SSA created guidelines for reimbursing disability claimants’ authorized representatives.  Disability Associates has developed a way to follow them while avoiding the frustration you might otherwise experience in dealing with government-based fee structures.  We explain our methods here, and also recommend that you visit the “Fee Data” segment of our Program Syllabus.

Competition and Your Fee

In most regions you’ll find the Advocacy field is not very competitive.   Attorneys don’t usually specialize in Social Security disability work, although an increasing number of them are choosing to do so.  Typically attorneys take disability cases on contingency, collecting 25% of back benefits upon allowance.  Back benefits accrue while cases await decision, so they let them drag on.  This greedy attitude has not gone unnoticed by our students or by the disability market. 

The key to success in Advocacy is moving cases quickly.  Your final fee for any given case may be a bit less, but your reputation for fast turnaround will attract more clients to your service.  They can expect the same results from a Disability Advocate that they would get with an attorney, but without the attitude.  The wise Advocate processes cases in less time, saving the client money and mental anguish.  This is a strong selling point to use in your marketing strategy.

Attorneys tack on Case Development fees, which are often open-ended.  Disability Associates also charges the 25% contingency, but we use a set Case Development fee.  We collect the Case Development fee up front and place it in an escrow account.  If development costs more than expected, we settle up at the end of the case.  If there’s money left over, we return it to our client.   We explain this standard procedure clearly in our Fee Contract.

When you agree to represent, you are really entering into a three-way contract, since only SSA can authorize payment.  This is actually to your advantage.  Later in this lesson we’ll explain how this three-way relationship can protect you from non-paying clients.

The Basic Fee Structure

Any individual who meets SSA’s basic requirements and has acted as authorized representative for a disability applicant may charge a fee for his/her services upon successfully completing the case.  SSA reviews the fee amount and can change it if you don’t stay within reasonable guidelines.  You may not collect more than the authorized amount and you cannot collect a fee prior to authorization.  To get authorized you must submit a written Fee Contract or Fee Petition to SSA for every case you successfully represent.   SSA will review it and notify you by mail of approval.

We use three basic fee structures:

·       Advance Fee - Used in 5%-15% of cases

·       Times or Times Monthly Fee – Used 10%-15% of the time, in SSI or SSDI cases with no back benefits.  The claimant pays a sum equal to one month’s benefit multiplied by one, two or three. 

·       Contingency Fee -  Used in 80-90% of SSDI cases

The Advance and Times Monthly fee types are non-policy fees - that is, SSA doesn’t recognize them.  The only fee type that SSA accepts is the Contingency Fee, which sometimes doesn’t work in actual practice.  We use the other two for situations where the Contingency approach isn’t feasible.

Using the Three Fee Structures:  1. Advance Fee

In this option, you collect your fee in advance using an escrow account.  It is best used in cases that are:

·        Easy wins

·        Quick turnarounds

Example:  Joe suffered two heart attacks in rapid succession and is having on-going problems.  He is incapacitated and requires round-the-clock attention.  There is plenty of medical evidence documenting Joe’s difficult condition.  You have no doubt this case will be allowed.  Joe’s case is an easy win, so you only ask for an Advance fee of $750 to represent him.

SSA only lets you charge an up-front fee if you hold the money in escrow until case completion.  An escrow account is a segregated “trust account”, and has the advantage that it completely eliminates collection headaches.

You can easily set up an escrow account by depositing a little of your own money into a new interest-bearing bank account and then using the account exclusively to hold dedicated business monies such as Advance fees.  When a client pays for your services in advance, immediately deposit the entire amount into this account.  The funds draw interest (although not much these days!), which also becomes part of your income if the case is allowed. 

NOTE:  You can save yourself a lot of money if you use a regular checking or savings account rather than a formal bank-defined escrow account.  If you open a formal escrow account, the bank will charge you an arm and a leg.  Also, there are a lot of regulations that make these accounts expensive, inconvenient and impractical. 

The escrow account is used to store the advanced and development fee.  You can use the development fee funds to pay for case processing  activities like medical record fees.  If you run out of development fee, pay the additional expense out-of-pocket, not to exceed $150.  You can add these overflow case processing fees to your bill and settle with the client when the case is completed.  Even if the case is lost, the client will still owe you for any out-of-pocket expense you've contributed to his case.  Be careful here!  Don't pay out of pocket unless it's the only way to move the case forward.   

The Advance fee is a win/win for client and Advocate when an allowance is obvious and/or the case is already fully documented.  Such cases are easy for the Advocate to develop and less expensive for the client to pay.

The Advance fee approach generates less money per case because you should not ask for more than $1500.  Actually, we typically charge less than $1000 for these cases.  This relatively low fee is more manageable for the client while compensating you adequately for your work.  It is best used for clients with strong work histories who suddenly became disabled within the last six months because they usually still have resources available to pay an up-front fee.  As you become more experienced, you will easily spot cases where an Advance fee is appropriate.  You’ll find that approximately 5%-15% of your customers will be financially able to take advantage of this option.  

As with any fee type you’ll submit a Fee Petition with attachment at case end.  Whatever you charge, make sure that the attachment shows an adequate amount of work for the compensation you’re requesting.  After SSA has authorized your fee you may remove your payment from escrow.  Of course, you can only keep the advance if you win the case!   Therefore restrict this approach to cases that you strongly believe are easy wins with rapid decision potential.

Using the Three Fee Structures:  2. Times or Times Monthly Fee

The Times or Times Monthly fee is a little more versatile than the Advance fee.  It equals the monthly cash benefit amount your client is awarded times a multiplier of one, two or three - hence the designation “Times or Times Monthly”.  In other words, this fee involves taking up to three months of benefits in exchange for your time, energy and expertise.  You usually collect a lump sum, but you can choose to set up monthly payments.

While you can use this option with any disability case, we recommend it mainly for cases with current onset dates, such as SSI claims or SSDI cases with no back benefits.  Like the Advance fee, this is a non-policy approach, which means SSA will not recognize it.  To get around this, prepare a Fee Contract in which you and your client agree that your fee will be a specified multiplier times the value of the awarded monthly benefit amount.  Of course, make it clear that there will be no fee if SSA doesn’t award benefits. 

Upon winning an allowance, send SSA a Fee Petition with attachment itemizing services rendered and indicating the fee amount.  Do not mention to SSA that the dollar amount is based on a calculation involving benefit multipliers.  Only you and your client really need to understand where the dollar figure came from.   Just make sure that the Fee Petition attachment shows enough work hours to justify the fee you’re asking.

In the Times Monthly approach, the multiplier you choose should be based on your perception of the case’s complexity and the amount of time and work it will take to successfully complete.  The norm is two times the monthly benefit.

You should also charge an up-front Development Fee of between $50 and $150.  Use the money to pay for medical evidence, phone calls and other case processing expenses.  Make it clear in your Fee Contract that all Case Development costs are the client's responsibility.  Apply any unspent Development Fee funds toward your Advocate fee or return them to your client.  If the case is denied and there are leftover development funds, return them to the client. An honest Advocate is a busy and prosperous Advocate!

The Development fee is a useful business tool because it essentially demonstrates the client’s commitment and locks him/her into your service.

Using the Basic Fee Structures:  3. Contingency Fee

Of course, collection of any fee is contingent on a successful outcome.  The difference between the fee types is in how they are set:

·     Advance fee:  a pre-determined amount

·    Times Monthly fee:  a multiplier of the client’s monthly benefit

·    Contingency fee:  based on back benefits 

The Contingency fee approach is the one most commonly used.   What we like most about it is that SSA likes it too!  SSA considers it to be the ultimate in fairness for the claimant because there’s no way he/she can lose and it protects people from misrepresentation.  Also, since there is no up-front cost, any claimant can afford it.  It is the only officially sanctioned fee. 

Accept the case with a Fee Contract that clearly says you are paid only if you win.  Upon an allowance decision, submit a Fee Petition attachment itemizing your work to justify charges.  You are allowed up to 25% of back benefits. 

Example:  You agree to represent Alice’s case on Contingency for 25% of her back benefits, whatever they may be.  SSA allows the case and awards Alice $6400 in back benefits. You submit your Fee Petition and collect $1600.

Used properly, the Contingency Fee approach is a gold mine.  It works best with clients whose onset dates are a year or more in the past.  Back benefits for such cases accrue from the onset date to the date of award minus the waiting period, although SSA now limits them to one full year.  Even with this restriction your client can receive a substantial cash settlement resulting in a nice fee for you.

To implement this approach, have your client sign a Fee Petition Form 1560 and Fee Contract at the outset.  If he/she has a mental disorder or is too sick to understand what he/she is signing, have a responsible third party sign the forms. 

Be sure to ask your new client for a small Development Fee when taking a case on contingency.  Explain verbally and in the contract what the fee is and under what circumstances you refund it.   Most people won’t resist paying it if they understand it.   If the client refuses, decide if you want to accept the case. 

The secret to succeeding with this or any fee type is three words:  Win the case!  How do you increase your chances of winning and getting paid?   Answer:  The Case Assessment process.  By screening out weak cases you instantly increase your success percentage.

Calculating Your Fee

SSA bases allowable fees on the claimant's income history and other factors so don't get too hung up on final totals.  The easiest way to set payment is to simply decide which fee structure you are going to use.  Then when SSA determines the actual benefit amount, just do the math.

Example:  You choose the Contingency Fee approach for Ella’s case.  You agree on 25% of back benefits upon successful case completion.  You also collect $50 for development costs up front.  SSA allows the case and awards Ella $5000 in back benefits.  Your fee will be $1250.  You spent $75 on development, so you also bill Ella for an additional $25 in expenses.

Typical fee amounts with the three approaches:

·        Advance Fee:  A mutually agreed upon set fee, usually between $550 and $1500 

·        Times Monthly:  Usually two or three times the awarded monthly benefit

·        Contingency Fee Approach:  Usually 25% of the awarded back benefit

Fee Contracts

A Fee Contract (also known as a Fee Agreement) is a contract between an Advocate and the claimant who retains him/her.  It should make the fee calculation method clear, although the dollar amount may not be specified. 

Only use the two non-policy approaches (Advance and Times Monthly) to calculate your fee when the potential for back benefits is not significant.  How you arrive at a fee amount is between you and your client, and should only be spelled out in your Fee Contract.  Don’t include these details in the Fee Petitions and attachments that you submit to SSA; it only confuses things.

There’s nothing mysterious or threatening about creating a client contract.  You can write your own, but to protect yourself and your company we recommend that you use an attorney to make sure it meets local legal standards.  To protect yourself and your service, write a list of issues to be covered in your contract and take it to an attorney who has some familiarity with SSA policy.  Have him/her create a custom boilerplate contract that protects you and the interests of your service.  Be sure to include:

·       A description of the specific service you’re providing

·        An explanation of the adjudicative levels covered by the contract

·        A place to put the client's name and SSN

·        A place to date each contract

·        Spaces to fill in names of all parties to the contract, including a space for a responsible third party in case of a client mental disorder

·        A place to fill in the type of fee structure to be used, or a checkbox list of the three fee approaches so that you can simply check one off

·        Areas to fill in all details associated with:

ü      Fee amount or percentage specifications

ü      Due dates/ time frames for fee collection if the case is an allowance

ü      Payment conditions, penalties, late charges, payment plans, collections issues, etc. 

·        A place to include a Development Fee, if any

·        An explanation of the Development Fee, its uses and conditions for refund

·        A clear statement that you will only charge a fee if you win the case

·        An explanation of conditions for service cancellation and fee reimbursements

Make sure that the contract:

·        Uses simple terms and plain English 

·       Addresses the issue of travel costs for adjudicative purposes

·       Addresses penalties for false statements or bogus evidence

·       Uses protective clauses that protect your interests while staying within the boundaries of State and Federal regulations.  Protective clauses typically address things like service termination and non-payment. 

For sample protective clauses, see "Protecting Your Fees" on our Executive website.  After you are satisfied with the contract template, copyright it.  This protects you from unethical representatives who might adapt your contract to their own purposes without your permission.

The Fee Petition

If you do not submit a Fee Contract to SSA during the case, you must provide a signed Fee Petition with attachment upon successful completion.  The Fee Petition is an SSA form that you and your client should sign at the outset to establish that you charge a fee for services rendered.  After the case is allowed, create an attachment to the Fee Petition itemizing your actions and time spent on your client’s behalf, thus justifying your fee.  Submit the Fee Petition and attachment to SSA at the end of the case.   SSA will review them to determine if the requested amount is appropriate for the work done. 

The Fee Petition is increasingly becoming the SSA-preferred option because it makes it easier for them to determine if the fee amount is justified.   Recently SSA began requiring that you include a detailed Fee Petition Action Report (attachment) with each submitted Fee Petition Form 1560. 

Creating a detailed Fee Petition attachment is a tedious job, so we have developed an automated report generator within Olivia©.  As you process a disability claim, you’ll input the actions you take on your client’s behalf.  They are automatically added to the internal Fee Petition so that at the end of the case the petition and attachment are just a button click away.   You can also edit the fee amount instantly by entering one change in the hourly rate box before printing.

Aside from its popularity with SSA, we recommend using the Fee Petition to avoid having to share your Fee Contract with SSA.  Although they contain the same type of information, the Fee Contract and Fee Petition have different purposes.  The Fee Contract is your formal agreement with your client for representational services.  Unless you are using the Advance fee approach, your contract won’t indicate an exact amount because you won’t know what it is until the case is allowed.  The Fee Petition is the form you submit after allowance to get the exact dollar amount approved by SSA.  Get client signatures on both a Fee Petition Form and your Fee Contract at the beginning of the case so that you can easily fill out the Fee Petition and attachment upon completion.  Don’t send your Fee Contract to SSA unless they request a copy – it just confuses things.

The Fee Petition Attachment

The Fee Petition is a simple one-page form.  More important is the attachment that accompanies it, as this is the form that justifies your fee. 

The attachment lists all work performed on your client’s behalf by date, action taken, time spent and fee charged.  In other words, you must indicate what you did, when you did it and how long you spent on it for every action within the case.   Because the Olivia © system automatically tracks all this data for you, you can generate a complete attachment with one button click!  Imagine the hours of drudgery this Olivia© tool saves you!

Getting Paid

To be successful, you must be willing to accommodate the needs of as many customers as possible.  Be willing to be flexible on fees - not just the price of your service, but also on the types of payment options you’ll accept.  The more payment options you offer, the more potential clients you'll attract.

Experience has shown us that the overwhelming majority of claimants pay their representatives without issue.  However, there are always those who try to take advantage of the system.  Here is some practical advice to help you protect yourself from dishonest types:

·      Keep a signed, stamped and dated copy of the Authorization to Represent Form 1696 in your records. This document proves that you did indeed act as the claimant's authorized representative and are entitled to a fee.

·      Keep a signed and dated copy of the Fee Petition SSA Form 1560 with attachment.  This establishes the commercial relationship between you and the client and proves your mutual agreement.

·      IMPORTANT!  Make sure your client understands when he/she signs your contract and a Fee Petition Form that he/she has just entered into a three-way contract with you and the Federal Government.  Tell him/her that SSA will require copies of the documents if there are any disagreements.  Explaining the three-way relationship gives you a legal right to challenge benefits if your fee isn’t paid as agreed.  Most clients get the hint and give no problems at case completion.

·      If you suspect that the client has financial problems that could prevent payment, set up a payment plan.  Assure him/her that it will only go into effect upon successful case completion.  If you use this approach, ask for a substantial first payment – say, 30% of the total amount, with the rest to follow in 12 equal monthly payments.

·       If your client has any hint of a mental disorder, have a responsible third party sign the Fee Contract and Fee Petition, even if he/she appears perfectly normal.  If his/her primary diagnosis is a mental disorder, get a responsible third party signature or do not take the case!  This gives you recourse if your client disputes the fee after allowance.  It’s considered politically incorrect to go after a certified nut who has just been placed on disability benefits, but it’s not in such bad taste to go after the third party. 

Note:  This doesn’t work in SSI cases because these folks are indigent.

If your client receives an allowance and then refuses to pay, here’s what to do:

1.    Send a letter to your client politely requesting your fee, and perhaps briefly outlining all that you have done to earn it. 

2.    One week later, send a second, stronger letter demanding your fee.  Indicate that failure to pay could result in a legal challenge that could cut off his/her benefits. 

3.    If this doesn’t work, notify SSA to ask their help in collecting your fee.  BE SURE TO SEND A COPY to the offending client.  He/she usually pays, not knowing that SSA doesn’t generally respond to such requests. 

4.    If nothing you do results in payment, you may be forced to write it off as a bad debt and take the tax deduction.  If this occurs, deduct the maximum fee that is legally possible according to your accountant. 

Check out our most powerful fee protection approach in the Executive Support website under “Protecting your Fee.” 

Pending Death of a Client:   If you're representing a person with a terminal disease, we recommend doing the following to protect your fee:

·        Get both your client and a responsible third party to sign the Fee Contract and Fee Petition Form before you begin representation.  This ensures that someone will be liable for your fee even if your client dies.   

·        Instruct this third party to become the “Representative Payee”, in case your client becomes too ill to handle his/her own funds.  This designated person will then be able to pay you even if your client dies.  

·        If no responsible third party is available, become the Representative Payee yourself.  This is a last resort because it requires that you handle the client's financial affairs.  Becoming a Representative Payee can be an awesome responsibility, so only use this approach if there is absolutely no other person available to handle this liability. 

To learn more about becoming a Representative Payee, click on the SSA link in the Program Syllabus.

SSA Challenges:  Establishing Your Qualifications

Fee Petition Form asks about your background.  What SSA wants to know is how your background or training enabled you to assist the claimant in his/her pursuit of benefits.  Here are some items that SSA will respect:

·        Your previous experience as an Advocate (i.e., “I have represented x number of cases over x number of years”) 

·        Your experience in other pertinent fields

·        Your level of educational and/or general professional background

·        Any work history that adds to your credibility in this field 

·        Your training through Disability Associates

We have never seen SSA challenge an Advocate's background, education or experience.  We believe this is a sort of survey question to determine what types of people are acting as representatives.

On occasion SSA may specifically ask what your qualifications are.  Do not be intimidated by this request.  To our knowledge, other than a training requirement, there is no rule directing what background an Advocate must have in order to practice.  Here is a generic statement that you can use if this situation arises:

Where to Send Fee Retition

Although a representative may file a fee petition at any SSA office, he or she generally files the petition with the office shown below:

• If a court or the Appeals Council issued the decision, the representative sends the petition to:

  SSA, Office of Disability Adjudication and Review
  ATTN: Attorney Fee Branch, Suite 805
  5107 Leesburg Pike
  Falls Church, VA 22041-3255

• If an Administrative Law Judge issued the decision, the representative sends the petition to him or her using the hearing office address.
  
  
• In most other cases, the representative sends the petition to the processing center address that appears at the top right of the claimant's title II notices, or in a title XVI only case, to the servicing field office.

SSA Challenges:  Supporting Your Fee Request

In our many years of experience as Disability Advocates and business owners, we have only seen two instances where SSA challenged the fee amount.  If this happens to you, don't panic and don't feel hostile toward SSA.  Remember, such things happen when you are working with large bureaucracies.

Both of the challenges mentioned above were because SSA thought the fee excessive.  However, in both instances the requested amount was well below the regulatory maximum, which at the time was $4000.  The problem was solved both times by providing SSA with a very detailed Fee Petition attachment and politely requesting that they reconsider their challenge.  The Fee Petition and attachment supported the amount of work claimed, so in both cases SSA eventually authorized full payment.  This is why a detailed Fee Petition attachment is so important.  If you carefully document your work and use Olivia© to generate your attachment, you will rarely encounter this situation.

If you present SSA with one of the non-policy fee approaches mentioned in this program, they will challenge your fee.  Keep any non-policy fee agreement between you and the claimant.  Remember, the non-policy fee approaches (Advance and Times Monthly) are simply formulas you can use to preset the fee in cases where there are no back benefits.

Example:  Al has agreed to be represented on Contingency.  He understands that he won’t pay anything unless he wins, but will pay 25% of back benefits, not to exceed $6,000, upon success case completion.  However, neither of you is sure that he will get any back benefits.  Therefore, you must set up some alternative fee that won’t exceed SSA’s regulatory maximum payment amount. 

After some discussion, you and Al agree that if there are no back benefits, the amount of your fee will be no more than two times his monthly SSI benefit amount, not to exceed $1500.  With this written into your Fee Contract, both of you clearly understand the basis and terms of your final fee.   

You win the case, but the ALJ decides there are no back benefits.  You then submit your Fee Petition and attachment, requesting a fee based on the Times Monthly clause of your signed Fee Contract.  However, in the Fee Petition you simply state the amount of the fee and justify it with the detailed attachment that shows your work.   You do not refer to the Times Monthly fee calculation when communicating with SSA. They wouldn’t know what you were referring to anyway because the approach is “non-policy”, meaning that it isn’t in the Code of Federal Regulations (CFR).   

You then go on with business as usual, and are surprised when you receive a fee challenge from SSA in Al’s case. You quickly draft a letter to SSA supporting your fee, further documenting and explaining the extent of the work that you performed on his behalf, and clearly stating that the amount requested is well within regulatory limits.  You submit the information, feeling confident that SSA will eventually pay the fee in full because you have definitely earned it.

Meanwhile, SSA challenges take time.  What happens to the fee that Al owes you while you’re answering the challenge?  During our two fee challenges, we billed our client as usual and collected the full fee.  We felt comfortable doing this because we knew that the fees charged were far from excessive.  SSA decided in our favor in both cases and life went on.

If you collect your fee from your client in advance of official approval, you'll probably get away with it.  However, if for any reason the fee is mixed with other obligations, delayed or challenged, put these funds into an escrow account until you receive SSA's final approval.  If SSA asks about the fee, indicate that it is in escrow awaiting their decision.  This avoids a serious fee conflict with SSA.

If SSA arbitrarily approved a fee amount lower than your original request, accept it and move on.  Don't waste valuable time trying to change SSA’s bureaucratic mind for a couple of hundred bucks.  Challenging an SSA fee decision can take many months and a lot of your spare time.  It's usually not worth it!   Consult your accountant to see if you can write off the difference as a tax deduction.

Lesson Six Summary

We outlined three different fee structures:  the non-policy Advance Fee and Times Monthly approaches and the SSA-recognized Contingency approach.  The non-policy approaches allow you and your client to agree on a fee structure when there might not be back benefits.  How you calculate your fee is between you and your client only, and so is specified in the Fee Contract but not in the SSA’s Fee Petition.  Upon winning your case, submit a Fee Petition and attachment to SSA itemizing your fee amount and how you earned it.  This lesson also provided you with tips to protect your fee from challenges from either your client or SSA.

Lesson Seven Preview

In Lesson Six, you have learned the in’s and out’s of calculating and documenting fees and ensuring payment.  In Lesson Seven we’ll cover the all-important topics of confidentiality and good record keeping practices.  You’ll learn how to practice safely within SSA guidelines.