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CCH® UNEMPLOYMENT INSURANCE — 10/8/08

SSA proposes major revision to regulations concerning representation

The Social Security Administration, in a lengthy notice of proposed rulemaking, is proposing to recognize firms as claimants' representatives and to move the representation process from one that is paper driven to one that relies primarily on the Internet for filings. In short, the proposed amendments would recognize entities as representatives; define the concept of “professional representative”; authorize principal representatives to sign and file claims for benefits; mandate the use of Form SSA-1696 to not only appoint, but also to revoke the appointment of a representative; require “professional representatives” to electronically register and file requests for reconsideration; require representatives to maintain certain paper documents for hearings before ALJs; and allow the SSA to pay fees directly to a firm rather than to the firm's employee who handled the actual representation.

The proposed amendments also would impose sanctions on attorneys and nonattorneys for refusing to comply with the SSA's regulations, for violating any section of the Social Security Act for which a criminal or civil monetary penalty is prescribed, and for assisting another individual who has been suspended or disqualified. These sanctions could be imposed not only on the representative whom the claimant has appointed, but also upon any attorney or nonattorney who works for or on behalf of the appointed representative and who helps represent the claimant in his or her claim before the SSA.

Comments on the proposed regulations must be submitted to one of the addresses listed in the notice of proposed rulemaking by November 7, 2008, in order to receive consideration. They may be submitted electronically, by mail or telefax, or in person. The full text of the SSA's notice of proposed rulemaking was published in the September 8, 2008, Federal Register (73 Fed. Reg. 51963).

Amendments recognize changes in business practices

The changes proposed by the SSA recognize the shift in Social Security practice from individuals to firms and from paper to computers. Currently, the SSA recognizes attorneys or other persons as representatives of claimants in benefit claims under Title II or Title XVI (Supplemental Security Income —SSI). Although the Social Security Act defines “person” to include partnerships, associations, and corporations, the agency has, until now, only recognized individuals as representatives of claimants.

In its notice of proposed rulemaking, the SSA acknowledges that many representatives now practice in group settings. The amended regulations acknowledge this reality as follows:

• It will no longer be necessary for each attorney or nonattorney representative working for the same firm and representing the same claimant before the SSA to file a Form SSA-1696; rather, the form may be filed by the firm itself.
• The person signing Form SSA-1696 will be the contact person for the firm for the purpose of receiving notices and other information about the claim.
• Fee payments can be made to the firm providing representation, which allows for issuance of the IRS 1099-MISC to the firm, rather than to the individual attorney handling the case. This change is significant because attorneys or nonattorney representatives working for firms who turn over any earned fees to that firm will no longer be put into the position of having to explain to the IRS why the amount reported on a 1099 as “miscellaneous income” does not appear on the attorney's or nonattorney representative's income tax return.

These changes are reflected in proposed amendments to Reg. §§404.1703, 404.1710, 404.1712, 404.1715, 404.1720, 404.1730, 404.1732, 416.1503, 416.1510, 416.1512, 416.1515, 416.1520, 416.1530 and 416.1732.

SSA establishes role of “principal representative”

Although the SSA currently requires a claimant to appoint a principal representative if more than one representative represents him or her, if a claimant has only one representative, that representative will be deemed the “principal representative”.

The principal representative is responsible for disseminating information and requests from the SSA to the claimant and to the claimant's other representatives. If the principal representative's authority ends for any reason, and if there are other multiple representatives, the SSA will appoint one of the other representatives to act as the principal representative unless the claimant changes the designation on Form SSA-1696.

The principal representative now will be allowed to sign and file applications on behalf of a claimant; however, the claimant will have to expressly acknowledge on Form SSA-1696 that he or she is responsible for the information provided to the principal representative for the application.

The agency states that it will send to the claimant and all the representatives notices relating to the appointment, revocation of appointment or withdrawal of a principal representative. However, the notice of proposed rulemaking is silent regarding what other notices, if any, it also would send to the claimant.

The changes regarding principal representatives appear in Reg. §§404.612, 404.1700, 404.1703, 404.1705, 404.1707, 404.1710, 404.1715, 408.1101, 416.315, 416.1500, 416.1503, 416.1505, 416.1507, 416.1510 and 416.1515.

SSA to require electronic filing for “professional representatives”

With the proposed regulations, the SSA seeks to further automate its processes by requiring professional representatives to use the Internet to file Form SSA-1696 as well as when they file requests for reconsideration and for hearings before an Administrative Law Judge. A “professional representative” is defined as any attorney, any individual other than an attorney, or any entity that holds itself out to the public as providing representational services before the SSA (see Reg. §§ 404.1735 and 416.1535), regardless of whether the representative charges or collects a fee for providing the representational services.

Representatives would be required to maintain dated, paper copies of Form SSA-1696 with the signatures of the claimant and the representative. Although a representative may be sanctioned for failure to follow the rules on the electronic filing of appeals, the SSA asserts that it would not penalize a claimant whose representative fails to abide by the electronic filing requirements.

Going forward, the SSA will publish notices in the Federal Register regarding what other forms and processes must be submitted or conducted through the Internet. Provision is made for situations in which electronic access is not possible due to mechanical or system failure. (See Reg. §§ 404.910, 404.934, 404.1703, 404.1707, 404.1713, 416.1410, 416.1434, 416.1503, 416.1507 and 416.1513.)

Access registration required for all representatives

Professional representatives and their employees now will be required to complete an initial access registration, in which they will be required to supply certain personal, professional and business affiliation information that the SSA will use to authenticate and authorize representatives and their employees to do business with the agency. Nonprofessional representatives also will be required to complete an initial access registration, but will not be required to do so electronically. (See Reg. §§ 404.1703, 404.1705, 404.1713, 416.1503, 416.1505 and 416.1513.)

Direct pay via electronic funds transfer would be required

Under the proposed amendments, all direct pay representatives' fees would now be paid by electronic funds transfer. Any firm seeking direct payment of fees must maintain (and provide to the SSA upon request) a signed statement from each attorney and nonattorney representative that the attorney or eligible nonattorney is performing representational services on behalf of the entity. The statements also must assert that any fees should be paid directly to the entity and that the representatives will receive any compensation directly from the entity. Any request for direct payment of fees made by an entity must include an attestation that the entity is in possession of such a signed statement from each attorney or eligible nonattorney who has performed any representational services for the claim in question. Under these proposed amendments, the SSA also would issue IRS Form 1099-MISC to both individuals as well as to firms for payments over the annual aggregate of $600 as set forth in 26 CFR §1.6045-5. (See Reg. §§ 404.1703, 404.1713, 404.1730, 416.1503, 416.1513 and 416.1530.)

Prohibited actions, sanctions and rejection of appointment

The proposed amendments add to the list of prohibited actions in Reg. §§404.1740 and 416.1540 refusing to comply with any of the SSA's regulations, violating any section of the Act for which a criminal or civil monetary penalty is prescribed, and assisting another individual whom the SSA has suspended or disqualified. Violations would be subject to sanctions.

Additionally, the SSA may reject any appointment of a representative if the representative fails to meet the agency's requirements. (See Reg. §§ 404.903, 404.1705, 416.1403 and 416.1505.)

The notice of proposed rulemaking also includes a number of minor changes to improve clarity and consistency.

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