[Federal Register Volume 68, Number 186 (Thursday, September 25, 2003)]
[Proposed Rules]
[Pages 55323-55335]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24017]


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SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404, 408 and 416

[Regulation Nos. 4, 8, and 16]
RIN 0960-AF83


Representative Payment Under Titles II, VIII and XVI of the 
Social Security Act

AGENCY: Social Security Administration (SSA).

ACTION: Proposed rules.

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SUMMARY: We propose to revise our regulations explaining the procedures 
we follow in determining the need for a representative payee, the 
procedures we follow in selecting a representative payee, the 
responsibilities of a representative payee, and restitution of benefits 
where SSA is negligent under titles II, VIII and XVI of the Social 
Security Act (the Act). This regulation codifies SSA's long-standing 
enacted representative payee policy based on statutory changes made 
since 1990. This regulation sets forth our rules applicable to claims 
for special veteran's benefits (SVB) under title VIII of the Act. We 
began making payments under the SVB program in May 2000. We propose to 
add new rules on Representative Payment for the SVB program.
    The proposed changes to the representative payee provisions of the 
regulations will reflect several statutory changes that provide 
protection for beneficiaries who need representative payees. These 
proposed changes include representative payment procedures for 
investigating payee applicants, identifying unsuitable applicants, 
making direct payment in some circumstances, providing advance notice 
of our determination to make representative payment, and providing 
affected beneficiaries with the opportunity to appeal our 
determinations. Also included are procedures for making restitution of 
benefits where a payee has misused a beneficiary's payments and SSA was 
negligent in investigating or monitoring the payee, and representative 
payee policies and procedures for the title VIII program.

DATES: To consider your comments, we must receive them no later than 
November 24, 2003.

ADDRESSES: You may give us your comments by: using our Internet site 
facility (i.e., Social Security Online) at http://policy.ssa.gov/pnpublic.nsf/LawRegs; e-mail to [email protected]; telefax to (410) 
965-2830; or letter to the Commissioner of Social Security, P.O. Box 
17703, Baltimore, MD 21235-7703. You may also deliver them to the 
Office of Regulations, Social Security Administration, 100 Altmeyer 
Building, 6401 Security Boulevard, Baltimore, MD 21235-6401, between 8 
a.m. and 4:30 p.m. on regular business days. Comments are posted on our 
Internet site for your review, or you may inspect them physically on 
regular business days by making arrangements with the contact person 
shown in this preamble.

Electronic Version

    The electronic file of this document is available on the date of 
publication in the Federal Register on the Internet site for the 
Government Printing Office, http://www.gpoaccess.gov/fr/index.html. It 
is also available on the Internet site for SSA (i.e., Social Security 
Online) at http://policy.ssa.gov/pnpublic.nsf/LawRegs.

FOR FURTHER INFORMATION CONTACT: Regarding this Federal Register 
document--Robert Augustine, Social Insurance Specialist, Office of 
Regulations, Social Security Administration, 6401 Security Boulevard, 
Baltimore, MD 21235-6401, (410) 965-0020 or TTY (410) 966-5609; 
regarding eligibility or filing for benefits--our national toll-free 
number, 1-800-772-1213 or TTY 1-800-325-0778 or visit our internet web 
site, Social Security Online at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Background

    We are withdrawing the Notice of Proposed Rulemaking (NPRM) we 
published in the Federal Register on March 15, 1994 (59 FR 11949). This 
notice, which includes proposed changes that reflect legislation 
affecting representative payment policies enacted since 1990, replaces 
it.
    Subpart U of part 404 and subpart F of part 416 of our regulations 
explain the principles and procedures that we follow in determining 
whether to make representative payment and in selecting a 
representative payee under the title II and title XVI programs. These 
subparts also describe the responsibilities of a representative payee 
regarding the use of funds the payee receives on behalf of the 
beneficiary. Under the authority provided in sections 205(j) and 
1631(a)(2) of the Act and these regulations, we select a representative 
payee for a person receiving Social Security benefits under title II or 
supplemental security income (SSI) benefits under title XVI of the Act 
if we believe that representative payment rather than direct payment of 
benefits is in the interest of that person.
    In selecting a representative payee, we choose the person, agency, 
or organization that we believe will best serve the interest of a 
beneficiary. Any person or organization chosen as a representative 
payee must use benefits and accept all payee responsibilities as 
required under the Act and our regulations.

A. Changes Required by Public Law 101-508

    Section 5105(a)(1) and (2), and (c) of Public Law (Pub. L.) 101-
508, the Omnibus Budget Reconciliation Act of 1990 (OBRA 90) enacted 
November 5, 1990, amended sections 205(j) and 1631(a)(2) of the Act. 
These sections of OBRA 90 made numerous modifications and additions to 
the representative payee provisions of the Act and were intended to 
provide additional safeguards and protection for beneficiaries who need 
representative payees. These modifications and additions include:
    [sbull] Investigating representative payee applicants;
    [sbull] Identifying unsuitable representative payee applicants;
    [sbull] Making direct payment to some beneficiaries while we try to 
find a representative payee;

[[Page 55324]]

    [sbull] Allowing a delay or suspension of direct payment for one 
month (or longer under certain exceptions) when searching for a 
representative payee where direct payment would cause substantial harm 
to the beneficiary;
    [sbull] Providing advance notice to the beneficiary of 
determinations to make representative payment and selections of 
representative payees;
    [sbull] Providing beneficiaries with the opportunity to appeal our 
determination to make representative payment or to select a particular 
representative payee;
    [sbull] Making restitution (in some instances) to beneficiaries of 
benefits misused by representative payees; and
    [sbull] Making a good faith effort in those instances to obtain 
restitution from terminated representative payees who have misused 
benefits.
    The restitution provision of section 5105(c) of OBRA 90 contained 
in these proposed regulations was effective November 5, 1990--the date 
OBRA 90 was enacted. The other OBRA 90 representative payee provisions 
addressed by these proposed rules were effective with respect to 
determinations regarding payment of benefits to representative payees 
made on or after July 1, 1991.

B. Changes Required by Public Law 103-296

    Section 201 of Public Law 103-296, the Social Security Independence 
and Program Improvements Act of 1994 (SSIPIA 94), enacted August 15, 
1994:
    [sbull] Extends the authority for qualified organizations to 
collect fees for representative payee services beyond the July 1, 1994 
sunset date;
    [sbull] Included state or local government agencies as qualified 
organizations for purposes of collecting fees; and
    [sbull] Required an annual adjustment (beginning with December 
1996) to the limit on the fee collected by qualified organizations for 
providing payee services.

C. Changes Required by Public Law 104-121

    Section 105 of Public Law 104-121, the Contract With America 
Advancement Act of 1996, enacted March 29, 1996, eliminated disability 
benefits based on drug addiction and/or alcoholism (DAA). However, 
individuals are considered to have a DAA condition when there is 
medical evidence of DAA, but the DAA is not material to the disability 
determination. Under Public Law 104-121, individuals with a DAA 
condition (as determined by the Commissioner), who are eligible for 
Social Security or SSI benefits based on a disability other than DAA 
and who are also found to be incapable of managing their own benefits, 
must have a representative payee if the Commissioner determines that 
representative payment would serve the interests of the individual. The 
statute also provided an exception to the one-month limit on suspension 
of benefit payment while we are looking for a representative payee for 
an individual with a DAA condition. Appointment of organizational 
representative payees for incapable individuals with a DAA condition is 
preferred; however, in certain cases we can select a family member.

D. Changes Required By Public Law 105-33 and Public Law 106-170

    Section 5525(b) of Public Law 105-33, the Balanced Budget Act of 
1997, enacted August 5, 1997, provided technical amendments to the 
title XVI portions of Public Law 104-121 relating to the effective date 
of provisions concerning representative payees. Effective July 1, 1996 
or later, certain individuals with a DAA condition who were found to be 
incapable of managing their benefits would be paid through a 
representative payee. In addition, section 401 of Public Law 106-170, 
the Ticket to Work and Work Incentives Improvement Act of 1999, 
provided technical amendments to Public Law 104-121 to change the 
effective date of the title II representative payee and referral 
provisions applicable to individuals with a DAA condition.

E. Changes Required by Public Law 106-169

    Section 251 of Public Law 106-169, the Foster Care Independence Act 
of 1999, enacted on December 14, 1999, added a new title VIII program 
to the Act--Special Benefits for Certain World War II Veterans. Title 
VIII requires SSA to pay SVB to certain World War II Veterans. Section 
807 of the Act authorizes SSA to pay SVB to a representative payee when 
we determine that would be in the beneficiary's interest. We propose to 
add a new subpart F--Representative Payment to part 408 of our 
regulations to set forth the representative payment rules applicable to 
the SVB program.

Explanation of Proposed Regulations

    We are proposing the following changes in our regulations to 
reflect the amendments to the Act made by sections 5105(a)(1) and (2), 
and (c) of OBRA 90; section 201 of Public Law 103-296; section 105 of 
Public Law 104-121; section 5525(b) of Public Law 105-33; section 251 
of Public Law 106-169 and section 401 of Public Law 106-170.

A. Restitution

    We propose to amend Sec. Sec.  404.902 and 416.1402 to include a 
determination on restitution as an initial determination subject to the 
administrative review process. This change reflects our view that our 
determination regarding a person's right to restitution is a decision 
covered by sections 205(b)(1) and 1631(c)(1) of the Act, and is an 
initial determination subject to the administrative review process.

B. Substantial Harm

    We propose to add new Sec. Sec.  404.2011 and 416.611 to explain 
that when we have determined a beneficiary needs to be paid through a 
representative payee and a representative payee is not immediately 
available:
    1. We would pay monthly benefits directly to a beneficiary who we 
determine should have a representative payee until a suitable 
representative payee is selected, unless we determine that direct 
payment of these benefits would result in substantial harm to the 
beneficiary.
    2. Findings of substantial harm would be made on a case-by-case 
basis. We would find substantial harm in cases where direct payment of 
benefits is expected to result in physical or mental injury to the 
beneficiary (such as instances when the beneficiary cannot deal with 
the stress associated with handling his or her own financial affairs). 
We also would find substantial harm to exist when the beneficiary is 
legally incompetent, under age 15, or is receiving disability payments 
and we have determined that he or she has a DAA condition. However, we 
would allow these individuals to provide evidence that direct payment 
would not cause substantial harm. If we find upon review of this 
evidence that direct payment would not result in substantial harm, then 
we will make direct payment to the individual.
    3. Findings of substantial harm are not considered initial 
determinations subject to appeal rights. This is because a finding of 
substantial harm will not materially affect the beneficiary since delay 
or suspension of direct payment is temporary. Beneficiaries who have 
their benefits temporarily suspended can challenge the determination to 
make representative payment (Sec. Sec.  404.902(o) and 416.1402(d)).
    4. If we find that direct payment to an individual would cause 
substantial harm, we may delay or suspend benefits up to 1 month. If 
the beneficiary who needs a representative payee is legally

[[Page 55325]]

incompetent, under age 15, or receiving disability payments and 
determined by us to have a DAA condition and is incapable, we may delay 
payments for more than 1 month.
    5. Payment of any benefits which were deferred or suspended pending 
selection of a representative payee will be made to the beneficiary or 
the representative payee as a single sum, or in installments when we 
determine that installments are in the best interest of the 
beneficiary.

C. Unsuitable Representative Payees

    We propose to add new Sec. Sec.  404.2022 and 416.622 to explain 
that:
    1. A representative payee applicant convicted of a violation under 
section 208, 811 or 1632 of the Act may never serve as a representative 
payee. This prohibition was in sections 208 and 1632 of the Act prior 
to enactment of section 5105(a)(2) of OBRA 90 but was never included in 
our regulations. We added section 811 violations because of the 
enactment of the new SVB program (section 807 of the Act).
    2. A representative payee applicant receiving Social Security, SVB 
or SSI benefits through a representative payee may not serve as a 
representative payee. These individuals have already been determined to 
be incapable of managing their own benefits.
    3. A representative payee applicant whose prior certification or 
appointment as representative payee was revoked or terminated for 
misusing title II, VIII or XVI benefits generally may not be appointed 
as a representative payee. We may make an exception to this prohibition 
on a case-by-case basis if:
    [sbull] Direct payment is not possible,
    [sbull] No suitable alternative payee is available,
    [sbull] Payment to the payee applicant would serve the best 
interest of the beneficiary,
    [sbull] The information we have indicates the applicant is now 
suitable to serve as payee and
    [sbull] The applicant has repaid the misused benefits or has a plan 
to repay them.
If such an applicant is appointed, evaluation(s) of the applicant's 
performance as representative payee will be conducted periodically at 
intervals not to exceed 3 months until we are satisfied that the payee 
poses no risk to the beneficiary and is likely to perform in the 
beneficiary's best interest.
    4. Payment will not be certified to a representative payee 
applicant who is a creditor of the beneficiary, i.e., someone who 
provides the beneficiary with goods or services for monetary 
consideration, unless the creditor is:
    [sbull] A relative of the beneficiary living in the same household 
as the beneficiary;
    [sbull] A legal guardian or legal representative of the 
beneficiary;
    [sbull] A facility that is licensed or certified as a care facility 
under State or local law, or an administrator, owner, or employee of 
such a facility and the selection of the facility or such person is 
made only after we have attempted to locate an alternative 
representative payee who would better serve the interests of the 
beneficiary;
    [sbull] An individual we determine to be acceptable to serve as a 
representative payee because we have determined that the individual 
poses no risk to the beneficiary, the financial relationship of the 
applicant to the beneficiary poses no substantial conflict of interest, 
and a more suitable representative payee cannot be found; or
    [sbull] A qualified organization authorized to collect a monthly 
fee from the beneficiary for expenses incurred by the organization in 
providing services performed as the individual's representative payee.

D. Investigation of Representative Payee Applicants

    We propose to add new Sec. Sec.  404.2024 and 416.624 to explain 
that before certifying payment to a representative payee applicant, we 
will conduct an investigation of the payee applicant to determine the 
applicant's suitability. A face-to-face interview will be included as 
part of the investigation unless it is impracticable to do so. A face-
to-face interview may be considered impracticable if it would cause the 
representative payee applicant undue hardship. Undue hardship exists 
when the applicant cannot reasonably make arrangements to visit the 
Social Security field office. During the investigation, we will:
    [sbull] Require the payee applicant to submit documented proof of 
identity, unless such information has been submitted with an 
application for titles II, VIII or XVI benefits;
    [sbull] Verify the payee applicant's Social Security account number 
or employer identification number;
    [sbull] Determine whether the payee applicant has been convicted of 
a violation under section 208, 811, or 1632 of the Act;
    [sbull] Determine whether the payee applicant previously served as 
a representative payee and had his or her certification revoked or 
terminated because of misuse of title II, VIII or XVI benefits.

E. Notice of Appointment of Representative Payee

    We propose to amend existing Sec. Sec.  404.2030 and 416.630 to 
explain that whenever we intend to make representative payment or to 
appoint a particular representative payee, we will provide written 
notice to the beneficiary (or the legal guardian or the legal 
representative of the beneficiary) in advance of actually appointing 
the payee and certifying payment. This will allow the beneficiary the 
opportunity to appeal the proposed representative payee appointment. 
The advance notice will:
    [sbull] Be clearly written in language that is easily 
understandable to the reader;
    [sbull] Identify the person to be designated as representative 
payee;
    [sbull] Explain the right of the beneficiary (or the legal guardian 
or legal representative of the beneficiary) to appeal our determination 
that a representative payee is necessary;
    [sbull] Explain the right to appeal the designation of a particular 
person to serve as the representative payee of the beneficiary; and
    [sbull] Explain the right to review the evidence upon which the 
payee designation is based, and to submit additional evidence.
    If the beneficiary, or his or her legal guardian or legal 
representative, appeals and the appeal is received before the 
appointment of the representative payee is effective, the appointment 
will not be processed until the appeal has been resolved in accordance 
with subpart J of part 404 or subpart N of part 416. We will pay 
current monthly benefits directly to the beneficiary, where 
appropriate, in accordance with proposed Sec. Sec.  404.2011 and 
416.611, until we select a payee.

F. Organizational Representative Payees

    We propose to amend existing Sec. Sec.  404.2040a and 416.640a to 
remove the requirement that the organization must have been in 
existence prior to October 1, 1988. We propose to include State or 
local government agencies as qualified organizations for purposes of 
collecting fees. We also propose to revise paragraph (g), Limitation on 
fees, to reflect that the limit on fees collected by such organizations 
increases annually by the same percentage as the cost of living 
adjustment.

G. Liability for Misused Benefits

    We propose to amend Sec. Sec.  404.2041 and 416.641 to explain 
that:
    [sbull] The representative payee is liable for misuse of the 
beneficiary's benefits and is responsible for paying back

[[Page 55326]]

misused benefits to us. We will always make every reasonable effort to 
obtain restitution of misused benefits;
    [sbull] We will be liable for repayment of misused benefits if such 
misuse by a representative payee results from our negligent failure to 
investigate or monitor the representative payee. The term ``negligent 
failure'' as used in the proposed regulation means that we failed to 
investigate or monitor a representative payee or that we did 
investigate or monitor a representative payee but were negligent in 
that effort;
    [sbull] For title XVI purposes, when we find that our negligent 
failure to investigate or monitor a representative payee results in 
misuse of SSI benefits which involve federally administered State 
supplementary payments, our repayment of misused funds will include any 
portion of misused SSI benefits which are State supplementary payments.
    [sbull] If we determine that repayment of misused benefits is 
appropriate, we will certify for payment to the beneficiary or the 
beneficiary's new representative payee an amount equal to such misused 
benefits.

H. When a New Representative Payee Will Be Selected

    We propose to amend Sec. Sec.  404.2050 and 416.650 to reflect 
changes made by section 5105(a)(1) of OBRA 90 requiring that we will 
promptly stop payment to a representative payee and make payment 
directly to the beneficiary or to a new payee if we, or a court of 
competent jurisdiction, determine that the representative payee has 
misused the beneficiary's benefits. We may make exceptions to this rule 
on a case-by-case basis if the requirements discussed in C.3. above are 
met.

I. Annual Accounting of Benefits

    We propose to amend Sec. Sec.  404.2065 and 416.665 to show that an 
annual accounting of benefits is required from all representative 
payees except for certain State institutions, and to clarify the types 
of questions included in the accounting report. We also clarify that 
payees must keep records and make them available to us upon request.

J. Other Changes

    We propose to amend existing Sec. Sec.  404.2025 and 416.625 to 
change the title of the sections to ``What information must a 
representative payee report to us?'', move existing paragraph (a) of 
these sections with minor revisions to new Sec. Sec.  404.2024 and 
416.624 as new paragraph (a)(8) and keep existing paragraph (b) as an 
undesignated paragraph under Sec. Sec.  404.2025 and 416.625.
    We also propose to amend Sec. Sec.  404.902 and 416.1402, 
paragraphs (o) and (d), respectively, to remove the reference to DAA 
being a contributing factor material to the disability determination. 
We included a new paragraph (x) and (o), respectively, to include 
misuse of benefits by a representative payee when we were negligent in 
failing to investigate or monitor the payee as an initial determination 
subject to judicial review.

K. Representative Payment of SVB

    Section 807 of the Act authorizes SSA to pay your SVB benefits to a 
representative payee when we determine that would be in your interest. 
The title VIII provisions on representative payment closely parallel 
the representative payment provisions in titles II and XVI of the Act 
(although not all title II/XVI provisions apply to the title VIII 
program). We are therefore proposing a new subpart F to part 408 which 
includes an introductory section on representative payment in the title 
VIII program followed by sections (with the exception of Sec.  408.630) 
that refer users to the sections in part 404 that deal with the 
appropriate topics. Proposed subpart F would consist of the following 
sections:
    [sbull] Section 408.601 introduces subpart F.
    [sbull] Section 408.610 provides a cross-reference to Sec.  
404.2010(a), which explains the circumstances under which we will make 
representative payment.
    [sbull] Section 408.611 provides a cross-reference to Sec.  
404.2011, which explains what happens to your monthly benefits while we 
are finding a suitable representative payee.
    [sbull] Section 408.615 provides a cross-reference to Sec.  
404.2015, which explains the kinds of information we consider in 
determining whether to make representative payment.
    [sbull] Section 408.620 provides a cross-reference to Sec.  
404.2020, which explains the information we consider in determining an 
appropriate representative payee for you.
    [sbull] Section 408.621 provides a cross-reference to Sec.  
404.2021(a), which provides a list of the payees that we prefer to 
serve your interests.
    [sbull] Section 408.622 provides a cross-reference to Sec.  
404.2022, which contains a list of individuals whom we generally will 
not select as your representative payee.
    [sbull] Section 408.624 provides a cross-reference to Sec.  
404.2024, which explains how we investigate whether an individual is 
suitable to serve as a representative payee, including the requirement 
that we conduct a face-to-face interview with the payee applicant 
unless it is impracticable to do so.
    [sbull] Section 408.625 provides a cross-reference to Sec.  
404.2025, which explains the information a representative payee or 
payee applicant must give us.
    [sbull] Section 408.630 explains how we will notify you when we 
decide you need a representative payee.
    [sbull] Section 408.635 provides a cross-reference to Sec.  
404.2035, which explains the responsibilities of a representative 
payee.
    [sbull] Section 408.640 provides a cross-reference to Sec.  
404.2040, which explains how a representative payee may use the SVB 
payments he or she receives on your behalf.
    [sbull] Section 408.641 provides a cross-reference to Sec.  
404.2041, which explains who is liable when a representative payee 
misuses the benefits he or she receives on your behalf.
    [sbull] Section 408.645 provides a cross-reference to Sec.  
404.2045, which explains the rules your representative payee must 
follow to conserve or invest excess benefits, contains a list of 
preferred investments, and explains that any interest and dividends 
that result from an investment is your property, not the property of 
your payee.
    [sbull] Section 408.650 provides a cross-reference to Sec.  
404.2050, which explains when we will select a new representative payee 
for you.
    [sbull] Section 408.655 provides a cross-reference to Sec.  
404.2055, which explains when we will stop representative payment and 
begin making payment directly to you.
    [sbull] Section 408.660 provides a cross-reference to Sec.  
404.2060, which explains what happens to accumulated funds when your 
representative payee changes.
    [sbull] Section 408.665 provides a cross-reference to Sec.  
404.2065, which explains how we require your representative payee to 
verify that he or she used your benefits on your behalf.

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 comments you may have on the substance of these proposed rules, we 
also invite your comments on how to make these rules easier to 
understand. For example:
    [sbull] Have we organized the material to suit your needs?
    [sbull] Are the requirements in the rules clearly stated?
    [sbull] Do the rules contain technical language or jargon that is 
not clear?

[[Page 55327]]

    [sbull] Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the rules easier to understand?
    [sbull] Would more (but shorter) sections be better?
    [sbull] Could we improve clarity by adding tables, lists, or 
diagrams?
    [sbull] What else could we do to make the rules easier to 
understand?

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these proposed rules meet the criteria for a 
significant regulatory action under Executive Order 12866, as amended 
by Executive Order 13258. Thus, they were reviewed by OMB. However, the 
estimated amounts of the savings or costs involved do not cross the 
threshold for an economically significant regulation as defined in 
Executive Order 12866, as amended by Executive Order 13258.

Executive Order 13132 (Federalism) and the Unfunded Mandates Reform Act 
of 1995

    We have reviewed the proposed rules for compliance with Executive 
Order 13132 and the Unfunded Mandates Reform Act of 1995 (UMRA of 
1995). We have determined that the proposed rules are not significant 
within the meaning of the UMRA of 1995 nor will they have any 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government within the 
meaning of Executive Order 13132.
    The provision regarding restitution of misused benefit payments 
will not significantly impact the States. Even though the States would 
be responsible for the supplementary payments portion of the 
restitution, there should only be a small number of cases involved. 
There is a very small number of representative payees who are found to 
misuse benefit payments and of that number, misuse involving SSI 
payments is even smaller. The number of cases where ``negligent 
failure'' might potentially be involved would be much smaller still. In 
addition, SSA will seek restitution of misused funds from the 
terminated representative payee and, if the restitution is obtained, 
the State will be reimbursed for any State supplementary payment 
involved.

Regulatory Flexibility Act

    We certify that these proposed regulations will not have a 
significant economic impact on a substantial number of small entities. 
Therefore, a regulatory flexibility analysis as provided in the 
Regulatory Flexibility Act, as amended, is not required.

Paperwork Reduction Act

    These proposed rules contain reporting requirements as shown in the 
table below. Where the public reporting burden is accounted for in 
Information Collection Requests for the various forms that the public 
uses to submit the information to SSA, a 1-hour placeholder burden is 
being assigned to the specific reporting requirement(s) contained in 
these rules; we are seeking clearance of these burdens because they 
were not considered during the clearance of the forms.

----------------------------------------------------------------------------------------------------------------
                                                                                                     Estimated
            CFR section                 Number of     Frequency of   Average burden per response   annual burden
                                       respondents      response                                       hours
----------------------------------------------------------------------------------------------------------------
404.2011(a)(1).....................             250               1  15 Minutes.................            62.5
416.611(a)(1)......................
404.2024(a)(2).....................  ..............               1  1 Hour.....................               1
408.624............................
416.624(a)(2)......................
404.2024(a)(8).....................  ..............               1  1 Hour.....................               1
408.624............................
416.624(a)(8)......................
404.2025...........................           3,000               1  6 Minutes..................             300
408.625............................
416.625............................
404.2040a(a)-(d)...................              60               1  15 Minutes.................              15
416.640a(a)-(d)....................
404.2040a(e).......................               8               1  1 Hour.....................               8
416.640a(e)........................
404.2065...........................  ..............               1  1 Hour.....................               1
408.665............................
416.665............................
----------------------------------------------------------------------------------------------------------------

    An Information Collection Request has been submitted to OMB for 
clearance. We are soliciting comments on the burden estimate; the need 
for the information; its practical utility; ways to enhance its 
quality, utility and clarity; and on ways to minimize the burden on 
respondents, including the use of automated collection techniques or 
other forms of information technology. Comments should be submitted 
and/or faxed to OMB and the Social Security Administration at the 
following addresses/numbers:
    Office of Management and Budget, Attn: Desk Officer for SSA, New 
Executive Office Building, Room 10230, 725 17th St., NW., Washington, 
DC 20530, Fax Number: 202-395-6974.
    Social Security Administration, Attn: SSA Reports Clearance 
Officer, Rm. 1338 Annex Building, 6401 Security Boulevard, Baltimore, 
MD 21235-6401, Fax Number: 410-965-6400.
    Comments can be received for up to 60 days after publication of 
this notice and will be most useful if received by SSA within 30 days 
of publication. To receive a copy of the OMB clearance package, you may 
call the SSA Reports Clearance Officer on 410-965-0454.

(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; 96.006, 
Supplemental Security Income; 96-020, Special Benefits for Certain 
World War II Veterans)


[[Page 55328]]



List of Subjects

20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-Age, Survivors and Disability Insurance; Reporting and 
recordkeeping requirements, Social Security.

20 CFR Part 408

    Administrative practice and procedure, Aged; Reporting and 
recordkeeping requirements, Social Security; Special Veterans benefits; 
Veterans.

20 CFR Part 416

    Administrative practice and procedure, Aged, Blind, Disability 
benefits, Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental security income (SSI).

    Dated: June 19, 2003.
Jo Anne B. Barnhart,
Commissioner of Social Security.
    For the reasons set out in the preamble, we propose to amend 
subparts J and U of part 404, add subpart F to part 408, and amend 
subparts F and N of part 416 of Title 20 of the Code of Federal 
Regulations as follows:

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE 
(1950- )

    1. The authority citation for subpart J continues to read as 
follows:

    Authority: Secs. 201(j), 204(f), 205(a), (b) and (d)-(h), and 
(j), 221, 225, and 702(a)(5) of the Social Security Act (42 U.S.C. 
401(j), 404(f), 405(a), (b), (d)-(h), and (j), 421, 425, and 
902(a)(5)); 31 U.S.C. 3720A; sec. 5, Pub. L. 97-455, 96 Stat. 2500 
(42 U.S.C. 405 note); secs. 5, 6(c)-(e), and 15, Pub. L. 98-460, 98 
Stat. 1802 (42 U.S.C. 421 note).

    2. Amend Sec.  404.902 by revising paragraph (o), removing the word 
``and'' at the end of paragraph (v), revising the period at the end of 
paragraph (w) to read ``; and'' and adding paragraph (x) to read as 
follows:


Sec.  404.902  Administrative actions that are initial determinations.

* * * * *
    (o) Whether the payment of your benefits will be made, on your 
behalf, to a representative payee;
* * * * *
    (x) Whether we were negligent in failing to investigate or monitor 
your representative payee, which resulted in the misuse of benefits by 
your representative payee.
    3. The authority citation for subpart U of part 404 continues to 
read as follows:

    Authority: Secs. 205(a), (j), and (k), and 702(a)(5) of the 
Social Security Act (42 U.S.C. 405(a), (j), and (k), and 902(a)(5)).

    4. Add Sec.  404.2011 to read as follows:


Sec.  404.2011  What happens to your monthly benefits while we are 
finding a suitable representative payee for you?

    (a) We may pay you directly. We will pay current monthly benefits 
directly to you while finding a suitable representative payee unless we 
determine that paying you directly would cause substantial harm to you. 
We determine substantial harm as follows:
    (1) If you are receiving disability payments and we have determined 
that you have a drug addiction or alcoholism condition, or you are 
legally incompetent, or you are under age 15, we will presume that 
substantial harm exists. However, we will allow you to dispute this 
presumption by presenting evidence that direct payment would not cause 
you substantial harm.
    (2) If you do not fit any of these categories, we make findings of 
substantial harm on a case-by-case basis. We consider all matters that 
may affect your ability to manage your benefits in your own best 
interest. We decide that substantial harm exists if both of the 
following conditions exist:
    (i) Directly receiving benefits can be expected to cause you 
serious physical or mental injury.
    (ii) The possible effect of the injury would outweigh the effect of 
having no income to meet your basic needs.
    (b) We may delay or suspend your payments. If we find that direct 
payment will cause substantial harm to you, we may delay (in the case 
of initial entitlement to benefits) or suspend (in the case of existing 
entitlement to benefits) payments for as long as 1 month while we try 
to find a suitable representative payee for you. If we do not find a 
payee within one month, we will pay you directly. If you are receiving 
disability payments and we have determined that you have a drug 
addiction and alcoholism condition, or you are legally incompetent, or 
you are under age 15, we will withhold payment until a representative 
payee is appointed even if it takes longer than one month. We will, 
however, as noted in paragraph (a)(1) of this section, allow you to 
present evidence to dispute the presumption that direct payment would 
cause you substantial harm. See Sec.  404.2001(b)(3) for our policy on 
suspending benefits if you are currently receiving benefits directly.

    Example 1: Substantial Harm Exists. We are unable to find a 
representative payee for Mr. X, a 67-year-old retirement beneficiary 
who is an alcoholic. Based on contacts with the doctor and 
beneficiary, we determine that Mr. X was hospitalized recently for 
his drinking. Paying him directly will cause injury, so we may delay 
payment for as long as one month based on substantial harm while we 
locate a suitable representative payee.

    Example 2: Substantial Harm Does Not Exist. We approve a claim 
for Mr. Y, a title II claimant who suffers from a combination of 
mental impairments but who is not legally incompetent. We determine 
that Mr. Y needs assistance in managing his benefits, but we have 
not found a representative payee. Although we believe that Mr. Y may 
not use the money wisely, there is no indication that receiving 
funds directly would cause him substantial harm (i.e., physical or 
mental injury). We must pay current benefits directly to Mr. Y while 
we locate a suitable representative payee.

    (c) How we pay delayed or suspended benefits. Payment of benefits, 
which were delayed or suspended pending appointment of a representative 
payee, can be made to you or your representative payee as a single sum 
or in installments when we determine that installments are in your best 
interest.
    5. Amend Sec.  404.2021 by revising the heading and paragraph (a) 
introductory text, redesignating paragraph (b) as paragraph (c) and 
adding new paragraph (b) to read as follows:


Sec.  404.2021  What is our order of preference in selecting a 
representative payee for you?

* * * * *
    (a) For beneficiaries 18 years old or older (except those described 
in paragraph (b) of this section), our preference is--
* * * * *
    (b) For individuals who are disabled and who have a drug addiction 
or alcoholism condition our preference is--
    (1) A community-based nonprofit social service agency which is 
licensed by the State, or bonded;
    (2) A Federal, State, or local government agency whose mission is 
to carry out income maintenance, social service, or health care-related 
activities;
    (3) A State or local government agency with fiduciary 
responsibilities;
    (4) A designee of an agency (other than a Federal agency) referred 
to in paragraphs (b)(1), (2), and (3) of this section, if appropriate; 
or
    (5) A family member.
* * * * *
    6. Add Sec.  404.2022 to read as follows:


Sec.  404.2022  Who may not serve as a representative payee?

    A representative payee applicant may not serve if he/she:

[[Page 55329]]

    (a) Has been convicted of a violation under section 208, 811 or 
1632 of the Social Security Act.
    (b) Receives title II, VIII, or XVI benefits through a 
representative payee.
    (c) Previously served as a representative payee and was found by 
us, or a court of competent jurisdiction, to have misused title II, 
VIII or XVI benefits. However, if we decide to make an exception to 
this prohibition, we must evaluate the payee's performance at least 
every 3 months until we are satisfied that the payee poses no risk to 
the beneficiary's best interest. Exceptions are made on a case-by-case 
basis if all of the following are true:
    (1) Direct payment of benefits to the beneficiary is not in the 
beneficiary's interest.
    (2) No suitable alternative payee is available.
    (3) Selecting the payee applicant as representative payee would be 
in the best interest of the beneficiary.
    (4) The information we have indicates the applicant is now suitable 
to serve as a representative payee.
    (5) The payee applicant has repaid the misused benefits or has a 
plan to repay them.
    (d) Is a creditor. A creditor is someone who provides you with 
goods or services for consideration. This restriction does not apply to 
the creditor who poses no risk to you and whose financial relationship 
with you presents no substantial conflict of interest, and who is any 
of the following:
    (1) A relative living in the same household as you do.
    (2) Your legal guardian or legal representative.
    (3) A facility that is licensed or certified as a care facility 
under the law of a State or a political subdivision of a State.
    (4) A qualified organization authorized to collect a monthly fee 
from you for expenses incurred in providing representative payee 
services for you, under Sec.  404.2040a.
    (5) An administrator, owner, or employee of the facility in which 
you live and we are unable to locate an alternative representative 
payee.
    (6) Any other individual we deem appropriate based on a written 
determination.
    Example 1: Sharon applies to be representative payee for Ron who 
we have determined cannot manage his benefits. Sharon has been 
renting a room to Ron for several years and assists Ron in handling 
his other financial obligations, as needed. She charges Ron a 
reasonable amount of rent. Ron has no other family or friends 
willing to help manage his benefits or to act as representative 
payee. Sharon has demonstrated that her interest in and concern for 
Ron goes beyond her desire to collect the rent each month. In this 
instance, we may select Sharon as Ron's representative payee because 
a more suitable payee is not available, she appears to pose no risk 
to Ron and there is minimal conflict of interest. We will document 
this decision.

    Example 2: In a situation similar to the one above, Ron's 
landlord indicates that she is applying to be payee only to ensure 
receipt of her rent. If there is money left after payment of the 
rent, she will give it directly to Ron to manage on his own. In this 
situation, we would not select the landlord as Ron's representative 
payee because of the substantial conflict of interest and lack of 
interest in his well being.

    7. Add Sec.  404.2024 to read as follows:


Sec.  404.2024  How do we investigate a representative payee applicant?

    Before selecting an individual or organization to act as your 
representative payee, we will perform an investigation.
    (a) Nature of the investigation. As part of the investigation, we 
do the following:
    (1) Conduct a face-to-face interview with the payee applicant 
unless it is impracticable as explained in paragraph (b) of this 
section.
    (2) Require the payee applicant to submit documented proof of 
identity, unless information establishing identity has recently been 
submitted with an application for title II, VIII or XVI benefits.
    (3) Verify the payee applicant's Social Security account number or 
employer identification number.
    (4) Determine whether the payee applicant has been convicted of a 
violation of section 208, 811 or 1632 of the Social Security Act.
    (5) Determine whether the payee applicant has previously served as 
a representative payee and if they had an appointment as payee revoked 
or terminated for misusing title II, VIII or XVI benefits.
    (6) Use our records to verify the payee applicant's employment and/
or direct receipt of title II, VIII, or XVI benefits.
    (7) Verify the payee applicant's concern for the beneficiary with 
the beneficiary's custodian or other interested person.
    (8) Require the applicant to provide adequate information showing 
his or her relationship to the beneficiary and describe his or her 
responsibility for the care of the beneficiary.
    (9) Determine whether the payee applicant is a creditor of the 
beneficiary (see Sec.  404.2022(d)).
    (b) A face-to-face interview. We may consider a face-to-face 
interview impracticable if it would cause the payee applicant undue 
hardship. For example, the payee applicant cares for children or 
disabled individuals in the home and no alternative caregiver is 
available, or is employed and cannot arrange for time off from work, or 
would have to travel a great distance to the field office. In this 
situation, we may conduct the investigation to determine the payee 
applicant's suitability to serve as a representative payee without a 
face-to-face interview. We may decide subsequent face-to-face 
interviews are impracticable for an organizational representative payee 
applicant when the organization is known by the field office as a 
suitable payee. We base this decision on the organization's past 
performance, recent contacts, and its knowledge of and compliance with 
reporting requirements.
    8. Revise Sec.  404.2025 to read as follows:


Sec.  404.2025  What information must a representative payee report to 
us?

    Anytime after we select a representative payee for you, we may ask 
your payee to give us information showing a continuing relationship 
with you, a continuing responsibility for your care, and how he/she 
used the payments on your behalf. If your representative payee does not 
give us the requested information within a reasonable period of time, 
we may stop sending your benefit payment to him/her--unless we 
determine that he/she had a satisfactory reason for not meeting our 
request and we subsequently receive the requested information. If we 
decide to stop sending your payment to your representative payee, we 
will consider paying you directly (in accordance with Sec.  404.2011) 
while we look for a new payee.
    9. Revise Sec.  404.2030 to read as follows:


Sec.  404.2030  How will we notify you when we decide you need a 
representative payee?

    (a) We notify you in writing of our determination to make 
representative payment. This advance notice explains that we have 
determined that representative payment is in your interest, and it 
provides the name of the representative payee we have selected. We send 
this notice before we actually appoint the payee and allow you 10 days 
from the receipt of the notice to protest the proposed payee 
appointment before we certify payment to the payee. If you are under 
age 15, an unemancipated minor under the age of 18, or legally 
incompetent, our written notice goes to your legal guardian or legal 
representative. The advance notice:

[[Page 55330]]

    (1) Contains language that is easily understandable to the reader.
    (2) Identifies the person designated as your representative payee.
    (3) Explains that you, your legal guardian, or your legal 
representative can appeal our determination that you need a 
representative payee.
    (4) Explains that you, your legal guardian, or your legal 
representative can appeal our designation of a particular person or 
organization to serve as your representative payee.
    (5) Explains that you, your legal guardian, or your legal 
representative can review the evidence upon which our designation of a 
particular representative payee is based and submit additional 
evidence.
    (b) If you, your legal guardian, or your legal representative 
objects to representative payment or to the designated payee, we will 
handle the objection as follows:
    (1) If you disagree with the decision and wish to file an appeal, 
we will process it under subpart J of this part.
    (2) If you file the appeal before the decision takes effect, we 
will delay the action until we make a decision.
    10. Revise Sec.  404.2040a to read as follows:


Sec.  404.2040a  Compensation for qualified organizations serving as 
representative payees.

    (a) Organizations that can request compensation. A qualified 
organization can request us to authorize it to collect a monthly fee 
from your benefit payment. A qualified organization is:
    (1) Any State or local government agency with fiduciary 
responsibilities or whose mission is to carry out income maintenance, 
social service, or health care-related activities; or
    (2) Any community-based nonprofit social service organization 
founded for religious, charitable or social welfare purposes which is 
licensed in the State in which it serves as representative payee or 
bonded.
    (b) What requirements must qualified organizations meet? 
Organizations that are qualified under paragraphs (a)(1) or (a)(2) of 
this section must also meet the following requirements before we can 
authorize them to collect a monthly fee.
    (1) A qualified organization must regularly provide representative 
payee services concurrently to at least five beneficiaries. An 
organization which has received our authorization to collect a fee for 
representative payee services, but is temporarily (not more than 6 
months) not a payee for at least five beneficiaries, may request our 
approval to continue to collect fees for those beneficiaries it 
currently serves during this short period in which the qualified 
organization has less than 5 beneficiaries. A qualified organization 
may not collect a fee unless the conditions in paragraph (g)(3) of this 
section are met.
    (2) A qualified organization must demonstrate that it is not a 
creditor of the beneficiary. See paragraph (c) of this section for 
exceptions to the requirement regarding creditors.
    (c) Creditor relationship. On a case-by-case basis, we may 
authorize an organization to collect a fee for payee services despite 
the creditor relationship. (For example, the creditor is the 
beneficiary's landlord.) To provide this authorization, we will review 
all of the evidence submitted by the organization and authorize 
collection of a fee when:
    (1) The creditor services (e.g., providing housing) provided by the 
organization help to meet the current needs of the beneficiary; and
    (2) The amount the organization charges the beneficiary for these 
services is commensurate with the beneficiary's ability to pay.
    (d) Authorization process. (1) An organization must request in 
writing and receive an authorization from us before it may collect a 
fee.
    (2) An organization seeking authorization to collect a fee must 
also give us evidence to show that it is qualified, pursuant to 
paragraphs (a), (b), and (c) of this section, to collect a fee.
    (3) If the evidence provided to us by the organization shows that 
it meets the requirements of this section, and additional investigation 
by us proves it suitable to serve, we will notify the organization in 
writing that it is authorized to collect a fee. If we need more 
evidence, or if we are not able to authorize the collection of a fee, 
we will also notify the organization in writing that we have not 
authorized the collection of a fee.
    (e) Revocation and cancellation of the authorization. (1) We will 
revoke an authorization to collect a fee if we have evidence which 
establishes that an organization no longer meets the requirements of 
this section. We will issue a written notice to the organization 
explaining the reason(s) for the revocation.
    (2) An organization may cancel its authorization at any time upon 
written notice to us.
    (f) Notices. The written notice we will send to an organization 
authorizing the collection of a fee will contain an effective date for 
the collection of a fee pursuant to paragraphs (a), (b) and (c) of this 
section. The effective date will be no earlier than the month in which 
the organization asked for authorization to collect a fee. The notice 
will be applicable to all beneficiaries for whom the organization was 
payee at the time of our authorization and all beneficiaries for whom 
the organization becomes payee while the authorization is in effect.
    (g) Limitation on fees. (1) An organization authorized to collect a 
fee under this section may collect from a beneficiary a monthly fee for 
expenses (including overhead) it has incurred in providing payee 
services to a beneficiary. The limit on the fee a qualified 
organization may collect for providing payee services increases by the 
same percentage as the annual cost of living adjustment (COLA). The 
increased fee amount (rounded to the nearest dollar) is taken beginning 
with the benefit for December (received in January).
    (2) Any agreement providing for a fee in excess of the amount 
permitted shall be void and treated as misuse of your benefits by the 
organization under Sec.  404.2041.
    (3) A fee may be collected for any month during which the 
organization--
    (i) Provides representative payee services;
    (ii) Receives a benefit payment for the beneficiary; and
    (iii) Is authorized to receive a fee for representative payee 
services.
    (4) Fees for services may not be taken from any funds conserved for 
the beneficiary by a payee in accordance with Sec.  404.2045.
    (5) Generally, an organization may not collect a fee for months in 
which it does not receive a benefit payment. However, an organization 
will be allowed to collect a fee for months in which it did not receive 
a payment if we later issue payment for these months and the 
organization:
    (i) Received our approval to collect a fee for the months for which 
payment is made;
    (ii) Provided payee services in the months for which payment is 
made; and
    (iii) Was the payee when the retroactive payment was paid by us.
    (6) An authorized organization can collect a fee for providing 
representative payee services from another source if the total amount 
of the fee collected from both the beneficiary and the other source 
does not exceed the amount authorized by us.
    11. Revise Sec.  404.2041 to read as follows:

[[Page 55331]]

Sec.  404.2041  Who is liable if your representative payee misuses your 
benefits?

    (a) A representative payee who misuses your benefits is responsible 
for paying back misused benefits. We will make every reasonable effort 
to obtain restitution of misused benefits so that these benefits can be 
repaid to you.
    (b) We will repay benefits in cases when we determine that a 
representative payee misused benefits and we were negligent in the 
investigation or monitoring of that representative payee. When we make 
restitution, we will pay you or your alternative representative payee 
an amount equal to the misused benefits less any amount repaid by the 
misuser.
    (c) The term ``negligent failure'' used in this subpart means that 
we failed to investigate or monitor a representative payee or that we 
did investigate or monitor a representative payee but did not follow 
established procedures in our investigation or monitoring. Examples of 
our negligent failure include, but are not limited to, the following:
    (1) We did not follow our established procedures in this subpart 
when investigating, appointing, or monitoring a representative payee;
    (2) We did not timely investigate a reported allegation of misuse; 
or
    (3) We did not take the necessary steps to prevent the issuance of 
payments to the representative payee after it was determined that the 
payee misused benefits.
    (d) Our repayment of misused benefits under these provisions does 
not alter the representative payee's liability and responsibility as 
described in paragraph (a) of this section.
    12. Revise Sec.  404.2050 to read as follows:


Sec.  404.2050  When will we select a new representative payee for you?

    When we learn that your interest is not served by sending your 
benefit payment to your present representative payee or that your 
present payee is no longer able or willing to carry out payee 
responsibilities, we will promptly stop sending your payment to the 
payee. We will then send your benefit payment to an alternative payee 
or directly to you, until we find a suitable payee. We may suspend 
payment as explained in Sec.  404.2011(c) if we find that paying you 
directly would cause substantial harm and we cannot find a suitable 
alternative representative payee before your next payment is due. We 
will terminate payment of benefits to your representative payee and 
find a new payee or pay you directly if the present payee:
    (a) Has been found by us or a court of competent jurisdiction to 
have misused your benefits;
    (b) Has not used the benefit payments on your behalf in accordance 
with the guidelines in this subpart;
    (c) Has not carried out the other responsibilities described in 
this subpart;
    (d) Dies;
    (e) No longer wishes to be your payee;
    (f) Is unable to manage your benefit payments; or
    (g) Fails to cooperate, within a reasonable time, in providing 
evidence, accounting, or other information we request.
    13. Revise Sec.  404.2065 to read as follows:


Sec.  404.2065  How does your representative payee account for the use 
of benefits?

    A representative payee must account for the use of benefits. We 
require written reports from your representative payee no less than 
annually (except for certain State institutions which participate in a 
separate onsite review program). We may verify how your representative 
payee used the funds. Your representative payee should keep records of 
how benefits were used in order to make accounting reports and make 
those records available upon our request. We may ask your 
representative payee to give us the following information:
    (a) Where you lived during the accounting period;
    (b) Who made the decisions on how your benefits were spent or 
saved;
    (c) How your benefit payments were used; and
    (d) How much of your benefit payments were saved and how the 
savings were invested.

PART 408--SPECIAL BENEFITS FOR CERTAIN WORLD WAR II VETERANS (SVB)

    14. Add new subpart F to part 408 to read as follows:
Subpart F--Representative Payment
Sec.
408.601 What is this subpart about?
408.610 When will we send your SVB payments to a representative 
payee?
408.611 What happens to your monthly benefits while we are finding a 
suitable representative payee for you?
408.615 What information do we consider in determining whether we 
will pay your benefits to a representative payee?
408.620 What information do we consider in selecting the proper 
representative payee for you?
408.621 What is our order of preference in selecting a 
representative payee for you?
408.622 Who may not serve as a representative payee?
408.624 How do we investigate a representative payee applicant?
408.625 What information must a representative payee report to us?
408.630 How will we notify you when we decide you need a 
representative payee?
408.635 What are the responsibilities of your representative payee?
408.640 How must your representative payee use your benefits?
408.641 Who is liable if your representative payee misuses your 
benefits?
408.645 What must your representative payee do with unused benefits?
408.650 When will we select a new representative payee for you?
408.655 When will we stop making your payments to a representative 
payee?
408.660 What happens to your accumulated funds when your 
representative payee changes?
408.665 How does your representative payee account for the use of 
your SVB payments?

Subpart F--Representative Payment

    Authority: Secs. 702(a)(5), 807, and 810 of the Social Security 
Act (42 U.S.C. 902(a)(5), 1007, and 1010).


Sec.  408.601  What is this subpart about?

    (a) Explanation of representative payment. This subpart explains 
the policies and procedures we follow to determine whether to pay your 
benefits to a representative payee and to select a representative payee 
for you. It also explains the responsibilities your representative 
payee has for using the funds he or she receives on your behalf. A 
representative payee may be either an individual or an organization. We 
will select a representative payee to receive your benefits if we 
believe your interests will be better served by paying a representative 
payee than by paying you directly. Generally, we appoint a 
representative payee if we determine you are unable to manage or direct 
the management of your own benefit payments. Because the representative 
payment policies and procedures we use for the title VIII program 
closely parallel our title II policies and procedures, we provide 
cross-references to the appropriate material in our title II 
representative payment rules in subpart U of part 404 of this chapter.
    (b) Policy we use to determine whether to make representative 
payment. For an explanation of the policy we use to determine whether 
to pay your SVB to a representative payee, see Sec.  404.2001(b) of 
this chapter.


Sec.  408.610  When will we send your SVB payments to a representative 
payee?

    In determining when we will pay your benefits to a representative 
payee, we follow the rules in Sec.  404.2010(a) of this chapter.

[[Page 55332]]

Sec.  408.611  What happens to your monthly benefits while we are 
finding a suitable representative payee for you?

    For an explanation of the policy we use to determine what happens 
to your monthly benefits while we are finding a suitable representative 
payee for you, see Sec.  404.2011 of this chapter.


Sec.  408.615  What information do we consider in determining whether 
we will pay your benefits to a representative payee?

    We determine whether to pay your benefits to a representative payee 
after considering the information listed in Sec.  404.2015 of this 
chapter.


Sec.  408.620  What information do we consider in selecting the proper 
representative payee for you?

    To select a proper representative payee for you, we consider the 
information listed in Sec.  404.2020 of this chapter.


Sec.  408.621  What is our order of preference in selecting a 
representative payee for you?

    We use the preference list in Sec.  404.2021(a) of this chapter as 
a guide in selecting the proper representative payee for you.


Sec.  408.622  Who may not serve as a representative payee?

    For a list of individuals who may not serve as a representative 
payee, see Sec.  404.2022 of this chapter.


Sec.  408.624  How do we investigate a representative payee applicant?

    Before selecting an individual or organization as your 
representative payee, we investigate him or her following the rules in 
Sec.  404.2024 of this chapter.


Sec.  408.625  What information must a representative payee report to 
us?

    Your representative payee must report to us information as 
described in Sec.  404.2025 of this chapter.


Sec.  408.630  How will we notify you when we decide you need a 
representative payee?

    (a) We notify you in writing of our determination to make 
representative payment. The notice explains that we have determined 
that representative payment is in your interest, and it provides the 
name of the representative payee we have selected. The notice:
    (1) Contains language that is easily understandable to the reader.
    (2) Identifies the person designated as your representative payee.
    (3) Explains that you, your legal guardian, or your legal 
representative can appeal our determination that you need a 
representative payee.
    (4) Explains that you, your legal guardian, or your legal 
representative can appeal our designation of a particular person to 
serve as representative payee.
    (b) If you, your legal guardian, or your legal representative 
objects to representative payment or to the designated payee, you can 
file a formal appeal.


Sec.  408.635  What are the responsibilities of your representative 
payee?

    For a list of your representative payee's responsibilities, see 
Sec.  404.2035 of this chapter.


Sec.  408.640  How must your representative payee use your benefits?

    Your representative payee must use your benefits in accordance with 
the rules in Sec.  404.2040 of this chapter.


Sec.  408.641  Who is liable if your representative payee misuses your 
benefits?

    For the rules we follow to determine who is liable for repayment of 
misused benefits, see Sec.  404.2041 of this chapter.


Sec.  408.645  What must your representative payee do with unused 
benefits?

    If your representative payee has accumulated benefits for you, he 
or she must conserve or invest them as provided in Sec.  404.2045 of 
this chapter.


Sec.  408.650  When will we select a new representative payee for you?

    We follow the rules in Sec.  404.2050 of this chapter to determine 
when we will select a new representative payee for you.


Sec.  408.655  When will we stop making your payments to a 
representative payee?

    To determine when we will stop representative payment for you, we 
follow the rules in Sec.  404.2055 of this chapter.


Sec.  408.660  What happens to your accumulated funds when your 
representative payee changes?

    For a description of what happens to your accumulated funds 
(including the interest earned on the funds) when we change your 
representative payee or when you begin receiving benefits directly, see 
Sec.  404.2060 of this chapter.


Sec.  408.665  How does your representative payee account for the use 
of your SVB payments?

    Your representative payee must account for the use of your benefits 
as specified in Sec.  404.2065 of this chapter.

PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND AND 
DISABLED

    15. The authority citation for subpart F continues to read as 
follows:

    Authority: Secs. 702(a)(5), 1631(a)(2) and (d)(1) of the Social 
Security Act (42 U.S.C. 902(a)(5) and 1383(a)(2) and (d)(1)).

    16. Add Sec.  416.611 to read as follows:


Sec.  416.611  What happens to your monthly benefits while we are 
finding a suitable representative payee for you?

    (a) We may pay you directly. We will pay current monthly benefits 
directly to you while finding a suitable representative payee unless we 
determine that paying you directly would cause substantial harm to you. 
We determine substantial harm as follows:
    (1) If you are receiving disability payments and we have determined 
that you have a drug addiction or alcoholism condition, or you are 
legally incompetent, or you are under age 15, we will presume that 
substantial harm exists. However, we will allow you to dispute this 
presumption by presenting evidence that direct payment would not cause 
you substantial harm.
    (2) If you do not fit any of these categories, we make findings of 
substantial harm on a case-by-case basis. We consider all matters that 
may affect your ability to manage your benefits in your own best 
interest. We decide that substantial harm exists if both of the 
following conditions exist:
    (i) Directly receiving benefits can be expected to cause you 
serious physical or mental injury.
    (ii) The possible effect of the injury would outweigh the effect of 
having no income to meet your basic needs.
    (b) We may delay or suspend your payments. If we find that direct 
payment will cause substantial harm to you, we may delay (in the case 
of initial eligibility for benefits) or suspend (in the case of 
existing eligibility for benefits) payments for as long as 1 month 
while we try to find a suitable representative payee. If we do not find 
a payee within one month, we will pay you directly. If you are 
receiving disability payments and we have determined that you have a 
drug addiction or alcoholism condition, or you are legally incompetent, 
or you are under age 15, we will withhold payment until a 
representative payee is appointed even if it takes longer than one 
month. We will, however, as noted in paragraph (a)(1) of this section, 
allow you to present evidence to dispute the presumption that direct 
payment would cause you substantial harm. See Sec.  416.601(b)(3) for 
our policy on suspending the benefits if you are currently receiving 
benefits directly.

    Example 1: Substantial Harm Exists. We are unable to find a 
representative payee for Mr. X, a 67 year old retirement beneficiary

[[Page 55333]]

who is an alcoholic. Based on contacts with the doctor and 
beneficiary, we determine that Mr. X was hospitalized recently for 
his drinking. Paying him directly will cause injury, so we may delay 
payment for as long as one month based on substantial harm while we 
locate a suitable representative payee.
    Example 2: Substantial Harm Does Not Exist. We approve a claim 
for Mr. Y, a title XVI claimant who suffers from a combination of 
mental impairments but who is not legally incompetent. We determine 
that Mr. Y needs assistance in managing benefits, but we have not 
found a representative payee. Although we believe that Mr. Y may not 
use the money wisely, there is no indication that receiving funds 
directly would cause him substantial harm (i.e., physical or mental 
injury). We must pay current benefits directly to Mr. Y while we 
locate a suitable representative payee.

    (c) How we pay delayed or suspended benefits. Payment of benefits, 
which were delayed or suspended pending appointment of a representative 
payee, can be made to you or your representative payee as a single sum 
or in installments when we determine that installments are in your best 
interest.
    17. Amend Sec.  416.621 by revising the heading and paragraph (a) 
introductory text, redesignating paragraph (b) as paragraph (c) and 
adding new paragraph (b) to read as follows:


Sec.  416.621  What is our order of preference in selecting a 
representative payee for you?

* * * * *
    (a) For beneficiaries 18 years old or older (except those described 
in paragraph (b) of this section), our preference is--
* * * * *
    (b) For individuals who are disabled and who have a drug addiction 
or alcoholism condition our preference is--
    (1) A community-based nonprofit social service agency licensed by 
the State, or bonded;
    (2) A Federal, State or local government agency whose mission is to 
carry out income maintenance, social service, or health care-related 
activities;
    (3) A State or local government agency with fiduciary 
responsibilities;
    (4) A designee of an agency (other than a Federal agency) referred 
to in paragraphs (b)(1), (2), and (3) of this section, if appropriate; 
or
    (5) A family member.
* * * * *
    18. Add Sec.  416.622 to read as follows:


Sec.  416.622  Who may not serve as a representative payee?

    A representative payee applicant may not serve if he/she:
    (a) Has been convicted of a violation under section 208, 811 or 
1632 of the Social Security Act.
    (b) Receives title II, VIII, or XVI benefits through a 
representative payee.
    (c) Previously served as a representative payee and was found by 
us, or a court of competent jurisdiction, to have misused title II, 
VIII or XVI benefits. However, if we decide to make an exception to the 
prohibition, we must evaluate the payee's performance at least every 3 
months until we are satisfied that the payee poses no risk to the 
beneficiary's best interest. Exceptions are made on a case-by-case 
basis if all of the following are true.
    (1) Direct payment of benefits to the beneficiary is not in the 
beneficiary's interest.
    (2) No suitable alternative payee is available.
    (3) Selecting the payee applicant as representative payee would be 
in the best interest of the beneficiary.
    (4) The information we have indicates the applicant is now suitable 
to serve as a representative payee.
    (5) The payee applicant has repaid the misused benefits or has a 
plan to repay them.
    (d) Applicant is a creditor. A creditor is someone who provides you 
with goods or services for consideration. This restriction does not 
apply to the creditor who poses no risk to you and whose financial 
relationship with you presents no substantial conflict of interest, and 
is any of the following:
    (1) A relative living in the same household as you do.
    (2) Your legal guardian or legal representative.
    (3) A facility that is licensed or certified as a care facility 
under the law of a State or a political subdivision of a State.
    (4) A qualified organization authorized to collect a monthly fee 
from you for expenses incurred in providing representative payee 
services for you, under Sec.  416.640a.
    (5) An administrator, owner, or employee of the facility in which 
you live and we are unable to locate an alternative representative 
payee.
    (6) Any other individual we deem appropriate based on a written 
determination.

    Example 1: Sharon applies to be representative payee for Ron who 
we have determined needs assistance in managing his benefits. Sharon 
has been renting a room to Ron for several years and assists Ron in 
handling his other financial obligations, as needed. She charges Ron 
a reasonable amount of rent. Ron has no other family or friends 
willing to help manage his benefits or to act as representative 
payee. Sharon has demonstrated that her interest in and concern for 
Ron goes beyond her desire to collect the rent each month. In this 
instance, we may select Sharon as Ron's representative payee because 
a more suitable payee is not available, she appears to pose no risk 
to Ron and there is minimal conflict of interest. We will document 
this decision.

    Example 2: In a situation similar to the one above, Ron's 
landlord indicates that she is applying to be payee only to ensure 
receipt of her rent. If there is money left after payment of the 
rent, she will give it directly to Ron to manage on his own. In this 
situation, we would not select the landlord as Ron's representative 
payee because of the substantial conflict of interest and lack of 
interest in his well being.

    19. Add Sec.  416.624 to read as follows:


Sec.  416.624  How do we investigate a representative payee applicant?

    Before selecting an individual or organization to act as your 
representative payee, we will perform an investigation.
    (a) Nature of the investigation. As part of the investigation, we 
do the following:
    (1) Conduct a face-to-face interview with the payee applicant 
unless it is impracticable as explained in paragraph (b) of this 
section.
    (2) Require the payee applicant to submit documented proof of 
identity, unless information establishing identity has recently been 
submitted with an application for title II, VIII or XVI benefits.
    (3) Verify the payee applicant's Social Security account number or 
employer identification number.
    (4) Determine whether the payee applicant has been convicted of a 
violation of section 208, 811 or 1632 of the Social Security Act.
    (5) Determine whether the payee applicant has previously served as 
a representative payee and if they had an appointment as payee revoked 
or terminated for misusing title II, VIII or XVI benefits.
    (6) Use our records to verify the payee applicant's employment and/
or direct receipt of title II, VIII, or XVI benefits.
    (7) Verify the payee applicant's concern for the beneficiary with 
the beneficiary's custodian or other interested person.
    (8) Require the applicant to provide adequate information showing 
his or her relationship to the beneficiary and describe his or her 
responsibility for the care of the beneficiary.
    (9) Determine whether the payee applicant is a creditor of the 
beneficiary (see Sec.  416.622(d)).
    (b) A face-to-face interview. We may consider a face-to-face 
interview impracticable if it would cause the payee applicant undue 
hardship. For example, the payee applicant cares for children or 
disabled individuals in the home and no alternative caregiver is

[[Page 55334]]

available, or is employed and cannot arrange for time off from work, or 
would have to travel a great distance to the field office. In this 
situation, we may conduct the investigation to determine the payee 
applicant's suitability to serve as a representative payee without a 
face-to-face interview. We may decide subsequent face-to-face 
interviews are impracticable for an organizational representative payee 
applicant when the organization is known by the field office as a 
suitable payee. We base this decision on the organization's past 
performance, recent contacts, and its knowledge of and compliance with 
reporting requirements.
    20. Revise Sec.  416.625 to read as follows:


Sec.  416.625  What information must a representative payee report to 
us?

    Anytime after we select a representative payee for you, we may ask 
your payee to give us information showing a continuing relationship 
with you, a continuing responsibility for your care, and how he/she 
used the payments on your behalf. If your representative payee does not 
give us the requested information within a reasonable period of time, 
we may stop sending your benefit payment to him/her--unless we 
determine that he/she had a satisfactory reason for not meeting our 
request and we subsequently receive the requested information. If we 
decide to stop sending your benefit payment to your representative 
payee, we will consider paying you directly (in accordance with Sec.  
416.611) while we look for a new payee.
    21. Revise Sec.  416.630 to read as follows:


Sec.  416.630  How will we notify you when we decide you need a 
representative payee?

    (a) We notify you in writing of our determination to make 
representative payment. This advance notice explains that we have 
determined that representative payment is in your interest, and it 
provides the name of the representative payee we have selected. We send 
this notice before we actually appoint the payee and allow you 10 days 
from the receipt of the notice to protest the proposed payee 
appointment before we certify payment to the payee. If you are under 
age 15, an unemancipated minor under the age of 18, or legally 
incompetent, our written notice goes to your legal guardian or legal 
representative. The advance notice:
    (1) Contains language that is easily understandable to the reader.
    (2) Identifies the person designated as your representative payee.
    (3) Explains that you, your legal guardian, or your legal 
representative can appeal our determination that you need a 
representative payee.
    (4) Explains that you, your legal guardian, or your legal 
representative can appeal our designation of a particular person to 
serve as your representative payee.
    (5) Explains that you, your legal guardian, or your legal 
representative can review the evidence upon which our designation of a 
particular representative payee is based and submit additional 
evidence.
    (b) If you, your legal guardian, or your legal representative 
objects to representative payment or to the designated payee, we will 
handle the objection as follows:
    (1) If you disagree with the decision and wish to file an appeal, 
we will process it under subpart N of this part.
    (2) If you file the appeal before the decision takes effect, we 
will delay the action until we make a decision.
    22. Revise Sec.  416.640a to read as follows:


Sec.  416.640a  Compensation for qualified organizations serving as 
representative payees.

    (a) Organizations that can request compensation. A qualified 
organization can request us to authorize it to collect a monthly fee 
from your benefit payment. A qualified organization is:
    (1) Any State or local government agency with fiduciary 
responsibilities or whose mission is to carry out income maintenance, 
social service, or health care-related activities; or
    (2) Any community-based nonprofit social service organization 
founded for religious, charitable or social welfare purposes which is 
licensed in the State in which it serves as representative payee or 
bonded.
    (b) What requirements must qualified organizations meet? 
Organizations that are qualified under paragraphs (a)(1) or (a)(2) of 
this section must also meet the following requirements before we can 
authorize them to collect a monthly fee.
    (1) A qualified organization must regularly provide representative 
payee services concurrently to at least five beneficiaries. An 
organization which has received our authorization to collect a fee for 
representative payee services, but is temporarily (not more than 6 
months) not a payee for at least five beneficiaries, may request our 
approval to continue to collect fees.
    (2) A qualified organization must demonstrate that it is not a 
creditor of the beneficiary. See paragraph (c) of this section for 
exceptions to the requirement regarding creditors.
    (c) Creditor relationship. On a case-by-case basis, we may 
authorize an organization to collect a fee for payee services despite 
the creditor relationship. (For example, the creditor is the 
beneficiary's landlord.) To provide this authorization, we will review 
all of the evidence submitted by the organization and authorize 
collection of a fee when:
    (1) The creditor services (e.g., providing housing) provided by the 
organization help to meet the current needs of the beneficiary; and
    (2) The amount the organization charges the beneficiary for these 
services is commensurate with the beneficiary's ability to pay.
    (d) Authorization process. (1) An organization must request in 
writing and receive an authorization from us before it may collect a 
fee.
    (2) An organization seeking authorization to collect a fee must 
also give us evidence to show that it is qualified, pursuant to 
paragraphs (a), (b), and (c) of this section, to collect a fee.
    (3) If the evidence provided to us by the organization shows that 
it meets the requirements of this section, and additional investigation 
by us proves it suitable to serve, we will notify the organization in 
writing that it is authorized to collect a fee. If we need more 
evidence, or if we are not able to authorize the collection of a fee, 
we will also notify the organization in writing that we have not 
authorized the collection of a fee.
    (e) Revocation and cancellation of the authorization. (1) We will 
revoke an authorization to collect a fee if we have evidence which 
establishes that an organization no longer meets the requirements of 
this section. We will issue a written notice to the organization 
explaining the reason(s) for the revocation.
    (2) An organization may cancel its authorization at any time upon 
written notice to us.
    (f) Notices. The written notice we will send to an organization 
authorizing the collection of a fee will contain an effective date for 
the collection of a fee pursuant to paragraphs (a), (b) and (c) of this 
section. The effective date will be no earlier than the month in which 
the organization asked for authorization to collect a fee. The notice 
will be applicable to all beneficiaries for whom the organization was 
payee at the time of our authorization and all beneficiaries for whom 
the organization becomes payee while the authorization is in effect.
    (g) Limitation on fees. (1) An organization authorized to collect a 
fee

[[Page 55335]]

under this section may collect from a beneficiary a monthly fee for 
expenses (including overhead) it has incurred in providing payee 
services to a beneficiary. The limit on the fee a qualified 
organization may collect for providing payee services increases by the 
same percentage as the annual cost of living adjustment (COLA). The 
increased fee amount (rounded to the nearest dollar) is taken beginning 
with the payment for January.
    (2) Any agreement providing for a fee in excess of the amount 
permitted shall be void and treated as misuse of your benefits by the 
organization under Sec.  416.641.
    (3) A fee may be collected for any month during which the 
organization--
    (i) Provides representative payee services;
    (ii) Receives a benefit payment for the beneficiary; and
    (iii) Is authorized to receive a fee for representative payee 
services.
    (4) Fees for services may not be taken from any funds conserved for 
the beneficiary by a payee in accordance with Sec.  416.645.
    (5) Generally, an organization may not collect a fee for months in 
which it does not receive a benefit payment. However, an organization 
will be allowed to collect a fee for months in which it did not receive 
a payment if we later issue payment for these months and the 
organization:
    (i) Received our approval to collect a fee for the months for which 
payment is made;
    (ii) Provided payee services in the months for which payment is 
made; and
    (iii) Was the payee when the retroactive payment was paid by us.
    (6) An authorized organization can collect a fee for providing 
representative payee services from another source if the total amount 
of the fee collected from both the beneficiary and the other source 
does not exceed the amount authorized by us.
    23. Revise Sec.  416.641 to read as follows:


Sec.  416.641  Who is liable if your representative payee misuses your 
benefits?

    (a) A representative payee who misuses your benefits is responsible 
for paying back misused benefits. We will make every reasonable effort 
to obtain restitution of misused benefits so that these benefits can be 
repaid to you.
    (b) We will repay benefits in cases when we determine that a 
representative payee misused benefits and we were negligent in the 
investigation or monitoring of that representative payee. When we make 
restitution, we will pay you or your alternative representative payee 
an amount equal to the misused benefits less any amount repaid by the 
misuser.
    (c) The term ``negligent failure'' used in this subpart means that 
we failed to investigate or monitor a representative payee or that we 
did investigate or monitor a representative payee but did not follow 
established procedures in our investigation or monitoring. Examples of 
our negligent failure include, but are not limited to, the following:
    (1) We did not follow our established procedures in this subpart 
when investigating, appointing, or monitoring a representative payee;
    (2) We did not investigate timely a reported allegation of misuse; 
or
    (3) We did not take the steps necessary to prevent the issuance of 
payments to the representative payee after it was determined that the 
payee misused benefits.
    (d) Our repayment of misused benefits under these provisions does 
not alter the representative payee's liability and responsibility as 
described in paragraph (a) of this section.
    24. Revise Sec.  416.650 to read as follows:


Sec.  416.650  When will we select a new representative payee for you?

    When we learn that your interest is not served by sending your 
benefit payment to your present representative payee or that your 
present payee is no longer able or willing to carry out payee 
responsibilities, we will promptly stop sending your payment to the 
payee. We will then send your benefit payment to an alternative payee 
or directly to you, until we find a suitable payee. We may suspend 
payment as explained in Sec.  416.611(c) if we find that paying you 
directly would cause substantial harm and we cannot find a suitable 
alternative representative payee before your next payment is due. We 
will terminate payment of benefits to your representative payee and 
find a new payee or pay you directly if the present payee:
    (a) Has been found by us or a court of competent jurisdiction to 
have misused your benefits;
    (b) Has not used the benefit payments on your behalf in accordance 
with the guidelines in this subpart;
    (c) Has not carried out the other responsibilities described in 
this subpart;
    (d) Dies;
    (e) No longer wishes to be your payee;
    (f) Is unable to manage your benefit payments; or
    (g) Fails to cooperate, within a reasonable time, in providing 
evidence, accounting, or other information we request.
    25. Revise Sec.  416.665 to read as follows:


Sec.  416.665  How does your representative payee account for the use 
of benefits?

    A representative payee must account for the use of benefits. We 
require written reports from your representative payee no less than 
annually (except for certain State institutions which participate in a 
separate onsite review program). We may verify how your representative 
payee used the funds. Your representative payee should keep records of 
how benefits were used in order to make accounting reports and make 
those records available upon our request. We may ask your 
representative payee to give us the following information:
    (a) Where you lived during the accounting period;
    (b) Who made the decisions on how your benefits were spent or 
saved;
    (c) How your benefit payments were used; and
    (d) How much of your benefit payments were saved and how the 
savings were invested.
    26. The authority citation for subpart N continues to read as 
follows:

    Authority: Secs. 702(a)(5), 1631, and 1633 of the Social 
Security Act (42 U.S.C. 902(a)(5), 1383, and 1383(b)); 31 U.S.C. 
3720A.

    27. Amend Sec.  416.1402 by revising paragraph (d), removing the 
word ``and'' at the end of paragraph (m), replacing the period at the 
end of paragraph (n) with ``; and,'' and adding paragraph (o) to read 
as follows:


Sec.  416.1402  Administrative actions that are initial determinations.

* * * * *
    (d) Whether the payment of your benefits will be made, on your 
behalf, to a representative payee;
* * * * *
    (o) Whether we were negligent in failing to investigate or monitor 
your representative payee, which resulted in the misuse of benefits by 
your representative payee.

[FR Doc. 03-24017 Filed 9-24-03; 8:45 am]
BILLING CODE 4191-02-P