TN 2 (08-05)

PR 07230.035 New York

A. PR 09-066 Niagara Lutheran Home PNA and Cost of Care DEBT

DATE: March 5, 2009

1. SYLLABUS

An organizational payee is not required by law to deduct a personal needs allowance ("PNA") from a Title II check for the beneficiaries. The organizational payee may use the beneficiaries' conserved funds to reimburse itself for outstanding cost-of-care debts so long as the beneficiaries' current needs and reasonably foreseeable needs are being met. If payee is a Title XIX facility, it also does not need SSA approval to collect the beneficiaries' past debts so long as it allocates two month's PNA to the beneficiaries' resident accounts. If the payee is not a Title XIX facility, it must establish the validity of the debt and seek SSA approval to reimburse itself as a creditor payee.

2. OPINION

You asked us to review whether Niagara Lutheran Home ("NLH"), an organizational representative payee, may reimburse itself with monies from their Title II beneficiaries' conserved funds and monthly PNA allowances for outstanding cost-of-care debts owed to them. NLH is not required by law to deduct a personal needs allowance ("PNA") from a Title II check for the beneficiaries. NLH may use the beneficiaries' conserved funds to reimburse itself for outstanding cost-of-care debts so long as the beneficiaries' current needs and reasonably foreseeable needs are being met. If NLH is a Title XIX facility, it also does not need SSA approval to collect the beneficiaries' past debts so long as it allocates two month's PNA to the beneficiaries' resident accounts. If NLH is not a Title XIX facility, it must establish the validity of the debt and seek SSA approval to reimburse itself as a creditor payee. With respect to Title XVI beneficiaries for whom NLH is payee, NLH is required to provide PNA each month to those beneficiaries.

BACKGROUND

You note that during a triennial review of NLH, the SSA representative padre cadre learned that a number of beneficiaries (mostly Title II recipients) received both SSA and non-SSA benefits. You state that the beneficiaries' family members receive other non-SSA benefits. You further note that the beneficiaries' family members are supposed to turn over the non-SSA benefits to NLH for cost-of-care expenses but that these families have not done so. As such, you indicate, that the beneficiaries have acquired an ongoing monthly debt to NLH for their cost-of-care. As a result of the beneficiaries' families' unwillingness to use non-SSA benefits for cost-of-care, NLH has stopped providing beneficiaries their PNA. In addition, NLH has begun using some of the beneficiaries' conserved funds towards payment for the debt owed for their cost-of-care expenses. NLH stated that the beneficiaries' families granted them permission to use the PNA funds towards the debt.

ANALYSIS

With regard to the Title II beneficiaries residing at NLH, there is no federal regulation which requires that PNA must be deducted from Title II benefits. The POMS notes that when a beneficiary is institutionalized, SSA's policy is that the representative payee must set aside a minimum of $30 per month to be used for the Title II beneficiary's personal needs or saved on his behalf. POMS GN 00605.067D.3, POMS GN 00602.010. The POMS, however, does not cite to any legal authority that supports the policy that $30.00 may be deducted from a Title II check.

Federal regulations and state law suggest that PNA was developed under the structure of the Title XVI program. The regulations at 20 C.F.R. § 416.640(c) require that, when an SSI recipient resides in an institution that receives more than 50 percent of the cost of the recipient's care from Medicaid, any SSI payment due the recipient must be used only for the personal needs of the recipient. The SSI payment due such a recipient would be the reduced payment of $30 per month under 20 C.F.R. § 416.211(b) and 416.414. Thus, 20 C.F.R. § 416.640(c) essentially requires the representative payee to use the $30 per month reduced SSI payment as a PNA. However, the corresponding regulations at 20 C.F.R. § 404.2040 are silent on whether Title II beneficiaries are entitled to PNA.

As such, NLH's practice of retaining Title II beneficiaries' PNA does not violate any laws since legal authority does not indicate that a PNA must be deducted from Title II benefits and given to the Title II beneficiary. As we have stated in the past, the issue of whether PNA must be deducted from Title II benefits is within the purview of the policymakers.

Of paramount importance is that NLH must ensure that each beneficiary's current maintenance and foreseeable needs are met before they may use a beneficiary's funds to satisfy a past debt. 20 C.F.R. §§ 404.2040, 404.2045, 416.640, 416.645; POMS GN 00602.030, POMS GN 00602.010. NLH may use the beneficiaries' conserved Title II funds to pay their outstanding cost-of-care debts so long as their current needs and reasonably foreseeable needs are met.

Also, since NLH serves as both a creditor and payee for its residential beneficiaries, NLH is required to obtain Social Security Administration ("SSA") approval before it may use beneficiaries' monies for self-reimbursement. POMS GN 00602.030. Specifically, NLH must provide the appropriate evidence to SSA to show that it may collect the cost-of-care debts owed by its residential beneficiaries, unless it is a Title XIX facility. POMS GN 00602.030. For example, if NLH is requesting payment of past charges for care and maintenance, SSA should obtain a bill or statement of the amount owed. Id. The statement should designate the months for which care was provided and the monthly customary charges.

If NLH is a Title XIX facility, under SSA's POMS guidelines, it must allocate two month's PNA to the beneficiary's resident account prior to using any conserved funds to pay cost-of-care debts. Id. The payee then may use remaining funds to pay for past care and maintenance without obtaining SSA approval. Id.

Further, it is not within SSA's jurisdiction to collect non-SSA monies from beneficiaries' families to pay for their cost-of-care debts. Thus, SSA would not be involved in any matter between NLH and the families.

CONCLUSION

NLH is not required by law to deduct a personal needs allowance ("PNA") from a Title II check for the beneficiaries. NLH may use the beneficiaries' conserved funds to reimburse itself for outstanding cost-of-care debts so long as the beneficiaries' current needs and reasonably foreseeable needs are being met. If NLH is a Title XIX facility, it also does not need SSA approval to collect the beneficiaries' past debts so long as it allocates two month's PNA to the beneficiaries' resident accounts. If NLH is not a Title XIX facility, it must establish the validity of the debt and seek SSA approval to reimburse itself as a creditor payee.

Mary A. S~
Acting Regional Chief Counsel
By: _______________
Kristina C~

B. PR 05-211 Re: Representative Payee Commingling of Beneficiaries' Personal Funds With Operating Funds

DATE: August 3, 2005

1. SYLLABUS

A representative payee may not commingle beneficiaries' personal allowance funds and operating funds for a residential facility in the same account.

2. OPINION

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 conser