TN 42 (10-11)

A. Policy for direct deposit for representative payee cases

1. General rule

Title II or title XVI payments paid to a representative payee are for the beneficiary and the beneficiary owns them. If a representative payee requests direct deposit, the title of the account or sub account must show that the representative payee has only a fiduciary interest in the account or sub account and the beneficiary is the owner of the funds.

The beneficiary must not have direct access to the account or sub account. A separate account or sub account is mandatory for each beneficiary; see GN 02402.050; because each sub account is a separate account, payments for beneficiaries with representative payees may be direct deposit to the same master account as those of other beneficiaries. For exceptions, see GN 02402.055A.3., GN 02402.055B.3. and GN 02402.060. For an explanation of master- sub accounts, see GN 02402.050.

2. Acceptable account titles

Any form of account title the financial institution (FI) recognizes as establishing beneficiary ownership of the funds, but without beneficiary direct access to them, is acceptable. The title of the account or sub account must show that the representative payee has only a fiduciary (not personal) interest in the funds.

a. Example of acceptable titles

Mary Smith is the representative payee for her cousin, Jane Jones. The account title may be

• Mary Smith for Jane Jones;

• Jane Jones by Mary Smith;

• Jane Jones by Mary Smith, trustee; or

• Jane Jones by Mary Smith, guardian.

b. Example of unacceptable titles

“Mary Smith in trust for Jane Jones” is not an acceptable title for representative payee cases because some FIs would consider Mary Smith as the owner of the funds. “Jane Jones” is not an acceptable title for representative payee cases because it gives the beneficiary direct access to the funds. “For additional account titling requirements for rep payees, refer to POMs GN 00603.010 through GN 00603.020”

3. Exception for showing a beneficiary’s ownership of funds

There are exceptions to the general rule that the title of the account or sub account must show the beneficiary's ownership of the funds. This exception applies if the title meets all of the following conditions:

• Spouses and parents

• The payee is the spouse, natural parent or adoptive parent, or stepparent of the beneficiary, and

• The payee and the beneficiary live in the same household, and

• The payee requests direct deposit to the payee's personal checking account, and

• The field office (FO) confirms with the payee that benefits received are for the beneficiary's current expenses and there will be no accumulation of funds in the account.

This exception applies for any category of title II or title XVI payments. The beneficiary does not need to be receiving benefits as a disabled/blind child or disabled adult child. The age of the “child” is not material. In addition, the exception applies for the child's benefits whether the representative payee parent is the sole owner of the account or is married and has a joint account with his or her spouse. For more exceptions, see GN 00603.020 and GN 00603.010.

EXAMPLE 1: Sam Smith, age 62, lives with his mother and receives retirement benefits. He becomes unable to handle his own benefits, and his mother becomes his representative payee. She requests direct deposit to her checking account and states all benefits spent are for her son's current expenses. The FO approves her request.

EXAMPLE 2: Betty Roe, age 25, qualifies for SSI benefits as a disabled individual. Her father, with whom she lives, becomes her representative payee and requests direct deposit to his own checking account. He states that all funds spent are for Betty's current expenses. The FO approves the request.

EXAMPLE 3: Mary Jones files for survivor's benefits for her three children (ages three, five, and seven), when their father dies. She requests direct deposit of their benefits to her checking account, stating the children live with her and all benefits spent are for the children and no money will accumulate in the account. The FO approves the request.

EXAMPLE 4: (NOT ACCEPTABLE) Joe Johnson, age 8, becomes eligible for SSI payments as a blind child. His brother James, with whom he lives, requests direct deposit of Joe's payments to James's checking account. He states all of Joe's money is for Joe's needs and will not accumulate in the account. Because James is not Joe's parent, the FO denies the request and provides examples of account titles for a beneficiary with a representative payee. For another exception that applies to trust agreement cases, see GN 02402.060.

Examples of master account titles for nursing home institutional representative payees

• Sunnydale Nursing Home Resident Trust Account

• Sunnydale Patient’s Fund for Social Security Beneficiaries

4. Exception to the general account-titling rule for State or local governmental organizational payees

We may allow an exception to the general account-titling rule for agencies of a State or local government when the State or local government’s accounting structure sufficiently protects beneficiary interests and clearly identifies what funds belong to the beneficiary. The requirements for allowing an account titling exception for State or local agencies serving as payees are described in “Collective Checking and Savings Accounts” (GN 00603.020B.).

For another exception that applies to trust agreement cases, see GN 02402.060.

B. Processing request for direct deposits for representative payee cases

1. Savings accounts

Approve a request for direct deposit to a savings account by a representative payee if:

• The title of the account or sub account (see section A1) reflects the beneficiary's ownership of the funds but does not give the beneficiary direct access to the funds, and

• The payee establishes a separate account or sub account for each beneficiary.

EXAMPLE 1 (NOT ACCEPTABLE)

A widow and three children are entitled on the record of Harry Brown. The widow requests the children's payments are distributed to a savings account titled “Susan Brown for minor children of Harry Brown.” The FO cannot approve the request because all conserved funds must be in a form that shows the individual beneficiary's ownership of the funds. (If the widow had requested direct deposit to her checking account and met the conditions listed in GN 02402.055A.3., we could have approved her request.)

EXAMPLE 2

Sister Mary Theresa, the representative payee for Sister Elizabeth (another member of her religious order), requests direct deposit to an account titled in the name of the order and is not part of the orders accounting operation. The treasurer of the order has set up savings sub accounts for all direct deposit participants and keeps a strict accounting of all deposits and withdrawals and the current balance for each sub account. The representative payee explains the treasurer has set up a sub account titled “Sister Mary Theresa for Sister Elizabeth.” This is acceptable.

2. Checking accounts

Approve a request for direct deposit to a checking account by a representative payee if:

• The title of the account or sub account reflects the beneficiary's ownership of the funds, but does not allow the beneficiary direct access to the funds, and

• The payee establishes a separate account or sub account for each beneficiary.

EXAMPLE: Mary Smith is the aunt of Frank Jones' two minor children. As their payee, she requests direct deposit of their payments to individual checking accounts and provides the correct bank account title. The teleservice representative approves her request and makes necessary inputs.

3. Collective accounts

Accept a request by an individual or institution acting as representative payee for several beneficiaries to have direct deposit into a common checking or savings account. If the request complies with all conditions listed in GN 00603.020, we will approve it. The collective account is the master account and the payee must maintain sub account documentation that shows the receipts, expenses paid, and balance for each individual.

To establish and document this type of account, obtain an SF-1199A, Direct Deposit Sign-Up Form. A single, signed SF-1199A with an attached listing of beneficiaries/recipients and claim numbers is sufficient.

C. Providing information to FIs for direct deposit representative payee cases

To aid FIs and representative payees in allocating payments to the correct beneficiary, we now send FIs additional information with title II and title XVI payments to beneficiaries with representative payees. Previously, only the first line of the name information was visible to the FI. For example, “JANE JONES FOR” or “MAPLE CO DEV GROUP FOR.” In a line limited to 22 characters, there is not usually room for the names of both the representative payee and the beneficiary. For an institutional representative payee, this could result in hundreds of payments with the same name information. Now, if there is a second line of name on our record, the FI receives both lines. Within the two lines, there is usually enough space for the names of both the representative payee and the beneficiary, such as “JANE JONES FOR JOHN JONES” or “MAPLE CO DEV GROUP FOR MARY SMITH.”

We encourage FIs to use this information in one of two ways, depending on the type of representative payee. If the representative payee is an individual, the FI should display the addenda information on the monthly account statement. For an institutional representative payee, the FI should pass the addenda information as quickly as possible to the institution by fax, electronic media, or another method.

D. References

• SI 01140.200 Checking and savings accounts

• SI 01140.205 Joint checking and savings accounts,

• MSOM T2PE 003.002 POS Address/Direct Deposit/Phone (PEAD)

• MSOM MCS 005.012 Additional Benefits (ADDB),

• MSOM MCS 009.008 Check/Notice 1 (NOT1)

• SM 01315.000 Check Processing - Table of Contents

• MSOM MSSICS 008.005 Mailing/Payment Address (ADDR)