If you lose your disability appeal hearing and your lawyer appeals the case to Social Security's Appeals Council and federal district court, your lawyer will end up spending more time on your case than usual. In this situation, your lawyer is usually allowed to submit a fee petition to the Social Security Administration (SSA), asking to charge you more than the usual maximum fee of 25% of your backpay or $6,000, whichever is lower. (Read our article on disability fee agreements to find out more about the usual fee.) In addition, there are several situations where a lawyer may file a fee petition to avoid not being paid at all.
Lawyers use fee petitions in the following situations to be able to collect payment.
When your case goes to federal court. Many attorneys use "two-tier fee agreements" that allow the attorney to submit a fee petition if the claim is denied at the disability appeal hearing and the case is appealed to Social Security's Appeals Council and federal district court. The two-tier agreement will call for the lawyer to be paid the usual maximum fee of 25% of your backpay, capped at $6,000, if you are approved at the initial application, reconsideration, or ALJ hearing stage, but allows the attorney to petition for fees beyond the $6,000 cap if the case goes further.
If your case is denied. Attorneys are not prevented from requesting a fee under the fee petition process even if your disability claim is ultimately denied. However, if you and the attorney signed a contingency fee contract where the attorney agreed to charge and collect a fee only if the SSA favorably decided your claim, and the SSA's decision is unfavorable, then the attorney may not collect a fee under the fee petition process. The attorney can submit a fee petition to the SSA after a fee agreement is denied only if you won your disability claim.
More than one attorney. If multiple attorneys from different law firms have been involved in the case, each attorney who wants to charge and collect a fee must file a separate fee petition, unless an attorney has waived—agreed not to collect—his or her fee.
Unlike fee agreements, an attorney files a fee petition after the attorney's services in the case have ended. In the petition, the attorney must describe the specific services that you have been provided by the attorney and his or her office. The attorney must send a copy of this fee petition and any attachments to the SSA and to you.
There is no express limit on the amount of an attorney's fee requested under a fee petition, but Social Security ultimately decides the amount of the fee that an attorney receives. Sometimes Social Security will deny a fee petition if the fee is unreasonable or doesn't reflect the amount of time spent on the case.
The SSA will approve a fee only if it's reasonable. To determine how much a reasonable fee would be in a particular case, the SSA will look at the following factors:
Although the SSA's authorization is required for payment of attorney fees, it is not required for the payment of an attorney's out-of-pocket expenses. These expenses may include the cost of making copies, postage, travel, and obtaining your medical records or birth certificate. Before hiring an attorney, you should discuss with your attorney whether there will be out-of-pocket expenses in addition to the attorney's fee.
Note that Social Security does not allow these expenses to include the cost of paralegal or secretarial services, in-house experts, review of fees, or any share of the attorney's overhead or utility costs. If it appears to the SSA that an attorney is attempting to skip the fee petition process by designating some services as out-of-pocket expenses instead of filing a fee petition, or if the expenses appear unreasonable, then the SSA may require the attorney to provide proof of the actual out-of-pocket expenses.
Payments under a fee petition can be paid directly by Social Security. The SSA has set a program in place for direct payment of attorney fees with disability benefits. Under this program, the SSA will withhold part of your past-due benefits for payment of the authorized fee. (For an attorney to be paid under this system, you must be entitled to past-due benefits.) If the SSA withholds an attorney fee from your benefits, the SSA will collect a service charge from the attorney. This service charge is 6.3% of the fee amount paid. The attorney cannot ask you to pay for this service charge.
If you are not entitled to past-due benefits but you owe your lawyer because the SSA approved the fee petition, you must pay the attorney fee out of your current monthly disability benefits.