Topic: Social Security Payments
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Is it true that supplemental security income (SSI) benefits are not prepaid and that payments received during the month of a beneficiary’s death are not subject to reclamation?
No, we believe that SSI benefit payments made within the month of death are subject to reclamation. The regulations governing reclamation of federal benefit payments require banks to return all federal benefit payments received after learning of a beneficiary’s death. Based on its internal operations manual, we think it may be possible that the Social…
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A customer’s account became overdrawn after she deposited a fraudulent check. Is our bank permitted to use her social security payments to bring her account current? The customer contacted a social security officer who said a bank may keep only half of a customer’s social security deposits to offset an overdrawn account.
Yes, we believe your bank may use all of the customer’s social security funds to bring her overdrawn account current. The Social Security Act prohibits social security benefit payments from being “subject to execution, levy, attachment, garnishment, or other legal process or to the operation of any bankruptcy or insolvency law.” However, federal courts have…
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If a customer dies, and the bank receives notice that the customer’s social security payments must be returned, can we place a hold on the funds to prevent their loss?
Yes, and we in fact 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. As stated in the U.S. Treasury’s Green Book, you are not required to wait for a Notice of Reclamation…
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We have a customer who is a beneficiary on a representative payee account. He wants to set up his own deposit account. Can we open an account for him even though we know that he is a beneficiary on a representative payee account, which indicates some level of mental incompetency?
In most cases, we would not recommend opening an individual checking account for the beneficiary of a representative payee account without a competent individual serving as guardian or pursuant to a power of attorney. The Social Security Administration will assign a representative payee to an individual who is “legally incompetent or mentally incompetent of managing…
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We have a mother who set up a representative payee account for her daughter (the beneficiary, who is an adult). The mother died earlier this year. One of the daughter’s sisters would like to close the account, and we believe that she has applied to become the replacement representative payee. What documentation should we obtain before closing the account?
We do not recommend closing the account until the sister provides a copy of a letter or other document from the Social Security Administration (SSA) appointing her as the new representative payee. When a representative payee dies, the SSA rules provide that it will “find a new payee or pay [the beneficiary] directly.” In either…
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We had a joint deposit account that received social security administration (SSA) payments, and the SSA recipient recently died. One SSA payment posted to the account after the recipient’s death, and we must return that payment to Social Security. The surviving joint owner closed the account after most of the account funds were withdrawn (the joint owner claims that the withdrawals were unauthorized, but we disagree). The surviving joint owner does hold an individual account at our institution. Can we reclaim the SSA payment from that account? We believe that the account agreement for the individual account provides us with a right of setoff for debts owed to us by the account owner.
Yes, we believe that you may exercise your contractual right of setoff in the funds held in the individual deposit account. The surviving joint accountholder agreed in your deposit account agreement that your bank could setoff account funds for debts. The surviving joint accountholder owes your bank a debt — the amount reclaimed by the…
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Can we exercise our right of setoff in a deposit account to offset a loan if the funds primarily or entirely are social security funds?
The Social Security Act prohibits the transfer or assignment of Social Security payments, and this prohibition applies to offsetting debts with Social Security payments. Consequently, a bank cannot offset a deposit account that contains only Social Security payments, with a narrow exception for overdraft and similar account fees. For example, a federal bankruptcy court in…
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A customer passed away on May 6. The bank received a Social Security payment for the month of April, while the customer was still alive. Can we accept the payment?
Yes, we believe the bank may accept the Social Security payment for the month of April. The Social Security Administration requires you to return the payment that is received for the month of death or any subsequent months. Because the customer passed away in May, we believe you can accept the payment for the month…
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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.
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…