Complying with SSA’s New SNT Fee Approval Rule
Christian N. Horde, Esq., LL.M.
Elder Law Committee // The Briefs // March 2020, Vol. 88 No. 3
Author’s Note: Following submission of this article, the SSA archived the new POMS GN 03920.007. However, concern still remains that SSA’s position that services unrelated to direct work before the agency by non-representatives, such as attorneys drafting SNTs, will require fee approval.
The SSA is expected to meet with concerned organizations, such as NAELA, to discuss the issues raised with these new POMS. It appears that the SSA does plan to go back to the drawing board, given the concerns and confusion raised about the examples. Until then, attorneys should be prepared for further updates as these rules may come back in a new form, for better or for worse. The following explains the rules that were briefly in effect, the many ongoing concerns the legal community has with them, and what the future may hold.
On June 25, 2019, the Social Security Administration (“SSA”) issued a new rule under the Program Operations Manual System (“POMS”), effective the same date. The rule is found under POMS GN 03920.007 and is titled “Legal and Specialized Services Not Subject to Fee Authorization.”1 Generally, the SSA must authorize a representative’s fee when the representative’s services are performed “in connection with” a claim before the agency.2 This new POMS rule is designed to address what services might be considered “in connection with a claim.” Paragraph B lists types of services that may not (or may) require fee authorization, which includes “establishing a trust account.”3 Paragraph C lists services that generally require SSA to authorize fees, but does not mention trusts. This new rule, however, has caused alarm in the legal community for several reasons: (1) confusion to which trusts it applies to and their connections to a claim, (2) the time it will take for fee agreements to be approved, and (3) what attorneys need to do with fees until fee approval.
Specifically, it was the examples in the new POMS that gave alarm that the SSA may require attorneys to submit fee authorization requests when special needs trusts (“SNTs”) are drafted or amended “for the purpose of affecting clients’ eligibility for benefits.”4 The new examples appear to apply the fee authorization rule to those who simply consult with a person with a disability, draft an SNT, and potentially include attorneys who prepare a third-party SNT for a child who may one day be eligible to receive Supplemental Security Income (“SSI”).
Historically, the SSA did not require attorneys to submit fee authorizations for drafting SNTs. More importantly, the violation of the SSA’s fee authorization process can result in a misdemeanor conviction for the attorney with a $500.00 fine and up to one year in jail for each occurrence.5 Depending on how the SSA interprets this new rule, this can greatly affect many attorneys’ practices that include SNT planning.
The POMS Examples
In Paragraph D, it is the first three examples that expressly include an attorney performing SNT drafting services, and it is those three examples that raise the difficulty in assessing when an attorney must comply with the SSA fee authorization process. The remaining four examples cover separate issues that do not involve SNT drafting.
Mary Smith, a woman whom we have found disabled under title II and allowed monthly disability benefits, hires an attorney, Ms. Roberts, to establish a trust with $10,000 in assets. We do not need to authorize Ms. Roberts’ fee for the services provided to establish the trust.
Explanation: An attorney may establish a trust for an individual who is already receiving benefits without the need of our authorization of the fee he or she seeks, so long as the trust was not established to protect continuation of SSI eligibility.6
The first example is a simple start. Mary starts receiving Title II Social Security Disability Insurance (“SSDI”) benefits, which is not means tested,7 therefore no fee authorization is required for the trust established. In other words, because no trust affects these benefits, the SSA does not have to authorize the fee.
However, the reverse is also true. If Mary’s trust is established in connection with SSI eligibility (e.g., to protect continuation of SSI or create eligibility before applying), then fee authorization is required. Prima facie, this phrase reads that every SNT, whether first party, third party, or pooled, for an SSI recipient is established in part to protect continuation of SSI eligibility. Could this mean that whenever an attorney establishes an SNT for an SSI recipient, they must request fee authorization to the SSA? In all likelihood, no. Taking the entire scope of the POMS rules concerning SSA fee authorization into consideration, fee authorization is not required unless the SNT is established “in connection with a claim.”8 But if SSA takes the position that the monthly resource test for SSI is a claim, then does the drafting of the SNT require fee authorization? There is no definitive answer because the law, regulations, and policies are too vague. The following example does not make things any clearer.
Sometime later, Ms. Smith applies for SSI. She also asks Ms. Roberts to revise her trust because she has changed her name. The attorney can again collect a fee for the services provided on the trust due to the name change without our authorization.
A month later, we notify Ms. Roberts that the trust language needs to be revised again because, as drafted, it does not meet our requirements for exception to resource counting. She discusses the issue with the claims representative (“CR”), amends the trust, and submits the amended trust to the agency. The services related to amending the trust and communication with the agency are performed in direct connection with Ms. Smith’s pending SSI claim, and fees for those services require our authorization.
Explanation: If a representative assists a claimant or recipient to alter an established trust for reasons such as a name change or the death of a parent, we do not need to authorize the fee because the legal service is not performed in connection with a pending claim or future claim and the parties have not submitted a fee agreement or a fee petition. However, the second transaction affects whether the assets in Ms. Smith’s trust are countable resources for SSI purposes, and therefore her potential eligibility for benefits, so we must authorize the fee the representative may seek for the preparation of documents or conducting business with us.9
Regarding the name change, no fee authorization is required because Ms. Roberts changing her name does not affect her SSI claim. But the second transaction affects whether the assets in Ms. Smith’s trust are countable resources for SSI purposes, and therefore her potential eligibility for benefits, so the SSA must authorize the fee the attorney may seek for the preparation of the trust documents or conducting work with SSA.
The language in the SSA’s explanation, however, could be interpreted that fee authorization is required any time an attorney prepares trusts that affect whether the claimant’s assets are countable for SSI purposes even if the attorney’s services only affect the claimant’s pending or future claim for benefits. If that reasoning is followed in other matters, then almost all attorneys who draft an SNT must submit SSA fee authorization, even when there was no intent by the attorney to ever represent the person before the SSA. The final example only adds to the confusion.
Clara Waters, a grandmother, establishes a trust for Rainbow, her granddaughter through Mr. Johnson, an attorney. Generally, we would not need to authorize Mr. Johnson’s fee so long as the trust was not established for the purpose of affecting his clients’ eligibility for benefits.
Explanation: An attorney may establish a trust for a minor child for many reasons. If a trust is prepared in order to affect someone’s eligibility for benefits, we must authorize the representative’s fee for preparation of the trust. However, if a trust is prepared for a reason unrelated to a claim for benefits, we may not need to authorize the fee charged for preparing the trust. Depending on the information in a claims file, we may need to obtain an explanation from the representative or claimant if there is a question about the purpose of the trust, or about why it was established. If a trust is prepared not in connection with a claim, but the parents later apply for benefits and enlist the assistance of an appointed representative (the same attorney or someone else) to prepare or provide information to us, we would authorize fees for only those services provided in connection with a matter before us.10
Who is the attorney’s client in this example? It does not say. Usually, the grandmother and attorney would enter into a fee agreement to prepare an SNT for the granddaughter to be funded with the grandmother’s assets. If the attorney represented Rainbow, then the example could make more sense. However, it is unusual for an attorney to represent the granddaughter in a situation when the money funding the trust is coming from the grandmother or parent. If the client is the grandmother, it is uncertain how the grandmother’s benefits would be affected by the establishment of a third-party SNT for her granddaughter.
It is standard that unfunded third-party SNTs are established for the purpose of securing potential future benefits. Is this kind of drafting subject to fee approval? The answer here is no. The SSA has stated in the POMS they do not want unfunded third-party SNTs sent in for review.11 What about funded third-party trusts? Some attorneys agree it is reasonable to conclude that they must be reviewed only if Rainbow is currently on SSI benefits. Some are not so sure.
Furthermore, what if the attorney has no idea a claim was presented? What if the granddaughter’s parents submit a claim for SSI while the grandmother’s attorney is drafting the SNT for the granddaughter? What if the attorney does not submit fee authorization to the SSA and there is a pending claim for benefits by the granddaughter? Is the attorney being fined or going to jail? The SSA still does not properly explain the situation because it states, “we would authorize fees for only those services provided in connection with a matter before us.”12
Attorneys and groups, such as the National Academy of Elder Law Attorneys (“NAELA”), are now working to clarify these issues with SSA. In the meantime, if you are drafting special needs trusts that require (or you believe SSA may require) fee authorization, you should familiarize yourself with the SSA’s fee petition process outlined below in preparation of the future. This is not to be confused with SSA’s fee agreement process for attorneys representing applicants for benefits in front of SSA, which is an entirely different agreement.
Fee Petition Process
It is advisable that legal fees be held in your firm’s trust account until SSA approves the fee petition. Remember to have a separate fee agreement for your client in writing. Keep billable time records even if you only charge a flat rate. Understand that the SSA can take more than a year before they approve your fee petition.
- Use the SSA-1560 Fee Petition form.13 This form will include dates of service, time, amount sought, and amount held in your trust account pending SSA fee approval.
- Both your signature and the client’s are required. Attach all supporting documentation, including your written fee agreement.
- The form and supporting documentation are filed when services are completed at the local SSA office for matters concluded below the ALJ hearing level.
- Your fee petition will be decided by a fee authorizer at one of the six Program Services Centers.14 The petition is evaluated under 20 C.F.R. § 416.1525(b), which lists the standards being reviewed by the fee authorizer.
Two recent Executive Orders15 were signed on October 9, 2019, that may require this new rule to go through the Administrative Procedures Act (“APA”) regulatory process. The SSA may want to quickly redo and publish the POMS GN 03920.007, but they may not have the authority to do so unless they go the APA federal regulation route under these new Orders. The APA process includes a formal notice and comment period with responses from SSA before the final adoption process; however, in our opinion, it would be much more beneficial for the legal community to be able to comment and have its concerns addressed by SSA to lead towards a rule that is better than what was originally published. The future is still uncertain, so stay tuned so you and your practice can be prepared for what is next.
Christian N. Horde, Esq., LL.M., is an associate attorney at The Elder Law Center of Kirson & Fuller located in Orlando, Florida, and is chair of the OCBA Elder Law Committee. He practices in the areas of estate planning, Medicaid planning, and special needs trusts. He received his J.D. and LL.M. in Elder Law from Stetson University College of Law. He has been a member of the OCBA since 2017.
- See https://secure.ssa.gov/apps10/poms.nsf/lnx/0203920007.
- 42 U.S.C. § 406.
- POMS GN 03920.007C.
- POMS GN 03920.007D Example 3.
- 42 U.S.C. § 406(a)(5).
- POMS GN 03920.007D Example 1.
- 42 U.S.C § 423.
- POMS GN 03920.007A.
- POMS GN 03920.007D Example 2.
- POMS GN 03920.007D Example 3.
- POMS SI 01120.202H.4.b.
- POMS GN 03920.007D Example 3.
- See https://www.ssa.gov/forms/ssa-1560.pdf.
- POMS GN 01050.051B.1.
- See https://www.federalregister.gov/documents/2019/10/15/2019-22623/promoting-the-rule-of-law-through-improved-agency-guidance-documents and https://www.federalregister.gov/documents/2019/10/15/2019-22624/promoting-the-rule-of-law-through-transparency-and-fairness-in-civil-administrative-enforcement-and.