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

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