Jennifer Cronenberg, Senior Counsel, Director of Legal Information

In light of the recent good news regarding the representative fee cap increase, I wanted to take a moment to discuss fee agreements.

First, as a reminder, the fee cap increase is not yet in place. We expect an announcement in the Federal Registrar soon, with an effective date beginning in the fall. However, even though the increase is not yet effective, it is good practice to review your fee agreements and ensure that they are using the proper escalator language so that you can benefit from the increase as soon as it becomes effective.

Social Security does not require that representatives use a specific fee agreement or specific fee agreement language. They do provide their own fee agreement that representatives can choose to use, but use of this form is not required. They also provide some general guidance regarding the required and prohibited elements for fee agreements on their website. Importantly, there is no one way to structure a fee agreement as long as it meets the statutory conditions of the Act and is not otherwise excepted.

Generally, there are two types of fee agreements: standard and two-tiered. For the standard fee agreement, the representative and client are agreeing to representation for the client’s claim without limitation. The language on that agreement might look something like this:

The client, CLIENT NAME, retains REPRESENTATIVE NAME of ADDRESS to perform the services listed below. REPRESENTATIVE NAME agrees to perform them faithfully and with due diligence.

The services to be performed are to provide representation for CLIENT NAME in HIS/HER claim for Social Security disability benefits (SSDI), Supplemental Security Income benefits (SSI), or both.

REPRESENTATIVE NAME and CLIENT NAME understand that the Social Security Administration (SSA) must approve any fee REPRESENTATIVE NAME charges or collects for services provided in proceedings before the SSA.

CLIENT NAME and REPRESENTATIVE NAME agree that if SSA favorably decides the claim(s), the client will pay REPRESENTATIVE NAME a fee that does not exceed the lesser of 25 percent of any past-due benefits or the maximum dollar amount allowed under the Social Security Act Section 206(a)(2), or such higher amount set by the Commissioner of Social Security based on the date SSA authorizes the representative’s fee. This fee is based on the total of the primary and dependent retroactive awards.

In the event that the client does not become entitled to benefits, there will be no fee payable to the representative.

Here, there is no limit placed on the duration of the relationship as long as the claim is before the Social Security Administration, and the client has agreed to pay the standard 25% of past-due benefits or the statutory cap, whichever is less. If you do not intend to practice beyond the administrative levels, this is a perfectly acceptable fee agreement.

However, some firms know that they might take a claim all the way to federal court, in which case, they may seek allowable additional fees via fee petition. In that case, a two-tiered fee agreement can be utilized—an example looks like this:

I hereby employ REPRESENTATIVE NAME to represent me before the Social Security Administration in my Social Security Disability case, Supplemental Security Income (SSI) case, or both.

My representative and I understand that for a fee to be payable, the Social Security Administration (SSA) must approve any fee my representative charges or collects from me for services my representative provides in proceedings before SSA in connection with my claim(s) for benefits.

I agree that if SSA favorably decides my claim(s) at any stage through the first hearing before an Administrative Law Judge (ALJ), I will pay my representative a fee equal to the lesser of 25% of the past-due benefits resulting from my claim(s), or the dollar limit imposed under 42 U.S.C. § 406(a)(2)(A) at the time of the decision. If I receive both Social Security disability and SSI benefits, I understand that my total fee will not be more than 25% of all past-due benefits, or no more than the limit set by 42 U.S.C. § 406(a)(2)(A), if the limit applies.

If the first ALJ decision after the date of this agreement is a denial and my representative agrees to appeal and I win my case later, my representative will ask SSA to approve a fee no greater than 25% of all back benefits awarded in my case. If the Social Security Administration or Federal law raises or lowers the maximum amount to be charged by a representative, that amount will apply, including amounts which may be approved by an Administrative Law Judge. If this case goes to Federal District Court, the fee maximum does not apply. I understand that the Social Security Administration will hold out 25% of past-due Social Security Disability and/or SSI benefits and pay my attorneys for this work. No attorney/representative fee will be charged if we do not win.

You certainly also have the option of utilizing a standard fee agreement as a starting point, and then supplementing that agreement with a secondary agreement should you choose to take the case beyond the administrative levels. You might want to include a sentence in a standard agreement that indicates this will be your process—something like this would suffice:

I am hiring REPRESENTATIVE NAME to represent me on my Social Security case.

If I do NOT get money from Social Security, there will be NO fee.

If I DO get money from Social Security, the fee will be the lesser of ONE-QUARTER (25%) of the “back money” that I get, or the maximum dollar amount set as the cap by the Commissioner of the Social Security Administration. If the cap is increased by the Commissioner, as allowed by statute, the limit on the fee will be the new cap set by the Commissioner at the time of claim approval. “Back money” includes all money going to me and my family under regular Social Security and Supplemental Security Income.

In addition, if I win, I will pay my representatives back for the costs of getting medical records and copying my file.

As soon as I get any money from Social Security, I will let my representatives know and I will pay them their fee.

This contract covers only representation before the Social Security Administration. If I want to appeal my case to Federal Court, my lawyers and I will have to make a further contract concerning representative fees.

Your fee agreement can also include provisions on whether or not you will charge for administrative costs, how long you will retain the client’s file, and expectations for two-way communication. As the first example above does, you may also want to make clear that auxiliary benefits may also comprise a portion of your fee within the statutorily allowed limit.

Perhaps most importantly, your fee agreement’s escalator language needs to be clear. As we previously announced, the Commissioner has agreed to continue to raise the fee cap along with the annual COLA increases. This means that the fee cap amount is likely to change annually, and SSA will be closely checking fee agreements to make certain that the proper escalator language exists before they apply the current cap. Although there is no requirement to do so, we recommend removing the number figure from the fee agreement altogether, leaving in place only the escalator language indicating that you can charge up to the statutorily allowed limit. All three examples above include acceptable escalator clauses without listing a particular dollar amount.

Finally, if you work at a firm or organization where multiple representatives may represent the claimant at various stages of the claim’s life, in order to avoid a fee petition, all representatives must sign a “single fee agreement.” SSA defines this as “one agreement signed by all parties to the agreement. Therefore, if the claimant appoints a representative after submitting a fee agreement, the representative must sign onto the first agreement or the claimant and representative must submit an amended agreement signed by all.” Different firms have different practices for accomplishing this goal—some have all employed representatives sign the same fee agreement from the beginning, others simply take the original fee agreement that was signed with one representative and have any subsequent representative sign and date the same piece of paper (with the claimant re-signing and re-dating the same form each time a new representative signs on). While neither method is perfect, both have proven effective in getting fees properly paid to a firm without the need for a fee petition.

As discussed in the September issue of The Forum, we continue to await a final rule in SSA’s proposed “changes to the administrative rules for claimant representation and provisions for direct payment to entities” which we hope, once finalized, will provide clarity in how SSA can pay entities like law firms when more than one salaried employee works on a case. But, until then, please continue to utilize the everyone-signs-a-single-fee-agreement approach as detailed above.

We will continue to monitor all progress on the fee cap, signature requirements, and payments to entities and will immediately update you with any important changes. In the meantime, please enjoy the projected future fee cap increases below.