Effective Dates: 09/18/2024 - Present Previous | Next

TN 35 (09-24)

GN 00602.150 Misapplication of Funds in a Dedicated Account

A. Policy - General

Section 213 of Public Law (P.L.) 104-193, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, enacted August 22, 1996, lists the allowable expenses for which the funds in the dedicated account shall be used. These allowable expenses include those for education, training, medical treatment and other items or services related to the impairment. Any impermissible use “shall be considered a misapplication of benefits..., and any representative payee (payee) who knowingly misapplies benefits from such an account shall be liable to the Commissioner in an amount equal to the total amount of such benefits.” (See GN 00602.140 for details about allowable expenses.)

In this section, we will refer to the person managing the dedicated account as a payee; but a recipient in direct payment can manage their own dedicated account. Additionally, a misapplication determination can apply to a recipient in direct payment. Follow these instructions for payees and recipients in direct payment.

B. Definitions

1. Dedicated account

A dedicated account is an account in a financial institution for supplemental security income (SSI) past-due monthly benefits (including any Federally administered State Supplement) which are required or allowed to be paid into such an account and the use of which is restricted by section 1631 (a)(2)(F) of the Social Security Act (Act).

2. Allowable expenses

Allowable expenses are education, training, medical treatment and other items or services related to the individual's impairment. See GN 00602.140.

3. Misapplication of funds

The use of funds from a dedicated account for an expense not permissible by the Act is considered misapplication of funds. A permissible expense can include an item or service not specifically listed in the Act if the item or service is determined to be appropriate by the Commissioner and is related to the individual's impairment. See GN 00602.140.

4. Repayment

Repayment is the return to SSA of an amount equal to the amount misapplied. Returned misapplied funds go back into the general revenues of the Treasury Department.

C. Policy - Overview of misapplication

Misapplication of the funds from a dedicated account is not an overpayment. Waiver rules do not apply to the requirement to return misapplied funds because misapplication is not an overpayment.

Misapplication is not misuse when the payee's use of the funds, while not permissible or approved, did benefit the recipient.

If a payee does not manage funds in the best interests of the beneficiary, SSA must conduct a suitability determination.

If SSA determines that an individual recipient who is in direct-payment misapplied funds from their dedicated account, the misapplied funds can be repaid from SSI benefits payable to the individual in an amount equal to the misapplied amount.

For more information on the remittance process, see GN 00602.150D.2.b. and MS 01103.001.

D. Procedure

NOTE: Use the following procedures in the determination of misapplication of funds.

1. Determination of misapplication

  1. a. 

    Misapplication can occur when the individual is in a period of suspension, as long as the payee continues to have control of the dedicated account.

  2. b. 

    The restrictions on the use of the funds in a dedicated account terminate when the individual's eligibility terminates.

  3. c. 

    A finding that a payee knowingly misapplied funds for impermissible expenditures can be made based on a signed “Allowable Use Of Funds” statement (see GN 00602.140), but other relevant facts, if any, must also be considered.

  4. d. 

    Prepare an SSA-553, Special Determination, see OS 15010.170. The SSA-553 must include all relevant information to explain your determination (e.g., names, SSNs, facts of the misapplication, whether the payee knowingly misapplied funds, and basis of your determination). Store the SSA-553 in the Non-Disability Repository for Evidentiary Documents (NDRed) using the Evidence Portal (EP). For information on EP, see MS 09701.001.

  5. e. 

    Notify the payee of your determination and the requirement to repay the misapplied funds if the misapplication was knowing (see GN 00602.150D.2.a.).

    NOTE: A signed SSA-552 or other statement from a payee certifying that the payee understood the dedicated account restrictions can support a finding that a payee knowingly misapplied funds. However, the certification does not automatically establish misapplication of funds. Field office staff must consider any other relevant evidence, such as the nature and amount of the expenditure, and the payee's explanation of why they believed the expenditure was permissible.

    If your review of the dedicated account indicates that the payee may have misused benefits, fully investigate for misuse following GN 00604.020.

    If you determine that misuse occurred, take appropriate actions regarding misuse and possible restitution. For information on misuse, see GN 00604.045. While a finding of misuse does not preclude a finding of misapplication, SSA will, in the recipient’s interest, pursue the finding of misuse, so any recovered funds go back into the dedicated account.

2. Repayment of misapplied funds

NOTE: The payee cannot use dedicated account funds to repay misapplied funds. We will seek repayment from the payee for the misapplied amount on a dollar-for-dollar basis.

a. Notification

Prepare an SSI Important Information Notice (SSA-L8166) titled "Dedacnt 10 - Rep Payee-Misapplication." This notice is located in the Document Processing System (DPS), under the National and PE tabs. Include:

  • •

    your determination that dedicated account funds were misapplied;

  • •

    a demand for full repayment within 60 days;

  • •

    that payment is to be made to SSA;

  • •

    the payment stub; and

  • •

    a return envelope addressed to the field office serving the payee.

Also send:

  • •

    an eFAX copy of the notice to the Office of Financial Policy and Operations:

    • –

      eFAX - (833) 955-2293

b. When payment is received:

  • •

    Follow remittance processing procedures in GN 02403.001 and MS 01103.001.

  • •

    Code the Debt Management System (DMS) remittance screen with a trust fund code of M and a reason code of S.

  • •

    Annotate the SSR Remarks field that a refund has been received, the amount received and the amount of misapplied funds that remains to be repaid. Do not delete the original amount of the misapplied funds.

NOTE: DO NOT add a manually computed overpayment to the record (P TAC). Remittances of misapplied funds are not posted to the Supplemental Security Record (SSR).

c. If payee cannot repay the full amount in one payment:

  • •

    Allow for repayment over a period of up to 12 months.

  • •

    Ensure that payments will be made on a regular monthly basis.

  • •

    Do not complete Section II of the SSA-632-BK.

  • •

    Give the payee enough Payment Stubs and return envelopes.

  • •

    Set up manual control of the installment payments.

d. When the payee does not respond to a repayment letter within 60 days (plus 5 days for mailing), take the following recovery actions:

  • •

    Determine whether the payee did not receive the letter (e.g., was it returned), or is delinquent in dealing with the repayment.

  • •

    If the payee is delinquent, send a letter stating that payment is past due and demanding payment within 10 days.

  • •

    If no response is received, attempt phone contact.

  • •

    If phone contact is unsuccessful or the payee is unresponsive, send a letter by certified mail. This letter will:

    •  

      Demand repayment;

    •  

      State that the case may be referred to the Department of Justice (DOJ) for civil action; and

    •  

      That we may review the payee's continuing suitability to remain payee considering their failure to repay the misapplied funds.

  • •

    Allow 30 days for a response.

  • •

    Take appropriate follow up action. See SI 02220.035

e. When there is no response to the requests for repayment or the payee refuses to repay/cooperate or referral to DOJ is not appropriate (or DOJ will not take the case (SI 02220.035)):

  • •

    Annotate the file; and,

  • •

    Send a report of contact outlining the recovery efforts to the Office of Financial Policy and Operations eFAX number in GN 00602.150D.2.a.

3. Appeals

a. Waiver of repayment

Because misapplication of funds from a dedicated account is not an overpayment, do not apply overpayment waiver procedures (based on defeat the purpose of the Act (SI 02260.020), against equity and good conscience (SI 02260.025) or impede effective or efficient administration (SI 02260.030)).

b. Reconsideration/Hearing/etc.

The determination that a payee has misapplied funds is an initial determination. Therefore, the payee has the right to appeal this determination.

When a request for reconsideration is filed within 60 days of the date of the notice of the initial determination of misapplication, stop all recovery efforts. Resume recovery efforts only after making the reconsideration determination.

It is not necessary to stop recovery efforts when further appeals — Hearing, Appeals Council, etc. — are requested.

When the payee objects to the determination (i.e., the notice sent per GN 00602.150D.1.d., and GN 00602.150D.2.a.) that they knowingly misapplied funds, obtain a Request For Reconsideration (Form SSA-561). Make a reconsideration determination using the same criteria as in GN 00602.150D.1. Consider any additional evidence/statements. Notify the payee of the determination using a Notice of Reconsideration (Form SSA-8457-CL).

NOTE: Send a copy of the SSA-561, SSA-8457-CL and information/documentation on any subsequent appeal, annotated with the payee's social security number, to the Office of Financial Policy and Operations, Office of Benefit Accounting and Systems Analysis, at the eFAX number shown in GN 00602.150D.2.a for processing.

E. References

  • •

    GN 00603.025 Dedicated Accounts for Disabled/Blind SSI recipients Under Age 18

  • •

    GN 00604.030 through GN 00604.035 Misuse

  • •

    GN 02403.001 Overview of Field Office Remittance Process

  • •

    SI 02101.010 Past-Due Benefits Payable- Individual Alive Under Age 18 with Representative Payee- Dedicated Account Required

  • •

    SI 02201.015 SSI Netting/Offsetting Overpayments Against Underpayments,

  • •

    SM 01311.300 Manual Overpayments- P TAC

To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0200602150
GN 00602.150 - Misapplication of Funds in a Dedicated Account - 09/18/2024
Batch run: 09/18/2024
Rev:09/18/2024