TN 2 (08-11)

PR 07115.033 New Jersey

A. PR 05-199 Licensing for New York Non-Governmental Fee-For-Service Payees

DATE: July 11, 2005

1. SYLLABUS

This opinion settles an inquiry regarding the types of licenses required by non-governmental representative payee organizations in the States of New Jersey and New York when filing for authorization to collect a fee. The opinion emphasizes that in these two states certain types of organizations must be licensed or obtain an operating certificate and that SSA must obtain documentation that the license or certificate is valid and current. In addition, it addresses that if these non-governmental organizations are not required to obtain a license or operating certificate, then they must provide one of the services listed in the procedural guidelines for fee for service authorization (i.e., community based, non profit social service agency). In conclusion, the opinion intensifies the need to precisely ascertain what type of service is provided and ensure that the facility does or does not require a license or operating certificate in order to collect a fee in the States of New Jersey and New York.

2. OPINION

You asked us to review whether a non-governmental fee for service payee needs a license in order to charge a fee in New York and New Jersey. You further asked us what information SSA should secure from the organization to show they are licensed. We conclude that certain types of organizations must be licensed or obtain an operating certificate. If the organization is so required, SSA must obtain documentation that the license or operating certificate is valid and current. When an organization is not required to obtain a license or operating certificate, the non-governmental fee for service payee may also charge a fee in New York if it is providing one of the services listed in POMS GN 00506.105. It is important in this circumstance to precisely ascertain what type of service is being provided and ensure that the facility does not need a license or operating certificate and is a "community based non profit organization providing social services" and that it is bonded. Similarly, when New Jersey requires that a facility maintain a license or operating certificate, SSA must obtain proof of such license or operating certificate in order for the non-governmental payee to charge a fee in New Jersey. When New Jersey does not require a license or operating certificate, the non-governmental fee for service payee may also charge a fee in New Jersey if it is providing one of the services listed in POMS GN 00506.105. As with New York facilities, we must ensure that such a facility is a "community based non profit organization providing social services" and that it is bonded.

FACTS

You note that Section 102 of the Social Security Protection Act of 2004 requires that all non-governmental fee for service payees be licensed and bonded, provide representative payee services to at least five beneficiaries, and not be a creditor of the beneficiary. You also note that the non-governmental fee for service payee must be licensed and bonded by April 1, 2005 and that failure to fulfill this requirement will result in the revocation of the payee's authority to collect a fee from the beneficiaries they serve. You further note that for SSA's purpose, the licensing document must be issued in the State in which the agency serves as payee and it must permit the agency to:

Provide specialized services to residents of the State, such as:

Fiduciary services,

Community mental health services,

Social Services,

Substance abuse treatment services,

Residential care services,

Psychiatric care services,

Skilled nursing services, or

Medicaid services

You mention that many of the Region's field offices in central and western New York State have inquired about the type of license the payees need. You also mention that the payees are concerned that their authorization to charge a fee will be revoked if they do not have a license in place by April 1, 2005. You further mention that some payees in New Jersey have had similar inquiries.

LAW

1. SSA Act

Pertinent to this discussion are certain sections of the Social Security Act concerning the licensing and bonding requirements for non-governmental fee for service organizations. Section 205(j)(4)(A)(i)of the Social Security Act (hereinafter "the Act")provides in part that "a qualified organization may collect from an individual a monthly fee for expenses (including overhead) incurred by such organization in providing services performed as such individual's representative payee. . . ."

Further, the Act states:

the term "qualified organization" means any State or local government agency whose mission is to carry out income maintenance, social service, or health care-related activities, any State or local government agency with fiduciary responsibilities, or any community-based nonprofit social service agency which is bonded or licensed in each State in which it serves as a representative payee. . . .

Section 205(j)(4)(A)(i)(B).

More specifically, the Act provides:

the term 'certified community-based nonprofit social service agency' means a community-based nonprofit social service agency which is in compliance with requirements, under regulations which shall be prescribed by the Commissioner for annual certification to the Commissioner that it is bonded in accordance with requirements specified by the Commissioner and that it is licensed in each State in which it serves as a representative payee (if licensing is available in the State) in accordance with requirements specified by the Commissioner.

Section 205(j)(10)(emphasis added).

Thus, a non-governmental fee for service representative payee must be bonded and licensed (if licensing is available).

2. POMS

Like the Act, the POMS instructions do not waiver regarding the insistence that all non-governmental fee for service payees must be bonded and licensed (if licensing is available). The POMS consistently states that non-governmental fee for service representative payees must be bonded and licensed in each state in which they serve as representative payees, provided that licensing is available in the state. POMS GN 00506.001, POMS GN 00506.100, POMS GN 00506.110. Indeed, the POMS denotes the requirement for bonding and licensing by bolding the "and" in the relevant section:

To qualify as a FFS [fee for service] organization, the payee must be either:

a state or local government agency, OR

a community based, non-profit social service agency, that is bonded and licensed by each state in which it serves as a representative payee (if licensing is available)

POMS GN 00506.001.

In addition, the POMS provides guidance on the types of bonding and licensing that non-governmental fee for service payees must possess in order to receive fees for service. POMS GN 00506.105. The POMS defines bonding as "a bond or insurance contract guaranteeing payment to either the beneficiary, or SSA on behalf of the organization, in the event of the unforeseen financial loss caused by the action or inaction of the organization or an employee of the organization." Id. Bonds and insurance policies that would satisfy the bonding requirement include:

blanket bonds,

fiduciary bonds,

fidelity bonds,

dishonesty bonds,

insurance contracts, or

a simplified crime insurance policy.

Id.

The POMS further provide that fee for service organizations must possess (if licensing is available in the state), a licensing document issued in the state, which permits the agency to:

Provide a specialized service to residents of the state, such as:

Fiduciary services,

Community mental health services,

Social Services,

Substance abuse treatment services,

Residential care services,

Psychiatric care services,

Skilled nursing services

Medicaid services, OR

Conduct business or operate in the State (generally referred to as an "operating license")

Id.

The POMS recognizes that there may be some instances where it is difficult to determine whether a non-governmental fee for service payee is properly bonded and/or licensed. POMS GN 00506.110. The POMS suggest that if it cannot be determined that the payee organization is bonded or/and licensed in the state in which it serves as payee, an individual may:

Contact a representative of the organization or State agency which issued the agreement or license to obtain further explanation; and/or

Obtain the necessary information, such as the protection given under a bonding agreement or the purpose of a license, and document the RPS RFST screen with the information obtained

Document the contact on an SSA-5002 and photocopy the proofs for the FO paper precedent file.

POMS GN 00506.110.

Finally, the State Licensing Digest in the POMS indicates for New York under Fiduciary Services that the type of license needed is "not shown." POMS GN 00506.430. The State Licensing Digest indicates for New Jersey under Fiduciary Services that the State of New Jersey has compiled a listing of the occupations and business activities that require some form of registration, license or certification. Id.

3. New York State Law

New York requires that organizations providing certain activities be licensed or possess an operating certificate to conduct business in New York. Many of the services that require licensing in New York are similar to the services that the POMS notes would require licensing. See POMS GN 00506.105. For example, New York requires that the following facilities and activities be licensed:

"Assisted living facilities"

Community mental health services

Alcoholism community residence

Psychiatric care facilities

Registered and Licensed Practical Nurses

New York also provides that certain facilities including adult care facilities and nursing facilities must hold operating certificates to operate within the State. While similar background information is typically needed when applying for an operating certificate or license, New York does expressly require some organizations to obtain the former and others the latter. In addition, a charitable organization must file a certificate of incorporation with the New York Department of State. Further, prior to solicitation of contributions or within six months after any property held or income received is required to be used for charitable purposes (whichever comes first), the organization must register with the State of New York, Department of Law, Charities Bureau.

New Jersey Law

As noted in POMS GN 00506.430, the State of New Jersey has compiled a listing of the occupations and business activities that require some form of registration, license, or certification. The following information should assist the field in informing non-governmental fee for service organizations of any licensing requirements they must meet. For example, organizations providing services similar to those listed in POMS GN 00506.105, supra, that require New Jersey licensing/certification include:

Adult Daycare

Alcoholism Treatment Center (Residential)

Assisted Living Administrator

Home for the Aged

Nurse Residences for Disabled

Residential Facilities for Children

Residential Health Care Facility

Drug Treatment Center

Each organization providing a social service will often require some form of license, registration or certification by the State of New Jersey. The organization should consult the appropriate agency contact for a listing of those requirements.

CONCLUSION

Social Security Regulations provide that non-governmental fee for service representative payees must be bonded and licensed, provided that licensing is available in the State. New York requires facilities providing certain services to be licensed and/or certified in order to operate within the state. These services include, but are not limited to, assisted living facilities, community mental health services, alcoholism community residences, psychiatric care facilities, registered and licensed practical nurses, adult care facilities, nursing facilities, and charitable organizations. We, therefore, recommend that when New York requires the facility to maintain a license or operating certificate, SSA must obtain proof of such license or operating certificate in order for the non-governmental payee to charge a fee in New York. When New York does not require a license or operating certificate, the non-governmental fee for service payee may also charge a fee in New York if it is providing one of the services listed in POMS GN 00506.105. It is important in this circums