AR 93-4(2) (Rescinded 4/14/2000)
EFFECTIVE DATE: 07/29/93
Whether continued benefits paid to claimants pursuant to section 2(e) of the Social Security Disability Benefits Reform Act of 1984 or section 223(g) of the Social Security Act (the Act) are "past-due benefits" within the meaning of section 206(b)(1) of the Act.
Sections 206(b)(1) and 223(g) of the Social Security Act (42 U.S.C. §§ 406(b)(1) and 423(g)); sections 2(d) and 2(e) of the Social Security Disability Benefits Reform Act of 1984, Pub. L. No. 98-460; 20 CFR 404.1703; 20 CFR 404.1728-1730; and section 5106 of Pub. L. No. 101-508.
Second (Connecticut, New York, Vermont)
Condon and Brodner v. Bowen, 853 F.2d 66 (2d Cir. 1988)
This Ruling applies to cases in which a court may allow an attorney's fee as a result of a civil action. It does not affect the way the Social Security Administration (SSA) adjudicates cases, but only affects how SSA calculates past-due benefits and disburses accumulated past-due benefits within the meaning of section 206(b)(1) of the Act.
Plaintiffs William Condon and Leatrice Brodner, who were found eligible for disability insurance benefits under title II of the Act since 1974 and 1972, respectively, were subsequently found no longer entitled to such benefits as of October 1982 and March 1983, respectively. After exhausting their administrative remedies, both plaintiffs sought judicial review in the United States District Court for the District of Connecticut of the decisions to terminate their benefits. While their cases were pending in the district court, the Social Security Disability Benefits Reform Act of 1984, Pub. L. No. 98-460 (1984 Disability Amendments) was enacted. Under the provisions of section 2(d) of the 1984 Disability Amendments, these cases were remanded by the court to the Secretary for further review under a medical improvement standard. Both plaintiffs elected to receive continued benefits pursuant to section 2(e) of the 1984 Disability Amendments.
Upon readjudication, the Secretary reinstated Condon's entitlement to benefits as of August 1982 and Brodner's entitlement to benefits as of June 1983. The Secretary then calculated the amounts of accumulated past-due benefits to which the plaintiffs were entitled. Prior to releasing the past-due benefits to the plaintiffs, the Secretary withheld 25 percent of the benefits pursuant to section 206 of the Act (42 U.S.C. 406) for the possible payment of attorney's fees.
The plaintiffs' attorney then filed petitions with the Social Security Administration pursuant to section 206(a) of the Act (42 U.S.C. 406(a)) seeking approval to charge and collect a fee for services performed in the administrative proceedings. The Secretary authorized a fee and certified direct payment to the attorney out of a portion of the withheld funds and released the balance of the withheld funds to the plaintiffs. Condon deposited the balance of his withheld funds in an escrow account with his attorney.
The plaintiffs' attorney subsequently filed motions in the district court pursuant to section 206(b)(1) of the Act (42 U.S.C. 406(b)(1)) seeking compensation for his services in proceedings before the court. Section 206(b)(1) permits a court, whenever it renders a judgment favorable to a claimant who was represented before the court by an attorney, to set a reasonable fee for attorney's services not in excess of 25 percent of the past-due benefits to which the claimant is entitled. The attorney's fee requests were based on his calculation of the total amount of all benefits payable or paid to the plaintiffs from the dates benefits stopped to the dates of reinstatement, including the continued benefits.
The Secretary filed briefs opposing the plaintiffs' motions for attorney's fees. The Secretary contended that continued benefits paid to claimants were not past-due benefits within the meaning of section 206(b)(1) and that the court could only award the attorney 25 percent of the accumulated past-due benefits.
A magistrate concluded that "interim benefits" (i.e., continued benefits) do constitute past-due benefits for the purpose of calculating attorney's fees, and awarded attorney fees based on both the accumulated past-due benefits and the "interim benefits." The district court adopted the magistrate's opinion. The funds held in escrow by Condon's attorney were released in payment of the fee for his representation of Condon in court. Brodner paid the attorney the fee that the district court awarded in full. The Secretary appealed the district court's decision to award attorney's fees to the United States Court of Appeals for the Second Circuit. The Second Circuit affirmed the decision of the district court.
The Second Circuit held that "interim benefits" (i.e., continued benefits) paid to Social Security claimants pursuant to section 2(e) of the 1984 Disability Amendments in accordance with section 223(g) of the Act should be included in the calculation of past- due benefits for the purpose of awarding attorney's fees under section 206(b) of the Act.
Because the language of the statute did not expressly state whether or not continued benefits are included in the definition of past-due benefits, the court looked to congressional intent to reach its conclusion. The court stated that "[i]n implementing section 206(b) of the Act, Congress was seeking to 'encourage effective legal representation of claimants' by assuring attorneys that they would receive adequate pay for representing Social Security claimants while at the same time prohibiting attorneys from charging claimants 'inordinately large fees.'" 853 F.2d at 70. The court further concluded that: (1) 25 percent of the continued benefits that attorneys could receive would not constitute the type of inordinately large fees that Congress intended to prohibit under section 206(b)(l) and, (2) the Secretary's reading of the statutes would undermine "the Act's purpose of encouraging attorneys to represent Social Security claimants."
In addition, the court specifically stated that it did not intend to transform SSA into "a collection agency for the Social Security bar." It noted that claimants can enter into their own private arrangements with their attorneys, i.e., by setting up escrow accounts for possible payment of attorney's fees, as Condon did in his action. Consequently, it should not be necessary for SSA to become involved in the collection of attorney's fees.
Under section 206 of the Act, the Secretary is authorized to withhold up to 25 percent of the total of title II past-due benefits to which a claimant is entitled for possible payment of attorney's fees. Although at the time of the court's decision section 206 did not expressly define past-due benefits, 20 CFR 404.1703 defines past-due benefits as the total amount of benefits payable under title II of the Act to all beneficiaries that has accumulated because of a favorable administrative or judicial determination or decision. When calculating past-due benefits, SSA does not consider continued benefits to be past-due benefits because: (1) they have already been paid and are not accumulated and payable, and (2) they result from legislation, not from an "administrative or judicial determination or decision."
Accordingly, when computing the 25 percent withholding amount from which attorney's fees can be paid, SSA considers only those benefits which are payable to the claimant. Contrary to SSA's interpretation of the term "past-due benefits," the court of appeals held that continued benefits paid to Social Security claimants are included in past-due benefits for the purpose of calculating attorney's fees under section 206(b).
Although Congress has since expressly excluded continued benefits from the calculation of "past-due benefits" for section 206(a) purposes, the legislative history is silent as to whether continued benefits are to be included in the amount of money available for court allowed attorney's fees for court services (section 206(b) cases). SSA believes its policy of not including continued benefits in the "past-due benefit" calculation for section 206(b) purposes addresses the overriding concern of Congress in enacting section 223(g), i.e., to provide claimants with "continuation of payments during appeal ... to ease the severe financial and emotional hardships that would otherwise be suffered." H.R. Rep. No. 98-618, 98th Cong., 2d Sess. 18, reprinted in 1984 U.S. Code Cong. & Ad. News 3038, 3055.
This Ruling applies to title II disability cases and the title II portion of concurrent title II and title XVI disability cases in which a fee petition is filed involving court services performed within the Second Circuit (Connecticut, New York or Vermont).
When a case involves: (l) a fee petition that has been filed in a federal court based on proceedings on the issue of continuing entitlement to disability insurance benefits and (2) a claimant who has received continued benefits pursuant to section 2(e) of the 1984 Disability Amendments or section 223(g) of the Act during any period considered in the court's decision, SSA will consider both accumulated benefits and continued benefits already paid to be "past-due benefits" within the meaning of section 206(b)(1) of the Act.
SSA will not withhold funds from continued benefits to pay an attorney's fee. SSA will pay the approved fee directly to the attorney from the accumulated past-due benefits held by the Secretary, subject to the maximum of 25 percent of the total past-due benefits amount (as defined by the court, i.e., past-due benefits include both accumulated benefits and continued benefits).
If the sum of accumulated past-due benefits which the Secretary certifies for direct payment and any funds held in trust or escrow by the attorney is less than the fee set by the court, SSA will advise the attorney to seek payment of the balance of the authorized fee directly from the claimant.
 These two cases were consolidated for the purpose of ruling on the motions for attorney's fees because they presented the same issue and the same attorney represented both plaintiffs.
 The benefits received by the plaintiff were authorized by section 2(e) of the 1984 Amendments. The characteristics of "interim" benefits under section 223(g) of the Social Security Act (42 U.S.C.423(g)) and benefits under section 2(e) of the 1984 Amendments are not distinguishable in any manner relevant to the issue of whether "interim" benefits are considered "past-due" benefits.
 Section 5106 of Pub. L. No. 101-508, the Omnibus Budget Reconciliation Act of 1990 states that for the purposes of section 206(a) of the Social Security Act the term "past-due benefits" excludes continued and interim benefits payable under sections 223(g) and (h), respectively, of the Act. Congress did not expressly exclude continued benefits from "past-due benefits" for purposes of calculating attorney fees under section 206(b) of the Act.