Representative Payment Policies and Administrative Procedure for Imposing Penalties for False or Misleading Statements or Withholding of Information, 60251-60256 [05-20697]

Download as PDF Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Proposed Rules SOCIAL SECURITY ADMINISTRATION 20 CFR Parts 404, 408 and 416 RIN 0960–AG09 Representative Payment Policies and Administrative Procedure for Imposing Penalties for False or Misleading Statements or Withholding of Information AGENCY: Social Security Administration (SSA). ACTION: Proposed rules. Electronic Version We propose to amend our regulations on representative payment and on the administrative procedure for imposing penalties for false or misleading statements or withholding of information to reflect and implement certain provisions of the Social Security Protection Act of 2004 (SSPA), Public Law 108–203. The SSPA amends representative payment policies by providing additional safeguards for Social Security, Special Veterans and Supplemental Security Income beneficiaries served by representative payees. These changes include additional disqualifying factors for representative payee applicants, additional requirements for nongovernmental fee-for-service payees, authority to redirect delivery of benefit payments when a representative payee fails to provide required accountings, and authority to treat misused benefits as an overpayment to the representative payee. In addition, we propose to modify our rules to explain financial requirements for representative payees, and we also have made minor clarifying plain language changes. The SSPA also allows SSA to impose a penalty on any person who knowingly withholds information that is material for use in determining any right to or the amount of monthly benefits under titles II or XVI. The penalty is nonpayment for a specified number of months of benefits under title II that would otherwise be payable and ineligibility for the same period of time for cash benefits under title XVI (including State supplementary payments). SUMMARY: To consider your comments, we must receive them no later than December 16, 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 at http://www.regulations.gov; e-mail to regulations@ssa.gov; telefax to (410) 966–2830; or letter to the Commissioner DATES: VerDate Aug<31>2005 11:41 Oct 14, 2005 of Social Security, P.O. 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. Jkt 208001 The electronic file of this document is available on the date of publication in the Federal Register on the Internet site for the Government Printing Office, http://www.gpoaccess.gov/fr/ index.html. It is also available on the Internet site for SSA (i.e., Social Security Online) at http:// policy.ssa.gov/pnpublic.nsf/LawsRegs. FOR FURTHER INFORMATION CONTACT: Regarding this Federal Register document—Robert Augustine, Social Insurance Specialist, Office of Regulations, Social Security Administration, 6401 Security Boulevard, Baltimore, MD 21235–6401, (410) 965–0020 or TTY (410) 966–5609; regarding eligibility or filing for benefits—our national toll-free number, 1–800–772–1213 or TTY 1–800–325– 0778 or visit our Internet Web site, Social Security Online, at http:// www.socialsecurity.gov. SUPPLEMENTARY INFORMATION: Background Public Law 108–203, the SSPA, enacted March 2, 2004, requires a number of changes to representative payee policy and procedures. A representative payee is the person, agency, organization, or institution selected to receive and manage benefits on behalf of an incapable beneficiary. This includes a parent who is receiving benefits on behalf of his or her minor child. The SSPA also changes the rules for imposing penalties for false or misleading statements or for withholding information. Section 102 of the SSPA requires nongovernmental fee-for-service organizational representative payees to be both bonded and licensed, provided that licensing is available in the State. Section 103 of the SSPA expands the scope of disqualification to prohibit an individual from serving as a representative payee if he or she: (1) Has been convicted of any offense resulting in imprisonment for more than 1 year, unless the Commissioner of Social Security determines that an exception to PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 60251 this prohibition is appropriate; or (2) is fleeing to avoid prosecution, or custody or confinement after conviction of a crime that is a felony. Section 104 of the SSPA requires feefor-service representative payees to forfeit their fees for any months during which they misuse all or part of any beneficiary’s benefits. Section 105 of the SSPA makes nongovernmental representative payees liable for any benefits they misuse and requires SSA to treat such misused benefits as overpayments to the representative payees, subject to overpayment recovery authorities. Section 106 of the SSPA authorizes the Commissioner of Social Security to require a representative payee to receive benefits in person at a Social Security field office or a United States Government facility designated by the Social Security Administration if the payee fails to provide an annual accounting of benefits report or other requested information. In addition to the changes required by Public Law 108–203, we propose to clarify financial requirements for representative payees. Our current regulations specify that the interest earned on conserved funds belongs to the beneficiary. However, the regulations do not specifically address interest earned on current benefits or how current benefits should be held. We propose to specify that a representative payee must keep any payments received for the beneficiary separate from the representative payee’s own funds and ensure that the beneficiary’s ownership is shown unless the representative payee is the spouse or parent of the beneficiary and lives in the same household with the beneficiary. We also propose to provide for an exception to this requirement for State or local government agencies when we determine that their accounting structure sufficiently protects the beneficiaries’ interest in the benefits (i.e., accounting structure clearly identifies what funds belong to the beneficiary). We further propose to specify that the payee must treat any interest earned on current benefits as the beneficiary’s own property. In addition, we propose to clarify that the payee is responsible for making records available for review if requested by us. These records must be examined when conducting our site visits. Section 201(a)(2) of the SSPA amended section 1129A of the Act to help prevent and respond to fraud and abuse in SSA’s programs and operations. Prior to its amendment by the SSPA, section 1129A allowed SSA to impose a penalty against any person E:\FR\FM\17OCP1.SGM 17OCP1 60252 Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Proposed Rules who makes, or causes to be made, a statement or representation of a material fact that the person knows or should know is false or misleading or that omits a material fact, or that the person makes with a knowing disregard for the truth. The statement must have been made for use in determining eligibility for or the amount of benefits under titles II or XVI. The penalty is nonpayment for 6, 12 or 24 months of benefits under title II that would otherwise be payable to the person and ineligibility for the same period of time for cash benefits under title XVI (including State supplementary payments made by SSA according to § 416.2005). Section 201(a)(2) amended section 1129A to also allow SSA to impose this penalty against any person who withholds disclosure of information that is material for use in determining any right to or the amount of monthly benefits under titles II or XVI if the person knows, or should know, that the withholding of such disclosure is misleading. Prior to the enactment of section 201(a)(2), in order for a penalty to be imposed, the law required an affirmative act on the part of the individual of making a statement that omitted a material fact. This new penalty under section 1129A of the Act will be effective with respect to violations committed after the date on which SSA implements the centralized computer file described in section 202 of the SSPA. This centralized computer file will electronically record information about changes in work status that a disability beneficiary (or representative) reports to SSA and is expected to be implemented in February 2006. Explanation of Proposed Changes on Representative Payment Because our regulations for representative payment under the title VIII program cross-reference the appropriate material in our title II representative payment rules, most of the changes we now propose to our title II representative payment regulations would also apply to title VIII. Where only a cross-reference to the title II rules would not be sufficient, we propose a specific rule for title VIII. We are proposing the following policy changes to our representative payment regulations: 1. We propose to amend §§ 404.2022 and 416.622 to explain that a person who is convicted of an offense resulting in imprisonment for more than 1 year may not serve as a representative payee. These sections also would explain that we may make an exception to this rule if the nature of the conviction poses no VerDate Aug<31>2005 11:41 Oct 14, 2005 Jkt 208001 risk to the beneficiary and selection of the applicant is in the beneficiary’s best interest. In addition, these sections would explain that a person who is fleeing prosecution, custody or confinement for a crime, or an attempt to commit a crime that is a felony may not serve as a representative payee. If we identify a currently serving payee who is no longer qualified for this reason, we will allow them 10 days to respond to notification before making any payee change. 2. We propose to amend §§ 404.2035 and 416.635 to explain that a representative payee must keep any payments received for the beneficiary separate from the payee’s own funds and ensure the beneficiary’s ownership is shown unless the payee is the spouse or parent of the beneficiary and lives in the same household with the beneficiary. We also propose to provide for an exception to this requirement for State or local government agencies that use a different accounting structure. We would grant such an exception to a State or local government agency if we determine that its accounting structure sufficiently protects the beneficiaries’ interest in the benefits. Also, these sections would explain that the payee must treat any interest earned on current benefits as the beneficiary’s own property. 3. We propose to amend §§ 404.2035 and 416.635 to require representative payees to make available to us their records supporting their written accounting reports. We believe those records are essential to verify the written reports. 4. We propose to amend existing §§ 404.2040a and 416.640a to require fee-for-service non-governmental community-based nonprofit organizational representative payees to be both bonded and licensed (provided that licensing is available in the State). The bond would have to be of a sufficient amount to repay any funds (current social security benefits and supplemental security income payments plus any conserved funds and interest) lost by the beneficiaries in the event of misuse or theft, and the license would have to be appropriate under the laws of the State for the type of services the organization provides. These bonding and licensing requirements would not apply to the title VIII program. In addition, these sections would explain that a fee-for-service representative payee must forfeit its fee for the months during which it misused benefits. 5. We propose to amend §§ 404.2041 and 416.641 to explain that a nongovernmental representative payee will be liable for any benefits it misuses and PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 that SSA will treat the misused benefits as an overpayment to the representative payee, subject to overpayment recovery authorities. 6. We propose to amend §§ 404.2065 and 416.665 to explain that we may require a representative payee to receive benefits in person at a local Social Security field office or a United States Government facility designated by the Social Security Administration if the payee fails to provide an annual accounting of benefits or other requested information. We propose to make a similar amendment to § 408.665, but the benefits would be directed to a United States Government facility designated by the Social Security Administration. Explanation of Proposed Changes on Administrative Procedures for Imposing Administrative Penalties We propose to amend §§ 404.459 and 416.1340 of our regulations by revising the heading and paragraphs (a) and (e) of each section to reflect that, as a result of section 201 of the SSPA, an individual will be subject to the penalty if he or she withholds information that is material for use in determining any right to or the amount of monthly benefits under title II or XVI if the person knows, or should know, that the withholding of the information is misleading. Clarity of These Regulations Executive Order 12866, as amended by Executive Order 13258, requires each agency to write all rules in plain language. In addition to comments you may have on the substance of these proposed rules, we also invite your comments on how to make these rules easier to understand. For example: • Have we organized the material to suit your needs? • Are the requirements in the rules clearly stated? • Do the rules contain technical language or jargon that is not clear? • Would a different format (grouping and order of sections, use of headings, paragraphing) make the rules easier to understand? • Would more (but shorter) sections be better? • Could we improve clarity by adding tables, lists, or diagrams? • 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 E:\FR\FM\17OCP1.SGM 17OCP1 60253 Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Proposed Rules meet the criteria for a significant regulatory action under Executive Order 12866, as amended by Executive Order 13258. Thus, the rules have been reviewed by OMB. Executive Order 13132 (Federalism) and the Unfunded Mandates Reform Act of 1995 We have reviewed the proposed rules for compliance with Executive Order 13132 and the Unfunded Mandates Reform Act of 1995 (UMRA of 1995). We have determined that the proposed rules are not significant within the meaning of the UMRA of 1995 nor will they have any substantial direct effects on the States, on the relationship between the federal government and the States, or on the distribution of power and responsibilities among the various levels of government within the meaning of Executive Order 13132. The provision requiring a State license for certain qualified organizations seeking compensation for serving as representative payees affects a very small number of organizational payees and will not significantly impact the States. First, the total number of organizations seeking compensation is very small, approximately 800. There are a significant number of State or local government agencies within this group which we do not require to be licensed. Only the small number of remaining organizations (community-based nonprofit social service organizations) must seek State licensing. Second, such organizations should already have obtained the necessary license to be in compliance with State law. Therefore, the very small number of organizations seeking a State license will not significantly impact the States. Regulatory Flexibility Act We certify that these proposed rules will not have a significant economic impact on a substantial number of small entities. Therefore, a regulatory flexibility analysis, as provided for in the Regulatory Flexibility Act, as amended, is not required. Paperwork Reduction Act These proposed rules contain reporting requirements as shown in the table below. Where the public reporting burden is accounted for in Information Collection Requests for the various forms that the public uses to submit the information to SSA, a 1-hour placeholder burden is being assigned to the specific reporting requirement(s) contained in these rules; we are seeking clearance of these burdens because they were not considered during the clearance of the forms. Section Annual number of responses Frequency of response Average burden per response 404.2035(d) ...................................................................................................... 404.2035(e); 404.2065; 408.665 ..................................................................... 404.2035(f) ....................................................................................................... 416.635(d) ........................................................................................................ 416.635(e); 416.665 ........................................................................................ 416.635(f) ......................................................................................................... 550,000 ........................ 5,500 300,000 ........................ 3,000 1 ........................ 1 1 ........................ 1 .083 ........................ .083 .083 ........................ .083 45,650 1 457 24,900 1 250 Total .......................................................................................................... 858,500 ........................ ........................ 71,257 An Information Collection Request has been submitted to OMB. We are soliciting comments on the burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility and clarity; and on ways to minimize the burden on respondents, including the use of automated collection techniques or other forms of information technology. Comments should be submitted and/or faxed to OMB and to the Social Security Administration at the following addresses/numbers: Office of Management and Budget, Attn: Desk Officer for SSA, Fax Number: 202–395– 6974. Social Security Administration, Attn: SSA Reports Clearance Officer, Rm: 1338 Annex Building, 6401 Security Boulevard, Baltimore, MD 21235–6401, Fax Number: 410–965– 6400. Comments can be received for up to 60 days after publication of this notice and will be most useful if received within 30 days of publication. To receive a copy of the OMB clearance package, you may call the SSA Reports Clearance Officer on 410–965–0454. (Catalog of Federal Domestic Assistance Program Nos. 96.001, Social Security- VerDate Aug<31>2005 11:41 Oct 14, 2005 Jkt 208001 Disability Insurance; 96.002, Social SecurityRetirement Insurance; 96.004, Social Security-Survivors Insurance; 96.006, Supplemental Security Income; 96.020, Special Benefits for Certain World War II Veterans) List of Subjects 20 CFR Part 404 Administrative practice and procedure, Blind, Disability benefits, Old-Age, Survivors and Disability Insurance; Reporting and recordkeeping requirements, Social Security. Administrative practice and procedure, Aged; Reporting and recordkeeping requirements, Social Security; Special Veterans benefits; Veterans. 20 CFR Part 416 Administrative practice and procedure, Aged, Blind, Disability benefits, Public assistance programs, Reporting and recordkeeping requirements, Supplemental security income (SSI). Frm 00019 Fmt 4702 Dated: October 7, 2005. Jo Anne B. Barnhart, Commissioner of Social Security. For the reasons set out in the preamble, we propose to amend subparts E and U of part 404, subpart F of part 408, and subparts F and M of part 416 of Title 20 of the Code of Federal Regulations as follows: PART 404—FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE (1950– ) Subpart E—[Amended] 20 CFR Part 408 PO 00000 Estimated annual burden Sfmt 4702 1. The authority citation for subpart E of part 404 continues to read as follows: Authority: Secs. 202, 203, 204(a) and (e), 205(a) and (c), 216(l), 223(e), 224, 225, 702(a)(5), and 1129A of the Social Security Act (42 U.S.C. 402, 403, 404(a) and (e), 405(a) and (c), 416(l), 423(e), 424a, 425, 902(a)(5), 1320a–8a) and 48 U.S.C. 1801. 2. Amend § 404.459 by revising the heading and paragraphs (a) and (e) to read as follows: E:\FR\FM\17OCP1.SGM 17OCP1 60254 Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Proposed Rules § 404.459 Penalty for making false or misleading statements or withholding information. disclose in terms of its likely impact on your benefits. * * * * * (a) When may SSA penalize me? You will be subject to a penalty if: (1) You make, or cause to be made, a statement or representation of a material fact, for use in determining any initial or continuing right to, or the amount of, monthly insurance benefits under title II or benefits or payments under title XVI, that you know or should know is false or misleading, or (2) You make a statement or representation of a material fact for use as described in paragraph (a)(1) of this section with knowing disregard for the truth, or (3) You omit from a statement or representation made for use as described in paragraph (a)(1) of this section, or otherwise withhold disclosure (for example, fail to come forward to notify SSA) of a fact which you know or should know is material to the determination of any initial or continuing right to, or the amount of, monthly insurance benefits under title II or benefits or payments under title XVI, if you know, or should know, that the statement or representation with such omission is false or misleading or that the withholding of such disclosure is misleading. * * * * * (e) How will SSA make its decision to penalize me? In order to impose a penalty on you, we must find that you knowingly (knew or should have known or acted with knowing disregard for the truth) made a false or misleading statement or omitted or failed to report a material fact if you knew, or should have known, that the omission or failure to disclose was misleading. We will base our decision to penalize you on the evidence and the reasonable inferences that can be drawn from that evidence, not on speculation or suspicion. Our decision to penalize you will be documented with the basis and rationale for that decision. In determining whether you knowingly made a false or misleading statement or omitted or failed to report a material fact so as to justify imposition of the penalty, we will consider all evidence in the record, including any physical, mental, educational, or linguistic limitations (including any lack of facility with the English language) which you may have had at the time. In determining whether you acted knowingly, we will also consider the significance of the false or misleading statement or omission or failure to VerDate Aug<31>2005 11:41 Oct 14, 2005 Jkt 208001 Subpart U—[Amended] 3. The authority citation for subpart U of part 404 continues to read as follows: Authority: Secs. 205(a), (j), and (k), and 702(a)(5) of the Social Security Act (42 U.S.C. 405(a), (j), and (k), and 902(a)(5)). 4. Amend § 404.2022 by redesignating paragraphs (b), (c) and (d) as paragraphs (d), (e) and (f) and adding new paragraphs (b) and (c) to read as follows: § 404.2022 Who may not serve as a representative payee? * * * * * (b) Is fleeing to avoid prosecution, or custody or confinement after conviction of a crime, or an attempt to commit a crime, that is a felony under the laws of the place from which he/she flees (or, in jurisdictions that do not define crimes as felonies, is punishable by death or imprisonment for a term exceeding one year, regardless of the actual sentence imposed). If we identify a currently serving payee who is no longer qualified for this reason, we will allow them 10 days to respond to notification before making any payee change. (c) Has been convicted of an offense resulting in imprisonment for more than 1 year. However, we may make an exception to this prohibition, if the nature of the conviction is such that selection of the applicant poses no risk to the beneficiary and the exception is in the beneficiary’s best interest. * * * * * 5. Revise § 404.2035 to read as follows: § 404.2035 What are the responsibilities of your representative payee? A representative payee has a responsibility to— (a) Use the benefits received on your behalf only for your use and benefit in a manner and for the purposes he or she determines, under the guidelines in this subpart, to be in your best interests. (b) Keep any benefits received on your behalf separate from his or her own funds and show your ownership of these benefits unless he or she is your spouse or natural or adoptive parent or stepparent and lives in the same household with you or is a State or local government agency for whom we have granted an exception to this requirement. (c) Treat any interest earned on the benefits as your property. (d) Notify us of any event or change in your circumstances that will affect the amount of benefits you receive, your PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 right to receive benefits, or how you receive them; (e) Submit to us, upon our request, a written report accounting for the benefits received on your behalf, and make all supporting records available for review if requested by us; and (f) Notify us of any change in his or her circumstances that would affect performance of his/her payee responsibilities. 6. Amend § 404.2040a by revising paragraph (a)(2), redesignating paragraph (g)(6) as (g)(7), and adding a new paragraph (g)(6) to read as follows: § 404.2040a Compensation for qualified organizations serving as representative payees. * * * * * (a) * * * (2) Any community-based nonprofit social service organization founded for religious, charitable or social welfare purposes, which is tax exempt under section 501(c) of the Internal Revenue Code and which is bonded/insured to cover misuse and embezzlement by officers and employees and which is licensed in each State in which it serves as representative payee (if licensing is available in the State). The minimum amount of bonding or insurance coverage must equal the average monthly amount of social security payments received by the organization plus the amount of the beneficiaries’ conserved funds (i.e., beneficiaries’ saved social security benefits) plus interest on hand. For example, an organization that has conserved funds of $5,000 and receives an average of $12,000 a month in social security payments must be bonded/insured for a minimum of $17,000. The license must be appropriate under the laws of the State for the type of services the organization provides. An example of an appropriately licensed organization is a community mental health center holding a State license to provide community mental health services. * * * * * (g) * * * (6) Fees for services may not be taken from beneficiary benefits for the months for which the Commissioner or a court of competent jurisdiction determines that the representative payee misused benefits. Any fees collected for such months will be treated as a part of the beneficiary’s misused benefits. * * * * * 7. Amend § 404.2041 by adding a new paragraph (f) to read as follows: E:\FR\FM\17OCP1.SGM 17OCP1 Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Proposed Rules § 404.2041 Who is liable if your representative payee misuses your benefits? * * * * * (f) Any amounts that the representative payee misuses and does not refund will be treated as an overpayment to that representative payee. See subpart F of part 404. 8. Amend § 404.2065 by revising the introductory text to read as follows: § 404.2065 How does your representative payee account for the use of benefits? Your representative payee must account for the use of your benefits. We require written reports from your representative payee at least once a year (except for certain State institutions that participate in a separate onsite review program). We may verify how your representative payee used your benefits. Your representative payee should keep records of how benefits were used in order to make accounting reports and must make those records available upon our request. If your representative payee fails to provide an annual accounting of benefits or other required reports, we may require your payee to receive your benefits in person at the local Social Security field office or a United States Government facility designated by the Social Security Administration serving the area in which you reside. The decision to have your representative payee receive your benefits in person may be based on a variety of reasons. Some of these reasons may include the payee’s history of past performance or SSA’s past difficulty in contacting the payee. We may ask your representative payee to give us the following information: * * * * * PART 408—SPECIAL BENEFITS FOR CERTAIN WORLD WAR II VETERANS (SVB) Subpart F—[Amended] 9. The authority citation for subpart F of part 408 continues to read as follows: Authority: Secs. 702(a)(5), 807, and 810 of the Social Security Act (42 U.S.C. 902(a)(5), 1007, and 1010). 10. Revise § 408.665 to read as follows: § 408.665 How does your representative payee account for the use of your SVB benefits? Your representative payee must account for the use of your benefits. We require written reports from your representative payee at least once a year. We may verify how your representative payee used your benefits. Your representative payee should keep VerDate Aug<31>2005 11:41 Oct 14, 2005 Jkt 208001 records of how benefits were used in order to provide accounting reports and must make those records available upon our request. If your representative payee fails to provide an annual accounting of benefits or other required report, we may require your payee to appear in person at a United States Government facility designated by the Social Security Administration serving the area in which you reside. The decision to have your representative payee receive your benefits in person may be based on a variety of reasons. Some of these reasons may include the payee’s history of past performance or SSA’s past difficulty in contacting the payee. We may ask your representative payee to give us the following information: (a) Where you lived during the accounting period; (b) Who made the decisions on how your benefits were spent or saved; (c) How your benefit payments were used; and (d) How much of your benefit payments were saved and how the savings were invested. PART 416—SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND AND DISABLED Subpart F—[Amended] 11. The authority citation for subpart F continues to read as follows: Authority: Secs. 702(a)(5), 1631(a)(2) and (d)(1) of the Social Security Act (42 U.S.C. 902(a)(5) and 1383(a)(2) and (d)(1)). 12. Amend § 416.622 by redesignating paragraphs (b), (c) and (d) as paragraphs (d), (e) and (f) and adding new paragraphs (b) and (c) to read as follows: § 416.622 Who may not serve as a representative payee? * * * * * (b) Is fleeing to avoid prosecution, or custody or confinement after conviction of a crime, or an attempt to commit a crime, that is a felony under the laws of the place from which he/she flees (or in jurisdictions that do not define crimes as felonies, is punishable by death or imprisonment for a term exceeding one year, regardless of the actual sentence imposed). If we identify a currently serving payee who is no longer qualified for this reason, we will allow them 10 days to respond to notification before making any payee change. (c) Has been convicted of an offense resulting in imprisonment for more than 1 year. However, we may make an exception to this prohibition, if the nature of the conviction is such that selection of the applicant poses no risk PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 60255 to the beneficiary and the exception is in the beneficiary’s best interest. * * * * * 13. Revise § 416.635 to read as follows: § 416.635 What are the responsibilities of your representative payee? A representative payee has a responsibility to— (a) Use the benefits received on your behalf only for your use and benefit in a manner and for the purposes he or she determines under the guidelines in this subpart, to be in your best interests. (b) Keep any benefits received on your behalf separate from his or her own funds and show your ownership of these benefits unless he or she is your spouse or natural or adoptive parent or stepparent and lives in the same household with you or is a State or local government agency for whom we have granted an exception to this requirement. (c) Treat any interest earned on the benefits as your property. (d) Notify us of any event or change in your circumstances that will affect the amount of benefits you receive, your right to receive benefits, or how you receive them; (e) Submit to us, upon our request, a written report accounting for the benefits received on your behalf, and make all supporting records available for review if requested by us; and (f) Notify us of any change in his or her circumstances that would affect performance of his/her payee responsibilities. (g) If you are under age 18 (including cases in which your low birth weight is a contributing factor material to our determination that you are disabled), ensure that you are receiving treatment to the extent considered medically necessary and available for the condition that was the basis for providing benefits (see § 416.994a(i)). 14. Amend § 416.640a by revising paragraph (a)(2), redesignating paragraph (g)(6) as (g)(7), and adding a new paragraph (g)(6) to read as follows: § 416.640a Compensation for qualified organizations serving as representative payees. * * * * * (a) * * * (2) Any community-based nonprofit social service organization founded for religious, charitable or social welfare purposes, which is tax exempt under section 501(c) of the Internal Revenue Code and which is bonded/insured to cover misuse and embezzlement by officers and employees and licensed in each State in which it serves as E:\FR\FM\17OCP1.SGM 17OCP1 60256 Federal Register / Vol. 70, No. 199 / Monday, October 17, 2005 / Proposed Rules representative payee (if licensing is available in the State). The minimum amount of bonding or insurance coverage must equal the average monthly amount of supplemental security income payments received by the organization plus the amount of the beneficiaries’ conserved funds (i.e., beneficiaries’ saved supplemental security income payments) plus interest on hand. For example, an organization that has conserved funds of $5,000 and receives an average of $12,000 a month in supplemental security income payments must be bonded/insured for a minimum of $17,000. The license must be appropriate under the laws of the State for the type of services the organization provides. An example of an appropriately licensed organization is a community mental health center holding a State license to provide community mental health services. * * * * * (g) * * * (6) Fees for services may not be taken from beneficiary benefits for the months for which the Commissioner or a court of competent jurisdiction determines that the representative payee misused benefits. Any fees collected for such months will be treated as a part of the beneficiary’s misused benefits. * * * * * 15. Amend § 416.641 by adding a new paragraph (f) to read as follows: § 416.641 Who is liable if your representative payee misuses your benefits? * * * * * (f) Any amounts that the representative payee misuses and does not refund will be treated as an overpayment to that representative payee. See subpart E of part 416. 16. Amend § 416.665 by revising the introductory text to read as follows: § 416.665 How does your representative payee account for the use of benefits? Your representative payee must account for the use of your benefits. We require written reports from your representative payee at least once a year (except for certain State institutions that participate in a separate onsite review program). We may verify how your representative payee used your benefits. Your representative payee should keep records of how benefits were used in order to make accounting reports and must make those records available upon our request. If your representative payee fails to provide an annual accounting of benefits or other required reports, we may require your payee to receive your benefits in person at the local Social Security field office or a United States VerDate Aug<31>2005 11:41 Oct 14, 2005 Jkt 208001 Government facility designated by the Social Security Administration serving the area in which you reside. The decision to have your representative payee receive your benefits in person may be based on a variety of reasons. Some of these reasons may include the payee’s history of past performance or SSA’s past difficulty in contacting the payee. We may ask your representative payee to give us the following information: * * * * * Subpart M—[Amended] 17. The authority citation for subpart M of part 416 continues to read as follows: Authority: Secs. 702(a)(5), 1129A, 1611– 1614, 1619, and 1631 of the Social Security Act (42 U.S.C. 902(a)(5), 1320a–8a, 1382– 1382c, 1382h, and 1383). 18. Amend § 416.1340 by revising the heading and paragraphs (a) and (e) to read as follows: § 416.1340 Penalty for making false or misleading statements or withholding information. (a) When may SSA penalize me? You will be subject to a penalty if: (1) You make, or cause to be made, a statement or representation of a material fact, for use in determining any initial or continuing right to, or the amount of, monthly insurance benefits under title II or benefits or payments under title XVI, that you know or should know is false or misleading, or (2) You make a statement or representation of a material fact for use as described in paragraph (a)(1) of this section with knowing disregard for the truth, or (3) You omit from a statement or representation made for use as described in paragraph (a)(1) of this section, or otherwise withhold disclosure (for example, fail to come forward to notify SSA) of, a fact which you know or should know is material to the determination of any initial or continuing right to, or the amount of, monthly insurance benefits under title II or benefits or payments under title XVI, if you know, or should know, that the statement or representation with such omission is false or misleading or that the withholding of such disclosure is misleading. * * * * * (e) How will SSA make its decision to penalize me? In order to impose a penalty on you, we must find that you knowingly (knew or should have known or acted with knowing disregard for the truth) made a false or misleading statement or omitted or failed to report PO 00000 Frm 00022 Fmt 4702 Sfmt 4702 a material fact if you knew, or should have known, that the omission or failure to disclose was misleading. We will base our decision to penalize you on the evidence and the reasonable inferences that can be drawn from that evidence, not on speculation or suspicion. Our decision to penalize you will be documented with the basis and rationale for that decision. In determining whether you knowingly made a false or misleading statement or omitted or failure to report a material fact so as to justify imposition of the penalty, we will consider all evidence in the record, including any physical, mental, educational, or linguistic limitations (including any lack of facility with the English language) which you may have had at the time. In determining whether you acted knowingly, we will also consider the significance of the false or misleading statement or omission or failure to disclose in terms of its likely impact on your benefits. * * * * * [FR Doc. 05–20697 Filed 10–14–05; 8:45 am] BILLING CODE 4191–02–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 801 [REG–114444–05] RIN 1545–BE45 Balanced System for Measuring Organizational and Employee Performance Within the Internal Revenue Service Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations. AGENCY: SUMMARY: In the Rules and Regulations section of this issue of the Federal Register, the IRS is issuing temporary regulations designed to modify 26 CFR part 801, the regulations governing the IRS Balanced System for Measuring Organizational and Employee Performance, to clarify when quantity measures, which are not tax enforcement results, may be used in measuring organizational and employee performance. The temporary regulations affect internal operations of the IRS and the systems it employs to evaluate the performance of organizations within the IRS. The text of the temporary regulations also serves as the text of these proposed regulations. E:\FR\FM\17OCP1.SGM 17OCP1

Agencies

[Federal Register Volume 70, Number 199 (Monday, October 17, 2005)]
[Proposed Rules]
[Pages 60251-60256]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-20697]



[[Page 60251]]

=======================================================================
-----------------------------------------------------------------------

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404, 408 and 416

RIN 0960-AG09


Representative Payment Policies and Administrative Procedure for 
Imposing Penalties for False or Misleading Statements or Withholding of 
Information

AGENCY: Social Security Administration (SSA).

ACTION: Proposed rules.

-----------------------------------------------------------------------

SUMMARY: We propose to amend our regulations on representative payment 
and on the administrative procedure for imposing penalties for false or 
misleading statements or withholding of information to reflect and 
implement certain provisions of the Social Security Protection Act of 
2004 (SSPA), Public Law 108-203. The SSPA amends representative payment 
policies by providing additional safeguards for Social Security, 
Special Veterans and Supplemental Security Income beneficiaries served 
by representative payees. These changes include additional 
disqualifying factors for representative payee applicants, additional 
requirements for non-governmental fee-for-service payees, authority to 
redirect delivery of benefit payments when a representative payee fails 
to provide required accountings, and authority to treat misused 
benefits as an overpayment to the representative payee. In addition, we 
propose to modify our rules to explain financial requirements for 
representative payees, and we also have made minor clarifying plain 
language changes.
    The SSPA also allows SSA to impose a penalty on any person who 
knowingly withholds information that is material for use in determining 
any right to or the amount of monthly benefits under titles II or XVI. 
The penalty is nonpayment for a specified number of months of benefits 
under title II that would otherwise be payable and ineligibility for 
the same period of time for cash benefits under title XVI (including 
State supplementary payments).

DATES: To consider your comments, we must receive them no later than 
December 16, 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 at http://
www.regulations.gov; e-mail to regulations@ssa.gov; telefax to (410) 
966-2830; or letter to the Commissioner of Social Security, P.O. 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 on the Internet site for the 
Government Printing Office, http://www.gpoaccess.gov/fr/index.html. It 
is also available on the Internet site for SSA (i.e., Social Security 
Online) at http://policy.ssa.gov/pnpublic.nsf/LawsRegs.

FOR FURTHER INFORMATION CONTACT: Regarding this Federal Register 
document--Robert Augustine, Social Insurance Specialist, Office of 
Regulations, Social Security Administration, 6401 Security Boulevard, 
Baltimore, MD 21235-6401, (410) 965-0020 or TTY (410) 966-5609; 
regarding eligibility or filing for benefits--our national toll-free 
number, 1-800-772-1213 or TTY 1-800-325-0778 or visit our Internet Web 
site, Social Security Online, at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Background

    Public Law 108-203, the SSPA, enacted March 2, 2004, requires a 
number of changes to representative payee policy and procedures. A 
representative payee is the person, agency, organization, or 
institution selected to receive and manage benefits on behalf of an 
incapable beneficiary. This includes a parent who is receiving benefits 
on behalf of his or her minor child. The SSPA also changes the rules 
for imposing penalties for false or misleading statements or for 
withholding information.
    Section 102 of the SSPA requires non-governmental fee-for-service 
organizational representative payees to be both bonded and licensed, 
provided that licensing is available in the State.
    Section 103 of the SSPA expands the scope of disqualification to 
prohibit an individual from serving as a representative payee if he or 
she: (1) Has been convicted of any offense resulting in imprisonment 
for more than 1 year, unless the Commissioner of Social Security 
determines that an exception to this prohibition is appropriate; or (2) 
is fleeing to avoid prosecution, or custody or confinement after 
conviction of a crime that is a felony.
    Section 104 of the SSPA requires fee-for-service representative 
payees to forfeit their fees for any months during which they misuse 
all or part of any beneficiary's benefits.
    Section 105 of the SSPA makes non-governmental representative 
payees liable for any benefits they misuse and requires SSA to treat 
such misused benefits as overpayments to the representative payees, 
subject to overpayment recovery authorities.
    Section 106 of the SSPA authorizes the Commissioner of Social 
Security to require a representative payee to receive benefits in 
person at a Social Security field office or a United States Government 
facility designated by the Social Security Administration if the payee 
fails to provide an annual accounting of benefits report or other 
requested information.
    In addition to the changes required by Public Law 108-203, we 
propose to clarify financial requirements for representative payees. 
Our current regulations specify that the interest earned on conserved 
funds belongs to the beneficiary. However, the regulations do not 
specifically address interest earned on current benefits or how current 
benefits should be held. We propose to specify that a representative 
payee must keep any payments received for the beneficiary separate from 
the representative payee's own funds and ensure that the beneficiary's 
ownership is shown unless the representative payee is the spouse or 
parent of the beneficiary and lives in the same household with the 
beneficiary. We also propose to provide for an exception to this 
requirement for State or local government agencies when we determine 
that their accounting structure sufficiently protects the 
beneficiaries' interest in the benefits (i.e., accounting structure 
clearly identifies what funds belong to the beneficiary). We further 
propose to specify that the payee must treat any interest earned on 
current benefits as the beneficiary's own property. In addition, we 
propose to clarify that the payee is responsible for making records 
available for review if requested by us. These records must be examined 
when conducting our site visits.
    Section 201(a)(2) of the SSPA amended section 1129A of the Act to 
help prevent and respond to fraud and abuse in SSA's programs and 
operations. Prior to its amendment by the SSPA, section 1129A allowed 
SSA to impose a penalty against any person

[[Page 60252]]

who makes, or causes to be made, a statement or representation of a 
material fact that the person knows or should know is false or 
misleading or that omits a material fact, or that the person makes with 
a knowing disregard for the truth. The statement must have been made 
for use in determining eligibility for or the amount of benefits under 
titles II or XVI. The penalty is nonpayment for 6, 12 or 24 months of 
benefits under title II that would otherwise be payable to the person 
and ineligibility for the same period of time for cash benefits under 
title XVI (including State supplementary payments made by SSA according 
to Sec.  416.2005).
    Section 201(a)(2) amended section 1129A to also allow SSA to impose 
this penalty against any person who withholds disclosure of information 
that is material for use in determining any right to or the amount of 
monthly benefits under titles II or XVI if the person knows, or should 
know, that the withholding of such disclosure is misleading. Prior to 
the enactment of section 201(a)(2), in order for a penalty to be 
imposed, the law required an affirmative act on the part of the 
individual of making a statement that omitted a material fact.
    This new penalty under section 1129A of the Act will be effective 
with respect to violations committed after the date on which SSA 
implements the centralized computer file described in section 202 of 
the SSPA. This centralized computer file will electronically record 
information about changes in work status that a disability beneficiary 
(or representative) reports to SSA and is expected to be implemented in 
February 2006.

Explanation of Proposed Changes on Representative Payment

    Because our regulations for representative payment under the title 
VIII program cross-reference the appropriate material in our title II 
representative payment rules, most of the changes we now propose to our 
title II representative payment regulations would also apply to title 
VIII. Where only a cross-reference to the title II rules would not be 
sufficient, we propose a specific rule for title VIII.
    We are proposing the following policy changes to our representative 
payment regulations:
    1. We propose to amend Sec. Sec.  404.2022 and 416.622 to explain 
that a person who is convicted of an offense resulting in imprisonment 
for more than 1 year may not serve as a representative payee. These 
sections also would explain that we may make an exception to this rule 
if the nature of the conviction poses no risk to the beneficiary and 
selection of the applicant is in the beneficiary's best interest. In 
addition, these sections would explain that a person who is fleeing 
prosecution, custody or confinement for a crime, or an attempt to 
commit a crime that is a felony may not serve as a representative 
payee. If we identify a currently serving payee who is no longer 
qualified for this reason, we will allow them 10 days to respond to 
notification before making any payee change.
    2. We propose to amend Sec. Sec.  404.2035 and 416.635 to explain 
that a representative payee must keep any payments received for the 
beneficiary separate from the payee's own funds and ensure the 
beneficiary's ownership is shown unless the payee is the spouse or 
parent of the beneficiary and lives in the same household with the 
beneficiary. We also propose to provide for an exception to this 
requirement for State or local government agencies that use a different 
accounting structure. We would grant such an exception to a State or 
local government agency if we determine that its accounting structure 
sufficiently protects the beneficiaries' interest in the benefits. 
Also, these sections would explain that the payee must treat any 
interest earned on current benefits as the beneficiary's own property.
    3. We propose to amend Sec. Sec.  404.2035 and 416.635 to require 
representative payees to make available to us their records supporting 
their written accounting reports. We believe those records are 
essential to verify the written reports.
    4. We propose to amend existing Sec. Sec.  404.2040a and 416.640a 
to require fee-for-service non-governmental community-based nonprofit 
organizational representative payees to be both bonded and licensed 
(provided that licensing is available in the State). The bond would 
have to be of a sufficient amount to repay any funds (current social 
security benefits and supplemental security income payments plus any 
conserved funds and interest) lost by the beneficiaries in the event of 
misuse or theft, and the license would have to be appropriate under the 
laws of the State for the type of services the organization provides. 
These bonding and licensing requirements would not apply to the title 
VIII program. In addition, these sections would explain that a fee-for-
service representative payee must forfeit its fee for the months during 
which it misused benefits.
    5. We propose to amend Sec. Sec.  404.2041 and 416.641 to explain 
that a non-governmental representative payee will be liable for any 
benefits it misuses and that SSA will treat the misused benefits as an 
overpayment to the representative payee, subject to overpayment 
recovery authorities.
    6. We propose to amend Sec. Sec.  404.2065 and 416.665 to explain 
that we may require a representative payee to receive benefits in 
person at a local Social Security field office or a United States 
Government facility designated by the Social Security Administration if 
the payee fails to provide an annual accounting of benefits or other 
requested information. We propose to make a similar amendment to Sec.  
408.665, but the benefits would be directed to a United States 
Government facility designated by the Social Security Administration.

Explanation of Proposed Changes on Administrative Procedures for 
Imposing Administrative Penalties

    We propose to amend Sec. Sec.  404.459 and 416.1340 of our 
regulations by revising the heading and paragraphs (a) and (e) of each 
section to reflect that, as a result of section 201 of the SSPA, an 
individual will be subject to the penalty if he or she withholds 
information that is material for use in determining any right to or the 
amount of monthly benefits under title II or XVI if the person knows, 
or should know, that the withholding of the information is misleading.

Clarity of These Regulations

    Executive Order 12866, as amended by Executive Order 13258, 
requires each agency to write all rules in plain language. In addition 
to comments you may have on the substance of these proposed rules, we 
also invite your comments on how to make these rules easier to 
understand. For example:
     Have we organized the material to suit your needs?
     Are the requirements in the rules clearly stated?
     Do the rules contain technical language or jargon that is 
not clear?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the rules easier to understand?
     Would more (but shorter) sections be better?
     Could we improve clarity by adding tables, lists, or 
diagrams?
     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

[[Page 60253]]

meet the criteria for a significant regulatory action under Executive 
Order 12866, as amended by Executive Order 13258. Thus, the rules have 
been reviewed by OMB.

Executive Order 13132 (Federalism) and the Unfunded Mandates Reform Act 
of 1995

    We have reviewed the proposed rules for compliance with Executive 
Order 13132 and the Unfunded Mandates Reform Act of 1995 (UMRA of 
1995). We have determined that the proposed rules are not significant 
within the meaning of the UMRA of 1995 nor will they have any 
substantial direct effects on the States, on the relationship between 
the federal government and the States, or on the distribution of power 
and responsibilities among the various levels of government within the 
meaning of Executive Order 13132.
    The provision requiring a State license for certain qualified 
organizations seeking compensation for serving as representative payees 
affects a very small number of organizational payees and will not 
significantly impact the States. First, the total number of 
organizations seeking compensation is very small, approximately 800. 
There are a significant number of State or local government agencies 
within this group which we do not require to be licensed. Only the 
small number of remaining organizations (community-based nonprofit 
social service organizations) must seek State licensing. Second, such 
organizations should already have obtained the necessary license to be 
in compliance with State law. Therefore, the very small number of 
organizations seeking a State license will not significantly impact the 
States.

Regulatory Flexibility Act

    We certify that these proposed rules will not have a significant 
economic impact on a substantial number of small entities. Therefore, a 
regulatory flexibility analysis, as provided for in the Regulatory 
Flexibility Act, as amended, is not required.

Paperwork Reduction Act

    These proposed rules contain reporting requirements as shown in the 
table below. Where the public reporting burden is accounted for in 
Information Collection Requests for the various forms that the public 
uses to submit the information to SSA, a 1-hour placeholder burden is 
being assigned to the specific reporting requirement(s) contained in 
these rules; we are seeking clearance of these burdens because they 
were not considered during the clearance of the forms.

----------------------------------------------------------------------------------------------------------------
                                                   Annual number   Frequency of   Average burden     Estimated
                     Section                       of responses      response      per response    annual burden
----------------------------------------------------------------------------------------------------------------
404.2035(d).....................................         550,000               1            .083          45,650
404.2035(e); 404.2065; 408.665..................  ..............  ..............  ..............               1
404.2035(f).....................................           5,500               1            .083             457
416.635(d)......................................         300,000               1            .083          24,900
416.635(e); 416.665.............................  ..............  ..............  ..............               1
416.635(f)......................................           3,000               1            .083             250
                                                 -----------------
    Total.......................................         858,500  ..............  ..............          71,257
----------------------------------------------------------------------------------------------------------------

    An Information Collection Request has been submitted to OMB. We are 
soliciting comments on the burden estimate; the need for the 
information; its practical utility; ways to enhance its quality, 
utility and clarity; and on ways to minimize the burden on respondents, 
including the use of automated collection techniques or other forms of 
information technology. Comments should be submitted and/or faxed to 
OMB and to the Social Security Administration at the following 
addresses/numbers: Office of Management and Budget, Attn: Desk Officer 
for SSA, Fax Number: 202-395-6974. Social Security Administration, 
Attn: SSA Reports Clearance Officer, Rm: 1338 Annex Building, 6401 
Security Boulevard, Baltimore, MD 21235-6401, Fax Number: 410-965-6400.
    Comments can be received for up to 60 days after publication of 
this notice and will be most useful if received within 30 days of 
publication. To receive a copy of the OMB clearance package, you may 
call the SSA Reports Clearance Officer on 410-965-0454.

(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; 96.020, Special Benefits for Certain 
World War II Veterans)

List of Subjects

20 CFR Part 404

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

20 CFR Part 408

    Administrative practice and procedure, Aged; Reporting and 
recordkeeping requirements, Social Security; Special Veterans benefits; 
Veterans.

20 CFR Part 416

    Administrative practice and procedure, Aged, Blind, Disability 
benefits, Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental security income (SSI).

    Dated: October 7, 2005.
Jo Anne B. Barnhart,
Commissioner of Social Security.
    For the reasons set out in the preamble, we propose to amend 
subparts E and U of part 404, subpart F of part 408, and subparts F and 
M of part 416 of Title 20 of the Code of Federal Regulations as 
follows:

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

Subpart E--[Amended]

    1. The authority citation for subpart E of part 404 continues to 
read as follows:

    Authority: Secs. 202, 203, 204(a) and (e), 205(a) and (c), 
216(l), 223(e), 224, 225, 702(a)(5), and 1129A of the Social 
Security Act (42 U.S.C. 402, 403, 404(a) and (e), 405(a) and (c), 
416(l), 423(e), 424a, 425, 902(a)(5), 1320a-8a) and 48 U.S.C. 1801.

    2. Amend Sec.  404.459 by revising the heading and paragraphs (a) 
and (e) to read as follows:

[[Page 60254]]

Sec.  404.459  Penalty for making false or misleading statements or 
withholding information.

    (a) When may SSA penalize me? You will be subject to a penalty if:
    (1) You make, or cause to be made, a statement or representation of 
a material fact, for use in determining any initial or continuing right 
to, or the amount of, monthly insurance benefits under title II or 
benefits or payments under title XVI, that you know or should know is 
false or misleading, or
    (2) You make a statement or representation of a material fact for 
use as described in paragraph (a)(1) of this section with knowing 
disregard for the truth, or
    (3) You omit from a statement or representation made for use as 
described in paragraph (a)(1) of this section, or otherwise withhold 
disclosure (for example, fail to come forward to notify SSA) of a fact 
which you know or should know is material to the determination of any 
initial or continuing right to, or the amount of, monthly insurance 
benefits under title II or benefits or payments under title XVI, if you 
know, or should know, that the statement or representation with such 
omission is false or misleading or that the withholding of such 
disclosure is misleading.
* * * * *
    (e) How will SSA make its decision to penalize me? In order to 
impose a penalty on you, we must find that you knowingly (knew or 
should have known or acted with knowing disregard for the truth) made a 
false or misleading statement or omitted or failed to report a material 
fact if you knew, or should have known, that the omission or failure to 
disclose was misleading. We will base our decision to penalize you on 
the evidence and the reasonable inferences that can be drawn from that 
evidence, not on speculation or suspicion. Our decision to penalize you 
will be documented with the basis and rationale for that decision. In 
determining whether you knowingly made a false or misleading statement 
or omitted or failed to report a material fact so as to justify 
imposition of the penalty, we will consider all evidence in the record, 
including any physical, mental, educational, or linguistic limitations 
(including any lack of facility with the English language) which you 
may have had at the time. In determining whether you acted knowingly, 
we will also consider the significance of the false or misleading 
statement or omission or failure to disclose in terms of its likely 
impact on your benefits.
* * * * *

Subpart U--[Amended]

    3. The authority citation for subpart U of part 404 continues to 
read as follows:

    Authority: Secs. 205(a), (j), and (k), and 702(a)(5) of the 
Social Security Act (42 U.S.C. 405(a), (j), and (k), and 902(a)(5)).

    4. Amend Sec.  404.2022 by redesignating paragraphs (b), (c) and 
(d) as paragraphs (d), (e) and (f) and adding new paragraphs (b) and 
(c) to read as follows:


Sec.  404.2022  Who may not serve as a representative payee?

* * * * *
    (b) Is fleeing to avoid prosecution, or custody or confinement 
after conviction of a crime, or an attempt to commit a crime, that is a 
felony under the laws of the place from which he/she flees (or, in 
jurisdictions that do not define crimes as felonies, is punishable by 
death or imprisonment for a term exceeding one year, regardless of the 
actual sentence imposed). If we identify a currently serving payee who 
is no longer qualified for this reason, we will allow them 10 days to 
respond to notification before making any payee change.
    (c) Has been convicted of an offense resulting in imprisonment for 
more than 1 year. However, we may make an exception to this 
prohibition, if the nature of the conviction is such that selection of 
the applicant poses no risk to the beneficiary and the exception is in 
the beneficiary's best interest.
* * * * *
    5. Revise Sec.  404.2035 to read as follows:


Sec.  404.2035  What are the responsibilities of your representative 
payee?

    A representative payee has a responsibility to--
    (a) Use the benefits received on your behalf only for your use and 
benefit in a manner and for the purposes he or she determines, under 
the guidelines in this subpart, to be in your best interests.
    (b) Keep any benefits received on your behalf separate from his or 
her own funds and show your ownership of these benefits unless he or 
she is your spouse or natural or adoptive parent or stepparent and 
lives in the same household with you or is a State or local government 
agency for whom we have granted an exception to this requirement.
    (c) Treat any interest earned on the benefits as your property.
    (d) Notify us of any event or change in your circumstances that 
will affect the amount of benefits you receive, your right to receive 
benefits, or how you receive them;
    (e) Submit to us, upon our request, a written report accounting for 
the benefits received on your behalf, and make all supporting records 
available for review if requested by us; and
    (f) Notify us of any change in his or her circumstances that would 
affect performance of his/her payee responsibilities.
    6. Amend Sec.  404.2040a by revising paragraph (a)(2), 
redesignating paragraph (g)(6) as (g)(7), and adding a new paragraph 
(g)(6) to read as follows:


Sec.  404.2040a  Compensation for qualified organizations serving as 
representative payees.

* * * * *
    (a) * * *
    (2) Any community-based nonprofit social service organization 
founded for religious, charitable or social welfare purposes, which is 
tax exempt under section 501(c) of the Internal Revenue Code and which 
is bonded/insured to cover misuse and embezzlement by officers and 
employees and which is licensed in each State in which it serves as 
representative payee (if licensing is available in the State). The 
minimum amount of bonding or insurance coverage must equal the average 
monthly amount of social security payments received by the organization 
plus the amount of the beneficiaries' conserved funds (i.e., 
beneficiaries' saved social security benefits) plus interest on hand. 
For example, an organization that has conserved funds of $5,000 and 
receives an average of $12,000 a month in social security payments must 
be bonded/insured for a minimum of $17,000. The license must be 
appropriate under the laws of the State for the type of services the 
organization provides. An example of an appropriately licensed 
organization is a community mental health center holding a State 
license to provide community mental health services.
* * * * *
    (g) * * *
    (6) Fees for services may not be taken from beneficiary benefits 
for the months for which the Commissioner or a court of competent 
jurisdiction determines that the representative payee misused benefits. 
Any fees collected for such months will be treated as a part of the 
beneficiary's misused benefits.
* * * * *
    7. Amend Sec.  404.2041 by adding a new paragraph (f) to read as 
follows:

[[Page 60255]]

Sec.  404.2041  Who is liable if your representative payee misuses your 
benefits?

* * * * *
    (f) Any amounts that the representative payee misuses and does not 
refund will be treated as an overpayment to that representative payee. 
See subpart F of part 404.
    8. Amend Sec.  404.2065 by revising the introductory text to read 
as follows:


Sec.  404.2065  How does your representative payee account for the use 
of benefits?

    Your representative payee must account for the use of your 
benefits. We require written reports from your representative payee at 
least once a year (except for certain State institutions that 
participate in a separate onsite review program). We may verify how 
your representative payee used your benefits. Your representative payee 
should keep records of how benefits were used in order to make 
accounting reports and must make those records available upon our 
request. If your representative payee fails to provide an annual 
accounting of benefits or other required reports, we may require your 
payee to receive your benefits in person at the local Social Security 
field office or a United States Government facility designated by the 
Social Security Administration serving the area in which you reside. 
The decision to have your representative payee receive your benefits in 
person may be based on a variety of reasons. Some of these reasons may 
include the payee's history of past performance or SSA's past 
difficulty in contacting the payee. We may ask your representative 
payee to give us the following information:
* * * * *

PART 408--SPECIAL BENEFITS FOR CERTAIN WORLD WAR II VETERANS (SVB)

Subpart F--[Amended]

    9. The authority citation for subpart F of part 408 continues to 
read as follows:

    Authority: Secs. 702(a)(5), 807, and 810 of the Social Security 
Act (42 U.S.C. 902(a)(5), 1007, and 1010).

    10. Revise Sec.  408.665 to read as follows:


Sec.  408.665  How does your representative payee account for the use 
of your SVB benefits?

    Your representative payee must account for the use of your 
benefits. We require written reports from your representative payee at 
least once a year. We may verify how your representative payee used 
your benefits. Your representative payee should keep records of how 
benefits were used in order to provide accounting reports and must make 
those records available upon our request. If your representative payee 
fails to provide an annual accounting of benefits or other required 
report, we may require your payee to appear in person at a United 
States Government facility designated by the Social Security 
Administration serving the area in which you reside. The decision to 
have your representative payee receive your benefits in person may be 
based on a variety of reasons. Some of these reasons may include the 
payee's history of past performance or SSA's past difficulty in 
contacting the payee. We may ask your representative payee to give us 
the following information:
    (a) Where you lived during the accounting period;
    (b) Who made the decisions on how your benefits were spent or 
saved;
    (c) How your benefit payments were used; and
    (d) How much of your benefit payments were saved and how the 
savings were invested.

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

Subpart F--[Amended]

    11. The authority citation for subpart F continues to read as 
follows:

    Authority: Secs. 702(a)(5), 1631(a)(2) and (d)(1) of the Social 
Security Act (42 U.S.C. 902(a)(5) and 1383(a)(2) and (d)(1)).

    12. Amend Sec.  416.622 by redesignating paragraphs (b), (c) and 
(d) as paragraphs (d), (e) and (f) and adding new paragraphs (b) and 
(c) to read as follows:


Sec.  416.622  Who may not serve as a representative payee?

* * * * *
    (b) Is fleeing to avoid prosecution, or custody or confinement 
after conviction of a crime, or an attempt to commit a crime, that is a 
felony under the laws of the place from which he/she flees (or in 
jurisdictions that do not define crimes as felonies, is punishable by 
death or imprisonment for a term exceeding one year, regardless of the 
actual sentence imposed). If we identify a currently serving payee who 
is no longer qualified for this reason, we will allow them 10 days to 
respond to notification before making any payee change.
    (c) Has been convicted of an offense resulting in imprisonment for 
more than 1 year. However, we may make an exception to this 
prohibition, if the nature of the conviction is such that selection of 
the applicant poses no risk to the beneficiary and the exception is in 
the beneficiary's best interest.
* * * * *
    13. Revise Sec.  416.635 to read as follows:


Sec.  416.635  What are the responsibilities of your representative 
payee?

    A representative payee has a responsibility to--
    (a) Use the benefits received on your behalf only for your use and 
benefit in a manner and for the purposes he or she determines under the 
guidelines in this subpart, to be in your best interests.
    (b) Keep any benefits received on your behalf separate from his or 
her own funds and show your ownership of these benefits unless he or 
she is your spouse or natural or adoptive parent or stepparent and 
lives in the same household with you or is a State or local government 
agency for whom we have granted an exception to this requirement.
    (c) Treat any interest earned on the benefits as your property.
    (d) Notify us of any event or change in your circumstances that 
will affect the amount of benefits you receive, your right to receive 
benefits, or how you receive them;
    (e) Submit to us, upon our request, a written report accounting for 
the benefits received on your behalf, and make all supporting records 
available for review if requested by us; and
    (f) Notify us of any change in his or her circumstances that would 
affect performance of his/her payee responsibilities.
    (g) If you are under age 18 (including cases in which your low 
birth weight is a contributing factor material to our determination 
that you are disabled), ensure that you are receiving treatment to the 
extent considered medically necessary and available for the condition 
that was the basis for providing benefits (see Sec.  416.994a(i)).
    14. Amend Sec.  416.640a by revising paragraph (a)(2), 
redesignating paragraph (g)(6) as (g)(7), and adding a new paragraph 
(g)(6) to read as follows:


Sec.  416.640a  Compensation for qualified organizations serving as 
representative payees.

* * * * *
    (a) * * *
    (2) Any community-based nonprofit social service organization 
founded for religious, charitable or social welfare purposes, which is 
tax exempt under section 501(c) of the Internal Revenue Code and which 
is bonded/insured to cover misuse and embezzlement by officers and 
employees and licensed in each State in which it serves as

[[Page 60256]]

representative payee (if licensing is available in the State). The 
minimum amount of bonding or insurance coverage must equal the average 
monthly amount of supplemental security income payments received by the 
organization plus the amount of the beneficiaries' conserved funds 
(i.e., beneficiaries' saved supplemental security income payments) plus 
interest on hand. For example, an organization that has conserved funds 
of $5,000 and receives an average of $12,000 a month in supplemental 
security income payments must be bonded/insured for a minimum of 
$17,000. The license must be appropriate under the laws of the State 
for the type of services the organization provides. An example of an 
appropriately licensed organization is a community mental health center 
holding a State license to provide community mental health services.
* * * * *
    (g) * * *
    (6) Fees for services may not be taken from beneficiary benefits 
for the months for which the Commissioner or a court of competent 
jurisdiction determines that the representative payee misused benefits. 
Any fees collected for such months will be treated as a part of the 
beneficiary's misused benefits.
* * * * *
    15. Amend Sec.  416.641 by adding a new paragraph (f) to read as 
follows:


Sec.  416.641  Who is liable if your representative payee misuses your 
benefits?

* * * * *
    (f) Any amounts that the representative payee misuses and does not 
refund will be treated as an overpayment to that representative payee. 
See subpart E of part 416.
    16. Amend Sec.  416.665 by revising the introductory text to read 
as follows:


Sec.  416.665  How does your representative payee account for the use 
of benefits?

    Your representative payee must account for the use of your 
benefits. We require written reports from your representative payee at 
least once a year (except for certain State institutions that 
participate in a separate onsite review program). We may verify how 
your representative payee used your benefits. Your representative payee 
should keep records of how benefits were used in order to make 
accounting reports and must make those records available upon our 
request. If your representative payee fails to provide an annual 
accounting of benefits or other required reports, we may require your 
payee to receive your benefits in person at the local Social Security 
field office or a United States Government facility designated by the 
Social Security Administration serving the area in which you reside. 
The decision to have your representative payee receive your benefits in 
person may be based on a variety of reasons. Some of these reasons may 
include the payee's history of past performance or SSA's past 
difficulty in contacting the payee. We may ask your representative 
payee to give us the following information:
* * * * *

Subpart M--[Amended]

    17. The authority citation for subpart M of part 416 continues to 
read as follows:

    Authority: Secs. 702(a)(5), 1129A, 1611-1614, 1619, and 1631 of 
the Social Security Act (42 U.S.C. 902(a)(5), 1320a-8a, 1382-1382c, 
1382h, and 1383).

    18. Amend Sec.  416.1340 by revising the heading and paragraphs (a) 
and (e) to read as follows:


Sec.  416.1340  Penalty for making false or misleading statements or 
withholding information.

    (a) When may SSA penalize me? You will be subject to a penalty if:
    (1) You make, or cause to be made, a statement or representation of 
a material fact, for use in determining any initial or continuing right 
to, or the amount of, monthly insurance benefits under title II or 
benefits or payments under title XVI, that you know or should know is 
false or misleading, or
    (2) You make a statement or representation of a material fact for 
use as described in paragraph (a)(1) of this section with knowing 
disregard for the truth, or
    (3) You omit from a statement or representation made for use as 
described in paragraph (a)(1) of this section, or otherwise withhold 
disclosure (for example, fail to come forward to notify SSA) of, a fact 
which you know or should know is material to the determination of any 
initial or continuing right to, or the amount of, monthly insurance 
benefits under title II or benefits or payments under title XVI, if you 
know, or should know, that the statement or representation with such 
omission is false or misleading or that the withholding of such 
disclosure is misleading.
* * * * *
    (e) How will SSA make its decision to penalize me? In order to 
impose a penalty on you, we must find that you knowingly (knew or 
should have known or acted with knowing disregard for the truth) made a 
false or misleading statement or omitted or failed to report a material 
fact if you knew, or should have known, that the omission or failure to 
disclose was misleading. We will base our decision to penalize you on 
the evidence and the reasonable inferences that can be drawn from that 
evidence, not on speculation or suspicion. Our decision to penalize you 
will be documented with the basis and rationale for that decision. In 
determining whether you knowingly made a false or misleading statement 
or omitted or failure to report a material fact so as to justify 
imposition of the penalty, we will consider all evidence in the record, 
including any physical, mental, educational, or linguistic limitations 
(including any lack of facility with the English language) which you 
may have had at the time. In determining whether you acted knowingly, 
we will also consider the significance of the false or misleading 
statement or omission or failure to disclose in terms of its likely 
impact on your benefits.
* * * * *
[FR Doc. 05-20697 Filed 10-14-05; 8:45 am]
BILLING CODE 4191-02-P