Wednesday, November 4, 2015

New Social Security Changes buried in Budget Act of 2015 kills "File and Suspend" Strategy for Retirees

The Congress, Senate, and President screwed future retirees and didn't tell you about it.

They cut our Social Security Benefits !!!

On Monday November 2, 2015, President Obama signed into law the "Bipartisan Budget Act of 2015" which was proposed and passed by both the Republicans and Democrats in both Houses of Congress. As part of this Act, the section "TITLE VIII - SOCIAL SECURITY, Subtitle C - Protecting Social Security Benefits" essentially eliminates the ability for future retirees to collect spousal benefits while suspending their own at the same time.

The new Bipartisan Budget Act of 2015 still allows individuals to:
  • "File and Suspend" their benefits once they reach full retirement age, allowing benefits to grow by 8% annually; or to
  • Collect the higher of spousal benefits or the benefits based on their own work record.

But, people cannot both "file and suspend" and "collect" at the same time unless they are already doing so. This means that nothing can be collected from a "suspended" account.

In the past, any person who reached full retirement age could "file and suspend" their benefits. Then, if married (or divorced), they could collect spousal benefits based on their partner's SSI work history. This meant that both a husband and wife could simultaneously suspend their benefits from age 66 to 70, and one of them could collect a spousal benefit at the same time (which is equal to 1/2 of a persons FRA benefit).

However, the new  Bipartisan Budget Act of 2015 prevents anyone from collecting benefits on "suspended" account, and after April 30 2016, nobody can "file and suspend" if they are collecting spousal benefits.

Congress provided very little time for both retirees and near-retirees to react and adjust their retirement strategies:
  • They prevent anyone who turns 62 after December 31 2015 from both collecting spousal benefits and suspending their benefits. Once they have received a benefit (either theirs or spousal), they have forfeited their right to suspend. However, if they do not collect, they may suspend.
  • Those who are 62 and above at the end of 2015 can collect spousal benefits and suspend at the same time.
  • But, to qualify for the above, their spouse has only 180 days to have either: begun collecting or have "filed and suspended" benefits. Since the Act was signed into law on November 2 2015, the 180 day grace period ends on April 30 2016. If a spouse has not filed before this date, the spousal benefit is forfeited.

What steps MUST you take?

There is very little wiggle room in this new law. However, the "small" group of people who are 66 or older can still protect most of their benefits.

  • First, if you are of Full Retirement Age (now or soon), either file for benefits or "file and suspend" before April 30 2016.
  • Second, if you have reached FRA and have not filed - do so immediately. If you do this after April 30 2016, you lose the ability for someone to collect your spousal benefits.
  • Third, if you can file, do so immediately. We anticipate that SSI will experience backlogs as the April 30th deadline nears, and many will be "out of luck" simply due to bureaucracy.
  • Fourth, those of you who are already collecting benefits are "grandfathered-in", meaning you will not lose their benefits. So, don't worry, you are not affected.


Situation 1:Tom 68 has filed for benefits 2 years ago and suspended his payments. His wife, Elaine 66, began collecting spousal benefits and suspended her payments as well. Action: Since they have both filed, above FRA, and already collecting, nothing will change.

Situation 2: Fred is 67, above FRA, but he did not file for benefits. By not filing, Fred's benefits are growing at 8% per year (just like suspending). His wife Alice is 65 and will turn 66 next October, and she expects to suspend her benefits then and begin collecting spousal benefits. Action: Fred must "File and Suspend" NOW. If he does not file before April 30 2016, Alice will not be able to both suspend her benefits and collect spousal benefits in October.

Assuming Fred does file in time, Fred and Alice must make more decisions. If Alice begins to collect spousal benefits, then Fred must "unsuspend" and beging receiving SSI as well. Alice can continue to defer her benefits until age 70 because she was older than 62 on December 31 2015.

Because Alice does is not of FRA before the April 30th deadline, Fred cannot collect spousal benefits on Alice's account.

Situation 3: Mike turns 66 in February. His wife Jean is 64. Action: Mike must file for SSI in February. He can either take benefits or defer. Because Jean is currently above 62, she retains the ability to collect spousal benefits and to defer her own SSI payments. If Mike files after April 30, Jean will lose her option to collect and defer.

Situation 4: Bobby is turning 66 in March 2016. His wife Rachel is 61, and turns 62 on January 1 2016. Action: Bobby should file in March and can defer or receive payments. Rachel cannot defer if she receives any SSI benefits at all whether they be her own or spousal. This is because she is under 62 on December 31 2015.

Why were these changes made?
  • Because only a small group of old people will be affected (those near retirement age)
  • Those already receiving benefits will not care
  • The younger people are too dumb to know what happened
  • The Congress and President want to increase their own retirement benefits
  • To save Social Security?
  • To close a loophole?
  • Because we want to spend more on Government and screw the American public

Notes and references:

H.R.1314 - Bipartisan Budget Act of 2015
  • Subtitle C - Protecting Social Security Benefits
  • Sec. 831. Closure of unintended loopholes.
  • Signed into law by President Obama on Monday November 2 2015
  • Senate Passed
  • Congress Passed

42 USC 402: Old-age and survivors insurance benefit payments
  • Existing SSI Law - prior to Bipartisan Budget Act of 2015

Neither of  two articles below mentions the above changes.

This source helps to describe the changes.

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