81 FR 41438 - Penalty Inflation Adjustments for Civil Money Penalties

SOCIAL SECURITY ADMINISTRATION

Federal Register Volume 81, Issue 123 (June 27, 2016)

In accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996, and further amended by the Bipartisan Budget Act of 2015, section 701: Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, this interim final rule incorporates the penalty inflation adjustments for the civil money penalties contained in the Social Security Act.

[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Rules and Regulations]
[Pages 41438-41441]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-13241]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 498

[Docket No. SSA-2016-0009]
RIN 0960-AH99


Penalty Inflation Adjustments for Civil Money Penalties

AGENCY: Social Security Administration.

ACTION: Interim Final Rule.

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SUMMARY: In accordance with the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended by the Debt Collection Improvement 
Act of 1996, and further amended by the Bipartisan Budget Act of 2015, 
section 701: Federal Civil Penalties Inflation

[[Page 41439]]

Adjustment Act Improvements Act of 2015, this interim final rule 
incorporates the penalty inflation adjustments for the civil money 
penalties contained in the Social Security Act.

DATES: This interim final rule is effective on August 1, 2016.

FOR FURTHER INFORMATION CONTACT: Joseph E. Gangloff, Chief Counsel to 
the Inspector General, Room 3-ME-1, 6401 Security Boulevard, Baltimore, 
MD 21235-6401, (410) 966-4440, both directly and for IPTTY. For 
information on eligibility or filing for benefits, call the Social 
Security Administration's national toll-free number, 1-800-772-1213 or 
TTY 1-800-325-0778, or visit the Social Security Administration's 
Internet site, Social Security Online, at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Background

    The Social Security Administration (SSA) was established as an 
independent agency, effective March 31, 1995, under Public Law 103-296, 
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 for civil monetary penalty 
(CMP) cases 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.
    On April 24, 1996, the OIG published a final rule 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 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 Old-Age, 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 or 
misleading, or omitted a material fact.
    In addition, on May 17, 2006, the OIG published a final rule at 71 
FR 28579 implementing the changes in the CMP program required by 
section 251(a) of Public Law 106-169, the Foster Care Independence Act 
of 1999 (FCIA), enacted December 14, 1999, and by sections 111, 201, 
204, and 207 of Public Law 108-203, the Social Security Protection Act 
of 2004 (SSPA), enacted March 2, 2004. Section 251(a) of FCIA expanded 
the authority under section 1129 to impose a civil monetary penalty and 
assessment for fraud involved in the receipt of benefits by certain 
World War II veterans. Sections 111, 201, 204, and 207 of SSPA 
broadened the scope under section 1129 by adding new categories of 
penalties against (1) representative payees with respect to wrongful 
conversions, and (2) individuals who withhold the disclosure of 
material facts to the SSA.

I. The Debt Collection Improvement Act of 1996

    In an effort to maintain the remedial impact of civil money 
penalties (CMPs) and promote compliance with the law, the Federal Civil 
Penalties Inflation Adjustment Act of 1990 (Pub. L. 101-410) was 
amended by the Debt Collection Improvement Act of 1996 (Pub. L. 104-
134) to require Federal agencies to regularly adjust certain CMPs for 
inflation. As amended, the law requires each agency to make an initial 
inflationary adjustment for all applicable CMPs, and to make further 
adjustments at least once every four years thereafter for these penalty 
amounts. The Debt Collection Improvement Act of 1996 further stipulates 
that any resulting increases in a CMP due to the calculated inflation 
adjustments (i) should apply only to the violations that occur after 
October 23, 1996--the Act's effective date--and (ii) should not exceed 
10 percent of the penalty indicated. In addition to those penalties 
that fall under the Internal Revenue Code of 1986, the Tariff Act of 
1930 and the Occupational Safety and Health Act of 1970, CMPs that come 
under the Social Security Act were specifically exempted from the 
requirements of the Debt Collection Improvement Act of 1996.

II. Bipartisan Budget Act of 2015, Section 701: Federal Civil Penalties 
Inflation Adjustment Act Improvements Act of 2015

    The Bipartisan Budget Act of 2015, Section 701: Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (Pub. L. 
114-74) (the 2015 Adjustment Act) amends the Federal Civil Penalties 
Inflation Adjustment Act of 1990 to require Federal agencies that 
impose CMPs subject to inflation adjustments to adjust the penalties 
for inflation annually instead of at least once every four years. The 
2015 Act expanded the categories of penalties that require adjustment 
for inflation to include CMPs under the Occupational Safety and Health 
Act of 1970 and the Social Security Act. The 2015 Adjustment Act 
further requires affected agencies to adjust the level of CMPs with an 
initial ``catch-up'' adjustment through the publication of this interim 
final rule no later than July 1, 2016, to be effective no later than 
August 1, 2016. We will identify, for each penalty, the year and 
corresponding amount(s) for which the maximum penalty level or range of 
minimum and maximum penalties was established or last adjusted in 
statute or regulation.

III. Initial Catch-Up Adjustment and Calculation for Annual Inflation 
Adjustments

    Based on guidance issued by the Office of Management and Budget 
(OMB),\1\ we will modify the penalty level or range that we identify as 
needing an initial catch-up based on the percent change between the 
non-seasonally adjusted Consumer Price Index for All Urban Consumers 
(CPI-U) for the month of October in the year in which the penalty was 
established or previously adjusted and the October 2015 CPI-U.\2\ We 
also will use OMB-published multipliers to make these adjustments.\3\ 
This initial catch-up adjustment may not exceed 150 percent of the 
amount of that penalty on the date of enactment of the 2015 Adjustment 
Act.\4\ The annual inflation adjustment in subsequent years must be a 
cost-of-living adjustment based on any increases in the October CPI-U 
(not seasonally adjusted) each year.\5\ Inflation adjustment increases 
must be rounded to the nearest multiple of $1.\6\
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    \1\ On February 24, 2016, OMB published its memorandum 
``Implementation of the Federal Civil Penalties Inflation Adjustment 
Act Improvements Act of 2015'' (OMB Memorandum M-16-06). The 
memorandum can be found at https://www.whitehouse.gov/sites/default/files/omb/memoranda/2016/m-16-06.pdf. The memorandum provides 
guidance to implement the civil monetary penalty adjustment 
requirements of Section 701 of Public Law 114-74.
    \2\ Id. at 3.
    \3\ Id. at 6.
    \4\ Id. at 3 and 8.
    \5\ Id. at 1.
    \6\ Id. at 3.
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IV. Social Security Administration's New Penalty Levels Under the 
Initial Catch-Up Adjustment

    The Social Security Act currently includes three different CMP 
levels, one under Section 1129, 42 U.S.C. 1320a-8, and two under 
Section 1140, 42 U.S.C.

[[Page 41440]]

1320b-10. The Section 1129 CMP was established in Section 206(b) of the 
Social Security Independence and Program Improvements Act of 1994, 
Public Law 103-296, 108 Stat. 1509. The Section 1140 CMPs were 
established in Sec. 428(a) of the Medicare Catastrophic Coverage Act of 
1988, Public Law 100-360, 102 Stat. 815.
    Our current maximum CMP is $5,000.00 for each violation under 
Section 1129 of the Social Security Act, $25,000.00 per broadcast or 
telecast under Section 1140 of the Social Security Act, and $5,000.00 
for all other violations under Section 1140 of the Social Security Act. 
In OMB Memorandum, M-16-06, OMB instructed affected agencies to add an 
initial inflationary adjustment amount (a ``catch-up'' amount) to 
relevant CMPs based on the percent change between the CPI-U for the 
month of October in the year of the previous adjustment and the October 
2015 CPI-U. Based on OMB's guidance, our adjustments to the existing 
maximum CMPs result in the following new maximum penalties, which will 
be effective as of August 1, 2016. The information below serves as 
public notice of the new maximum penalty amounts for 2016; we will not 
be publishing a separate Federal Register Notice for this change. For 
any future adjustments, we will publish a notice in the Federal 
Register to announce the new amounts.

Section 1129 CMPs

    $5,000.00 (current maximum) x 1.59089 (OMB-issued initial 
adjustment multiplier) = $7,954.00 (new maximum CMP amount-rounded to 
the nearest dollar).

Section 1140 CMPs

    $25,000.00 (current maximum per broadcast or telecast) x 1.97869 
(OMB-issued initial adjustment multiplier) = $49,467.00 (new maximum 
CMP amount-rounded to the nearest dollar).
    $5,000.00 (current maximum for all other violations) x 1.97869 
(OMB-issued initial adjustment multiplier) = $9,893.00 (new maximum CMP 
amount-rounded to the nearest dollar).

Regulatory Procedures

Good Cause for Exception to Rulemaking Procedures

    Pursuant to sections 205(a), 702(a)(5), and 1631(d)(1) of the 
Social Security Act, 42 U.S.C. 405(a), 42 U.S.C. 902(a)(5), and 42 
U.S.C. 1383(d)(1), the Social Security Administration follows the 
Administrative Procedures Act (APA) rulemaking procedures specified in 
5 U.S.C. 553 in the development of our regulations.
    The APA provides exceptions to its Notice of Proposed Rulemaking 
(NPRM) procedures when an agency finds that there is good cause for 
dispensing with such procedures on the basis that they are 
impracticable, unnecessary, or contrary to the public interest. In the 
case of these interim final rules, we have determined that under 5 
U.S.C. 553(b)(B), good cause exists for waiving the NPRM procedures 
because doing so would have been impractical given the Congressional 
mandates.
    Public Law 114-74 was signed into law on November 2, 2015. Section 
701(b)(1)(D) requires that the Commissioner issue regulations to adjust 
CMPs through an interim final rulemaking, and requires the initial 
catch up adjustment to take effect no later than August 1, 2016. 
Accordingly, to issue these rules as a NPRM would have delayed issuance 
of final rules well past the required August 1, 2016 effective date. In 
light of the Congressional mandate that we issue regulations to adjust 
CMPs through an interim final rulemaking, and that the initial catch up 
adjustment take effect no later than August 1, 2016, we believe good 
cause exists for waiver of the NPRM procedures under the APA.

Executive Order 12866 as Supplemented by Executive Order 13563

    We consulted with OMB and determined that this interim final rule 
does not meet the criteria for a significant regulatory action under 
Executive Order 12866 as supplemented by Executive Order 13563. Thus, 
OMB did not review the interim final rule.

Regulatory Flexibility Act

    We generally prepare a regulatory flexibility analysis consistent 
with Public Law 96-354, the Regulatory Flexibility Act, unless the 
Inspector General certifies that a regulation will not have a 
significant economic impact on a substantial number of small business 
entities. While the increase in the civil monetary penalties provided 
for under sections 1129 and 1140 of the Social Security Act might have 
a slight impact on small entities, it is the nature of the violation 
and not the size of the entity that will result in an action by the 
OIG. In either case, we do not anticipate that a substantial number of 
small entities will be significantly affected by this revised 
rulemaking. These final rules reflect legislative amendments affecting 
previously existing sections of the Social Security Act, and do not 
substantially alter the effect of these sanctions on small business 
entities. Therefore, we have concluded, and the Inspector General 
certifies, that a regulatory flexibility analysis is not required for 
this interim final rule.

Paperwork Reduction Act

    These rules do not create any new or affect any existing 
collections and, therefore, do not require Office of Management and 
Budget approval under the Paperwork Reduction Act.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social 
Security--Disability Insurance; 96.002, Social Security--Retirement 
Insurance; 96.004, Social Security--Survivors Insurance; and 96.006, 
Supplemental Security Income)

List of Subjects in 20 CFR Part 498

    Administrative practice and procedure, Fraud.

Gale Stallworth Stone,
Deputy Inspector General of Social Security.
    For the reasons set forth in the preamble, we amend 20 CFR part 498 
as set forth below:

PART 498--CIVIL MONETARY PENALTIES, ASSESSMENTS AND RECOMMENDED 
EXCLUSIONS

0
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), 1320a-8, and 1320b-10).


0
2. Amend Sec.  498.103 by adding and reserving paragraph (f), and 
adding paragraph (g), to read as follows:


Sec.  498.103  Amount of penalty.

* * * * *
    (f) [Reserved]
    (g) (1) The amount of the penalties described in paragraphs (a) 
through (d) of this section are the maximum penalties which may be 
assessed under these paragraphs for violations made after June 16, 
2006, but before August 1, 2016.
    (2) (i) After August 1, 2016 penalties are adjusted in accordance 
with the Federal Civil Penalties Inflation Adjustment Act of 1990 (Pub. 
L. 101-410), as amended by the Debt Collection Improvement Act of 1996 
(Pub. L. 104-134), as further amended by the Bipartisan Budget Act of 
2015, Section 701: Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015 (Section 701 of Pub. L. 114-74).
    (ii) The maximum penalties which may be assessed under this section 
is the larger of:
    (A) The amount for the previous calendar year; or
    (B) An amount adjusted for inflation, calculated by multiplying the 
amount

[[Page 41441]]

for the previous calendar year by the percentage by which the Consumer 
Price Index for all urban consumers for the month of October preceding 
the current calendar year exceeds the Consumer Price Index for all 
urban consumers for the month of October of the calendar year two years 
prior to the current calendar year, adding that amount to the amount 
for the previous calendar year, and rounding the total to the nearest 
dollar.
    (iii) Notice of the maximum penalty which may be assessed under 
this section for calendar years after 2016 will be published in the 
Federal Register on an annual basis on or before January 15 of each 
calendar year.

[FR Doc. 2016-13241 Filed 6-24-16; 8:45 am]
BILLING CODE 4191-02-P