Fees and Accounting Requirements for Individual and Organizational Representative Payees

Representative payees must carefully report all expenditures, and only sometimes can collect a fee for the services provided.

Sometime the Social Security Administration (SSA) determines that a disability recipient is unable to manage his or her payments. This can happen for a number of reasons, including evidence of drug or alcohol abuse, mental illness, or other mental disabilities. In these cases, the SSA will assign a representative payee (payee) to the recipient. The payee’s job is to receive the funds and make sure they are spent for the care and well-being of the recipient. To learn more, see our article about reasons why Social Security assigns payees to receive disability.

Types of Payees

A representative payee can be either an individual or an organization.

Individual payee

An individual payee is usually a family member, friend, or other interested party (for example, an attorney). If the SSA selects an individual payee for you, it will first conduct a careful investigate to make sure the person is the right choice. If your payee doesn't spend your money on your behalf only, he or she may face criminal charges, so the SSA is selective about who it chooses.

Organizational Payee

Although the SSA’s first choice is usually an individual payee, this is not always an option for recipients. If this is true for you and the SSA determines you cannot manage your own funds, it will select an organizational payee.

An organization payee can be a social service agency, institution (such as long-term mental health facility), non-profit organization, health care facility, or state or local government agency. Organizational payees usually serve multiple disability recipients.

To become an organizational payee, a representative from the organization must first file an application while undergoing a face-to face interview with the SSA. During the interview the SSA will discuss the following:

  • the relationship between the organization and the beneficiary
  • the organization’s qualifications
  • the duties the organization must perform on behalf of the beneficiary, and
  • the accounting requirements of the organization.

Once an organization is designated as a payee, it must undergo extensive training. Like individual payees, organizations will face criminal charges if they misuse a beneficiary’s funds.

Payee Reporting and Other Requirements

Both individual and organizational payees must file reports with the SSA detailing how payments were spent.

Individual payees. If an individual payee is selected to handle your funds, he or she must keep careful track of how your payments are spent. To encourage this, the SSA provides an “Income and Expense Worksheet” that details the month and year, the amount of money received, and payments made for food, shelter, clothing, recreation, and other miscellaneous costs. The totals from the worksheet are then entered into a form provided by the SSA (called Form 623) that is returned to the SSA. An individual representative payee must file this form every year. It can be done online or in-person. For more information on filing online, visit the SSA’s representative payee area on its website.

An individual payee must keep the funds in an account dedicated to the beneficiary. This means that the payee cannot “mingle” his or her money with the beneficiary’s. Also, the account cannot be held jointly with anyone—it must belong solely to the beneficiary (there is an exception for parent’s who receive benefits on behalf of their children).

Organizational payee. Reporting requirements for an organizational payee are more extensive than that for an individual payee. An organization must keep the following information for at least two years:

  • copies of cancelled checks
  • bank statements, and
  • receipts for payment of rent, utilities, and any other money paid on behalf of the beneficiary.

Also, if an organization keeps a collective account (one that contains the funds for more than one beneficiary in a single checking or savings account), the organization must:

  • put accounts in the beneficiaries' name (not the organization’s)
  • keep the account separate from the organization’s
  • give any earned interest to the beneficiary
  • keep clear and up-to-date records that show how much the beneficiary has in his or her account and how the funds are used, and
  • provide all financial records to the SSA when the SSA asks for them.

Like an individual payee, organizational payees must file annual reports that detail how funds were spent.

The SSA will also make on-site visits to organizational payees. During these visits, the SSA will:

  • review accounting records
  • discuss how a beneficiary’s needs are determined and how they are met, and
  • interview beneficiaries to see if they are satisfied with the organization’s services.

The SSA may suggest ways that an organization can improve its services, or if it suspects the organization is mishandling funds, may refer the matter to the Office of the Attorney General for an investigation and possible criminal charges.

Fees

Whether a payee is eligible for payment of a fee differs between individual and organizational payees.

Individual payees. Individual payees are usually not entitled to receive payment for managing the beneficiary’s money. However, there are exceptions to this, such as where the court has awarded a payee the right to collect a “guardian fee” and in other limited situations.

Organizational payees. Like individual payees, organizations generally cannot accept fees for their services. However, there are some exceptions to this. Organizational payees can apply to charge fees for services if the organization is:

  • a state or local government agency responsible for income maintenance, social services, health care, or other fiduciary duties, or
  • a not-for-profit organization that provides social services to the community (and the organization must be bonded and licensed).

Organizational payees must meet numerous other requirements and apply to the SSA for permission to collect a fee. The SSA regulates how much an organization can collect as a fee, which is usually 10% of the disability recipient's monthly disability check, up to certain maximums.

Drugs and Alcohol

If the SSA determines that a beneficiary has both a mental disability and suffers from drug or alcohol abuse, it will usually assign an organizational payee to manage the beneficiary’s funds. This is because organizations often specialize in assisting clients with these problems and can provide other social services to support their recovery (and can often charge a higher fee because of this).

For More Information

The SSA’s website contains extensive information about the requirements and duties of representative payees.

You can also learn more by reading the series of articles about representative payees on our website.

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