Sweeping changes to the Social Security laws ushered in by the passage of the Bipartisan Budget Act of 2015 are creating a myriad of questions from our readers and clients. While the rules that were overturned are complicated, removing these claiming strategies does not simplify the Social Security claiming process. The legislation brings to an end some of the benefit claiming strategies that have been foundational parts of many Americans’ retirement planning process.

WHAT IS CHANGING WITH THE NEW LEGISLATION?

In a nutshell, the new legislation removes File and Suspend and Restricted application for those who will reach age 62 in 2016 or later. For those that reach age 66 by April 30, 2016 (Tier 1) and for those that turn 62 by December 31, 2015 (Tier 2), the rules are being changed. For those in Tier 1, you have been grandfathered in. For those in Tier 2, you will still be able to use the Restricted application process, but the other wage earner must file for their benefits first.

MY SPOUSE AND I HAVE ALREADY STARTED BENEFITS, AND WE USED THE FILE AND SUSPEND STRATEGY. WHAT WILL HAPPEN TO OUR BENEFITS?

The good news is that nothing will happen to your benefits! You are grandfathered in.

MY SPOUSE AND I WERE PLANNING TO FILE FOR BENEFITS IN THE NEXT FEW MONTHS – AND WE WERE GOING TO USE THE FILE AND SUSPEND STRATEGY. ARE WE OUT OF LUCK?

Not completely. The legislation allows for a brief window of 180 days after the bill was signed (November 2, 2015) into law for consumers to implement a File and Suspend strategy. Remember, don’t miss these deadlines, and make sure you know what you are doing before you file, as it is basically a permanent decision.

I HAVE NOT SEEN ANY SPECIFIC INFORMATION ABOUT WIDOW(er)’S BENEFITS.

There is nothing in the new legislation that mentions widow(er)’s benefits. Because a claim for widow(er)’s benefits does not require a File and Suspend or Restricted Application, you will remain eligible to claim your own benefit first, and switch to a widow(er)’s benefit later or vice versa. This benefit is tricky because there is a 28.5% reduction is taken early and sometimes with the proper advice, that is not necessary and will not benefit you.

WHAT ABOUT DIVORCED SPOUSE BENEFITS?

While there has been some discussion that the legislation created an unintended consequence for divorcees, the legislation is clear about the Restricted Application. Prior to now, divorcees have had the option to file a Restricted Application at Full Retirement Age and collect a divorced spouse benefit while his or her own retirement benefit accrued delayed retirement credits. It appears that this option is no longer available except for those who will have reached age 62 prior to December 31, 2015.

A seminar on this topic will be held on February 2, 2016 at the Brandon Library at 6:00 p.m. Reservations are required as seating will be limited. Call us to reserve a seat at 601-954-0699 or visit our website at www.pillarsllc.com or email us at dthompson@pillarsllc.com.