The agency will make payment to a representative payee—

(a) If payments are due to a minor under the age of 18; or

(b) If payments are due to an annuitant or survivor who is mentally incompetent or under other legal disability; or

(c) If payments are due to an annuitant when the annuitant is physically or mentally incapable of managing or directing the management of his or her benefit.

(a) Annuity payments will be made directly to the annuitant or survivor annuitant while a suitable representative payee is located, unless the agency determines that direct payment would cause substantial harm to the individual.

(b) Substantial harm exists if both of the following conditions exist:

(1) Direct payment of benefits can be expected to cause serious physical or mental injury to the individual; and

(2) The potential effect of the injury outweighs the effect of having no income to meet the basic needs of the individual.

(c) If the agency determines that direct payment of benefits would cause substantial harm to the annuitant, annuity payments may be deferred (in the case of initial entitlement to benefits) or suspended (in the case of existing entitlement to benefits) until such time as a representative payee is appointed.

(d) Annuity payments will commence or resume as soon as practicable and will include all retroactive payments due to be paid.

In determining whether to appoint a representative payee, the agency will consider the following information:

(a) Evidence of legal guardianship or other court determinations. Evidence of the appointment of a legal guardian or other person legally vested with the care of the individual or estate of an incompetent or a minor shall be a certified copy of the court's determination.

(b) Medical evidence. The agency will use medical evidence to help determine whether an annuitant is capable of managing or directing the management of benefit payments. For example, a statement by a physician or other licensed health practitioner, based upon his or her recent examination of the annuitant and his or her knowledge of the annuitant's present condition, will be used in the agency's determination, if it includes information concerning the nature of the annuitant's illness or disability, the annuitant's chances for recovery, and the opinion of the physician or other licensed health practitioner as to whether the annuitant is able to manage or direct the management of benefit payments.

(c) Other evidence. The agency may also require statements of relatives, friends, or other people in a position to know and observe the annuitant, which contain information helpful to the agency in deciding whether the annuitant is able to manage or direct the management of benefit payments.