GN 03940.003: Fee Agreement Evaluation

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~~Effective Dates: 01/10/2017 - Present~~
Effective Dates: 11/06/2017 - Present
TN 15 (09-04)
GN 03940.003 Fee Agreement Evaluation
A. Policy – statutory conditions for approval
A fee agreement must meet the following five statutory conditions for the representative to obtain SSA's approval to charge and collect a fee under the fee agreement process.
* The claimant or representative filed the agreement with SSA before the date SSA made the first favorable decision the representative worked toward achieving. See GN 03940.001D., Fee Agreement Determination, and GN 03940.004C., Fee Agreement Submitted After First Favorable Decision.
NOTE 1: In concurrent Titles II and XVI claims, the date of the favorable decision under the first title is controlling for both titles (see GN 03940.001B.).
* The claimant or the claimant's legal guardian or representative payee, and the representative both signed the agreement.
* If the claimant is legally incompetent or under age 18, a court appointed representative or the person responsible for the claimant's care may sign the fee agreement (e.g., a mother may sign an application for Title XVI benefits, an appointment of representative form, and a fee agreement on behalf of her child). If SSA has determined that a claimant under age 18 will be his/her own payee (see GN 00502.070), the claimant may sign the fee agreement. Refer to GN 03940.003B.5. for guidance when a legally incompetent individual signs the 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 or the decision maker questions the representative's signature for any reason, the decision maker may contact the representative for clarification.
* If, at the time the decision maker is prepared to issue a favorable decision, he/she realizes that the claimant or representative failed to sign the agreement, the decision maker 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. See GN 03910.040B.3.
If the individual who signs the fee agreement, on behalf of the firm or corporation, is the appointed representative, the decision maker must approve the fee agreement if all other conditions for approval are met and none of the exceptions in GN 03940.003B. 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.
* The fee specified in the agreement does not exceed the lesser of 25 percent of the past-due benefits or:
* $4,000 if the fee agreement is approved before February 1, 2002.
* $5,300 if the fee agreement is approved on or after February 1, 2002.
* $6,000 if the fee agreement is approved on or after June 22, 2009.
NOTE 2: The specified dollar amount in the bullets above is established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act (the statute). This amount may be increased by the Commissioner of Social Security from time to time.
NOTE 3: The ceiling also applies to concurrent Titles II and XVI claims or post entitlement (PE) actions with a common issue. For example, in concurrent titles II and XVI disability claims, SSA will not approve an agreement that calls for a fee greater than 25 percent of the combined titles II and XVI past-due benefits amount or the specified dollar amount in the bullets above.
* SSA will accept language in a fee agreement that would apply if the Commissioner increases the limit after the date of the agreement. In the examples below, if the decision maker approves the fee agreement on or after the date the Commissioner increases the limit, and the agreement meets all conditions of the fee agreement process and no exceptions apply, SSA will authorize a fee of the lesser of 25 percent of past-due benefits or the increased cap limit:
EXAMPLE 3-1: If SSA favorably decides the claim, I will pay my representative a fee equal to the lesser of 25 percent of my past-due benefits or the dollar amount established pursuant to section 206(a)(2)(A) , which is currently [insert the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act], but may be increased from time to time by the Commissioner of Social Security.
EXAMPLE 3-2: If SSA favorably decides the claim, I will pay my representative a fee equal to the lesser of 25 percent of my past-due benefits or [insert the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act] or such higher amount as the Commissioner of Social Security may prescribe pursuant to section 206(a)(2)(A ) of the Social Security Act).
EXAMPLE 3-3 I will pay my representative a fee equal to 25 percent of any past-due benefits from my claim or, if less, the maximum dollar amount allowed pursuant to section 206(a)(2)(A) of the Social Security Act, based on the date SSA approves my fee agreement.
NOTE 4: Agreements that specify a minimum fee do not meet the statutory conditions for approval under the fee agreement process.
EXAMPLE 4: An agreement specifies that the representative's fee will be 25 percent of past-due benefits or [insert the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act], 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.
The language in example 4 is not consistent with the statutory provisions for approval because the controlling factor is the parties' agreement that the minimum fee will be $1,500.
NOTE 5:Agreements may state a lower maximum amount than the current limit.
EXAMPLE 5: An agreement specifies that the representative’s fee will be limited to $2500 or 15%, whichever is less.
* SSA's decision is fully or partially favorable to the claimant.
In some concurrent Titles II and XVI claims, SSA's decision may be favorable to the claimant under only one title. In such cases, the decision maker approves the fee agreement if all other factors are met.
* The claim or PE action results in past-due benefits.
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 (i.e., the approval is contingent on whether the claim results in past-due benefits).
In some concurrent Titles II and XVI claims, there may be past-due benefits under only one title. In such a case, the decision maker approves the fee agreement if all other factors are met.
B. Policy - exceptions to the fee agreement process
In certain situations, approval of a fee agreement is administratively unfeasible, either because it could lead to authorization of fees in excess of the statutory limit under the fee agreement process, or could otherwise cause inequity for the claimant or the representative. Therefore, SSA excepts or excludes an agreement from the fee agreement process (i.e., does not approve the fee agreement for purposes of authorizing a representative's fee) in the following situations:
* 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 1: This exception does not apply if the representative(s) who did not sign the fee agreement waived charging and collecting a fee. (GN 03920.020 discusses waiver requirements.)
NOTE 2: “Single fee agreement” is defined 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.
* The claimant appointed representatives who are not members of a single firm, partnership, or legal corporation.
* The claimant appointed representatives who are not members of a single firm, partnership, or legal corporation and not all representatives signed onto a single fee agreement.
NOTE 3: 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.
NOTE 3: This exception does not apply if the appointed representatives who have not signed onto the single fee agreement 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.
* The claimant discharged a representative, or a representative withdrew from the case, before SSA favorably decided the claim.
NOTE 4: This exception does not apply if the former representative waived charging and collecting a fee.
* 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.
* A State court declared the claimant legally incompetent and the claimant's legal guardian did not sign the fee agreement.
* Do not confuse legal incompetency with the issue of whether a claimant is mentally capable of managing his/her funds. SSA does not except a fee agreement solely because the claimant is mentally incapable of managing his/her funds and requires a representative payee, or because SSA is evaluating the claimant's mental capability.
* 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. (See GN 03940.037 and GN 03940.051 if mental capability is an issue.)
C. Policy – considerations related to the statutory conditions for approval and the exceptions
1. Multiple fee agreements in file from same representative
The decision maker will act on the last fee agreement SSA received before the date of the favorable decision.
2. Agreement provisions that will not cause SSA to disapprove a fee agreement
SSA will not disapprove a fee agreement solely because it contains one or more of the following statements:
* 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 Act.
* The representative may request administrative review under § 206(a)(3)(A) of the 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 paying state sales tax).
* A named third party will pay the representative a fee equal to the lesser of 25 percent of the past-due benefits or the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act (see GN 03940.003A. (3.), and the claimant will have no financial liability for paying the authorized fee. Refer to GN 03920.017, Payment of Representative's 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. Agreement 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 the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act (see GN 03940.003A. (3.). SSA will disapprove a fee agreement containing a provision stating 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 the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act, or at least $1,500). See the Example 4 in GN 03940.003A. (3).
* If 25 percent of the past-due benefits exceeds the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act, the representative will receive a fee equal to the specified dollar amount established pursuant to section 206(a)(2)(A)(ii)(II) of the Social Security Act and retain 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
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 Administrative Law Judge (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.
Therefore, 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 the person is acting as a co-representative and request that the claimant appoint that person to be his/her co-representative. If the fee agreement is not signed by that person, the decision maker will disapprove the fee agreement.
NOTE: If the claimant had submitted a written document appointing the paralegal in the above scenario to be his/her representative, the paralegal 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 SSA decision maker 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 SSA completes action in the matter the claimant engaged the representative to handle, SSA will presume, absent evidence to the contrary, that the representative's authority continues. (See GN 03910.060A. for information about when a representative's authority ends.) Therefore, if a claimant or representative submitted a fee agreement before the claimant's death, and SSA issues a favorable decision after the claimant's death, SSA will approve the fee agreement, assuming it meets all other statutory requirements for approval and is not otherwise excepted from the fee agreement process. Refer to GN 03940.008C. for notice requirements.
c. Death of claimant or representative after decision issued
When a claimant or representative submitted a valid fee agreement and either party dies after SSA issues a favorable decision, the decision maker will approve the fee agreement.
* If the claimant is deceased, the decision maker will notify the claimant's survivors or the representative of the claimant's estate of the fee agreement approval.
* If the representative is deceased, the decision maker will notify the executor or representative of the representative's estate of the fee agreement approval.
NOTE: SSA may issue the fee payment only to the executor or other person the State recognizes as the representative of the deceased representative's estate.
D. Policy – actions for which SSA can not approve a fee agreement
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.
If SSA receives a fee agreement in connection with processing one of these actions, the basis for the fee agreement disapproval is that the agreement was not filed before the date SSA made a decision in the claim that resulted in past-due benefits.

POMS Reference

GN 03940.003: Fee Agreement Evaluation