PROGRAM OPERATIONS MANUAL SYSTEMPart GN – GeneralChapter 006 – Use and Accountability of BenefitsSubchapter 03 – Conservation of BenefitsTransmittal No. 16, 10/13/2023
The IRS has published regulations to allow payees to establish and maintain ABLE accounts and signing authority, subject to SSA requirements.
Summary of Changes
GN 00603.041 The Use of Achieving a Better Life Experience (ABLE) Accounts by Representative
The IRS has published regulations to allow payees to establish and maintain ABLE accounts and signing authority, subject to SSA requirements. This new POMS section provides more specific guidance on how representative payees can use ABLE accounts, following all SSA payee program rules.
This section provides information on when a representative payee (payee) may use an ABLE account to manage a beneficiary’s SSA benefits and how our existing payee policies apply when a payee chooses to use an ABLE account to manage a beneficiary’s SSA benefits.
An ABLE account is a type of tax-advantaged account. By using an ABLE account, a payee can save funds for the disability-related expenses of the beneficiary. To qualify for an ABLE account, a beneficiary must be blind or disabled by a condition that began prior to his or her 26th birthday. A beneficiary generally may only have one ABLE account. For general information and policies on ABLE accounts, see SI 01130.740.
States establish and maintain individual ABLE account programs. Within these ABLE account programs, there may be varying account options. As a result, it is important to evaluate each ABLE account to ensure its compliance with our payee account titling rules.
Payees may place benefits into an ABLE account when they determine that it is in the beneficiary’s best interests. Payees who choose to place benefits in an ABLE account must follow our general payee rules for managing benefits. There are no exceptions to our payee rules for ABLE accounts. This section provides additional clarification on how our program rules apply when a payee uses an ABLE account to manage benefits.
The payee must title the ABLE account to show that the payee has a fiduciary interest in the funds. The account title must show that the beneficiary owns the funds but does not have access to them. Any account title establishing a fiduciary interest is acceptable; however, the preferred account title is (Name of Beneficiary) by (Name of Representative Payee), representative payee. Please document the account title in a Note on the Relationship Details tab in eRPS. For more information on account titling, see GN 00603.010B.1 and GN
The payee must have signature authority for the ABLE account. A person with signature authority may establish and control an ABLE account on behalf of a minor child beneficiary or a beneficiary who is otherwise unable to manage the account. The Internal Revenue Service’s (IRS) rules allow a payee to have signature authority over a beneficiary’s ABLE account.
In some instances, the payee appointed by SSA may not be the same person who has signature authority over the beneficiary’s ABLE account. For example, a legal guardian may have signature authority on an ABLE account for a beneficiary whose payee is someone other than the legal guardian. If the payee does not have signature authority over the ABLE account, they cannot deposit SSA benefits to the ABLE account.
Please be aware that under IRS rules, some ABLE programs may allow the designated beneficiary of the ABLE account to remove and replace any person with signature authority. Payees are responsible for reporting to SSA any events affecting their ability to fulfill the responsibilities of being a payee. If a payee uses an ABLE account for the SSA beneficiary served, and if the beneficiary removes the payee’s signature authority over the ABLE account, the payee must immediately alert SSA. In that case, the payee would no longer have control over the benefits placed into the ABLE account, and the payee would need to change the direct deposit of the benefits and no longer use the ABLE account.
Ask the payee why the beneficiary removed the payee’s signature authority and consider whether the payee remains suitable. After evaluation, if a change of payee is appropriate, follow the successor payee instructions in GN 00504.100. Document your conversation with the payee on an Report of Contact in eRPS on the Beneficiary Details tab. Always be alert to changes in circumstances that might indicate the need for a new capability determination, see GN 00502.055.
The payee must determine the beneficiary’s current and future needs and use the benefits to meet those needs. The payee must conserve any SSA funds remaining after meeting the beneficiary’s needs.
Funds in an ABLE account generally are meant to assist a person in the purchase of items and services that are covered as “qualified disability expenses” (QDE). See SI 01130.740B.8 for information about QDEs. If funds are used for non-QDEs, a portion of the investment earnings included in the distributed funds will be countable income and subject to a 10 percent additional tax under IRS rules. Additionally, funds used for housing and non-QDEs are subject to the SSI resource-counting rules. For an explanation about how ABLE income is counted, see SI 01130.740C.1. For more information about when ABLE resources are counted, as well as examples about how QDEs affect income and resources, see SI 01130.740C.5.
Payees are expected to understand IRS's rules for using an ABLE account, including the tax implications of spending the beneficiary’s ABLE funds on non-QDEs. If the beneficiary incurs a tax penalty because the payee spent benefits on a non-QDE, consider whether the payee remains suitable.
Payees are responsible for keeping records and reporting on how they spent or conserved the benefits. Non-exempt payees report on the use of benefits by completing a Representative Payee Report (Form SSA-623, SSA-6230, SSA-6234, or SSA-6233). We mail the form to the payee once a year. Payees can also file the report online using iRPA or myRPA. Payees must complete the report annually, unless they are exempt under GN 00605.015. All payees must also report on the use of benefits to SSA upon request.
Payees must keep detailed and accurate records of how they use benefits. We advise that payees keep records for at least two full calendar years.
ABLE accounts, however, may hold funds from a variety of sources, and there may be incentives to encourage contributions from the beneficiary’s family and friends. Generally, we do not recommend that a payee mix benefits with other funds that belong to the beneficiary. If the payee chooses to mix benefits with other funds that belong to the beneficiary, the payee must maintain a recordkeeping system to differentiate SSA benefits from other funds.
ABLE accounts offer options for payees to grow beneficiaries’ funds through investing. The available investment options present varying risk levels. If a payee chooses to invest funds in an ABLE account, they must do so carefully. After meeting the beneficiary’s current needs, the payee must conserve any remaining funds. Payees must comply with SSA’s rules on conservation and investment of benefit payments. See GN 00603.010 and GN 00603.040 for requirements on conserved funds and investments.
If there is a change of payee, or if the beneficiary receives direct payment, the payee must return any conserved funds and interest earned thereon, including SSA funds held in an ABLE account. Generally, the payee must return the conserved funds to SSA. On a case-by-case basis, we may permit the former payee to transfer funds directly to the new payee or the beneficiary.
For ABLE accounts, transferring control of the account to the new payee or beneficiary may be in the best interest of the beneficiary; see GN 00603.041B.6.b for details.
The former payee must return the conserved funds to us if we do not approve the direct transfer of the funds or if the new payee or beneficiary in direct pay does not intend to hold the funds in the ABLE account. The payee will need to remove the conserved funds from the ABLE account and return them to SSA. Follow the procedures in GN 00603.055B.1 for transferring conserved funds. Under IRS’s rules on disbursements from an ABLE account, removing the conserved funds from the ABLE account to return to SSA is considered a QDE. However, if the new payee or beneficiary decides to deposit those funds back into an ABLE account, the funds will count towards the annual contribution limit. Additionally, conserved funds removed from an ABLE account may be countable as resources (see SI
01130.740C.4 and C.5 for an explanation of ABLE funds as resources). For these reasons, it may be in the best interest of the beneficiary for the payee to transfer control of the ABLE account to the new payee or the beneficiary in direct pay, when appropriate.
If the former payee does not return the conserved funds, despite reasonable efforts by SSA to obtain the funds, document your efforts on the Make Note screen in eRPS and pursue an investigation into misuse of benefits. For additional information on misuse of benefits, see GN 00604.001. If the former payee claims that they are unable to return the conserved funds, for example because the bank has frozen the account or because the former payee no longer has signature authority over the account, you may need to contact the bank to work with the bank and the former payee to resolve the issue. If the funds are not returned to SSA because the bank will not release the funds, document the file as to the reasons given by the bank and refer the case to regional programs staff for referral to the Office of the General Counsel.
On a case-by-case basis, SSA may approve the former payee to transfer the SSA funds in an ABLE account directly to the new payee or beneficiary in direct pay. Follow the procedures in GN 00603.055B.2. When the former payee has conserved the beneficiary’s funds in an ABLE account and the new payee or beneficiary in direct pay intends to keep the funds conserved in the ABLE account, it may be in the beneficiary’s best interest to seek SSA’s approval to transfer conserved funds directly to the new payee or beneficiary. The former payee and new payee or beneficiary may accomplish this by changing the signature authority for the account to the new payee or beneficiary, as appropriate. This approach eliminates the need to remove the funds from the ABLE account. Payees should contact the state ABLE program for instructions on changing the signature authority on an account.
GN 02402.030 Acceptable Types of Financial Institutions and Accounts
GN 00502.055 Reevaluating a Beneficiary's Capability
GN 00504.100 Determining the Need for a Successor Payee
SI 01130.740 Achieving a Better Life Experience (ABLE) Accounts
GN 00602.001 Use of Benefits
GN 00602.130 Improper Use of Benefits
GN 00603.010 Conserving Benefits in a Savings or Checking Account
GN 00603.040 Investments Other Than U. S. Savings Bonds
GN 00603.055 Transfer of Conserved Funds
GN 00604.001 Misuse of Benefits
GN 00605.001 Overview of Annual Representative Payee Accounting
GN 00605.015 Payees Exempt from the Annual Accounting Requirement
SI 01120.022 Conserved Funds When Formally Designated Agent Changes
SI 01120.023 Return of Conserved Funds by a Representative Payee
GN 02402.055 Direct Deposit for Representative Payee Cases