Attorney Fee Hazards at Social Security Administration

A colleague posted a question on an elder law listserv about being paid to represent a Supplemental Security Income (SSI) recipient who lost benefits due to assets in a special needs trust (SNT). The SSI program has a $2,000 asset limit and an SNT is designed to protect excess assets. The question was answered by a very knowing Social Security attorney named Avram Sacks. Avram, former editor of the CCH Social Security Law Reporter, and author of CCH Social Security Explained, has agreed to allow his comments to be posted in this blog. He states as follows:

An elder law attorney has a client who the Social Security Administration (SSA) believes has exceeded the asset limit due to the counting of the assets in an SNT. The client wants him to challenge the Administration’s decision. How can he get paid for his efforts? The Administration has a complicated fee approval mechanism, but can that be avoided?

It was suggested that the attorney could be paid by the SSI recipient’s mother because the trust may not permit the payment of attorney fees from the trust and SSA is not lawyer-friendly and its fee approval process is not quick, “especially in overpayment cases.” The unstated (and incorrect) implication is that if the attorney’s fee contract is with the mother, he can bypass the SSA altogether when charging a fee. That would be playing with fire. An attorney who does that may be writing himself or herself a ticket to jail. I kid you not.

An attorney may not bypass the SSA’s fee authorization process by charging the fee to a third party non-claimant for services in connection with a claim before the Commissioner of Social Security. An attorney who does charge a third party and fails to file a Form SSA-1696 to seek authorization of any fee exposes himself to a fine of $500 and a year in the slammer. See SSA §206(a) (42 USCA § 406(a)) for details.  How so? The text of SSA §206(a), states, in part:

The Commissioner of Social Security may, by rule and regulation, prescribe the maximum fees which may be charged for services performed in connection with any claim before the Commissioner of Social Security under this title, and any agreement in violation of such rules and regulations shall be void.

In other words, the Commissioner’s control over the transaction for services is not dependent on who pays the fee, but rather, on whether the representation is “in connection with a claim before the Commissioner of Social Security.”

Now, the attorney may argue that when representing a claimant on an overpayments case that he or she is not actually representing a claimant in connection with a claim before the Commissioner in that the claim has already been awarded; rather, he or she is merely representing the claimant on an ancillary matter, an overpayment. But, that overpayment is connected to an award based on a claim. An attorney who relies on this argument may go to jail if it is one that neither the Administration nor the courts accept.

Here is a scenario: The attorney charges an hourly rate, say $300 per hour, to handle the matter. The attorney files a request for reconsideration, attends a conference or two, then represents the client in a hearing. After 10 or more hours of work the attorney loses again. The client wants to appeal what the attorney now sees as a losing matter. The attorney advises against appeal, but the client insists. The attorney appeals and loses again. Now client wants to go to federal court, but the attorney says, “enough!”

The attorney asks for payment of the fee, which now is $3,000 to $4,000. The mother doesn’t want to pay more than $1500, and the attorney tries to collect. Meantime, the mother complains to the SSA debt collection people that she can’t pay both the attorney and the overpayment at the same time and the debt collection people ask, “What attorney?” So now, the SSA learns about the illegal agreement that the attorney had with the mother. Guess what happens next?

By the way, several things for an attorney to keep in mind:

1. The SSA’s representation authorization form has a specific check off box to mark if the fee is being paid by a “third party entity” or government agency. While the attorney might have thought that the mother would be a “third-party entity” that is NOT what the SSA has in mind. If the attorney reads further on, under the same paragraph for that check-off box, the attorney will learn that the check off box still applies in the case of a “third-party individual.” The attorney will still have to obtain authorization for any fee that the attorney charges.

2. The attorney should not label the fee contract as a “fee agreement.” Although the SSA uses the words “fee agreement” interchangeably in two separate contexts (POMS GN 03930.005, “Selection of the Fee Petition Process,” indeed, states that one should attach a “fee agreement” to the fee petition and then, in the next breath, states “Do not confuse the fee petition with the attached ‘fee agreement’ with the fee agreement described in POMS GN 03940.000 – Fee Authorization Under the Fee Agreement Process.”), colloquially, everyone understands a “fee agreement” to refer to situations that only involve the “fee agreement process.” The better practice is to identify all fee contracts in an SSA matter as just that – a “fee contract.” That way, no one will be confused.

3. The attorney can be assured of being paid by requiring the mother or anyone else who agrees to take responsibility for the fee to pay a retainer that goes into a client trust account. The retainer should be pegged to cover the maximum fee that SSA might authorize. The attorney will have to file a fee petition and can only take money out of the trust account to be paid if and when the SSA authorizes a fee. Anything in excess of what is authorized goes back to the person who paid the retainer.

4. Where there is a representative payee, the client AND the rep payee should sign a Form SSA-1696 and the fee contract along with whoever actually is liable for the fee. The contract may specify that only the third party is liable for the fee, but having the client sign it ensures that the SSA won’t ask any questions about what the client/claimant might want.

5. With regard to the underlying excess assets problem, according to SSA § 1631(b)(1)(B), there is a 10% limit on the amount of the SSI check that can be withheld to recover overpayment, AFTER the excess assets issue is cured. See POMS SI 02220.016 .

I have set forth some essentials on attorneys’ fees, as related to representation of claimants after initial approval. However, before undertaking such cases, the attorney should read SSA § 206 very carefully, along with the related regs and POMS provisions. “Social Security Disability Practice, by Thomas E. Bush, from James Publishing, also covers this topic very well.


Avram L. Sacks
Attorney at Law
Skokie, IL

A Bureaucratic Absurdity

From time to time, one hears the time to wait for a delivery or answer expressed in “business hours.” What? A nurse recently said, “You will receive the test results in 48 to 72 business hours.” Does this mean two to three days or six to nine days? The latter if one assumes that a “business day” is eight hours. What addle-brained bureaucrat came up with this?bureaucracy-park

If it is an attempt to be more precise, it is horribly misguided. Two to three business days from Thursday is crystal clear. It translates into Monday or Tuesday, unless Friday or Monday is a holiday. If expressed as “48 to 72 business hours,” does that mean two to three days if the business is open 24 hours a day, four to six days if the business is open 12 hours a day, or six to nine days if the business is open 9:00 a.m. to 5:00 p.m? Why don’t they express the waiting period in a measure of time that is precise and readily understandable, such as Jovian lunar months or mayfly generations?

In terms of sheer silliness, this rivals the pointless 67-page Pennsylvania regulation on real estate transfers described in “Pennsylvania Commonwealth Bureaucracy.” It’s the kind of false precision sprouted in the fever dream of a pencil-necked desk jockey that gives bureaucracy a bad name.

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200

©2016 John B. Payne, Attorney

Death of Student-Loan Co-Signer

hail-to-the-victorsStudent loans are a burdensome fact of life for Americans of all ages. Post-secondary education is viewed as necessary for a lucrative occupation, either initially for a high-school graduate deciding on a career or later in life for an experienced worker who finds his or her previous employment choices disappearing. Tragically, the loan bargain many thought would help them escape poverty turns out to plunge them deeper into debt and further foreclose a brighter financial future.

The premise is that achieving educational goals financed through loans will result in income high enough that the loan can easily be paid off and will support a better lifestyle throughout the student’s career. Unfortunately, the recession at the end of the Bush Administration doomed many college graduates to low-wage jobs and years of struggle under the yoke of college debt. Also, for-profit schools like ITT lured hopeful veterans, low-wage and “downsized” workers, and persons with disabilities into training programs for clerical, mechanical and paraprofessional jobs. The jobs that were touted as lucrative and plentiful in the schools’ promotional literature, proved to be neither for those who received their diplomas or certificates. Even more catastrophically, many of these schools, like ITT, have closed their doors on their students. This left those students with nothing but loan debt.

There is a further hazard for student-loan debtors that is largely unknown and generally not explained to loan applicants who have co-signers. The hazard is that the loan may become immediately payable in full if the co-signer declares bankruptcy or dies.

The debtor must report the bankruptcy or death of a co-signer to the creditor. Failure to do so may be a default on the loan.

There are four possible results of co-signer death:

1. There might be no effect. Not all student loans have an acceleration clause triggered by the death of a co-signer.

2. The creditor may hold off on acceleration as long as payments are made as agreed.

3. The creditor may give the debtor the opportunity to apply as a sole debtor, without a co-signer.

4. The creditor may treat the event as a default and demand immediate payment in full.

This last alternative would result in a financial meltdown that could devastate the student-loan debtor. The default in one student loan could trigger defaults in other loans. Despite the lack of any blame on the debtor’s behalf it could take decades for him or her to recover.

A student-loan debtor with a co-signer should review the loan agreements to determine what would happen if the co-signer declared bankruptcy or died. This is particularly urgent if the co-signer does not have substantial net worth or is in declining health.

The debtor should place a high priority on getting a co-signer released from the loan. This may be possible under the following conditions: A) the debtor must be an adult, B) the debtor must have steady employment with good income and good credit, C) at least 12 months have passed since the debtor graduated or received a certificate of completion from the educational institution, and D) the debtor must have promptly made all required payments on the debt for at least 12 months. Different loan servicing agents have different requirements and 12 months of regular payments would be the bare minimum. Procuring a release for the co-signer may be an ordeal, but the project must be begun or it will never be completed.

Unfortunately, a bill to eliminate automatic default on the bankruptcy or death of a co-signer, the Protecting Students From Automatic Default Act of 2014, died in the 113th Congress. The terrible burden of student loans on individual borrowers and society at large is an important issue in the 2016 presidential and congressional elections. Will the attention turn out to be political hot air, or will there be significant reform? Time will tell whether Congress will reverse decades of allowing rapacious financial institutions and for-profit schools to prey on hopeful students. In the meanwhile, student-loan debtors must examine their loan documents and make plans to deal with the pitfalls they find there. Crossing one’s fingers and hoping or praying for the best is not an adequate plan.

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200

©2016 John B. Payne, Attorney

Do Not Put Premium Gas in your Chevy Sonic

The American Automobile Association (AAA) recently studied gas-buying behavior of U.S. motorists, finding that more than 7% of us (16 million out of approximately 210 million) use premium gas when our cars don’t need it. It has been known for decades that putting premium gas (90+ octane) in cars designed for regular (87+ octane) has no effect on performance, gas mileage, or engine life. Buying premium for a car that doesn’t need it is a serious waste of money, but at the same time motorists save only a few cents per gallon when they do not buy Top Tier gas, which does affect all of the above measures.

It’s tough to be a consumer. From the 19th Century, when quacks sold 100-proof panaceas from medicine wagons, to today, when Big Pharma spends billions convincing us to tell our doctors what prescriptions we need, we have been lied to about everything from drain cleaners to laxatives; from infant formula to hospice services. However, there are two relatively constant rules to guide us: TANSTAAFL (There ain’t no such thing as a free lunch) and PIQ (Price indicates quality).

Merchants do not give away their products. In the Good Ol’ Days, bars offered free lunches to patrons. This was not altruism, but opportunism. Bars made their money selling alcoholic drinks; the lunches were a come-on. Casinos give free drinks to gamblers for the same reason.

There is a fairly close correlation between price and quality. As between two similar products, if Acme’s product sells for a higher price than Excelsior’s, the fact that many consumers see Acme’s product as of superior reliability, appearance, or value retention, indicates that the product probably is of objectively higher value.

The 2014 Chevrolet Sonic RS sedan joins the Sonic line-up in Spring 2014 at a starting MSRP of $19,705. The performance-inspired Sonic RS sedan (left) offers customers the same youthful styling and sporty performance packaging as the hatchback (right).

The 2014 Chevrolet Sonic RS sedan joins the Sonic line-up in Spring 2014 at a starting MSRP of $19,705. The performance-inspired Sonic RS sedan (left) offers customers the same youthful styling and sporty performance packaging as the hatchback (right).

These principles break down when it comes to gasoline grades. “Premium” gas is not better gas. It has a different application. “Regular” gas is as good as premium when used in a car designed to run on lower octane fuel. Part of the problem may be that higher-octane gas is called premium when it is not qualitatively better than regular. If the manufacturer does not specify a higher octane, there is no benefit to spending the extra money for premium, according to John Nielsen, AAA’s managing director of Automotive Engineering and Repair.

Filling up with premium instead of regular can be quite expensive. While the price differential used to be 10 – 15%, in some regions it can be close to 50%. When it comes to gasoline, ‘premium’ does not mean ‘better’ if your vehicle doesn’t require it,” continued Nielsen. “Drivers looking to upgrade to a higher quality fuel for their vehicle should save their money and select a TOP TIER™ gasoline, not a higher-octane one.” Erin Stepp, “U.S. Drivers Waste $2.1 Billion Annually on Premium Gasoline” (AAA NewsroomSeptember 20, 2016),”

Top Tier retailers include 76, Aloha Petroleum, Amoco, ARCO, Beacon, BP, Break Time, Cenex, Chevron, CITGO, Conoco, Co-op, Costco, CountryMark, Diamond Shamrock, Entec, Esso, Express, Exxon, Holiday, Kwik Star Stores, Kwik Trip, Mahalo, MFA, Mobil, Ohana Fuels, Petro-Canada, Phillips 66, PUMA, QT, Quik Trip, Road Ranger, Shamrock, Shell / Shell V-Power, Sinclair Standard, SuperAmerica, SuperFuels, Tempo, Texaco, Tri-Par, and Valero. Jeff Bartlett, “Study Shows Top Tier Gasoline Worth the Extra Price.”  The latest roster of Top Tier brands may be found on the Top Tier website.

It makes sense to pay a nickel a gallon more for Top Tier gasoline, which protects the engine better than a non-Top Tier product. However, paying a large price differential for premium for a car does not need it is a huge waste.

There is a caveat concerning Top Tier gasoline. According to the Top Tier website, the product is endorsed by eight major auto manufacturers as increasing engine life, gas mileage and performance. This may all be true, but the consumer never really knows.  They could also claim that Top Tier gas reduces the risk of stroke or heart disease and cures hypertension and an ordinary motorist could not prove them wrong.  Still, the relatively small price differential makes the risk that it is just a marketing gimmick acceptable.

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200

©2016 John B. Payne, Attorney

Second Amendment Blues

I’m on the south side of Chicago
And I’ve got guns on every side.
When I stroll Madison Street;
I am ready to duck, dive and hide.

LaPierre and the NRA Honkies
Say more guns will keep us unharmed.
I can draw down and shoot back.
So I’m safe as long as I’m armed.

But Tina got caught in a crossfire
When she was about to turn four.
The bullet that killed little André
Came through the apartment front door.

The white folks of Kansas and Utah
Vote by the NRA line.
Their gospel is the Second Amendment
And they think self defense is divine.

They fear having their firearms takenguns
If we elect the wrong party this year.
As if the government could make
four hundred million guns disappear.

They are not in the middle of a gang war.
So they prattle their God-given right.
It’s like their right to stay dry while
We’re outside all the rainy night.

Topeka is not Chicago.
Though we all have a right to be free.
The freedom to carry a gun
In a war zone does not comfort me.

It’s not that we don’t know better.
We want to live well just like you.
Help us stop the river of handguns.
All we need is a statute or two.

Children should not carry pistols
And felons have no right to pack heat.
Suppliers of guns should go down
When their guns cause death on the street.

We track all the transfers of cars.
You must have a license to drive.
With a little more control of our guns
We could keep more children alive.

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200

©2016 John B. Payne, Attorney

Medicaid and Long-Term Care Insurance Partnership

Qualifying for Medicaid for care in a nursing home can be an ordeal. First, there are strict asset limits – $2,000 for a single person and an amount between $23,844 and $119,220 for a couple, if one spouse is not in long-term care. Second, the gauntlet an applicant or the applicant’s representative must run can be grueling and hazardous because the Medicaid agency is likely to flyspeck the last five years’ financial transactions in relentless pursuit of gifts. Finally, much of the “information” about Medicaid qualifications offered to the public is false or misleading. Michigan recently initiated a program to allow Medicaid applicants keep more assets if they purchase certain long-term care insurance (LTCI) policies, but the Department of Health and Human Services totally screwed up what could otherwise be a good idea.

Here is how the Medicaid policy manual describes the program:

Long term care insurance partnership policies are health insurance and are not counmoneytable as assets. However, there are special asset rules for individuals who use long term care insurance partnership policies to pay for long term care.

At the initial eligibility determination there is an asset disregard (starting with countable assets first) equal to the amount that the long term care policy has paid to, or on the behalf of, the applicant. The asset disregard can increase at redetermination or case closure. The countable asset limit for Extended Care category remains the same. Assets of any type can receive the disregard. These disregarded assets are also disregarded (protected from) estate recovery.
BEM 400, at 45 (July 1, 2016).

A more-extensive explanation of the Partnership was published in December 2015. According to the “Partnership Program Notice,” a Partnership Program insurance policy must:

● Be issued to an individual after December 31, 2007;
● Cover an individual who was a resident of Michigan when coverage first becomes
effective under the insurance policy;
● Be tax-qualified under Section 7702(B)(b) of the Internal Revenue Code of 1986;Meet prescribed consumer protection standards, and
● Provide the following inflation protections:
• For ages 60 and younger – provide compound annual inflation protection,
• For ages 61 through 75 – provide some level of inflation protection,
• For ages 76 and older – inflation protection may be offered but is not required.

Furthermore, the Department warns that “changes to the insurance policy may disqualify you as eligible for the Partnership Program” policies, that the policies are generally not portable from state to state, and that changes in the law could eliminate the asset protection the policy affords with regard to Medicaid.

What we have here is a specialized LTCI product with a substancial cost that may become worthless if the purchaser tries to make a change in the terms of the policy or moves to a different state, or if they change the law. This is like selling expensive computers that become junk if the purchaser tries to make a change to the operating system, while the producer of the operating system is allowed to introduce upgrades that render current hardware obsolete. Wouldn’t that be ridiculous?

Assume that the potential Medicaid applicant purchases an LTCI Partnership policy, and does not move out of state or try to change the policy, and the State does not change the law. This type of insurance is still of extremely limited utility unless the consumer can afford a benefit level that covers the entire cost of long-term care.

Consider this statement, “At the initial eligibility determination there is an asset disregard (starting with countable assets first) equal to the amount that the long term care policy has paid to, or on the behalf of, the applicant.” What this means is that when the person applies for Medicaid, the increase in allowable assets is only for the amount the Partnership policy has already paid for the applicant’s care.

Consumers generally do not purchase LTCI for the full cost of nursing care. That would be too expensive. Nursing care is expected to cost $400 per day in a few years. LTCI with a daily benefit of $400 for any appreciable benefit period would be quite expensive. However, if Merle has such a policy and goes on-claim for two years, the benefits paid would be $292,000 and Merle could be eligible for Medicaid, keeping assets of $294,000.

Burl, in comparison, purchased an LTCI Partnership policy with a $200 per day benefit for two years. If he became a nursing-home resident at $400 per day, he would have to pay $12,167 monthly out of pocket in addition to the LTCI payments. He could not qualify for Medicaid until he had spent down to $2,000 plus the LTCI payments already made on his behalf. His policy would pay out approximately $146,000, but the increase in protected assets would only be $73,000.

Therefore, the purchaser must purchase an LTCI Partnership policy to cover the full expected cost of care for the benefit period. Any policy with a lower benefit level would be of dubious value.

The ink on Michigan’s Partnership Program is barely dry, but at least two LTCI companies are offering policies – Genworth and Mutual of Omaha. Michael McDonnell, at, provided a proposal that was represented to conform to the Michigan Partnership Program from each of those companies. Insurance of this kind should be considered in estate planning, but the value of a Partnership policy with regard to Medicaid asset preservation can only be gauged with the assistance of an attorney who is knowledgeable about Medicaid qualification.

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200

©2016 John B. Payne, Attorney

Long-Term Care Insurance – Smart Buy or Not?

In another blog, a man in his late 60s was complaining that long-term care insurance (LTCI) he bought at age 65 was costing him $3,600 per year. He bemoaned not buying it younger so it would cost less.

It would have cost less because he would have paid premiums longer. Very few find themselves in nursing homes before age 85 — less than 4%. That is a 96% chance that if you buy LTCI at age 65 you will pay on it for 20 years – assuming that you do not get priced out of the market in that time.

Some agents selling LTCI promise that there will be no “rate” increase. However, that does not mean that the premium cannot go up. The company is still free to increase the cost of insurance for a class of customers. Insurance companies intend to make a profit. The executives would rather tarred and feathered than absorb increased claims costs without commensurate premium increases.

As a result of the run-up in claims in the last decade, longstanding customers have been subjected to large hikes in the premiums they pay. Many octogenarian insureds have been faced with the choice of absorbing a 100% increase in premiums or accepting a 50% decrease in promised benefits. A 65-year-old LTCI customer may be able to afford the premiums initially, but there is no guarantee he or she will not lose the coverage due to increased cost at the age it would likely be needed.

If invested, $3,600 per year would grow to almost $90,000, even at a measly 2% rate of return. Granted, the same policy might only cost $2,160 per year if purchased at age 55, but by age 85 the total paid in would be the same.

Compare the LTCI market 20 years ago to today’s. Many insurers no longer carry LTC policies and those that are still in that market charge much higher premiums. Do you think that LTCI will not change over the next 20 years? Consider investing an amount equal to the LTCI premium regularly instead of buying LTCI. For examples and further discussion, see “FAQ – Long-Term Care Insurance” at

John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200

©2016 John B. Payne, Attorney