PR 07211.017 Indiana

A. PR 10-054 Court Orders Regarding Representative Payees in Indiana State Court Our Ref: 10-0025

DATE: January 22, 2010

1. SYLLABUS

SSA is not required to obey court orders which attempt to appoint new representative payees or prohibit a representative payee from using funds in a certain way. SSA, not state courts, appoints representative payees and SSA requires those representative payees to comply with the federal statutes and SSA regulations.

2. OPINION

You requested an opinion as to the propriety of Indiana state court orders brought to SSA’s attention by the Indiana Department of Child Services (DCS). These orders either: (a) mandate a representative payee to use benefits for only certain expenditures (e.g. a restricted savings account for educational use), or (b) change the appointed representative payee. These orders are not consistent with Federal law and do not override Agency regulations where the Federal government has not submitted to the sovereignty of the state court. Furthermore, the court orders violate section 207 of the Social Security Act (the Act) (the anti-assignment provision). See 42 U.S.C. § 407(a). Lastly, if the representative payees were to follow the court orders, they would be in violation their duty to spend the benefits for only the use and purpose of the beneficiary (i.e. current maintenance) and would be held personally liable for repayment of any misused benefits. See 20 C.F.R. §§ 404.2035(a), 404.2041(a). We have attached some suggested language to send to DCS, informing them of the basis for SSA’s position and reminding DCS of its responsibilities as a representative payee.

Background

DCS has been receiving orders from Indiana state courts which they believe to be problematic. Typically, DCS is appointed representative payee by SSA for all children that are wards of the state and receive Social Security benefits, meaning DCS receives the child beneficiary’s benefits and determines how these benefits are to be disbursed.

Recently, however, Indiana state courts have begun issuing court orders which purport to require any combination of the following: to change the representative payee to a party other than DCS, to redirect part of a child beneficiary’s Social Security benefits to a party other than DCS, or to stipulate how a child beneficiary’s Social Security benefits are to be used.

For example, a recent Indiana state court order changed a child beneficiary’s representative payee to her foster mother and stated that the foster mother must place the child’s Social Security benefits in a restricted savings account. The court order mandated that the foster mother be allowed to remove $50.00 per week for “use and benefit” of the child, but the remainder of the money was only to be used for the child to “further her education and support herself after her eighteenth (18) birthday.”

DCS finds such orders problematic because they do not believe that a state court can remove DCS from its role as representative payee or require a representative payee to use Social Security benefits in a certain manner for a child beneficiary.

Discussion

SSA appoints a representative payee to receive a child’s benefits if the child beneficiary is unable to manage or direct the management of benefits payments in his or her interest. See 20 C.F.R. § 404.2001. Congress granted the Social Security Administration the power to determine who should manage a beneficiary’s benefits and how they should be managed in section 205(j) of the Social Security Act. Such power includes the power to appoint or remove a representative payee when necessary, and the power to direct how the representative payee uses the benefits. See 42 U.S.C. § 405(j); 20 C.F.R. §§ 404.2025; 404.2035 (directing use of benefits and responsibilities of representative payee); 404.2045 (instructing investment of conserved funds); 404.2050 (providing circumstances for removal of representative payee and appointment of new representative payee); 404.2065 (requiring representative payee to account for use of benefits).

Moreover, it is well established that the federal government, as sovereign, cannot be subjected to suits in state courts, unless the sovereign has consented to submit itself to the jurisdiction of the state court. 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, 586 (1941)). Indeed, in State ex rel. W.B., 755 So. 2d 281 (La. App. Ct. 1999), a Louisiana state court ordered the Louisiana Department of Child Services, which was appointed representative payee for a minor child, to pay a monetary award to the child’s mother that represented 10 months of benefits. Upon review, the appellate court found that the state court lacked jurisdiction to order Child Services to pay benefits to the child’s mother, as this effectively changed the representative payee to the child’s mother during that time period. The court reasoned that “[t]he SS benefits program is a federal program…[so] the decision to appoint, and the designation of a ‘representative payee’ is made by the [SSA]” and “[a] request to change the ‘representative payee’ is a question for the federal agency, the [SSA], with possible review by the federal courts.” Id. at 282. Accordingly, the court found that the state court did not have the “authority or power to change the ‘representative payee,’ or order an award of benefits that effectively changed the ‘representative payee.’” Id. See also MacGilvray v. Kanarskee, 196 Misc. 2d 469 (N.Y. Spec. Term 2003) (holding that, while the representative payee appointed by the state court might be treated as a “nomination,” the “final determination of who shall be the representative payee, however, remains within the province of the Social Security Administration”).

Here, the SSA has not relinquished its sovereignty and submitted to the jurisdiction of Indiana state courts. Because the SSA has not consented to submit itself to jurisdiction before state court, Indiana state courts cannot override the Agency’s regulations. Therefore, SSA is not required to obey court orders which attempt to appoint new representative payees or prohibit a representative payee from using funds in a certain way. SSA, not state courts, appoints representative payees and SSA requires those representative payees to comply with the federal statutes and SSA regulations.

The state court orders here also violate section 207(a) of the Social Security Act. 42 U.S.C. § 407(a). Section 207(a) states:

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…

Therefore, under the Act, Social Security benefits are generally neither assignable nor subject to legal process. Federal courts have interpreted Section 207 broadly, meaning the bar against legal process includes not only claimants and creditors, but also States. See Memorandum from Regional Chief Counsel, Philadelphia, to Regional Commissioner, Philadelphia, Pennsylvania Support Decree Assigning social Security Payments (March 24, 1994) (citing Philpott v. Essex County Welfare Bd., 409 U.S. 413, 416-17 (1973)). Courts have upheld the anti-assignment provision 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)).

Court orders that direct a representative payee to use Social Security benefits in a certain way or change representative payees violate the anti-assignment provision in Section 207 of the Act, because such orders constitute “other legal process.” As the Supreme Court stated in Washington Dep’t of Social and Health Servs. v. Guardianship Estate of Danny Keffeler, 537 U.S. 371, 385 (2003), “‘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” (emphasis added). The Court then pointed to the POMS, which defines “legal process” in Section 207 as “the means by which a court (or agency or official authorized by law) compels compliance with its demands; generally it is a court order” (emphasis added). Id. (citing POMS GN 02410.001). The Court held that the POMS’s definition of legal process “confirmed” its definition. Id. (citing POMS GN 02410.001).

A state court order certainly fits within the definition of “other legal process” as defined by the Court in Keffeler. By either changing the representative payee or dictating how benefits must be used, the state courts are attempting to utilize court orders (“judicial mechanisms”) to assign control of Social Security benefits (“property”) to someone other than the assigned representative payee. Furthermore, the POMS advises that court orders are most typically what constitute “other legal process.” POMS GN 02410.001 (2002). Thus, the state court orders constitute “other legal process” and violate the anti-assignment provision in Section 207(a). 42 U.S.C. § 407(a). SSA is not bound by state court orders which attempt to either order a representative payee to use Social Security benefits in a particular way or change the representative payee.

Additionally, if the representative payee were to obey a court order that instructed the representative payee to use Social Security benefits in a manner inconsistent with SSA policy, then that representative payee would be violating his or her duty to the beneficiary. See 42 U.S.C. § 405(j); 42 U.S.C. § 1383(a)(2). Under the regulations, a representative payee must ensure that Social Security benefits are used only for the “use and benefit” of the beneficiary and in the manner and for the purposes that the representative payee determines to be in the “best interests” of the beneficiary. 20 C.F.R. § 404.2035(a). SSA will consider payments given to the representative payee to have been used for the “use and benefit of the beneficiary” if they are used for the beneficiary’s “current maintenance.” 20 C.F.R. § 404.2040(a)(1). Current maintenance is defined as “costs incurred in obtaining food, shelter, clothing, medical care or personal comfort items.” Id. If any amount remains after the representative payee has used the benefits for the beneficiary’s current maintenance, then the representative payee can conserve or invest the remaining funds on behalf of the beneficiary. 20 C.F.R. § 404.2045(a). Conserved funds are to be “invested in accordance with the rules followed by trustees” and invested funds must “show clearly that the payee holds the property in trust for the beneficiary.” Id.

The regulations provide that only the representative payee has the discretion to determine how to best use the benefits in the beneficiary’s best interests. 20 C.F.R. § 404.2035(a). Therefore, a representative payee could be in violation of SSA regulations if he allowed another entity, including a court or a bank, to determine what is in the best interest of the beneficiary. See Kriegbaum v. Katz, 90 F.2d 70,74 (2nd Cir. 1990) (“[T]he Social Security Administration alone has the power to enforce the duties of a representative payee through the appointment of a new payee when the current payee has not used the benefit payments on the beneficiary’s behalf in accordance with the guidelines.”). Therefore, an order that prohibits the representative payee from deciding how to best use the benefits for current maintenance puts the payee in the position of being unable to comply with both the court order and federal law.

In addition, if DCS, as representative payee, were determined to have misused Social Security benefits, perhaps by allowing another party to obtain and use even part of Social Security, for something other than what DCS deems to be the “use and benefit of the beneficiary,” then DCS could be responsible for paying back the misused benefits. 20 C.F.R. § 404.2041(a). Furthermore, even if DCS were not forced to pay back these benefits, SSA would be required to reimburse the child beneficiary for all benefits paid out that are deemed misused. 20 C.F.R. § 404.2041(b).

DCS expressed concern over In the Matter of J.G., 652 S.E.2d 266, 273 (N.C. Ct. App. 2007), a North Carolina court of appeals case. In that case, the lower court ordered the Department of Social Services, the representative payee for a minor child, to use the child’s Social Security benefits to pay the monthly mortgage on his home, $2,800 in past-due mortgage payments, and $1,000 in home repairs. The court of appeals noted that it had previously held a trial court did not have jurisdiction to direct the representative payee to make payments to the mother of the beneficiary in Brevard v. Brevard, 328 S.E.2d 789, 792 (N.C. Ct. App. 1985). Id. However, the court attempted to distinguish this case from Brevard and upheld the lower court’s order. The court held that 42 U.S.C. § 407(a) (the anti-assignment provision) applied only to actions brought by creditors or claimants, and the guardian ad litem had brought the action in this case. Id. The court then went on to reason that it was necessary for state courts to have concurrent jurisdiction over Social Security benefits because the state has the best interest of the child in mind. Id.

SSA is not bound by state court rulings in cases where SSA was not a party. But in any event, in O’Connor v. Zelinske, 668 S.E.2d 615, 621 (N.C. Ct. App. 2008), the court overturned J.G. while upholding Brevard. In this case, the trial court ordered the plaintiff to transfer the Social Security benefits he received as representative payee for a minor child. Presumably, the trial court had found the authority to do this from the court’s holding in J.G. On review, this court held that “to the extent, if any…the holding in J.G. is in contravention to the holding in Brevard, [it]…must follow the earlier precedent set in Brevard. Id. The court noted that, although some jurisdictions determined that state courts had concurrent jurisdiction to make decisions concerning Social Security benefits and representative payees, they could not overturn the holding in Brevard. Therefore, the court vacated the trial court’s order for lack of subject matter jurisdiction and overturned part of the holding in J.G. that gave the trial court concurrent jurisdiction over Social Security benefits. Accordingly, J.G. should no longer provide support for state court orders requiring a representative payee to use Social Security benefits in a certain way.

Conclusion

The state court’s orders cannot override the federal statute and Agency regulation’s controlling the rights and duties of representative payees. Additionally, the state court orders violate the anti-assignment provision in Section 207. See 42 U.S.C. § 407. We recommend you use the attached draft language to inform DCS of SSA’s position.

Donna L. C~

Regional Chief Counsel

By: __ _________
Patrick E~

Assistant Regional Counsel

B. PR 04-250 James E. H~ and Bessie A. H~, Petitioners, and James E. P~, Minor, Wayne County Superior Court No. 1, No. 89DO1-9302-GU-008 (SSN:~)

DATE: October 15, 1993

1. SYLLABUS

A court order directing how a representative payee uses a beneficiary's social security benefits is not binding on the payee. Section 207 of the Social Security Act prohibits attempts to direct the disposition of benefits certified to a representative payee. If a court order directs a payee how to use an individual's social security benefit, the payee can use section 207 as a defense against such action.

2. OPINION

Dear Judge S~:

This is with reference to your April 8, 1993 order regarding the appointment of James E. H~ and Bessie A. H~ ("the H~s") as guardians of James E. P~. The order indicates that James E. P~ ("P~") receives Supplemental Security Income (SSI) in the amount of $358 per month, and Social Security (Child's Insurance Benefits ("CIB")) in the amount of $96.00 per month. In addition, the order states that P~ received a lump sum award of past SSI in the approximate amount of $19,500. The order directs that these funds shall only be accessible to P~'s guardians upon order of the Court.

The Social Security Administration appointed Bessie A. H~ ("Ms. H~") as representative payee for P~ in May 1993. Sections 205(j) and 1631(a) of the Social Security Act, 42 U.S.C. §§ 405(j) and 1383(a), set out, inter alia, the duties and responsibilities of representative payees.

The designation of payees to receive SSI and CIB payments on behalf of minor beneficiaries is made pursuant to sections 202(d)(1), 205(j), and 1631(a)(2) of the Social Security Act, 42 U.S.C. §§ 402(d)(1), 405(j), and 1383(a)(2). Pursuant to sections 205(j) and 1631(a)(2) of the Act and their implementing regulations, 20 C.F.R. §§ 404.2001-404.2065 (Subpart U), and 416.601-416.665 (Subpart F), the Social Security Administration under delegated authority from the Secretary of Health and Human Services (Secretary), selects the individual it determines to be in the best position to serve the interest of the beneficiary and to disburse the benefits on his or her behalf.

Payments certified to a representative payee must be applied only for the "use and benefit" of the beneficiary (20 C.F.R. §§ 404.2035, 416.635), i.e., for those purposes which will serve the beneficiary's best interest, taking into account the beneficiary's individual requirements and particular circumstances. The beneficiary must derive some advantage or satisfaction from the expenditures made by the representative payee. The Social Security Administration advises each individual appointed as a representative payee of the proper use of such benefits in accordance with the SSA regulations. Once a representative payee is appointed by the Social Security Administration, the Administration holds that representative payee responsible for disbursing benefits in the best interest of the beneficiary.

A State court lacks both the authority and the jurisdiction to designate a representative payee for purposes of the Social Security Act, or to direct the disposition of benefits certified to a representative payee. The pertinent statutory and regulatory authorities cited above provide that the Secretary has the discretion and authority to designate a representative payee. See McGrath v. Weinberger, 541 F.2d 249 (10th Cir. 1976), cert. denied 430 U.S. 933 (1977). A copy of the McGrath decision is attached.

The court's April 8, 1993 order appears to be inconsistent with sections 205(j), 207(a), 1631(a), and 1631(d)(1) of the Social Security Act, 42 U.S.C. §§ 405(j), 407(a), 1383(a), and 1383(d)(1). Under the Court order, Ms. H~ may only gain access to P~'s SSI and CIB after obtaining an order of the Court. Under sections 205(j), 207(a), 1631(a), and 1631(d)(1) of the Act, supra, Ms. H~ is to manage the monthly SSI and CIB payments which she receives on P~'s behalf "for the use and benefit of the beneficiary in a manner and for the purposes [they] determine, under the guidelines in this subpart, to be in the best interests of the beneficiary." 20 C.F.R. §§ 404.2035(a), 416.635(a).

Social Security benefits are exempted from any legal process by Section 207(a) of the Social Security Act, 42 U.S.C. § 407(a), which provides:

The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law." (Emphasis added).

Section 1631(d) of the Social Security Act incorporates section 207(a), making the exemption provisions of that section applicable to SSI payments as well. 42 U.S.C. §§ 407(a), 1383(d).

The exemption provisions of section 207(a) of the Act, supra, were construed by the Supreme Court in Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S. Ct. 590 (1973), as exempting Title II benefits from reimbursement claims of a State agency for assistance furnished. The Supreme Court stated at 93 S. Ct. 592:

On its face, the Social Security Act in § 407 bars the State of New Jersey from

reaching the federal disability payments paid to Wilkes. The language is all-

inclusive: "None of the moneys paid or payable ... under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process ... " The moneys paid as retroactive benefits were "moneys paid ... under this subchapter"; and the suit brought was an attempt to subject the money to "levy, attachment ... or other legal process." (Footnote omitted) (alterations in original).

The United States Supreme Court reversed the New Jersey Supreme Court on the basis of the Supremacy Clause of the Constitution.

The only exceptions were enacted in 1974, effective January 4, 1975, to enforce legal obligations to provide child support or make alimony payments. 42 U.S.C. § 659.

Furthermore, as is well established, the Federal government as sovereign is immune from suits in and the order 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. See State of Hawaii v. Gordon, 373 U.S. 57 (1963). and United States v. Sherwood, 312 U.S. 584 (1941). Hence, the Secretary is not bound by a state court order directing social security payments in a manner other than set forth in section 207(a) of the Act, supra, as incorporated by section 1631(d)(1) of the Act, supra.

Donna M. W~ III
Acting Regional Chief Counsel, Region VII

By ______________
Mary T~
Assistant Regional Counsel


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/1507211017
PR 07211.017 - Indiana - 03/04/2010
Batch run: 03/04/2010
Rev:03/04/2010