Jul 21, 2021

Win For Law Firms

      From Bloomberg Law:

The Social Security Administration must change its procedures for paying attorneys’ fees in disability benefit disputes to allow payments to law firms and payments for work done by lawyers who later join the government, the First Circuit held.

The administration’s requirement that attorneys’ fees be paid to individual attorneys and not to law firms is arbitrary and frustrates the statutory mandate to provide a reasonable legal fee for representing Social Security disability claimants, the U.S. Court of Appeals for the First Circuit said in a July 16 opinion.

The fact that only individual attorneys can serve as representatives in the disability claims process doesn’t justify a limitation on payments that ignores the “practical reality” that law firms “ordinarily are the ultimate recipients of fees paid to salaried associates,” the court said.

The court reached a similar conclusion with respect to the administration’s bar on paying attorneys’ fees for work completed by lawyers who later leave private practice to take a government job. The administration said this rule was necessary to comply with government-wide ethics requirements prohibiting officials from being paid to represent claimants before the administration.

The First Circuit disagreed, calling this logic “inscrutable” and “facially irrational.” ...

     The decision is in the case of Marasco & Nesselbush v. Collins, et al

     Social Security would only have to apply this in the relatively small First Circuit (Maine, Massachusetts, New Hampshire, Puerto Rico and Rhode Island) but if they don't apply it more generally there will be litigation elsewhere. Also, my hope is that those involved with Social Security policy on this issue know that something should have done about this decades ago.

8 comments:

Anonymous said...

Didn’t realize this was even an issue. In my area we just process the fee to the attorney of record no matter who attends the hearing for the NH. The firm then pays the attorneys individually. I thought that why we pay under the EIN?

Anonymous said...

This change is long overdue and should have been made long ago, as Charles mentions. This will not only save law firms hassle, but also hearing offices. In our office, new clients are signed up under the names of the two main partners. When the hearing is scheduled, it's then assigned to an available associate hearing attorney in the same firm. Because a claimant can now only hire an attorney and not a firm, when the hearing is scheduled, new 1696 and fee agreements have to be sent to the client to sign and return. Then the new documents have to be submitted to the hearing office to reflect the proper hearing attorney. Cutting out this step will save time and postage for law firms and the hearing offices. Additionally, having large amount of fees paid directly to me by Social Security has caused the IRS to question me several times about them, causing my CPA to get involved to explain the situation.

Anonymous said...

@10:05

You hit the nail on the head. We run into the same issues. I've also personally been audited by the IRS twice because Social Security sent a 1099 saying it paid me personally "x" dollars, then I have to sign a 1099 over the firm because I just get a flat salary. I guess that's enough to trigger alarm bells at the IRS. This change is long overdue. Plus, based on the first comment, it appears that there is a great deal of disparity depending on where you practice which causes its own headaches.

Anonymous said...

@8:36

That's the problem. Firms want the firms to get the fee, and then they can distribute it to the particular attorney(s) involved. It's a massive tax issue, it causes superfluous forms regarding representation being submitted, and just general confusion. The frustrating part is, I don't recall SSA even arguing they had a rational basis for doing this, just that the systems are set up to pay individual attorneys, not firms, and it would be a hassle to change it.

Anonymous said...

I don’t understand why SSA is in the business of making fee payments. That should be between you guys and your clients.

Anonymous said...

12.04. If the SSA did what every other insurance company did when making settlement, issue a check to the law firm for distribution, then there would be no problem. But, they don't trust the lawyers, maybe for good reason, to do that, going back to the 60's.

So we ended up with this convoluted system that ignores the fact that law firms exist.

Anonymous said...

About 15 years ago, at a NOSSCR confrence in DC, a Social Security official stated the agency was preparing to recognize law firms. The statement was made in front of approximately 1,000 people. Do not recall the individual's name or position.

Anonymous said...

Regarding the 10:02 AM post. I retired from SSA about 11 years ago, and sometime around 2007 or 2008 SSA did indeed have plans to change the Regulations and recognize firms as representatives. A lot of preliminary work was done towards rewriting procedure and updating the systems to do just that.

Then, the plug got pulled. We were told it was because SSA's OGC (Office of the General Counsel) raised objections. Apparently they opined that their reading of the statutes was that the law itself (Title 2, Section 206) only allowed recognizing individuals. Thus, before SSA could recognize firms the law itself had to be changed. It couldn't just be done by a change to the Regs. I don't know if SSA has seriously tried since then to get Congress to change the wording of the statute.