I-1-2-12.Fee Agreements — Evaluation Policy

Last Update: 6/22/09 (Transmittal I-1-58)

A. Statutory Conditions for Approval

The following statutory conditions must be met for the representative to obtain the Social Security Administration's (SSA's) approval to charge and collect a fee under this process:

  1. The representative or the claimant files the agreement with SSA before the date we make a favorable decision on the claim.

    This condition is met if the representative or claimant files the agreement with SSA before the date SSA makes the first favorable decision the representative worked toward achieving.

  2. The representative and the claimant both signed the fee agreement.

    • Representatives may use stamped or photocopied signatures in lieu of their actual signatures on a fee agreement, and may submit a photocopy (or fax) of the original fee agreement. A fee agreement stamped only with a representative's firm's name is not acceptable.

    • If the representative's signature is illegible and the Administrative Law Judge (ALJ) or Administrative Appeals Judge (AAJ) has a question about the representative's identify, the ALJ/AAJ may contact the representative for clarification.

    • If, at the time the ALJ or AAJ is prepared to issue a favorable decision, he/she realizes that the claimant or representative failed to sign the agreement, the ALJ or AAJ must disapprove the agreement because both did not sign it.

    • SSA recognizes the appointment of individuals, not firms, corporations or other entities, as representatives.

      If a claimant attempts to appoint a firm or other entity, and a representative accepts the appointment on behalf of the firm (e.g., by signing an SSA-1696-U4 (Appointment of Representative) or a fee agreement that contains an appointment provision), SSA recognizes that representative in his/her individual capacity as the claimant's appointed representative.

      If the individual who signs the fee agreement, on behalf of the firm or corporation, is the appointed representative or if the claimant appoints one representative and submits a fee agreement signed by that individual and others in the same firm, the decision maker must approve the fee agreement if all other conditions for approval are met and none of the exceptions in B. below apply.

      If someone other than the appointed representative signs the fee agreement on behalf of the firm or corporation, the decision maker must disapprove the fee agreement because the appointed representative did not sign the fee agreement.

  3. The fee specified in the agreement does not exceed, whichever is less:

    • 25 percent of the claimant's past-due benefits

    • or

      • $4,000 if the fee agreement was approved before February 1, 2002.

      • $5,300 if the fee agreement was approved on or after February 1, 2002, but before June 22, 2009.

      • $6,000 if the fee agreement was approved on or after June 22, 2009.

    NOTE 1:

    Pub. L. 101-508 established a limit of $4,000 in the fee agreement process and also gave the Commissioner of Social Security the authority to increase the limit, from time to time, provided that an increase does not at any time exceed the rate of increase in the primary insurance amounts since January 1, 1991. On January 17, 2002, the Commissioner announced an increase in the limit to $5,300, applicable to fee agreements approved on and after February 1, 2002. On February 4, 2009, the Commissioner announced a further increase in the dollar limit to $6,000, applicable to fee agreements approved on or after June 22, 2009. The increased limit is effective based on the date the decision maker acts on the fee agreement, not on the date the fee agreement was signed or filed or the date of the determination/decision on the claim for benefits.

    NOTE 2:

    In concurrent claims, the 25 percent includes the combined past-due benefits of both titles, and the $6,000 figure is the combined maximum SSA will approve for both titles under the fee agreement process. SSA will approve the lesser of the two (i.e., 25 percent of the total past-due benefits or $6,000).

    NOTE 3:

    Agreements that specify a minimum fee do not meet the statutory conditions for approval under the fee agreement process.

    Example:

    An agreement specifies that the representative's fee will be 25 percent of past-due benefits or $6,000, whichever is less, except that if 25 percent of past-due benefits does not exceed $1,500, the representative's fee will be $1,500. This constitutes an agreement that the least the claimant will owe is $1,500. Such an agreement is not consistent with the statutory provisions for approval.

  4. Our decision is favorable to the claimant.

  5. The claim results in past-due benefits.

    NOTE:

    The decision maker's approval or disapproval of a fee agreement is limited to whether the agreement meets the statutory conditions and is not otherwise excepted. Approval of the agreement is contingent on whether the claim results in past-due benefits.

B. Exceptions

The agreement is excepted from the fee agreement process in the following situations:

  1. The claimant appointed more than one representative associated in a firm, partnership or legal corporation and all did not sign a single fee agreement.

    NOTE:

    This exception does not apply if the representative(s) who did not sign the fee agreement waived charging and collecting a fee.

  2. The claimant appointed representatives who are not members of a single firm, partnership or legal corporation.

    NOTE:

    This exception does not apply if the claimant and the appointed representative(s) from a single firm, partnership or legal corporation signed the fee agreement and any other appointed representative(s) waived charging and collecting a fee.

    Example:

    The claimant appointed attorneys Brown and Smith of the law firm Brown and Smith PC as her representatives. Subsequently, the claimant also appoints attorney Jones of the law firm Black and Jones PC. The claimant and attorneys Brown and Smith enter into a fee agreement that they submitted to SSA. Attorney Jones waived charging and collecting a fee. The decision maker in this situation would approve the fee agreement. However, if attorneys Brown and Jones had submitted the fee agreement and attorney Smith had waived charging and collecting a fee, the decision maker would have to disapprove the fee agreement because the representatives who signed the fee agreement were not members of a single firm, partnership or legal corporation.

  3. The claimant discharged a representative or a representative withdrew from the case before SSA favorably decided the claim.

    NOTE:

    If the claimant appointed another representative after discharging the former representative or after the former representative withdrew, this exception does not apply if the former representative waived charging and collecting a fee.

  4. The representative died before SSA issued the favorable decision.

    When the representative dies before SSA issues a favorable decision and the claimant or representative submitted an otherwise valid fee agreement, the decision maker will:

    • disapprove the fee agreement, and

    • notify the parties, including the deceased's estate, that the agreement is excepted from the fee agreement process, but that the estate of the deceased representative may request SSA's authorization to charge and collect a fee by filing a fee petition.

  5. A State court declared the claimant legally incompetent and the claimant's legal guardian did not sign the fee agreement.

    NOTE:

    If SSA determined that the claimant is mentally incapable of managing his/her funds or is in the process of evaluating the claimant's mental capability, the effectuating component will defer sending notice regarding the amount of the fee under the fee agreement until SSA has selected a representative payee.

C. Considerations Related to the Statutory Conditions for Approval and the Exceptions

1. Multiple Fee Agreements in File From Same Representative(s)

The decision maker will act on the most recently negotiated and signed fee agreement SSA received before the date of the favorable decision.

2. Agreement Provisions That Will Not Cause SSA to Disapprove a Fee Agreement

The decision maker will not disapprove a fee agreement solely because it contains a provision stating that:

  • The representative has the right to seek review of the amount that otherwise would be the maximum fee under § 206(a)(2)(A) of the Social Security Act.

  • The representative may request administrative review (under § 206(a)(3)(A) of the Social Security Act) of the amount of the fee if the past-due benefits do not exceed a certain amount.

  • The authorized fee does not include any out-of-pocket expenses (e.g., costs involved in obtaining copies of medical reports or state sales tax, etc).

  • A named third party will pay the representative a fee equal to the lesser of 25 percent of the past-due benefits or $6,000, and the claimant will have no financial liability for paying the authorized fee.

  • The representative will charge interest on the unpaid balance of the authorized fee.

  • The representative will share the authorized fee with another person who referred the case.

3. Provisions/Situations That Will Cause SSA to Disapprove a Fee Agreement

a. Fee Amount

The following are examples of agreement provisions that are inconsistent with the statutory condition that the fee specified in the agreement does not exceed the lesser of 25 percent of the past-due benefits or $6,000. SSA will disapprove a fee agreement containing a provision that:

  • The claimant will pay a minimum fee (e.g., the fee agreement calls for a fee equal to 25 percent of the past-due benefits or $6,000, or at least $1,500). (See example in I-1-2-12A.3. NOTE 3.)

  • If 25 percent of the past-due benefits exceeds $6,000, the representative will receive a fee of $6,000 and retains the right to petition for an additional fee.

NOTE:

Do not confuse "petition" with "request administrative review." Whereas a representative retains the right to request administrative review under the fee agreement process, he/she may not substitute the fee petition process for the fee agreement process after SSA issues a favorable decision.

b. Unappointed Representative

If a representative and claimant both signed the Form SSA-1696-U4 (or equivalent statement) and the fee agreement, and a person other than the appointed representative (e.g., a paralegal working under the supervision of the appointed representative), actually attended the hearing as the claimant's sole advocate, the decision maker will assume that that person is acting as a co-representative. If that person did not sign the fee agreement, the decision maker will disapprove the fee agreement. The decision maker will do this because the representative may not delegate to an unappointed assistant the authority to undertake tasks that require making significant decisions regarding the case, such as appearing as the claimant's advocate in a hearing before an ALJ. This task requires making decisions about presenting evidence, cross-examining witnesses, arguing facts and law, and appealing any adverse ruling. Whoever performs such tasks is, by definition, a representative, and must be appointed as such by the claimant. Only an individual whom the claimant has appointed, and whom SSA has accepted as the claimant's representative, has the authority to perform such tasks.

NOTE:

If the paralegal in the above scenario had signed the fee agreement, the ALJ approved the fee agreement and the claimant was entitled to past-due benefits, the paralegal would share the authorized fee (but not receive direct payment).

4. Factors Not to Consider

a. Representative's Hours and Services

The number of hours the representative spends on a claim and the representative's specific services are not conditions for approval of a fee agreement. Therefore, the ALJ or AAJ may not request this information when making the initial determination on the fee agreement.

b. Death of Claimant Before Decision Issued

If a represented claimant dies before the ALJ or AAJ completes action in the matter the claimant engaged the representative to handle, the ALJ or AAJ will presume, absent evidence to the contrary, that the representative's authority continues. Therefore, if a claimant or representative submitted a fee agreement before the claimant's death, and the ALJ or AAJ issues a favorable decision after the claimant's death, the ALJ or AAJ will approve the fee agreement, assuming it meets all statutory requirements for approval and is not otherwise excepted from the fee agreement process.

c. Death of Claimant or Representative After Decision Issued

When a claimant or representative submitted a valid fee agreement and either party dies after an ALJ or the Appeals Council issues a favorable decision, the decision maker will approve the fee agreement if he/she did not do so at the time of the favorable decision. The ALJ or AAJ will notify the parties, including the survivors or deceased's estate, of the fee agreement approval.

D. Actions for Which SSA Cannot Approve a Fee Agreement

Section 206(a)(2)(A) of the Social Security Act provides that the fee agreement process applies in a claim of entitlement to past-due benefits. Actions such as changes in workers' compensation offset and other similar actions are adjustments of benefit amounts to which entitlement has already been established. Consequently, the fee agreement process does not apply to this category of actions.