This week’s budget deal (Section 831) that was agreed between Congress and the White House will significantly impact Social Security benefits. In particular, it affects spousal and dependent benefits related strategies, namely File and Suspend and Restricted option. While some language in the new rules needs to be interpreted, and policies and processes at the Social Security Administration need to be changed to reflect the new laws, below is our firm’s understanding of the new rules. While the details are still emerging, here is what you need to know:
- For some 66 is still the magic age, as we state in all our seminars. Those who are already 66, or who may turn 66 within six months of the signing of the bill (April 30, 2016), still have the right to File and Suspend under the old rules. This means they can also trigger benefits for a spouse or dependent child while their benefit continues to grow by 8% per year. “Saved by the Bell”
- Beginning 6 months after the passage of this bill, no one will be able to implement a “File and Suspend” strategy. Benefits based on a worker’s earnings record will no longer be paid to any spouse or other dependent if the worker’s benefit is suspended.
- If an individual has already claimed benefits using a File and Suspend strategy, they will be “grandfathered” and may continue receiving benefits as they are now. Any benefits being paid on the earnings of a worker who has suspended benefits will continue in this circumstance.
- If an individual will have already reached age 62 by the end of 2015, he or she will still have the option of filing a “Restricted Application” at full retirement age. This will allow the claiming of a spousal benefit while their own benefit will accrue delayed retirement credits. It will be possible for the client to switch to his or her own higher benefit at a later date. Keep in mind, though, that one will only be able to receive the spousal benefit if the worker is actually receiving a benefit payment. If the worker has suspended the benefit, no spousal benefit will be payable. This option will be phased out over the next four years. Still a great way to maximize your benefit.
- If an individual will turn age 62 after 2015, he or she will not be able to use the restricted application strategy at Full Retirement Age. If the client applies for any benefit, the application will be considered an application for all eligible benefits, and the amount paid will be essentially equal to the highest benefit. “Deemed Filing”
- Divorcees will no longer be able to take advantage of filing a Restricted Application for divorced spousal benefits only so that their own benefit can accrue the Delayed Retirement Credits. Again, the exception to this rule will be the group who have turned age 62 by the end of 2015.
- Benefits for widows go unchanged.
Anyone who qualifies under this SIX MONTH window of opportunity needs to do so. Usually changes to Social Security occur over several years. This time, it happened in backroom negotiations over the course of days. What is sad is that these filing strategies did not just benefit the rich as indicated in the summary of the legislation; it is going to hit the pocketbooks of Middle America.
The complicated has just become even more complicated, and trust me this is a short summary of the changes in our near future. Please do not hesitate to contact Pillars LLC to have your benefit reviewed. You can go to our website at www.pillarsllc.com or call us at 601-954-0699. We are currently scheduling seminars in our area to help our community with these new laws. Please call if interested in attending or in scheduling for your business.