New Social Security Rules Change Filing Strategy for Couples

A 2015 law made a number of changes to Social Security benefit maximization strategies. Section 831 of The Bipartisan Budget Act of 2015 amended the Social Security Act to close two loopholes that primarily affect married couples: The timing of multiple benefits (AKA: “deemed filing”) loophole and the file and suspend loophole.

Timing of multiple benefits

Prior to the reform, Social Security rules, individuals could claim spousal benefits without claiming their own Social Security benefits. By delaying claiming their own benefits, individuals could live, in part, off of spousal benefits while letting their own eventual monthly Social Security benefits grow larger.

Under the previous law, individuals who were eligible for both benefits — as a retired worker themselves and as the spouse (or qualified former spouse) of a retired worker – who were not yet at full retirement age had to apply for both benefits. They would then receive whichever of the two benefits was larger.

The new law expands the rules to apply not just to those who have not yet reached full retirement age, but also to those who have reached their full retirement age under Social Security rules.

The change means you can no longer receive one type of benefit while enjoying a bonus for postponing applying for the other benefit.

Who is affected? 

The law applies to all Social Security beneficiaries who turned age 62 on January 2ndof 2016 or later. However, the new rule does not apply to widow(ers), nor those who are receiving spousal benefits and who are also entitled to receive disability benefits from Social Security as well. Individuals who are receiving spousal benefits because they are caring for the retired worker’s child are also exempt from the new rule.

File and Suspend

The file and suspend loophole allowed beneficiaries who had reached full retirement age to apply for Social Security benefits, triggering payment of Social Security spousal benefits to a spouse. The retired worker could then voluntarily suspend his or her own benefits and let those benefits accrue, while still allowing the spouse to collect spousal benefits.

After the passage of the new law, if you suspend your own benefits, you will also suspend any other benefits you receive from another person’s record.

Example: Suppose you turn 66 this year – your full retirement age – and your spouse turns 62. You could start your benefits this year and take advantage of your full retirement age. Your spouse can also take advantage of his or her spousal benefits based on your record.

Under the previous law, if you suspended your benefit, your spouse could continue receiving benefits. Meanwhile, you let yours accrue until age 70. You get a higher monthly benefit for every month you postpone receiving them – and your spouses benefits could help you postpone them, because they provide some extra money for you to live on while you wait.

Under the new law, if you have not already requested to suspend your benefit by April 30th, 2016, your spouse’s spousal benefit will also be suspended as soon as you suspend your own benefits.

The rule does not apply to spouses who have divorced. If your ex-spouse suspends his or her benefit, it will not affect any spousal benefits you receive.

The new rules will apply to any individuals who turn in a request for a suspension on April 30th, 2016 or later. Note also that Medicare Part B premiums cannot be deducted from suspended benefits. If you are enrolled in Medicare Part B, you’ll be billed directly by the Center for Medicare & Medicaid Services for future Part B premiums, until you resume benefits. If you don’t pay the premiums, you could lose Part B benefits, which cover physician’s bills, lab fees and durable medical equipment.

Furthermore, if you are receiving SSI benefits, suspending your Social Security benefits will also make you ineligible for SSI.

The new rules will apply to any beneficiaries who suspend on or after April 30thof 2016.

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