House Committee on Ways and Means, Subcommittee on Social Security
(Shaw)
On Attorney Fee Implementation
William C. Taylor, Deputy
Associate Commissioner for the Office of Hearings and Appeals
Testified
June 14, 2000 Mr. Chairman, Mr. Matsui, and
Members of the Subcommittee:
Thank you for inviting me to discuss the process by which attorneys may
request that the Social Security Administration (SSA) approves and pays
attorney fees. We recognize the importance of timely payment to attorneys
who successfully represent their clients. Representatives are entitled to
world class service, as are all of SSA's customers, and in 1999, SSA made
2000,000 fee payments to attorneys totaling almost more $450 million.
Today, I will discuss with you the history of the attorney fee process,
SSA's current process, implementation of the new law, and some planned
improvements in this area. In addition, I will present SSA's views on H.R.
4633, which would make further changes to the attorney fee process.
History of Attorney Representation and Fee Approval
The Social Security Act has recognized a role for attorneys as
claimants' representatives since 1939, with the enactment of the Social
Security Amendments of 1939. Pursuant to statutory authority, the Social
Security Board's Administrator promulgated rules and regulations governing
representatives of claimants and set the maximum fee attorneys could
charge.
At first, the maximum an attorney could charge was $10 unless a
petition was filed and a higher amount was authorized. In 1960, the amount
an attorney could charge without approval was increased to $20 for
representation before the Bureau of Federal Old-Age Benefits with amounts
up to $50 for representation before the Bureau and a hearing examiner
and/or the Appeals Council. Disability cash benefits had begun in 1956 and
more and more appeals were on disability claims.
The Social Security Amendments of 1965 provided for withholding up to
25 percent of past-due benefits for direct payment to an attorney in court
cases to ensure that claimants had access to effective legal
representation at a fair rate of compensation. The Social Security
Amendments of 1967 required the Secretary to approve "reasonable" attorney
fees, not to exceed 25 percent of the past-due benefits, for services
rendered in administrative proceedings, and authorized the Secretary to
certify payment directly to an attorney from a claimant's past-due
benefits.
When the Ways and Means Committee designed the Supplemental Security
Income (SSI) program in 1972, it decided not to authorize any similar
withholding from a claimant's past-due benefits. The Committee concluded
that such a withholding would be "contrary to the purpose of the program."
This conclusion still makes sense. To paraphrase Justice Brennan in the
Supreme Court's decision in Bowen v. Galbreath in 1988, given the extreme
financial need of SSI beneficiaries, one can conclude that withholding
past-due benefits under the SSI program will cause greater hardship than
withholding past due benefits from insured individuals under the Old-Age,
Survivors and Disability Insurance programs.
The Omnibus Budget Reconciliation Act of 1990 created the fee agreement
process to streamline payment of attorney fees by permitting SSA to
routinely approve fees that were within certain limits (the lesser of
$4,000 or 25 percent of past-due benefits) if the representative and
client both agreed in writing to the fee. Payment of the fee could not be
certified pending a 15-day administrative review period after receipt of
the award notice. The 1990 legislation also continued the exclusion of SSI
claims from the direct payment of attorney fees from a claimant's past-due
benefits.
The Ticket to Work and Work Incentives Improvement Act of 1999
eliminated the 15-day waiting period for certification of an attorney fee
and allowed SSA to charge an assessment, not to exceed 6.3 percent of the
fee, to recover the costs for determining and certifying fees to
attorneys. In other words, the current 6.3 percent assessment is the cost
of providing the attorney with the service of calculating, withholding,
and paying the fee. SSA began charging the assessment on cases on which
the decision was made on or after February 1, 2000.
Process in General
Section 206 of the Social Security Act provides that a representative
may not charge or collect, directly or indirectly, a fee in any amount not
approved by SSA or a Federal court. SSA, under either the fee petition or
fee agreement process, approves the fee that may be charged to represent a
claimant for Social Security and SSI benefits in administrative
proceedings. At each level of the determination process, applicants may be
represented by an attorney or other individual in pursuing their claim.
Over the last 20 years, the proportion of applicants with representation
at the hearing level has increased dramatically; and in fiscal year 1999,
about 57 percent of all cases decided at the Administrative Law Judge
(ALJ) hearing level involved attorneys[SSA1].
Obtaining payment from clients is often difficult for attorneys, who
sometimes have to expend considerable resources to get paid. In virtually
all successful Social Security claims, SSA ensures that the attorney
receives payment. By paying attorneys from withheld past-due benefits, SSA
is providing a valuable service to attorneys, guaranteeing payment of all
or a portion of any fees due. In SSI cases, the attorney must look to the
claimant for payment.
Representatives may request payment for services through either a fee
petition or a fee agreement process.
Fee Petition Process
After completing his or her services for the claimant, the
representative (attorney or non-attorney) must request the Commissioner's
approval of fees. Each fee petition requires an individual evaluation by
an ALJ or other authorized personnel of the worth of the services.
Adjudicators, in authorizing a fee, consider factors such as the extent
and nature of the services performed, the complexity of the case, and the
amount of time the representative spent on the case. Fees over $5,000
require additional review.
After SSA authorizes a fee, we notify the claimant and their
representative of the authorized fee and their right to administrative
review. Because of the highly involved nature of this process, fee
petition claims are very rarely paid within 30 days.
While we do not routinely track data on the use of fee agreements and
fee petitions, we have just completed a special systems run on a sample of
attorney fee cases. That data show that the percentage of fee payments
that were withheld and paid using the fee petition process has steadily
declined from 1995 through 1999, from 30 percent in 1995 to just 13
percent in 1999. In addition, that decline appears to be continuing in
2000. From January 2000 through the end of May 2000, the percentage of fee
petitions fell to just under 12 percent.
What this tells us is that more attorneys are electing to receive their
fees through the fee agreement process, which I will discuss next, even
though fees received through that process are capped at a specified
amount. The decline in the number of fee petition requests filed suggests
that, contrary to some reports, attorneys are not seeking to have their
fees paid through the fee petition process because they can get a higher
fee than what they could receive under the alternate process. In fact, in
addition to the decline in the number of attorneys requesting payment
through fee petition, 91 percent of fee petition payments approved are for
less than $4,000 (generally, the amount which a fee under an approved
agreement may not exceed).
Fee Agreement Process
The fee agreement process was developed to be a simpler alternative to
the fee petition process. Under the fee agreement process, if the
representative and claimant sign and submit a written agreement as to the
amount of the fee, SSA will generally approve the agreement if the
specified fee does not exceed the lesser of 25 percent of the claimant's
past-due benefits or $4,000. SSA does not withhold past-due benefits for
non-attorney representatives or in SSI cases, but still must approve the
fee. The Commissioner then notifies the respective parties of the maximum
fee and right to request administrative review. This is usually the
quicker and more common method to set the fee.
Based on the sample run just completed, the number of fee agreement
cases accounted for almost 87 percent of fee payments processed in 1999.
The sample for 1995 showed 70 percent were fee agreement cases. The
percentage for this year through the end of May rose to 88 percent.
Obviously, more and more attorneys prefer to use the more streamlined
process, which suggests that attorneys are not concerned about the $4,000
limitation. The $4,000 limit was put in place
based on a recommendation that SSA adopt a rebuttable presumption that
a fee equaling 25 percent of the claimant's past-due benefits, up to
$4,000, is reasonable. In 1999, the average payment under the fee
agreement process was $2,555.
Implementation of the New Law
With the heightened awareness of the attorney fee process generated by
enactment of the 6.3 percent assessment has come an increase in the number
of complaints from attorneys about the fee process. We recognize the
importance of timely payment to attorneys who successfully represent their
clients. With elimination of the 15-day waiting period, some cases are
being paid more quickly. Other cases, however, are only being helped
marginally.
To address this issue, we have taken several measures to clear the
backlog of outstanding fee claims. Among these measures are providing 111
work years to technical staffs, diverting resources from other work loads
to process the attorney fee claims, and giving priority to these
outstanding fee claims to see if they can be paid immediately.
These measures have worked. By March 21, 2000, SSA had reviewed
approximately 79,700 (or 93 percent) of the 85,991 claims that were
outstanding as of February 2, 2000. Based on these reviews, we immediately
paid fully developed claims. When additional development was needed, we
requested it on a priority basis.
Furthermore, as of May 15, 2000, SSA had paid 167 (or approximately 84
percent) of the 197 fee claims that were brought to our attention by this
subcommittee. We plan to resolve the outstanding claims soon. Although we
have resolved many of these cases, we realize that there continue to be
concerns about delays in paying attorney fees.
The legislation introducing the attorney assessments is being
implemented in phases, beginning with an all manual process, with plans to
automate steps of the process as time and resources were to permit. This
is not unlike implementation of many SSA legislative initiatives. The
process of paying the attorney in Title II cases is not completely manual,
although it does require a manual review and input to begin the Treasury
payment process.
SSA's systems are set up to contain information on the primary
numberholder and any auxiliary beneficiaries only. Information about third
party payments, such as attorney fee payments, is not captured on SSA's
Master Beneficiary Record (MBR) system.
If the Agency decides to automate attorney payments, the effort would
be extremely significant, involving major redesign of the Title II data
structures and client files. One requirement for paying non-beneficiaries
would be to develop and record some discrete identifier for each payment
and payee to maintain a good audit trail. This might be the attorney's SSN
or a firm's Tax ID number or Employer ID number. Up to now, the attorneys
and their advocacy groups have been adamant that they not be required to
supply this or similar identifying information to SSA.
Proposal to Change the Attorney Fee Process
H.R.4633, recently introduced by you and other members of the
Subcommittee, would not allow SSA to impose the attorney fee assessment if
payment is not made to the attorney within 30 days after the initial
certification of payments to the beneficiary.
The current fee determination process, whether fee agreement or fee
petition, requires manual actions and considerable coordination between
hearing office functions and processing center functions. Because this is
a complex process, as I will describe, involving many steps, manual
actions, and even mailing time, the new legislation would require that SSA
forfeit the amount we assess the attorney in two-thirds of the attorney
fee cases.
While some fee agreement cases may require only limited development,
and SSA may even pay the attorney and the claimant at the same time, that
is not always the case. Many fee agreement cases require additional
development (for instance, if a workers' compensation computation is
needed to calculate the proper amount of past-due benefits or if we need
to develop applications for the children or spouse of the claimant), and
the claimant is awarded ongoing benefits pending determination of past-due
benefits. In those cases the attorney is not paid until past-due benefits
are awarded.
In fee petition cases, direct payment to the attorney must await both
the calculation of the past-due benefits and authorization of the fee.
Once past-due benefits have been calculated and the fee has been approved,
direct payment is made to the attorney.
Fee authorizations for larger amounts can also take longer to process
because they often occur in difficult, complicated cases involving a
lengthy appeals process. This results in SSA having to consider a long,
detailed record of all the services that were performed in order to
determine a "reasonable fee." In addition, fee authorizations for more
than $5,000 involve an additional step, i.e., our policy requires a review
and an approval by the Attorney Fee Officer in the Office of Hearings and
Appeals, a Regional Chief ALJ, or the Deputy Chief Administrative ALJ.
As you know, SSA does not have a tracking system in place from the
start to the finish of the process to measure the time it takes us to pay
attorney fees; however, attorney fees in fee agreement cases have
generally been paid within 90 days of the award notice. As a result of
changes that we have already made, including the elimination of the 15-day
pre-payment holding period for fee agreement cases, payment of attorney
fees can now generally be made within 60 days of the award notice.
As I mentioned, H.R.4633 would not allow SSA to impose the attorney fee
assessment if payment is not made to the attorney within 30 days after the
initial certification of payments to the beneficiary. There are cases in
which we are not able to pay the attorney until completion of the
additional development I have described. Any time limitation that would
restrict SSA from imposing the user fee assessment should exclude both fee
petition cases and fee agreement cases for which there is outstanding
development.
While we agree that, in general, attorneys should receive their fees
timely, there are cases in which the extra time needed to process the
attorney fee payment is not within SSA's control. These cases include not
only fee agreement cases with outstanding development, but virtually all
fee petition cases, since the attorney is not required to file a request
for payment until 60 days from the date of the decision, and may even
request an extension beyond the 60 days. In addition, some cases take
significantly longer to pay because of the need to develop additional
evidence, such as proof of workers' compensation payments.
The estimated $123 million in proceeds from the 6.3 percent assessment
over the first 5 years would be directed to the title II trust funds.
Thus, any restriction on SSA's ability to impose the assessment would
result in a loss to the trust funds. For instance, in the case of a 30-day
time limit, the Actuaries estimate that about two-thirds of the payments
would be lost[SSA2].
Extending Attorney Fee Withholding to the SSI Program
SSI is a means-tested program providing cash assistance to aged, blind,
and disabled individuals whose incomes and resources are below minimal
levels set by law. Currently, individuals with countable income above $512
a month and countable resources above $2,000 are not eligible for SSI. As
you can see, SSI beneficiaries are among the most vulnerable Americans in
that they have little in the way of other income or personal savings.
Arguably, SSI applicants are even worse off in that they often have
very small amounts of monthly income and are even poorer than SSI
beneficiaries. Any income or resources that they do have is needed for
food, clothing and shelter. It is likely that they may go into debt while
they are waiting for their SSI applications to be processed.
When they finally receive their SSI benefits, those benefits often are
used to pay bills or repay loans that they incurred during the months that
their SSI applications were pending. We are concerned that withholding 25
percent of accumulated benefits might take away funds needed for basic
needs. It would also eliminate the option that SSI beneficiaries and their
attorneys could work out agreements to pay the fee out over time.
In addition, there are other implications with regard to direct
withholding from SSI payments apart from the financial impact on SSI
beneficiaries. There are also serious workload implications for SSA
regarding extending the service we offer attorneys representing Social
Security claimants to SSI claimants. For instance, it would require major
systems changes to existing SSA programs, and would require our field
office employees to take direct actions to pay the attorney fees, which
they do not currently do, as well as responding to requests for
information regarding payments to SSI attorneys and explaining notices. At
this time, we do not have an estimate for the number of workyears we will
need to implement direct withholding of attorney fees in SSI cases.
Review Process
Our procedures to pay attorneys, particularly in fee petition cases
involving large amounts, are admittedly complex. That is why the
Commissioner has requested a review of the attorney fee process that is
currently underway. Part of the Commissioner's review will be to study
ways in which we can better measure our performance in attorney fee
processing. This review will allow us to identify those areas in which we
may be able to improve that performance. You can be assured that we will
share the results of that review. It is expected to be completed by the
end of this year.
Until our review is completed, however, I urge you not to make changes
in the current process. We need time to evaluate the current assessment
process, which has been in place for a very short time. Until we have the
results of our review, we would view any further changes to the program
with extreme hesitation.
Our review of the process will cover a number of issues, including:
- Gathering more current data on the attorney fee process, including a
comparison of fee processing before and after the elimination of the
15-day waiting period and the imposition of the 6.3 percent assessment;
- Ascertaining how best to assemble and maintain management
information about the fee authorization and payment process;
- Reevaluating the need to increase the $4,000 cap;
- Reevaluating our rules for approving fees, especially additional
review for larger fees; and
- Studying how best to coordinate fees among multiple representatives
and within law firms.
We hope to use the results of this review to significantly improve the
process. I will keep you informed of our progress. I would also point out
that the legislation allows SSA to lower the 6.3 percent assessment if the
cost of administering the attorney fee process is less than the revenue
raised by the assessment. As part of our overall review, we are beginning
a study to see whether our original estimates of the costs of providing
the attorney fee payment process and the 6.3 percent assessment are still
roughly equal. If they are not, we will lower the assessment.
Prompt Payment Act
You asked me to comment on the applicability of the Prompt Payment Act
to the attorney fee process. The Prompt Payment Act, enacted in 1982 and
amended in 1988, ensures that companies providing goods or services to the
government are paid in a timely manner. Under Section 3901 of title 31 of
the U.S. Code, a business can collect an interest penalty on late payments
from the government. According to regulations, the Prompt Payment Act
applies in the areas of procurement contracts, vendor payments, utility
payments, and Commodity Credit Corporation payments.
According to the plain language of the statute and its regulations,
SSA's direct payment of attorney fees on behalf of Social Security
claimants is not subject to the Prompt Payment Act. Through the direct
payment system, SSA merely serves as an intermediary to facilitate and
ensure payment of attorney fees owed by the client, the Social Security
claimant. In fact, SSA does not use its own funds to make direct payment
of attorney fees, but simply issues the payment on the claimant's behalf
through the Treasury Department. Consequently, Section 3901 does not apply
to SSA's unique relationship with claimants' attorneys, and SSA is not
required by that law to add interest to the attorney fees it directly
pays.
Conclusion
In conclusion, Mr. Chairman, the Social Security Administration needs
sufficient resources in order to process its work effectively. Lack of
adequate resources affects our ability to timely process not only attorney
fees but all Agency workloads. The Commissioner has presented SSA's FY
2001 budget to the House Appropriations Subcommittee on Labor, Health and
Human Services and Education. That subcommittee has, however, recommended
a reduction of $156 million below the President's request. This reduction
is even greater when compared to the Commissioner's budget request. The
Commissioner is on record saying that funding at this level would
seriously undermine stable staffing and performance for the agency.
As to attorney fee processing, we are committed to providing the best
service possible to the attorneys who represent our claimants, but we face
serious challenges as we work to improve our performance in this area.
Until our review of the attorney fee process is complete, we do not
know what our level of performance will be. As I have pointed out,
however, the 30-day time restriction imposed by the bill could result in a
loss to the Social Security trust funds in excess of $80 million over five
years.
We look forward to working with you and the other members of the
Subcommittee to find ways to meet our resource needs. I will be happy to
answer any questions you may have. [SSA1]In 1970, 20 percent of hearings
were represented; in 1980 that figure was 41 percent. [SSA2]Estimate
from OAct.
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