Monthly Archives: October 2015

File-and-Suspend and Restricted Application Strategies Eliminated Soon

[NOTE: Our software has been updated to reflect the new claiming rules, so reports are now available.]

Legislation  that has worked its way through Congress as part of the bill to raise the Federal debt ceiling would eliminate two claiming strategies used by many seniors: 1) file and suspend, and 2) restricted application. See Section 831 of the bill.

The President signed the bill into law on 11/2/15. It will go into effect on April 29, 2016 (unless the SSA chooses to extend this deadline).

In its current form (as of 11/2/15), the law will have the following effects:

File and Suspend

This strategy allows a spouse, who has reached full retirement age, to file for retirement benefits and then suspend them so that they continue to earn delayed retirement credits. The principal purpose for filing and suspending is to allow the other spouse to claim spousal benefits.

Those who are currently using this strategy, and those who employ it by April 29, 2016 are unaffected by the legislation.

Those who file and suspend after about early May 2016 will also have all auxiliary benefits suspended. The principal implication is that suspending one’s retirement benefits will also cause a suspension of spousal or other dependent benefits.

Restricted Application

This strategy is presently employed by people who have reached their full retirement age and their spouse has already claimed a retirement benefit. They can claim a spousal benefit while letting their own retirement benefit continue to grow.

Under the proposed legislation, those born prior to 1954 can continue to use this strategy.

Those born in 1954 or later will not be able to use this strategy. People in this category who claim a spousal benefit, even after they have reached their full retirement age, will be forced to also start their own retirement benefit.

We are monitoring this important development and will use this space to keep you informed.


Medicare Premium Alert

A number of forces have converged to create a situation where some Social Security beneficiaries may experience substantial increases in their Medicare insurance premiums.

This past year, in part because of the lower price of gasoline, the measured change in the cost-of-living index (CPI) that is used to adjust Social Security benefits is negative. This means the following will not change next year:

a) Social Security retirement benefits;

b) The maximum taxable income on which Social Security benefits have to be paid;

c) Medicare insurance Part B premiums for the majority of Social Security beneficiaries who        now pay $105/month and have their premiums deducted from their Social Security checks.

Because there is requirement that Medicare cover 25% of expenses from premiums, Medicare recipients who do not fall under the conditions described in (c) above will have to make up the difference to bring the revenues from premiums up to 25%. This means that these other Medicare recipients could experience substantial increases in their Part B premiums. While the numbers have not yet been released, these increases could be around 50%.

Unless there is a change in the law or the Obama administration finds a way around this problem, the following groups will be affected:

A) People who enroll in Medicare in 2016

B) People who pay premiums directly to Medicare. This will include people who have chosen to delay claiming their retirement benefits, but have signed up for Medicare.

C) People who pay higher-income Medicare premiums. These are individuals who have income (MAGI) over $85,000 or married couples with income over $170,000.

While these increases in premiums may last only one year, a new law passed this past spring will increase Medicare premiums in 2018 for higher-income individuals and families. At present, we can only forecast how much these premiums will increase. Projections from the Kaiser Family Foundation can be found here .

We do not recommend changing Social Security claiming strategies based on these possible premium changes. The purpose of this post is to provide an alert to those people who might be affected.