Effective Dates: 12/18/2024 - Present Previous | Next

TN 51 (12-24)

GN 03940.005 Two-Tiered Fee Agreements

A. General Information

The claimant and the representative may submit a fee agreement that includes a provision limiting the agreement's application to services through a specific level of the administrative review process (e.g., initial, reconsideration, hearing, and Appeals Council (AC) review). Such an agreement provides, in effect, a two-tiered fee structure. The fee agreement must allow the decision maker to readily ascertain, at the time of the favorable decision, which tier of the fee structure applies, and the decision maker will either approve or disapprove the fee agreement based on the level of review at the time of the decision.

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    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.

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    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 03940.003B.3.). If the decision maker disapproves the fee agreement, the representative must file a fee petition to charge and collect a fee for the services provided before us.

EXAMPLE: The claimant and representative submit a fee agreement that states:

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    If the Social Security Administration (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 dollar amount established by the Commissioner pursuant to section 206(a)(2)(A) of the Social Security Act (the Act).

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    If the claim progresses beyond the first ALJ hearing decision, the representative will request a fee of 25 percent of past-due benefits through the fee petition process.

If we favorably decide the claim at or below the first ALJ hearing decision, the requirement of § 206(a)(2)(A)(ii) of the Act is satisfied (i.e., the fee requested does not exceed the statutory maximum indicated in GN 03940.003B.3.), and the decision maker will approve the agreement if it meets all other conditions for approval and no exceptions apply.

If the ALJ issues the first favorable decision following a remand by the AC, the second tier of the fee agreement would apply and the ALJ will disapprove the fee agreement because the representative has not agreed to limit the fee to the statutory maximum indicated in GN 03940.003B.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 (i.e., it only applies at levels before the representative's involvement with the case), the decision maker will disapprove the fee agreement as the representative was not involved in the case at the time the fee agreement would have applied.

B. Partially Favorable Decisions

When we issue a partially favorable decision and approve a two-tiered fee agreement that applies only to services through the level at which the claim was favorably adjudicated, we authorize 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 the fee from the claimant's past-due benefits, we will directly pay the representative's fee payment to the representative. Likewise, if an eligible representative has validly assigned direct payment of the authorized fee to an eligible entity as described in GN 03920.021, we will process the fee payment to the entity. Refer to GN 03920.016, 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:

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    Whether the representative pursues additional fees above the applicable maximum specified dollar amount of the fee cap indicated in GN 03940.003B.3. for the representative's services,

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

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    The action we take 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:

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    The fee agreement between the claimant and the claimant's representative is a two-tiered agreement that includes the following terms:

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      If we favorably decide 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 Act.

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      If we favorably decide 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 file a petition with us for approval to charge a fee that does not exceed 25 percent of all past-due benefits.

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      If we do 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 will charge a fee only if we favorably decide the claim.

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

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    There is only one representative appointed on the claim(s).

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    The 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 charge more than the fee cap for any reason (e.g., because of the additional work anticipated on the appeal), the representative must file a request for administrative review of the fee amount within 15 days after the representative receives the award notice. The claimant may also request administrative review within 15 days of receiving the notice and ask us to decrease the fee amount. If no party timely requests administrative review, we will not review the fee authorization unless the requester establishes good cause for late filing.

If the representative requests administrative review, the representative should explain their reasoning. E.g., if the fee agreement contains the following terms: "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 previously authorized, the services performed for the claimant (and any auxiliary beneficiary) and the time spent on each type of service."

If the representative timely files a request for administrative review:

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    The representative may receive direct payment of the fee authorized under the approved agreement before a final decision is made on the request for administrative review.

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    We will delay action on the request until the appeal of the partially favorable decision is closed.

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

The reviewing official will:

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    Notify the representative where to send a statement of time and services to support the administrative review request, and

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    Give the claimant and any other parties to the claim 15 days to comment on the representative's submission in support of the request for administrative review. Refer to GN 03960.040C. for policy on reviewing the fee amount.

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    See GN 03960.010B.10., for an explanation of the limited circumstances when another individual may file the administrative review request on behalf of the claimant.

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

If, on appeal, the decision is more favorable to the claimant and additional past-due benefits result, we will issue an amended notice of award and fee authorization indicating a new fee amount. Therefore, the representative does not need to request administrative review 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 the representative 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 receiving the amended notice. Also, within 15 days of receiving notice of the fee amount the claimant or decision maker may ask us to decrease the fee. See GN 03960.005, Responsibility for Conducting Administrative Review Under the Fee Agreement Process - Jurisdiction.

3. AC Vacates the 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.

NOTE: If the AC remands the case but does not vacate the favorable portion of the hearing decision, an approved fee agreement remains in effect.

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, only if we favorably decide the claim.

a. ALJ's Decision on Remand Is Favorable

If the ALJ's decision on remand is favorable:

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    The ALJ who issues the decision must 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.

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    If the representative wants to charge and collect a fee, the representative, or in limited circumstances another individual (see GN 03930.020A) must submit a fee petition when the representative's services have ended. This fee petition should include the services and time spent in conjunction with the first hearing and any prior administrative proceedings related to the same claim during which the representative was appointed.

b. ALJ's Decision on Remand Is Unfavorable

If the ALJ's decision on remand is unfavorable:

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    The representative has agreed, based on the contingency agreement with the claimant, not to charge the claimant a fee.

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    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 does file a fee petition, the ALJ will explain why the fee was not authorized.

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    If the representative, or entity if direct payment was made to an entity, has not already refunded any fee paid directly to the representative or entity from past-due benefits, the processing center will request the representative or entity's point of contact (POC) do so (see GN 03920.051 and GN 03920.052).

4. The AC Issues a Fully Favorable Decision

If the AC issues a fully favorable decision without vacating the favorable aspect of the ALJ's decision, the fee agreement the ALJ approved may remain in effect unless the terms of the fee agreement limit its application to the hearing level or there is another change in pertinent circumstances (see GN 03940.004). Refer also to GN 03940.005B for more information on two-tiered fee agreements when there is a fully favorable AC decision. 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, to determine who has the responsibility to conduct the administrative review.

5. The AC Reverses the ALJ's Partially Favorable Decision and Issues an Unfavorable Decision

If the AC vacates and reverses the ALJ's partially favorable decision by issuing a wholly unfavorable decision, the ALJ's approval of the fee agreement is no longer in effect. This disapproval is necessary because one of the criteria for fee agreement approval (i.e., a favorable decision) is not met. Because the representative is representing the claimant on a contingency basis, with the fee premised on a percentage of past-due benefits only if successful, the representative is not entitled to a fee and the representative or entity if we made direct payment to the entity, must return any previously paid amount to us if the unfavorable decision becomes the final decision of the Commissioner. See GN 03920.051 and GN 03920.052 for instructions related to excess representative fee payments to an individual representative or an entity.

NOTE: If the representative did not represent the claimant on a contingency basis, the representative, or in limited circumstances another individual (see GN 03930.020A), must file a fee petition to obtain authorization to charge and collect any fee (including any amount we previously authorized and paid) for services provided at the administrative level.

 

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GN 03940.005 - Two-Tiered Fee Agreements - 12/18/2024
Batch run: 12/19/2024
Rev:12/18/2024