[Federal Register Volume 79, Number 25 (Thursday, February 6, 2014)]
[Proposed Rules]
[Pages 7127-7136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-02488]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Parts 262 and 264
RIN 0970--AC56
Temporary Assistance for Needy Families (TANF) Program, State
Reporting On Policies and Practices to Prevent Use of TANF Funds in
Electronic Benefit Transfer Transactions in Specified Locations
AGENCY: Office of Family Assistance (OFA), Administration for Children
and Families (ACF), Department of Health and Human Services (HHS).
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Administration for Children and Families (ACF) proposes to
amend the Temporary Assistance for Needy Families (TANF) regulations to
require states, subject to penalty, to maintain policies and practices
that prevent TANF funded assistance from being used in any electronic
benefit transfer transaction in specified locations. This responds to
provisions in the Middle Class Tax Relief and Job Creation Act of 2012
requiring states receiving TANF grants to maintain policies and
practices as necessary to prevent assistance provided under the program
from being used in any electronic benefit transfer transaction in any
liquor store; any casino, gambling casino, or gaming establishment; or
any retail establishment that provides adult-oriented entertainment in
which performers disrobe or perform in an unclothed state for
entertainment.
DATES: In order to be considered, comments on this proposed rule must
be received on or before May 7, 2014.
ADDRESSES: You may submit comments, identified by docket number by any
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
(We strongly recommend this method of submitting comments). Follow the
instructions for submitting comments.
Mail: Office of Family Assistance, Administration for
Children and Families, 5th Floor East, 370 L'Enfant Promenade SW.,
Washington, DC 20024, Attention: Robert Shelbourne.
Hand Delivery/Courier: OFA/ACF, 5th Floor East, 901 D
Street SW., Washington, DC 20251.
FOR FURTHER INFORMATION CONTACT: Robert Shelbourne, Office of Family
Assistance, 202-401-5150 (not a toll-free call). Deaf and hearing
impaired individuals may call the Federal Dual Party Relay Service at
1-800-877-8339 between 8 a.m. and 7 p.m. Eastern Time.
SUPPLEMENTARY INFORMATION:
Contents
I. Public Inspection of Comments
II. Statutory Authority
III. Background
IV. Discussion of Regulatory Provisions
Part 262--Accountability Provisions--General
Part 264--Other Accountability Provisions
V. Paperwork Reduction Act
VI. Regulatory Flexibility Analysis
VII. Regulatory Impact Analysis
VIII. Unfunded Mandates Reform Act of 1995
IX. Congressional Review
X. Assessment of Federal Regulation and Policies on Families
XI. Executive Order 13132
I. Public Inspection of Comments
All comments received, including any personal information provided,
will be made available for public inspection Monday through Friday 8:30
a.m. to 5 p.m. at 370 L'Enfant Promenade SW., Washington, DC.
II. Statutory Authority
This proposed regulation is being issued under the authority
granted to the Secretary of Health and Human Services (HHS) by the
Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96),
Section 408 of the Social Security Act (42 U.S.C. 608), Section 409 of
the Social Security Act (42 U.S.C. 609), and Section 1102 of the Social
Security Act (42 U.S.C. 1302), which authorizes the Secretary to make
and publish such rules and regulations, not inconsistent with the Act,
as may be necessary to the efficient administration of functions under
the Act.
The statute at 42 U.S.C. 617 limits the authority of the Federal
government to regulate state conduct or enforce the TANF provisions of
the Social Security Act, except as expressly provided. We have
interpreted this provision to allow us to regulate where Congress has
charged HHS with enforcing certain TANF provisions by assessing
penalties. Because the legislation includes a TANF penalty, HHS has the
authority to regulate in this instance.
III. Background
Authorized by title IV-A of the Social Security Act, TANF is a
block grant that provides states, territories and tribes
[[Page 7128]]
federal funds to design and operate a program to accomplish the
purposes of TANF. The purposes are: (1) Assisting needy families so
that children can be cared for in their own homes or homes of
relatives; (2) reducing the dependency of needy parents by promoting
job preparation, work and marriage; (3) preventing out-of-wedlock
pregnancies; and (4) encouraging the formation and maintenance of two-
parent families.
In addition to federal TANF block grant funds, each state must
spend a certain minimum amount of non-federal funds to help eligible
families in ways that further a TANF purpose. This is referred to as
maintenance-of-effort (MOE).
In general, federal TANF and state MOE funds may be expended on
benefits and services targeted to needy families, and activities that
aim to prevent and reduce out-of-wedlock pregnancies or encourage the
formation and maintenance of two-parent families, as well as
administrative expenses. Regulations under 45 CFR 260.31 define
``assistance,'' and regulations under 45 CFR 263.2 specify what kind of
state expenditures count toward meeting a state's MOE requirement. In
particular, federal TANF and state MOE funds may be expended on
``assistance,'' which includes cash payments, vouchers, and other forms
of benefits designed to meet a family's ongoing basic needs (i.e.,
food, clothing, shelter, utilities, household goods, personal care
items, and general incidental expenses). Assistance also includes
supportive services such as transportation and child care provided to
families who are not employed (see 45 CFR 260.31(a)). TANF funds also
can be used for a wide range of benefits and services that do not fall
within the definition of assistance; such expenditures are considered
``nonassistance.''
Based on the most recent information provided to us by states,
there are currently four means that states use to provide assistance
payments to eligible low-income families with children: Paper checks,
Electronic Funds Transfers (EFT), Electronic Benefit Transfer (EBT)
cards, and Electronic Payment Cards (EPC). Most states have replaced
paper checks with one or more of the other three delivery methods in
order to provide benefits in a timelier manner, reduce theft and fraud,
and eliminate the need to pay check-cashing fees. For example, states
are automatically transferring assistance payments directly into a
recipient's own private bank account through EFT; however, this option
is not available if a recipient does not have access to or qualify for
a checking account. Most states load the amount of assistance on EBT
cards or EPCs, both of which allow recipients to use a debit-like card
to access their benefits through automated teller machines (ATMs) and
point-of-sale (POS) devices. EPCs differ from government EBT cards in
that they are network-branded (Visa or MasterCard) prepaid cards that
recipients may use virtually anywhere the brand's logo is displayed. On
the other hand, EBT cards may be used in fewer locations, as retailers
and ATMs must be authorized to accept EBT cards.
On February 22, 2012, President Obama signed Public Law 112-96,
which among its provisions, requires states to maintain policies and
practices to prevent TANF funds from being used in any electronic
benefit transfer transaction in any liquor store; any casino, gambling
casino, or gambling establishment; or any retail establishment which
provides adult-oriented entertainment in which performers disrobe or
perform in an unclothed state for entertainment.
The legislation at Section 4004(b) also imposes a new reporting
requirement as well as a new penalty. Each state is required to report
to the Department of Health and Human Services (HHS) by February 22,
2014, its implementation of policies and practices related to
restricting recipient from using their TANF assistance in EBT
transactions at the locations specified in the previous paragraph. HHS
will reduce a state's block grant if the state fails to comply with
this reporting requirement or if, based on the information that the
state reports, HHS finds that the state has not implemented and
maintained the required policies and practices.
Finally, states are required to include in their state plans a
statement outlining how they intend to implement policies and
procedures to prevent access to assistance through electronic fund
transactions at casinos, liquor stores, and establishments providing
adult-oriented entertainment. The state plan also must include an
explanation of how the state plans to ensure that (1) recipients of the
assistance have adequate access to their cash assistance, and (2)
recipients of assistance have access to using or withdrawing assistance
with minimal fees or charges, including an opportunity to access
assistance with no fee or charges, and are provided information on
applicable fees and surcharges that apply to electronic fund
transactions involving the assistance, and that such information is
made publicly available.
Before enactment of Public Law 112-96, there were no federal
requirements to restrict a recipient's use of TANF assistance provided
on electronic benefit cards, nor were there any provisions in the TANF
statute or regulations precluding a state from implementing policies
that prevent a recipient from using his or her benefit card at
particular locations. Indeed, various states have taken measures to
restrict access to EBT benefits at ATMs located in different types of
establishments, such as casinos, adult entertainment establishments,
liquor stores, bail bonds businesses, bingo halls, cruise ships, gun/
ammunition stores, psychic readers, massage parlors, and tattoo and
piercing shops. These actions have been required through state
executive orders, state legislation, and state agency policy
directives.
On April 25, 2012, HHS published in the Federal Register a Request
for Public Comment (RFPC), which invited states and other interested
persons to provide information that could help to inform the rulemaking
process. State TANF agencies, others involved in implementation, and
any stakeholders were invited to comment on: Current methods of
assistance delivery and ability to identify transaction locations;
mechanisms to ensure that recipients have adequate access to their cash
assistance, including withdrawals with minimal fees and opportunities
to access assistance with no fee; incidence of the use of TANF EBT
transactions in restricted locations; issues and challenges states
could face in implementing the requirements of Public Law 112-96--e.g.,
technical issues, costs, and access implications--and mechanisms for
addressing problems identified; experience with implementing EBT
transaction restrictions (if applicable), e.g., nature of restriction,
specific method and procedures used, challenges to implementation and
responses, costs, if and how approach is effective, and any concerns
raised by businesses, electronic benefit vendors, and/or TANF
recipients.
As stated in the RFPC, while we do not intend to provide responses
to specific comments, in the next section we do indicate where comments
informed the proposed rule. In general, we received input from 45
commenters. A majority were state or local TANF agencies, most with
experience in implementing TANF EBT restrictions or in the process of
considering approaches to doing so. Other commenters included welfare
advocacy/research organizations, electronic benefit industry
organizations/companies, and one member of the general public.
[[Page 7129]]
Responses to the RFPC provided information on matters such as the
processes involved with tracking EBT transactions, the information
available in transaction records, the challenges associated with
identifying types of locations where transactions have occurred, and
potential options for preventing TANF EBT transactions at specified
locations. Some states that have already implemented EBT prohibitions
described their experiences, provided examples of definitions of the
types of businesses subject to restrictions, identified challenges and
costs associated with implementation, and described concerns of
businesses, vendors, and recipients. This information helped us assess
the feasibility and effectiveness of various approaches to identifying
locations subject to restrictions, preventing the use of TANF
assistance via EBT transactions at those locations, and monitoring and
enforcing compliance. For example, options for preventing the use of
TANF via EBT transactions in the specified locations included
centralized electronic blocking by a state or its EBT vendor, placing
the responsibility on business owners to block access at their
establishments, and relying on TANF recipients to monitor their EBT use
and imposing penalties on those who do not comply with restrictions. We
provide further detail on the options identified in the comments later
in this preamble in discussing potential approaches that HHS would
accept as complying with the new statutory requirements.
Additionally, commenters raised other concerns that they encouraged
HHS to consider when drafting regulations. For example, commenters
frequently highlighted that prohibiting EBT access at all of the
locations cited in the statute would have a detrimental effect on TANF
recipients access to cash assistance, particularly in rural areas,
inner city neighborhoods, and Indian reservations. Commenters expressed
that many clients do not have access to transportation, or the funds
for transportation if ATMs in their neighborhoods are restricted and
they are forced to travel further to obtain benefits. Another concern
expressed in a number of comments related to the inability of states or
their contractors/vendors to prevent TANF assistance that has been
deposited directly in a recipient's personal banking account from being
used or accessed in the locations identified in the legislation.
Several states provided comments that included data about the
incidence of the use of TANF EBT transactions in liquor stores, gaming
establishments, and adult entertainment venues (and any other types of
establishments on which the state chooses to place restrictions).
States that have conducted such an analysis consistently informed us
that they found the numbers engaged in possible misuse are very low.
While we understand that the extent of misuse of benefits may be low,
any inappropriate expenditure of public funds raises concerns.
Eight states reported that they had measured the extent that TANF
benefits were used in prohibited locations. While findings varied
slightly among states based on which locations are included in the
assessment, it was always less than one percent:
California, which prohibits TANF EBT access at the
greatest number of location types (12), found that less than one half
of one percent of the total number of cash transactions were performed
at these locations prior to implementing its prohibition.
Florida's last analysis in 2010 indicated less than .01%
of state cash benefits were being accessed at liquor stores and
casinos.
Indiana provided information on liquor store ATM
transactions in its comments, stating that from October through
December 2011 it found that fewer than 30 of the 28,000 transactions
per month took place in restricted establishments with the letters
``LIQ'' in the name.
New Hampshire reviewed a six-month period of EBT card
transactions. During this period, there were no transactions that could
be identified as happening at a New Hampshire liquor store, a casino or
other type of gambling establishment, or adult-oriented entertainment
business.
New Jersey reviewed transactions occurring at casinos from
April-October 2011, the total number of which represented less than 1%
of the total number Family First transactions for this period. The
state notes that these transactions may or may not have occurred on the
gaming floor, as any transaction on casino property was included in the
count.
Finally, commenters presented recommendations for HHS to consider
as we draft proposed regulations. There was a general consensus that
HHS should draft regulations in a manner that provides states
flexibility when implementing these new requirements. Commenters
generally urged that states be allowed to implement approaches that are
cost effective and fit within the existing structure of state
operations, yet at the same time meet the intent and requirements of
the law. Some commenters also cautioned that the regulations should
seek to protect recipients who inadvertently use an EBT card at
prohibited locations, and ensure that states' policies are implemented
in a non-discriminatory manner.
IV. Discussion of Regulatory Provisions
Part 262--Accountability Provisions--General
The proposed rule in part 262 adds new penalties for failure to
report or adequately implement the new requirements outlined in Public
Law 112-96, defines terms relevant to the new requirements, specifies
when the penalty takes effect, and identifies the reporting form that
ACF will use to determine whether a state warrants a penalty.
Section 262.1 What penalties apply to states?
Section 4004(b) of Public Law 112-96 at Section 409(a)(16) of the
Social Security Act (the Act) creates a new penalty. As provided in the
statute, the penalty will be imposed if, by February 22, 2014, a state
fails to report to HHS its implementation of the policies and practices
to prevent assistance provided under the state program funded under
this part from being used in any electronic benefit transfer
transaction in: (i) Any liquor store; (ii) any casino, gambling casino,
or gaming establishment; or (iii) any retail establishment which
provides adult-oriented entertainment in which performers disrobe or
perform in an unclothed state for entertainment. Furthermore, HHS may
impose a penalty if it determines, based on the information provided in
a state report, that the state has not implemented and maintained such
policies and practices. If HHS determines that the state should be
subject to a penalty, it will reduce the state family assistance grant
by five percent or a lesser amount based on the degree of
noncompliance. States should note that the regulations at 45 CFR 262.4
through 262.7, concerning the processes for appealing a penalty,
presenting a reasonable cause justification, and submitting a
corrective compliance plan, apply to the new penalty added to 45 CFR
262.1.
Accordingly, we propose to add paragraph (16)(i) to Sec. 262.1(a)
to provide that a penalty of not more than five percent of the adjusted
SFAG will be applied for failure to report by February 22, 2014, the
state's implementation of policies and practices related to these
prohibited EBT transactions and to add paragraph (16)(ii) to provide
that a penalty likewise will be applied for FY
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2014 and each succeeding fiscal year if the state does not demonstrate
that it has implemented and maintained such policies and practices.
Note that if a state submits the initial report after February 22, 2014
(or a subsequently due report after February 22 of a subsequent year),
and also fails to demonstrate its implementation of policies and
practices, the combined penalty will not exceed five percent of its
adjusted SFAG. Conforming changes also are proposed in paragraph (c)(2)
to add reference to the penalties proposed in paragraphs (a)(16)(i) and
(ii).
Section 262.2 When do the TANF penalty provisions apply?
We propose to amend Sec. 262.2 to add new paragraph (e) indicating
that the penalty for failure to report on how the state is implementing
and maintaining policies and practices to prevent assistance from being
used in electronic benefit transfer transactions in specified locations
will be imposed for FY 2014 and each succeeding fiscal year. Compliance
requires the submission of an initial report by February 22, 2014, and
annually by February 22 of each subsequent year.
Section 262.3 How will we determine if a state is subject to a penalty?
We propose to amend Sec. 262.3 by adding a new paragraph (g) to
specify we will use the information provided in an annual state report
due by February 22, 2014, and annually thereafter, to determine whether
to impose a penalty authorized by section 409(a)(16) of the Social
Security Act. Note that this reporting requirement is distinct from the
provisions of Public Law 112-96 related to additional state plan
requirements (see Sec. 4004(c)).
Part 264--Other Accountability Provisions
Subpart A--What specific rules apply for other program penalties?
The proposed rule in part 264 explains in further detail what HHS
expects of states when implementing the new requirements of Public Law
112-96 by specifying the policies and procedures required, providing
relevant definitions and addressing consequences if a state fails to
meet the requirement.
Section 264.0 What definitions apply to this part?
In order to clarify the types of locations where states are
required to block the use of TANF assistance via electronic benefit
transfer transactions and to ensure that the policies and practices are
applied consistently between states, we propose to amend section
264.0(b).
We will incorporate the statutory definition of ``electronic
benefit transfer transaction,'' which is ``the use of a credit or debit
card service at an automated teller machine, point-of-sales terminal,
or access to an online system for the withdrawal of funds or the
processing of a payment for merchandise or service.'' The statutory
language is broad and questions have been raised as to whether the
definition includes TANF funds directly deposited into a recipient's
private bank account, and whether it is feasible for states and banks
to implement such a requirement, particularly if the recipient also
maintains non-TANF funds in the same account. Accordingly, we encourage
commenters to address the question of whether states and banks have, or
reasonably could have, the capacity to apply the EBT transaction
restrictions to assistance funds deposited in private bank accounts and
to monitor whether recipients use such funds in a prohibited manner.
As provided in the statute, in proposed paragraph (b), the term
``liquor store'' refers to any retail establishment which sells
exclusively or primarily intoxicating liquor, and does not include a
grocery store which sells both intoxicating liquor and groceries
including staple foods.
The statute provides exclusions to the phrase ``casino, gambling
casino, or gaming establishment,'' but does not provide a further
definition. We propose to interpret the statutory reference to
``casino, gambling casino, or gaming establishment'' to mean an
establishment with a primary purpose of accommodating the wagering of
money. Under the statutory definition provided in proposed paragraph
(b), this would not include a grocery store which also offers, or is
located within the same building or complex as casino, gambling or
gaming activities or other establishments where such activities are
incidental to the principal purpose of the business.
The statute is silent of the definition of ``retail establishment
which provides adult-oriented entertainment in which performers disrobe
or perform in an unclothed state to entertainment.'' To clarify the
intended locations to which restrictions apply, we add to proposed
paragraph (b) that this term means ``such an establishment that
prohibits the entrance of minors under the age specified by state
law.'' Therefore, a theater or cinema whose primary purpose is not to
provide adult-oriented entertainment, but may, for instance,
occasionally feature an unrated or X-rated movie, would be excluded
from this definition because minors are generally allowed to enter such
an establishment (though not permitted to attend the unrated or X-rated
film).
Section 264.60 What policies and procedures must a state implement to
prevent assistance use in electronic benefit transfer transaction in
locations prohibited by the Social Security Act?
We propose to add a new section 264.60 under subpart A. Under the
proposed paragraph, states are required to implement policies and
procedures to prevent assistance (defined at Sec. 260.31(a)) provided
with federal TANF or state TANF MOE funds from being used in any
electronic benefit transfer transaction in any: (a) Liquor store, (b)
casino, gambling casino or gaming establishment, (c) retail
establishment which provides adult-oriented entertainment in which
performers disrobe or perform in an unclothed state for entertainment.
As states consider the appropriate policies and practices that they
will implement to comply with the new requirements of Public Law 112-
96, we advise them to be mindful of the goals of the legislation. The
new requirements not only aim to ensure that cash assistance is used in
a manner consistent with the purposes of TANF, but also serve to
promote the integrity of the program and the responsible stewardship of
public funds. When HHS reviews state reports that outline their
policies and procedures, we will accept any reasonable approaches that
further these goals and comply with the statutory and regulatory
requirements. We note that a state has flexibility in determining
appropriate policies and practices to prevent the use of TANF
assistance in electronic benefit transfer transactions at specified
locations. At the same time, states' policies and practices must
prevent the use of TANF funds at the specified locations, while
ensuring reasonable access to cash assistance, as directed by Congress.
Below, we outline examples of approaches that HHS would accept as
complying with statutory and regulatory requirements; at the same time,
states have the option to elect other methods to achieve the goals of
the legislation.
Identifying Locations: When reporting policies and practices to
prevent the use of TANF assistance at any liquor store; casino,
gambling casino or gaming establishment; and retail establishment which
provides adult-oriented entertainment in which performers disrobe or
perform in an unclothed state for entertainment, states must describe
an initial and on-going process for identifying the establishments in
their
[[Page 7131]]
states that are subject to the requirements. Comments responding to the
RFPC reflected a number of challenges associated with identifying the
locations where access to TANF assistance via EBT transaction should be
prevented; these predominately related to inaccurate or limited
information in transaction data, e.g., wrong addresses, missing data
elements. Comments explained that retailers do not always send accurate
ATM location information to the third party processors and/or third
party processors do not consistently populate ATM data fields
accurately. Furthermore, commenters stated that ATM location
information can change each time an ATM is moved or there is a change
in ownership, which also makes it difficult to ensure that ATMs have
the restrictions applied. The Government Accountability Office's recent
report on TANF Electronic Benefit Cards (GAO-12-535, July, 2012)
confirms this in describing California's experience identifying
locations where EBT access would be blocked. State officials said that
the EBT transaction data sometimes contain addresses that are
misspelled or refer to the address of a retailer's corporate offices
rather than the locations where the transactions actually took place.
GAO also found that address information was complete for only 30
percent of transactions in Texas, but also estimate that about 70.4
percent of those addresses could be simply standardized. Furthermore,
while ATM transactions contain merchant category codes (MCCs), this
information has limitations because some ATMs have an MCC that
identifies it as a financial institution rather than referring to the
type of establishment where the ATM is located. GAO concludes that
``preventing unauthorized transactions can be time-intensive and is
impaired by flaws in available transaction data and other challenges.
Addressing the limitations we found in the transaction data that impede
the identification and monitoring of certain locations could require
significant resources.'' HHS understands these challenges, and we
encourage states to explore an array of approaches aimed at identifying
locations subject to restrictions. We would anticipate that a state's
methodology would involve multiple actions to identify the relevant
establishments, such as reviewing transaction records, conducting
Internet searches (e.g., searches of specific keywords associated with
the types of establishments identified in the statute), and other forms
of searches a state determines to be appropriate and feasible (e.g.,
visiting establishments). When possible, we recommend that TANF
agencies collaborate with state licensing agencies, such as a state's
gaming commission, for whatever information licensing agencies can
provide in efforts to develop a list of locations that are subject to
these requirements. When seeking to identify liquor stores, a TANF
agency may contact the state liquor authority to obtain a list of all
establishments with a liquor license; the TANF agency can then notify
all the merchants that they must follow procedures to prevent TANF
assistance from being used or accessed at their place of business
unless they notify the state agency that they do not fall within the
definition of ``liquor store.'' Finally, states will need to develop
on-going procedures for identifying new establishments to which the
state's requirements apply.
Commenters noted that while gaming authorities may have a list of
all affected gaming establishments, and liquor authorities may have a
listing that includes all liquor stores (though the list is likely to
be broader than just liquor stores), there may be no entity in the
state charged with regulating adult entertainment, and accordingly,
there may be no readily available list of such establishments. If that
is the case, then a state may choose to conduct internet searches using
key words as the principal way of identifying such establishments, but
if the state relies on such a methodology, it will be appropriate to
provide notice to identified entities so that they can inform states of
any misclassification.
We received a number of comments explaining that states do not have
the authority to block transactions that occur on sovereign tribal
lands in the state. While Congress did not apply the requirements in
Public Law 112-96 to tribal TANF programs, we believe it is the
responsibility of the state to develop appropriate policies for
preventing access to TANF cash assistance provided by state programs at
any ``liquor store,'' ``casino, gambling casino, or gaming
establishment'' or ``retail establishment which provides adult-oriented
entertainment in which performers disrobe or perform in an unclothed
state for entertainment,'' including those that are located on
sovereign tribal land. We encourage states to work with tribes to try
to prevent state TANF assistance use at the prohibited locations
located on sovereign tribal land.
We also face the question of how to address internet transactions.
We note that the statutory definition of ``electronic benefit transfer
transaction'' refers to ``access to an online system for the withdrawal
of funds or the processing of a payment for merchandise or a service''
in the establishments identified in the statute. It has been suggested
that the statute is only intended to apply to transactions occurring in
the specified establishments and not to internet transactions. While we
are mindful of the overall goals of the legislative provision, we
recognize that there may be significant practical issues that states
would face in any efforts to enforce restrictions on internet
transactions. Accordingly, we invite comments in response to this
Notice of Proposed Rulemaking on the issue of whether the restrictions
should extend to internet transactions, and if so, what mechanisms
might be available to states to enforce such restrictions.
Furthermore, many commenters recommended that regulations allow
states the flexibility to avoid imposing a restriction at an ATM or POS
terminal if such a restriction would limit the ability of recipients in
a geographic area to access their cash assistance. While one of the new
state plan requirements at Section 4004(c) of Public Law 112-96 conveys
a clear emphasis that states ensure adequate access to cash assistance
for recipients, we do not interpret this language as providing states
the option to avoid imposing a restriction at an ATM or POS terminal
located in any of the three types of specified locations. Rather, it
conveys a responsibility for states to take corrective actions to
increase locations where TANF recipients may access their cash
assistance if they find that there is an insufficient number of access
points in a geographic area. Commenters provided the following examples
of factors to take into consideration when aiming to ensure reasonable
access by applying exceptions to restrictions: The number of recipients
who would be affected if a location to access assistance is blocked and
the number of ATMs available in a community (e.g., if a community
within a defined geographic area or zip code has fewer than three
locations to access cash assistance, none of those locations would be
subject to any restrictions). One state TANF agency that has
implemented blocking measures commented that it ``maintains cash access
plans for each county in the state to ensure that recipients have
reasonable access to benefits. These plans are reviewed on an annual or
as-need basis. The plans were reviewed prior to and after the
deactivation of certain ATMs and it has been determined that sufficient
cash access continues to be maintained.''
[[Page 7132]]
Finally, we remind states of the other state plan requirement at
Section 4004(c) of Public Law 112-96, stating that a plan must also
include an explanation of how the state plans to ensure that recipients
of assistance ``have access to using or withdrawing assistance with
minimal fees or charges, including an opportunity to access assistance
with no fee or charges, and are provided information on applicable fees
and surcharges that apply to electronic fund transactions involving the
assistance, and that such information is made publicly available.''
Therefore, as they develop plans to ensure adequate access to cash
assistance, states must be sure to consider whether there is an
adequate number of locations where recipients may obtain cash
assistance at a minimal cost and at no cost. Comments conveyed that a
reasonable cash access fee is between $0.25 and $1.00. Furthermore,
most states offer a number of free ATM withdrawals per month, which
would be stipulated in a state's contract with its EBT vendor. The
Electronic Funds Transfer Association (EFTA) commented that a survey of
electronic payment program directors revealed that ``about 93% of [23]
responding states say that their TANF beneficiaries exhaust their
monthly cash in no more than three transactions.'' In July of 2011, the
median of all states' maximum monthly benefit levels for a single
parent family of three was $428, ranging from $170 in Mississippi to
$923 in Alaska. With an amount that is ``less than the estimated cost
of a modest two-bedroom apartment (based on HUD Fair Market Rents or
FMRs) in all states, and less than half of the FMR in 26 states,'' it
is plausible that a recipient would withdraw all of his or her monthly
benefits in few transactions (I. Finch & L. Schott, ``TANF Benefits
Fell Further in 2011 and Are Worth Much Less Than in 1996 in Most
States,'' Center on Budget and Policy Priorities, November 21, 2011).
If a state TANF agency has data that indicate that a majority of its
TANF beneficiaries withdraw all of their cash in fewer than three
transactions, it may consider providing three free transactions so that
most TANF beneficiaries would incur little or no cost.
Preventing Use of TANF Assistance via EBT transactions: Once a
state or local TANF agency has identified the businesses that are
subject to restrictions, the agency may implement one or a combination
of approaches that aim to prevent a recipient from accessing or using
his or her TANF assistance in EBT transactions at those locations. For
example, a TANF agency may choose to implement electronic or automated
prevention measures; this may involve the reprogramming of ATMs and POS
terminals so that they deny TANF EBT or EPC transactions in specified
locations. A TANF agency would need to notify relevant merchants that
they must communicate to third-party processors or ATM owners to block
bank identification numbers (BINs) associated with TANF benefit cards.
Alternately, if feasible, a TANF agency or its EBT vendor may choose to
contact the third-party processors who provide the network services to
those devices directly and request that they block the EBT BIN at
locations subject to restrictions. Regarding EPC, one commenter
explained that ``transaction servicers could block transactions by
matching the terminal ID of the incoming transaction against a list of
prohibited terminal IDs/locations provided by the State.''
Another option that does not require electronic blocking of ATMs or
POS terminals is to communicate to recipients and/or establishments
that recipients are not permitted to access their TANF benefits via EBT
transactions at the specified locations and enforce compliance with
appropriate penalties for violations. This may involve requiring
merchants to post signs next to terminals to inform TANF recipients of
the restrictions, or providing a list of restricted establishments to
recipients, which should be updated on a regular basis. However, if a
state's policies and practices do not electronically prevent access to
cash assistance at restricted locations, the state should consider the
need for procedures for monitoring compliance and taking action (e.g.,
warnings, penalties) when violations are identified. States are
encouraged to periodically evaluate the effectiveness of these policies
to prevent the use of TANF assistance via electronic benefit transfer
transactions at specified locations, and adjust policies as necessary.
We note that if a state chooses to implement policies and practices
that do not involve steps to electronically block or prevent access of
TANF assistance via EBT transfer, we encourage them to ensure that
recipients are informed and reminded of the restrictions on a regular
basis.
Monitoring: State reports of policies and practices should include
a description of implementation activities. For example, a state agency
may have in place procedures for auditing a certain percentage of
recipients' transaction records to determine compliance by individuals
and businesses; TANF agency staff or EBT/EPC vendors may review monthly
ATM activity reports, matching them against a list of terminal IDs or
addresses of restricted locations, to determine whether the owners and
processors complied with the request to reprogram ATMs. A state agency
may also conduct random site visits to establishments that are subject
to the requirements.
Enforcement of Compliance: In order to fulfill the goals of the
legislation, a state should have mechanisms in place to maintain a
state's policies to prevent TANF assistance from being used or accessed
in restricted locations. For example, a state may choose to impose
penalties on the parties responsible for ensuring that ATMs and POS
terminals are reprogrammed (e.g., merchants, ATM owners or third-party
processors) if they do not block transactions with state EBT or EPC
cards from being processed at relevant ATMs and POS terminals. Or if a
state chooses to implement measures that do not involve steps to
electronically block EBT access, then the state may choose to impose
penalties on merchants who do not post signs informing TANF recipients
that they cannot use their EBT cards or EPC to purchase goods at that
establishment or access funds at an ATM located on the premises. If
authorized by state law, the state could impose financial penalties in
relation to entities that are subject to state licensing requirements.
If a TANF agency develops policies under which it imposes a sanction or
penalty on a recipient who is found to have used his or her EBT or EPC
card at a prohibited location, such action would be subject to
applicable appeals procedures needed to meet due process requirements.
Once a state has implemented policies and practices to comply with
these new requirements, in addition to the four areas described above
(i.e., identifying locations; methods to prevent use of TANF assistance
via EBT transactions in restricted locations; monitoring; and
enforcement of compliance), we encourage states to share any
information they develop concerning the effectiveness of policies and
enforcement practices (e.g., data related to the incidence of the use
of TANF assistance via EBT transactions in restricted locations),
whether the state was able to achieve desired outcomes, and any
potential plans to modify policies in order to address challenges or
improve effectiveness. This information may be useful to other states
as they consider adjustments to their procedures over time.
[[Page 7133]]
Section 264.61 What happens if a state fails to report or implement and
maintain policies and practices required in Section 264.60 of this
Subpart?
We propose to add a new section 264.61 to address the penalty
associated with the new requirements. Under paragraph (a), HHS will
impose a penalty of not more than five percent of a state's adjusted
SFAG for failure to submit by February 22, 2014 a report demonstrating
the state's implementation of policies and practices to prevent EBT use
in the locations specified in Public Law 112-96. Under paragraph (b),
HHS will impose a penalty of not more than five percent of a state's
adjusted SFAG each fiscal year succeeding FY 2014 in which the state
does not demonstrate it has implemented and maintained the required
policies and practices. In order to meet this requirement, states'
reports must fully explain the policies and practices that are being
implemented and maintained; reports should address each of the
following four areas: Identifying locations; methods to prevent use of
TANF assistance via EBT transactions in restricted locations;
monitoring; and enforcement of compliance. Note that if a state submits
a report after February 22 and also fails to demonstrate its
implementation of policies and practices, the combined penalty will not
exceed five percent of its adjusted SFAG.
All penalties will be imposed in accordance with 45 CFR Part 262,
which provides states with procedures for appealing a penalty, and
submitting a reasonable cause justification or corrective compliance.
Furthermore, Section 409(a)(16)(C) of the Act, as amended by Section
4004(b) of Public Law 112-96 provides HHS the discretion to reduce the
penalty amount based on the degree of noncompliance of the state.
Section 409(a)(16)(C) of the Act, as amended by Section 4004(b) of
Public Law 112-96, also specifies that ``Fraudulent activity by any
individual in an attempt to circumvent the policies and practices
required by Section 408(a)(12) shall not trigger a state penalty under
subparagraph (A);'' as such, HHS will not base any penalty on such
information.
V. Paperwork Reduction Act
This proposed rule establishes new information collection
requirements in Sec. 262.3(g). As required by the Paperwork Reduction
Act of 1995, codified at 44 U.S.C. 3507, the Administration for
Children and Families will submit a copy of these sections to the
Office of Management and Budget (OMB) for review and they will not be
effective until they have been approved and assigned a clearance
number.
----------------------------------------------------------------------------------------------------------------
Average
Number of Yearly burden per Total burden
Requirement respondents submittals respondent hours
(hours)
----------------------------------------------------------------------------------------------------------------
Annual reporting on policies and practices to 54 1 40 2,160
prevent TANF assistance from being used in
electronic benefit transfer transactions in
liquor stores; casinos, gambling casinos, or
gaming establishments; or any retail
establishment which provides adult-oriented
entertainment in which performers disrobe or
perform in an unclothed state for entertainment
----------------------------------------------------------------------------------------------------------------
We estimate the costs of implementing these proposed requirements
would be approximately $108,000 annually. We calculated this estimate
by multiplying 2,160 hours by $50 (average cost per hour).
With respect to these provisions, the Administration for Children
and Families will consider comment by the public on this collection of
information in the following areas:
Evaluating whether the proposed collection is necessary
for the proper performance of the functions of ACF, including whether
the information will have practical utility;
Evaluating the accuracy of ACF's estimate of the proposed
collection of information, including the validity of the methodology
and the assumptions used;
Enhancing the quality, usefulness, and clarify of the
information to be collected; and
Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technology, e.g.,
permitting electronic submission of responses.
OMB is required to make a decision concerning the collection of
information contained in this proposed regulation between 30 and 60
days after publication of this document in the Federal Register.
Therefore, a comment is best assured of having its full effect if OMB
receives it within 30 days of publication. This does not affect the
deadline for the public to comment to the Department on the
regulations. Written comments to OMB for the proposed collection of
information should be sent directly to the following: Office of
Management and Budget, either by fax to 202-395-6974 or by email to
OIRA at [email protected]. Please mark faxes and emails to the
attention of the desk officer for ACF.
VI. Regulatory Flexibility Analysis
The Secretary certifies under 5 U.S.C. 605(b), as enacted by the
Regulatory Flexibility Act (Pub. L. 96-354), that this proposed
regulation will not result in a significant impact on a substantial
number of small entities. We note that any impact on businesses
emanates from statutory mandate and the policies that states adopt in
implementing the statutory requirement. HHS sought information related
to concerns of businesses resulting from restrictions on TANF EBT
access when we released a Request for Public Comment on April 25, 2012.
A limited number of commenters addressed this issue, and most conveyed
that they are not aware of any concerns at this time. In fact, the
Western Center on Law and Poverty stated that in California, which
prohibits TANF EBT access to 12 location types, many banned businesses
expressed support for the policy. One commenter, the Electronic Funds
Transfer Association (EFTA), did however summarize concerns of EBT
vendors, such as Xerox and J.P. Morgan. EFTA stated that EBT vendors
have expressed concerns over the expense of implementing the new
requirements and notes that any system modifications that may be
required would be extra[hyphen]contractual for the processors and their
states; despite the financial opportunity this presents, EBT vendors
say that such modifications are not cost beneficial for either them or
the states.
In order to address these concerns, HHS has drafted the proposed
regulations in a manner that minimizes the impact on businesses,
including
[[Page 7134]]
small businesses, by providing states flexibility when implementing
policies and practices that comply with the new requirements. In
particular, states have the flexibility to implement approaches that do
not place significant burden or impose large costs on its EBT vendor,
small businesses, or any one particular party. Therefore any costs
resulting from policies under which states require action by small
entities, including small businesses, are the result of choices states
make when implementing the statutory requirements.
The primary impact of this proposed regulation is on state
governments. State governments are not considered small entities under
the Act.
VII. Regulatory Impact Analysis
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if the
regulation is necessary, to select the regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility. These proposed rules meet the criteria for a
significant regulatory action under E.O. 12866. Therefore, the Office
of Management and Budget has reviewed this rule.
Need for the Regulation
These regulations incorporate statutory changes to the TANF program
enacted in the Middle Class Tax Relief and Job Creation Act of 2012.
These proposed regulations are limited to the penalty provisions of
Section 4004 of Public Law 112-96. Because states have a range of
systems for disbursement of assistance, and a number of questions have
arisen regarding the applicability and requirements of the statutory
language, the proposed regulations are being released in order to
clarify for states the information they should submit in order to avoid
a penalty.
ACF does not believe there would be a significant economic impact
from this proposed regulatory action. The regulatory requirement is to
implement, maintain, and report on policies and practices that prevent
the use or withdrawal of TANF assistance in any electronic benefit
transfer transactions in the three specified locations. The costs
associated with implementation, and the parties that bear these costs,
largely depend on the policies and practices a state chooses to in
order to comply with the statutory requirements. For example, if a
state chooses to take on a centralized oversight role, it will face
additional resources at the agency-level; at the same time, if it
chooses to place the responsibility to prevent assistance from being
used in restricted locations via EBT transactions on its EBT service
provider, additional contract costs will need to be negotiated. Or if a
state chooses to direct ATM and business owners to take the necessary
steps to reprogram ATM and POS terminals within the restricted
establishments, then costs are passed on to these parties.
At the same time, states have flexibility in policies and practices
they choose to implement in order to comply with the statutory
requirements that prevent assistance (defined at Sec. 260.31(a))
provided with federal TANF or state TANF MOE funds from being used in
any electronic benefit transfer transaction in any liquor store;
casino, gambling casino or gaming establishment; and retail
establishment which provides adult-oriented entertainment in which
performers disrobe or perform in an unclothed state for entertainment.
States may develop approaches that are cost effective and fit within
the existing structure of state operations, yet at the same time meet
the requirements of the law.
Nevertheless, regardless of the approach a state may take when
implementing policies in order to comply with the statute and
regulations, there will be, at a minimum, administrative costs for the
state agency responsible for administering the TANF benefits. We
believe that states will spend funds on the following types of costs to
implement the changes in order to complete the annual progress report
to ACF:
Costs for identifying the prohibited locations;
Costs to modify existing tracking of recipient use of
electronic benefits and/or electronic banking;
Costs to monitor recipient use of electronic benefit
transfers;
Costs to investigate and follow up on violations of
electronic benefit transfers;
Cost of processing and responding to appeals.
With regards to the reporting requirement, based on our estimate
described under the Paperwork Reduction Act section of this preamble,
the total costs for all states to comply with this requirement would
fall well below the $100 million threshold.
The statutory requirements and proposed regulations also provide
potential benefits that coincide with goal of financial responsibility.
For example, the policies and practices that state implement may result
in reductions in inappropriate expenditures of government funds, and
provide opportunities to educate recipients on budgeting (emphasizing
to recipients that they should ensure assistance is spent only on basic
needs) and ways to minimize access fees.
VIII. Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that a covered agency prepare a budgetary impact statement before
promulgating a rule that includes any federal mandate that may result
in the expenditure by state, tribal and local governments, in the
aggregate, or by the private sector, of $100 million or more in any one
year. ACF has determined that this proposed rule would not result in
the expenditure by state, local and tribal governments, in the
aggregate, or by the private sector, of more than $100 million in any
one year.
IX. Congressional Review
This regulation is not a major rule as defined in 5 U.S.C. Chapter
8.
X. Assessment of Federal Regulation and Policies on Families
Section 654 of The Treasury and General Government Appropriations
Act of 1999 (Pub. L. 105-277) requires federal agencies to determine
whether a proposed policy or regulation may negatively affect family
well-being. If the agency's determination is affirmative, then the
agency must prepare an impact assessment addressing seven criteria
specified in the law.
This regulation will not have an impact on family well-being as
defined in the legislation.
XI. Executive Order 13132
Executive Order 13132, Federalism, prohibits an agency from
publishing any rule that has Federalism implications if the rule either
imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. We do not believe the regulation
has Federalism implications as defined in the Executive Order. However,
consistent with Executive Order 13132, the Department specifically
solicits and welcomes comments from state and local government
officials on this proposed rule.
[[Page 7135]]
List of Subjects in 45 CFR Parts 262 and 264
Administrative practice and procedures, Day care, Employment, Grant
programs-social programs, Loan programs-social programs, Manpower
training programs, Penalties, Public assistance programs, Reporting and
recordkeeping requirements, Vocational education.
(Catalog of Federal Domestic Assistance Program Number 93.558
Temporary Assistance for Needy Families)
Dated: January 13, 2014.
Mark Greenberg,
Acting Assistant Secretary for Children and Families.
Approved: January 15, 2014.
Kathleen Sebelius,
Secretary.
For the reasons set forth in the preamble, we propose to amend
Parts 262 and 264 of 45 CFR as follows:
PART 262--ACCOUNTABILITY PROVISIONS-GENERAL
0
1. The authority citation for 45 CFR part 262 is revised to read as
follows:
Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C. 606, 609 and 610;
Pub. L. 109-171; Pub. L. 112-96.
0
2. Amend Sec. 262.1 by adding paragraph (a)(16) and revising paragraph
(c)(2) to read as follows:
Sec. 262.1 What penalties apply to states?
(a) * * *
* * * * *
(16)(i) A penalty of not more than five percent of the adjusted
SFAG (in accordance with Sec. 264.61(a)), for failure to report by
February 22, 2014 on the state's implementation and maintenance of
policies and practices required in Sec. 264.60 of this chapter.
(ii) A penalty of not more than five percent of the adjusted SFAG
(in accordance with Sec. 264.61(b)), for FY 2014 and each succeeding
fiscal year in which the state does not demonstrate that it has
implemented and maintained policies and practices required in Sec.
264.60 of this chapter.
* * * * *
(c) * * *
0
(2) We will take the penalties specified in paragraphs (a)(3), (a)(4),
(a)(5), (a)(6), (a)(8), (a)(9), (a)(10), (a)(11), (a)(12), (a)(13),
(a)(14), (a)(15), and (a)(16) of this section by reducing the SFAG
payable for the fiscal year that immediately follows our final
decision.
* * * * *
0
3. Amend Sec. 262.2 by adding paragraph (e) to read as follows:
Sec. 262.2 When do the TANF penalty provisions apply?
* * * * *
0
(e) In accordance with Sec. 264.61(a) and (b), the penalty specified
in Sec. 262.1(a)(16) will be imposed for FY 2014 and each succeeding
fiscal year.
0
4. Amend Sec. 262.3 by adding paragraph (g) as follows:
Sec. 262.3 How will we determine if a State is subject to a penalty?
* * * * *
(g) To determine if a State is subject to a penalty under Sec.
262.1(a)(16), we will use the information provided in annual state
reports due by February 22, 2014, and annually thereafter in accordance
with section 409(a)(16) of the Social Security Act. State reports must
address the policies and practices that are being implemented and
maintained with respect to each of the following: Identifying
locations; methods to prevent use of TANF assistance via EBT
transactions in restricted locations; monitoring; and enforcement of
compliance.
PART 264--OTHER ACCOUNTABILITY PROVISIONS
0
5. The authority citation for 45 CFR part 264 is revised to read as
follows:
Authority: 31 U.S.C. 7501 et seq.; 42 U.S.C. 608, 609, 654,
1302, 1308, and 1337.
0
6. Amend Sec. 264.0(b) to add definitions of Casino, gambling casino,
or gaming establishment; Electronic benefit transfer transaction;
Liquor Store; and Retail establishment which provides adult-oriented
entertainment in which performers disrobe or perform in an unclothed
state for entertainment in alphabetical order to read as follows:
Sec. 264.0 What definitions apply to this part?
* * * * *
(b) * * *
Casino, gambling casino, or gaming establishment means an
establishment with a primary purpose of accommodating the wagering of
money. It does not include:
(i) A grocery store which sells groceries including staple foods
and which also offers, or is located within the same building or
complex as, casino, gambling, or gaming activities; or
(ii) Any other establishment that offers casino, gambling, or
gaming activities incidental to the principal purpose of the business.
* * * * *
Electronic benefit transfer transaction means the use of a credit
or debit card service, automated teller machine, point-of-sales
terminal, or access to an online system for the withdrawal of funds or
the processing of a payment for merchandise or a service.
* * * * *
Liquor Store means any retail establishment which sells exclusively
or primarily intoxicating liquor. Such term does not include a grocery
store which sells both intoxicating liquor and groceries including
staple foods (within the meaning of section 3(r) of the Food and
Nutrition Act of 2008 (7 U.S.C. 2012(r))).
Retail establishment which provides adult-oriented entertainment in
which performers disrobe or perform in an unclothed state for
entertainment means such an establishment that prohibits the entrance
of minors under the age specified by state law.
* * * * *
0
7. Add Sec. 264.60 and Sec. 264.61 to subpart A to read as follows:
Sec. 264.60 What policies and practices must a state implement to
prevent assistance use in electronic benefit transfer transactions in
locations prohibited by the Social Security Act?
Pursuant to section 408(a)(12) of the Act, states are required to
implement policies and procedures to prevent assistance (defined at
Sec. 260.31(a)) provided with federal TANF or state TANF MOE funds
from being used in any electronic benefit transfer transaction in any:
(a) Liquor store
(b) Casino, gambling casino or gaming establishment
(c) Retail establishment which provides adult-oriented
entertainment in which performers disrobe or perform in an unclothed
state for entertainment.
Sec. 264.61 What happens if a state fails to report or implement and
maintain policies and practices required in Sec. 264.60 of this
subpart?
(a) Pursuant to section 409(a)(16) of the Act and in accordance
with 45 CFR part 262, a penalty of not more than five percent of the
adjusted SFAG will be imposed for failure to report by February 22,
2014 and each succeeding fiscal year on the state's implementation of
policies and practices required in Sec. 264.60. The penalty will be
imposed in the succeeding fiscal year subject to Sec. 262.4(g) of this
chapter.
(b) Pursuant to section 409(a)(16) of the Act and in accordance
with 45 CFR part 262, a penalty of not more than five percent of the
adjusted SFAG will be imposed for FY 2014 and each succeeding fiscal
year in which the state fails to demonstrate the state's implementation
of policies and practices required in Sec. 264.60. The penalty will be
imposed in the
[[Page 7136]]
succeeding fiscal year subject to Sec. 262.4(g) of this chapter.
[FR Doc. 2014-02488 Filed 2-4-14; 11:15 am]
BILLING CODE 4184-01-P