[Federal Register Volume 75, Number 235 (Wednesday, December 8, 2010)]
[Rules and Regulations]
[Pages 76256-76259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30868]
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SOCIAL SECURITY ADMINISTRATION
20 CFR Part 404
[Docket No. SSA 2009-0073]
RIN 0960-AH07
Amendments to Regulations Regarding Withdrawal of Applications
and Voluntary Suspension of Benefits
AGENCY: Social Security Administration.
ACTION: Final rule with request for comments.
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SUMMARY: We are modifying our regulations to establish a 12-month time
limit for the withdrawal of old-age benefits applications, allow one
withdrawal per lifetime, and limit the voluntary suspension of benefits
for purposes of receiving delayed retirement credits to months for
which you have not received a payment. We are making these changes to
revise current policies that have the potential for misuse.
DATES: This final rule will be effective December 8, 2010. To ensure
that your comments are considered, we must receive them no later than
February 7, 2011.
ADDRESSES: You may submit comments by any one of three methods--
Internet, fax, or mail. Do not submit the same comments multiple times
or by more than one method. Regardless of which method you choose,
please state that your comments refer to Docket No. SSA-2009-0073 so
that we may associate your comments with the correct regulation.
Caution: You should be careful to include in your comments only
information that you wish to make publicly available. We strongly urge
you not to include in your comments any personal information, such as
Social Security numbers or medical information.
1. Internet: We strongly recommend that you submit your comments
via the Internet. Please visit the Federal eRulemaking portal at http://www.regulations.gov. Use the Search function to find docket number
SSA-2009-0073. The system will issue a tracking number to confirm your
submission. You will not be able to view your comment immediately
because we must post each comment manually. It may take up to a week
for your comment to be viewable.
2. Fax: Fax comments to (410) 966-2830.
3. Mail: Mail your comments to the Office of Regulations, Social
Security Administration, 107 Altmeyer Building, 6401 Security
Boulevard, Baltimore, Maryland 21235-6401.
Comments are available for public viewing on the Federal
eRulemaking portal at http://www.regulations.gov or in person, during
regular business hours, by arranging with the contact person identified
below.
FOR FURTHER INFORMATION CONTACT: Deidre Bemister, Social Insurance
Specialist, Social Security Administration, Office of Income Security
Programs, Office of Applications and Electronic Services Support
Policy, 2500 Operations Building, 6401 Security Boulevard, Baltimore,
Maryland 21235, 410-966-6223. 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
http://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 http://www.gpoaccess.gov/fr/index.html.
Background
In 1935, Congress passed the Social Security Act (Act), which
established and funded the Social Security program. In his Presidential
signing statement, President Franklin D. Roosevelt affirmed that the
lawmakers intended the Act to ``give some measure of protection to the
average citizen and to his family against the loss of a job and against
poverty-ridden old age.'' \1\ Due to concerns about the solvency of the
Social Security program, in 1977 Congress passed amendments to the Act
designed to restore the long-term balance of the program. Among the
changes enacted was a delayed retirement credit (DRC) that increased
benefits for those who delay retirement past full retirement age
(FRA).\2\
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\1\ Presidential Statement Signing the Social Security Act,
August 14, 1935. Available at: http://www.ssa.gov/history/fdrstmts.html#signing.
\2\ Section 216(l) of the Act provides for a gradual increase in
the full retirement age from age 65 to age 67. The change first
affected those workers born in 1938. By 2027, the incremental
increases will be complete and a full retirement age of 67 will be
applicable to all workers born in 1960 or later. These provisions do
not change the age at which a worker can take early retirement at a
reduced benefit amount, which remains age 62.
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Workers choose when to apply for old-age benefits. Workers who
apply for old-age benefits at FRA will receive full benefit rates.
Workers may also choose to apply before or after FRA. Workers who apply
between age 62 and FRA will receive benefit amounts reduced by a
certain percentage for each month they collect benefits before FRA.
Workers who apply between FRA and age 70 will receive amounts increased
by a certain percentage for each month they forego benefit payments
after FRA. Workers who live to their average life expectancies will
receive about the same amount in lifetime benefits, regardless if they
began receiving benefits at age 62, FRA, age 70, or any age in between.
Benefit Application Withdrawal
Workers occasionally reconsider their having applied for old-age
benefits. Continued work is a common reason for such reconsideration.
The income from continued work may bring workers earnings over the
annual earnings limit and require us to withhold benefits. Although the
Act does not include a specific provision concerning
[[Page 76257]]
withdrawal of an application, we have a longstanding policy that allows
workers to withdraw benefit applications.
Our current regulations permit living applicants or beneficiaries
to withdraw benefit applications for any reason. Applicants or
beneficiaries need simply submit written requests for withdrawal, and
beneficiaries must repay benefits received. Our program experience has
shown that most workers withdraw their applications within one year of
application.
Recent media articles have promoted the use of our application
withdrawal process as a means for retired beneficiaries to increase
their benefits or acquire an ``interest-free loan.'' \3\ Our current
policy permits retirement beneficiaries to apply for old-age benefits
prior to FRA, begin receiving reduced benefits, withdraw their
applications, repay benefits, and reapply for full or increased
benefits later. Under this policy, the payment of monthly benefits
ceases until the beneficiary reapplies, at which time the beneficiary
receives a higher monthly benefit amount than before.
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\3\ Janet Novack, Trade in Your Social Security Check,'' Forbes,
7 February 2008. Available at: http://www.forbes.com/2008/02/07/retirement-roth-taxes-pf-guru-in_jn_0207retirement_inl.html.
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Reacting to this media attention, the Center for Retirement
Research at Boston College published an article titled, Strange but
True: Free Loan from Social Security that discussed this
``unconventional claiming strateg[y].'' \4\ The authors very astutely
observed that our current withdrawal policy has the potential to ``pay
higher lifetime benefits to some individuals and increase system
costs.'' \5\
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\4\ Munnell, Alicia H., Alex Golub-Sass, and Nadia Karamcheva,
Strange but True: Free Loan From Social Security, Trustees of Boston
College, Center for Retirement Research. March 2009, Number 9-6.
Available at: http://crr.bc.edu/images/stories/Briefs/ib_9-6.pdf.
\5\ Id.
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This ``free loan'' is not free. It denies the Trust Fund and the
Federal Government the use of these monies and the potential returns on
the use of those funds. Moreover, the processing of withdrawal
applications uses resources that we could use to serve others. Our
Nation faces significant challenges resulting from the potential number
of future retirees. Current market and economic conditions have
exacerbated these challenges.
Additionally, our current withdrawal policy has the potential to
benefit those with the least need. Because a worker must repay
previously awarded benefits in one lump sum, without interest, it is
unlikely that the average retired beneficiary is in a position to
reverse this earlier decision. Those who have the means to take
advantage of our current policy do so at the expense of the Trust Fund.
Our field offices have noticed an increase in the number of
application withdrawals. We anticipate that the number of withdrawals
will continue to rise if this policy is not changed. The current
economic climate may lead many current retirees to return to work in
order to obtain a higher future benefit. Current retirees with the
means to repay benefits received could decide to do so in order to
start collecting higher benefits immediately.
Benefit Suspension
We currently allow beneficiaries to suspend past, current, and
future old-age benefit payments. Beneficiaries who suspend past
payments must repay benefits received during the period of suspension.
This policy also has the potential for misuse. Our current policy
allows workers to apply for old-age benefits prior to FRA, begin
receiving reduced benefits, suspend the benefits retroactively, repay
benefits, and earn DRCs for the period of suspension. Workers earn DRCs
for each month retirement is delayed past FRA up to age 70. As a
result, workers who retroactively suspend old-age benefits to earn DRCs
receive a higher monthly benefit amount. Because beneficiaries could
use retroactive voluntary suspension as a vehicle to repay benefits and
then reapply for higher benefits at a later age, we are revising this
policy.
Regulatory Changes
We are under a clear congressional mandate to protect the Trust
Funds. It is crucial that we change our current policies that have the
effect of allowing beneficiaries to withdraw applications or suspend
benefits and use benefits from the Trust Funds as something akin to an
interest-free loan. At the same time, we also need to ensure that
beneficiaries who experience an unforeseen change of circumstances and
who may need to withdraw an application or suspend benefits are able to
do so. Establishing limitations on the number and scope of application
withdrawals and on the period for which you can voluntarily suspend
your benefits for purposes of receiving delayed retirement credits will
help prevent abuse and maintain flexibility for beneficiaries.
In our experience, we have not found that survivor and disability
beneficiaries withdraw their applications and repay the benefits they
have received. Applications for old-age benefits are most prone to
manipulation for personal financial gain by our current policies. For
these reasons, these changes will be limited solely to applications for
old-age benefits.
We are modifying section 404.640 to limit the withdrawal of old-age
applications. Under this final rule, application withdrawals will be
limited to one withdrawal per lifetime. The withdrawal must occur
within 12 months of the first month of entitlement. This 12-month
limitation will allow flexibility for beneficiaries who experience an
unexpected change in circumstances during that time. In addition,
limiting the period for application withdrawals to within 12 months of
the first month of entitlement will minimize the likelihood of abuse
and the potential harm to the Trust Funds.
We decided to limit the withdrawal of old-age benefits to 12
months. We chose 12 months as an appropriate period because it balances
giving claimant's flexibility in reconsidering their claiming benefit
decisions with eliminating the ``interest-free loan'' loophole. First,
a longer period would not appreciably increase the universe of
claimants who reconsider their claiming decisions, because our data
show that in recent years 85-90 percent of applicants who withdrew
their applications did so in the first twelve months.
Second, the 12-month limitation period is a financial
disincentive--there is little to be gained by investing benefits for
only 12 months. Finally, for those cases where claimants request
withdrawal after 12 months, we have other ways to address their
concerns if they wish to change their date of entitlement to benefits.
For example, we can revise a month of election determination using
existing policies:
Evaluating conditional month of election determinations--
if individuals who are subject to the annual earnings test are due no
payment for the year of entitlement, they might believe that they need
to withdraw their application and re-file. However, withdrawing the
application is unnecessary because we may reopen and revise the month
of election. Because these claimants have earnings above the annual
earnings limit, we consider their month of election as ``conditional''
and would automatically revise it to a later date based on the annual
earnings report;
Adjusting benefits to consider the effect of work and
earnings on benefit amounts--if individuals decide to return to work,
it is unnecessary for them to withdraw their application. Beneficiaries
will receive credit for all months in which they do not receive a
[[Page 76258]]
full monthly benefit. When individuals reach full retirement age, SSA
will increase their monthly benefits under a process called the
adjustment of the reduction factor. This process removes from the
calculation of the ongoing benefit at full retirement age, the
actuarial reduction associated with each month for which beneficiaries
do not receive a full monthly benefit; and,
Reopening determinations under our rules of administrative
finality--SSA might discover that duplicate postings result in an
incorrect payment amount, causing a claimant to elect retirement
benefits instead of widow's benefits. The claimant does not need to
withdraw the retirement application. Instead, we can use our rules of
administrative finality to reopen the prior entitlement decision.
The 12-month limitations period should have no effect on
beneficiaries who wish to change their month of election because of a
change in their circumstances or because of an error in the calculation
of their benefits. It would, however, effectively eliminate ``interest-
free loans.''
We are also modifying section 404.313 to limit the voluntary
suspension of benefits. Under these final rules, if we have determined
that you are entitled to benefits, you may voluntarily suspend benefits
for any month beginning the month after the month in which you request
that we voluntarily suspend your benefits. If you apply for benefits,
and we have not made a determination that you are entitled to benefits,
you may voluntarily suspend benefits for any month for which you have
not received a payment.
Under the Act, if the beneficiary is entitled to retirement
benefits, delayed retirement credits may be available if the
beneficiary ``did not receive benefits pursuant to a request by such
individual that benefits not be paid.'' \6\ In these rules, we are
interpreting the statutory phrase ``did not receive benefits pursuant
to a request by such individual that benefits not be paid'' to mean
that the beneficiary may voluntarily suspend benefits for purposes of
the DRC only on a prospective basis.
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\6\ 42 U.S.C. 402(w)(2)(B)(ii).
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Applicants for whom we have not made an initial determination may
voluntarily suspend benefits for purposes of the DRC, for any
months.\7\ We recognize that this is a change from our current policy.
However, because the statute refers to benefits that the ``individual
did not receive,'' rather than ``received and repaid,'' we believe that
the policy we are adopting in these rules is consistent with the
language of the statute and congressional intent.
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\7\ Id.
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The following illustrates the change in policy:
1. Example--Beneficiary currently receiving benefits:
A beneficiary is currently receiving old-age benefits and requests
to voluntarily suspend retroactive, current, and future benefits and
repay all benefits received during the retroactive period.
The beneficiary can suspend benefits beginning with the month after
the month in which the beneficiary requests that we voluntarily suspend
benefits, provided the beneficiary has not received a monthly benefit
amount for those months. The beneficiary may not suspend retroactive
monthly benefits for which we have made a determination or suspend
retroactive monthly benefits that we have already paid.
2. Example--Applicant filing a new application:
An applicant files for old-age benefits one or more months after
the month the applicant attains FRA. The applicant could potentially be
due retroactive benefits. We have not yet made an initial determination
about monthly benefits or entitlement. In order to earn DRCs, the
applicant voluntarily requests to suspend retroactive, current, and
future benefits.
The applicant can suspend past, current, and future benefits for
months to which the applicant is entitled because we have not made any
monthly benefit determinations or payments.
We believe these changes will not penalize applicants who require
the suspension of unpaid benefits for reasons not related to misuse.
When will we start to use these rules?
We will start to use these rules on the date shown under DATES
earlier in this preamble. However, we are also inviting public comments
on the changes made by these rules. We will consider any relevant
comments we receive. We plan to publish another final rule document to
respond to any such comments we receive and to make any changes to the
rules as appropriate based on the comments.
Regulatory Procedures
We follow the Administrative Procedure Act (APA) rulemaking
procedures specified in 5 U.S.C. 553 when we develop regulations.
Section 702(a)(5) of the Social Security Act, 42 U.S.C. 902(a)(5).
Generally, the APA requires that an agency provide prior notice and
opportunity for public comment before issuing a final rule. The APA
provides exceptions to its notice and public comment procedures when an
agency finds good cause for dispensing with such procedures because
they are impracticable, unnecessary, or contrary to the public
interest.\8\
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\8\ 5 U.S.C. 553(b)(B).
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We find that good cause exists for proceeding without prior public
notice and comment in this instance. This final rule addresses our
policies on benefit application withdrawal and retroactive benefit
suspension that beneficiaries could take advantage of to obtain
increased benefits. Because these policies have the potential for
abuse, any delay in their modification through the revision of our
regulations could result in the harm that we are trying to prevent.
Providing prior public notice may act as a catalyst for more applicants
and beneficiaries to request withdrawal of their applications.
Accordingly, we find that prior public comment would be contrary to the
public interest. However, we are inviting public comment on the final
rule and will consider any substantive comments we receive within 60
days of the publication of this final rule.
In addition, for the reasons cited above, we also find good cause
for dispensing with the 30-day delay in the effective date of this
final rule.\9\ We find that it is contrary to the public interest to
delay the effective date of our rule changes because any delay in their
modification could result in the harm that we are trying to prevent.
Accordingly, we are making this final rule effective upon publication.
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\9\ 5 U.S.C. 553(d)(3).
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Executive Order 12866
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 and were
subject to OMB review.
Regulatory Flexibility Act
We certify that this final rule will not have a significant
economic impact on a substantial number of small entities as it affects
individuals only. Accordingly, a regulatory flexibility analysis is not
required under the Regulatory Flexibility Act, as amended.
Paperwork Reduction Act
This final rule does not create any new or affect any existing
collections and does not require Office of Management and Budget
approval under the Paperwork Reduction Act.
[[Page 76259]]
(Catalog of Federal Domestic Assistance Program No. 96.002 Social
Security--Retirement Insurance.)
List of Subjects in 20 CFR Part 404
Aged, Old-age, Survivors and disability insurance; Social Security.
Michael J. Astrue,
Commissioner of Social Security.
0
For the reasons set out in the preamble, we are amending 20 CFR chapter
III, part 404, subparts D and G as follows:
PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE
(1950-)
Subpart D--Old-Age, Disability, Dependents' and Survivors'
Insurance Benefits; Period of Disability
0
1. The authority citation for subpart D of part 404 continues to read
as follows:
Authority: Secs. 202, 203(a) and (b), 205(a), 216, 223, 225,
228(a)-(e), and 702(a)(5) of the Social Security Act (42 U.S.C. 402,
403(a) and (b), 405(a), 416, 423, 425, 428(a)-(e), and 902(a)(5)).
0
2. Amend Sec. 404.313(a) to add fifth and sixth sentences to the end
of the paragraph to read as follows:
Sec. 404.313 What are delayed retirement credits and how do they
increase my old-age benefit amount?
(a) * * * If we have determined that you are entitled to benefits,
you may voluntarily suspend benefits for any month beginning with the
month after the month in which you voluntarily request that we suspend
your benefits. If you apply for benefits, and we have not made a
determination that you are entitled to benefits, you may voluntarily
have your benefits suspended for any month for which you have not
received a payment.
* * * * *
Subpart G--Filing of Applications and Other Forms
0
3. The authority citation for subpart G of part 404 continues to read
as follows:
Authority: Secs. 202(i), (j), (o), (p), and (r), 205(a),
216(i)(2), 223(b), 228(a), and 702(a)(5) of the Social Security Act
(42 U.S.C. 402(i), (j), (o), (p), and (r), 405(a), 416(i)(2),
423(b), 428(a), and 902(a)(5)).
0
4. Amend Sec. 404.640 to add new paragraph (b)(4) to read as follows:
Sec. 404.640 Withdrawal of an application.
* * * * *
(b) * * *
(4) Old age benefits. An old age benefit application may be
withdrawn if, in addition to the requirements of this section--
(i) The request for withdrawal is filed within 12 months of the
first month of entitlement; and
(ii) The claimant has not previously withdrawn an application for
old age benefits.
* * * * *
[FR Doc. 2010-30868 Filed 12-7-10; 8:45 am]
BILLING CODE 4191-02-P