05-7450. Social Security Disability Program Demonstration Project: Benefit Offset Pilot Demonstration

AGENCY:

Social Security Administration.

ACTION:

Notice.

SUMMARY:

We announce a demonstration project relating to the Social Security disability program under title II of the Social Security Act (the Act). In this demonstration, called the Benefit Offset Pilot Demonstration, we will test modifications to current program rules that we apply to title II disability beneficiaries who work. We will also modify current rules for paying outcome payments to providers of services under the Ticket to Work and Self-Sufficiency program (Ticket to Work program). We are conducting this project under the demonstration authority provided in section 234 of the Act.

EFFECTIVE DATES:

We anticipate that we will implement the Benefit Offset Pilot Demonstration on or about May 1, 2005.

FOR FURTHER INFORMATION CONTACT:

Mark Green by e-mail at [e-mail], by telephone at [phone] or by mail at Social Security Administration, Office of Program Development and Research, 3520 Annex Building, 6401 Security Boulevard, Baltimore, MD 21235.

SUPPLEMENTARY INFORMATION:

The Benefit Offset Pilot Demonstration

In this demonstration project, we will apply alternate rules for treating the work activity of beneficiaries under the title II disability program. Our ultimate goal is to enable more beneficiaries to return to work and maximize their employment, earnings and economic independence. The project will test the effects of reducing benefits $1 for every $2 of a beneficiary's earnings above the Substantial Gainful Activity (SGA) amount when title II benefits otherwise would not be payable during the disability beneficiary's reentitlement period. This benefit offset will be provided in concert with other support services, such as benefits counseling. The demonstration also will test the effects of extending the duration of the reentitlement period from the current 36 months to 72 months. The demonstration also will test the effects of altering current rules that we use in continuing disability reviews. Only beneficiaries selected for the treatment group under the project will be eligible for the demonstration provisions. We will also modify the rules for paying outcome payments to providers participating in the Ticket to Work program who have accepted tickets from beneficiaries in the treatment group. We are conducting this demonstration project in the States of Connecticut, Utah, Vermont and Wisconsin.

This pilot demonstration is the beginning stage of demonstration activities that we plan to conduct to test the effects of a benefit offset as an alternative approach for treating work activity of title II disability beneficiaries. Information available from this pilot demonstration will be used to assist in the development of a more expansive demonstration project that we plan on conducting. We plan to conduct a demonstration project testing alternate methods of treating work activity in the title II disability program at a nationally representative sample of sites. We intend to enter into a contract to obtain assistance in the design, implementation, evaluation and management of this project, which will test a range of employment supports in combination with a $1 reduction in benefits for every $2 in earnings for individuals receiving disability benefits under title II of the Act. We estimate that this national demonstration project will begin in 2006. The contractor for the national demonstration project will carefully consider the information available from this pilot project.

In the Benefit Offset Pilot Demonstration, we have entered into contracts with Connecticut, Utah, Vermont and Wisconsin, to assist us in conducting a pilot demonstration designed to test a benefit offset in concert with various support services and inform the planning phases of the national demonstration. In this pilot demonstration, we are testing the effectiveness of certain modifications of title II disability program rules and a requirement under section 1148 of the Act. Our goal is to enable more beneficiaries to return to work and maximize their employment, earnings and economic independence. For title II disability beneficiaries who are participating in the treatment group of the demonstration project, we will waive title II rules that provide that we will stop benefits for any month, after the third month, in which a beneficiary performs SGA during the reentitlement period, and rules regarding the duration of the reentitlement period. In addition, we will waive certain rules relating to continuing disability reviews. We also will waive rules regarding payments to employment networks under the Ticket to Work program.

We are conducting the Benefit Offset Pilot Demonstration under the authority of section 234 of the Act. Section 234 of the Act directs the Commissioner of Social Security to carry out experiments and demonstration projects to determine the relative advantages and disadvantages of, among other approaches, various alternative methods of treating work activity of individuals entitled to title II benefits based on disability, including such methods as a reduction in benefits based on earnings, designed to encourage these beneficiaries to return to work.

Section 234 of the Act authorizes the Commissioner to waive compliance with the benefit requirements of title II of the Act and the requirements of section 1148 of the Act as they relate to the program established under title II, and authorizes the Secretary of Health and Human Services to waive compliance with the benefit requirements of title XVIII of the Act, insofar as is necessary for a thorough evaluation of the alternative methods under consideration.

Participation in the Benefit Offset Pilot Demonstration

To participate in the Benefit Offset Pilot Demonstration an individual must be entitled to title II benefits based on disability and be enrolled in the Benefit Offset Pilot Demonstration. Enrollment will be a function of the four States that are participating in the demonstration. The following rules on eligibility for participation in the demonstration project also will apply:

• Individuals who are entitled to title II disability benefits but whose benefits are suspended because of performance of SGA during the reentitlement period will be eligible to participate in the project.
• Beneficiaries whose 36-month reentitlement period has ended but who are still entitled to title II disability benefits will be eligible to participate in the project, provided that the beneficiary is enrolled as a project participant prior to the close of the 71st month following the end of his or her trial work period.
• Concurrent title II/title XVI beneficiaries will not be eligible to participate in the project.
• Beneficiaries for whom we have already started a continuing disability review will be eligible to participate in the project, but we will complete the continuing disability review in accordance with current rules.
• Beneficiaries who have received a medical cessation determination or decision will not be eligible to participate in the project unless, on appeal, they subsequently receive an administrative determination or decision that their disability continues.

While consent of participants is not a requirement of demonstration projects under section 234, participation in this demonstration will be through voluntary written consent. Title II disability beneficiaries who are eligible for statewide programs providing employment support services, such as the State vocational rehabilitation (VR) agency program and the Benefits Planning, Assistance and Outreach program in the State, will be asked by the State programs to volunteer for the demonstration project. Beneficiaries who volunteer for the project will be randomly assigned to treatment and control groups. The treatment group will receive State-specific employment supports and will be eligible for the benefit offset and other title II disability program waivers, while the control group will receive only the employment supports. Since these employment supports are provided through statewide programs, individuals do not have to participate in the demonstration project to be eligible for them.

The individual's consent to participate in the Benefit Offset Pilot Demonstration may be withdrawn by the individual, in writing, at any time. If an individual has withdrawn his or her consent or is no longer eligible for the demonstration project according to the terms of the informed consent, we will apply all the relevant provisions of title II and section 1148 of the Act beginning with the first day of the month following the month in which the revocation is signed or the individual ceases to be eligible for the demonstration project.

Alternate Title II Program Rules That Apply to Participants in the Benefit Offset Pilot Demonstration

1. The Reentitlement Period

Current rules provide an individual entitled to title II benefits based on disability with an additional period, immediately following the individual's completion of 9 months of trial work, during which the individual can continue to test his or her ability to work if the individual has a disabling impairment. Section 223(a)(1) and sections 202(d)(1), (e)(1), and (f)(1) of the Act provide that this additional period, known as the reentitlement period, ends after 36 months or, if earlier, when the individual ceases to have a disabling impairment. Under these sections of the Act, an individual's performance of SGA during the reentitlement period will not terminate his or her entitlement to disability benefits. However, section 223(e) of the Act provides that benefits may not be paid for any month, after the third month, in which the individual engages in SGA during the reentitlement period. Our regulation at 20 CFR 404.1592a reflects these provisions of the Act.

Under section 404.1592a(a)(1) of our regulations, the first month that an individual entitled to title II disability benefits engages in SGA following completion of a 9-month trial work period, we will find that the individual's disability ceased because he or she has demonstrated the ability to do SGA. If the month disability ceased due to the performance of SGA occurs after the reentitlement period, entitlement to and payment of benefits will terminate with the second month after the month disability ceased. There are different rules if the month disability ceased due to the performance of SGA occurs during the reentitlement period. In this situation, section 404.1592a(a)(3) provides that we will find that the individual's entitlement to disability benefits terminates in the first month in which the individual engages in SGA after the end of the reentitlement period.

If we determine that a beneficiary's disability ceased during the reentitlement period because he or she performed SGA, section 404.1592a(a)(2) provides that the beneficiary will be paid benefits for the first month after the trial work period in which the beneficiary engages in SGA and for the two succeeding months, whether or not the beneficiary does SGA in those months. These three months are known as the “grace period.” After the grace period, we will not pay benefits for any month during the reentitlement period in which the beneficiary does SGA. However, we will pay benefits for any month during the reentitlement period in which the beneficiary does not do SGA. In determining whether an individual does SGA in a month after the grace period, we will consider only the individual's work in, or earnings for, that month. We will not apply the rules regarding averaging of earnings or unsuccessful work attempts.

Section 404.1592a(b) provides that the reentitlement period ends with the earlier of:

• The month before the first month an individual's impairment no longer exists or is not medically disabling; or
• The last day of the 36th month following the end of the individual's trial work period.

We are waiving specific provisions relating to the reentitlement period for this demonstration project. First, we are waiving the provisions of section 223(e)(1) of the Act and 20 CFR 404.401a and 404.1592a(a)(2)(i) that provide that, after the grace period, we will not pay benefits for any month during the reentitlement period in which the beneficiary does SGA. For project participants selected for the treatment group, we are waiving these provisions to permit the payment of benefits for months during the reentitlement period in which the beneficiary does SGA, subject to the application of a benefit offset. Under the benefit offset, we will reduce the amount of the beneficiary's monthly title II disability benefits by $1 for every $2 of the beneficiary's earnings above the SGA threshold amount (for 2004, $830 per month for non-blind beneficiaries and $1350 per month for blind beneficiaries). We will determine the amount of monthly title II disability benefits that would have been payable to the beneficiary had the beneficiary not engaged in SGA, using the current title II program rules, including the rules in 20 CFR 404.401 et seq. regarding deductions, reductions, and nonpayment of benefits. We will apply the benefit offset to the disability benefits that would have been payable for the month had the beneficiary not engaged in SGA. This waiver will be effective only for benefits for months that begin after the month in which the disability beneficiary is enrolled as a participant in the treatment group of the project.

We also are waiving the provisions in section 223(e)(2) of the Act and 20 CFR 404.401a and 404.1592a(a)(2)(ii), which provide that title II benefits of dependents entitled on the earnings record of an individual entitled to disability insurance benefits will not be payable for any month for which the individual's disability insurance benefits are not payable under the Act and regulations because he or she engages in SGA during the reentitlement period. For persons entitled to dependents' benefits based on the earnings record of a disability insurance beneficiary who is a participant in the treatment group, we are waiving these provisions of the Act and regulations to permit the payment of such dependents' benefits for months in which the disability insurance beneficiary does SGA after the grace period and during his or her reentitlement period. Using the current title II program rules, including the rules in 20 CFR 404.401 et seq., we will pay the monthly dependents' benefits that would have been payable had the disability insurance beneficiary not engaged in SGA. This waiver will be effective only for dependents' benefits for months that begin after the month in which the disability insurance beneficiary is enrolled as a participant in the treatment group of the project.

In addition, for the purpose of this demonstration project, we are waiving the provisions of sections 223(a)(1) and (e)(1) and sections 202(d)(1), (e)(1), and (f)(1) of the Act and 20 CFR 404.1592a(b) that limit the duration of the reentitlement period to 36 months. We are waiving these provisions for the purpose of providing a reentitlement period of up to 72 months for project participants selected for the treatment group. For these project participants, the reentitlement period will end with the earliest of the following:

• The month before the first month an individual's impairment no longer exists or is not medically disabling; or
• The last day of the 72nd month following the end of the trial work period.

For a beneficiary whose 36-month reentitlement period has ended and who is enrolled as a participant in the treatment group prior to the close of the 71st month following the end of his or her trial work period, we will provide the beneficiary with an extended reentitlement period of up to 72 months beginning with the month immediately following the end of his or her trial work period. However, as explained above, the alternate rules for paying disability benefits subject to the application of the benefit offset (and for paying dependents' benefits, if applicable) will be effective only for benefits for months that begin after the month in which the disability beneficiary is enrolled as a participant in the treatment group of the project. Therefore, if a disability beneficiary in the treatment group (including the aforementioned category of beneficiary) does SGA in or before the month in which he or she is enrolled as a project participant, and such month of SGA occurs after the grace period and during the extended reentitlement period, we will suspend the payment of disability benefits (and any dependents' benefits, if applicable) for that month under the current title II program rules.

Finally, to reduce the reporting burden we are waiving the provision in 20 CFR 404.1592a(a)(2) that provides that, in deciding whether a beneficiary does SGA in a particular month after the grace period and within the reentitlement period for purposes of determining whether benefits should be paid for that month, we will consider only the work in, or earnings for, that month, and we will not apply the provision regarding averaging of earnings. For a project participant who works after the grace period and within the reentitlement period, we will consider the individual's earnings on an annual basis and use averaging to determine whether the individual's average monthly earnings are above the SGA amount and, if so, to calculate the monthly benefit amount. We will pay benefits based on the individual's estimate of annual earnings and make necessary adjustments when the year ends, or sooner if relevant information is available.

In order to ensure that beneficiaries are not disadvantaged by their participation in this demonstration project, the alternate title II program rules will affect neither entitlement to a trial work period nor the payment of benefits during the grace period for beneficiaries selected for the treatment group. The benefit offset will be effective beginning with the month immediately following the month in which the beneficiary is enrolled as a participant in the treatment group. However, the benefit offset will not take effect any earlier than with the first month in which the beneficiary engages in SGA after both the trial work period and the grace period. In addition, the waivers under this demonstration project will not affect the period of extended Medicare coverage that applies to an individual whose entitlement to title II disability benefits has terminated due to the performance of SGA after the reentitlement period and who continues to have a disabling impairment. The period of extended Medicare eligibility for such an individual will continue to be determined as though the reentitlement period were 15 months, as required under section 226(b) of the Act. Beneficiaries who participate in this demonstration will continue to be entitled to at least 93 months of hospital insurance and supplementary medical insurance under Medicare after the last month of the trial work period if they continue to have a disabling impairment.

2. Continuing Disability Reviews

We are required under section 221(i) of the Act and our regulations to periodically reevaluate a disability beneficiary's impairment(s) to determine whether he or she continues to be under a disability. We call this evaluation a continuing disability review (CDR). We conduct CDRs at regularly scheduled intervals. However, we may begin a CDR at other times if circumstances warrant. Our regulations at 20 CFR 404.1589 and 404.1590 explain when we will begin CDRs for title II disability beneficiaries. If we determine in a CDR that the individual is no longer under a disability, in most cases benefits will stop.

We are waiving section 221(i) and related provisions of the Act and 20 CFR 404.1589 and 404.1590 for the purpose of suspending the initiation of CDRs for participants in the Benefit Offset Pilot Demonstration for the period up to and including a participant's extended reentitlement period. This means that we will not begin a CDR for a participant in the treatment group either prior to or during his or her extended reentitlement period.

Alternate Rule for Outcome Payments Under the Ticket to Work Program

Under the Ticket to Work program under section 1148 of the Act, we make milestone and/or outcome payments to a provider of services which is serving as an employment network under that program and to which a disability beneficiary has assigned a ticket if certain conditions are met. Section 1148(h) of the Act and our regulations at 20 CFR 411.500, 411.525 and 411.575 provide that an employment network to which a beneficiary has assigned a ticket will be eligible for an outcome payment for each month (up to a maximum of 60 months) for which title II disability benefits and Federal Supplemental Security Income cash benefits based on disability or blindness are not payable to the individual because of work or earnings. Thus, an employment network to which a title II-only beneficiary has assigned a ticket can receive an outcome payment for any month during the beneficiary's reentitlement period for which title II disability benefits are not payable to the beneficiary because he or she is engaging in SGA.

For a participant in the demonstration project, we will not stop the payment of benefits for months during the beneficiary's extended reentitlement period because the beneficiary engages in SGA. Instead, we will reduce benefits by $1 for every $2 of the beneficiary's earnings above the SGA threshold amount. Thus, for employment networks serving beneficiaries who are project participants, a month of SGA that would otherwise generate an outcome payment for the employment network would not, because of the benefit offset, qualify as an outcome payment month under the Ticket to Work Program, unless the beneficiary's earnings are sufficient to reduce monthly benefits to zero after application of the benefit offset. This could impose an undue burden on employment networks serving these beneficiaries, since they would not receive outcome payments under the Ticket to Work program for which they would otherwise be eligible if the beneficiaries were not project participants.

Therefore, for this demonstration project, we are waiving the requirement in section 1148(h) of the Act and 20 CFR 411.500(b)-(e), 411.525(a)(1)(i), and 411.575(b)(1)(i)(A) that an outcome payment may be made to an employment network to which a title II beneficiary has assigned a ticket, only for a month for which title II disability benefits are not payable to the beneficiary because of work or earnings. For an employment network to which a beneficiary participating in this demonstration project has assigned a ticket, we are waiving this requirement for the purpose of permitting payment of an outcome payment for any month for which the employment network would have been eligible for such a payment if the beneficiary were not a participant in this demonstration project. If, but for this demonstration project, title II disability benefits would not have been payable to the beneficiary for a particular month because of the beneficiary's work or earnings, we will pay an outcome payment to the employment network for that month if all other requirements for payment under the Ticket to Work program are met.

We also may pay milestone and/or outcome payments to a State VR agency which is serving a beneficiary under the Ticket to Work program if the State agency has elected to be paid under an employment network payment system with respect to that beneficiary. Therefore, this waiver also will apply to a State VR agency to which a beneficiary participating in the project has assigned a ticket and which has elected to be paid under an employment network payment system with respect to that beneficiary.

Objectives of the Benefit Offset Pilot Demonstration

Through this demonstration project we expect to:

• Determine the effectiveness of the alternate rules in encouraging title II disability beneficiaries to return to work or increase their earnings;
• Obtain information that can be used in planning the national demonstration project;
• Support the President's New Freedom Initiative; and
• Further the goal of supporting work at all stages of our disability process.

We will work with the contractors to develop appropriate measurements of the effects of the alternate rules to be tested under this demonstration project. The evaluation of the project will focus on issues such as the rate of return to work by project participants, their earnings and ability to sustain their work attempts, and the rate at which they leave cash benefits because of work. We also will be examining for whom these interventions appear to be the most effective.

Statutory and Regulatory Provisions Waived

We waive the provisions of section 223(e)(1) of the Act and 20 CFR 404.401a and 404.1592a(a)(2)(i) to the extent necessary to permit the payment of disability benefits to a beneficiary who is a participant in the treatment group for months during the reentitlement period in which the beneficiary does SGA, subject to the application of the benefit offset described above. We also waive the provisions of section 223(e)(2) of the Act and 20 CFR 404.401a and 404.1592a(a)(2)(ii) to the extent necessary to permit the payment of dependents' benefits to persons entitled to such benefits based on the earnings record of a disability insurance beneficiary who is a participant in the treatment group, for months during the reentitlement period in which the project participant does SGA. We waive the provisions of sections 223(a)(1) and (e)(1) and sections 202(d)(1), (e)(1), and (f)(1) of the Act and 20 CFR 404.1592a(b) to the extent necessary to provide participants in the treatment group an extended reentitlement period of up to 72 months. We waive the provisions of 20 CFR 404.1592a(a)(2) to the extent necessary to permit us to consider a project participant's earnings on an annual basis and use averaging to determine whether that beneficiary's average monthly earnings for a month during the reentitlement period are above the SGA amount for purposes of applying the benefit offset and calculating the monthly benefit amount under the offset.

We waive section 221(i) and relevant provisions of sections 202(d)(1), (e)(1), and (f)(1), 216(i), and 223(a)(1) of the Act and 20 CFR 404.1589 and 404.1590 to the extent necessary to permit us to suspend the initiation of CDRs for a beneficiary who is a project participant for the period up to and including the participant's extended reentitlement period.

We waive the provisions of section 1148(h) of the Act and 20 CFR 411.500(b)-(e), 411.525(a)(1)(i), and 411.575(b)(1)(i)(A) to the extent necessary to permit us to make an outcome payment under the Ticket to Work program to an employment network (or State VR agency, if applicable) to which a beneficiary who is a participant in the treatment group has assigned a ticket, for any month for which the employment network (or State VR agency) would have been eligible for such payment if the beneficiary were not a participant in this demonstration project.

Authority: Section 234 of the Social Security Act.

Dated: March 23, 2005.

Jo Anne B. Barnhart,

Commissioner of Social Security.