Social Security fee agreements take one of two forms:
- Contingency based: If you win, the attorney gets 25% of your back benefits up to a $5,300 $6,000 cap. The “25% or $6,000” fee agreement is a standard fee agreement that Social Security will almost always approve if the case is won and results in back benefits.
- Fee Petition. This is the wild west of fee agreements. The representative has to itemize his or her time and ask Social Security to be paid a certain amount. Social Security will approve whatever fees it sees fit, which may be more or less than $6,000.
2009 UPDATE: As of June 2009, the fee cap is increased to $6,000 from $5,300.
If an attorney asks you to sign a fee agreement that is not either for a 25% contingency, or based on a fee petition, watch out!
Why would an attorney require a fee petition based fee agreement?
One reason is that some cases, such as overpayment cases, have no back benefits. So, the 25% fee agreement will not work (25% of 0 equals 0). In those cases, an attorney has to do a fee petition and may require a retainer which is held in a trust account until the case is over and SSA approves fees. This is discussed in detail here.
Other times, an attorney will require a fee petition fee agreement because he or she wants to charge more than the $6,000 cap. If this makes you angry, hold on a moment. There are attorneys who take “lost cause” cases – cases where a person is trying to prove a disability started 10, even 20 years ago; cases which have taken more than 8 years with a the cases having multiple appeals to the Appeals Council and even District Court. In those exceptional cases, a fee petition requesting fees in excess of the cap is reasonable. However, in most “regular” Social Security cases, the $6,000 cap protects the client from overpaying for legal services.
Tip: keep in mind this is only for fees (paying the representative for his/her time and experience. This does not include reimbursing the lawyer for expenses (any money the lawyer spends to develop the case, e.g. costs for medical records). Expenses are separate from fees and you may have to pay expenses even if you do not win (and do not owe any fees).
Social Security regulates what a representative can charge.
Social Security recently loosened their rules about who can practice in front of the Social Security Administration. Until recently, only lawyers could provide representation in front of Social Security and charge a fee. Now, non-lawyers can set up shop and provide representation on Social Security claims.
However, the cardinal rule is that a representative (lawyer or non-lawyer), cannot charge any fees unless it is approved by Social Security.
Unfortunately, this is where some non-lawyer representatives play fast and loose. They may charge you some money up front and may not refund it if they lose the case. Some people do not ask for the money because, “well, they took my case and they tried their best.” However, under Social Security regulations, a representative cannot charge any fee (remember, this does not include the representative’s expenses in building the case) unless it is approved by the Social Security Administration.
Of course, you may have the same problem with a lawyer. But, because of the higher level of regulation lawyers work under, they are less likely to scam you.
I personally feel that since you are not paying any less for a non-lawyer on a Social Security case, you are generally better off getting a lawyer to represent you.