Representative Payment Policies and Administrative Procedure for Imposing Penalties for False or Misleading Statements or Withholding of Information, 61403-61409 [E6-17320]

Agencies

• Social Security Administration

[Federal Register Volume 71, Number 201 (Wednesday, October 18, 2006)]
[Rules and Regulations]
[Pages 61403-61409]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-17320]


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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: Final rules.

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SUMMARY: We are amending 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). 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 are amending our rules to 
explain financial requirements for representative payees, and we have 
made minor clarifying plain language changes.
    The SSPA also allows us 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 payments under title XVI 
(including State supplementary payments).

DATES: These final rules are effective November 17, 2006.
    Applicability Date: Sections 404.459 and 416.1340, reflecting and 
implementing section 201(a)(2) of Public Law 108-203 relating to the 
withholding of information from us, or failure to disclose information 
to us, will be applicable upon implementation of the centralized 
computer file described in section 202 of Public Law 108-203. This is 
because Congress provided that section 201 of the SSPA would apply only 
with respect to violations committed after that centralized computer 
file was implemented. If you want information regarding the 
applicability date of this provision, call or write the SSA contact 
person. We will publish a document announcing the applicability date in 
the Federal Register when the centralized computer file has been 
implemented. The remainder of Sec. Sec.  404.459 and 416.1340 currently 
in effect is unaffected by this delay.

FOR FURTHER INFORMATION CONTACT: Betsy M. Byrd, Social Insurance 
Specialist, Social Security Administration, Office of Income Security 
Programs, 252 Altmeyer Building, 6401 Security Boulevard, Baltimore, MD 
21235-6401, (410) 965-7981 or TTY (410) 966-5609 for information about 
this Federal Register document. For information on eligibility or 
filing for benefits, call our national toll-free number, 1-800-772-1213 
or TTY 1-800-325-0778, or visit our Internet site, Social Security 
Online, at https://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Electronic Version

    The electronic file of this document is available on the date of 
publication in the Federal Register at https://www.gpoaccess.gov/fr/
index.html.

Background

    Public Law 108-203, the SSPA, enacted March 2, 2004, required a 
number of changes to our 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 we determine that an exception to this 
prohibition is appropriate; or (2) 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.
    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 us to treat 
such misused benefits as overpayments to the representative payees, 
subject to overpayment recovery authorities.
    Section 106 of the SSPA authorizes us to require a representative 
payee to receive benefits in person at a Social Security field office 
or a United States Government facility that we designate 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 are 
clarifying 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 are now specifying 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

[[Page 61404]]

payee is the spouse or parent of the beneficiary and lives in the same 
household with the beneficiary. We also 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 are 
further specifying that the payee must treat any interest earned on 
current benefits as the beneficiary's own property. In addition, we are 
clarifying that the payee is responsible for making records available 
for review if requested by us.
    Section 201(a)(2) of the SSPA amended section 1129A of the Social 
Security Act (the Act) to help us prevent and respond to fraud and 
abuse in our programs and operations. Prior to its amendment by the 
SSPA, section 1129A allowed us to impose a penalty against any person 
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 sanction period of nonpayment lasts for 6 
consecutive months for the first occurrence, 12 consecutive months for 
the second occurrence, and 24 consecutive months for each subsequent 
occurrence for benefits under title II that would otherwise be payable 
to the person. For payments under title XVI (including State 
supplementary payments that we make under Sec.  416.2005), the penalty 
results in ineligibility for the same periods of time.
    Section 201(a)(2) amended section 1129A of the Act to also allow us 
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 who made the statement that omitted a material fact.
    This new penalty under section 1129A of the Act applies only for 
violations occurring after the date on which we implement the 
centralized computer file described in section 202 of the SSPA to 
record the date of submission of information by a disabled beneficiary 
(or representative) regarding a change in the beneficiary's work or 
earnings status. As noted above in the Applicability Date section of 
the preamble, we will publish a document announcing the applicability 
date in the Federal Register when the centralized computer file has 
been implemented.

Explanation of Changes on Representative Payment

    Because our regulations for representative payment under the title 
VIII program cross-refer to the appropriate material in our title II 
representative payment rules, most of the changes to our title II 
representative payment regulations also apply to title VIII. We have 
shown a specific rule for title VIII only when a cross-reference to the 
title II rules would not be sufficient.
    We are making the following changes to our representative payment 
regulations:
    1. We are amending 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 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.
    2. We are amending 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 will 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. 
These sections also explain that the payee must treat any interest 
earned on current benefits as the beneficiary's own property.
    3. We are amending 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 are amending 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 must 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 must be appropriate under the laws of the State 
for the type of services the organization provides. These bonding and 
licensing requirements do not apply to the title VIII program. In 
addition, these sections explain that a fee-for-service representative 
payee must forfeit its fee for the months during which it misused 
benefits.
    5. We are amending 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 we will treat the misused benefits as an 
overpayment to the representative payee, subject to overpayment 
recovery authorities.
    6. We are amending Sec. Sec.  404.2065, 408.665 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 that we designate if the payee fails to provide an 
annual accounting of benefits or other requested information.

Explanation of Changes on Administrative Procedures for Imposing 
Administrative Penalties

    We are amending 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.

Public Comments

    On October 17, 2005, we published proposed rules in the Federal 
Register at 70 FR 60251 and provided a 60-day comment period. We 
received comments from four organizations and one individual. We 
carefully considered all of the comments in publishing these final 
rules. Because some of the comments received were quite detailed, we 
have condensed, summarized and paraphrased them in the following 
discussion. However, we have tried to present all views adequately and 
to carefully address all of the issues raised by the commenters that 
are within the scope of the proposed rules. We have not addressed in 
this preamble

[[Page 61405]]

comments that are outside the scope of this rulemaking proceeding.
    Comment: One commenter stated that exempting spouses and parents 
from the obligations to keep the beneficiary's funds separate from 
their own funds and to show the beneficiary's ownership of his or her 
funds will make it more difficult for us to track and account for the 
beneficiary's funds and make it easier for a spouse or parent to misuse 
the beneficiary's funds and not be caught.
    Response: We do not agree with this comment. We still require 
custodial parents or spouses to account annually for the funds received 
on behalf of a child or spouse. We afford this exception to parents or 
spouses living in the same households as their children or spouses in 
recognition of the inherent familial bonds and in support of family 
relationships. This exemption allows families the flexibility to manage 
their own finances without unwarranted, unnecessary, or excessive 
Federal Government intrusion.
    Comment: One commenter suggested that we create a discretionary 
exception to the 10-day period allowed for payees to respond to 
notification that they are no longer qualified to serve because they 
have an unsatisfied felony warrant. The commenter stated that we should 
allow for a longer time period for the payee to dispute the information 
in order to ensure that the beneficiary does not lose an otherwise good 
payee.
    Response: On December 6, 2005, the U.S. Court of Appeals for the 
Second Circuit issued a decision in the Fowlkes Court Case invalidating 
SSA's fugitive felon policy, which relies on an outstanding felony 
warrant as the sole basis for finding that an individual is a fugitive 
felon. The court ruled that SSA must have evidence that the individual 
knew that his or her apprehension was sought and consciously evaded 
arrest. Because of this case, we will be reviewing all fugitive felon 
policies and plan to publish a final rule at a later time. All comments 
regarding fugitive felons will be addressed as part of that 
publication. Therefore, we have removed the fugitive felon provision 
that was in the notice of proposed rulemaking.
    Comment: One commenter who supported the proposed bar against 
felons being representative payees, and the exception to that rule 
recommended that we provide additional language that would allow us to 
consider how long ago the offense occurred and the nature of the 
offense.
    Response: The procedures for appointing persons who have a criminal 
history are provided in our operating instructions (found in the 
Program Operations Manual System (POMS), chapter GN 00502 at https://
s044a90.ssa.gov/apps10/poms.nsf/) and do not need to be addressed in 
these regulations. When we make a determination involving such an 
applicant, our procedures discuss weighing information about the nature 
of the crime and when it occurred, along with the relationship to, and 
custody of, the beneficiary.
    Comment: One commenter suggested that we expand the proposed 
language regarding the redirection of benefit checks and require 
specific actions on the part of field office personnel in handling 
representative payees who have not responded to our request to complete 
an annual payee report. Another commenter suggested that we revise the 
proposed language to stress that the provision allowing for the 
redirection of benefit checks should be used sparingly to avoid delays 
in processing cases and to prevent potential harm to beneficiaries 
which might occur by interrupting benefits.
    Response: When we request it, the representative payee is required 
by Sec. Sec.  404.2025, 404.2035, 416.625, and 416.635 to account for 
how benefits were used. These final rules do not change that 
requirement. Rather, the redirection provision outlined in these rules 
provides field office personnel with an additional tool to use, at 
their discretion, to obtain accounting information when we request it. 
The description in these final rules regarding the frequency and manner 
in which this provision will be applied will give local field offices 
the flexibility to address payees on a case-by-case basis. In this way, 
field offices can use their experience with payees to decide which 
actions are most likely to succeed in obtaining the accounting report 
with the least harm to beneficiaries and without causing delays in the 
processing of critical workloads.
    Comment: A commenter noted that in order to differentiate between 
``improper use'' and ``misuse,'' the regulations should include the 
definition of the term ``misuse'' as described in section 205(j)(9) of 
the Act. This commenter also noted that it would be helpful to include 
examples of ``improper use.''
    Response: Because the law includes the definition of the term 
``misuse,'' we do not believe that we need to include it in these 
regulations. ``Improper use'' is currently discussed in our operating 
instructions (found in POMS chapter GN 00602) , and we do not believe 
it needs to be addressed in these regulations as it is a different 
concept and is outside the scope of the proposed rule.
    Comment: A commenter recommended that a representative payee who 
has been charged with an overpayment due to the misuse of a 
beneficiary's funds should have the right to seek waiver of the 
overpayment.
    Response: A representative payee who is charged with an overpayment 
due to misuse of a beneficiary's funds is entitled to the same rights 
that we give to all overpaid individuals, including the right to 
request waiver of overpayment recovery, and the full administrative 
appeals process.
    Comment: One commenter expressed a concern that we might impose a 
penalty on a beneficiary if his or her representative payee made a 
false or misleading statement or intentionally withheld information to 
be used in determining the amount of, or the eligibility for, a 
benefit. The comment stated that such a penalty would unfairly punish 
the beneficiary because of the actions of another.
    Response: We agree that it would be unfair to penalize a person 
because of another person's actions and believe the regulation is clear 
in this regard. In addition, current processing instructions for 
administrative sanction (found in POMS chapter GN 02604) cases 
specifically state that we will not impose a sanction on a beneficiary 
because a representative payee makes a false or misleading statement on 
the beneficiary's behalf, unless there is evidence that the beneficiary 
knowingly caused the false statement to be made. Those existing 
instructions will apply to the knowing withholding of information by a 
representative payee if the information affects the amount of, or 
eligibility for, a payment.
    Comment: One commenter was concerned that we would impose a penalty 
on a person who unknowingly made an incorrect statement.
    Response: The regulations reflecting the statutory provision 
providing penalties for knowingly making false or misleading statements 
have been in effect since 2000. These final rules now amend those 
regulations to reflect legislation that extends the penalties to cover 
situations where a claimant or recipient fails to provide information 
that affects the amount of, or eligibility for, a payment, but only if 
the person knows or should know that the failure to do so is 
misleading. Our regulations have provided that the decision to impose a 
sanction will be based on the evidence and the reasonable inferences 
that can be drawn from that evidence, not on speculation or suspicion, 
and will be documented with the basis and

[[Page 61406]]

rationale for that decision. In determining whether a person acted 
knowingly, our regulations have provided that we will consider, among 
other things, any physical, mental, educational or linguistic 
limitations the person might have, as well as the significance of the 
person's false or misleading statement or omission in terms of its 
likely impact on benefits. Those same guidelines will apply to persons 
who fail to report important information. We have an internal review 
process already established to help ensure that sanctions are imposed 
only when the evidence supports the finding that the person being 
penalized acted or failed to provide information knowingly.
    Comment: One commenter addressed the possibility that a person 
might attempt to return to work and fail to report that attempt because 
he or she was not aware of the need to report. The commenter suggested 
that we should take steps to ensure that disabled beneficiaries are 
reminded periodically of the need to contact us if they resume work 
activities.
    Response: We routinely remind beneficiaries of the need to report 
specific changes and events that might affect their payment status. We 
do this with mid-year mailers, check stuffers and redetermination 
notices. Under these final rules, we will not impose a penalty on a 
beneficiary for failing to report an event unless the evidence supports 
a finding that the person knew or should have known of the need to 
report.
    Comment: One commenter was concerned that a person who is incapable 
of understanding the reporting requirements might be penalized for not 
reporting something using the ``should have known'' standard.
    Response: We believe the existing regulations and instructions 
clearly explain when a person should know to report something. We have 
used the ``should have known'' standard for imposing penalties for 
false or misleading statements since 2000. During that time, we are not 
aware of any problem with applying the ``should have known'' standard, 
which is mandated by Congress. Our regulations and instructions clearly 
state that if a person cannot be aware of something because of a 
physical or mental impairment, we will not find that the person should 
be aware, and we will not impose a penalty.
    Comment: The same commenter also pointed out the need for more 
detailed instructions about considering a person's limitations and lack 
of proficiency with the English language.
    Response: Our current operating instructions for imposing 
administrative sanctions (found in POMS chapter GN 02604) contain 
guidelines that are much more detailed than the regulatory language 
contained in these final rules. We intend to update those instructions 
to include even more examples of scenarios that might arise. We do not 
believe that such detailed information should be included in the 
regulations.

Other Changes

    For the reasons discussed above, we have not changed the text of 
the proposed rules based on public comments. However, in addition to a 
few minor technical changes for clarification purposes, we did make two 
significant changes. First, as noted in our response to a public 
comment, we are not including the provision on fugitive felons that was 
included in the NPRM. Instead, we are reviewing all of our fugitive 
felon policies and will publish a final rule on this representative 
payee provision at a later time. Second, we have changed the regulation 
text for Sec.  408.665 from the NPRM to indicate that a title VIII 
beneficiary may also be served by a local Social Security field office 
as well as a United States Government facility.

Regulatory Procedures

Executive Order 12866, as Amended by Executive Order 13258

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these final rules meet the criteria for a 
significant regulatory action under Executive Order 12866, as amended 
by Executive Order 13258. Thus, they were reviewed by OMB. We have also 
determined that these final rules meet the plain language requirement 
of Executive Order 12866, as amended by Executive Order 13258.

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

    We have reviewed these final rules for compliance with Executive 
Order 13132 and the Unfunded Mandates Reform Act of 1995 (UMRA of 
1995). We have determined that the final 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 have 
a significant impact on the States. First, the total number of 
organizations seeking compensation is very small, approximately 800. We 
do not require most of the organizations within this group to be 
licensed because they are State or local government agencies. Only the 
very 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 have a significant 
impact on the States.

Regulatory Flexibility Act

    We certify that these final 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 final rules contain information collection requirements that 
require Office of Management and Budget (OMB) clearance under the 
Paperwork Reduction Act of 1995 (PRA). As required by the PRA, we have 
submitted a clearance request to OMB for approval. We will publish the 
OMB number and expiration date upon approval.
    As required by the PRA, we published an NPRM in the Federal 
Register on October 17, 2005 at 70 FR 60251. In this NPRM, we solicited 
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. None of the comments submitted in response to the Notice 
addressed the specific issues cited above.

(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)

[[Page 61407]]

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: July 10, 2006.
Jo Anne B. Barnhart,
Commissioner of Social Security.

0
For the reasons set out in the preamble, we are amending 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]

0
1. The authority citation for subpart E of part 404 continues to read 
as follows:

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


0
2. Amend Sec.  404.459 by revising the section heading and paragraphs 
(a) and (e) to read as follows:


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

    (a) Why would 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 us) 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]

0
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)).

0
4. Amend Sec.  404.2022 by redesignating paragraphs (b), (c) and (d) as 
paragraphs (c), (d) and (e) and adding a new paragraph (b) to read as 
follows:


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

* * * * *
    (b) 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.
* * * * *

0
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.

0
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

[[Page 61408]]

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 we or a court of competent jurisdiction 
determine(s) that the representative payee misused benefits. Any fees 
collected for such months will be treated as a part of the 
beneficiary's misused benefits.
* * * * *

0
7. Amend Sec.  404.2041 by adding a new paragraph (f) to read as 
follows:


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 this part.

0
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 that we designate 
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 our 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]

0
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).


0
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 the local 
Social Security field office or a United States Government facility 
that we designate 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 our 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]

0
11. The authority citation for subpart F of part 416 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)).


0
12. Amend Sec.  416.622 by redesignating paragraphs (b), (c) and (d) as 
paragraphs (c), (d) and (e) and adding a new paragraph (b) to read as 
follows:


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

* * * * *
    (b) 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.
* * * * *

0
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;
    (f) Notify us of any change in his or her circumstances that would 
affect performance of his/her payee responsibilities; and
    (g) 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)) 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).

0
14. Amend Sec.  416.640a by revising paragraph (a)(2), redesignating

[[Page 61409]]

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 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 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 we or a court of competent jurisdiction 
determine(s) that the representative payee misused benefits. Any fees 
collected for such months will be treated as a part of the 
beneficiary's misused benefits.
* * * * *

0
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 this part.

0
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 that we designate 
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 our past difficulty in contacting the 
payee. We may ask your representative payee to give us the following 
information:
* * * * *

Subpart M--[Amended]

0
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).


0
18. Amend Sec.  416.1340 by revising the section heading and paragraphs 
(a) and (e) to read as follows:


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

    (a) Why would 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 us) 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.
* * * * *

 [FR Doc. E6-17320 Filed 10-17-06; 8:45 am]
BILLING CODE 4191-02-P