(PPS-68)
SSR 82-39
SSR 82-39: TITLES II AND XVI -- USE OF TRUST OR ESCROW ACCOUNTS IN COLLECTION OF ATTORNEY FEES
PURPOSE: To state the policy on the use of trust or escrow accounts in collecting attorney fees for representation before the Social Security Administration (SSA).
CITATIONS (AUTHORITY): Sections 206(a), 207, and 1631(d)(2) of the Social Security Act; Section 413(b) of the Black Lung Benefits Act (part B of Title IV of the Federal Coal Mine Health and Safety Act of 1969, as amended); Regulations No. 4, sections 404.1720 through 404.1740; Regulations No. 10, sections 410.686b through 410.587a; Regulations No. 16, sections 416.1520 through 416.1540.
PERTINENT HISTORY: Legal organizations and individual attorneys have asked whether the use of trust or escrow accounts as a means of collecting attorney fees in connection with Social Security and black lung claims is consistent with the fee provisions of the law and regulations.
As a condition for undertaking representation, some attorneys solicit from Social Security or black lung claimants a deposit of money in a trust or escrow account as a means or assuring payment of the attorney's fees. The claimant may be asked to place funds into a trust or escrow account at the commencement of representation on a noncontingency fee basis, or in connection with a contingency fee agreement. In title XVI claims especially, some agreements may call for the claimant to deposit the first benefit check into a trust or escrow account pending approval of a fee by the Social Security Administration.
In regard to title II, title XVI, and black lung claims, the law provides that the Secretary may, by "rule and regulations, prescribe the maximum fees which may be charged" for services performed in connection with such claims, and that any agreement violating that rule or regulation would be void. the law also prohibits the charging or collecting of a fee, directly or indirectly, in excess of the maximum fee prescribed by the Secretary.
In certain cases the term "fees which may be charged" could be interpreted to include any amounts exacted by an attorney from a claimant's property, whether by way of a retainer, deposit in a trust or other escrow account. etc. If, however, the exaction is more than security for payment of a potential debt, it should not be considered a "fee". For example, a sum deposited under a trust or escrow agreement, which the claimant willingly entered into, could not legally be characterized as a "fee" if the agreement explicitly states that any money in excess of the fee authorized by SSA will be returned to the claimant when SSA approves a fee or when the claimant pays the attorney an amount SSA approves as a fee.
Applicable to title II, title XVI, and black lung benefits, the law provides that: "The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity . . ." This provision prohibits payment directly by SSA to a transferee or assignee of the claimant or someone else on his or her behalf. However, this provision doe snot preclude a claimant from using the benefits after receipt, any more than it precludes a claimant from using any other personal property as he or she sees fit. Thus, the placement of a claimant's funds (whether from benefit payments or other sources) into a trust or escrow account prior to and contingent upon SSA's authorization of a fee for the attorney's services is not a transfer or assignment within the meaning of the law.
Beyond these considerations, the fee provisions of the law that apply to title II and black lung claims differ significantly in one respect from the provisions applicable in title XVI claims. In title II and black lung cases, to assure that the claimant's attorney will be paid at least a part of the fee SSA approves, the law requires SSA to directly pay the attorney the authorized fee (up to a statutorily prescribed limit) our of the claimant's past-due benefits. In title XVI claims, there is no such statutory authority which could serve to encourage attorney representation. Thus, establishment of escrow and trust accounts, under agreements willingly entered into, is a mechanism that may encourage representation of claimants in title XVI claims, where otherwise the prospect of attorney representation would not exist.
As noted above, in title II and black lung claims, the law mandates that SSA will directly pay to an attorney the amount of the authorized fee (up to the prescribed limit) out of the claimant's past-due benefits in cases where a title II or black lung claimant and his or her attorney have entered into a trust or escrow account agreement, the money deposited in the trust or escrow account may have been paid over to the attorney, in accordance with such agreement, after SSA's award of benefits to the claimant but before direct payment of the authorized fee out of past-due benefits. Were SSA to make direct payment to the attorney out of past-due benefits without taking into account the money paid to the attorney out of the trust or escrow account, it would be highly probable that the attorney would have "collected" a total fee in excess of the fee authorized by SSA, and thus find himself in violation of the fee provisions of the law and regulations. Therefore, while the law mandates direct payment of attorney fees in title II and black lung cases, that mandate need not be construed so rigidly as to force SSA to make a fee payment when it is known that that payment, when added to monies already collected would place an attorney in violation of the law and SSA's own regulations.
POLICY STATEMENT: Consistent with Social Security law and regulations, an attorney may solicit from Social Security and black lung claimants whom he or she represents before SSA a deposit of money into a trust or escrow account as a means of assuring payment of the fee for services in connection with such representation; provided that:
- a. the claimant willingly entered into the trust or escrow agreement and willingly deposited the money in the trust or escrow account; and
- b. none of the money in the account is paid over to the attorney unless and until SSA has authorized a fee for the attorney, and then only in an amount up to, but not exceeding, the authorized fee; and
- c. any funds in the account in excess of the authorized fee will be refunded promptly to the claimant.
At the time the attorney petitions for a fee, the amount of money held in the trust or escrow account must be disclosed to SSA.
In title II and black lung cases, when the amount authorized by SSA as an attorney's fee is less than the total of (1) the money paid to the attorney from a trust or escrow account, and (2) the amount withheld from the claimant's past-due benefits the direct payment of the attorney's fee, SSA will reduce the amount of direct payment to the attorney by the amount that such total exceeds the authorized fee.
- EXAMPLE: If the authorized fee is $1000, but the combined total of escrow payment ($600) and withheld benefits ($600) is $1200, SSA will pay $400 directly to the attorney out of withheld benefits and will release the remainder of withheld benefits ($200) to the claimant.
If the total of withheld past-due benefits and money paid from a trust or escrow account is equal to or less than the amount of the authorized fee, there will be no reduction in the amount paid tot he attorney from past-due benefits.
EFFECTIVE DATE: This policy is applicable to all claims or proceedings pending before SSA as of the publication of this policy statement in any claim or proceeding where this policy was applied prior to the publication of this policy statement, such action will be deemed to have been taken properly and in accordance with interim procedures existing at that time.
DOCUMENTATION: A copy of the trust or escrow agreement or proof that any money from the trust or escrow account in excess of the authorized fee has been returned to the claimant must be provided to SSA upon request.
CROSS-REFERENCES: OHA Handbook, section 1-264(4); POMS sections GN03920.001, GN03920.070, GN03970.005