In most cases, Social Security is required to authorize the fee that a representative will charge. Once a fee has been authorized, payment of the representative’s fee is typically made by Social Security directly to the representative.
Fees Requiring Authorization
The first step is for a fee to be authorized. There are two fee authorization processes available:
- Fee Agreement Process
The fee agreement process uses a ‘fee agreement,’ which is essentially a contract between the disability claimant and their representative, specifying the amount of the fee. The disability claimant and their representative must sign this document, be filed before the date Social Security favorably decides the case, and cap the fee at the lesser of 25% or the regulatory cap (presently $6,000) of past due benefits. The regulations require that, for a fee to be authorized under this process, there must be past due benefits payable, meaning that Social Security’s decision on the claim must be at least partially favorable to the claimant.
- Fee Petition Process
The fee petition process uses a ‘fee petition,’ which is a written statement from the representative indicating the amount of the fee they would like to charge for services provided. The fee petition is submitted after the representative’s work on the case has been completed.
Payment of Authorized Fees
After the fee is authorized, Social Security will look at how the fee is to be paid. The Social Security Administration typically makes payment of the representative’s fee through their direct payment program. Under this program, Social Security withholds 25% of the past-due benefits payable to the disability beneficiary until the representative’s fee is authorized. Once authorized, Social Security releases the authorized fee, less a service charge of 6.3% up to $93, to the representative, returning any surplus funds to the claimant. The representative is not allowed to ask the claimant to pay the service charge.
Occasionally the regulations will prevent the direct payment of a representative’s fee, such as in cases where there is no past due benefits or the representative’s appointment was no longer in effect at the time of the favorable decision. In these instances, Social Security states that the issue of fee collection is “a matter between the representative and the claimant.”
Fees not requiring authorization
Below are examples of situations where Social Security does not authorize a representative’s fee.
Fee Payments Made by a Third-party Entity
The regulations do not require SSA’s authorization for a representative to collect a fee when the claimant and any auxiliary beneficiaries are free of direct or indirect liability to pay a fee or expenses. In these instances, a third-party entity (typically a government agency) pays the representative fee from its funds. The representative must indicate this arrangement on the Appointment of Representative form (SSA-1696-U4) that is submitted to Social Security.
Social Security’s regulations acknowledge that a representative may request reimbursement for out-of-pocket expenses incurred while working on a disability claimant’s case. Social Security’s stance is that these are not subject to their authorization; however, they retain the right to review these expenses if they appear unreasonable. Out-of-pocket expenses are generally the costs of obtaining doctor reports or medical records. Out-of-pocket expenses are invoiced to the beneficiary at the resolution of the claim, and it is their responsibility to pay the representative.