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How can we prevent losses on joint accounts that receive social security payments? When the social security recipient dies, the other joint owner removes the funds, leaving us to pay back the U.S. Treasury for benefits paid after the recipient’s death. We don’t freeze accounts until we receive a U.S. Treasury reclamation notice. – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

How can we prevent losses on joint accounts that receive social security payments? When the social security recipient dies, the other joint owner removes the funds, leaving us to pay back the U.S. Treasury for benefits paid after the recipient’s death. We don’t freeze accounts until we receive a U.S. Treasury reclamation notice.

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If possible, we recommend a policy of immediately freezing any social security payments attributable to a recipient who has died. It is important that your account agreements authorize your institution to freeze these amounts, and you have indicated that your account agreements do include this authority, under a provision authorizing you to deduct amounts owed to the U.S. Treasury without notice to the accountholder(s).

We also recommend consulting the U.S. Treasury regulations on federal ACH payments (12 CFR 210) and the Green Book (Chapter 5 covers reclamations). As stated in the Green Book, you do not have to wait for a Notice of Reclamation before returning post-death benefit payments (Chapter 5, page 5-9):

When an RDFI receives actual or constructive knowledge of the death, it does not have to wait for a Notice of Reclamation. The RDFI can immediately return all subsequent postdeath benefit payments to the Government Disbursing Office. The RDFI must also notify the sending agency of the recipient’s death. An ACH return using return reason code R15 or R14 constitutes proper notification to the Federal agency.