Social Security Spousal Benefit Timing Strategies End for Some



The Bipartisan Budget Act of 2015 (H.R.1314), signed into law Nov. 2 by President Obama will, among other things, end a couple of strategies that have allowed many people at retirement age to claim spousal Social Security benefits while letting their own grow to the maximum amount.

Under a prior law passed in 2000, an individual could “file and suspend” his or her Social Security benefits until age 70. Thus, for a married couple, Spouse A could claim Social Security retirement benefits when reaching full retirement age, but choose to not receive them. As a result, however, his/her dependents, including a spouse and children, would be able to receive Social Security benefits on Spouse A's record. The amount that the dependents could receive is equal to up to 50 percent of Spouse A's benefit. Under the new law, as of May 2016, none of Spouse A's dependents can receive a benefit based on Spouse A's record by using this strategy.

The new law also affects “deemed filing.”  Under this strategy, current and former spouses are able to file for benefits at age 66 based on a spouse or ex-spouse who is receiving Social Security or has “filed and suspended.” The spouse using the deemed filing strategy can restrict his/her application to exclude benefits until age 70. Under the new law, if the filer turns 62 in 2016 or later, he/she would be required to file for both and only get the higher benefit.

Sec. 831 of the new law provides that spouses who are currently collecting benefits as a result of the “file and suspend” rule can continue to do so without change. In addition, those who file and suspend in the six months after the bill is enacted will be grandfathered and allowed to use that method. However, the restriction on the deemed filing rule takes effect in the beginning of 2016, so a spouse who turns age 62 in 2016 will only be able to take the larger of his or her own retirement benefit or spousal benefit when using that strategy.

The change in the law has generated concerns about Social Security benefits being cut. However, Web Phillips, senior legislative representative at the National Committee to Preserve Social Security & Medicare, told BBNA Nov. 3 that only a handful of people relative to all those who receive Social Security benefits take advantage of the file and suspend strategy and it won't have a big financial impact on Social Security. The more important impact of the budget law is extending the life of the Social Security Disability Insurance Program through 2022, he said. There are 11 million people who get disability benefits, and if Congress hadn't acted, come the end of 2016 their benefits would be short by 20 percent. “In this bill Congress extended the life of the disability benefit program through 2022 and we think that is the headline,” he said.

AARP told BBNA in a Nov. 3 email, “The claiming strategies impacted would apply entirely to future beneficiaries who have at least some time to adjust their claiming strategy. Anyone who is today benefiting from the claiming strategies impacted in this legislation would be able to continue to receive enhanced benefits.”

The budget legislation also included increases in pension plan premiums paid to the Pension Benefit Guaranty Corporation, an extension of pension “smoothing” provisions for defined benefit plan funding and a repeal of requirements that large employers immediately enroll new full-time employees in their health plans. 

See related story, Budget Bill With Pension Premium Hike Headed to Obama

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