TN 1 (01-09)

PR 07211.043 Puerto Rico

A. PR 09-027 Department of Family-San Juan, PR - Use of Conserved Funds

DATE: December 3, 2008

1. SYLLABUS

A court order issued by a local Puerto Rico court directing the distribution of funds conserved by as former payee on behalf of a social security beneficiary conflicts with the Social Security Administration regulation that requires a former payee to return any conserved social security benefits to SSA for reissuance to a new payee. Federal law should trump the court order under the Supremacy Clause of the United States Constitution and the funds should be returned to SSA so that they may recertify them to the new payee or to the beneficiary. A state court may not direct the disposition of Social Security or SSI benefits by a representative payee.

2. OPINION

You asked us to review whether an order from a local Puerto Rico court that binds a representative payee to maintain conserved social security funds of an individual until he/she attains age twenty-one is inconsistent with SSA law. You note that the beneficiaries who are the subject of the court order receive survivor benefits which terminate upon the child attaining age eighteen or nineteen. SSA law states that conserved funds must be returned to SSA once the payee relationship ends so that the Agency may recertify them to the beneficiary. As such, a court order directing that the payee retain the benefits after said benefits are terminated violates SSA law. In light of the apparent conflict between a Puerto Rico court order and SSA law, we conclude that federal law should trump the court order under the Supremacy Clause of the United States Constitution and the funds should be returned to SSA so that they may recertify them to the beneficiary.

BACKGROUND

You note that during a recent representative payee seminar in Puerto Rico, the Department of Family ("DOF") inquired as to whether a court order which binds a representative payee to maintain conserved funds of an individual until they attain age twenty-one is inconsistent with SSA law which states that conserved funds must be returned to SSA once the payee no longer serves as payee and benefits are terminated. You also note that at this time, DOF has not cited to any specific case where these facts have arisen.

You indicate that the DOF is an organizational representative payee. You note that the DOF provides services to children who are removed from their families due to abuse, neglect, death of parents, etc., and that these children become wards of the Commonwealth. You also state that the majority of children obtaining representative payee services from DOF receive survivor benefits.

In addition, you note that the DOF explained that children who received survivors benefits can remain under their care until they attain age twenty-one even though their SSA benefits have terminated. You also state that the DOF does not return the conserved funds to SSA because they are following a court order which instructs them to maintain the funds until the individual is returned to the family unit or attains age twenty-one.

ANALYSIS

A representative payee acts to receive benefits on behalf of a beneficiary. 20 C.F.R. § 404.2001. SSA's regulations set out a number of circumstances when payment will be made to a representative payee. One instance occurs when a beneficiary is under the age of eighteen. The regulation states:

Generally, if a beneficiary is under age 18, we will pay benefits to a representative payee. However, in certain situations, we will make direct payments to a beneficiary under age who shows the ability to manage the benefits. For example, we make direct payments to a beneficiary under age 18 if the beneficiary is-

  1. Receiving disability insurance benefits on his or her own Social Security earnings record; or

  2. Serving in the military services; or

  3. Living alone and supporting himself or herself; or

  4. A parent and files for himself or herself and/or his or her child and he or she has experience in handling his or her own finances; or

  5. Capable of using the benefits to provide for his or her current needs and no qualified payee is available; or

  6. Within 7 months of attaining age 18 and is initially filing an application for benefits.

20 C.F.R. § 404.2010 (2)(b)(1)-(6).

As discussed above, many of the children for whom DOF provides representative payee services for, receive social security survivors benefits. Survivors benefits are payable to a child until he/she attains the age of eighteen or up to age nineteen if the child is attending school full-time. 20 C.F.R. § 404.352(b).

When an individual is no longer receiving benefits, he or she no longer requires a representative payee. 20 C.F.R. § 404.2001. When the payee relationship ends, SSA law provides that a representative payee who has conserved or invested benefit payments on behalf of a beneficiary shall transfer the funds to SSA. 20 C.F.R. § 404.2060. At the time the funds and the earned interest are returned to SSA, SSA will recertify them to the beneficiary. Id.

Here, the DOF explained that children who receive survivors benefits remain under their care until they attain age twenty-one even though their SSA benefits may have terminated. The DOF referenced a past c