Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
For some older adults, it can become difficult to manage day-to-day tasks. One example is finances. It can take a lot of work to make sure everything remains organized, with funds coming in and going out in a proper manner. Of course, the elderly aren’t alone in this scenario; many other people, including some with certain disabilities, may struggle when it comes to managing their money. The good news is there’s a program that can provide people with the help they need as it relates to benefits from the Social Security Administration. There are more than 8 million people who use this vital assistance. What is a payee account? Let’s explore.
What Is a Representative Payee Account?
A representative payee bank account receives and stores money for a beneficiary of the Social Security Administration (SSA)—but it is not managed by that beneficiary. The Social Security Administration is a United States government agency that offers social programs that cover retirement, disability, survivors’ benefits, and more. It issues social security numbers.A representative payee bank account is typically a checking account and managed by a person or organization known as a “representative payee.” These payees are tasked with helping manage the beneficiary’s payments coming from either Social Security or Supplemental Security Income (SSI). SSI is a federal program that supplies older or disabled adults with funds who have very little or no income on their own. The representative payee manages the account to accept these payments and then subsequently uses that money to pay for the beneficiary’s needs. But that’s not all; the payee is also charged with keeping track of absolutely everything going into the account. In fact, the SSA may request a report of the account’s financial activities.
What Are the Rules?
The rules for being a representative payee are that you must follow required duties. They include the following:
Determine the beneficiary’s needs and use their benefits to meet those needs.
Save any benefits left after meeting those current needs in a checking account for their future needs.
Report any life changes or events that could affect the beneficiary’s eligibility for benefits or payment amount to the appropriate agency.
Keep records of all benefits received and how they were spent and/or saved.
Provide benefit information to Social Services or other agencies serving the beneficiary.
Help the beneficiary get medical treatment when needed.
Notify Social Security, Veterans Administration, or Railroad Retirement of any changes in the beneficiary's circumstances that would impact their benefits.
Complete mandatory annual accounting reports for Social Security, Veterans Administration, or Railroad Retirement.
Return any payments to which the beneficiary is not entitled.
At this point, you want to know how to open a representative payee bank account.When it comes to opening the account itself, any bank account that lists the beneficiary as the owner with the payee being listed as the financial agent will work. Payees can set these up at any bank and are encouraged to open checking accounts because they are more practical for the job. However, savings accounts are also allowed.
Who Manages the Account?
A representative payee manages the account, which can be a person or organization, and is appointed by the Social Security Administration. To apply for this position, you should contact a SSA office. You will be required to complete an application, form SSA-11 (which is a request to be selected as a payee), and documents to verify your identity. You will also be asked to provide your Social Security number. If you are applying as a representative of an organization (as opposed to an individual), you will have to provide the organization’s employee identification number (EIN). This is a unique nine-digit number assigned to a business for tax reporting purposes. Afterward, you’ll attend an in-person interview (unless you are exempted) to be approved. But it should be known that representative payees are not paid unless the SSA has approved it in writing. Individual payees are never compensated. Only certain types of organizations can collect a fee for representative payee services. To qualify to be paid, these organizations must be:
A community-based, nonprofit social service organization that is bonded and licensed in the same state where it serves as payee
A state or local government agency with responsibility for income maintenance, social service, health care, or fiduciary duties, and has regularly served as a representative payee for at least five beneficiaries.
To collect a fee, an entity cannot be a creditor of the beneficiary (some exceptions apply). ASSA-445 application must be entered to collect a fee and be authorized in writing by SSA to collect that fee.Recommended: Guide to Making Direct Deposits Into a Savings Account
What Power Does a Representative Payee Have?
A representative payee has the power to accept the beneficiary’s payments coming from either Social Security or Supplemental Security Income (SSI). They have the power to pay the beneficiary’s bills using those funds. This includes costs for food, shelter, utilities, and clothing, along with medical and dental care. Other approved costs include personal comfort items and other foreseeable needs.It’s also important to understand the powers a representative payee does not have, which include:
Signing legal documents (other than Social Security ones) on behalf of the beneficiary.
Having any legal authority over earned income, pensions, or any income from sources that are not Social Security or SSI.
Using the beneficiary's funds for the payee's personal expenses, or spending the money in a manner that would leave the beneficiary without needed items or services (like food, housing, medical care, etc). So don’t ever attempt to transfer fundsfrom the beneficiary’s bank to yours.
Placing a beneficiary's Social Security or SSI funds into the payee’s or someone else’s account.
Using a child beneficiary's "dedicated account" funds for basic living expenses. (This only applies to disabled or blind SSI beneficiaries who are under the age of 18.)
Keeping conserved funds once you stop your services as the representative payee.
Charging the beneficiary for services— unless authorized by the SSA. (See above for details on when payees can be compensated.).
The Takeaway
Millions of people who receive financial support from either Social Security or Supplemental Security Income are unable to manage this money on their own. This can be due to age or disabilities. They need a representative payee to help them, which is often an unpaid but important community service. Any bank account should suffice so long as the beneficiary receiving the income is listed as the account owner, while the payee is listed as the financial agent. So if you’re wondering: “Can a representative payee close an account?” The answer is no. The payee cannot do that without the account owner. Need help finding an account? If you’re looking for a new banking relationship, be sure to shop around. Lantern by SoFi can simplify your search; check out top savings accounts for 2023.
Frequently Asked Questions
Who owns the funds in a representative payee account?
What can a representative payee not do?
What disqualifies a person from being a payee?
Photo credit: iStock/Vadym Pastukh
LCBK0523011
About the Author
Chris Alexis
Chris Alexis has been putting pen to paper and fingertips to keyboard since his youth. He ultimately grew into an accomplished and award-winning writer who loves using the power of language to connect with audiences. He also strongly enjoys learning about who he is writing for so he can create something that will truly resonate with them. He has worked for a variety of companies, each of which have given him more experience and insight.
