Sometimes a disability case will require multiple hearings, an appeal to the Appeals Council, or even a trip to federal district court. These sorts of cases can drag on for many years and require a lot of work for disability attorneys. In these situations, a lawyer is permitted to file a fee petition with Social Security to allow their fee to exceed the maximum of $6,000.
First, the basics: Federal law generally limits the fees charged by Social Security disability attorneys to 25% of your backpay, or $6,000, whichever is lower. Back payments are benefits that accrued while you were waiting for Social Security to approve your case. The amount of your backpay depends on your onset date of disability, when you filed for benefits, and whether you're applying for SSDI or SSI. (To learn more, see Nolo's article on how SSDI back benefits are calculated.)
Typically, SSA withholds one-quarter of your past-due benefits and pays the money directly to your attorney. The direct payment of fees saves disability recipients the hassle of arranging to pay their attorneys, and allows attorneys to receive payment without needing to bill their clients and wait for the money. The fee is capped at $6,000 but is often much less, especially if you are approved for benefits without having to wait for a hearing. Under the contingency fee arrangement required by Social Security, your attorney may not charge a fee unless your case is successful.
In order to collect fees from a client, an attorney is required to submit a fee agreement to Social Security. The fee agreement spells out the terms of the contingency fee and must be signed by both attorney and client. For more details, see Nolo's article on how much disability lawyers charge.
In a few situations, your attorney may be able to charge more than the $6,000 cap. Here are some examples:
A common situation that requires a fee petition is where a claimant has a former disability lawyer who did not waive his or her fee when the client hired a new lawyer. When this occurs, the current disability attorney need to file a fee petition with Social Security so that the fee can be apportioned between the two attorneys. If both lawyers did a significant amount of work, Social Security may approve a fee higher than $6,000.
To charge a higher fee, your lawyer must submit a "fee petition" to Social Security and Social Security must approve it before the lawyer can ask you for the additional fees.
Most standard fee agreements will contain a provision that an attorney may submit a fee petition to Social Security if he or she has performed an unusually large amount of work on your case. These are called "two-tier agreements" because they provide for two different scenarios:
A fee petition must contain an itemized list of the attorney's activities on the case. Your attorney will send the fee petition to Social Security after your case is complete, and will send a copy to you as well.
Social Security will approve the petition only if the fees requested by the attorney are reasonable. Social Security's decision as to whether the requested fee amount is justified will take into account the nature and amount of work performed by the attorney, the complexity of the case, the attorney's knowledge and experience, and the level of appeal the case went to. You can object to or comment on the fee petition if you wish.
If your disability claim is ultimately denied, your lawyer can request a fee under the fee petition process. But if you and your attorney signed a contingency fee agreement (where the lawyer agreed to charge a fee only if you won your case), and the agreement was accepted by Social Security, the attorney may not collect a fee under the fee petition process.
The $6,000 cap (or 25% of your backpay limit) does not apply to your attorney's out-of-pocket expenses. Disability attorneys often incur up-front costs in pursuing a disability case, mostly from obtaining medical records and getting opinions from treating doctors. Your lawyer may also charge you for the cost of postage, travel, copying, and long-distance phone calls.
Your attorney will ask you to sign an expense agreement when you hire him or her. Read the expense agreement carefully so that you know what exactly it covers, and whether you will be responsible for repaying the expenses even if you lose your case. In the typical case where a claimant is approved for benefits after a disability hearing, the expenses will usually be no more than a few hundred dollars.