The Social Security Act allows a “qualified organization” to collect a monthly fee from a beneficiary for expenses incurred by the organization in providing services as a representative payee. 42 U.S.C. §§ 405(j)(4)(A)(i), 1383(a)(2)(D)(i). To become a fee-for-service (FFS) representative payee, the organization must apply for authorization to collect the fee, and the applicant organization must provide proof that it is qualified. 20 C.F.R. §§ 404.2040a(d), 416.640a(d).

A “qualified organization” is defined as either:

a State or local government agency whose mission is to carry out income maintenance, social service, or health care-related activities or who has fiduciary responsibilities, or

a community-based nonprofit social service organization that is tax exempt under section 501(c) of the Internal Revenue Code, with additional requirements, such as licensing and bonding or insurance coverage. 42 U.S.C. §§ 405(j)(4)(B), 1383(a)(2)(D)(ii); 20 C.F.R. §§ 404.2040a(a), 416.640a(a).

In addition, the organization must regularly provide representative payee services to at least five individuals and must not be a creditor of any beneficiary.^[1] Id; 20 C.F.R. §§ 404.2040a(b), 416.640a(b).

Neither NorthWest Senior and Disability Services (NWSDS) or Mid-Columbia Council of Governments (MCCOG) have non-profit status. The relevant issues are whether these applicant organizations are “State or local government” agencies with either an income maintenance, social service, or health care-related mission, or fiduciary responsibilities, and, thus, meet the definition of “qualified organization for purposes of applying to be fee-for-service organizational representative payees.”

QUESTION PRESENTED

Whether North West Senior and Disability Services (NWSDS) and Mid-Columbia Council of Governments (MCCOG) meet the definition of a “qualified organization” for purposes of applying to be fee-for-service organizational representative payees.

BRIEF ANSWER

Yes, these fee-for-service applicant payees are qualified organizations because each is a “State or local government” agency that has a social service and/or health-care related mission.

SUMMARY OF FACTS

NWSDS is an organizational representative payee providing payee services to approximately 17 beneficiaries. The organization does not have non-profit status under 26 U.S.C. § 501(c)(3). In August 2016, NWSDS inquired with SSA about seeking authorization to collect a fee for providing payee services. SSA received the application materials on December 1, 2016. On December 7, 2016, SSA denied the fee-for-service application. On December 19, 2016, NWSDS requested review of that denial.

MCCOG is an organizational representative payee providing payee services to approximately 14 beneficiaries. The organization does not have non-profit status under § 501(c)(3). On August 18, 2016, MCCOG applied for authorization to collect a fee for providing payee services. SSA has not yet taken any action on that application.

ANALYSIS

A. Relevant Federal Authority

The Social Security Act allows a “qualified organization” to collect a monthly fee from a beneficiary for expenses incurred by the organization in providing services as a representative payee. 42 U.S.C. §§ 405(j)(4)(A)(i), 1383(a)(2)(D)(i). To become a fee-for-service (FFS) representative payee, the organization must apply for authorization to collect the fee, and the applicant organization must provide proof that it is qualified. 20 C.F.R. §§ 404.2040a(d), 416.640a(d).

A “qualified organization” is defined as either (1) a State or local government agency whose mission is to carry out income maintenance, social service, or health care-related activities or who has fiduciary responsibilities, or (2) a community-based nonprofit social service organization that is tax exempt under section 501(c) of the Internal Revenue Code, with additional requirements, such as licensing and bonding or insurance coverage. 42 U.S.C. §§ 405(j)(4)(B), 1383(a)(2)(D)(ii); 20 C.F.R. §§ 404.2040a(a), 416.640a(a). In addition, the organization must regularly provide representative payee services to at least five individuals and must not be a creditor of any beneficiary.^[2] Id; 20 C.F.R. §§ 404.2040a(b), 416.640a(b).

In this case, as neither NWSDS or MCCOG have non-profit status, the relevant issues are whether these applicant organizations are “State or local government” agencies with either an income maintenance, social service, or health care-related mission, or fiduciary responsibilities, and, thus, meet the definition of “qualified organization.”

B. Relevant Oregon Statutes

Under Oregon law, a unit of local government^[3] may enter into a written agreement with any other unit(s) of local government for the performance of any or all functions and activities that a party to the agreement, its officers or agencies, have authority to perform. Oregon Revised Statutes (ORS) 190.010. The agreement may provide for the performance of a function or activity by an intergovernmental entity created by the agreement and governed by a board or commission appointed by, responsible to and acting on behalf of the units of local government that are parties to the agreement. ORS 190.010(5). The intergovernmental entity is then vested with all powers, rights and duties relating to those functions and activities that are vested by law in each separate party to the agreement, its officers and agencies. ORS 190.030(1). In other words, an intergovernmental entity created under ORS 190.010 (a 190 agreement) is an instrumentality of multiple units of local government.^[4]

In addition, the State of Oregon has declared that seniors and citizens with disabilities are entitled to enjoy their later years with maximum freedom and independence and has therefore created programs for those citizens. ORS 410.010. The Oregon Department of Human Services is the central state agency tasked with coordinating these programs. ORS 410.070. It assists area agencies in coordinating a system for the delivery of social services to persons with disabilities and to elderly persons. ORS 410.070(g, h). An “area agency” is a “type A or type B Area Agency on Aging within a planning and service area designated under Section 305 of the Older Americans Act.” ORS 410.040(2). NWSDS is designated by the State of Oregon as a “type B area agency.”^[5] MCCOG is designated by the State of Oregon as a “type A area agency.”^[6]

C. Application of Authority to NWSDS and MCCOG FFS Applications

The first issue is whether either of the applicant organizations qualifies as a “State or local government agency” for purposes of meeting the definition of a “qualified organization.”

NWSDS was created under an ORS 190 agreement that indicates the entity functions as an agency. The agreement reflects that it is an intergovernmental entity created by Clatsop, Marion, Polk, Tillamook, and Yamhill counties.^[7] Its Board of Directors consists of a commissioner from each county it serves.^[8] Because NWSDS is an organization vested with certain powers, rights, and duties of each of the individual counties, it qualifies as a “State or local government agency.”

MCCOG was created under an ORS 190 agreement that indicates the entity functions as an agency. The agreement reflects that it is an intergovernmental entity created by Wasco, Hood River, Sherman, Gilliam, and Wheeler counties.^[9] Its governing body includes representatives from each county, including a county commissioner and some city council members.^[10] Because MCCOG is an organization vested with certain powers, rights, and duties of each of the individual counties, it qualifies as a “State or local government agency.”

The next issue is whether the applicant organizations have a mission “to carry out income maintenance, social service, or health care-related activities” or have “fiduciary responsibilities.”

According to the ORS 190 agreement, NWSDS’s purpose is to develop a “comprehensive and coordinated system for the delivery of services to those elderly persons and people with disabilities in greatest economic or social need eligible for programs operated by the A[gency].”^[11] Thus, the purpose of the agency is tied to social services issues. According to its website, NWSDS’s mission is to “promote dignity, independence and health: honor choice & empower people.”^[12] NWSDS’s mission statement is also tied to social services and health care-related activities. In addition, the organization offers services including financial and medical assistance.^[13] Accordingly, NWSDS is a State or local government agency whose mission is to carry out social service and health-care related activities, per the definition of a “qualified organization.”^[14]

According to the ORS 190 agreement, MCCOG’s purpose is to provide a forum to identify needs, to obtain intergovernmental cooperation, and to assure the pooling of common resources for maximum efficiency and economy in governmental operations.^[15] According to its website, MCCOG’s mission is to “serve as a forum for intergovernmental cooperation and cost effectiveness by providing joint strategic planning for the provision of services; centralization of expertise which may not be affordable by individual member organizations; and the acquisition of revenue with which to fund programs and services as designated by its Board of Directors and the member governments which they represent.”^[16] Thus, neither MCCOG’s stated purpose nor mission necessarily fit within the confines of the definition of “qualified organization.”

However, as a “type A area agency,” MCCOG’s duties under Oregon law include “assess[ing] the needs of elderly persons within the planning and service delivery area for service for social and health services,” as well as to assure that such services are provided within the resources available. ORS 410.250. In that capacity, MCCOG’s goal is to “provide programs and services to maintain and enhance the quality of life to assure that basic needs are met for seniors, and people with disabilities.”^[17] Thus, MCCOG’s mission as a type A area agency is to carry out social service activities. Accordingly, MCCOG qualifies as a State or local government agency whose mission is to carry out social service activities, per the definition of “qualified organization.”^[18]

CONCLUSION

It is our opinion that applicant FFS organizations NWSDS and MCCOG are State or local government agencies whose mission is to carry out social service and/or health care-related activities. Assuming the applicant organizations also serve at least five beneficiaries and are not creditors, each meets the definition of a “qualified organization” under the Social Security Act.

Under the Act, the Agency may select a qualified organization to serve as a representative payee to receive benefits on behalf of a beneficiary.^[19] 42 U.S.C. §§ 405(j)(1)(A), 1383(a)(2)(A)(ii)(I). The Act also provides that a qualified organization may collect a monthly fee for providing representative payee services. 42 U.S.C. §§ 405(j)(4)(A)(i), 1383(a)(2)(D)(i). However, Agency regulations specify that an organization “must request in writing and receive an authorization from [the Agency] before it may collect a fee” for providing payee services to a beneficiary. 20 C.F.R. §§ 404.2040a(d)(1), 416.640a(d)(1) (emphasis in original).

The Oregon Money Management Program (OMMP) Agreement contains a clause (SSA fee clause or provision) that allows the representative payee to charge “the fee set by the Social Security Administration.”^[20] This provision appears to permit the State of Oregon to authorize a representative payee organization to collect a fee for providing representative payee services. However, only SSA can authorize a “qualified organization” to collect such a fee. Because the OMMP provision indicates the State of Oregon can authorize a Regional Sponsor/representative payee organization to collect a fee without requisite authorization from SSA, it violates Agency regulations and is, therefore, void and unenforceable.

QUESTIONS PRESENTED

You provided us with an Amended Intergovernmental Agreement (the Agreement) between the State of Oregon, acting through the Department of Human Services (DHS), and a Social Security Administration (SSA or Agency) representative payee organization pursuant to the Oregon Money Management Program (OMMP). You then asked for a legal opinion on the following issues:

A. Whether compensation paid from the State of Oregon to an SSA representative payee organization under the OMMP affects the payee’s ability to collect a fee from the beneficiary, and

B. Whether there are any other fee concerns with the Agreement.

BRIEF ANSWERS

A. Yes. Compensation paid by the State of Oregon to a representative payee organization under the OMMP Agreement likely affects the payee organization’s ability to collect a fee from the beneficiary because the monthly base rate appears to compensate the payee organization for the provision of representative payee services.

B. Yes. The provision in the Agreement indicating Oregon DHS authorizes a representative payee organization to charge “the fee set by the Social Security Administration” is void because it violates Agency regulations.

SUMMARY OF FACTS

The OMMP is a program sponsored by the State of Oregon that provides daily money management services assistance for seniors and people with disabilities (Consumers) who have difficulty budgeting, paying routine bills, and keeping track of financial matters and, therefore, are at risk of losing their independence. Through a network of volunteers and staff coordinators, who are trained and supervised by the “Regional Sponsor” to provide assistance with money management tasks, the program helps Consumers organize and keep track of their finances. In addition to providing money management assistance, volunteers provide the secondary service of “companionship and socialization.”

The Regional Sponsor enters into the Agreement with Oregon DHS. Under the Agreement, the Regional Sponsor administers and coordinates OMMP services in a region. Regional Sponsors perform approximately 40 services and activities in their respective service area. Chief among those services is the duty to provide “Payee services” to eligible Consumers enrolled in OMMP. “Payee service” is defined as:

an OMMP Money Management Program service delivered through a network of [Regional Sponsors] RS’s by Volunteers or Regional Coordinators. Representative Payee Service is offered to seniors and people with disabilities. Volunteers or coordinators provide one-on-one assistance to Consumers who do not have the capacity to manage their Federal benefits and other pensions.

The Agreement includes “Payment Provisions,” which explain the five types of payments Oregon DHS makes to the Regional Sponsor, including: (1) monthly base rate payments; (2) Consumer service incentive payments; (3) a one-time volunteer service incentive payment; (4) an additional rural region rate; and (5) new program add-on payments. For example, in the current Agreement, Oregon DHS agreed to pay the Regional Sponsor:

1. a monthly base rate of $3,000 per month;

2. a monthly Consumer service incentive payment based on the number of “new” Consumers receiving services each month (ranging from $500 to $3,000);

3. a one-time volunteer service incentive payment based on the number of volunteers that provide services (ranging from $2,000 to $10,000);

4. an additional rate of $2,000.00 per month to help cover additional costs that rural areas experience, including but not limited to, increased transportation costs; and

5. a new program add-on of $2,000.00 per month to cover the transition expenses, such as additional training, additional staff, purchase of computer programs, or additional insurance requirements.

The Agreement further requires the Regional Sponsor to provide its services free of charge for those with limited available income. However, for those with enough available income, the Agreement states the Regional Sponsor can charge “the fee set by the Social Security Administration.”

The Region X Center for Disability and Program Support (CDPS) is concerned about whether the compensation paid by Oregon DHS to a representative payee organization/Regional Sponsor under the payment provisions affects the representative payee organization’s ability to collect a fee from the beneficiary for providing representative payee services. CDPS is further requesting a review of the Agreement’s fee-related provisions.

ANALYSIS

A. The Compensation Paid by the State of Oregon to a Representative Payee Organization Under the OMMP Agreement Affects the Payee’s Ability to Collect a Fee From the Beneficiary

Under the Social Security Act (the Act), an authorized “qualified organization” can collect a monthly fee from a beneficiary for expenses incurred by the organization in providing services as a representative payee. 42 U.S.C. §§ 405(j)(4)(A)(i), 1383(a)(2)(D)(i). Fees for performing payee services must not “exceed the lesser of (I) 10 percent of the monthly benefit involved, or (II) $[41.00] per month.” Id. An authorized organization can collect a fee for providing representative payee services from another source so long as the total amount collected from both the beneficiary and the other source does not exceed the amount authorized by the Agency. 20 C.F.R. §§ 404.2040a(g)(7), 416.640a(g)(7).

In other words, where a representative payee is collecting at least $41.00 per month per beneficiary (or, if less, 10% of the monthly benefit amount) for its representative payee services from another source, that payee cannot also collect the fee from the beneficiary. Indeed, internal policy reiterates that a fee “cannot be collected from a beneficiary” if the organization is “receiving compensation…for performing any representative payee services for the individual from another source (that equals or exceeds the payee’s allowable fee).” POMS GN 00506.220(A). The payee can collect the fee from another source and from the beneficiary only if the total amount does not exceed the amount authorized by the Agency. Id. Agency policy recognizes that allowing the payee to collect the fee from another source is “favorable to the recipient since it will be less money being taken from his/her benefits.” Id. Thus, the law, regulations, and internal guidance establish that the limitation on fees for providing representative payee services is designed to preserve funds by restricting the amount of money a representative payee can collect from the beneficiary.

Against this backdrop, the relevant question is whether any of the compensation paid from Oregon DHS to the representative payee under the OMMP program is for providing representative payee services. After reviewing the Agreement, the monthly base rate payment appears to be, at least in part, compensation for representative payee services work.

According to the language of the Agreement, the initial six-month period of base payments is intended to allow sufficient time for the Regional Sponsor to plan and fully implement a regional money management program. Subsequent monthly base payments represent compensation for enrolling and providing money management services. As currently drafted, one of those money management services is “Payee services,” which is compensation for representative payee services work. In the current Agreement, the base rate payment is set at $3,000.00 per month.

Because the Regional Sponsor is providing “Payee services,” at least some portion of the $3,000 monthly base payment is compensation for representative payee services work. Such compensation could exceed the statutory limitation on fees that is currently set at $41.00 per month per beneficiary, making the collection of any fee from the beneficiary’s funds a potential violation of the Social Security Act, as well as regulations and Agency policy. 42 U.S.C. §§ 405(j)(4)(A)(i), 1383(a)(2)(D)(i); 20 C.F.R. §§ 404.2040a(g)(7), 416.640a(g)(7); POMS GN 00506.220.

However, it is important to note that neither the Social Security Act, the regulations, nor Agency policy restrict Oregon DHS from compensating representative payees. Rather, representative payees are simply restricted from collecting any fee from the individual beneficiaries that exceeds the statutory allowance of $41.00. The representative payee organization and/or Oregon DHS could clarify the issue by submitting documentation to the Agency specifying what portion of the monthly base rate is compensation for providing representative payee services. If the specified amount is less than $41.00 per month per beneficiary, then an Agency-authorized fee-for-service representative payee organization could collect some or the entire fee from the beneficiary, per regulatory and policy guidance.

B. The Agreement Provision Allowing the Collection of SSA Fees for Providing Payee Services is Void

Under the Act, the Agency may select a qualified organization to serve as a representative payee to receive benefits on behalf of a beneficiary. 42 U.S.C. §§ 405(j)(1)(A), 1383(a)(2)(A)(ii)(I). The Act also provides that a qualified organization may collect a monthly fee for providing representative payee services. 42 U.S.C. §§ 405(j)(4)(A)(i), 1383(a)(2)(D)(i). However, Agency regulations specify that an organization “must request in writing and receive an authorization from [the Agency] before it may collect a fee” for providing payee services to a beneficiary. 20 C.F.R. §§ 404.2040a(d)(1), 416.640a(d)(1) (emphasis in original).

The OMMP Agreement contains a clause (SSA fee clause or provision) that allows the representative payee to charge “the fee set by the Social Security Administration.” This provision appears to permit the State of Oregon to authorize a representative payee organization to collect a fee for providing representative payee services. However, only SSA can authorize a “qualified organization” to collect such a fee. 20 C.F.R. §§ 404.2040a(d)(1), 416.640a(d)(1) (“An organization must request in writing and receive an authorization from us before it may collect a fee.”) (emphasis added). Because the OMMP provision indicates the State of Oregon can authorize a Regional Sponsor/representative payee organization to collect a fee without requisite authorization from SSA, it violates Agency regulations and is, therefore, void and unenforceable. See, e.g., Resolution Trust Corp. v. Home Sav. of Am., 946 F.2d 93, 96 (8th Cir. 1991) (“In general, a contract entered in violation of federal statutory or regulatory law is unenforceable.”) (citation omitted); Compton v. Compton, 187 Or. App. 142, 146 (Or. Ct. App. 2003) (“An agreement is illegal if it is contrary to law, morality or public policy.”) (internal quotation marks and citation omitted).

We understand the State of Oregon is working on an updated Agreement and is agreeable to revising the current contract language to comply with Agency regulations. To that end, all future Agreements should omit the provision authorizing the representative payee to charge the fee set by SSA.

CONCLUSION

The compensation paid from the State of Oregon to representative payee organizations under the payments provisions of the OMMP Agreement is, at least in part, compensation for representative payee services under the monthly base rate category. Therefore, regulations restricting the amount of fees a representative payee can collect from a beneficiary’s funds for providing representative payee services apply. The payee organization is restricted from collecting monies from the beneficiary unless it can specify to the Agency that it receives less than $41.00 per month per individual for providing representative payee services.

The provision in the Agreement that allows the representative payee to charge “the fee set by the Social Security Administration” violates Agency regulations and is, therefore, void and unenforceable. Any future agreements between Oregon DHS and a representative payee should omit this provision.