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How to Be a Social Security Representative Payee

The program lets you manage the Social Security benefits of those who can't

A responsible payee helps an elderly woman with Social Security finances.

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As a designated “representative payee,” you can help elderly loved ones with Social Security benefits when they need assistance.

Q. My uncle is getting to the point where he can't manage his money. His Social Security retirement benefits are a big part of his income, but we in the family worry that the money isn't being put to good use. Is there any way that we can get directly involved?

A. Yes. Social Security's "representative payee" program was created with people like you and your uncle in mind.

More than 8 million people who get Social Security or Supplemental Security Income (SSI) benefits take part in this program because they have this same problem: They need help managing their money. The reasons can include advanced age, illness, disability or youth — the group includes children who get benefits.

For example, consider Frank, a former industrial worker who receives disability benefits and has limited mobility. Getting around to stores and banks had become difficult for him. Products and services that Frank needed for a comfortable life weren't being purchased.

When Social Security became aware of his problems, it asked Frank to suggest a relative or friend who would be willing to serve as his representative payee and help him manage his money. Frank suggested his nephew, John, who agreed to take on the job.

But John's willingness wasn't enough. Being a payee entails serious responsibilities, so, as it always does, Social Security conducted an investigation to make sure John was fit for the job.

You can be sure that the folks at Social Security wouldn't be happy to discover an embezzlement conviction, but they would also want to be confident the John is responsible and has a mind for numbers.

As a payee, John would have to closely and ethically follow a series of sometimes complex regulations, including the periodic filing of reports to Social Security concerning what happens to the money.

There are rules, for instance, on what kind of bank account the benefits can go into and on how to handle lump-sum payments. The payee must see that the money figures in the beneficiary's income tax return, and must report life changes that might affect the person's eligibility.

John passed this scrutiny, and Social Security now sends Frank's benefits to John and has given John the authority and the obligation to use Frank's money for Frank's needs.

Q. So what does a payee actually do?

A. According to Social Security, the first job is to "take care of the beneficiary's day-to-day needs for food and shelter." The payee also can use the money for the beneficiary's medical and dental care that's not covered by health insurance. And it's also OK to use it for the beneficiary's personal needs, such as clothing and recreation.

Q. Overall, what's it like to be a payee?

A. It can be an odd combination of pleasure and pain. You're helping a loved one solve a vital life problem, but you may also experience tensions with that person, who may not entirely welcome surrendering financial independence this way. Plus, there are the paperwork and rules. Social Security can revoke your status as a payee if you don't do things by the book.

Q. What role do payees play for people who get SSI?

A. SSI is a program whose beneficiaries include the aged, the blind and people with few resources. Because there are strict income and asset limitations in SSI, the rules on money are particularly important for payees who work with SSI recipients.

Q. Are there also payee roles for children who get SSI?

A. Yes. And in addition to managing finances, payees who work with children on SSI must pay attention to the child's physical condition and make sure he or she gets medical attention that is needed.

Q. What about other income a person may have?

A. One of the complicating factors in this program is that payees are appointed to supervise only the spending of the person's Social Security benefits. A payee has no authority to manage non-Social Security money.

It's common for a family member to use a financial document called a power of attorney to get authority to act on the person's behalf. However, Social Security does not recognize power of attorney concerning the benefits it pays. For that, the family member must apply for representative payee status.

Q. If I do this job for a relative, can I take a fee for my services?

A. No. "You may not take a fee from the beneficiary's funds for your services as a representative payee," the Social Security Administration says.

And while Social Security prefers that relatives or friends play this role — they make up more than 99 percent of payees — it also allows certain organizations to serve as "Fee for Service" (FFS) payees. As the name implies, these groups can charge fees.

Q. What kind of organizations qualify to become such a payee?

A. An organization must be a state or local government agency, or a community-based nonprofit social service agency that is bonded and licensed in the state in which the organization works.

It must submit a variety of forms and documents attesting to its experience and ability to serve as payees for a group of individuals.

As of December 2014, Fee for Service organizations could collect up to 10 percent of the total monthly benefit, up to a maximum of $41 a month. The organizations also were allowed to collect up to 10 percent — up to $78 a month — if beneficiaries receiving disability benefits have drug addiction or alcoholism problems.

Q. I have a friend who needs money managing help. How do I get things rolling?

A. Call Social Security at 800-772-1213 or TTY 800-325-0778. You can volunteer to be the payee, but you don't have to. Social Security is always interested in hearing about people who may need this kind of help and it can find someone else to be the payee. But if you think you're up to this very important role, have a look at Social Security's booklet, "A Guide For Representative Payees," to learn more.

Stan Hinden, a former columnist for the Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question? Check out the Social Security Mailbox archive. If you don't find your answer there, send an email to the Social Security Mailbox.