[Federal Register Volume 59, Number 19 (Friday, January 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1919]


[Federal Register: January 28, 1994]


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RAILROAD RETIREMENT BOARD

20 CFR Part 266

RIN 3220-AA83


Representative Payment

AGENCY: Railroad Retirement Board.

ACTION: Final rule.

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SUMMARY: The Railroad Retirement Board (Board) revises part 266 in 
order to provide more detailed guidelines regarding the selection, 
payment, responsibilities, and monitoring of representative payees. The 
title of part 266 is also changed from ``Incompetence'' to 
``Representative Payment'' which better describes the contents of part 
266. These revisions are being made to improve the administration of 
the Board's representative payee program.

EFFECTIVE DATE: January 28, 1994.

ADDRESSES: Secretary to the Board, Railroad Retirement Board, 844 Rush 
Street, Chicago, Illinois 60611.

FOR FURTHER INFORMATION CONTACT: Thomas W. Sadler, Assistant General 
Counsel, Railroad Retirement Board, 844 Rush Street, Chicago, Illinois 
60611 (312) 751-4513; TDD (312) 751-4701.

SUPPLEMENTARY INFORMATION: The Railroad Retirement Act of 1974 (45 
U.S.C. 231 et seq.) provides a system of retirement and disability 
benefits for railroad employees, their spouses, children, and survivors 
who meet certain eligibility requirements under that Act. Section 12 of 
the Act (45 U.S.C. 231k) contains the same provisions as section 19 of 
the Railroad Retirement Act of 1937, the predecessor of the present 
Act, regarding the competence of an annuitant and the Board's authority 
in cases where an annuitant is incompetent. Under these provisions, any 
claimant or annuitant is presumed to be competent until the Board 
receives written notice to the contrary. If a claimant or annuitant is 
incompetent, the Board may make payments to, or conduct transactions 
with, any legally appointed guardian on behalf of the claimant or 
annuitant. Furthermore, section 12(a) expressly authorizes the Board to 
make payments, or conduct transactions, directly with the claimant or 
annuitant, or with any other person on his or her behalf, even though 
he or she is an incompetent for whom a guardian is acting. The 
provisions of section 12 are applicable to benefits claimed or paid 
under any Act administered in whole or in part by the Board, including 
any claim for or payment of social security benefits administered by 
the Board pursuant to section 7(b)(2) of the Railroad Retirement Act 
(45 U.S.C. 231f(b)(2)).
    There has been growing concern in the Congress to assure that 
surrogate decision making services, including representative-payee 
services, are provided in a uniform, high quality manner which 
maximizes the potential of every individual for self-reliance and 
independence.
    Since the Board is currently in the process of a comprehensive 
review, revision, and amendment of its regulations, part 266 is revised 
at this time to address concerns that adequate safeguards be provided 
where payment of an annuity under the Railroad Retirement Act is made 
to a representative payee rather than directly to the annuitant. Thus, 
the revised part 266 expands, as well as revises, the present 
regulation.
    A brief summary of the disposition of the various section of the 
present part 266 under the proposed regulation is set forth below.
    The present Sec. 266.1 simply sets forth the statutory provisions 
of section 12 of the Railroad Retirement Act (RRA) (45 U.S.C. 231k), 
and because of this redundancy, is removed.
    The present Sec. 266.2 has been incorporated into Sec. 266.1(b) of 
the revised regulation. The new Sec. 266.1 sets forth an introduction, 
consisting of an explanation of representative payment and the law and 
policy used to determine whether to make representative payment.
    The present Sec. 266.3 has been incorporated into Sec. 266.3(a) of 
the revised regulation. The new Sec. 266.3 sets forth information which 
the Board will consider in determining whether to make representative 
payment.
    The present Sec. 266.4 has been redesignated as Sec. 266.12. New 
Sec. 266.4 sets forth what information the Board will use in selecting 
a representative payee.
    Paragraphs (a) and (b) of the present Sec. 266.5 have been 
redesignated as Sec. 266.2, and the term ``beneficiary'' has been 
removed and the term ``annuitant'' has been added in its place 
throughout the new part 266. New Sec. 266.5 describes the order of 
preference the Board will generally use in selecting representative 
payees.
    The present Sec. 266.6 has been incorporated into the new 
Sec. 266.9(a). The new Sec. 266.9 sets forth general responsibilities 
of a representative payee.
    The present Secs. 266.7, 266.9, 266.10, and 266.11 have been 
revised and incorporated into a single section, Sec. 266.10, which 
details how a representative payee is to use benefit payments.
    The present Sec. 266.8, ``Conservation and investment of benefit 
payments,'' has been revised and incorporated into the new Sec. 266.11.
    Sections Secs. 266.6, 266.7, and 266.8 are new. Section 266.6 
provides that a representative payee applicant must provide the Board 
with the information listed in Sec. 266.4 and will generally be 
required to undergo a face-to-face interview with a field 
representative of the Board.
    Section Sec. 266.7 provides that the representative payee make an 
accounting to the Board for the use of benefits he or she receives as 
payee and sets forth what information will satisfy the requirement of 
an accounting.
    Section Sec. 266.8 provides that an annuitant may challenge the 
appointment or selection of a representative payee. However, an 
individual who requests to be made a representative payee for an 
annuitant has no standing to challenge the Board's refusal to make the 
appointment.
    The present Sec. 266.12 has been revised and incorporated into the 
new Sec. 266.7(c) described above. Section Sec. 266.12, as noted 
earlier, is the redesignated Sec. 266.4.
    The present Sec. 266.13 has been redesignated as the new 
Sec. 266.15. Sections Secs. 266.13 and 266.14 are new. The former 
section describes when the Board will terminate an individual's status 
as a representative payee and appoint a new one. The latter section 
describes what evidence an annuitant must provide to the Board to 
terminate representative payments and thereby receive benefits 
directly.
    The Board published this regulation as a proposed rule on March 10, 
1993 (58 FR 13225), requesting comments by April 9, 1993. A number of 
comments were received.
    One commenter suggested that a paragraph be added to Sec. 266.4 
(Information considered in selecting a representative payee) to provide 
that a creditor who provides goods and services to the annuitant should 
not be able to serve as a representative payee unless such creditor is 
a relative, legal guardian, or connected with a licensed or certified 
care facility. The Board agrees with this comment and a new paragraph 
(i) is added to Sec. 266.4 to reflect this proposal.
    One commenter suggested that Sec. 266.6 be modified to require a 
face-to-face interview with the payee-applicant rather than a 
discretionary interview as was proposed in that section. In the Board's 
experience a mandatory interview with the payee-applicant is not always 
necessary. In many cases the payee-applicant is a court appointed legal 
guardian or conservator or is a licensed care facility. However, the 
Board will modify its internal procedures to provide that where the 
payee-applicant is not interviewed, the Board employee responsible for 
developing the application for representative payment shall document in 
writing why no interview was done.
    In the same vein, another commenter suggested that the regulation 
provide for a mandatory interview with the annuitant when a payee is 
proposed and that the Board seek suggestions from the annuitant as to 
whom would make an appropriate payee. As in the case of payee-
applicant, the Board has found that a requirement to interview the 
annuitant in each and every case where a representative-payee is 
required is not necessary. In many cases, the reason for the 
appointment of a representative payee is that the annuitant is no 
longer sentient or capable of significant communication. Of course, in 
these cases a requirement for an interview would serve no purpose. 
Rather than adopt a mandatory requirement for an interview with the 
annuitant, the Board is of the opinion that the better approach is the 
one referred to above with respect to the payee-applicant interview; 
namely, that the annuitant will be interviewed and his or her 
recommendations sought whenever possible. Where the annuitant is not 
interviewed, the Board employee responsible for developing the 
application for representative-payee must document the basis for not 
conducting the interview. The Board's internal operating procedures 
will be modified to reflect this change.
    A comment was also received with respect to Secs. 266.7 (b) and 
(c). Under these sections where the representative payee fails to 
provide the Board with an accounting of his or her expenditures or 
fails to provide other information, the Board may suspend payment to 
the payee and then the payments are held in trust by the Board until a 
new representative payee is found or payments are reinstated to the 
present payee. One commenter was concerned that the regulation did not 
provide that if a new representative payee is not found, or payment to 
the present representative payee reinstated, within 30 days, that 
payments were not required to be made to the annuitant. The commenter 
pointed out that such a provision is provided for in the Social 
Security Act with respect to its representative payee program. See 42 
U.S.C. 204(j)(2)(D). In the Board's experience the vast majority of 
annuitants for whom representative payees are appointed are not 
competent to handle their finances. When payment to a representative 
payee is suspended pending appointment of a new payee, the Board seeks 
to appoint a new payee with the utmost speed. However, this process may 
take longer than 30 days because, as the commenter pointed out, there 
is indeed a shortage of individuals willing to act as representative 
payees. On the other hand, making payments to an individual who cannot 
manage his or her own affairs would not be in the best interest of the 
annuitant. Consequently, the Board has modified Sec. 266.7 by adding a 
new paragraph (d) which provides that where payment to a representative 
payee is suspended to appoint a new representative payee, such payment 
must be reinstated within 30 days unless the annuitant is an 
unemancipated minor under age 18, or is judged by the Board to be 
incapable of handling his benefit payments, in which case the Board 
will hold the payments in trust until a new representative payee is 
appointed.
    Finally, one commenter suggested that the Board seek legislative 
authority to impose administrative penalties on representative payees 
who misuse funds. The Board agrees that this suggestion has merit and 
will take it under advisement.
    The Board has determined that this is not a significant regulatory 
action for purposes of Executive Order 12866; therefore, no regulatory 
impact analysis is required. Information collection has been approved 
by the Office of Management and Budget under control numbers 3220-0151 
and 3220-0052.
    A distribution table is provided to show the distribution of the 
old part 266. 

------------------------------------------------------------------------
                Old section                          New section        
------------------------------------------------------------------------
266.1.......................................  Removed.                  
266.2.......................................  266.1(b).                 
266.3.......................................  266.3(a).                 
266.4.......................................  266.12.                   
266.5.......................................  266.2 and 266.5.          
266.6.......................................  266.9(a).                 
266.7.......................................  266.10 (a) and (b).       
266.8.......................................  266.11.                   
266.9.......................................  266.10(b).                
266.10......................................  266.10(c).                
266.11......................................  266.10(d).                
266.12......................................  266.7.                    
266.13......................................  266.15.                   
------------------------------------------------------------------------

    A derivation table is provided to show the sources of the revised 
part 266. 

------------------------------------------------------------------------
                    Old section                          New section    
------------------------------------------------------------------------
266.1...............................................  266.2.            
266.2...............................................  266.5.            
266.3...............................................  266.3.            
266.4...............................................  none.             
266.5...............................................  266.5.            
266.6...............................................  none.             
266.7...............................................  266.12.           
266.8...............................................  none.             
266.9...............................................  266.6.            
266.10..............................................  266.7, 266.9,     
                                                       266.10, 266.11.  
266.10..............................................  266.8.            
266.12..............................................  266.4.            
266.13..............................................  none.             
266.14..............................................  none.             
266.15..............................................  266.13.           
------------------------------------------------------------------------

List of Subjects in 20 CFR Part 266

    Railroad employees, Railroad retirement.

    For the reasons set out in the preamble, title 20, chapter II, Part 
266, of the Code of Federal Regulations is revised as follows:

PART 266--REPRESENTATIVE PAYMENT

Sec.
266.1  Introduction.
266.2  Recognition by the Board of a person to act in behalf of 
another.
266.3  Information considered in determining whether to make 
representative payments.
266.4  Information considered in selecting a representative payee.
266.5  Order of preference in selecting a representative payee.
266.6  Information to be submitted by a representative payee 
applicant; face-to-face interview.
266.7  Accountability of a representative payee.
266.8  Advance notice of the determination to make representative 
payment.
266.9  Responsibilities of a representative payee.
266.10  Use of benefit payments.
266.11  Conservation and investment of benefit payments.
266.12  Effect of matters or actions submitted or taken by legal 
guardian, etc.
266.13  When a new representative payee will be selected.
266.14  When representative payment will be stopped.
266.15  Transfer of accumulated benefit payments.

    Authority: 45 U.S.C. 231k and 231f.

PART 266--REPRESENTATIVE PAYMENT


Sec. 266.1  Introduction.

    (a) Explanation of representative payment. This part explains the 
principles and procedures that the Board follows in determining whether 
to make representative payment and in selecting a representative payee. 
It also explains the responsibilities that a representative payee has 
concerning the use of the funds which he or she receives on behalf of 
an annuitant. A representative payee may be either a person or an 
organization selected by the Board to receive benefits on behalf of an 
annuitant. A representative payee will be selected if the Board 
believes that the interest of an annuitant will be served by 
representative payment rather than direct payment of benefits. 
Generally, the Board will appoint a representative payee if it 
determines that the annuitant is not able to manage or direct the 
management of benefit payments in his or her interest.
    (b) Statutory authority. Section 12 of the Railroad Retirement Act 
provides that every annuitant and claimant shall be conclusively 
presumed to have been competent until the date on which the Board 
receives a notice in writing that a legal guardian or other person 
legally vested with the care of the person or estate of an incompetent 
or a minor has been appointed: Provided, however, That despite 
receiving such notice, the Board may, if it finds the interests of such 
annuitant or claimant to be served thereby, recognize actions by, 
conduct transactions with, and make payments to such annuitant or 
claimant.
    (c) Policy used to determine whether to make representative 
payment. (1) In accordance with section 12 of the Railroad Retirement 
Act, the Board's policy is that every annuitant has the right to manage 
his or her own benefits. However, some annuitants due to mental or 
physical condition or due to their youth may be unable to do so. If the 
Board determines that the interests of an annuitant would be better 
served if benefit payments were certified to another person as 
representative payee, the Board will appoint a representative payee in 
accordance with the procedures set forth in this part. The Board may 
appoint a representative payee even if the annuitant is a legally 
competent individual. If the annuitant is a legally incompetent 
individual, the Board may appoint the legal guardian or some other 
person as a representative payee.
    (2) If payment is being made directly to an annuitant and a 
question arises concerning his or her ability to manage or direct the 
management of benefit payments, the Board may, if the annuitant is 18 
years old or older and has not been adjudged legally incompetent, 
continue to pay the annuitant until the Board makes a determination 
about his or her ability to manage or direct the management of benefit 
payments and the selection of a representative payee.


Sec. 266.2   Recognition by the Board of a person to act in behalf of 
another.

    (a) Regardless of the receipt of written notice of the appointment 
of a guardian or other person legally vested with the care of the 
person or estate of an incompetent or a minor who is receiving or 
claiming benefits or to whom any right or privilege is extended under 
the law, the Board may, in its discretion, validly recognize actions by 
and conduct transactions with others acting on behalf of the individual 
found by the Board to be a minor or to be unable to manage his or her 
affairs, if the Board finds such actions or transactions to be in the 
best interest of such individual.
    (b) In the absence of a written notice of the appointment of a 
guardian or other person legally vested with the care of the person or 
estate of an incompetent or minor, the Board shall, except where 
special circumstances appear, recognize a person to act on behalf of an 
individual under the following circumstances:
    (1) When the individual has been adjudged mentally incompetent by a 
court having jurisdiction to do so;
    (2) When the individual has been committed to a mental institution 
by a court having jurisdiction to do so;
    (3) When the individual is an inmate of a mental institution;
    (4) When the individual is less than 16 years of age; or
    (5) When the individual is between 16 and 18 years of age and is in 
the care of another person and does not have the capacity to act on his 
or her own behalf.


Sec. 266.3   Information considered in determining whether to make 
representative payments.

    In determining whether to make representative payment, the Board 
may consider the following information:
    (a) Evidence of legal guardianship. Evidence of the appointment of 
a legal guardian or other person legally vested with the care of the 
person or estate of an incompetent or a minor shall be a certified copy 
of the court's determination.
    (b) Medical evidence. The Board may use medical evidence, when such 
is available, to help determine whether an annuitant is capable of 
managing or directing the management of benefit payments. For example, 
a statement by a physician or other medical professional based upon his 
or her recent examination of the annuitant and his or her knowledge of 
the annuitant's present condition will be used in the Board's 
determination, if it includes information concerning the nature of the 
annuitant's illness, the annuitant's chances for recovery and the 
opinion of the physician or other medical professional as to whether 
the annuitant is able to manage or direct the management of benefit 
payments.
    (c) Other evidence. The Board may also consider statements of 
relatives, friends, and other people in a position to know and observe 
the annuitant, which contain information helpful to the Board in 
deciding whether the annuitant is able to manage or direct the 
management of benefit payments.


Sec. 266.4   Information considered in selecting a representative 
payee.

    In selecting a representative payee, the Board tries to select the 
person, agency, organization or institution that will best serve the 
interest of the annuitant. In making this selection, the Board may 
consider such factors as the following:
    (a) The relationship of the person to the annuitant, including the 
type of relationship, e.g., family or legal guardianship; degree of 
relationship, if the person is a family member; and the length of 
association, if a non-family member;
    (b) The amount of interest that the person shows in the annuitant, 
including the contributions the person makes to the welfare of the 
annuitant and the contacts and frequency of such contacts with the 
annuitant;
    (c) Any legal authority the person, agency, organization or 
institution has to act on behalf of the annuitant;
    (d) Whether the potential payee has custody of the annuitant;
    (e) Whether the potential payee is in a position to know of and 
look after the needs of the annuitant;
    (f) Verification of the social security account number, name, 
address, telephone number, place of employment, and main source of 
income if applicable, accepted as part of any person's application for 
designation as a representative payee, unless such person's 
identification has already been established to the satisfaction of the 
Board;
    (g) Whether an applicant for designation as a representative payee 
has ever been convicted of a felony or misdemeanor under the statutes 
administered by the Board or the Social Security Act, or convicted of a 
felony under any other Federal or State law; and
    (h) Whether the services of such person as representative payee 
have previously been terminated, suspended, or declined by the Board or 
the Social Security Administration for:
    (1) Misuse of the benefits of the annuitant for whom they were 
intended;
    (2) Failure to comply with any provision of or regulation under the 
Railroad Retirement Act or the Social Security Act; or
    (3) Failure to meet the requirements of this part.
    (i) Whether the potential payee is a creditor of the annuitant. A 
creditor who provides goods and services to the annuitant ordinarily 
may not serve as a representative payee unless such appointment poses 
no substantial conflict of interest and unless the creditor is:
    (1) A relative who resides with the annuitant;
    (2) A legal guardian or legal representative of the annuitant; or
    (3) A licensed or certified care facility (or owner, administrator 
or employee thereof) where there annuitant resides.


Sec. 266.5   Order of preference in selecting a representative payee.

    As a guide in selecting a representative payee, categories of 
preferred payees have been established. These preferences are flexible. 
The primary concern of the Board is to select the payee who will best 
serve the annuitant's interest. The preferences are:
    (a) For annuitants 18 years old or older, the preference is:
    (1) A legal guardian, spouse, or other relative who has custody of 
the annuitant or who demonstrates strong concern for the personal 
welfare of the annuitant;
    (2) A friend who has custody of the annuitant or demonstrates 
strong concern for the personal welfare of the annuitant;
    (3) A public or nonprofit agency or institution having custody of 
the annuitant;
    (4) A private institution operated for profit and licensed under 
State law, which has custody of the annuitant; and
    (5) Persons other than those listed above who are qualified to 
carry out the responsibilities of a representative payee and who are 
able and willing to serve as a payee for an annuitant; e.g., members of 
community groups or organizations who volunteer to serve as 
representative payee for an annuitant.
    (b) For annuitants under age 18, the preference is:
    (1) A natural or adoptive parent who has custody of the annuitant, 
or a legal guardian;
    (2) A natural or adoptive parent who does not have custody of the 
annuitant, but is contributing toward the annuitant's support and is 
demonstrating strong concern for the annuitant's well-being;
    (3) A relative or stepparent who has custody of the annuitant;
    (4) A natural or adoptive parent who does not have custody of the 
annuitant and is not contributing toward his or her support but is 
demonstrating strong concern for the annuitant's well-being;
    (5) A relative who does not have custody of the annuitant but is 
contributing toward the annuitant's support and is demonstrating 
concern for the annuitant's well-being;
    (6) A relative or close friend who does not have custody of the 
annuitant but is demonstrating concern for the annuitant's well-being; 
and
    (7) An authorized social agency or custodial institution.


Sec. 266.6  Information to be submitted by a representative payee-
applicant; face-to-face interview.

    Before the Board selects a representative payee, the Board may 
request the payee-applicant to provide information concerning the 
factors listed in Sec. 266.4 of this part. An employee of the Board may 
also conduct a face-to-face interview with the payee-applicant.

(Approved by the Office of Management and Budget under control 
number 3220-0052.)


Sec. 266.7  Accountability of a representative payee.

    (a) A representative payee is accountable for the use of benefits. 
The Board will require periodic written reports from representative 
payees. The Board may also, at the Board's option, verify how a 
representative payee used benefit payments. A representative payee must 
keep records of what was done with all benefit payments in order to 
make accounting reports. The Board may ask the following questions:
    (1) The amount of benefit payments on hand at the beginning of the 
accounting period;
    (2) How the benefit payments were used;
    (3) How much of the benefit payments were saved and how the savings 
were invested;
    (4) Where the annuitant lived during the accounting period;
    (5) The amount of the annuitant's income from other sources during 
the accounting period. The Board may ask for information about other 
funds to enable the Board to evaluate the use of benefit payments; and
    (6) Whether the representative payee has been convicted of a felony 
or misdemeanor offense under the statutes administered by the Board or 
by the Social Security Administration within the past 15 years or 
whether any such charges are pending.
    (b) An individual to whom payments are certified as representative 
payee on behalf of an annuitant shall submit a written report in such 
form and at such times as the Board may require, accounting for the 
payments certified to him or her on behalf of the annuitant. If, 
however, such payee is a court-appointed fiduciary and, as such, is 
required to make an annual accounting to the court, a true copy of each 
such account filed with the court may be submitted in lieu of the 
accounting form prescribed by the Board. If any representative payee 
fails to submit the required accounting within a reasonable period of 
time after it is requested, no further payments shall be made to him or 
her on behalf of the annuitant unless for good cause shown, the default 
of the representative payee is excused by the Board, and the required 
accounting is thereafter submitted.
    (c) At any time after the Board has selected a representative 
payee, the Board may ask such payee to submit information showing a 
continuing relationship to the annuitant and a continuing 
responsibility for the care of the annuitant. If the representative 
payee does not give the Board the requested information within a 
reasonable period of time, the Board may stop paying such payee unless 
the Board determines that the payee had a good reason for not complying 
with the Board's request, and the Board receives the information 
requested.

(Approved by the Office of Management and Budget under control 
numbers 3220-0052 and 3220-0151.)

    (d) Where, pursuant to paragraphs (b) or (c) of this section, the 
Board suspends payments, such suspension shall not exceed a period of 
30 days; thereafter, the payments will be made to the annuitant except 
where the annuitant is an unemancipated minor under age 18 or where in 
the Board's judgment the interests of the annuitant would not be served 
by releasing payment to the annuitant.


Sec. 266.8  Advance notice of the determination to make representative 
payment.

    (a) As a general rule, whenever the Board intends to make 
representative payment and to name a representative payee, the Board 
will notify the annuitant or, in the case of an unemancipated minor 
under age 18, or an individual who is legally incompetent, the 
individual acting on his or her behalf of the Board's proposed actions. 
Such notice will tell the person that the Board plans to name a 
representative payee and who that payee will be. The notice will also 
ask the person to contact the Board within 15 days of the date of the 
notice if he or she objects to either proposed action. If he or she 
objects to either proposed action, the objecting party may--
    (1) Review the evidence upon which the proposed actions will be 
based; and
    (2) Submit any additional evidence regarding the proposed actions.
    (b) If the objecting party objects to the proposed actions, the 
Board will review its proposed determinations and consider any 
additional information provided. The Board will then issue a decision 
on whether to appoint a representative payee and who that payee will 
be. If the objecting party is dissatisfied with either determination, 
he or she may request a reconsideration under part 260 of this chapter.
    (c) If the objecting party does not file a timely objection to the 
proposed actions, the Board will issue a decision on whether to appoint 
a representative payee and who that payee will be. If the objecting 
party is dissatisfied with either determination, he or she may request 
a reconsideration under part 260 of this chapter.
    (d) A request for reconsideration or an appeal from a determination 
under this section under part 260 of this chapter shall not prevent the 
Board from making payments to a representative payee during the 
pendency of such reconsideration or appeal.
    (e) The Board's failure or refusal to select an individual as 
representative payee or the Board's termination of representative payee 
status with respect to an individual is not subject to a request for 
reconsideration or an appeal under part 260 of this chapter by such 
individual.


Sec. 266.9  Responsibilities of a representative payee.

    (a) A representative payee shall, subject to review by the Board 
and to such requirements as it may from time-to-time prescribe, apply 
the payments made to him or her on behalf of the annuitant only for the 
use and benefit of such annuitant, and in a manner and for purposes 
which are in the annuitant's best interests.
    (b) A representative payee shall notify the Board of any event that 
will affect the amount of benefits the annuitant receives or the right 
of the annuitant to receive benefits.
    (c) A representative payee shall notify the Board of any change in 
his or her circumstances that would affect performance of the payee 
responsibilities.


Sec. 266.10  Use of benefit payments.

    (a) Current maintenance. Payments made to an individual as 
representative payee on behalf of an annuitant shall be considered as 
having been applied for the use and benefit of the annuitant when they 
are used for the annuitant's current maintenance. Current maintenance 
includes costs incurred in obtaining food, shelter, clothing, medical 
care, and personal comfort items.

    Example: An aged annuitant is entitled to a monthly railroad 
retirement benefit of $800. His son, who is his representative 
payee, disburses his benefits in the following manner:

Rent and utilities
 $500
Medical
 50
Food
 80
Clothing (coat)
 90
Savings
 60
Miscellaneous
 20

    The above expenditures would represent proper disbursements on 
behalf of the annuitant.

    (b) Institutional care. If an annuitant is receiving care in a 
Federal, state, or private institution because of mental or physical 
incapacity, current maintenance includes the customary charges made by 
the institution in providing care and maintenance, as well as 
expenditures for those items which will aid in the annuitant's recovery 
or release from the institution or expenses for personal needs which 
will improve the annuitant's conditions while in the institution.
    (c) Support of legal dependents. If the current maintenance needs 
of the annuitant are met, the representative payee may use part of the 
payments for the support of the annuitant's legally dependent spouse, 
child, and/or parent.
    (d) Claims of creditors. Where a debt arose prior to the first 
month for which benefits are certified to a representative payee, the 
representative payee may satisfy such debt out of present benefit 
payments only if the current and reasonably foreseeable needs of the 
annuitant are met.

    Example: A retroactive railroad retirement annuity check in the 
amount of $2,100, representing benefits due for November 1989 
through January 1990, was issued on behalf of the annuitant to the 
annuitant's daughter, who is the representative payee. The check was 
certified in February 1990. The nursing home, where the annuitant 
resides, is owed money for maintenance expenses the annuitant 
incurred prior to February 1990.

    If the accrual is not required for the annuitant's current 
maintenance and the annuitant had no foreseeable needs which would 
require large disbursements, the expenditure of the accrual or part 
thereof for the past due maintenance charges would be consistent with 
the Board's guidelines.


Sec. 266.11  Conservation and investment of benefit payments.

    (a) General. If benefit payments made to a representative payee are 
not needed for the annuitant's current maintenance or reasonably 
foreseeable needs or the support of legal dependents or to pay 
creditors in accordance with Sec. 266.10, they shall be conserved or 
invested on behalf of the annuitant. Such funds must be invested in 
accordance with the rules applicable to investment of trust estates by 
trustees. Any investment must show clearly that the representative 
payee holds the property in trust for the annuitant.
    (b) Preferred investments. Preferred investments for excess funds 
are deposits in an interest or dividend paying account in a bank, trust 
company, credit union, or savings and loan association which is insured 
under either Federal or State law, direct obligations of the United 
States Government or obligations for which both principal and interest 
are guaranteed unconditionally by the United States Government. The 
account must be in a form which shows clearly that the representative 
payee has only a fiduciary, and not a personal, interest in the funds. 
If the payee is the legally appointed guardian or fiduciary of the 
annuitant, the account may be established to indicate this 
relationship. If the payee is not the legally appointed guardian or 
fiduciary, the accounts may be established as follows:
    (1) For U.S. Savings Bonds--

----------------------------------------------------------------------
(Name of annuitant)

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(Social Security Number), for whom

----------------------------------------------------------------------
(Name of payee)

is representative payee for Railroad Retirement benefits;

    (2) For interest or dividend paying accounts--

----------------------------------------------------------------------
(Name of annuitant) by

----------------------------------------------------------------------
(Name of payee), representative payee.

    (c) Interest and dividend payments. The interest and dividends 
which result from an investment are the property of the annuitant and 
may not be considered to be the property of the representative payee.
    (d) Prohibition against commingling. The representative payee shall 
not commingle his or her personal funds with the representative 
payments. A representative payee may consolidate and maintain an 
annuitant's funds in an account with other annuitants if he or she 
maintains a separate, accurate and complete accounting of each 
annuitant's funds under his or her control.


Sec. 266.12  Effect of matters or actions submitted or taken by legal 
guardian, etc.

    All matters and actions in connection with an annuity submitted or 
taken by the guardian or other person legally vested with the care of 
the person or estate of an incompetent or a minor shall be considered 
by the Board in the same manner and with the same effect as though such 
matters or actions had been submitted or taken by the ward, if the ward 
had capacity to act in his or her own behalf; Provided, however, That 
the Board may, if it deems it necessary, require the guardian or other 
person legally vested with the care of the person or estate of an 
incompetent or a minor to submit a certified copy of an order from the 
court of appointment authorizing some particular action which the 
guardian or other person legally vested with the care of the person or 
estate desires to take in connection with the application.


Sec. 266.13  When a new representative payee will be selected.

    When the Board learns that the interests of the annuitant are not 
served by continuing payment to the present representative payee or 
that the present representative payee is no longer able to carry out 
the payee responsibilities, the Board will undertake to find a new 
representative payee. The Board will select a new representative payee 
if the Board finds a preferred payee or if the present payee--
    (a) Has not used the benefit payments on the annuitant's behalf in 
accordance with the guidelines in this part;
    (b) Has not carried out the other responsibilities described in 
this part;
    (c) Dies;
    (d) No longer wishes to be representative payee;
    (e) Is unable to manage the benefit payments; or
    (f) Fails to cooperate, within a reasonable time, in providing 
evidence, accounting, or other information which the Board requests.


Sec. 266.14  When representative payment will be stopped.

    If an annuitant receiving representative payment shows the Board 
that he or she is mentally and physically able to manage or direct the 
management of benefit payments, the Board will make direct payment to 
the annuitant. Information which the annuitant may give to the Board to 
support his or her request for direct payment include the following:
    (a) A physician's statement regarding the annuitant's condition, or 
a statement by a medical officer of the institution where the annuitant 
is or was confined, showing that the annuitant is able to manage or 
direct the management of his or her funds;
    (b) A certified copy of a court order restoring the annuitant's 
rights in a case where an annuitant was adjudged legally incompetent; 
or
    (c) Other evidence which establishes the annuitant's ability to 
manage or direct the management of benefits.


Sec. 266.15  Transfer of accumulated benefit payments.

    A representative payee who has conserved or invested funds from 
railroad retirement payments made to him or her on behalf of an 
annuitant shall, upon direction of the Board, transfer any such funds 
(including interest or dividends earned from investment of such funds) 
to a successor representative payee appointed by the Board, or, at the 
option of the Board, shall transfer such funds, including interest, to 
the Board for payment to a successor payee or to the annuitant.

    Dated: January 21, 1994.

    By Authority of the Board.
Beatrice Ezerski,
Secretary to the Board.
[FR Doc. 94-1919 Filed 1-27-94; 8:45 am]
BILLING CODE 7905-01-P