EM-13024 And Fees to Representatives that Waive Direct Payment

The Social Security Administration regulates fees that representatives can charge and receive.  The Program Operations Manual System (POMS) confirms agency policy.  The regulations carve out an exception when SSA will not involve itself in the authorization of when a representative can charge and receive a fee.  20 C.F.R. sec. 404.1720(e).  That exception concerns payment an entity or government agency will pay the representative.  The exception has two elements:  (1) the claimant will not have liability to pay fees or expenses to the representative or someone else; and (2) the representative tells SSA that he/she is waiving the fee from the claimant.  The form is SSA-1696 - the appointment of representative form.  The portion of the form provides:

I certify that my fee will be paid by a third-part entity [...] that the claimant [is] free of all liability [...]  to pay any fee or expenses to me or anyone as a result of their claim(s) or asserted rights(s).  [...] Do not check this box if a third-party individual will pay the fee.)

Now for the fun stuff.   On July 15, 2013, SSA published an Emergency Message.  EM-13024 provides guidance on what to expect when a claimant has multiple representatives and SSA approves the fee agreement (the expedited fee process).  The first and third examples reflect the waiver fees benefiting the claimant and not the representatives.  If the waving representative is a member of the firm that will receive a fee, the fee is reduced.  If the waiving representative is not a member of the firm that will receive a fee, the fee is not reduced.  I am not sure how that differentiation squares with HALLEX I-1-2-18.  When a representative waives, the other representatives should receive a percentage of the fee regardless of whether the waiving representative was a member of the firm.

The EM represents a concession that permits claimants to change representatives and permit the new representative to receive a full fee.  Many representatives won't take a claim if they can't get the fee agreement approved.  No one likes fee petitions and SSA sees a way to accommodate the interests of the claimants and the representatives as long as the waiving representative comes from a different firm from the other representative(s).

Now the hard part -- example two is wrong.  Examples one and three represent an accommodation and a sub-regulatory address of a bare bones statutory scheme.  But the second example contradicts the regulation.

The regulation permits a representative to get paid by a third party if and only if the claimant has no liability to any representative for the fees or expenses associated with the claim.  The appointment of representative form tracks the regulation.  But example two allows the representatives from firm A to receive the fees while the solo practitioner gets paid by a third-party entity. We can ignore the withdrawing representative from firm B so the redacted example is this:

The claimant appointed two representatives from Firm A, [...] and one representative who is a sole practitioner. [...] The sole practitioner waived charging and collecting a fee from the claimant or any auxiliary beneficiaries because a third party entity will be paying his or her fee. The two representatives from Firm A have an approved fee agreement that each of them signed, and SSA determines a fee of $6000. The representatives from Firm A will receive $3000 each.

The claimant in the example has a liability to the representatives from firm A.  SSA pays the fees but that payment comes from the past due benefits -- making the liability or payment indirect.

If the sole practitioner gets paid by firm A, then the representatives are paying the solo to represent the claimant without SSA authorization over the fee.  While that fits with fee splitting rules under the Rules of Professional Conduct and the Model Rules, it doesn't fit with the expedited fee process and the regulations stating that SSA will authorize not only the fees to the representatives from firm A and the payment to the solo.

If the sole practitioner gets paid by someone else (an insurance carrier or a governmental entity), then a real question exists about the value of the services provided by the members of firm A or the solo or both.  If the claimant ends up with the representatives from firm A, the only reason to permit the solo to get paid by the third-party entity is a time saving device and the assumption that the third-party entity can protect its own interests.  If the claimant ends up with the solo and the paying entity is firm A, then SSA is encouraging a business model that violates the regulation and defeats the interest of the claimant.

The claimant hires firm A.  The claimant appoints one or more representatives from firm A to represent the claimant at the hearing.  SSA sets the claim for hearing.  Firm A hires the solo to appear at the hearing.  The claimant finds out about the solo the day of the hearing or some time shortly before the hearing.  The claimant does not get the continuity of representation, the representative most familiar with the claim, or someone responsible for the claim at the firm.  The arrangement violates the regulation and removes the financial supervision of the representation by the solo by SSA.

EM-13024 will sunset on January 15, 2016.  SSA should delete example 2.  It violates the regulation.