Issue
You requested an opinion as to whether a state court "has the authority to override
Social Security regulations concerning the use of funds paid to a [representative
payee] . . . ."
Short Answer
No. A state court cannot override an Agency regulation where the Federal Government,
as sovereign, has not consented to submit itself to the jurisdiction of the court.
The court orders at issue direct the use of Social Security benefits paid to a representative
and, therefore, violate section 207 (the anti-assignment provision) of the Social
Security Act (the Act). See 42 U.S.C. § 407(a).
Facts
According to information that you provided, on March 4, 1998, the Montana Eighth Judicial
District Court for Cascade County issued an order establishing a Final Parenting Plan
for George Y~, the father of Landen and Cameron Y~, and Gale W~, the children's mother
and current representative payee. The parties stipulated to a modification of child
support, and on January 31, 2002, the court approved the stipulation. The order clarified
that auxiliary Social Security benefits for the children had to be used first to pay
health insurance premiums for the children; thereafter, the parties had to share the
balance equally.
The court reiterated these instructions in the Findings of Fact, Conclusions of Law
and Order Establishing Child Support dated October 20, 2006. The court also directed
that the parent responsible for paying the children's insurance premium would receive
money from the auxiliary Social Security benefits to cover that cost. At the time
of the order, Mr. Y~ was not the representative payee but was responsible for paying
the children's insurance costs. The court directed that "he should receive money from
the auxiliary Social Security benefit to cover that cost." While the information you
provided suggests that Ms. W~ has been the children's only representative payee, the
October 2006 order indicates that Ms. W~ received checks for both children for some
period after the January 2002 order; that Mr. Y~ received both checks for one month
in 2002; that for some period beginning in 2002 and ending in 2005, each parent received
one check; and that after Mr. Y~'s accident in 2005, Ms. W~ received both checks.
The October 2006 order also directed that "[b]oth parties shall use all auxiliary
Social Security benefits on behalf of the two minor children." In July 2007, Mr. Y~
petitioned the court for past due child support and past due sums due for costs of
health insurance premiums.
Legal Analysis
The Commissioner determines who should manage a beneficiary's benefits and how they
should be managed
Congress granted the power to determine who should manage a beneficiary's benefits
and how they should be managed to the Commissioner in section 205(j) of the Act. Such
power includes the rights to appoint or remove a representative payee and to direct
them. See Social Security Act § 205(j); 20 C.F.R. §§ 404.2025 (stating what information
a representative payee must report to the Agency); 404.2035 (directing the use of
benefits by and specifying the reporting responsibilities of a representative payee);
404.2040 (specifying how a representative payee should use the beneficiary's benefits);
404.2045 (directing the investment of conserved funds by a representative payee);
404.2050 (stating circumstances under which the Agency will remove a representative
payee and appoint a successor payee); 404.2065 (requiring a representative payee to
account for the use of benefits and provide information to the Agency regarding the
beneficiary).
The Supremacy Clause of the Constitution, Article VI, cl. 2, states that the "Constitution,
and the laws of the United States which shall be made in Pursuance thereof ... shall
be the supreme Law of the Land, and the Judges in every State shall be bound thereby,
anything in the Constitution or Laws of any State to the Contrary notwithstanding."
The Supreme Court has recognized it "is a seminal principle of our law that the constitution
and the laws made in pursuance thereof are supreme; that they control the constitution
and laws of the respective States and cannot be controlled by them."
Memorandum from OGC Policy and Legislation Division to Office of Disability Division
of Medical and Vocational Policy, Issues Related to Disability Examiners Ordering
Consultative Examinations and Tests and Medical and Psychological Consultants Developing
Cases for Disability Determination Services (DDS) in Other States (August 21, 1998)
(citing Hancock v. Train, 426 U.S. 167, 178 (1976)) (internal quotation marks omitted).
The Agency has not relinquished its sovereignty. That is, the Agency has not consented
to the jurisdiction of the state court. "[I]t is well-established that the Federal
Government, as sovereign, is immune from suits in and the orders of state courts,
unless the sovereign has consented to submit itself to the jurisdiction of such court,
which in the present case, it has not." Memorandum from Regional Chief Counsel, Chicago,
to Manager, Cleveland Downtown Field Office, Charles C~, Advice About State Court
Order to Appoint Representative Payee (October 4, 2002) (citing United States v. Sherwood, 312 U.S. 584 (1941)). Sovereign immunity in concert with the Supremacy Clause of
the Constitution and the Act, supports our position that the Agency controls who should
manage a beneficiary's Social Security benefits and how they should be managed. Because
the Agency has not consented to submit itself to jurisdiction of the state court,
the Montana Eighth Judicial District Court cannot override the Agency's regulations
that direct how representative payees manage the benefit payments they receive.
B. The anti-assignment provision of the Act
Section 207 of the Act protects a beneficiary's right to receive Title II benefits
directly and to use them as he or she sees fit by prohibiting the assignment of benefits.
See Social Security Act § 407(a) (The right of any person to any future payment under
this subchapter shall not be transferable or assignable, at law or in equity, and
none of the moneys paid or payable or rights existing under this subchapter shall
be subject to execution, levy, attachment, garnishment, or other legal process, or
to the operation of any bankruptcy or insolvency law.). Section 1631(d)(1) of the
Act, 42 U.S.C. § 1383(d)(1), incorporates section 207 to similarly protect Title XVI
(SSI) payments. See also 20 C.F.R. §§ 404.2001(b), 416.601(b); POMS GN 02410.001.
"Under the Act, therefore, Social Security benefits and the associated rights under
the Social Security Act are generally neither assignable nor subject to legal process.
Indeed, section 207's broad bar against the use of any legal process to reach Social
Security benefits includes not only all claimants or creditors, but also states."
Memorandum from Regional Chief Counsel, Philadelphia, to Regional Commissioner, Philadelphia,
Pennsylvania Support Decree Assigning Social Security Payments - Rachel R. M~ (March
25, 1994) (citing Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416-17 (1973)). In sum, section 207 of the Act is intended to protect
the rights and benefits arising under the Act "from all attempts to use legal process
to alienate them, unless Congress has specifically indicated otherwise." Memorandum,
Pennsylvania Support Decree, supra.
"Federal courts have generally interpreted section 207 broadly. Courts have upheld
the bar of section 207 when attempts have been made to alienate Social Security benefits
from both recipients and representative payees." Id. (citing Tidwell v. Schweiker, 677 F.2d 560, 566-68 (7th Cir. 1982) (holding that a consent form, which a state
psychiatric facility asked those seeking hospitalization to sign authorizing the facility
to reimburse itself for the cost of hospitalization from the Social Security benefits
of the individual, violated section 207); Woodall v. Bartolino, 700 F. Supp. 210, 219-20 (S.D. N.Y. 1983) (holding that court orders may not properly
be entered against Social Security benefits when they are managed by representative
payees in order to enforce the application of the benefits to the care and maintenance
of an institutionalized individual).
C. Both court orders violate the anti-assignment provision of the Act
We believe the January 2002 and October 2006 court orders violate section 207 of the
Act, because both constitute legal processes that seek to affect rights arising under
the Act. The Supreme Court in Washington Dep't of Social and Health Servs. v. Guardianship Estate of Danny Keffeler, 537 U.S. 371 (2003), explained that, for the purpose of section 207, "other legal
process" should be understood to be process much like the processes of execution,
levy, attachment, and garnishment, and at a minimum, would seem to require utilization
of some judicial or quasi-judicial mechanism, though not necessarily an elaborate
one, by which control over property passes from one person to another in order to
discharge or secure discharge of an allegedly existing or anticipated liability.
Keffeler, 537 U.S. at 385. The Keffeler court also pointed to the Agency's own POMS, which define "legal process" as used
in section 207(a) of the Act as "the means by which a court (or agency or official
authorized by law) compels compliance with its demand; generally, it is a court order."
Id. (citing POMS GN 02410.001 (2002)).
The orders at issue can be construed as assigning control of Landen and Cameron's
Social Security benefits to someone other than the representative payee, i.e., to
the court. "Identifiable Social Security benefits cannot be taken by judicial order,
and in this case it appears that they have been." Memorandum, Pennsylvania Support
Decree, supra (citing Woodall, 700 F. Supp. at 221). The state court has assumed the authority to decide who shall
manage the children's Social Security benefits, and how they shall be managed. However,
as noted above, Congress has granted the power to make that selection exclusively
to the Commissioner in section 205(j) of the Act, and the Commissioner's regulations
and decisions issued thereunder are clearly to be given deference. See Keffeler, 537 U.S. at 382. Both the January 2002 and October 2006 orders constitute legal
processes to which the children's benefits have been subjected because both orders
state, with specificity, how the children's parents are to spend the auxiliary Social
Security benefits.
D. Possible termination of benefits to representative payee
Under the Agency's regulations, a representative payee has the responsibility to ensure
that Social Security benefits are used only for the benefit of the beneficiary in
the manner the representative payee determines to be in the best interests of the
beneficiary. See 20 C.F.R.
§ 404.2035 (emphasis added). Even when a representative payee enters into a stipulation
that the court approves, as is the case here, "it could be said that by complying
with the court order, [the individual] has allowed [his or] her rights and responsibilities
as a representative payee to be usurped: [the individual] is not making the decisions
about the use of the funds . . . ." Memorandum, Pennsylvania Support Decree, supra.
Currently, Ms. W~ is the children's representative payee. There is no question that
Ms. W~ is in a difficult legal predicament. By abiding by the state court's orders,
she does not have unfettered discretion to satisfy her obligations as a representative
payee. Conversely, by attempting to satisfy her obligations as a representative payee,
Ms. W~ would place herself in legal jeopardy for failing to comply with the state
court's orders. If she complies with the court's order, the Agency may determine she
is no longer willing or able to carry out her responsibilities as payee, see 20 C.F.R. § 404.2050, and consider terminating her as representative payee and appointing
a successor payee, see 20 C.F.R. § 404.2050, other than Mr. Y~, who is also bound
by the state court's order. As a matter of litigation policy, the Agency does not
get involved in section 207 issues that arise after the Agency has completed payment
to the beneficiary. As an alternative to removing Ms. W~ immediately as representative
payee, however, the Agency could advise her in writing of section 207's prohibition
on assignment or alienation of Social Security benefits. If Ms. W~ wants to avoid
being terminated as the representative payee after the date determined by the Agency,
she may choose to seek legal representation to petition the court to rescind, vacate
or amend its orders, whichever is appropriate pursuant to the court's local rules,
directing the use of the children's auxiliary Social Security benefits.
This matter is complicated further by a motion filed by Mr. Y~ dated July 16, 2007,
for past due child support and health insurance premiums in the amount of $7,387.22.
Thus, it appears Ms. W~ may not have complied with the state court orders, at least
for some period of time. Ironically, if Ms. W~ never complied with the court orders,
and there is no evidence of misuse, the Agency would have no cause to terminate her
as representative payee.
SSA must be mindful to take appropriate action in a case such as this to avoid liability
for potentially misused benefits. 20 C.F.R. § 404.2041 (Agency will repay benefits
if the Agency's negligent failure in investigating or monitoring the representative
payee results in the misuse). Because of the shifting representative payee responsibilities
from 2002 to 2005, we recommend the Agency request an accounting from Ms. W~ and Mr.
Y~ to determine how they used the benefits in their care.
CONCLUSION
The state court's orders cannot override the controlling Federal statute and the Agency's
implementing regulations. The orders violate section 207 of the Act, which prohibits
assignment of an individual's Social Security benefits. The Agency determines who
can manage a beneficiary's benefits, who can be a representative payee, and how the
benefits can be managed. If Ms. W~ is unwilling or unable to request that the court
modify the court orders to eliminate language regarding assignment or transfer of
the children's benefits, the Agency should terminate Ms. W~ as the representative
payee.
Sincerely
Deana R. E~-L~
Regional Chief Counsel
By: _______________
Stephanie F. K~
Assistant Regional Counsel