Federal Register: March 23, 2005 (Volume 70, Number 55)
DOCID: FR Doc 05-5717
SOCIAL SECURITY ADMINISTRATION
Social Security Administration
CFR Citation: 20 CFR Part 498
RIN ID: RIN 0960-AG08
NOTICE: PROPOSED RULES
DOCUMENT ACTION: Proposed rules.
SUBJECT CATEGORY:
Civil Monetary Penalties, Assessments and Recommended Exclusions
DATES: To be sure that your comments are considered, we must receive them no later than May 23, 2005.
DOCUMENT SUMMARY:
In accordance with legislative changes, we propose to add new rules that would amend current procedures for the Social Security Administration's civil monetary penalty cases. These proposed rules would amend the current rules by holding representative payees liable for the wrongful conversion of Social Security benefits and by adding a provision for withholding disclosure of material statements to the Social Security Administration. These proposed rules would also amend the current rules by prohibiting offers that charge fees for products or services otherwise provided free of charge by the Social Security Administration, unless sufficient notice is provided, and by adding to the list of enumerated terms that could be used as part of misleading advertisements. These revisions reflect provisions of the Social Security Protection Act of 2004.
These proposed rules would also reflect the addition of title VIII, Special Benefits for Certain World War II Veterans, to the Social Security Act, to subject individuals to the possible imposition of a civil monetary penalty and assessment for a violation of this title. These revisions reflect provisions of the Foster Care Independence Act of 1999.
SUMMARY:
Civil monetary penalties, assessments and recommended exclusions,
SUPPLEMENTAL INFORMATION
Background
The Social Security Administration (SSA) was established as an independent agency effective March 31, 1995, under Public Law 103296, the Social Security Independence and Program Improvements Act of 1994 (SSIPIA). The SSIPIA also created an independent Office of the Inspector General (OIG), to which the Commissioner of Social Security (Commissioner) delegated certain authority under the civil monetary penalty (CMP) provisions on June 28, 1995.
On November 27, 1995, the OIG published a final rule at 60 FR 58225 establishing a new part 498 in title 20 of the Code of Federal Regulations. This part serves as a repository for SSA's existing CMP regulations which implemented section 1140 of the Social Security Act (the Act). These regulations were previously located at 42 CFR part 1003.
In addition, the OIG published a final rule on April 24, 1996 at 61 FR 18078 to implement SSA's new CMP authority provided under section 206(b) of the SSIPIA, which added section 1129 to the Act, effective October 1, 1994. This authority allows for the imposition of penalties and assessments against any individual, organization, agency or other entity that makes or causes to be made a false or misleading statement or representation of a material fact for use in determining initial or continuing rights to OldAge, Survivors, and Disability Insurance or supplemental security income benefit payments if the person knew or should have known that such statement or representation was false, misleading or omitted a material fact.
Changes Required by Public Law 106169
Section 251(a) of Public Law 106169, the Foster Care Independence Act of 1999, enacted December 14, 1999, added title VIII, Special Benefits for Certain World War II veterans, to the Social Security Act. Section 251(b)(6) of Public Law 106169 amended section 1129 to include reference to title VIII.
Changes Required by Public Law 108203
Sections 111, 201, 204, and 207 of Public Law 108203, the Social Security Protection Act of 2004, enacted March 2, 2004, amended sections 1129 and 1140 of the Social Security Act (42 U.S.C. 1320a8 and 1320b10).
Section 1129 Amendments
The two amendments to section 1129 broaden the scope of the civil
monetary penalty program by adding new categories for penalties (1)
against representative payees with respect to wrongful conversions, and (2) against individuals who withhold the
[[Page 14604]]
disclosure of material facts to the Social Security Administration.
The first amendment to section 1129 extends the civil monetary penalty provisions to representative payees of individuals entitled to benefits. The proposed rule would implement this amendment by subjecting representative payees who wrongfully convert a payment of benefits intended for another Social Security beneficiary to a penalty of up to $5,000 for each such wrongful conversion. Our proposed rule would apply to individuals, organizations, agencies, or other entities who receive benefits on behalf of another individual, for the purpose of distributing the benefits with the beneficiary's best interests in mind. Previously, representative payees could elude civil monetary penalties under section 1129 for such wrongful actions, as section 1129 did not extend to representative payees who improperly converted lawfully issued payments intended for another beneficiary.
The second amendment under section 1129 extends the civil monetary penalty provisions to individuals who withhold disclosure of material facts used in the determination of eligibility of benefit amounts under title II, title VIII or title XVI of the Social Security Act from SSA.
Our proposed rule would implement this amendment by providing for civil monetary penalties and assessments to be imposed for the failure to come forward and notify SSA of changed circumstances that affect eligibility or benefit amounts when the individual knew or should have known that the withheld fact was material and that the failure to come forward was misleading.
This amendment extends the coverage of section 1129. Previously, under section 1129, the OIG was only able to impose a civil monetary penalty and assessment against individuals who made false statements or representations or omitted a material fact on a SSA form or to a SSA employee. Therefore, a civil monetary penalty and assessment could not be imposed against an individual who should have known to, but did not, come forward to notify the SSA of changed circumstances that affected that individual's or another individual's eligibility or benefit amount. This amendment is intended to cover situations that include (but are not limited to) the following: (1) When an individual, who has a joint bank account with a beneficiary, knows or should have known that SSA directly deposits the beneficiary's Social Security checks in the joint account; upon death of the beneficiary, the individual fails to disclose the death of the beneficiary to SSA in order to continue to receive and use the deceased beneficiary's Social Security checks; and (2) when an individual receives benefits under one Social Security number, but is working under a second Social Security number.
This proposed rule would allow the OIG to impose a penalty of up to $5,000, and an assessment in lieu of damages, for each individual payment of Social Security benefits received while withholding disclosure of such material fact.
The Senate Committee Report, 108176, accompanying Public Law 108 203, states in its analysis of section 201, under the subheading Reason for Change, at page 1314, that this amendment is not intended to apply against individuals whose failure to come forward was not for the purpose of improperly obtaining or continuing to receive benefits.
This amendment is effective for violations occurring after the date on which the Commissioner of Social Security implements the centralized computer file described in section 202 of Public Law 108203.
This amendment strengthens the deterrence factor of section 1129 by enabling the OIG to pursue civil monetary penalties and assessments against individuals who withhold disclosure of material facts in order to receive benefits to which they may not be entitled. The OIG will continue to use its discretion to impose reasonable penalties on a casebycase basis by applying the five enumerated factors employed in other section 1129 cases, as set out at 20 CFR 498.106(a).
Section 1140 Amendments
Section 1140 prohibits individuals and groups from using specific terms related to Social Security in an advertisement or other format that could be interpreted or construed as conveying the impression that the advertisement is approved, endorsed, or authorized by the Social Security Administration. Section 1140 is aimed at protecting consumers, especially senior citizens who rely on SSA and are some of our most vulnerable stakeholders, from being victimized by misleading advertisers or direct marketers who improperly use Social Security symbols or emblems in order to suggest they have some connection with or authorization from SSA.
The first amendment to section 1140 authorizes the Commissioner to impose a penalty against certain individuals or groups who offer to assist an individual in obtaining products or services for a fee that the Social Security Administration provides free of charge. If the individual or group charges a fee for such product or service, the solicitation/mailing for services must include a written notice stating the product or service is available from the Social Security Administration free of charge. Section 204 of Public Law 108203 authorizes the Commissioner to set the standards for the notice with respect to content, placement and legibility. Pursuant to this authority, our proposed rule would require clear and prominent display of the notice. By drawing the attention of the reader, the notice would help protect consumers. The goal of this regulation would be to prevent solicitations/mailings that embed such notices among other text, or place the notice in small type face in an attempt to hide the fact that the products or services are provided free of charge by SSA.
In addition, the amendment provides exceptions for persons serving as a claimant representative in connection with a claim arising under title II, title VIII or title XVI and for persons assisting individuals in a plan with the goal of supporting themselves without Social Security disability benefits.
The second amendment to section 1140 adds certain words and phases to the statute and prohibits the use of these words and phrases in a misleading manner. Specifically, the amendment expands section 1140 to include words associated with ``Death Benefits Update,'' ``Federal Benefit Information,'' ``Funeral Expenses,'' or ``Final Supplemental Program.'' These words and phrases have been used by solicitors/ marketers to give the false impression that their solicitations/ mailings are connected to or authorized by the SSA.
Explanation of Proposed Regulations
We are proposing the following changes in our regulations to reflect the amendments to the Act made by section 251 of Public Law 106169 and sections 111, 201, 204, and 207 of Public Law 108203. A. Basis and Purpose
We propose to amend Sec. Sec. 498.100 and 498.102 to include:
(1) Individuals who fail to come forward to disclose to SSA a
material fact, which they knew or should have known was material and
who knew or should have known that such withholding disclosure of a
material fact was misleading, for purposes of determining eligibility
for, or the amount of, Social Security benefits under titles II, VIII, or XVI of the Act; and
[[Page 14605]]
(2) Representative payees who convert payments received under
titles II, VIII, or XVI of the Act, to a use that the representative
payee knew or should have known was other than for the use and benefit
of the beneficiary, as new bases for imposing a civil monetary penalty and assessment under section 1129.
We also propose to amend Sec. 498.102 to include:
(1) In the list of words prohibited to be used in a manner that
such person knew or should have known would convey the false impression
that the solicitation/mailing was approved, endorsed, or authorized by
the SSA or that the sender had some connection with or authorization
from the SSA, the following: (a) Death Benefits Update; (b) Federal
Benefit Information; (c) Funeral Expenses; or (d) Final Supplemental
Program to the previously existing list of ``Social Security,''
``Social Security Administration,'' ``Social Security Account,''
``Social Security System,'' ``Supplemental Security Income Program,'' ``SSA,'' ``SSI'' or any combination of those words; and
(2) The failure to provide written notice in a solicitation/mailing
offering to assist an individual in obtaining products or services that
the mailer knew or should have known were provided free of charge by
the SSA pursuant to the standards set out in Sec. 498.102(d), as new
bases for imposing a civil monetary penalty and assessment under section 1140.
B. Definitions
We propose to amend the definition of ``material fact'' in Sec. 498.101 to include title VIII of the Social Security Act, to reflect the inclusion of this title in section 1129 by Public Law 106169.
We also propose to insert a definition for ``Otherwise withhold disclosure'' to mean the failure to come forward to notify the SSA of a material fact, when such person knew or should have known that the withheld fact was material and that such withholding was misleading for purposes of determining eligibility or Social Security benefit amount for that person or another person.
C. Amount of Penalty and Assessment
We propose to amend Sec. Sec. 498.103 and 498.104 to authorize the imposition of a civil monetary penalty and assessment against: (1) Individuals who fail to come forward to disclose to SSA a material fact, which they knew or should have known was material and who knew or should have known that such withholding disclosure of a material fact was misleading, for purposes of determining eligibility for, or the amount of, Social Security benefits under titles II, VIII, or XVI of the Act; (2) representative payees who convert payments received under titles II, VIII, or XVI of the Act to a use that the representative payee knew or should have known was other than for the use and benefit of the beneficiary; (3) individuals who use in a solicitation/mailing the phrases ``Death Benefits Update,'' ``Federal Benefit Information,'' ``Funeral Expenses,'' or ``Final Supplemental Program'' in a manner that such person knew or should have known would convey the false impression that the solicitation/mailing was approved, endorsed, or authorized by the SSA or that the sender had some connection with or authorization from the SSA; and, (4) entities that fail to provide written notice in a solicitation/mailing offering to assist an individual in obtaining products or services that the mailer knew or should have known were provided free of charge by the SSA, pursuant to the standards set out in Sec. 498.102(d).
D. Determination and Notice of Proposed Determination
We are proposing to amend Sec. Sec. 498.106 and 498.109 to reflect the amendments to Sec. Sec. 498.102, 498.103, and 498.104. E. Collateral Estoppel and Collection of Penalty and Assessment
We are proposing to amend Sec. Sec. 498.114 and 498.128 to reflect the expansion of the scope of section 1129 by Public Law 108203, to include more than false statements or omissions from false statements in connection with an individual's eligibility for, or amount of, Social Security benefits and the addition of title VIII by Public Law 106169.
Clarity of These Regulations
Executive Order 12866, as amended by Executive Order 13258,
requires each agency to write all rules in plain language. In addition
to your substantive comments on these rules, we invite your comments in how to make these rules easier to understand. For example:
Regulatory Procedures
Executive Order 12866
We have consulted with the Office of Management and Budget (OMB) and determined that these proposed rules meet the requirements for a significant regulatory action under Executive Order 12866, as amended by Executive Order 13258. Thus, they are subject to OMB review. Regulatory Flexibility Act
We have determined that no regulatory impact analysis is required for these proposed regulations. While the penalties and assessments which the OIG could impose as a result of sections 1129 and 1140 of the Act might have a slight impact on small entities, we do not anticipate that a substantial number of small entities will be significantly affected by these proposed rules. Based on our determination, the Inspector General certifies that these proposed regulations would not have a significant impact on a substantial number of small entities. These proposed rules are modifications to the existing sections 1129 and 1140 of the Act and do not substantially alter the effect on small entities. Therefore we have not prepared a regulatory flexibility analysis.
Paperwork Reduction Act
These proposed regulations impose no new reporting or recordkeeping requirements requiring OMB clearance.
(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social
SecurityDisability Insurance; 96.002, Social SecurityRetirement
Insurance; 96.003, Social SecuritySurvivors Insurance; 96.006,
Supplemental Security Income; 96.020, Special Benefits for Certain World War II Veterans)
List of Subjects in 20 CFR Part 498
Civil monetary penalties for material false statements, withholding disclosures, misuse of symbols and misleading advertising.
Dated: December 9, 2004.
Patrick P. O'Carroll,
Inspector General, Social Security Administration.
For the reasons set out in the preamble, we propose to amend part
498 of chapter III of title 20 of the Code of Federal Regulations as follows:
[[Page 14606]]
PART 498CIVIL MONETARY PENALTIES, ASSESSMENTS AND RECOMMENDED EXCLUSIONS
1. The authority citation for part 498 continues to read as follows:
Authority: Secs. 702(a)(5), 1129 and 1140 of the Social Security Act (42 U.S.C. 902(a)(5), 1320a8 and 1320b10).
2. Amend Sec. 498.100 by redesignating paragraph (b)(2) as
paragraph (b)(3) and adding a new paragraph (b)(2) to read as follows: Sec. 498.100 Basis and purpose.
* * * * *
(b) * * *
(2) Convert payments received under title II, VIII, or XVI, while
acting in the capacity of a representative payee, to a use that such
person knew or should have known was other than for the use and benefit of the beneficiary; or
* * * * *
3. Amend Sec. 498.101 by adding to the definition for ``Material
fact,'' the words ``title VIII or'' before the words ``title XVI'' and
by adding the new definition for ``Otherwise withhold disclosure'' in alphabetical order to read as follows:
Sec. 498.101 Definitions.
* * * * *
Otherwise withhold disclosure means the failure to come forward to
notify the SSA of a material fact, when such person knew or should have
known that the withheld fact was material and that such withholding was
misleading for purposes of determining eligibility or Social Security benefit amount for that person or another person.
* * * * *
4. Revise Sec. 498.102 to read as follows:
Sec. 498.102 Basis for civil monetary penalties and assessments.
(a) The Office of the Inspector General may impose a penalty and
assessment, as applicable, against any person who it determines in accordance with this part
(1) Has made, or caused to be made, a statement or representation
of a material fact for use in determining any initial or continuing right to or amount of:
(i) Monthly insurance benefits under title II of the Social Security Act; or
(ii) Benefits or payments under title VIII or XVI of the Social Security Act; and
(2)(i) Knew, or should have known, that the statement or representation was false or misleading, or
(ii) Made such statement with knowing disregard for the truth; or
(3) Omitted from a statement or representation, or otherwise
withheld disclosure of a material fact for use in determining any
initial or continuing right to or amount of benefits or payments, which
the person knew or should have known was material for such use and that such omission or withholding was false or misleading.
(b) The Office of the Inspector General may impose a penalty and
assessment, as applicable, against any representative payee who
receives a payment under title II, VIII, or XVI for the use and benefit
of another individual, and who converts such payment, or any part
thereof, to a use that such representative payee knew or should have
known was other than for the use and benefit of such other individual.
(c) The Office of the Inspector General may impose a penalty
against any person whom it determines in accordance with this part has
made use of certain Social Security program words, letters, symbols, or
emblems in such a manner that the person knew or should have known
would convey, or in a manner which reasonably could be interpreted or
construed as conveying, the false impression that an advertisement or
other item was authorized, approved, or endorsed by the Social Security
Administration, or that such person had some connection with, or authorization from, the Social Security Administration.
(1) Civil monetary penalties may be imposed for misuse, as set forth in paragraph (c) of this section, of
(i) The words ``Social Security,'' ``Social Security Account,''
``Social Security Administration,'' ``Social Security System,''
``Supplemental Security Income Program,'' ``Death Benefits Update,''
``Federal Benefit Information,'' ``Funeral Expenses,'' ``Final
Supplemental Program,'' or any combination or variation of such words; or
(ii) The letters ``SSA,'' or ``SSI,'' or any other combination or variation of such letters; or
(iii) A symbol or emblem of the Social Security Administration
(including the design of, or a reasonable facsimile of the design of,
the Social Security card, the check used for payment of benefits under
title II, or envelopes or other stationery used by the Social Security
Administration), or any other combination or variation of such symbols or emblems.
(2) Civil monetary penalties will not be imposed against any agency
or instrumentality of a State, or political subdivision of a State,
that makes use of any words, letters, symbols or emblems, of the Social
Security Administration or instrumentality of the State or political subdivision.
(d) The Office of the Inspector General may impose a penalty
against any person who offers, for a fee, to assist an individual in
obtaining products or services that the person knew or should have
known that the Social Security Administration provided free of charge, unless:
(1) The person provides sufficient notice that the product or
service is available free of charge, before the service is provided to the individual, and:
(i) In printed solicitations or advertisements, such notice is
clearly and prominently placed and written in a font that is distinguishable from the rest of the text;
(ii) In a broadcast or telecast such notice must be clearly
communicated so as not to be construed as misleading or deceptive.
(2) Paragraph (d) of this section shall not apply to offers
(i) To serve as a claimant representative in connection with a claim arising under title II, title VIII, or title XVI; or
(ii) To prepare, or assist in the preparation of, an individual's plan for achieving selfsupport under title XVI.
(e) The use of a disclaimer of affiliation with the United States
Government, the Social Security Administration or its programs, or any
other agency or instrumentality of the United States Government, will
not be considered as a defense in determining a violation of section 1140 of the Social Security Act.
5. Revise Sec. 498.103 to read as follows:
Sec. 498.103 Amount of penalty.
(a) Under Sec. 498.102(a), the Office of the Inspector General may
impose a penalty of not more than $5,000 for each false statement or
representation, omission, or receipt of payment or benefit while withholding disclosure of a material fact.
(b) Under Sec. 498.102(b), the Office of the Inspector General may
impose a penalty of not more than $5,000 against a representative payee
for each time the representative payee wrongfully converts a payment or
benefit intended for the use and benefit of another individual under title II, title VIII, or title XVI.
(c) Under Sec. Sec. 498.102(c) and (d), the Office of the
Inspector General may impose a penalty of not more than $5,000 for each
violation resulting from the misuse of Social Security Administration
program words, letters, symbols, or emblems, or resulting from
insufficient notice in printed media regarding products or services provided free of charge by the Social Security
[[Page 14607]]
Administration. If such misuse or insufficient notice relates to a
broadcast or telecast, the Office of the Inspector General may impose a penalty of not more than $25,000 for each violation.
(d) For purposes of paragraph (c) of this section, a violation is defined as
(1) In the case of a mailed solicitation or advertisement, each
separate piece of mail which contains one or more program words,
letters, symbols, or emblems or insufficient notice related to a determination under Sec. 498.102(c); and
(2) In the case of a broadcast or telecast, each airing of a single
commercial or solicitation related to a determination under Sec. 498.102(c).
6. Revise Sec. 498.104 to read as follows:
Sec. 498.104 Amount of assessment.
A person subject to a penalty determined under Sec. 498.102(a) and (b) may be subject, in addition, to an assessment of not more than twice the amount of benefits or payments paid as a result of the statement, representation, omission, withheld disclosure of a material fact, or conversion which was the basis for the penalty. An assessment is in lieu of damages sustained by the United States because of such statement, representation, omission, withheld disclosure, or conversion, as referred to in Sec. 498.102(a) and (b).
7. Amend Sec. 498.106 by revising paragraphs (a) introductory
text, (a)(1), and (b) introductory text to read as follows:
Sec. 498.106 Determinations regarding the amount or scope of penalties and assessments.
(a) In determining the amount or scope of any penalty and
assessment, as applicable, in accordance with Sec. Sec. 498.103(a) and
(b) and 498.104, the Office of the Inspector General will take into account:
(1) The nature of the statements, representations, or actions
referred to in Sec. 498.102(a) and (b) and the circumstances under which they occurred;
* * * * *
(b) In determining the amount of any penalty in accordance with
Sec. 498.103(c), the Office of the Inspector General will take into account
* * * * *
8. Amend Sec. 498.109 by revising paragraph (a)(2) to read as follows:
Sec. 498.109 Notice of proposed determination.
(a) * * *
(2) A description of the false statements, representations, or
other actions (as described in Sec. 498.102(a) and (b)), and
incidents, as applicable, with respect to which the penalty and assessment, as applicable, are proposed;
* * * * *
9. Amend Sec. 498.114 by revising paragraph (a) to read as follows:
Sec. 498.114 Collateral estoppel.
* * * * *
(a) Is against a person who has been convicted (whether upon a
verdict after trial or upon a plea of guilty or nolo contendere) of a Federal or State crime; and
* * * * *
10. Amend Sec. 498.128 by revising paragraphs (b), (c)(1), and (d)(1) to read as follows:
Sec. 498.128 Collection of penalty and assessment.
* * * * *
(b) In cases brought under section 1129 of the Social Security Act,
a penalty and assessment, as applicable, imposed under this part may be
compromised by the Commissioner or his or her designee and may be
recovered in a civil action brought in the United States District Court
for the district where the violation occurred, or where the respondent resides.
(c) * * *
(1) Violation referred to in Sec. 498.102(c) and (d) occurred; or * * * * *
(d) * * *
(1) Monthly title II, title VIII, or title XVI payments,
notwithstanding section 207 of the Social Security Act as made
applicable to title XVI by section 1631(d)(1) of the Social Security Act;
* * * * *
[FR Doc. 055717 Filed 32205; 8:45 am]
BILLING CODE 419102P
FOR FURTHER INFORMATION CONTACT
Kathy A. Buller, Chief Counsel to the Inspector General, Social Security Administration, Office of the Inspector General, Room 4M1 Operations, 6401 Security Boulevard, Baltimore, MD 212356401, (410) 9652827 or TTY (410) 9665609.