How are attorney fees charged or calculated in a Social Security disability case?
The most efficient and, thus the most common, method of collecting attorney fees in Social Security Disability Insurance Benefit (DIB) and Supplemental Security Income (SSI) cases is by use of a standard administrative fee agreement that complies with the Social Security Administration’s regulatory requirements.
“A fee agreement is a written statement, signed by the claimant and his/her appointed representative, specifying the fee the representative expects to charge and collect and the claimant expects to pay, for services the representative provides in pursuing the claimant’s benefit rights in proceedings before SSA. Although the fee agreement must be a written statement, there is no statutorily prescribed language. Therefore, representatives may craft their own fee agreements and decision makers must approve an agreement if the statutory conditions of the fee agreement provisions are met and no exceptions apply.” HALLEX I-1-2-11.
To qualify for the fee agreement process, the fee in the fee agreement must be limited to the lesser of 25 percent of the past-due benefits or $6,000. 42 U.S.C. § 406(a)(2)(A)(ii); HALLEX I-1-2-12(A)(3). In other words, the maximum fee under the fee agreement process is limited to the lower of two amounts: either 25 percent of the claimant’s (and any auxiliary beneficiaries) past-due benefits or $6,000. If a claimant’s past-due benefits exceed $24,000, the maximum fee is $6,000. If a claimant’s past-due benefits are below $24,000, then the maximum fee is equal to 25 percent of the past-due benefits and that sum will be less than $6,000.
The maximum fee available under the fee agreement process is set out in the Act at 42 U.S.C. § 406(a)(2), which provides:
(A) In the case of a claim of entitlement to past-due benefits under this subchapter, if—
(i) an agreement between the claimant and another person regarding any fee to be recovered by such person to compensate such person for services with respect to the claim is presented in writing to the Commissioner of Social Security prior to the time of the Commissioner’s determination regarding the claim,
(ii) the fee specified in the agreement does not exceed the lesser of—
(I) 25 percent of the total amount of such past-due benefits (as determined before any applicable reduction under section 1320a–6
(a) of this title), or
(II) $4,000, and
(iii) the determination is favorable to the claimant,
then the Commissioner of Social Security shall approve that agreement at the time of the favorable determination, and (subject to paragraph (3)) the fee specified in the agreement shall be the maximum fee. The Commissioner of Social Security may from time to time increase the dollar amount under clause (ii)(II) to the extent that the rate of increase in such amount, as determined over the period since January 1, 1991, does not at any time exceed the rate of increase in primary insurance amounts under section 415 (i) of this title since such date. The Commissioner of Social Security shall publish any such increased amount in the Federal Register.
Pursuant to the Act, the Commissioner of SSA raised the maximum fee from $4,000 to $5,300 on February 1, 2002, and to $6,000 on June 22, 2009. HALLEX I-1-2-12(A)(3).
The following requirements must also be satisfied before a decision maker can approve a fee agreement under the fee agreement process:
- The fee agreement must be filed with SSA prior to the issuance of a favorable decision. HALLEX I-1-2-12(A)(1); see also, 42 U.S.C. § 406(a)(2)(A)(i); HALLEX I-1-2-11.
- The claimant and representative must both sign the fee agreement. HALLEX I-1-2-12(A)(2).
- SSA must issue a decision favorable to the claimant. HALLEX I-1-2-12(A)(4); see also, 42 U.S.C. § 406(a)(2)(A)(iii); HALLEX I-1-2-11.
- And the claim must result in past-due benefits. HALLEX I-1-2-12(A)(5).
In some situations, such as where a claimant has had more than one attorney, the standard fee agreement process will be inapplicable and the attorney(s) will be required to submit a fee petition along with a record of all time spent working on the claim in order to be compensated. HALLEX I-1-2-12(B).