                     United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                  _____________

                                  No. 98-3640SD
                                  _____________

Dwight L. Holz,                       *
                                      *
             Appellant,               *
                                      * On Appeal from the United
      v.                              * States District Court
                                      * for the District of
Kenneth S. Apfel, Commissioner of     * South Dakota.
Social Security Administration,       *
                                      *
             Appellee.                *
                                 ___________

                          Submitted: July 16, 1999
                              Filed: September 13, 1999
                                  ___________

Before McMILLIAN, RICHARD S. ARNOLD, and HANSEN, Circuit Judges.
                           ___________

RICHARD S. ARNOLD, Circuit Judge.


       Dwight Holz appeals the District Court’s grant of summary judgment upholding
a partial denial of social security benefits. The administrative law judge (ALJ) found
Holz was disabled within the meaning of the Social Security Act beginning on
February 27, 1995, the date of his fiftieth birthday. The ALJ also found that from
December 13, 1992, through February 27, 1995, Holz was not disabled. We believe
this latter finding is not supported by substantial evidence, and we therefore reverse the
judgment.

       The parties do not dispute that Holz has a severe back impairment and that he
is thereby limited exertionally to sedentary work. It is also undisputed that Holz can
no longer perform his past construction work and that he has no transferrable skills.
The extent of Holz’s nonexertional limitations related to his mental impairments is
disputed.

       Upon review following the Commissioner’s denial of Holz’s first application for
benefits, the District Court remanded for further consideration. Specifically, the
District Court found that because the record indicated Holtz potentially had
nonexertional limitations stemming from a mental impairment, the ALJ should not have
relied on Rule 201.18 of the medical-vocational guidelines (see 20 C.F.R. Pt. 404,
Subpt. P, App. 2, Table 1 (1998)) and was instead required to consult a vocational
expert (VE). At a second hearing in February 1997, the ALJ considered additional
benefits applications (for both disability insurance benefits and supplemental security
income) and additional evidence. In relevant part, the additional evidence included a
vocational assessment conducted in November 1994. Test results indicated Holz had
an IQ composite score of 76, verbal and nonverbal reasoning ability in the low average
to borderline range, an above average capacity to perform repetitive manual tasks (but
the report noted that most jobs in this category required long periods in a fixed
position), and a vocabulary below reading levels required for most jobs or training
programs. At the hearing, a VE testified that Holz’s past construction work would be
classified as within the medium or heavy exertional levels, and as skilled or semiskilled,
and that Holtz’s skills would not be transferrable to any jobs in the sedentary category.
The VE was not asked whether jobs existed in the national economy that Holz could
perform.




                                           -2-
       In a June 1997 decision, the ALJ found that Holz’s marginal education and
difficulty in reading, writing, and spelling did not erode his residual functional capacity
(RFC) to perform the full range of unskilled sedentary work since December 1992.
The ALJ again relied on Rule 201.18 of the guidelines to find that Holz was not
disabled until he reached the age of 50 on February 27, 1995. The ALJ attached a
Psychiatric Review Technique Form, in which she assessed Holz as having no
restrictions of activities of daily living; no difficulties in maintaining social functioning;
no deficiencies of concentration, persistence, or pace; and no episodes of deterioration
in a work or work-like setting. After the Appeals Council denied review, Holz sought
judicial review of the final agency decision, and the District Court granted summary
judgment in favor of the Commissioner. The District Court held, in part, that the ALJ
properly relied on the guidelines because the evidence supported the ALJ’s conclusion
that Holz had no significant mental impairments.

       We review the ALJ’s decision to determine whether it is supported by substantial
evidence on the record as a whole--that is, whether there exists relevant evidence that
a reasonable person might accept as adequate to support the conclusion. See Ingram
v. Chater, 107 F.3d 598, 600 (8th Cir. 1997). Accordingly, the ALJ's finding that
Holz's nonexertional impairments were not significant is not supported by substantial
evidence.

       The Commissioner may use the guidelines to find that a claimant is not disabled
if the claimant does not have nonexertional impairments, or if the nonexertional
impairment does not diminish the claimant's RFC to perform the full range of activities
listed in the guidelines. See id. If the nonexertional impairments significantly affect
the RFC, however, the guidelines are not controlling and may not be used to direct a
conclusion of not disabled. See Thompson v. Bowen, 850 F.2d 346, 350 (8th Cir.
1988). "Adequate training and intellectual capacity are presumed in the [g]uidelines,
and evidence that militates against those presumptions makes the [g]uidelines
inapplicable." Simmons v. Sullivan, 915 F.2d 1223, 1225 (8th Cir. 1990). Holz's

                                             -3-
borderline intellectual functioning, see Thomas v. Sullivan, 876 F.2d 666, 668 n.1 (8th
Cir. 1989) (borderline intellectual functioning describes individuals with IQ between
71 and 84), was a significant nonexertional impairment that needed to be considered
by the VE, see Foreman v. Callahan, 122 F.3d 24, 26 (8th Cir. 1997); Lucy v. Chater,
113 F.3d 905, 908 (8th Cir. 1997).

       We conclude that the case must be remanded to the Social Security
Administration for further proceedings to determine the effect of Holz's borderline
intellectual functioning. See Foreman, 122 F.3d at 26-27. We direct the
Commissioner, on remand, to consider whether the guidelines, to the extent they are
instructive, direct or suggest a finding of disability in the particular circumstances of
this case. Holz was 47 to 49 years old during the period relevant to the disability
determination at issue, he could not perform his past relevant work, he had no
transferrable skills, and he was physically limited to sedentary work. In addition, with
an IQ of 76 and a limited ability to read and write, he may be illiterate, see 20 C.F.R.
§ 404.1564(b)(1) (1998), or nearly so. See also 20 C.F.R. Pt. 404, Subpt. P. App. 2,
§ 201.00(h) & Ex. 2 (1998) (term "younger individual" denotes persons who are 18-49,
but for those who are 45-49, age is less positive factor than for those who are 18-44;
unskilled, illiterate, 45-to-49-year-old who is limited to sedentary work is generally
disabled; Example 2: Illiterate 41-year-old with IQ of 78 restricted to unskilled
sedentary work cannot perform full range of sedentary work, and finding of disabled
is appropriate).

      Accordingly, the judgment of the District Court is reversed, and the cause
remanded to that Court with instructions to remand the matter to the Commissioner of
the Social Security Administration for further proceedings in light of this opinion.

      It is so ordered.




                                           -4-
A true copy.

      Attest:

               CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                               -5-
