Federal Old-Age, Survivors, and Disability Insurance and Supplemental Security Income for the Aged, Blind, and Disabled; Representative Payment Under Title II and Title XVI of the Social Security Act

Federal RegisterMar 15, 1994

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Parts 404 and 416

RIN 0960-AD22

Federal Old-Age, Survivors, and Disability Insurance and

Supplemental Security Income for the Aged, Blind, and Disabled;

Representative Payment Under Title II and Title XVI of the Social

Security Act

AGENCY: Social Security Administration, HHS.

ACTION: Proposed rules.

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SUMMARY: We propose to amend our regulations on payment of Social

Security and supplemental security income (SSI) benefits under title II

and title XVI of the Social Security Act (the Act). The proposed

regulations reflect the provisions of section 5105(a) (1) and (2), and

5105 amended sections 205(j) and 1631(a)(2) of the Act and made

numerous modifications and additions to the representative payee

provisions of the Act intended to provide additional safeguards and

protection for beneficiaries who need representative payees. These

modifications and additions include procedures for investigating

representative payee applicants, identifying unsuitable representative

payee applicants, making direct payment to some beneficiaries while we

try to find a payee, providing advance notice of determinations to make

representative payment and selections of representative payees,

providing all affected beneficiaries with the opportunity to appeal our

determination to make representative payment or to select a particular

representative payee, and making restitution in some instances to

beneficiaries of benefits misused by representative payees.

DATES: To be sure your comments are considered, we must receive them no

later than May 16, 1994.

ADDRESSES: Comments should be submitted in writing to the Commissioner

of Social Security, Department of Health and Human Services, P.O. Box

1585, Baltimore, MD 21235, or delivered to the Office of Regulations,

Social Security Administration, 3-B-1 Operations Building, 6401

Security Boulevard, Baltimore, MD 21235, between 8 a.m. and 4:30 p.m.

on regular business days. Comments received may be inspected during

these same hours by making arrangements with the contact person shown

below.

FOR FURTHER INFORMATION CONTACT: Philip Berge, Legal Assistant, 3-B-1

Operations Building, 6401 Security Boulevard, Baltimore, MD 21235,

(410) 965-1769.

SUPPLEMENTARY INFORMATION:

Background

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. 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 will select

a representative payee for a person receiving Social Security or

supplemental security income benefits under title II or title XVI of

the Act if we believe that representative payment rather than direct

payment of benefits would be in the interest of that person.

In selecting a representative payee, we select 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 responsibilities as required under

the Act and our regulations.

Section 5105 of OBRA 90 amended sections 205(j) and 1631(a)(2) of

the Act to:

1. Mandate prompt revocation or termination of payment to a

representative payee, and allow certification of payment to an

alternative payee or directly to the beneficiary if we, or a court of

competent jurisdiction, determine that the representative payee misused

the beneficiary's benefits.

2. Authorize exemptions on a case-by-case basis to the prohibition

on payment to a payee applicant who previously served as a

representative payee and had certification of payment of benefits

revoked or terminated by reason of misuse, if appointing the payee

applicant would be in the best interest of an individual.

3. Require that any determination that payment of benefits be made

to a particular representative payee be made on the basis of an

investigation conducted in advance of the appointment of the payee,

including a face-to-face interview with the payee applicant when

practicable.

4. Prohibit, with certain exceptions, payment to a payee applicant

who is a creditor of the beneficiary providing the beneficiary with

goods or services for monetary consideration. Previously, we had no

regulations on this subject.

5. Require a determination whether a payee applicant who would

ordinarily be precluded from being selected as a representative payee

because he or she is a creditor of an individual receiving benefits

would be acceptable to serve as a representative payee.

6. Require a finding that direct payment of monthly benefits can be

expected to cause substantial harm to the beneficiary before we suspend

or defer benefits to the beneficiary until a suitable representative

payee is selected.

In such cases delay of benefits will not exceed 1 month except if

the individual is, as of the date of our determination, legally

incompetent, under age 15, or an SSI beneficiary eligible for benefits

based on disability and medically determined to be a drug addict or

alcoholic. For beneficiaries residing in California, we will continue

to follow the immediate direct payment requirement as explained in

Briggs v. Sullivan, No. CV-S-89-0203 EJG (E.D. Cal. March 23, 1990).

Under the Briggs court order, we may not refuse to pay directly or

withhold the Social Security or SSI benefits of any California

beneficiary, 18 years or older, who has been determined to need, but

does not have a representative payee. The court order does not apply to

individuals who are eligible for SSI disability payments and who have

been medically determined to be drug addicts or alcoholics or to

individuals who have been declared legally incompetent by a court.

Members of the Briggs class will be paid directly and will not be

subject to deferral or suspension of benefits based on a substantial

harm determination. Payment of any benefits which are delayed pending

selection of a representative payee shall be made to the individual or

the representative payee as a single sum or over such period of time as

we determine is in the best interest of the individual entitled to such

benefits.

7. Require that we provide, in advance of certification of payment,

written notice to the beneficiary of our determination to certify

payment of benefits to a representative payee and the right to appeal

that determination. If, however, the beneficiary is under the age of

15, an unemancipated minor under the age of 18, or legally incompetent,

the notice will be provided solely to the beneficiary's legal guardian

or legal representative.

Present regulations (Secs. 404.2030 and 416.630) generally require

that we notify the beneficiary, or the individual acting on his or her

behalf, whenever we intend to make representative payment and appoint a

payee. We must also ask an individual to contact us if he or she

objects to either proposed action. Sections 404.902(o) and 416.1402(d)

of the regulations currently indicate that a decision to make

representative payment is an initial determination, which is

appealable, unless the beneficiary is under age 18, legally incompetent

or in the case of title XVI only, an SSI beneficiary eligible on the

basis of disability and medically determined to be a drug addict or

alcoholic.

8. Provide that when our negligent failure to investigate or

monitor a representative payee results in misuse of benefits by the

representative payee, we shall make payment to the beneficiary or the

beneficiary's new representative payee in an amount equal to such

misused benefits.

9. Provide that we shall make a good faith effort to obtain

restitution from the representative payee who misused benefits.

Current regulations (Secs. 404.2041 and 416.641) explain that our

obligation to the beneficiary is completely discharged when we make a

correct payment to a representative payee on behalf of the beneficiary

and that the representative payee may be liable if the payee misuses

the beneficiary's benefits.

Proposed Regulations

We propose to make the following changes in our regulations to

reflect the pertinent amendments to sections 205(j) and 1631(a)(2) of

the Act made by sections 5105(a) (1) and (2), and (c) of OBRA 90.

Amend Secs. 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 conclusion that

our determination regarding a person's right to restitution is a

decision covered by the provisions of section 205(b)(1) or 1631(c)(1)

of the Act, and accordingly, an initial determination subject to the

administrative review process.

Amend Secs. 404.2001(b)(3) and 416.601(b)(3) to add a

parenthetical statement at the end of each advising that Secs. 404.2011

and 416.611, respectively, should be referenced if continued direct

payment would cause substantial harm to the beneficiary. This proposed

regulatory change results from the amendments to sections

205(j)(2)(D)(i) and 1631(a)(2)(B)(vii) of the Act made by section

5105(a)(2) of OBRA 90 which reflect the prohibition against deferring

or suspending payment of benefits unless direct payment to the

beneficiary would cause substantial harm to the beneficiary.

Add new Secs. 404.2011 and 416.611 to explain the

following:

--We will 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 benefits to the beneficiary would result in substantial

harm to the beneficiary.

--Findings of substantial harm will be made on a case-by-case

basis. When the direct receipt of benefits can be 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), substantial harm will be

found to exist. Substantial harm will also be found to exist when

the beneficiary is legally incompetent, or under age 15, unless

there is evidence to the contrary regarding substantial harm, or

when the beneficiary is an SSI recipient eligible based on a

disability and is medically determined to be a drug addict or

alcoholic. We believe that Congress did not intend that these

categories of beneficiaries should receive direct payment.

Therefore, we believe it is reasonable to consider that direct

payment would result in substantial harm to these categories of

beneficiaries and to delay payment of benefits to these

beneficiaries for more than 1 month until an appropriate payee is

selected and appointed. However, with respect only to individuals

adjudged legally incompetent and children under age 15, we will

allow the individual to provide evidence that substantial harm does

not exist, and 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. Every effort will be made to

select and appoint a payee expeditiously.

--Findings of substantial harm will not be considered initial

determinations subject to appeal rights. This is because a finding

of substantial harm will not materially affect the beneficiary's

payment since delay or suspension of direct payment may not exceed 1

month unless the beneficiary is: legally incompetent, under age 15,

or an SSI recipient eligible based on a disability and is medically

determined to be a drug addict or alcoholic. Beneficiaries who have

had their benefits temporarily suspended can also avail themselves

of additional administrative remedies in that they can challenge the

determination to make representative payment (Secs. 404.902(o) and

416.1402(d)) and/or challenge the appointment of a particular person

to be their representative payee (Secs. 404.902(p) and 416.1402(e)).

A finding of substantial harm is closely associated with a

determination to make representative payment or to change

representative payee and can be raised in connection with the appeal

of those determinations.

--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 is legally incompetent, under age 15, or is eligible

for SSI benefits based on a disability and is medically determined

to be a drug addict or alcoholic, we may delay payments for more

than 1 month.

--Payment of any benefits which were deferred or suspended

pending selection of a representative payee shall be made to the

beneficiary or the representative payee as a single sum or over such

period of time as we determine is in the best interest of the

beneficiary.

Add new Secs. 404.2022 and 416.622 to explain that:

--A payee applicant who has been convicted of a violation under

section 208 or section 1632 of the Act may never be appointed as a

representative payee. This provision was in section 208 of the Act

prior to enactment of section 5105(a)(2) of OBRA 90 but was never

included in our regulations.

--A payee applicant who receives Social Security or SSI benefits

through a representative payee may not serve as a representative

payee. Such individuals have already been determined to be incapable

of handling financial affairs.

--A payee applicant whose prior certification or appointment as

representative payee was revoked or terminated by reason of misuse

of title II or title XVI benefits may not be appointed as a

representative payee. We may make an exception to this prohibition

on a case-by-case basis if direct payment is not possible and

payment to the payee applicant would serve the best interest of the

beneficiary. An exception may be granted if no suitable alternative

payee is available and the information indicates the applicant is

now suitable to serve as payee. If the applicant is appointed,

evaluation(s) of the applicant's performance as payee will be

conducted as our field offices determine are necessary.

--Payment will not be certified to a 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:

(1) A relative of the beneficiary living in the same household

as the beneficiary;

(2) A legal guardian or legal representative of the beneficiary;

(3) 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, if the beneficiary resides in the 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;

(4) An individual whom we determine, based on written findings

and under procedures prescribed in our regulations to be acceptable

to serve as a representative payee. The individual must establish

that he or she poses no risk to the beneficiary, that the financial

relationship of the applicant to the beneficiary poses no

substantial conflict of interest, and a more suitable payee cannot

be found; or

(5) 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. (This regulatory provision and implementing regulations

separately published on June 1, 1992 (57 FR 23054), apply only as

long as the payment for services provisions set out in sections

205(j)(4) and 1631(a)(2)(D) of the Act, currently scheduled to lapse

on July 1, 1994, are in effect.)

Add new Secs. 404.2024 and 416.624 to explain that before

certifying payment to a representative payee applicant, we will conduct

an investigation of a 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 will be considered impracticable if it would cause the payee

applicant undue hardship such as when the applicant cannot reasonably

make arrangements to visit the Social Security field office.

During the investigation we will:

--Require the payee applicant to submit documented proof of

identity, unless such information has been submitted with an

application for title II or title XVI benefits;

--Verify the payee applicant's Social Security account number or

employer identification number;

--Determine whether the payee applicant has been convicted of a

violation of section 208 or section 1632 of the Act; and

--Determine whether the payee applicant previously served as a

representative payee and had his or her certification revoked or

terminated by reason of misuse of title II or title XVI benefits.

Amend existing Secs. 404.2025 and 416.625 to change the

title of the sections to ``Information to be submitted by a

representative payee after a representative payee has been selected,''

moving existing paragraph (a) of these sections with minor revisions to

new Secs. 404.2024 and 416.624 as new paragraph (c) and keeping

existing paragraph (b) as an undesignated paragraph under

Secs. 404.2025 and 416.625.

Amend existing Secs. 404.2030 and 416.630 to explain that

whenever we intend to make representative payment or to appoint a

payee, we will provide written notice to the beneficiary (or the legal

guardian or the legal representative of the beneficiary) in advance of

the certification of payment. The advance notice will:

--Be clearly written in language that is easily understandable

to the reader;

--Identify the person to be designated as representative payee;

--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; and

--Explain the right to appeal the designation of a particular

person to serve as the representative payee of the beneficiary and

to review the evidence upon which such designation is based and

submit additional evidence.

If the beneficiary or his or her legal guardian or legal

representative appeals and the appeal is received before the

effectuation of the payee appointment, the payee 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. Current monthly

benefits will be paid directly to the beneficiary, where appropriate,

in accordance with proposed Secs. 404.2011 and 416.611, until we have

selected a payee. Also, we are proposing to amend Secs. 404.902(o) and

416.1402(d) to include as an initial determination whether

representative payment will be made. This will afford the right to

request review to all beneficiaries for whom we propose representative

payment including beneficiaries who are under age 18, who are legally

incompetent, or who receive SSI disability benefits and are medically

determined to be drug addicts or alcoholics.

Amend existing Secs. 404.2041 and 416.641 to explain that:

--The representative payee is liable for misuse of the

beneficiary's benefits and is responsible for paying back misused

benefits to us. Restitution will always be sought from a payee who

misused benefits;

--We will be liable for repayment of misused benefits when our

negligent failure to investigate or monitor a representative payee

resulted in misuse;

--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;

--The term ``negligent failure'' as used in the proposed

regulations 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; and

--We will make every effort to obtain the return of misused

funds from the terminated representative payee.

--Section 416.641 will also explain that 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. We believe that Congress

intended that beneficiaries should be made whole in cases where

restitution is appropriate. Therefore, we have determined that State

funds which are Federally administered and which are involved in

restitution cases will be reissued as appropriate. The replacement

State supplementary payment will constitute a State liability under

existing Federal-State agreements.

Amend Secs. 404.2050 and 416.650 to reflect the 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.

Regulatory Procedures

Executive Order 12291

The Secretary has determined that this is not a major rule under

Executive Order 12291 because it will result in negligible

administrative costs and savings. Therefore, a regulatory impact

analysis is not required.

Regulatory Flexibility Act

We certify that these regulations, if promulgated, will not have a

significant economic impact on a substantial number of small entities

because these rules will primarily affect only individuals. Therefore,

a regulatory flexibility analysis as provided in Public Law 96-354, the

Regulatory Flexibility Act, is not required.

Paperwork Reduction Act

These regulations contain reporting requirements in Secs. 404.2024

and 416.624. We would normally seek approval of these requirements

(under the Paperwork Reduction Act) from the Office of Management and

Budget (OMB). We are not doing so in this situation because we have

already obtained clearance from OMB to collect this information using

form SSA-11 BK, OMB No. 0960-0014.

(Catalog of Federal Domestic Assistance Program Nos. 93.802-93.805

Social Security; and 93.807 Supplemental Security Income.)

List of Subjects

20 CFR Part 404

Administrative Practice and Procedure; Aged, Blind, Death benefits;

Disability Insurance benefits; Old-Age, Survivors, and Disability

Insurance; Reporting and recordkeeping requirements, Social Security.

20 CFR Part 416

Administrative Practice and Procedure; Aged, Blind, Disability

benefits; Medicaid, Reporting and recordkeeping requirements;

Supplemental Security Income (SSI).

Editorial Note: This document was received at the Office of the

Federal Register on March 9, 1994.

Dated: May 25, 1993.

Louis D. Enoff,

Principal Deputy Commissioner of Social Security.

Approved: August 26, 1993.

Donna E. Shalala,

Secretary of Health and Human Services.

For the reasons set out in the preamble, subparts U and J of part

404 and subparts F and N of part 416 of 20 CFR chapter III are amended

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), 205(a), (b) and (d)-(h), 221(d), and

1102 of the Social Security Act; 31 U.S.C. 3720A; 42 U.S.C. 401(j),

405(a), (b) and (d)-(h), 421(d), and 1302.

2. Section 404.902 is amended by revising paragraph (o), by

removing the ``and'' after paragraph (t), by removing the period after

paragraph (u) and replacing it with ``; and'' and by adding new

paragraph (v) after paragraph (u) 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;

* * * * *

(v) Restitution of misused benefits.

3. The authority citation for Subpart U of part 404 continues to

read as follows:

Authority: Secs. 205 (a), (j), and (k), and 1102 of the Social

Security Act; 42 U.S.C. 405(a), (j), and (k), and 1302.

Sec. 404.2001 [Amended]

4. Section 404.2001 is amended by adding the following

parenthetical statement after the last sentence of paragraph (b)(3):

Sec. 404.200 Introduction.

* * * * *

(b) * * *

(3) * ** (See Sec. 404.2011 if direct payment of benefits would

cause substantial harm to the beneficiary.)

5. New Sec. 404.2011 is added to subpart U to read as follows:

Sec. 404.2011 When a beneficiary will be paid directly pending

selection of a suitable representative payee.

(a) We will pay current monthly benefits directly to the

beneficiary until we have selected a representative payee except as

explained in paragraphs (b), (c), (d) and (e) of this section.

(b) We may delay (in the case of initial entitlement to benefits)

or suspend (in the case of existing entitlement to benefits) payment to

a beneficiary while we try to find a suitable representative payee if

we determine that direct payment would cause substantial harm to the

beneficiary.

basis, taking into consideration all matters that may affect the

ability of the beneficiary to handle his or her affairs in his or her

interest. When the direct receipt of benefits can be expected to cause

physical or mental injury to the beneficiary, we will consider

substantial harm to exist. We will also consider direct payment to

cause substantial harm when the beneficiary is legally incompetent or

under age 15, unless there is evidence to the contrary which

establishes that substantial harm to the beneficiary will not result if

direct payment is made.

(d) If we find that direct payment will cause substantial harm to

the beneficiary, we may delay payment for a period not to exceed 1

month. If the beneficiary is legally incompetent, or under age 15,

payments will be withheld until we appoint a representative payee.

Example 1: Substantial Harm Does Not Exist. A claim is approved

for a title II claimant who suffers from a combination of mental

impairments but who is not legally incompetent. We determine that

the beneficiary needs assistance in managing benefits; however, a

representative payee has not been found when we are ready to pay

benefits. Although we believe that the beneficiary may not use the

money wisely, there is no indication that the direct receipt of

funds would cause physical or mental injury. Benefits must be paid

directly to the beneficiary while we locate a suitable

representative payee.

Example 2: Substantial Harm Exists. We are unable to find a

representative payee for a title II beneficiary who suffers from

alcoholism and has been determined to need assistance in managing

funds. There is evidence that the beneficiary has had repeated and

recent hospitalizations due to acute problems caused by excessive

drinking. We may delay payment based on the substantial harm rule

while we locate a suitable representative payee. If a representative

payee is not found in 1 month, we must make direct payment while we

continue to make every reasonable effort to locate a suitable payee.

(e) Payment of any benefits which were deferred or suspended

pending appointment of a representative payee shall be made to the

beneficiary or the representative payee as a single sum or over such

period of time as we determine is in the best interest of the

beneficiary.

6. New Sec. 404.2022 is added to Subpart U to read as follows:

Sec. 404.2022 Persons who may not serve as representative payees.

(a) A payee applicant who has been convicted of a violation under

section 208 or section 1632 of the Social Security Act may not serve as

a representative payee.

(b) A payee applicant who receives Social Security or SSI benefits

through a representative payee may not serve as a representative payee.

(c)(1) A payee applicant who previously served as a representative

payee and was found by us, or a court of competent jurisdiction, to

have misused title II or title XVI benefits will not be selected to be

a representative payee. However, we may grant an exception to this

prohibition on a case-by-case basis if direct payment of benefits to

the beneficiary is not feasible, and selection of the payee applicant

as representative payee would be in the interest of the beneficiary.

Such a payee applicant may be appointed as a representative payee if--

(i) No suitable alternative payee is available, and

(ii) The information we have indicates the applicant is now

suitable to serve as a representative payee.

(2) If the payee applicant is appointed, we will evaluate the

applicant's performance as payee at such intervals as the local field

office determines are necessary.

(d) A payee applicant who is a creditor, i.e., someone who provides

the beneficiary with goods or services for monetary consideration, will

not be selected to be a representative payee unless the creditor is--

(1) A relative of the beneficiary living in the same household as

the beneficiary;

(2) A legal guardian or legal representative of the beneficiary;

(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, or a

person who is an administrator, owner, or employee of the facility, if

the beneficiary resides in such facility, and we are unable to locate

an alternative representative payee;

(4) An individual who establishes that he or she poses no risk to

the beneficiary and that his or her financial relationship to the

beneficiary poses no substantial conflict of interest. We will

investigate each case to ensure that such individual poses no risk to

the beneficiary and presents no substantial conflict of interest. Our

determination will be based on written findings and will be made when a

more suitable payee cannot be found under procedures set out in this

subpart on the selection of representative payees; or

(5) 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,

under Sec. 404.2040a.

Example 1

An individual applies to be representative payee for a

beneficiary who has been determined to need assistance in managing

benefits. The payee applicant has been renting a room to the

beneficiary for several years and assists the beneficiary with his

other financial obligations, as needed. He charges the beneficiary a

reasonable amount of rent. The beneficiary has no other family or

friends willing to help manage his benefits or to act as

representative payee. The payee applicant has demonstrated that his

interest in and concern for the beneficiary goes beyond his desire

to collect the rent each month. In this instance, the applicant may

be selected as a representative payee because a more suitable payee

is not available, the applicant appears to pose no risk to the

beneficiary, and there is minimal conflict of interest.

Example 2

In a situation similar to the one above, the beneficiary's

landlord indicates that he is applying to be payee only to ensure

receipt of his rent, and will give the balance of the benefit funds

remaining after payment of the rent directly to the beneficiary. In

this situation the applicant will not be considered suitable because

of the apparent conflict of interest.

7. New Sec. 404.2024 is added to Subpart U to read as follows:

Sec. 404.2024 Investigation of representative payee applicant.

(a) We will conduct an investigation of a payee applicant before

selecting the applicant as a payee. We will include a face-to-face

interview with the payee applicant as part of the investigation unless

it is impracticable to do so. As part of the investigation we will--

(1) Require the payee applicant to submit documented proof of

identity, unless such information has been previously submitted with an

application for title II or title XVI benefits;

(2) Verify the payee applicant's Social Security account number or

employer identification number;

(3) Determine whether the payee applicant has been convicted of a

violation of section 208 or section 1632 of the Social Security Act;

(4) Determine whether the payee applicant has previously served as

a representative payee and has had a previous appointment as payee

revoked or terminated by reason of misuse of title II or title XVI

benefits;

(5) Use our records to verify the payee applicant's employment and/

or direct receipt of Social Security or SSI benefits;

(6) Corroborate the payee applicant's concern for the beneficiary

with the beneficiary's custodian; and

(7) Determine whether the payee applicant is a creditor of the

beneficiary (see Sec. 404.2022(d)).

(b) A face-to-face interview will be considered impracticable if it

would cause the payee applicant undue hardship (e.g., 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 will conduct the investigation to

determine the payee applicant's suitability to serve as a

representative payee without a face-to-face interview.

also must give us adequate information showing his or her relationship

to the beneficiary and demonstrating his or her responsibility for the

care of the beneficiary.

8. Section 404.2025 is revised to read as follows:

Sec. 404.2025 Information to be submitted by a representative payee

after a representative payee has been selected.

Anytime after we have selected a payee, we may ask the payee to

give us information showing a continuing relationship with the

beneficiary and a continuing responsibility for the care of the

beneficiary. If the payee does not give us the requested information

within a reasonable period of time, we may stop paying the payee unless

we determine that the payee had a satisfactory reason for not complying

with our request and we receive the information requested. We will

consider paying the beneficiary directly in accordance with

Sec. 404.2011 in instances when we decide to stop paying the

representative payee.

9. Section 404.2030 is revised to read as follows:

Sec. 404.2030 Advance notice of the determination to make

representative payment.

(a) We will provide written notice to the beneficiary of our

determination to make representative payment in advance of

certification of payment of the beneficiary's benefits to a

representative payee. We will also advise the beneficiary that we have

determined that representative payment would be in the interest of the

beneficiary, and we will provide the name of the representative payee

we expect to select. If the beneficiary is under age 15, is an

unemancipated minor under the age of 18, or is legally incompetent, the

written notice will be provided to the legal guardian or legal

representative of the beneficiary. The advance notice will--

(1) Be clearly written in language that is easily understandable by

the reader;

(2) Identify the person to be designated as representative payee;

(3) Explain the right of the beneficiary (or the legal guardian or

legal representative of the beneficiary) to appeal a determination, in

accordance with subpart J of this part, that a representative payee is

necessary for the beneficiary; and

(4) Explain the right of the beneficiary, legal guardian or legal

representative to appeal, in accordance with subpart J of this part,

the designation of a particular person to serve as the representative

payee of the beneficiary and to review the evidence upon which such

designation is based and submit additional evidence.

(b) If the beneficiary or his or her legal guardian or legal

representative objects to representative payment or to the designated

payee, and the objection is received before the effectuation of the

payee appointment, we will resolve the objection in the same manner as

we resolve other objections to initial determinations in accordance

with subpart J of this part before the payee appointment is processed.

10. Section 404.2041 is revised to read as follows:

Sec. 404.2041 Restitution of misused benefit payments.

(a) We will repay benefits in cases when we determine that a

representative payee misused benefits and the misuse resulted from our

negligent failure to investigate or monitor a representative payee.

When we make restitution, we will pay to the beneficiary or the

beneficiary's alternative representative payee an amount equal to the

misused benefits.

(b) The representative payee who misuses the beneficiary's benefits

is responsible for paying back misused benefits to us. Restitution of

misused benefits will always be sought from the payee who misused the

benefits.

that we failed to investigate or monitor a representative payee or that

we did investigate or monitor a representative payee but were negligent

in our investigation or monitoring. Examples of SSA's negligent failure

include, but are not limited, to the following. We did not--

(1) Follow our established procedures in this subpart when

investigating, appointing, or monitoring a representative payee;

(2) Investigate timely a reported allegation of misuse; or

(3) Take the steps necessary to prevent the issuance of payments to

the payee after it was determined that the payee misused benefits.

(d) Our repayment of misused benefits under these provisions does

not alter the payee's liability and responsibility as described in

paragraph (b) of this section. Therefore, we will make every reasonable

effort to obtain the return of misused benefits from the payee who

misused the benefits.

11. Section 404.2050 is amended by revising the introductory

paragraph, and paragraph (a) to read as follows:

Sec. 404.2050 When a new representative payee will be selected.

When we learn that the interest of a beneficiary is not served by

continuing payment to the present payee or that the present payee is no

longer able or willing to carry out payee responsibilities, we will

promptly stop payment to the payee and make payment directly to the

beneficiary or to an alternative payee until we find a suitable payee.

We will terminate payment of benefits to the payee and find a new payee

if the present payee:

(a) Has been determined to have misused the beneficiary's benefits

as found by us or a court of competent jurisdiction;

* * * * *

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

DISABLED

1. The authority citation for subpart F continues to read as

follows:

Authority: Secs. 1102 and 1631(a)(2) and (d)(1) of the Social

Security Act; 42 U.S.C. 1302 and 1383 (a)(2) and (d)(1).

Sec. 416.601 [Amended]

2. Section 416.601 is amended by adding the following parenthetical

statement after the last sentence of paragraph (b)(3):

Sec. 416.601 Introduction.

* * * * *

(b) * * *

(3) * * * (See Sec. 416.611 if direct payment of benefits would

cause substantial harm to the beneficiary.)

3. New Sec. 416.611 is added to subpart F to read as follows:

Sec. 416.611 When a beneficiary will be paid directly pending

selection of a suitable representative payee.

(a) We will pay current monthly benefits directly to the

beneficiary until we have selected a representative payee except as

explained in paragraphs (b), (c), (d) and (e) of this section.

(b) We may delay (in the case of initial eligibility for benefits)

or suspend (in case of existing eligibility for benefits) payment to a

beneficiary while we try to find a suitable representative payee if we

determine that direct payment would cause substantial harm to the