Representative Payment

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.

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Old section New section

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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.

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A derivation table is provided to show the sources of the revised

part 266.

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Old section New section

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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.

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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--

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(Name of annuitant)

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(Social Security Number), for whom

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(Name of payee)

is representative payee for Railroad Retirement benefits;

(2) For interest or dividend paying accounts--

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(Name of annuitant) by

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(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