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Special Savings Accounts Can Help Child Welfare Agencies Conserve Social Security Benefits

BlogChild WelfareJan 16 2024

Child welfare advocates and the media are increasingly asking child welfare agencies to rethink a controversial approach to funding services for the children and families they serve, who are disproportionately children of color. Each year, an estimated 27,000 children in foster care, or about 5 percent of all children in care, receive Social Security (SS) benefits, and child welfare agencies are currently allowed to access the SS benefits of a child in their care to pay for the costs of foster care.

As researchers who study child welfare financing, we seek to elevate this complex and controversial topic and share background information to inform policymakers as they grapple with tough decisions. This blog describes current practice, explains arguments against it, and highlights recent federal guidance that encourages child welfare agencies to save a child’s SS funds on the child’s behalf, when possible.

Current practice

Children can receive SS benefits if they meet certain criteria, such as having a disability (Supplemental Security Income [SSI]) or losing a parent (Social Security survivors benefits).[1] The Social Security Administration (SSA) requires that a minor’s SS benefits be used in the child’s best interest, with the first priority given to a child’s current needs (e.g., food, shelter, clothing). When a child receives SS benefits, they have a “representative payee” who manages the money on their behalf. Usually, this is a parent or relative but the payee can also be an organization or government agency.

When a child enters foster care, the child welfare agency can apply to be appointed the representative payee. SSA guidance lists eight possible payees, ranked in order of preference, with child welfare agencies as seventh (after other categories such as parents, relatives, and family friends). In 2020, the SSA approved a child welfare agency as the representative payee for 81 percent of minor beneficiaries in foster care. Given limited funding, child welfare agencies utilize any allowable funding source to cover their costs, including SS funds. As representative payees, child welfare agencies use almost all SS funds to cover food, housing, and other current needs of children in foster care (amounting to approximately $165 million in State Fiscal Year 2020[2]), which is consistent with SSA’s requirements but leaves very little conserved on behalf of the child.

Child welfare agencies reported using approximately $165 million
of Supplemental Security Income, Social Security Disability Insurance, and Social Security Survivor’s benefits to offset their costs in SFY 2020. Agencies predominately use these dollars to offset the cost of foster care.

Arguments against the current practice

While it is legal for child welfare agencies to access the SS benefits of a child in foster care to pay for the costs of care, this practice is facing scrutiny by child welfare advocates and the media, who argue that funds should be saved for the child’s exit from foster care (e.g., through reunification with their family, aging out of care). Child welfare agencies have a legal responsibility to provide for a child’s needs while in foster care, regardless of whether a child is entitled to SS benefits. Therefore, advocates argue that the needs of children in foster care are already met through other available sources (e.g., state funds or federal funds, like Title IV-E) and that any SS benefits the child receives should only be used in situations where the child has a unique need beyond what the agency is typically expected to pay (for instance, nontraditional therapies not covered by insurance); otherwise, the SS benefits should be conserved for the child. In addition, advocates argue that by using SS benefits to cover foster care costs, child welfare agencies are essentially charging children for being in foster care when children are under no obligation to pay for foster care.

Opportunity to save funds for a child’s future use

In response to the recent attention garnered by this practice, the SSA and the Administration for Children and Families (ACF) issued guidance encouraging child welfare agencies to conserve funds on behalf of a child if the child’s current and foreseeable needs are met via other sources (e.g., federal foster care payments). Granted, conserving funds is not without challenges, including a resource limit of $2,000 tied to eligibility for SSI benefits. This means that, if an otherwise eligible beneficiary has or accrues resources (e.g., property, bank accounts, stocks) with a combined value of $2,000, they are no longer eligible for SSI benefits. However, there are options to overcome this issue, such as through Achieving a Better Life Experience (ABLE) Accounts. Specifically intended for individuals with disabilities, funds up to $100,000 saved in ABLE Accounts do not count against resource limits for SSI eligibility. In fiscal year 2019, almost half (48%) of SS beneficiaries in foster care had a clinically diagnosed disability. ABLE Accounts could be a viable option for these children—and especially the 45 percent of SS beneficiaries ages 14 and older with a diagnosed disability who aged out of foster care in 2019.

Youth aging out of care experience the transition to adulthood and are expected to reach financial independence at younger ages, and are less likely to be recipients of intergenerational wealth than their peers with no foster care experience. Asset-building programs can mitigate common risks faced by transition-aged youth due to their involvement with the child welfare system (e.g., homelessness and low incomes). Young people who have participated in asset-building programs, such as the Jim Casey Youth Opportunities Initiative, have used assets toward the purchase of a vehicle, housing deposits, or tuition; or as a financial safety net in times of unforeseen hardship. While not a specific asset-building program, conserving SS benefits could have similar impacts on a young person’s life and well-being, especially when combined with financial literacy programs.

Utilizing ABLE Accounts can provide children with disabilities—in particular, transition-aged youth—with cash assets that can set them up for success. Given that SS beneficiaries ages 14 and older with a diagnosed disability are more likely than their peers in foster care to age out of care, the use of ABLE Accounts or similar programs can be a valuable tool to support young people as they enter adulthood. While the guidance from SSA and ACF does not address all aspects of this ongoing controversy, it clearly encourages child welfare agencies to reexamine their practices to better support youth who have experienced foster care.

Learn more about child welfare financing work at Child Trends

Child welfare financing is complex, and states and communities often report that they lack adequate funding to provide all the services and supports that children, youth, and families need. Understanding how different funding sources are leveraged, how those sources change over time, and how funding influences the experiences of children and youth is important for making decisions. For those interested in learning more about how child welfare services are funded—including supports for young people transitioning from foster care and state-level variation in the use of federal funds—we suggest our comprehensive suite of child welfare financing resources.


[1] Unless specified otherwise, all references to “SS benefits” include both Supplemental Security Income and Social Security Survivors Benefits.

[2] This is an unpublished figure from Child Trends’ SFY 2020 Child Welfare Financing Survey.

Suggested citation

Rosinsky, K., & Williams, S. C. (2024). Special savings accounts can help child welfare agencies conserve Social Security benefits. Child Trends. DOI: 10.56417/3273n7429a