New Social Security Rules to go into Effect from May 1st

The Bipartisan Budget Act of 2015[1] made significant changes to the Social Security program. The goal was to reduce the Social Security deficits and to affect certain valuable claiming options for retirees.[2]

Under the current Social Security Act, a married individual, when 62 is entitled to both benefits – spousal as well as the worker’s. Initially, such an individual who filed a claim between 62 and his full retirement age was deemed to have filed for larger of the two benefits, also referred to as the “deemed filing” rule. An individual waiting to file until full retirement age had the option to elect the spousal benefit and then switch to the worker’s benefit by the age of 70. This allowed one to receive the spousal benefit while deferring the worker’s benefit, which could continue to grow with deferral credits.

However, recently Congress has wiped out this deemed filing rule, for it had several “loopholes”, as well as to stop married couples and families from collecting more in Social Security than was intended.

The new law eliminates the opportunity to switch benefits by extending the concept of “deemed filing,” to the age of 70. As a result, anyone filing for benefits will receive the larger of either of the benefits. This new rule is to come into effect from May 1, 2016 (180 days after the Act becomes law). According to the reform, no one will be able to voluntarily “file and suspend” benefits for the purposes of either: (a) triggering a spousal benefit for a spouse; or (b) protecting the right to file for retroactive benefits.

The 180 days grace period will give an opportunity to seniors aged or about to get to 66 years of age before May 1st, to voluntarily “file-and-suspend” in order to be grandfathered into the current rules.

The core benefits of Social Security and the factors used for calculating the worker, spousal, and survivor benefits will remain the same. Also, the persons who already receive Social Security payments would not be affected by the new legislation and the changes would be applicable to spousal benefits and to switching from spousal benefits to worker benefits before the age of 70.

Married individuals are still eligible to claim payments worth up to 50 percent of the higher earning spouse’s benefit, if that amount is higher than payments based on the lower earning spouse’s work record. Widows and widowers inherit their spouse’s benefit payment when it is higher than their existing benefit. All workers also have the option to increase their monthly Social Security payments by delaying claiming them till the age of 70.

The reform is regarded as a threat to financial security of as many as 21.3 million Americans. The bill was passed by the House of Representatives and Senate with overwhelming majorities and without public notice or debate as the changes were struck in the middle of an "emergency bill".

Leave a Reply