[NOTE: Our software has been updated to reflect the new claiming rules, so reports are now available.]
Legislation has worked its way through Congress (as part of the bill to raise the Federal debt ceiling) that 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 on 11/2/15, so it is now law. It will go into effect on April 29, 2016 (unless the SSA chooses to extend that deadline).
Based on our reading of this new law, some groups of Social Security claimants will not be affected by these changes, while others will lose all access to these claiming strategies.
I. GROUPS NOT AFFECTED:
1) Single people
3) Divorcees who were born in 1953 or earlier.
4) Couples who are already pursuing a restricted application claiming strategy.
These are couples where the primary beneficiary has already claimed his/her benefit and the spouse has claimed a spousal benefit. The spouse will still be able to switch to their own benefit at a later date.
5) Couples who are already pursing a file and suspend strategy.
These are couples where the primary beneficiary has already filed and suspended, and the spouse has claimed a spousal benefit. The spouse will still be able to claim their own benefit at a later date. The primary beneficiary will also be able to claim his/her own benefit at a later date.
6) Couples who are planning to pursue a restrictive application strategy and the person who plans to claim a spousal benefit was born in 1953 or earlier.
These are couples where the primary beneficiary plans to claim his/her benefit in the future (or has already claimed a benefit), but the spouse has not yet claimed a spousal benefit. As long as the spouse was born in 1953 or earlier, the spouse will be able to claim a spousal benefit after reaching 66 and then claim their own benefit later.
7) Couples who plan to pursue a file and suspend strategy before April 29, 2016, and the person who plans to claim a spousal benefit was born in 1953 or earlier.
The new law provides a window of 180 days after the law becomes effective where couples can still use the file and claim strategy.
II. GROUPS AFFECTED BY THE CHANGES:
1) Divorcees who were born in 1954 or later
These divorcees will be able to claim either a spousal benefit or their own retirement benefit (whichever is larger), but they will not be able to switch from one to the other at a later time.
2) Couples where the person who was previously planning to claim a spousal benefit first than switch to their own benefit later under a restricted application strategy was born after 1953.
People born after 1953 will not be able to claim one benefit and then switch to another benefit later.
3) Couples who are planning to pursue a file and suspend strategy, but wait more than six months to file and suspend.
The new law allows people to file and suspend for another 180 days after the law goes into effect. If someone waits more than six months, they will not be able to use this strategy. They will be able to pursue a restricted application strategy if the person who claims the spousal benefit was born in 1953 or earlier.
III. SOME RULES-OF-THUMB FOR INTERPRETING PREVIOUS REPORTS
Here are a couples of suggestions, based on our reading of the law) for helping you to determine whether recommendations in previous reports are valid.
1. If a scenario recommends “file and suspend” it is probably not a valid recommendation. Only if the person can sensibly file and suspend no later than April 29, 2016 will this strategy work. (The exact cut-off date is 180 days after the law becomes effective, which appears to be 11/2/15.)
2. If the scenario recommends a “restricted application” (and no file and suspend involved), it is almost surely a valid recommendation if the person was born in 1953 or earlier. If they were born in 1954 or later, a recommendation to file a restricted application would not be valid. Whether this statement also applies to ex-spouses is unclear at present.