You asked us to review whether Herkimer DDS, which has been appointed a representative
payee, may commingle funds with its operating funds for a residential facility. We
conclude that the representative payee may not commingle personal allowance funds
and operating funds for a residential facility in the same account.
FACTS
The Utica Field Office contacted the volume payee Herkimer County DDS ("Herkimer")
regarding the collective account it maintains for SSA beneficiaries. The account is
commingled with the operating account. You note that for SSA this is not acceptable.
You also note that Herkimer submitted a section of the NYS Fiscal Reference Manual
("Manual") (Accounting Principals), which they believe allows such an action. Specifically,
Herkimer cited to section TA53, the Social Services Trust Account section of the New
York State Federal Reference Manual. According to TA53, a Social Services Trust account
"may be broken down into sub-accounts for recoveries, burial funds, representative
payee accounts for adults, protective payee accounts for adults, representative payee
account for foster care children, adult conservatorships, etc." You also note that
Herkimer has segregated the funds of the beneficiaries in the operating account and
the ledgers of the SSA beneficiaries are perfect. You further note, however, that
the beneficiaries' funds are mixed with the operating account.
LAW
1. SSA Regulations & POMS
The SSA Regulations state that conserved funds should be invested in accordance with
the rules followed by trustees and that any investment must show clearly that the
payee holds the property in trust for the beneficiary. 20 C.F.R.§§404.2045(a) and
416.645(a). The POMS provide that "Generally a beneficiary's funds must not be commingled
with the payee's personal or organizational operating funds." POMS GN 00603.010. The only exceptions are for spousal or parental payee ships, which don't apply here.
Furthermore, a collective account must be properly titled to show the beneficiaries
as owners of the account and any interest earned belongs to the beneficiaries. POMS
GN 00603.020B.
2. State Law
New York law provides:
Whenever a resident authorizes an operator of a facility to exercise control over
his or her personal allowance such authorization shall be in writing and subscribed
by the parties to be charged. Any such money shall not be mingled with the funds or
become an asset of the facility or the person receiving the same, but shall be segregated
and recorded on the facility's financial records as independent accounts.
NY Soc. Serv. §131-o(2).
Further, New York law states:
Personal allowance accounts and accounts for other resident funds shall be kept separate
and distinct from each other and from other account(s).
N.Y. Soc. Serv. §487.6(4).
New York law also prohibits operating facilities from using any portion of resident
funds to compensate themselves for services provided. The statute states:
The operator shall hold resident funds in custody for the sole use of the resident
and shall not use these funds for any other purpose.
N.Y. Soc. Serv. §487(c)(3).
Additionally, New York law provides that any interest on money received and held for
a resident by a representative payee is the property of the individual resident. The
statute provides:
An assisted living operator or employee of a residence or any other entity which is
a representative payee of a resident of such residence pursuant to designation by
the social security administration or which otherwise assumes management responsibility
over the funds of a resident shall maintain such funds in a fiduciary capacity to
the resident. Any interest on money received and held for the resident shall be the
property of the individual resident.
New York Public Health Law §4661.
In accordance with the plain language of the aforementioned regulations, POMS, and
statutes, we opine that operating facilities must maintain separate accounts for their
residents' personal funds and their own operating funds. Although we do not have any
information regarding the titling of the account, we do not see how the titling of an operating account could show clearly that the funds in that
account are held in trust for the beneficiaries. Also, if the account is an interest
bearing account, which it should be, we have no information to show that the interest
on the account is distributed to each beneficiary in an appropriate proportionate
share. Additionally, we do not see anywhere in section TA53 of the New York State Fiscal Reference Manual authorization
to commingle trust account funds with a facility's operating funds. To the extent
that Herkimer DDS interprets TA53 to conflict with SSA requirements, we take the position
that SSA requirements must be followed. Under the Supremacy Clause of the United States
Constitution, any state law that would interfere with or is contrary to federal law
will not stand. Courts have found implied conflict pre-emption where it is impossible
for a private party to comply with both state and federal requirements or where state
law stands as an obstacle to the accomplishment and execution of the full purposes
and objectives of Congress. See Beulah
Johnson v. Brian J. Wing, et al., 12 F. Supp. 2d 311, 317 (S.D.N.Y. 1998); see
also, Perez v. Campbell, 402 U.S. 637, 651-52 (1971). Herkimer County DDS, thus, would have to follow SSA's
beneficiary fund requirements. The practice of earmarking and segregating beneficiary
funds and operating monies in a single operating account is not sufficient protection
for conserved beneficiary funds and should not be permitted.
CONCLUSION
We conclude that a representative payee may not commingle personal allowance funds
and operating funds for a residential facility in the same account.
Barbara L. S~
By:/s/__________________
Kristina C~
Assistant Regional Counsel