TN 17 (03-05)

GN 03940.005 Two-Tiered Fee Agreements

A. Policy - General

A claimant and his or her representative may submit a fee agreement that includes a provision limiting the agreement's application to services through a specific level of the administrative appeals process. Such an agreement would provide, in essence, for a two-tiered fee structure. The decision maker will be able to readily ascertain, at the time of the favorable decision, which tier of the fee structure applies, and will either approve or disapprove the fee agreement based on the current level of appeal.

  • The decision maker will approve such an agreement if, considering the tier that applies to the level at which the claim was first favorably decided, the agreement meets the statutory conditions for approval and none of the exceptions apply. (Refer to GN 03940.003 for fee agreement evaluation policy.)

  • The decision maker will disapprove the agreement if, considering the tier that applies to the level at which the claim was first favorably decided, the agreement does not meet the statutory conditions for approval (e.g., the agreement does not limit the fee to the statutory maximum indicated in GN 03940.003A.3.). Disapproval of the fee agreement notifies the claimant and the representative that SSA will not authorize a fee based on the fee agreement.

EXAMPLE: The claimant and representative submit a fee agreement that provides the following:

  • If SSA favorably decides the claim(s) at or below the first Administrative Law Judge (ALJ) hearing decision, the fee shall be the lesser of 25 percent of past-due benefits or the maximum specified dollar amount established by the Commissioner pursuant to section 206(a)(2)(A) of the Social Security Act (e.g., $5300, $6000).

  • If the claim progresses beyond that level of the administrative appeals process, the representative will request a fee through the fee petition process. (Another example of alternative language for the second clause is “If the claim progresses beyond the first hearing decision, the representative will request a fee of 25 percent of the claimant's past-due benefits.”)

If the applicable clause is the first clause, the requirement of § 206(a)(2)(A)(ii) of the Act is satisfied (i.e., the fee requested did not exceed the statutory maximum indicated in GN 03940.003A.3.), and the decision maker will approve the agreement if it meets all other conditions for approval and no exceptions apply.

If the second clause applies (e.g., the ALJ issues the first favorable decision following a remand by the Appeals Council (AC)), § 206(a)(2)(A)(ii) of the Act would not be satisfied and the ALJ will disapprove the fee agreement because the representative has not agreed to limit his or her fee to the statutory maximum indicated in GN 03940.003A.3.).

NOTE: If the representative's involvement begins after the initial hearing decision and the representative and claimant enter into an agreement that applies to administrative decisions made through the initial hearing decision, the SSA decision maker will disapprove the fee agreement.

B. Policy - Partially Favorable Decisions

When SSA issues a partially favorable decision and approves a two-tiered fee agreement that applies only to services through the level at which the claim was favorably adjudicated, SSA authorizes the representative's fee in effectuating the partially favorable decision. Generally, if the representative is eligible for direct payment and does not waive direct payment of his or her fee from the claimant's past-due benefits, SSA will process the representative's fee payment. (Refer to GN 03920.017, Payment of Representative’s Fee, and GN 03940.009, Payment of Representative’s Fee.)

If the claimant appeals the partially favorable decision, further action related to the fee agreement and the representative's fee for services will depend upon:

  • whether the representative pursues additional fees above the applicable maximum specified dollar amount of the fee cap indicated in GN 03940.003A.3. for his or her services,

  • whether the fee initially authorized was less than the applicable maximum specified dollar amount of the fee cap indicated in GN 03940.003A.3., and

  • the action SSA takes on the claim on appeal.

The following scenario illustrates a case involving both a subsequent decision (see GN 03940.004) and a two-tiered fee agreement. For the purposes of the discussion in GN 03940.005B.1. through GN 03940.005B.6., assume the following situation:

  • The fee agreement between the claimant and his or her representative is a two-tiered agreement that includes terms similar to the following:

    • If SSA favorably decides the claim at or below the first ALJ hearing level, the representative's fee will be the lesser of 25 percent of past-due benefits or the applicable maximum specified dollar amount established by the Commissioner pursuant to section 206(a)(2)(A) of the Social Security Act (e.g., $5300, $6000).

    • If SSA favorably decides the claim at the AC level, or at the ALJ hearing level after a remand by the AC or a Federal court, the representative will petition SSA for approval to charge a fee not in excess of 25 percent of all past-due benefits.

    • If SSA does not issue a favorable decision, no fee will be charged. With this provision, the representative agrees to represent the claimant on a contingency basis, i.e., the representative receives a fee only if SSA favorably decides the claim.

  • At the initial ALJ hearing level, an ALJ issues a partially favorable decision and approves the fee agreement.

  • The representative or claimant appeals the partially favorable decision or the AC reviews the decision on its own motion.

1. Fee Authorized Under the Approved Agreement Is the Maximum Specified Dollar Amount of the Fee Cap

If the representative wants to be able to charge more than the maximum specified dollar amount of the fee cap for any reason (e.g., because of the additional work anticipated on the appeal), he or she must file a request for administrative review of the fee amount within 15 days after he or she receives the award notice. The claimant or SSA decision maker may also ask SSA to decrease the fee amount. If no party requests administrative review timely, SSA will not review the fee authorization unless the requester establishes good cause for late filing.

If the representative requests administrative review, he or she should explain, for example: "If additional benefits are payable as a result of our appealing the ALJ's partially favorable decision, I intend to seek approval to charge a fee greater than the specified maximum dollar amount established by the Commissioner pursuant to section 206(a)(2)(A) of the Social Security Act. At the conclusion of the case, I will identify the amount I want to charge, the amount authorized before, the services performed for the claimant (and auxiliary beneficiary(ies) (if any)) and the time spent on each type of service."

If the representative files a timely request for administrative review:

  • He or she may accept the fee authorized under the approved agreement while recognizing that the amount he or she is authorized to charge and collect may change as a result of administrative review.

  • There is no statutory time limit within which SSA must act on the administrative review; therefore, SSA will delay action on the request until it completes its action on the appeal.

After SSA completes its action on the appeal, the component that takes the last administrative action will send the request for administrative review to the SSA official authorized to conduct the review. (See GN 03960.005, Responsibility for Conducting Administrative Review Under the Fee Agreement Process – Jurisdiction.)

The reviewing official will:

  • notify the representative where to send his or her statement of time and services to support the administrative review request, and

  • give the claimant and any other parties to the claim 15 days to comment on what the representative submitted to support his or her request for administrative review. (Refer to GN 03960.040C. for policy on reviewing the amount of the fee.)

2. Fee Initially Authorized Under the Approved Agreement Is Less Than Less Than the Maximum Specified Dollar Amount of the Fee Cap

It is not necessary for the representative to request administrative review when he or she receives the first award certificate if he or she only wishes to obtain a greater fee of up to the maximum specified dollar amount of the fee cap based on any additional past-due benefits. If, on appeal, the decision is more favorable to the claimant and additional past-due benefits result, SSA will issue an amended notice of award indicating a new fee amount.

If the representative then wants to charge more than the maximum specified dollar amount of the fee cap for any reason, the representative must file a request for administrative review of the amount of the fee within 15 days after he or she receives the amended notice. Also, the claimant or SSA decision maker may ask SSA to decrease the fee. (See GN 03960.005, Responsibility for Conducting Administrative Review Under the Fee Agreement Process - Jurisdiction.)

3. Appeals Council Vacates ALJ's Favorable Decision and Remands the Case

If the AC vacates the ALJ's favorable decision and remands the case, the ALJ's approval of the fee agreement and any authorization of fees under the agreement are vacated as well because there is no favorable decision. In the two-tiered fee agreement situation described above, the representative agreed to represent the claimant on a contingency basis if the claim went beyond the first ALJ level, with the fee premised on a percentage of past-due benefits, if successful, and nothing if unsuccessful.

a. Outcome on Remand Is Favorable

If the outcome on remand is favorable:

  • The ALJ who issues the decision should disapprove the fee agreement because the agreement does not limit the fee to the lesser of 25 percent of past-due benefits or the maximum specified dollar amount of the fee cap in remand situations.

  • If the representative wants to charge and collect a fee, he or she must submit a fee petition when his or her services have ended. This fee petition should include the services and time spent in conjunction with the first hearing.

b. Outcome on Remand Is Unfavorable

If the outcome on remand is unfavorable:

  • The representative has agreed, based on the contingency agreement he or she had with the claimant, not to charge the claimant a fee.

  • The ALJ who issues the decision will not act on the fee agreement or invite the representative to file a fee petition. If the representative files a fee petition, the ALJ will authorize $00.00 fee and explain why.

  • If the representative has not already refunded any fee paid directly to him or her from past-due benefits, the processing center will request the representative to do so.

4. Appeals Council Issues a Fully Favorable Decision

If the AC grants a request for review or reviews the hearing decision on its own motion and issues a fully favorable decision without vacating the favorable aspect of the ALJ decision, the fee agreement the ALJ approved remains in effect. If a party requested administrative review of the fee resulting from the ALJ's decision, or requests administrative review of the fee resulting from the AC's decision, refer to GN 03960.005, Responsibility for Conducting Administrative Review Under the Fee Agreement Process – Jurisdiction.

5. Appeals Council Upholds the ALJ's Decision and Remands for a New Determination on the Onset Date

If the AC grants the request for review, upholds and does not vacate the favorable aspect of the ALJ's decision, and remands the case to an ALJ for a new decision with regard to the unfavorably decided issues(s), the fee agreement (which the ALJ approved) remains in effect. If a party requested administrative review of the fee resulting from the ALJ's decision, or requests administrative review of the fee resulting from the AC's decision, refer to GN 03960.005, Responsibility for Conducting Administrative Review