Representative Payee Accounts: Know the Rules
Verify that the beneficiary is in the credit union’s field of membership.
The Social Security Administration issues 10% of its benefits payments to representative payees.
When a member asks you to open an account for another person who receives Social Security benefits, be clear on the rules.
The Social Security Administration (SSA) issues approximately 10% of its benefits payments (about five million per month) to representative payees.
A representative payee is an individual or organization appointed by SSA to receive Social Security benefits for someone who can’t manage or direct someone else to manage his or her money (a “beneficiary”).
The main responsibilities of a payee are to use the benefits to pay for the current and foreseeable needs of the beneficiary and to properly save any benefits not needed to meet current needs.
A payee must also keep records of expenses to show the SSA how benefits were used or saved. These expenses might include costs incurred in obtaining food, housing, clothing, medical care, and personal comfort items for the beneficiary.
Next: Establishing the account
Establishing the account
A representative payee isn’t required to open an account at a financial institution for the beneficiary, but the SSA encourages doing so.
The first step in opening a representative payee account is to verify that the beneficiary is in the credit union’s field of membership.
Remember, the beneficiary, not the representative payee, owns the SSA benefits funds.
The representative payee serves in the capacity of “manager” of the account, not the owner, so base membership eligibility on the beneficiary.
Make sure the account is set up in your system so the beneficiary is listed as the only owner. Neither the representative payee nor a third party can have ownership interest in the account.
On the other hand, while the beneficiary retains ownership interest, the account title shouldn’t permit the beneficiary to have direct access to the funds in the account.
Here are two recommended titles:
- “(Beneficiary’s name) by (representative payee’s name), Representative Payee.”
- “(Representative payee’s name), Representative Payee for (beneficiary’s name).”
Because the beneficiary owns the funds in a representative payee account, use the beneficiary’s tax identification number on the account for reporting purposes.
Next: Requests for information
Requests for information
Sometimes the beneficiary of this type of account might ask the credit union for account information, such as balances, transaction history, and so on. Can you release this information to the beneficiary?
The SSA doesn’t address this question in its representative guide. Informally, the SSA leaves up to each credit union whether to release account information to a beneficiary.
Some issues to consider in relevant policies include:
- Any physical or mental limitations of the beneficiary;
- Privacy issues; and
- Proper identification of the beneficiary.
Visit SSA’s website for more information about representative payee accounts.
This article first appeared in Front Line Newsletter.