaired people in your community who are doing 
the same or similar occupations as their means of livelihood, taking 
into account the time, energy, skill, and responsibility involved in 
the work; and (B) your work, although significantly less than that done 
by unimpaired people, is clearly worth the amounts shown in paragraph 
(b)(2) of Sec.  404.1574 or Sec.  416.974, according to pay scales in 
your community.
    The provisions of proposed Sec. Sec.  404.1574(b)(3)(i) and (ii) 
and 416.974(b)(3)(i) and (ii) are based on the rules that are stated in 
the first sentence of existing paragraph (b)(3), the last sentence of 
existing paragraph (b)(4), existing paragraph (b)(5), and existing 
paragraphs (b)(6)(ii) and (iii) of Sec. Sec.  404.1574 and 416.974.
    In addition, we propose to include certain provisions in proposed 
Sec.  404.1574(b)(3) that we are not including in proposed Sec.  
416.974(b)(3). In proposed Sec.  404.1574(b)(3), we propose to include 
a paragraph (b)(3)(iii), Special rule for considering earnings alone 
when evaluating the work you do after you have received social security 
disability benefits for at least 24 months, to state a rule that may 
apply to you if you are covered by section 221(m) of the Act and you 
perform work as an employee. The rule in proposed Sec.  
404.1574(b)(3)(iii) provides an exception to the rule in proposed Sec.  
404.1574(b)(3)(ii), discussed above, which describes those 
circumstances in which we may consider other information in addition to 
your earnings, such as the comparability and value of services 
(proposed Sec.  404.1574(b)(3)(ii)(A) and (B)). The exception would 
apply when we are evaluating the work that you perform while you are 
entitled to Social Security disability benefits and you have received 
such benefits for at least 24 months. The exception would apply only if 
we are evaluating that work to decide whether the work shows that you 
are able to engage in substantial gainful activity for the purpose of 
determining whether your disability has ceased because of your work 
activity. In this case, even if the circumstances described in proposed 
Sec.  404.1574(b)(3)(ii) are present, we will not consider other 
information in addition to your earnings. Instead, we will apply the 
general rule described in proposed Sec.  404.1574(b)(3)(i). That is, in 
the case described above, if your average monthly earnings from that 
work are equal to or less than the amount(s) determined under Sec.  
404.1574(b)(2) for the year(s) in which that work occurs, we will find 
that your earnings from that work will show that you have not engaged 
in substantial gainful activity.
    If you are entitled to Social Security disability benefits and you 
perform work as an employee after you have received such benefits for 
at least 24 months, we interpret section 221(m)(1)(B) of the Act to 
provide that we may not consider information about the activities you 
perform in that work (such as the information described in proposed 
Sec.  404.1574(b)(3)(ii)(A) and (B)) to determine that the work shows 
that you are able to engage in substantial gainful activity and are, 
therefore, no longer disabled, i.e., that your disability has ceased. 
We may still consider your earnings from that work under the earnings 
guidelines to decide whether your earnings show that you have engaged 
in substantial gainful activity for the purpose of determining whether 
your disability has ceased. Also, we may still consider other 
information in addition to your earnings in the circumstances described 
in Sec.  404.1574(b)(3)(ii) to decide whether that work is substantial 
gainful activity for purposes other than the purpose of determining 
whether your disability has ceased.
    In proposed Sec.  404.1574(b)(3)(iii), we explain that, even if the 
circumstances described in proposed Sec.  404.1574(b)(3)(ii) are 
present, we will not consider other information in addition to your 
earnings in evaluating the work you are doing or have done if: (A) at 
the time you do the work, you are entitled to Social Security 
disability benefits and you have received such benefits for at least 24 
months; and (B) we are evaluating that work to consider whether you 
have engaged in substantial gainful activity or demonstrated the 
ability to engage in substantial gainful activity for the purpose of 
determining whether your disability has ceased because of your work 
activity. We include cross-references to the sections of our 
regulations that concern making substantial gainful activity 
determinations for purposes of determining whether your disability has 
ceased.
    Also, in proposed Sec.  404.1574(b)(3), we propose to include a 
paragraph (b)(3)(iv), When we consider you to have received social 
security disability benefits for at least 24 months. The

[[Page 59005]]

provisions of proposed paragraph (b)(3)(iv) apply for purposes of 
proposed paragraph (b)(3)(iii) of Sec.  404.1574. In proposed Sec.  
404.1574(b)(3)(iv), we provide a definition of Social Security 
disability benefits. We explain that we consider you to have received 
such benefits for at least 24 months beginning with the first day of 
the first month following the 24th month for which you received Social 
Security disability benefits that you were due. We state that the 24 
months do not have to be consecutive. We explain that we do not count 
months for which you were entitled to benefits but for which you did 
not receive benefit payments, and we provide two examples. In addition, 
we explain that if you also receive SSI payments, months for which you 
received only SSI payments will not count for the 24-month requirement.
    We are including proposed new paragraphs (b)(3)(iii) and (iv) only 
in our proposed revision of Sec.  404.1574(b). We are not including 
similar provisions in our proposed revision of Sec.  416.974(b) because 
the performance of substantial gainful activity is not a basis for 
determining that disability has ceased under the SSI program.
    As we explain above, proposed new paragraph (b)(3) of Sec. Sec.  
404.1574 and 416.974 would replace existing paragraphs (b)(3) through 
(b)(6) of these sections. As a consequence, we propose to make certain 
conforming changes to paragraphs (b)(1) and (2) of Sec. Sec.  404.1574 
and 416.974. In paragraph (b)(1) of Sec. Sec.  404.1574 and 416.974, we 
propose to remove references to paragraphs (b)(4), (5), and (6). In the 
introductory text of paragraph (b)(2) of Sec. Sec.  404.1574 and 
416.974, we propose to revise the parenthetical phrase to read, 
``(including earnings from work in a sheltered workshop or a comparable 
facility especially set up for severely impaired persons),'' to 
incorporate the description of sheltered work contained in existing 
paragraph (b)(4) of these sections.
    Section 404.1575 Evaluation guides if you are self-employed. If you 
are covered by section 221(m) of the Act and you are self-employed, we 
propose to amend our rules in Sec.  404.1575 to explain how we will 
evaluate your work activity when deciding whether you have engaged in 
substantial gainful activity following the completion of a trial work 
period for purposes of determining if your disability has ceased. (We 
are not proposing to amend our rules in Sec.  416.975 because your 
performance of substantial gainful activity does not affect your 
disability status for purposes of your continuing eligibility for SSI 
payments.) As we explained earlier, if you are self-employed, we 
consider three tests to determine if you have engaged in substantial 
gainful activity. Since the three tests require us to consider your 
activities at work and their value to your business, we decided that we 
could not use these tests to decide that the work you do after you have 
received Social Security disability benefits for at least 24 months 
shows that you are able to engage in substantial gainful activity and 
are, therefore, no longer disabled. Based on section 221(m)(1)(B) of 
the Act, we concluded that we needed to provide a different test for 
considering whether that work is substantial gainful activity for 
purposes of determining whether your disability has ceased. Therefore, 
we are proposing to use a new evaluation test for that purpose. We 
refer to this new test as the countable income test.
    To explain this new evaluation test and when we will apply it, we 
propose to revise paragraphs (a) and (c) of Sec.  404.1575 and to add a 
new paragraph (e). We are retaining all of the provisions of existing 
paragraph (a). However, we are restructuring the paragraph. We propose 
to make the first two sentences of paragraph (a) the introductory text 
of that paragraph. (We propose to revise the first sentence of the 
paragraph to include a reference to proposed new paragraph (e).) We 
propose to include the remaining provisions of paragraph (a) in a new 
paragraph (a)(2), General rules for evaluating your work activity if 
you are self-employed. Because of this change, existing paragraphs 
(a)(1), (2), and (3) of Sec.  404.1575 would be redesignated paragraphs 
(a)(2)(i), (ii), and (iii), respectively.
    Following the first two sentences of paragraph (a) of Sec.  
404.1575, we propose to add a new paragraph (a)(1), How we evaluate the 
work you do after you have become entitled to disability benefits. In 
proposed Sec.  404.1575(a)(1), we explain which rules we will use to 
evaluate your work activity if you are self-employed and you perform 
the work activity while you are entitled to Social Security disability 
benefits. (We explain that Social Security disability benefits means 
disability insurance benefits for a disabled worker, child's insurance 
benefits based on disability, or widow's or widower's insurance 
benefits based on disability.) We explain that the way we will evaluate 
your work activity will depend on whether the work occurs before or 
after you have received Social Security disability benefits for at 
least 24 months and on the purpose of the evaluation. We explain in 
Sec.  404.1575(a)(1) that we will use the guides in proposed paragraph 
(e), which provide for the use of the countable income test, to 
evaluate the work activity you do after you have received such benefits 
for at least 24 months to determine whether you have engaged in 
substantial gainful activity for the purpose of determining whether 
your disability has ceased. In all other cases in which we evaluate 
your work activity as a self-employed person to make a substantial 
gainful activity determination, we will apply the guides in proposed 
Sec.  404.1575(a)(2). Proposed Sec.  404.1575(a)(2) sets out the three 
tests we currently use to evaluate the work of a self-employed person.
    We explain in proposed Sec.  404.1575(a)(1) that we will use the 
three tests described in proposed Sec.  404.1575(a)(2) to evaluate the 
work activity you do before you have received Social Security 
disability benefits for 24 months to determine if you have engaged in 
substantial gainful activity, regardless of the purpose of the 
evaluation. We also explain that, after we have determined that your 
disability has ceased during the reentitlement period because you 
performed substantial gainful activity, we will use the three tests to 
determine whether you are doing substantial gainful activity in 
subsequent months in or after your reentitlement period, whether your 
work activity occurs before or after you have received Social Security 
disability benefits for at least 24 months. After we have determined 
that your disability has ceased due to the performance of substantial 
gainful activity during the reentitlement period, we make substantial 
gainful activity determinations to decide whether benefits should be 
started or stopped for a subsequent month(s) during the reentitlement 
period and to decide when your entitlement to benefits terminates (see 
Sec.  404.1592a(a)(2) and (3)). We may use the three tests that involve 
looking at work activity in making these substantial gainful activity 
determinations because these determinations do not involve deciding 
that you are no longer disabled.
    We propose to revise Sec.  404.1575(c). In proposed 404.1575(c)(1), 
Determining countable income, we explain what deductions are applied to 
your net income to decide the amount of your income we use to determine 
if you have done substantial gainful activity. We explain that we refer 
to this amount as your countable income. In proposed Sec.  
404.1575(c)(2), we explain when we consider your countable income to be 
substantial.
    In proposed Sec.  404.1575(e), Special rules for evaluating the 
work you do

[[Page 59006]]

after you have received social security disability benefits for at 
least 24 months, we explain the countable income test and when it 
applies. We explain that we will apply this test to evaluate the work 
you are doing or have done if, at the time you perform the work, you 
are entitled to Social Security disability benefits and you have 
received such benefits for at least 24 months. We explain that we will 
apply the test only when we are evaluating that work to consider 
whether you have engaged in substantial gainful activity or 
demonstrated the ability to engage in substantial gainful activity for 
the purpose of determining whether your disability has ceased because 
of your work activity. We explain that, under the countable income 
test, we will not consider the services you perform in that work to 
determine that the work you are doing shows that you are able to engage 
in substantial gainful activity and are, therefore, no longer disabled. 
However, we may consider the services you perform to determine that you 
are not doing substantial gainful activity.
    In proposed paragraph (e)(2), The 24-month requirement, we explain 
that we consider you to have received Social Security disability 
benefits for at least 24 months beginning with the first day of the 
first month following the 24th month for which you received Social 
Security disability benefits that you were due. We provide examples of 
months that do not count toward the 24-month requirement.
    We explain the new evaluation test in proposed (e)(3), The 
countable income test. Under the countable income test, we will compare 
your countable income to the substantial gainful activity earnings 
guidelines in Sec.  404.1574(b)(2) to determine if you have engaged in 
substantial gainful activity. We will consider that you have engaged in 
substantial gainful activity if your monthly countable income averages 
more than the amounts in Sec.  404.1574(b)(2) unless the evidence shows 
that you did not render significant services in the month(s). If your 
average monthly countable income is equal to or less than the amounts 
in Sec.  404.1574(b)(2), or if the evidence shows that you did not 
render significant services, we will consider that your work as a self-
employed person shows that you have not engaged in substantial gainful 
activity.
    Sections 404.1590 and 416.990 When and how often we will conduct a 
continuing disability review. We propose to add two new paragraphs to 
these sections to explain when we will and will not start continuing 
disability reviews if you are in the Ticket to Work program and your 
ticket is in use (proposed paragraph (h)), and if you are covered by 
the provisions of section 221(m) of the Act (proposed paragraph (i)).
    In proposed Sec. Sec.  404.1590(h) and 416.990(h), If you are 
participating in the Ticket to Work program, we restate our rules 
already set out in Sec. Sec.  411.160 and 411.165 that we will not 
start a continuing disability review for you during the period in which 
you are using a ticket under the Ticket to Work program. This proposed 
amendment to Sec. Sec.  404.1590 and 416.990 is not a change in policy, 
but incorporates rules already set out in Sec. Sec.  411.160 and 
411.165. In addition, we provide in proposed Sec.  404.1590(h) that 
this provision does not apply to the reviews we do under title II using 
the rules in Sec. Sec.  404.1571-404.1576 to determine whether the work 
you have done shows that you are able to do substantial gainful 
activity (see Sec.  411.160(b)). (As we have already noted, your 
performance of substantial gainful activity does not affect your SSI 
eligibility because of the work incentive provisions of section 1619 of 
the Act.)
    In proposed Sec. Sec.  404.1590(i) and 416.990(i), If you are 
working and have received social security disability benefits for at 
least 24 months, we provide rules for you if you are covered by section 
221(m) of the Act. In proposed paragraph (i)(1), General, we explain 
that we will not start a continuing disability review based solely on 
your work activity if you are currently entitled to benefits based on 
disability under title II of the Act and you have received such 
benefits for at least 24 months. We also list the types of title II 
disability benefits that qualify.
    Although section 221(m)(1)(A) says that a continuing disability 
review may not be ``scheduled'' based solely on your work activity, we 
propose to use the word ``start'' in this provision and the remainder 
of proposed paragraph (i) of Sec. Sec.  404.1590 and 416.990 to avoid 
any confusion about what we will do, and to use consistent language 
throughout these sections of our rules. Existing provisions in 
Sec. Sec.  404.1590 and 416.990 use both words. We use the word 
``start'' in the opening sentence of current Sec. Sec.  404.1590(b) and 
416.990(b) to explain when we will do a continuing disability review. 
We then use the word ``scheduled'' in current paragraphs (b)(1), (b)(2) 
and (b)(10) to explain when we will start a continuing disability 
review that we have scheduled in advance; that is, based on a diary for 
``medical improvement expected,'' ``medical improvement possible,'' or 
``medical improvement not expected,'' or on a ``vocational 
reexamination diary.'' In current paragraph (b)(11) of Sec.  416.990, 
we specify a timeframe within which we must review the cases of certain 
children (i.e., by the first birthday of the child) unless certain 
conditions are met. In current paragraph (b)(11)(ii) of Sec.  416.990, 
which discusses one of the conditions, we use the word ``schedule'' to 
describe a situation in which we set a time in advance for conducting a 
continuing disability review. The remaining provisions in current 
paragraphs (b)(3)-(b)(9) of Sec. Sec.  404.1590 and 416.990 describe 
situations in which we do not schedule continuing disability reviews in 
advance but may start them sooner than the regularly scheduled reviews.
    In proposed Sec. Sec.  404.1590(i)(2) and 416.990(i)(2), The 24-
month requirement, we provide rules for determining whether the 24-
month requirement in proposed Sec. Sec.  404.1590(i)(1) and 
416.990(i)(1) is met. In proposed paragraph (i)(2)(i), we explain that 
months for which you have actually received Social Security disability 
benefit payments under title II that you were due will be counted for 
the 24-month requirement. The 24 months do not have to be consecutive. 
We also explain that we do not include months for which you were 
technically ``entitled'' but did not receive benefit payments, and 
provide two examples. In addition, we clarify that months for which you 
received only SSI payments and months for which you received continued 
benefits pending the appeal of a medical cessation determination, do 
not count toward the 24-month requirement.
    In proposed Sec. Sec.  404.1590(i)(2)(ii) and 416.990(i)(2)(ii), we 
explain that you will not meet the 24-month requirement for purposes of 
proposed Sec.  404.1590(i)(1) or Sec.  416.990(i)(1) if you have not 
received Social Security disability benefits for at least 24 months as 
of the date on which we start a continuing disability review. We 
explain that the date on which we start a continuing disability review 
is the date on the notice we send you that tells you that we are 
beginning the review.
    In proposed Sec. Sec.  404.1590(i)(3) and 416.990(i)(3), When we 
may start a continuing disability review even if you have received 
social security disability benefits for at least 24 months, we include 
a reminder that, even if you meet the requirements of proposed 
paragraph (i)(1) of Sec.  404.1590 or Sec.  416.990, we may still start 
a continuing disability review if we have another reason to do so; that 
is, when the fact that you are working is not the sole reason for the 
continuing disability review. We include two examples,

[[Page 59007]]

including a reminder that we must still schedule you for regularly 
scheduled continuing disability reviews, as provided under section 
221(m)(2)(A) of the Act.
    In Sec.  404.1590, we propose to include a paragraph (i)(4), 
Reviews to determine whether the work you have done shows that you are 
able to do substantial gainful activity, to clarify that the exemption 
from continuing disability reviews in proposed paragraph (i)(1) of that 
section does not apply to certain reviews we conduct under title II of 
the Act. We explain that proposed paragraph (i)(1) does not apply to 
the reviews we conduct using the rules in Sec. Sec.  404.1571-404.1576 
to determine whether the work you have done shows that you are able to 
do substantial gainful activity and are, therefore, no longer disabled. 
We do not conduct similar reviews under title XVI because of the work 
incentive provisions in section 1619 of the Act. Therefore, we do not 
include a similar provision in the proposed amendments to Sec.  
416.990.
    As we explain earlier in this preamble, if we start a continuing 
disability review based on your work activity, we will provide an 
opportunity for you to request that we review that action if you 
believe that you are protected by section 221(m)(1)(A) of the Act and 
that the action of starting the continuing disability review was in 
error. If we review the action and conclude that the initiation of the 
medical continuing disability review was in error, we will discontinue 
the processing of the continuing disability review. If the continuing 
disability review proceeds to completion and we make a medical 
cessation determination, we are proposing rules in Sec. Sec.  
404.1590(i)(5) and 416.990(i)(4) to provide a procedure under which we 
will vacate the medical cessation determination if the action of 
starting the continuing disability review is shown to have been in 
error because you were protected by section 221(m)(1)(A). You must 
provide evidence to us that establishes that you met the requirements 
of proposed Sec.  404.1590(i)(1) or Sec.  416.990(i)(1) as of the date 
of the start of your continuing disability review and that the start of 
the review was erroneous. In addition, we must receive the evidence 
within 12 months of the date of the notice of the initial determination 
of medical cessation.
    We also propose to amend paragraph (a) of Sec. Sec.  404.1590 and 
416.990 to include references to proposed new paragraphs (h) and (i) of 
these sections.
    Section 404.1592a The reentitlement period. We propose to amend 
paragraph (a) of Sec.  404.1592a to explain when the special rules in 
proposed Sec. Sec.  404.1574(b)(3)(iii) and 404.1575(e) may apply, and 
when they will not apply, in making substantial gainful activity 
determinations. We also propose to revise paragraph (a)(3) of Sec.  
404.1592a to separate the provisions into two lower level paragraphs. 
We propose to designate the second, third, and fourth sentences of 
paragraph (a)(3) as paragraph (a)(3)(i). We propose to designate the 
fifth, sixth, and seventh sentences of paragraph (a)(3) as paragraph 
(a)(3)(ii).
    We propose to amend paragraph (a)(1) of Sec.  404.1592a to include 
a reference to the special rules for evaluating the work you do after 
you have received Social Security disability benefits for at least 24 
months. We are including this reference in the list of examples of the 
relevant rules we will apply when deciding whether the work you do 
following completion of a trial work period is substantial gainful 
activity for purposes of determining whether your disability has 
ceased. We are proposing to make a similar change in newly designated 
paragraph (a)(3)(ii).
    We propose to revise the last sentence of paragraph (a)(2)(i) of 
this section to clarify that, if we have decided that your disability 
ceased during the reentitlement period because you performed 
substantial gainful activity, we will not apply the special rules in 
proposed Sec. Sec.  404.1574(b)(3)(iii) and 404.1575(e) in making 
substantial gainful activity determinations for purposes of determining 
whether benefits should be paid for any particular months in the 
reentitlement period. We propose to make a similar change in newly 
designated paragraph (a)(3)(i) to indicate that, if we have decided 
that your disability ceased during the reentitlement period based on 
your work activity, we will not apply the special rules in proposed 
Sec. Sec.  404.1574(b)(3)(iii) and 404.1575(e) when deciding whether 
you engaged in substantial gainful activity following the reentitlement 
period for purposes of determining whether your entitlement to benefits 
has terminated. The special rules in proposed Sec. Sec.  
404.1574(b)(3)(iii) and 404.1575(e) do not apply in making these 
substantial gainful activity determinations because these 
determinations do not involve deciding whether your disability has 
ceased.
    Section 404.1594 How we will determine whether your disability 
continues or ends.
    Section 416.994 How we will determine whether your disability 
continues or ends, disabled adults. We propose to add new Sec.  
404.1594(i), If you work during your current period of entitlement 
based on disability or during certain other periods, and new Sec.  
416.994(b)(8), If you work during your current period of eligibility 
based on disability or during certain other periods, to:
    <bullet> Incorporate a longstanding instruction we have that 
interprets our regulations on the medical improvement review standard;
    <bullet> Explain how we will consider the activities you do in your 
work if you are covered by section 221(m) of the Act;
    <bullet> Explain how we will consider the activities you do in your 
work if you are not covered by section 221(m) of the Act; and
    <bullet> Explain how we will consider the activities you perform in 
work when determining whether you are entitled to expedited 
reinstatement of benefits under sections 221(i) or eligible for 
expedited reinstatement of benefits under 1631(p) of the Act.
    In proposed Sec. Sec.  404.1594(i)(1) and 416.994(b)(8)(i), we 
propose to clarify our rules about the last two steps of the medical 
improvement review standard sequential evaluation process for 
determining whether disability continues or ends to reflect an 
interpretation contained in an operating instruction we have been using 
for a number of years. The proposed provisions clarify that we will not 
consider work you are doing now, or work that you did, during your 
current period of entitlement based on disability under title II 
(proposed Sec.  404.1594(i)(1)), or during your current period of 
eligibility based on disability under title XVI (proposed Sec.  
416.994(b)(8)(i)), to be past relevant work for purposes of the second 
to last step of the sequential evaluation processes described in 
Sec. Sec.  404.1594(f) and 416.994(b)(5). The proposed provisions also 
explain that we will not consider such work to be ``past work 
experience'' when we decide whether you can do other work at the last 
step of those processes. In these provisions of the proposed rules, we 
also propose to provide that we will not consider certain work to be 
past relevant work or past work experience for purposes of the last two 
steps of the medical improvement review standard sequential evaluation 
process when we decide whether you qualify for expedited reinstatement 
of benefits under section 223(i) or 1631(p) of the Act. For purposes of 
deciding whether you qualify for expedited reinstatement of benefits, 
the proposed rules would apply to work you are doing or have done 
during or after your previous period of entitlement or eligibility 
which terminated and which is the basis

[[Page 59008]]

for your request for expedited reinstatement. We published final rules 
regarding the expedited reinstatement provisions in the Federal 
Register on September 30, 2005 (70 FR 57132). Those rules do not 
discuss the specific issue we are addressing here.
    In proposed Sec. Sec.  404.1594(i)(2) and 416.994(b)(8)(ii), we 
provide rules for you if you are covered by section 221(m) of the Act. 
Section 221(m)(1)(B) of the Act explains that if you are covered by 
this section, ``no work activity engaged in by the individual may be 
used as evidence that the individual is no longer disabled.'' Based on 
this statutory language, we provide in the proposed rules that we will 
not consider the activities you do in your work if they support a 
finding that you are no longer disabled. We may still find that you are 
no longer disabled, but only if that finding is based on other 
evidence.
    We also provide that we may consider the activities you do in your 
work if they provide evidence that you are still disabled or if they do 
not conflict with a finding that you are still disabled. Your 
functioning on the job may help us to establish that you are still 
disabled. We concluded that we are required to include this provision 
because the language of section 221(m)(1)(B) speaks only about the use 
of work activity as evidence that an individual is ``no longer 
disabled.''
    We also propose to include in Sec. Sec.  404.1594(i)(2) and 
416.994(b)(8)(ii) a statement that we will not presume that you are 
still disabled if you stop working. This would incorporate the 
statutory requirement of section 221(m)(1)(C) into our regulations.
    In proposed Sec. Sec.  404.1594(i)(3) and 416.994(b)(8)(iii), we 
explain how we consider activities from work in all other continuing 
disability reviews; that is, if you receive disability benefits under 
title II but are not covered by section 221(m) or if you are eligible 
only for SSI benefits. The proposed rules would only incorporate into 
our regulations an interpretation we already use. Even though we may 
not consider the work that you do during your current period of 
entitlement or eligibility based on disability to be past relevant work 
or past work experience, we do consider the physical and mental 
activities you do in your work when we need to assess your functioning 
(for example, when we assess your residual functional capacity) in 
deciding whether your disability continues or ends. We consider the 
activities regardless of whether they support a finding that your 
disability continues or support a finding that your disability has 
ended. (It is only when you are covered by section 221(m) that we would 
not consider the activities if they support a finding that your 
disability has ended, as explained in proposed Sec. Sec.  
404.1594(i)(2) and 416.994(b)(8)(ii), discussed above.) In proposed 
Sec. Sec.  404.1594(i)(3) and 416.994(b)(8)(iii), therefore, we are 
only proposing to codify in our regulations our current practice when 
you are not covered by section 221(m).
    We concluded that we are required to do this in these cases, 
because of the general requirements of the Act and our regulations that 
we consider all of the relevant evidence in your case record whenever 
we make a determination about your disability. Section 221(m) provides 
an explicit exception to this rule, but only for people who are covered 
by that section.
    We are aware that the proposed provisions in Sec. Sec.  
404.1594(i)(2) and 416.994(b)(8)(ii) may create a more complex process 
because we may, in some cases, be required to disregard information 
about your work that would otherwise be evidence about your physical 
and mental abilities. We may also be required to undertake additional 
development to obtain alternative evidence about your abilities, or to 
clarify evidence (such as medical opinion evidence) that may have been 
based on information about your activities at work. We are also aware 
that these proposed provisions may be too complex for you to 
understand. However, we concluded that there is no other permissible 
interpretation of the language of section 221(m)(1)(B).
    We are also adding cross-references in several places in Sec. Sec.  
404.1594 and 416.994 as a reminder to consider the provisions in 
proposed Sec. Sec.  404.1594(i) and 416.994(b)(8) whenever appropriate.
    Other changes. We propose to make a few minor editorial corrections 
and revisions to existing provisions. These changes are not substantive 
and we do not intend to change the meaning of existing rules in any way 
by them. For example, we propose to provide paragraph designations for 
some of the clauses within Sec. Sec.  404.1590(b) and 416.990(b) to 
make them easier to refer to. We are also deleting the reference to 
completion of a trial work period from Sec.  416.990(b)(4). There are 
no trial work periods under title XVI because of other work incentive 
provisions in the Act. When we last revised our regulations to remove 
references to the trial work period from the SSI regulations, we 
inadvertently overlooked this provision. See 65 FR 42772, 42775 (July 
11, 2000). In addition, we are replacing the word ``decide'' with the 
word ``determine'' in the heading of Sec.  416.994 to conform to the 
language used in the headings of Sec. Sec.  404.1594 and 416.994a.
    Clarity of These Proposed Rules. Executive Order 12866, as amended 
by Executive Order 13258, requires each agency to write all rules in 
plain language. In addition to your substantive comments on these 
proposed rules, we invite your comments on how to make them easier to 
understand.
    For example:
    <bullet> Have we organized the material to suit your needs?
    <bullet> Are the requirements in the rules clearly stated?
    <bullet> Do the rules contain technical language or jargon that 
isn't clear?
    <bullet> Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the rules easier to understand?
    <bullet> Would more (but shorter) sections be better?
    <bullet> Could we improve clarity by adding tables, lists, or 
diagrams?
    <bullet> What else could we do to make the rules easier to 
understand?

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these proposed rules meet the criteria for a 
significant regulatory action under Executive Order 12866, as amended 
by Executive Order 13258. Thus, they were subject to OMB review.

Regulatory Flexibility Act

    We certify that these proposed regulations would not have a 
significant economic impact on a substantial number of small entities 
because they affect only individuals. Thus, a regulatory flexibility 
analysis as provided in the Regulatory Flexibility Act, as amended, is 
not required.

Paperwork Reduction Act

    These proposed regulations impose no reporting or recordkeeping 
requirements that require OMB clearance.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social 
Security--Disability Insurance; 96.002, Social Security--Retirement 
Insurance; 96.004, Social Security--Survivors Insurance; 96.006, 
Supplemental Security Income)

List of Subjects

20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-Age, Survivors and Disability

[[Page 59009]]

Insurance, Reporting and recordkeeping requirements, Social Security, 
Vocational rehabilitation.

20 CFR Part 416

    Administrative practice and procedure, Aged, Blind, Disability 
benefits, Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental Security Income (SSI), Vocational 
rehabilitation.

    Dated: October 3, 2005.
Jo Anne B. Barnhart,
Commissioner of Social Security.

    For the reasons set out in the preamble, we propose to amend 
subparts J and P of part 404 and subparts I and N of part 416 of 
chapter III of title 20 of the Code of Federal Regulations as set forth 
below:

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

Subpart J--Determinations, Administrative Review Process, and 
Reopening of Determinations and Decisions

    1. The authority citation for subpart J continues to read as 
follows:

    Authority: Secs. 201(j), 204(f), 205(a), (b), (d)-(h), and (j), 
221, 225, and 702(a)(5) of the Social Security Act (42 U.S.C. 
401(j), 404(f), 405(a), (b), (d)-(h), and (j), 421, 425, and 
902(a)(5)); 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 404.903 is amended by removing the word ``and'' at the 
end of paragraph (v), replacing the period at the end of paragraph (w) 
with ``; and'', and adding a new paragraph (x) to read as follows:


Sec.  404.903  Administrative actions that are not initial 
determinations.

* * * * *
    (x) Starting or discontinuing a continuing disability review.

Subpart P--Determining Disability and Blindness

    3. The authority citation for subpart P is revised to read as 
follows:

    Authority: Secs. 202, 205(a), (b), and (d)-(h), 216(i), 221(a), 
(i), and (m), 222(c), 223, 225, and 702(a)(5) of the Social Security 
Act (42 U.S.C. 402, 405(a), (b), and (d)-(h), 416(i), 421(a), (i), 
and (m), 422(c), 423, 425, and 902(a)(5)); sec. 211(b), Pub. L. 104-
193, 110 Stat. 2105, 2189.

    4. Section 404.1574 is amended by revising paragraph (b) to read as 
follows:


Sec.  404.1574  Evaluation guides if you are an employee.

* * * * *
    (b) Earnings guidelines. (1) General. If you are an employee, we 
first consider the criteria in paragraph (a) of this section and Sec.  
404.1576, and then the guides in paragraphs (b)(2) and (3) of this 
section. When we review your earnings to determine if you have been 
performing substantial gainful activity, we will subtract the value of 
any subsidized earnings (see paragraph (a)(2) of this section) and the 
reasonable cost of any impairment-related work expenses from your gross 
earnings (see Sec.  404.1576). The resulting amount is the amount we 
use to determine if you have done substantial gainful activity. We will 
generally average your earnings for comparison with the earnings 
guidelines in paragraphs (b)(2) and (3) of this section. See Sec.  
404.1574a for our rules on averaging earnings.
    (2) Earnings that will ordinarily show that you have engaged in 
substantial gainful activity. We will consider that your earnings from 
your work activity as an employee (including earnings from work in a 
sheltered workshop or a comparable facility especially set up for 
severely impaired persons) show that you engaged in substantial gainful 
activity if:
    (i) Before January 1, 2001, they averaged more than the amount(s) 
in Table 1 of this section for the time(s) in which you worked.
    (ii) Beginning January 1, 2001, and each year thereafter, they 
average more than the larger of:
    (A) The amount for the previous year, or
    (B) An amount adjusted for national wage growth, calculated by 
multiplying $700 by the ratio of the national average wage index for 
the year 2 calendar years before the year for which the amount is being 
calculated to the national average wage index for the year 1998. We 
will then round the resulting amount to the next higher multiple of $10 
where such amount is a multiple of $5 but not of $10 and to the nearest 
multiple of $10 in any other case.

                                 Table 1
------------------------------------------------------------------------
                                                           Your monthly
                                                             earnings
                       For months:                         averaged more
                                                               than:
------------------------------------------------------------------------
In calendar years before 1976...........................            $200
In calendar year 1976...................................             230
In calendar year 1977...................................             240
In calendar year 1978...................................             260
In calendar year 1979...................................             280
In calendar years 1980-1989.............................             300
January 1990-June 1999..................................             500
July 1999-December 2000.................................             700
------------------------------------------------------------------------

    (3) Earnings that will ordinarily show that you have not engaged in 
substantial gainful activity. (i) General. If your average monthly 
earnings are equal to or less than the amount(s) determined under 
paragraph (b)(2) of this section for the year(s) in which you work, we 
will generally consider that the earnings from your work as an employee 
(including earnings from work in a sheltered workshop or comparable 
facility) will show that you have not engaged in substantial gainful 
activity. We will generally not consider other information in addition 
to your earnings except in the circumstances described in paragraph 
(b)(3)(ii) of this section.
    (ii) When we will consider other information in addition to your 
earnings. We will generally consider other information in addition to 
your earnings if there is evidence indicating that you may be engaging 
in substantial gainful activity or that you are in a position to defer 
or suppress your earnings. (See paragraph (b)(3)(iii) of this section 
for when we do not apply this rule.) Examples of other information we 
may consider include, whether--
    (A) Your work is comparable to that of unimpaired people in your 
community who are doing the same or similar occupations as their means 
of livelihood, taking into account the time, energy, skill, and 
responsibility involved in the work; and
    (B) Your work, although significantly less than that done by 
unimpaired people, is clearly worth the amounts shown in paragraph 
(b)(2) of this section, according to pay scales in your community.
    (iii) Special rule for considering earnings alone when evaluating 
the work you do after you have received social security disability 
benefits for at least 24 months. Notwithstanding paragraph (b)(3)(ii) 
of this section, we will not consider other information in addition to 
your earnings to evaluate the work you are doing or have done if--
    (A) At the time you do the work, you are entitled to social 
security disability benefits and you have received such benefits for at 
least 24 months (see paragraph (b)(3)(iv) of this section); and
    (B) We are evaluating that work to consider whether you have 
engaged in substantial gainful activity or

[[Page 59010]]

demonstrated the ability to engage in substantial gainful activity for 
the purpose of determining whether your disability has ceased because 
of your work activity (see Sec. Sec.  404.1592a(a)(1) and (3)(ii) and 
404.1594(d)(5) and (f)(1)).
    (iv) When we consider you to have received social security 
disability benefits for at least 24 months. For purposes of paragraph 
(b)(3)(iii) of this section, social security disability benefits means 
disability insurance benefits for a disabled worker, child's insurance 
benefits based on disability, or widow's or widower's insurance 
benefits based on disability. We consider you to have received such 
benefits for at least 24 months beginning with the first day of the 
first month following the 24th month for which you received social 
security disability benefits that you were due. The 24 months do not 
have to be consecutive. Any months for which you were entitled to 
benefits but for which you did not receive a benefit payment will not 
be counted for the 24-month requirement; for example, a month for which 
you did not receive a benefit payment because of worker's compensation 
offset or because you repaid an overpayment to us. If you also receive 
supplemental security income payments based on disability or blindness 
under title XVI of the Social Security Act, months for which you 
received only supplemental security income payments will not be counted 
for the 24-month requirement.
* * * * *
    5. Section 404.1575 is amended by revising paragraphs (a) and (c) 
and adding new paragraph (e) to read as follows:


Sec.  404.1575  Evaluation guides if you are self-employed.

    (a) If you are a self-employed person. If you are working or have 
worked as a self-employed person, we will use the provisions in 
paragraphs (a) through (e) of this section that are relevant to your 
work activity. We will use these provisions whenever they are 
appropriate, whether in connection with your application for disability 
benefits (when we make an initial determination on your application and 
throughout any appeals you may request), after you have become entitled 
to a period of disability or to disability benefits, or both.
    (1) How we evaluate the work you do after you have become entitled 
to disability benefits. If you are entitled to social security 
disability benefits and you work as a self-employed person, the way we 
will evaluate your work activity will depend on whether the work 
activity occurs before or after you have received such benefits for at 
least 24 months and on the purpose of the evaluation. For purposes of 
paragraphs (a) and (e) of this section, social security disability 
benefits means disability insurance benefits for a disabled worker, 
child's insurance benefits based on disability, or widow's or widower's 
insurance benefits based on disability. We will use the rules in 
paragraph (e)(2) of this section to determine if you have received such 
benefits for at least 24 months.
    (i) We will use the guides in paragraph (a)(2) of this section to 
evaluate any work activity you do before you have received social 
security disability benefits for at least 24 months to determine 
whether you have engaged in substantial gainful activity, regardless of 
the purpose of the evaluation.
    (ii) We will use the guides in paragraph (e) of this section to 
evaluate any work activity you do after you have received social 
security disability benefits for at least 24 months to determine 
whether you have engaged in substantial gainful activity for the 
purpose of determining whether your disability has ceased because of 
your work activity.
    (iii) If we have determined under Sec.  404.1592a(a)(1) that your 
disability ceased in a month during the reentitlement period because 
you performed substantial gainful activity, and we need to decide under 
Sec.  404.1592a(a)(2)(i) or (a)(3)(i) whether you are doing substantial 
gainful activity in a subsequent month in or after your reentitlement 
period, we will use the guides in paragraph (a)(2) of this section 
(subject to the limitations described in Sec.  404.1592a(a)(2)(i) and 
(a)(3)(i)) to determine whether your work activity in that month is 
substantial gainful activity. We will use the guides in paragraph 
(a)(2) of this section for these purposes, regardless of whether your 
work activity in that month occurs before or after you have received 
social security disability benefits for at least 24 months.
    (2) General rules for evaluating your work activity if you are 
self-employed. We will consider your activities and their value to your 
business to decide whether you have engaged in substantial gainful 
activity if you are self-employed. We will not consider your income 
alone because the amount of income you actually receive may depend on a 
number of different factors, such as capital investment and profit-
sharing agreements. We will generally consider work that you were 
forced to stop or reduce to below substantial gainful activity after 6 
months or less because of your impairment as an unsuccessful work 
attempt. See paragraph (d) of this section. We will evaluate your work 
activity based on the value of your services to the business regardless 
of whether you receive an immediate income for your services. We 
determine whether you have engaged in substantial gainful activity by 
applying three tests. If you have not engaged in substantial gainful 
activity under test one, then we will consider tests two and three. The 
tests are as follows:
    (i) Test one: You have engaged in substantial gainful activity if 
you render services that are significant to the operation of the 
business and receive a substantial income from the business. Paragraphs 
(b) and (c) of this section explain what we mean by significant 
services and substantial income for purposes of this test.
    (ii) Test Two: You have engaged in substantial gainful activity if 
your work activity, in terms of factors such as hours, skills, energy 
output, efficiency, duties, and responsibilities, is comparable to that 
of unimpaired individuals in your community who are in the same or 
similar businesses as their means of livelihood.
    (iii) Test Three: You have engaged in substantial gainful activity 
if your work activity, although not comparable to that of unimpaired 
individuals, is clearly worth the amount shown in Sec.  404.1574(b)(2) 
when considered in terms of its value to the business, or when compared 
to the salary that an owner would pay to an employee to do the work you 
are doing.
* * * * *
    (c) What we mean by substantial income. (1) Determining countable 
income. We deduct your normal business expenses from your gross income 
to determine net income. Once we determine your net income, we deduct 
the reasonable value of any significant amount of unpaid help furnished 
by your spouse, children, or others. Miscellaneous duties that 
ordinarily would not have commercial value would not be considered 
significant. We deduct impairment-related work expenses that have not 
already been deducted in determining your net income. Impairment-
related work expenses are explained in Sec.  404.1576. We deduct 
unincurred business expenses paid for you by another individual or 
agency. An unincurred business expense occurs when a sponsoring agency 
or another person incurs responsibility for the payment of certain 
business expenses, e.g., rent, utilities, or purchases and repair of 
equipment, or provides you

[[Page 59011]]

with equipment, stock, or other material for the operation of your 
business. We deduct soil bank payments if they were included as farm 
income. That part of your income remaining after we have made all 
applicable deductions represents the actual value of work performed. 
The resulting amount is the amount we use to determine if you have done 
substantial gainful activity. For purposes of this section, we refer to 
this amount as your countable income. We will generally average your 
countable income for comparison with the earnings guidelines in Sec.  
404.1574(b)(2). See Sec.  404.1574a for our rules on averaging of 
earnings.
    (2) When countable income is considered substantial. We will 
consider your countable income to be substantial if--
    (i) It averages more than the amounts described in Sec.  
404.1574(b)(2); or
    (ii) It averages less than the amounts described in Sec.  
404.1574(b)(2) but it is either comparable to what it was before you 
became seriously impaired if we had not considered your earnings or is 
comparable to that of unimpaired self-employed persons in your 
community who are in the same or a similar business as their means of 
livelihood.
* * * * *
    (e) Special rules for evaluating the work you do after you have 
received social security disability benefits for at least 24 months. 
(1) General. We will apply the provisions of this paragraph to evaluate 
the work you are doing or have done if, at the time you do the work, 
you are entitled to social security disability benefits and you have 
received such benefits for at least 24 months. We will apply the 
provisions of this paragraph only when we are evaluating that work to 
consider whether you have engaged in substantial gainful activity or 
demonstrated the ability to engage in substantial gainful activity for 
the purpose of determining whether your disability has ceased because 
of your work activity (see Sec. Sec.  404.1592a(a)(1) and (3)(ii) and 
404.1594(d)(5) and (f)(1)). We will use the countable income test 
described in paragraph (e)(3) of this section to determine whether the 
work you do after you have received such benefits for at least 24 
months is substantial gainful activity or demonstrates the ability to 
do substantial gainful activity. We will not consider the services you 
perform in that work to determine that the work you are doing shows 
that you are able to engage in substantial gainful activity and are, 
therefore, no longer disabled. However, we may consider the services 
you perform to determine that you are not doing substantial gainful 
activity. We will generally consider work that you were forced to stop 
or reduce below substantial gainful activity after 6 months or less 
because of your impairment as an unsuccessful work attempt. See 
paragraph (d) of this section.
    (2) The 24-month requirement. For purposes of paragraphs (a)(1) and 
(e) of this section, we consider you to have received social security 
disability benefits for at least 24 months beginning with the first day 
of the first month following the 24th month for which you received 
social security disability benefits that you were due. The 24 months do 
not have to be consecutive. Any months for which you were entitled to 
benefits but for which you did not receive a benefit payment will not 
be counted for the 24-month requirement; for example, a month for which 
you did not receive a benefit payment because of worker's compensation 
offset or because you repaid an overpayment to us. If you also receive 
supplemental security income payments based on disability or blindness 
under title XVI of the Social Security Act, months for which you 
received only supplemental security income payments will not be counted 
for the 24-month requirement.
    (3) Countable income test. We will compare your countable income to 
the earnings guidelines in Sec.  404.1574(b)(2) to determine if you 
have engaged in substantial gainful activity. See paragraph (c)(1) of 
this section for an explanation of countable income. We will consider 
that you have engaged in substantial gainful activity if your monthly 
countable income averages more than the amounts described in Sec.  
404.1574(b)(2) for the month(s) in which you work, unless the evidence 
shows that you did not render significant services in the month(s). See 
paragraph (b) of this section for what we mean by significant services. 
If your average monthly countable income is equal to or less than the 
amounts in Sec.  404.1574(b)(2) for the month(s) in which you work, or 
if the evidence shows that you did not render significant services in 
the month(s), we will consider that you work as a self-employed person 
shows that you have not engaged in substantial gainful activity.
    6. Section 404.1590 is amended by adding three new sentences to the 
end of paragraph (a), revising paragraph (b) introductory text and 
paragraphs (b)(6), (b)(7)(i), and (b)(8), and adding new paragraphs (h) 
and (i) to read as follows:


Sec.  404.1590  When and how often we will conduct a continuing 
disability review.

    (a) General. * * * In paragraphs (b) through (g) of this section, 
we explain when and how often we conduct continuing disability reviews 
for most individuals. In paragraph (h) of this section, we explain 
special rules for some individuals who are participating in the Ticket 
to Work program. In paragraph (i) of this section, we explain special 
rules for some individuals who work.
    (b) When we will conduct a continuing disability review. Except as 
provided in paragraphs (h) and (i) of this section, we will start a 
continuing disability review if--
* * * * *
    (6) You tell us that--
    (i) You have recovered from your disability; or
    (ii) You have returned to work;
    (7) Your State Vocational Rehabilitation Agency tells us that--
    (i) The services have been completed; or
* * * * *
    (8) Someone in a position to know of your physical or mental 
condition tells us any of the following, and it appears that the report 
could be substantially correct:
    (i) You are not disabled; or
    (ii) You are not following prescribed treatment; or
    (iii) You have returned to work; or
    (iv) You are failing to follow the provisions of the Social 
Security Act or these regulations;
* * * * *
    (h) If you are participating in the Ticket to Work program. If you 
are participating in the Ticket to Work program, we will not start a 
continuing disability review during the period in which you are using a 
ticket. However, this provision does not apply to reviews we conduct 
using the rules in Sec. Sec.  404.1571-404.1576 to determine whether 
the work you have done shows that you are able to do substantial 
gainful activity and are, therefore, no longer disabled. See subpart C 
of part 411 of this chapter.
    (i) If you are working and have received social security disability 
benefits for at least 24 months.
    (1) General. Notwithstanding the provisions in paragraphs (b)(4), 
(b)(5), (b)(6)(ii), (b)(7)(ii), and (b)(8)(iii) of this section, we 
will not start a continuing disability review based solely on your work 
activity if--
    (i) You are currently entitled to disability insurance benefits as 
a disabled worker, child's insurance benefits based on disability, or 
widow's

[[Page 59012]]

or widower's insurance benefits based on disability; and
    (ii) You have received such benefits for at least 24 months (see 
paragraph (i)(2) of this section).
    (2) The 24-month requirement.
    (i) The months for which you have actually received disability 
insurance benefits as a disabled worker, child's insurance benefits 
based on disability, or widow's or widower's insurance benefits based 
on disability that you were due will count for the 24-month requirement 
under paragraph (i)(1)(ii) of this section, regardless of whether the 
months were consecutive. Any month for which you were entitled to 
benefits but for which you did not receive a benefit payment will not 
be counted for the 24-month requirement; for example, a month for which 
you did not receive a benefit payment because of worker's compensation 
offset or because you repaid an overpayment to us. If you also receive 
supplemental security income payments based on disability or blindness 
under title XVI of the Social Security Act, months for which you 
received only supplemental security income payments will not be counted 
for the 24-month requirement. Benefits that are continued pending 
reconsideration and/or a hearing before an administrative law judge 
based on medical cessation determination (see Sec. Sec.  404.1597a) 
will not be counted for the 24-month requirement.
    (ii) In determining whether paragraph (i)(1) of this section 
applies, we consider whether you have received disability insurance 
benefits as a disabled worker, child's insurance benefits based on 
disability, or widow's or widower's insurance benefits based on 
disability for at least 24 months as of the date on which we start a 
continuing disability review. For purposes of this provision, the date 
on which we start a continuing disability review is the date on the 
notice we send you that tells you that we are beginning to review your 
disability case.
    (3) When we may start a continuing disability review even if you 
have received social security disability benefits for at least 24 
months. Even if you meet the requirements of paragraph (i)(1) of this 
section, we may still start a continuing disability review for a 
reason(s) other than your work activity. We may start a continuing 
disability review if we have scheduled you for a periodic review of 
your continuing disability, we need a current medical or other report 
to see if your disability continues, we receive evidence which raises a 
question as to whether your disability continues, or you fail to follow 
the provisions of the Social Security Act or these regulations. For 
example, we will start a continuing disability review when you have 
been scheduled for a medical improvement expected diary review, and we 
may start a continuing disability review if you failed to report your 
work to us.
    (4) Reviews to determine whether the work you have done shows that 
you are able to do substantial gainful activity. Paragraph (i)(1) of 
this section does not apply to reviews we conduct using the rules in 
Sec. Sec.  404.1571-404.1576 to determine whether the work you have 
done shows that you are able to do substantial gainful activity and 
are, therefore, no longer disabled.
    (5) Erroneous start of the continuing disability review. If we 
start a continuing disability review based solely on your work activity 
that results in a medical cessation determination, we will vacate the 
medical cessation determination if--
    (i) You provide us evidence that establishes that you met the 
requirements of paragraph (i)(1) of this section as of the date of the 
start of your continuing disability review and that the start of the 
review was erroneous; and
    (ii) We receive the evidence within 12 months of the date of the 
notice of the initial determination of medical cessation.
    7. Section 404.1592a is amended by revising the second sentence of 
paragraph (a)(1), the sixth sentence of paragraph (a)(2)(i), and 
paragraph (a)(3) to read as follows:


Sec.  404.1592a  The reentitlement period.

    (a) * * *
    (1) * * * When we decide whether this work is substantial gainful 
activity, we will apply all of the relevant provisions of Sec. Sec.  
404.1571-404.1576 including, but not limited to, the provisions for 
averaging earnings, unsuccessful work attempts, and deducting 
impairment-related work expenses, as well as the special rules for 
evaluating the work you do after you have received disability benefits 
for at least 24 months. * * *
    (2)(i) * * * Once we have determined that your disability has 
ceased during the reentitlement period because of the performance of 
substantial gainful activity as explained in paragraph (a)(1) of this 
section, we will not apply the provisions of Sec. Sec.  404.1574(c) and 
404.1575(d) regarding unsuccessful work attempts, the provisions of 
Sec.  404.1574a regarding averaging of earnings, or the special rules 
in Sec. Sec.  404.1574(b)(3)(iii) and 404.1575(e) for evaluating the 
work you do after you have received disability benefits for at least 24 
months, to determine whether benefits should be paid for any particular 
month in the reentitlement period that occurs after the month your 
disability ceased.
    (3) The way we will consider your work activity after your 
reentitlement period ends (see paragraph (b)(2) of this section) will 
depend on whether you worked during the reentitlement period and if you 
did substantial gainful activity.
    (i) If you worked during the reentitlement period and we decided 
that your disability ceased during the reentitlement period because of 
your work under paragraph (a)(1) of this section, we will find that 
your entitlement to disability benefits terminates in the first month 
in which you engaged in substantial gainful activity after the end of 
the reentitlement period (see Sec.  404.325). (See Sec.  404.321 for 
when entitlement to a period of disability ends.) When we make this 
determination, we will consider only your work in, or earnings for, 
that month; we will not apply the provisions of Sec. Sec.  404.1574(c) 
and 404.1575(d) regarding unsuccessful work attempts, the provisions of 
Sec.  404.1574a regarding averaging of earnings, or the special rules 
in Sec. Sec.  404.1574(b)(3)(iii) and 404.1575(e) for evaluating the 
work you do after you have received disability benefits for at least 24 
months.
    (ii) If we did not find that your disability ceased because of work 
activity during the reentitlement period, we will apply all of the 
relevant provisions of Sec. Sec.  404.1571-404.1576 including, but not 
limited to, the provisions for averaging earnings, unsuccessful work 
attempts, and deducting impairment-related work expenses, as well as 
the special rules for evaluating the work you do after you have 
received disability benefits for at least 24 months, to determine 
whether your disability ceased because you performed substantial 
gainful activity after the reentitlement period. If we find that your 
disability ceased because you performed substantial gainful activity in 
a month after your reentitlement period ended, you will be paid 
benefits for the month in which your disability ceased and the two 
succeeding months. After those three months, your entitlement to a 
period of disability or to disability benefits terminates (see 
Sec. Sec.  404.321 and 404.325).
* * * * *
    8. Section 404.1594 is amended by adding a new second sentence to 
paragraph (b) introductory text, redesignating the second sentence of

[[Page 59013]]

paragraph (c) introductory text as the third sentence and adding a new 
second sentence, revising the third sentence of paragraph (f) 
introductory text and adding a new fourth sentence, and adding a new 
paragraph (i) to read as follows:


Sec.  404.1594  How we will determine whether your disability continues 
or ends.

* * * * *
    (b) Terms and definitions. * * * In addition, see paragraph (i) of 
this section if you work during your current period of entitlement 
based on disability or during certain other periods.
* * * * *
    (c) Determining medical improvement and its relationship to your 
abilities to do work. * * * (In addition, see paragraph (i) of this 
section if you work during your current period of entitlement based on 
disability or during certain other periods.) * * *
* * * * *
    (f) Evaluation steps. * * * The steps are as follows. (See 
paragraph (i) of this section if you work during your current period of 
entitlement based on disability or during certain other periods.)
* * * * *
    (i) If you work during your current period of entitlement based on 
disability or during certain other periods. (1) We will not consider 
the work you are doing or have done during your current period of 
entitlement based on disability (or, when determining whether you are 
entitled to expedited reinstatement of benefits under section 223(i) of 
the Act, the work you are doing or have done during or after the 
previously terminated period of entitlement referred to in section 
223(i)(1)(B) of the Act) to be past relevant work under paragraph 
(f)(7) of this section or past work experience under paragraph (f)(8) 
of this section. In addition, if you are currently entitled to 
disability benefits under title II of the Social Security Act, we may 
or may not consider the physical and mental activities that you perform 
in the work you are doing or have done during your current period of 
entitlement based on disability, as explained in paragraphs (i)(2) and 
(3) below.
    (2) If you are currently entitled to disability insurance benefits 
as a disabled worker, child's insurance benefits based on disability, 
or widow's or widower's insurance benefits based on disability under 
title II of the Social Security Act, and at the time we are making a 
determination on your case you have received such benefits for at least 
24 months, we will not consider the activities you perform in the work 
you are doing or have during your current period of entitlement based 
on disability if they support a finding that your disability has ended. 
(We will use the rules in Sec.  404.1590(i)(2) to determine whether the 
24-month requirement is met.) However, we will consider the activities 
you do in that work if they support a finding that your disability 
continues or they do not conflict with a finding that your disability 
continues. We will not presume that you are still disabled if you stop 
working.
    (3) If you are not a person described in Sec.  404.1594(i)(2), we 
will consider the activities you perform in your work at any of the 
evaluation steps in paragraph (f) of this section at which we need to 
assess your ability to function.

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

Subpart I--Determining Disability and Blindness

    9. The authority citation for subpart I of part 416 is revised to 
read as follows:

    Authority: Secs. 221(m), 702(a)(5), 1611, 1614, 1619, 1631(a), 
(c), and (d)(1), and 1633 of the Social Security Act (42 U.S.C. 
421(m), 902(a)(5), 1382, 1382c, 1382h, 1383(a), (c), and (d)(1), and 
1383b); secs. 4(c) and 5, 6(c)-(e), 14(a), and 15, Pub. L. 98-460, 
98 Stat. 1794, 1801, 1802, and 1808 (42 U.S.C. 421 note, 423 note, 
1382h note).

    10. Section 416.974 is amended by revising paragraph (b) to read as 
follows:


Sec.  416.974  Evaluation guides if you are an employee.

* * * * *
    (b) Earnings guidelines. (1) General. If you are an employee, we 
first consider the criteria in paragraph (a) of this section and Sec.  
416.976, and then the guides in paragraphs (b)(2) and (3) of this 
section. When we review your earnings to determine if you have been 
performing substantial gainful activity, we will subtract the value of 
any subsidized earnings (see paragraph (a)(2) of this section) and the 
reasonable cost of any impairment-related work expenses from your gross 
earnings (see Sec.  416.976). The resulting amount is the amount we use 
to determine if you have done substantial gainful activity. We will 
generally average your earnings for comparison with the earnings 
guidelines in paragraphs (b)(2) and (3) of this section. See Sec.  
416.974a for our rules on averaging earnings.
    (2) Earnings that will ordinarily show that you have engaged in 
substantial gainful activity. We will consider that your earnings from 
your work activity as an employee (including earnings from work in a 
sheltered workshop or a comparable facility especially set up for 
severely impaired persons) show that you have engaged in substantial 
gainful activity if:
    (i) Before January 1, 2001, they averaged more than the amount(s) 
in Table 1 of this section for the time(s) in which you worked.
    (ii) Beginning January 1, 2001, and each year thereafter, they 
average more than the larger of:
    (A) The amount for the previous year, or
    (B) An amount adjusted for national wage growth, calculated by 
multiplying $700 by the ratio of the national average wage index for 
the year 2 calendar years before the year for which the amount is being 
calculated to the national average wage index for the year 1998. We 
will then round the resulting amount to the next higher multiple of $10 
where such amount is a multiple of $5 but not of $10 and to the nearest 
multiple of $10 in any other case.

                                 Table 1
------------------------------------------------------------------------
                                                           Your monthly
                                                             earnings
                       For months:                         averaged more
                                                               than:
------------------------------------------------------------------------
In calendar years before 1976...........................            $200
In calendar year 1976...................................             230
In calendar year 1977...................................             240
In calendar year 1978...................................             260
In calendar year 1979...................................             280
In calendar years 1980-1989.............................             300
January 1990-June 1999..................................             500
July 1999-December 2000.................................             700
------------------------------------------------------------------------

    (3) Earnings that will ordinarily show that you have not engaged in 
substantial gainful activity.
    (i) General. If your average monthly earnings are equal to or less 
than the amount(s) determined under paragraph (b)(2) of this section 
for the year(s) in which you work, we will generally consider that the 
earnings from your work as an employee (including earnings from work in 
a sheltered workshop or comparable facility) will show that you have 
not engaged in substantial gainful activity. We will generally not 
consider other information in addition to your earnings except in the 
circumstances described in paragraph (b)(3)(ii) of this section.
    (ii) When we will consider other information in addition to your 
earnings. We will generally consider other information in addition to 
your earnings if there is evidence indicating that you may be engaging 
in substantial gainful activity or that you are in a position to 
control when earnings are

[[Page 59014]]

paid to you or the amount of wages paid to you; (for example, if you 
are working for a small corporation owned by a relative). Examples of 
other information we may consider include, whether--
    (A) Your work is comparable to that of unimpaired people in your 
community who are doing the same or similar occupations as their means 
of livelihood, taking into account the time, energy, skill, and 
responsibility involved in the work; and
    (B) Your work, although significantly less than that done by 
unimpaired people, is clearly worth the amounts shown in paragraph 
(b)(2) of this section, according to pay scales in your community.
* * * * *
    11. Section 416.990 is amended by adding three new sentences to the 
end of paragraph (a), revising paragraph (b) introductory text and 
paragraphs (b)(4), (b)(6), and (b)(8), and adding new paragraphs (h) 
and (i) to read as follows:


Sec.  416.990  When and how often we will conduct a continuing 
disability review.

    (a) General. * * * In paragraphs (b) through (g) of this section, 
we explain when and how often we conduct continuing disability reviews 
for most individuals. In paragraph (h) of this section, we explain 
special rules for some individuals who are participating in the Ticket 
to Work program. In paragraph (i) of this section, we explain special 
rules for some individuals who work and have received social security 
benefits as well as supplemental security income payments.
    (b) When we will conduct a continuing disability review. Except as 
provided in paragraphs (h) and (i) of this section, we will start a 
continuing disability review if--
* * * * *
    (4) You return to work;
* * * * *
    (6) You tell us that--
    (i) You have recovered from your disability; or
    (ii) You have returned to work;
* * * * *
    (8) Someone in a position to know of your physical or mental 
condition tells us any of the following, and it appears that the report 
could be substantially correct:
    (i) You are not disabled or blind; or
    (ii) You are not following prescribed treatment; or
    (iii) You have returned to work; or
    (iv) You are failing to follow the provisions of the Social 
Security Act or these regulations;
* * * * *
    (h) If you are participating in the Ticket to Work program. If you 
are participating in the Ticket to Work program, we will not start a 
continuing disability review during the period in which you are using a 
ticket. See subpart C of part 411 of this chapter.
    (i) If you are working and have received social security disability 
benefits for at least 24 months.
    (1) General. Notwithstanding the provisions in paragraphs (b)(4), 
(b)(5), (b)(6)(ii), (b)(7)(ii), and (b)(8)(iii) of this section, we 
will not start a continuing disability review based solely on your work 
activity if--
    (i) You are currently entitled to disability insurance benefits as 
a disabled worker, child's insurance benefits based on disability, or 
widow's or widower's insurance benefits based on disability under title 
II of the Social Security Act (see subpart D of part 404 of this 
chapter); and
    (ii) You have received such benefits for at least 24 months (see 
paragraph (i)(2) of this section).
    (2) The 24-month requirement. (i) The months for which you have 
actually received disability insurance benefits as a disabled worker, 
child's insurance benefits based on disability, or widow's or widower's 
insurance benefits based on disability that you were due under title II 
of the Social Security Act will count for the 24-month requirement 
under paragraph (i)(1)(ii) of this section, regardless of whether the 
months were consecutive. Any month for which you were entitled to 
social security disability benefits but for which you did not receive a 
benefit payment will not be counted for the 24-month requirement; for 
example, a month for which you did not receive a benefit payment 
because of worker's compensation offset or because you repaid an 
overpayment to us. Months for which you received only supplemental 
security income payments will not be counted for the 24-month 
requirement. Benefits that are continued pending reconsideration and/or 
a hearing before an administrative law judge based on medical cessation 
determination (see Sec.  416.996) will not be counted for the 24-month 
requirement.
    (ii) In determining whether paragraph (i)(1) of this section 
applies, we consider whether you have received disability insurance 
benefits as a disabled worker, child's insurance benefits based on 
disability, or widow's or widower's insurance benefits based on 
disability under title II of the Social Security Act for at least 24 
months as of the date on which we start a continuing disability review. 
For purposes of this provision, the date on which we start a continuing 
disability review is the date on the notice we send you that tells you 
that we are beginning to review your disability case.
    (3) When we may start a continuing disability review even if you 
have received social security disability benefits for at least 24 
months. Even if you meet the requirements of paragraph (i)(1) of this 
section, we may still start a continuing disability review for a 
reason(s) other than your work activity. We may start a continuing 
disability review if we have scheduled you for a periodic review of 
your continuing disability, we need a current medical or other report 
to see if your disability continues, we receive evidence which raises a 
question as to whether your disability or blindness continues, or you 
fail to follow the provisions of the Social Security Act or these 
regulations. For example, we will start a continuing disability review 
when you have been scheduled for a medical improvement expected diary 
review, and we may start a continuing disability review if you failed 
to report your work to us.
    (4) Erroneous start of the continuing disability review. If we 
start a continuing disability review based solely on your work activity 
that results in a medical cessation determination, we will vacate the 
medical cessation determination if--
    (i) You provide us evidence that establishes that you met the 
requirements of paragraph (i)(1) of this section as of the date of the 
start of your continuing disability review and that the start of the 
review was erroneous; and
    (ii) We receive the evidence within 12 months of the date of the 
notice of the initial determination of medical cessation.
    12. Section 416.994 is amended by revising the section heading, 
adding a new sentence to the end of paragraph (b)(1) introductory text, 
redesignating the second sentence of paragraph (b)(2) introductory text 
as the third sentence and adding a new second sentence, revising the 
third sentence of paragraph (b)(5) introductory text and adding a new 
fourth sentence, and adding a new paragraph (b)(8) to read as follows:


Sec.  416.994  How we will determine whether your disability continues 
or ends, disabled adults.

* * * * *
    (b) Disabled persons age 18 or over (adults). * * *
    (1) Terms and definitions. * * * In addition, see paragraph (b)(8) 
of this section if you work during your current period of eligibility 
based on disability or during certain other periods.
* * * * *

[[Page 59015]]

    (2) Determining medical improvement and its relationship to your 
abilities to do work.
    * * * (In addition, see paragraph (b)(8) of this section if you 
work during your current period of eligibility based on disability or 
during certain other periods.) * * *
* * * * *
    (5) Evaluation steps. * * * The steps are as follows. (See 
paragraph (b)(8) of this section if you work during your current period 
of eligibility based on disability or during certain other periods.)
* * * * *
    (8) If you work during your current period of eligibility based on 
disability or during certain other periods.
    (i) We will not consider the work you are doing or have done during 
your current period of eligibility based on disability (or, when 
determining whether you are eligible for expedited reinstatement of 
benefits under section 1631(p) of the Act, the work you are doing or 
have done during or after the previously terminated period of 
eligibility referred to in section 1631(p)(1)(B) of the Act) to be past 
relevant work under paragraph (b)(5)(vi) of this section or past work 
experience under paragraph (b)(5)(vii) of this section. In addition, if 
you are currently entitled to disability benefits under title II of the 
Social Security Act, we may or may not consider the physical and mental 
activities that you perform in the work you are doing or have done 
during your current period of entitlement based on disability, as 
explained in paragraphs (b)(8)(ii) and (iii).
    (ii) If you are currently entitled to disability insurance benefits 
as a disabled worker, child's insurance benefits based on disability, 
or widow's or widower's insurance benefits based on disability under 
title II of the Social Security Act, and at the time we are making a 
determination on your case you have received such benefits for at least 
24 months, we will not consider the activities you perform in the work 
you are doing or have during your current period of entitlement based 
on disability if they support a finding that your disability has ended. 
(We will use the rules in Sec.  416.990(i)(2) to determine whether the 
24-month requirement is met.) However, we will consider the activities 
you do in that work if they support a finding that your disability 
continues or they do not conflict with a finding that your disability 
continues. We will not presume that you are still disabled if you stop 
working.
    (iii) If you are not a person described in paragraph (b)(8)(ii) of 
this section, we will consider the activities you perform in your work 
at any of the evaluation steps in paragraph (f) of this section at 
which we need to assess your ability to function.
* * * * *

Subpart N--Determinations, Administrative Review Process, and 
Reopening of Determinations and Decisions

    12. The authority citation for subpart N continues to read as 
follows:

    Authority: Secs. 702(a)(5), 1631, and 1633 of the Social 
Security Act (42 U.S.C. 902(a)(5), 1383, and 1383b).

    13. Section 416.1403 is amended by removing the word ``and'' at the 
end of paragraph (a)(20), replacing the period at the end of paragraph 
(a)(21) with ``; and'', and adding new paragraph (a)(22) to read as 
follows:


Sec.  416.1403  Administrative actions that are not initial 
determinations.

    (a)* * *
    (22) Starting or discontinuing a continuing disability review.
* * * * *

[FR Doc. 05-20266 Filed 10-7-05; 8:45 am]
BILLING CODE 4191-02-P


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