What Are the Penalties for Misused Social Security or SSI funds?

Misusing Social Security or SSI funds involves recipients who are physically or psychologically unable to manage their finances allowing someone else to handle their SS/SSI payments. When these representative payees do not use SSI/SS payments in the best interest of the recipients, they may be charged with misuse of funds and incur SSD penalties.

What Does the Social Security Administration Expect From Representative Payees?

People assigned to manage SSI funds are mandated to maintain “continuing awareness” of a beneficiary’s condition and needs, using payments ONLY to address a beneficiary’s needs and notifying the SSA of changes to a beneficiary’s circumstances. The SSA considers the following as “essential needs” of an SSI/SSD recipient: food, clothing, utilities, shelter, medical/dental care and rehabilitation therapy expenses. Any remaining funds should be saved and/or invested in a trust.

SSD Penalties for Misusing Funds

If the Social Security Administration finds someone has misused a beneficiary’s SSD and/or SSI payments, that person will be forced to repay the total amount of misused funds. Other potential penalties include imprisonment (up to 10 years), a fine as high as $250,000 and civil penalties up to $5000 per SSD/SSI payment that was misused.

Before handing down SSD penalties to a representative payee, the SSA will determine if the misuse is a deliberate violation or a negligent violation. Since rules and regulations regarding how a representative payee is expected to manage a beneficiary’s funds are complicated, many representatives choose to consult with a SS disability representative before assuming management of someone else’s SSD/SSI funds.