Payee Representatives scramble to continue service
May 1, 2021 | View PDF
In the fall of 2019, representative payees in Alaska were involved in a controversy with the Social Security Administration over the legality of charging a certain fee for representative payee services.
A representative payee is a person or organization appointed by the Social Security Administration to receive the Social Security or Social Security Income (SSI) benefits for beneficiaries who can’t manage or direct the management of their benefits. Millions of Americans who receive monthly Social Security or SSI benefits need help managing their money and may need a representative payee.
According to the Social Security Administration, representative payee organizations can only operate as nonprofit entities charging $45 per month from SSI income per client. Alaska had been operating outside the law with representative payee organizations operating as for-profit organizations charging more than the $45 per month allotment from SSI income, despite consistent audits from the Social Security Administration over the years.
The issue of running as a for-profit organization wasn’t brought to light until federal officials from Washington D.C. and regional officials from Seattle conducted an official audit of all representative payee organizations in Alaska in 2019.
At the time, Alaska had around 15 representative payee services, each serving 15 to 20 clients, according to Vicki Jorgensen, owner of the now-closed Community Payee Services in Anchorage.
Jorgensen ran Community Payee Services as a for-profit business for over 20 years, and charged each of her 220 clients a flat rate of $85 per client per month to process all monthly income from SSI, Alaska Native Dividends, Senior Benefits, Public Assistance, wages and more. Jorgensen was confused by the abrupt shift in operations, as her business had been audited several times over her career and no issues were raised.
While it seems counterintuitive to charge clients for performing necessary, life sustaining activities, such as making sure rent is paid on time, the fees charged by the for-profit organizations were the only way to stay in business.
“They treated us like criminals,” said Jorgensen. “It was unbearable. We tried to be a good service, and I was a stable person in a lot of my clients’ lives. They knew their rent would be paid, that their groceries were taken care of, that they would have help with their PFD and taxes. We were very responsible with the PFD and tried tactics to space out an allowance over the year for clients.”
Switching to nonprofit status
The Social Security Administration offered to assist each for-profit business with the transition to nonprofit status. However, the “simple” switch is harder with the fine print.
It took almost a year for Michael Kelly, executive director of the nonprofit Kenai Peninsula Human Services Center (KPHSC), to get up and running per the Social Security Administration’s standards
for a representative payee organization.
Kelly had never operated as a representative payee organization before, so he had to work independently as a representative payee for free for five to 10 folks for about four months before applying to the Social Security Administration for recognized representative payee organizational status. On top of this, he also had to fulfill the nonprofit requirement by applying to the IRS for 501(c)3 status and recruiting a board of trustees.
“There are about 2,000 people in the state of Alaska that need a representative payee,” said Kelly, citing market research he conducted within the last few months. “When I heard that Alaska no longer had representative payee organizations, I dropped everything I was working on because I knew that this would be a critical need for the state.”
HOPE Community Resources, a nonprofit based in Anchorage, resumed offering representative payee services after the Social Security Administration closed down all the for-profit businesses in the state.
HOPE used to provide representative payee services as an organization several years ago, but stopped offering the service to allow clients more of a separation between their service provider, such as HOPE, and the organization that manages their money.
“We started offering representative payee services again with the idea of keeping people solvent and safe,” said Michele Girault, executive director of HOPE Community Resources. “The representative payee services we offer are an elective program. If a person wants to hire another financial services partner outside of HOPE, that’s alright. It doesn’t need to be for people that are already affiliated with HOPE either. This is for the community at large.”
How is nonprofit status sustainable?
The question at hand for past for-profit business owners like Jorgensen is, how is offering representative payee services as a nonprofit financially sustainable? In short, it isn’t.
“I work three jobs, including this one, to make ends meet,” confided Jorgensen. “I have 10 clients at this time, but I have at least three on my roll that, as it stands right now, I’m not sure if I’m going to collect the fee that the Social Security Administration lets me collect.”
Kelly’s projection comes from the knowledge that most SSI checks are around $700 per month, and most folks’ rent is about that much. Most clients are receiving state funds as well, but those aren’t usually over $400 monthly. After the need to support the client through groceries and other bills, there isn’t much left over for representative payees like Kelly to collect fees.
On the other hand, in order to become more profitable - which in nonprofit terms, means simply making ends meet - nonprofits need to amass a certain amount of clients to stay in business offering representative payee services.
When Jorgensen was doing research to decide whether or not switching her for-profit business to a nonprofit was practical, she reached out to nonprofits in the Lower 48 and discovered a sole nonprofit supporting 1,200 clients to help them make ends meet financially.
Cache Integrity Services based in Wasilla currently serves around 200 clients, whereas HOPE received around 70 clients from Jorgensen’s business after she was closed down.
Nonprofits such as HOPE maneuver the financial strain by charging additional fees for each type of financial service provided on top of SSI assistance in order to stay afloat. HOPE’s establishment as a nonprofit with other programs - and supportive income - also helps manage the potential strain of operating as a representative payee service charging only $45 per client per month for services.
What happened to the clients?
Aside from the financial strain and logistics with the Social Security Administration, those most-impacted by the change in operations were clients who were forced to switch from the representative payee they knew.
Of Jorgensen’s 220 clients at the time of the shutdown, 50 clients had a guardian step in as their new representative payee, 70 went to HOPE Community Resources, 18 went to Cache Integrity Services and two went to KPHSC. Thirty moved to direct pay status, where they currently receive their benefits monthly but do not have any assistance managing them.
Forty-five of Jorgensen’s clients were given court appointed conservatorships. A court appointed conservator is the next step up from a representative payee and is in charge of a client’s health and finances in addition to ensuring the client does not become homeless. Clients cannot file for a court appointed conservator themselves and instead must rely on their representative payee to do so for them, according to Jorgensen.
At the time of the shutdowns, the Social Security Administration estimated there were 1,000 people eligible for a representative payee in Alaska, meaning hundreds of eligible SSI beneficiaries are either receiving assistance from a trusted family member or guardian or have fallen through the cracks and are either still receiving their benefits and potentially mismanaging them or are no longer receiving their benefits at all because they were never given a court appointed conservator.
“I feel like the whole policy contributed to homelessness,” said Jorgensen. “I tried to explain to the Social Security Administration the logistics of Alaska, that rural villages are spread out and you can’t deposit checks right away in some places. They didn’t listen. It was cut and dry, baked into their statute. They didn’t care what happened to people.”
If you, a loved one or a community member you know is needing representative payee services, reach out to the following organizations:
HOPE Community Resources in Anchorage, Lisa Huntley 907-433-4948
Kenai Peninsula Human Services Center in Sterling, Michael Kelly at 901-444-0819
Cache Integrity Services in Wasilla, Tom McDuffie 907-631-2000
Note: Alaska is under a moratorium with the Social Security Administration that allows clients to work with a representative payee organization that is more than 70 miles away – help is still available even if you live in an isolated or underserved community that is outside of Anchorage, Sterling or Wasilla.