SSR 82-39: TITLES II AND XVI -- USE OF TRUST OR ESCROW ACCOUNTS IN COLLECTION OF ATTORNEY FEES

(PPS-68)

SSR 82-39

PURPOSE: To state the policy on the use of trust or escrow

accounts in collecting attorney fees for representation before the Social

Security Administration (SSA).

CITATIONS (AUTHORITY): Sections 206(a), 207, and 1631(d)(2) of the

Social Security Act; Section 413(b) of the Black Lung Benefits Act (part B

of Title IV of the Federal Coal Mine Health and Safety Act of 1969, as

amended); Regulations No. 4, sections 404.1720 through 404.1740;

Regulations No. 10, sections 410.686b through 410.587a; Regulations No.

16, sections 416.1520 through 416.1540.

PERTINENT HISTORY: Legal organizations and individual attorneys

have asked whether the use of trust or escrow accounts as a means of

collecting attorney fees in connection with Social Security and black lung

claims is consistent with the fee provisions of the law and

regulations.

As a condition for undertaking representation, some attorneys solicit

from Social Security or black lung claimants a deposit of money in a trust

or escrow account as a means or assuring payment of the attorney's fees.

The claimant may be asked to place funds into a trust or escrow account at

the commencement of representation on a noncontingency fee basis, or in

connection with a contingency fee agreement. In title XVI claims

especially, some agreements may call for the claimant to deposit the first

benefit check into a trust or escrow account pending approval of a fee by

the Social Security Administration.

In regard to title II, title XVI, and black lung claims, the law provides

that the Secretary may, by "rule and regulations, prescribe the maximum

fees which may be charged" for services performed in connection with such

claims, and that any agreement violating that rule or regulation would be

void. the law also prohibits the charging or collecting of a fee, directly

or indirectly, in excess of the maximum fee prescribed by the

Secretary.

ms, the law provides

that the Secretary may, by "rule and regulations, prescribe the maximum

fees which may be charged" for services performed in connection with such

claims, and that any agreement violating that rule or regulation would be

void. the law also prohibits the charging or collecting of a fee, directly

or indirectly, in excess of the maximum fee prescribed by the

Secretary.

In certain cases the term "fees which may be charged" could be

interpreted to include any amounts exacted by an attorney from a

claimant's property, whether by way of a retainer, deposit in a trust or

other escrow account. etc. If, however, the exaction is more than security

for payment of a potential debt, it should not be considered a "fee". For

example, a sum deposited under a trust or escrow agreement, which the

claimant willingly entered into, could not legally be characterized as a

"fee" if the agreement explicitly states that any money in excess of the

fee authorized by SSA will be returned to the claimant when SSA approves a

fee or when the claimant pays the attorney an amount SSA approves as a

fee.

Applicable to title II, title XVI, and black lung benefits, the law

provides that: "The right of any person to any future payment under this

title shall not be transferable or assignable, at law or in equity . . ."

This provision prohibits payment directly by SSA to a transferee or

assignee of the claimant or someone else on his or her behalf. However,

this provision doe snot preclude a claimant from using the benefits after

receipt, any more than it precludes a claimant from using any other

personal property as he or she sees fit. Thus, the placement of a

claimant's funds (whether from benefit payments or other sources) into a

trust or escrow account prior to and contingent upon SSA's authorization

of a fee for the attorney's services is not a transfer or assignment

within the meaning of the law.

ts after

receipt, any more than it precludes a claimant from using any other

personal property as he or she sees fit. Thus, the placement of a

claimant's funds (whether from benefit payments or other sources) into a

trust or escrow account prior to and contingent upon SSA's authorization

of a fee for the attorney's services is not a transfer or assignment

within the meaning of the law.

Beyond these considerations, the fee provisions of the law that apply to

title II and black lung claims differ significantly in one respect from

the provisions applicable in title XVI claims. In title II and black lung

cases, to assure that the claimant's attorney will be paid at least a part

of the fee SSA approves, the law requires SSA to directly pay the attorney

the authorized fee (up to a statutorily prescribed limit) our of the

claimant's past-due benefits. In title XVI claims, there is no such

statutory authority which could serve to encourage attorney

representation. Thus, establishment of escrow and trust accounts, under

agreements willingly entered into, is a mechanism that may encourage

representation of claimants in title XVI claims, where otherwise the

prospect of attorney representation would not exist.

As noted above, in title II and black lung claims, the law mandates that

SSA will directly pay to an attorney the amount of the authorized fee (up

to the prescribed limit) out of the claimant's past-due benefits in cases

where a title II or black lung claimant and his or her attorney have

entered into a trust or escrow account agreement, the money deposited in

the trust or escrow account may have been paid over to the attorney, in

accordance with such agreement, after SSA's award of benefits to the

claimant but before direct payment of the authorized fee out of past-due

benefits

t-due benefits in cases

where a title II or black lung claimant and his or her attorney have

entered into a trust or escrow account agreement, the money deposited in

the trust or escrow account may have been paid over to the attorney, in

accordance with such agreement, after SSA's award of benefits to the

claimant but before direct payment of the authorized fee out of past-due

benefits. Were SSA to make direct payment to the attorney out of past-due

benefits without taking into account the money paid to the attorney out of

the trust or escrow account, it would be highly probable that the attorney

would have "collected" a total fee in excess of the fee authorized by SSA,

and thus find himself in violation of the fee provisions of the law and

regulations. Therefore, while the law mandates direct payment of attorney

fees in title II and black lung cases, that mandate need not be construed

so rigidly as to force SSA to make a fee payment when it is known that

that payment, when added to monies already collected would place an

attorney in violation of the law and SSA's own regulations.

POLICY STATEMENT: Consistent with Social Security law and

regulations, an attorney may solicit from Social Security and black lung

claimants whom he or she represents before SSA a deposit of money into a

trust or escrow account as a means of assuring payment of the fee for

services in connection with such representation; provided that :

At the time the attorney petitions for a fee, the amount of money held in

the trust or escrow account must be disclosed to SSA.

In title II and black lung cases, when the amount authorized by SSA as an

attorney's fee is less than the total of (1) the money paid to the

attorney from a trust or escrow account, and (2) the amount withheld from

the claimant's past-due benefits the direct payment of the attorney's fee,

SSA will reduce the amount of direct payment to the attorney by the amount

that such total exceeds the authorized fee.

ack lung cases, when the amount authorized by SSA as an

attorney's fee is less than the total of (1) the money paid to the

attorney from a trust or escrow account, and (2) the amount withheld from

the claimant's past-due benefits the direct payment of the attorney's fee,

SSA will reduce the amount of direct payment to the attorney by the amount

that such total exceeds the authorized fee.

If the total of withheld past-due benefits and money paid from a trust or

escrow account is equal to or less than the amount of the authorized fee,

there will be no reduction in the amount paid tot he attorney from

past-due benefits.

EFFECTIVE DATE: This policy is applicable to all claims or

proceedings pending before SSA as of the publication of this policy

statement in any claim or proceeding where this policy was applied prior

to the publication of this policy statement, such action will be deemed to

have been taken properly and in accordance with interim procedures

existing at that time.

DOCUMENTATION: A copy of the trust or escrow agreement or proof

that any money from the trust or escrow account in excess of the

authorized fee has been returned to the claimant must be provided to SSA

upon request.

CROSS-REFERENCES: OHA Handbook, section 1-264(4); POMS sections

GN03920.001, GN03920.070, GN03970.005