capitalBudget Bill Changes Social Security Filing Strategies

As part of the budget bill (H.R. 1314) to raise the U.S. debt limit which the President signed into law on 11/2/15, two key Social Security filing strategies are closing: file and suspend and restricted application for spousal benefits. The ban on file and suspend will start with suspension requests submitted 180 days after enactment of the bill. The ban on filing a restricted application (also presented as “Claim Now, Claim More Later” in Meld’s SS seminars) will apply to anyone who turns 62 in 2016 or later.

Depending on your birthday, this may affect your Social Security planning:

  • If you are over 62 now (or will turn 62 before 12/31/15), you may still file a restricted application for spousal benefits when you turn full retirement age (FRA). The ability to collect a spousal benefit while your own benefit builds delayed credits (i.e. an additional 8% / per year until age 70), will be closed in four years. Bottom line: If you are turning 66 anytime over the next four years, you may still take advantage of this strategy.
  • File and suspend will be disallowed after six months from the enactment of the law (on approximately 4/30/16). This popular strategy allows a husband, for example, to file for his benefit to entitle a wife to her spousal benefit, after which he immedicably suspends his benefit to build delayed credits. While voluntary suspension will still be allowed, no spousal or dependent benefits may be paid based on a suspended benefit. After approximately 4/30/16 there will effectively be no reason to file and suspend. Bottom Line: Over the next six months, if you are eligible for this strategy (that is, you are over FRA), you will still be able to implement it. After that, it will be disallowed.
  • If you are under 62 as of December 31, 2015, spousal strategies that take advantage of file and suspend and restricted application for spousal benefits will be disallowed.

In summary, there are three phases of implementation of the SS filing strategies with the passage of the budget bill.

  • Next 6 months through approximately 4/30/16: business as usual
    • Anyone over FRA can file and suspend and allow their spouse to claim a spousal benefit, now or later
    • Anyone over FRA can file a restricted application for spousal benefits
  • Through 2019:
    • Anyone turning FRA can file a restricted application for spousal benefits
    • After April 2016 no file and suspend – spousal benefits cannot be claimed on benefits suspended therefore in order for a wife, for example, to receive benefits based on her husband’s work record, the husband must have filed AND be receiving his own SS benefit as well.
  • After 2020: No file and suspend and no restricted application.

Source: Horsesmouth, LLC

Patricia L. Burris, CFP®
Vice President
Corporate & Retirement Plan Services