I-1-2-9.Direct Payment of Fees to Representatives

Last Update: 2/25/05 (Transmittal I-1-48)

A. Definitions

1. Direct Payment

Direct payment means SSA's payment of all or part of an authorized fee directly to the representative. SSA makes this payment from benefits SSA withholds from past-due benefits.

2. Representative Eligible to Receive Direct Fee Payment

A representative who is eligible to receive direct payment of the fee is either:

  • an attorney, or

  • a non-attorney whom SSA has determined meets the prerequisites for participation in the demonstration project that extends fee withholding procedures to non-attorney representatives.

3. Representative Ineligible for Direct Payment

A representative ineligible for direct fee payment is:

  • a non-attorney whom SSA has not determined is eligible for direct fee payment. A non-attorney may be ineligible for direct fee payment because he or she has not applied to be included in the demonstration project on direct pay, because SSA has determined that the non-attorney did not meet the prerequisites for participation in the demonstration project, or because the non-attorney fails to maintain his or her eligibility after being included in the demonstration project; or

  • a representative who has withdrawn or been discharged from representing a claimant.

B. Direct Payment to Representatives -Title II Cases

The Social Security Administration (SSA) withholds (up to) 25 percent of a claimant's and the claimant's otherwise unrepresented affected auxiliary's (ies') title II past- due benefits , for possible direct payment of all or part of a representative's fee for administrative and court proceedings, unless the representative eligible to receive direct fee payment has waived direct payment or waived the fee.. (For rationale for withholding from auxiliary beneficiaries see Social Security Ruling SSR 68-61c).

NOTE:

Section 303 of the Social Security Protection Act of 2004 (SSPA) (Public Law 108-203) expanded the direct payment provisions by authorizing a five-year demonstration project to allow non-attorneys who represent claimants before the Commissioner of Social Security (the Commissioner) under title II and title XVI, the option of fee withholding and direct payment. The demonstration project is effective for direct payment to eligible non-attorneys of fees for representation in claims for benefits in which the agreement for representation is entered into on or after the date on which the Commissioner submitted notice to Congress of completion of the actions necessary to fully implement this project. The Commissioner sent notice to Congress on February 28, 2005. Therefore, on and after, but not before, February 28, 2005, SSA withholds title II past-due benefits for direct payment of a fee for administrative proceedings to a non-attorney representative whom SSA has determined is eligible for direct payment.

SSA must make direct payment of an authorized fee (to the extent possible based on the available past-due benefits to a non-attorney representative if:

  • the representative and the claimant have entered into an appointment of representative or supplemental appointment of representative on or after February 28, 2005;

  • SSA has determined that the non-attorney is eligible to receive direct payment of fees and not determined that the non-attorney's eligibility for direct payment is no longer in effect; and

  • the representative has not waived the fee or direct payment of the fee.

An appointment of representative filed on or after February 28, 2005, satisfies the SSPA requirement that the claimant and the representative enter into the agreement for representation after SSA implements section 303.

SSA currently does not have the systems capability to propagate the status of a non-attorney's direct payment eligibility; therefore, SSA strongly encourages eligible non-attorneys to identify themselves to SSA in each case in which they wish to receive direct payment of fees. Non-attorneys who are eligible for direct payment identify themselves by filing Forms SSA-1696-U4 (Appointment of Representative) or equivalent written statements.

The following notification guidelines apply when a claimant is represented by a non-attorney who is eligible for direct payment.

  • If the claimant and representative signed and submitted an appointment of representative on Form SSA-1696 or comparable statement before February 28, 2005, the SSPA requires that the claimant and the non-attorney representative sign and submit to SSA another appointment of representative to establish an agreement for representation on or after that date.

  • If the claimant and representative signed and submitted an appointment of representative on Form SSA-1696 or equivalent written statement on or after February 28, 2005, but before SSA determines that the non-attorney representative is eligible to participate in the direct payment demonstration project, SSA requests that the representative submit a supplemental SSA-1696, on each case on which he or she wishes to receive direct payment, to advise SSA of the change in his/her direct payment status. If the claimant signed an appointment of representative on or after February 28, 2005, it is not necessary for the claimant to sign the supplemental appointment statement the non-attorney submits to notify SSA of his/her status change.

1. Fee Agreement Cases

The amount that SSA will certify for direct payment to a representative is the amount authorized as a result of the approved fee agreement, less:

  • the assessment imposed to cover administrative costs (see 3. below), and

  • any funds the claimant put into a trust or escrow account the representative established (see I-1-2-8).

2. Fee Petition Cases

In fee petition cases, the amount that SSA will certify for direct payment to a representative is the lesser of the authorized fee or 25 percent of the claimant's and auxiliary's(ies') past-due benefits, if any, less:

  • the assessment imposed to cover administrative costs (see 3. below), and

  • any funds the claimant put into a trust or escrow account the representative established.

3. Assessment on Representatives

Sections 206(d) and 1631(d)(2) of the Social Security Act require SSA to charge an assessment (or “user fee”) not to exceed 6.3 percent of the amount SSA certifies for direct payment to a representative, to recover SSA's full cost for determining and certifying representative fees. SSA sets the assessment rate based upon the cost it incurs to determine and certify fees. The Commissioner may collect the assessment imposed on the representative by withholding it from the amount of the fee to be certified for payment to the representative from a claimant's past-due benefits. This provision applies to fees SSA directly pays from title II and/or title XVI past-due benefits under both the fee agreement and fee petition processes, and to court-awarded fees that SSA directly pays from title II and /or title XVI past-due benefits.

Effective February 1, 2000, legislation set the assessment rate at 6.3 percent. The assessment rate remained at 6.3 percent through August 31, 2004. Section 302 of the SSPA amended section 206(d)(2)(A) of the Social Security Act by:

  • capping the assessment at $75 or 6.3% of the fee payment, whichever is lower, effective September 1, 2004; and

  • adjusting the flat-rate cap based on annual cost-of-living adjustments rounded down to the next lower $1. (See POMS GN 03920.019 for current and past flat-rate dollar limits, and other subsections for information regarding how the applicable cap is applied.)

For cases SSA favorably decides, SSA will:

  • Deduct a user fee from the amount of the representative fee payable if SSA certifies direct payment to the representative.

NOTE:

If the representative established a trust or escrow account and SSA is notified of the amount in the account before making direct payment, the escrow amount is subtracted from the payable fee amount before the user fee is calculated.

  • Pay the representative the remainder (i.e., all or part of the payable fee amount, minus the user fee). In a fee agreement case, SSA will make direct payment immediately when all development is complete and the fee under the approved agreement can be set.

  • Release excess withheld funds, if any, to the beneficiary(ies) except in a concurrent case when offset has not yet occurred or in a case with Federal court involvement.

  • Advise the claimant that the representative cannot charge or collect the assessment from him/ her.

C. Direct Payment to Representatives -- Title XVI Cases

Prior to February 28, 2005, SSA did not withhold and make direct fee payment in a title XVI only (SSI) case and there was no provision for direct fee payment to non-attorneys.

The SSPA:

  • in section 302, extended the title II attorney fee withholding and direct payment process to title XVI for a period of five years. This provision applies to fees for representation of claimants in the case of any claim for benefits effectuated on or after the date the Commissioner notified Congress about full implementation of section 303. The Commissioner sent notice to Congress on February 28, 2005.

  • in section 303, authorized a five-year demonstration project to allow non-attorneys who represent claimants before the Commissioner under title XVI, the option of fee withholding and direct payment.

For favorable decisions SSA effectuates on or after February 28, 2005, SSA withholds (up to) 25 percent of a claimant's title XVI past-due benefits for possible direct payment:

  • of all or part of an attorney's fee for administrative and court proceedings, unless the attorney has waived direct payment or waived the fee, or the attorney withdrew or was discharged from representing the claimant.

  • of all or part of a non-attorney's fee for administrative proceedings, if SSA has determined that the non-attorney is eligible to receive direct payment and if the representative has not waived a fee or waived direct payment of the fee.

When SSA effectuates a favorable title XVI decision on or after February 28, 2005, and the claimant is represented by an attorney who did not waive direct payment or waive a fee, SSA will make direct payment of the authorized fee, to the extent possible, to the attorney representative.

SSA must make direct payment of an authorized fee (to the extent possible based on the available past-due benefits) to a non-attorney representative if:

  • the representative and the claimant have entered into an appointment of representative or supplemental appointment of representative on or after February 28, 2005;

  • SSA has determined that the non-attorney is eligible to receive direct payment of fees and has not determined that the non-attorney's eligibility for direct payment is no longer in effect; and

  • the representative has not waived the fee or direct payment of the fee.

SSA currently does not have the systems capability to propagate the status of a non-attorney's direct payment eligibility; therefore, SSA strongly encourages eligible non-attorneys to identify themselves to SSA in each case in which they wish to receive direct payment of fees. Non-attorneys who are eligible for direct payment identify themselves by filing Forms SSA-1696-U4 (Appointment of Representative) or equivalent written statements.

The following notification guidelines apply when a claimant is represented by a non-attorney who is eligible for direct payment.

  • If the claimant and representative signed and submitted an appointment of representative on Form SSA-1696 or comparable statement before February 28, 2005, the SSPA requires that the claimant and the non-attorney representative sign and submit to SSA another appointment of representative to establish an agreement for representation on or after that date.

  • If the claimant and representative signed and submitted an appointment of representative on Form SSA-1696 or equivalent written statement on or after February 28, 2005, but before SSA determines that the non-attorney representative is eligible to participate in the direct payment demonstration project, SSA requests that the representative submit a supplemental SSA-1696, on each case on which he or she wishes to receive direct payment, to advise SSA of the change in his/her direct payment status. If the claimant signed an appointment of representative on or after February 28, 2005, it is not necessary for the claimant to sign the supplemental appointment statement the non-attorney submits to notify SSA of his/her status change.