Confusion reigns at many, if not most, local Social Security offices today. While advice from Social Security agents has always been problematic, things seem to have gotten much worse with the passage of the Bi-Partisan Budget Act last November, which changed two key claiming options.

First, the Act eliminates the file-and-suspend option as of April 29, 2016. This option has allowed one spouse to file for benefits at their full retirement age (currently 66) and then suspend those benefits, permitting them to earn delayed retirement credits of 8 percent per year. This allows the other spouse to claim spousal benefits.

The Act also eliminates the restricted application option for anyone born after 1953. This option has allowed a person to claim spousal (or ex-spousal) benefits at their full retirement age without also claiming their own retirement benefits, thereby letting those benefits grow at 8 percent per year.

These two options are often employed by couples. For example, a husband might file and suspend while the wife files a restricted application for spousal benefits. Combining these options allows both to earn delayed retirement credits up to age 70.

We have recommended these strategies to thousands of clients. Since the changes in the law a surprising number of clients have reported back that their efforts to implement our advice is stymied by an uninformed Social Security agent. All too often, an SSA agent erroneously tells an applicant that our recommendations are not possible.

While we have observed problems in the past, the changes in the claiming rules have clearly added to the confusion. And this confusion is compounded by the failure of the SSA to provide clear  guidance to its agents or to the public as to how it will implement the new rules. (Some guidance has been offered here, but it is far from clear and not comprehensive.)

Here is just one example of the misinformation you might encounter at your local SSA office. A client of ours, Mike, is turning 66 in March; his wife, Jen, is turning 66 in September. He told an SSA agent that he wanted to file and suspend now (before the April 29 deadline) so that his wife could file a restricted application for spousal benefits in September. The SSA agent told him that he could file and suspend only if his wife simultaneously filed for spousal benefits. This claim is completely incorrect.

Anyone (even singles) receiving Social Security retirement benefits can suspend them, provided they have reached their full retirement age. There is no rule that requires a file-and-suspend action to be tied to a spouse’s claiming actions. So, the agent’s statement to our client was groundless, and it could have cost our client tens-of-thousands of dollars. Fortunately for him and his wife, he knew the agent was wrong so he pushed back and asked to speak with a supervisor who did understand the rules.

Here is the bottom line. If you plan to do anything other than the simplest filing for your own retirement benefits, you need to be prepared to educate the SSA agent sitting in front of you. How can you prepare yourself for the chaos you may encounter at your local SSA office?

One thing you can do is read about the file-and-suspend and restricted-application options under the new claiming rules. The SSA website  should be place to start, but it presently contains no information about the new claiming rules.  At a minimum, you can check out the useful information on our main website and elsewhere on this blog, especially this post.

Second, if you use a financial planner or CPA, you might turn to them for advice. The problem with this approach is that most financial planners and CPA’s do not know much about Social Security claiming rules.

Third, regardless of how your educate yourself, you need to be prepared to push back if you think you are being misinformed by an SSA agent. If necessary, ask to speak with a supervisor or a “technical expert.” One reliable way to push back is to have copies of the relevant Social Security rules that you can show a poorly trained and confused agent. Helpful information is available here.

Finally, you can avoid the confusion in your local SSA office by filing for retirement or spousal benefits on-line. Use the “Remarks” section of the application form to spell out anything unusual that you wish to do, such as file and suspend. An advantage of this approach is that you have an electronic record of your requests. If the SSA makes a mistake in awarding your benefits, you will have a record that will help you get things straightened out.

As of 4/9/16, the SSA has published some guidance as to how its representatives should implement the new claiming rules. But it has more work to do.

The clearest statement by the SSA was posted around 2/25/16 here. The key element in this new statement is discussed below.

The SSA also recently published some FAQs about “deemed filing” (which applies to the restricted-application option)  that are helpful. And it has finally published some FAQS about file and suspend (or voluntary suspension).

Some earlier guidance has been provided here, here and here, but it is hard to understand and is not comprehensive.

As the SSA publishes statements, we will post links to them here.

The new law seems clear, and we have based our software revisions on our reading of that law. However, virtually every law contains ambiguities that administrative regulations must clarify. So, we cannot be 100 percent certain that our reading of the law will be fully consistent with what the SSA ultimately decides about the implementation of the new rules.

The biggest uncertainty, by far has surrounded the interaction between the file and  suspend option and the restricted application option for married couples. To illustrate, suppose a husband is 67 and his wife is 65, turning 66 in July 2016. Just to simplify the discussion, assume that she has no benefits on her own record. He will file and suspend his benefits before April 29, 2016. If she claims spousal  benefits before April 29, we have no doubt that she would receive them even though his benefits had been suspended. But, if she claims spousal benefits, say, when she turns 66 in July, we are not fully confident that she would receive them while his benefits remained in suspension. Our reports that allow for file-and-suspend (free after ordering our basic report) assume that the wife in this example would receive spousal benefits even if she applied after April 29. But, there is some small uncertainty as to whether that assumption is correct. (A recent post by the SSA may have resolved this uncertainty; see below.)

We emailed this above question to a Social Security contact and received the following helpful email response from the Mid-Atlantic regional office:

“It is important to remember that naming a current spouse on the Number Holder’s Title II [retirement benefits] application who is potentially entitled to spouse’s benefits and appears to meet the factors of entitlement for spouse’s benefits establishes a protective filing for spouse’s benefits and any other Title II benefits he or she may qualify for (See GN 00204.010). Since the husband filed and requested suspension before enactment of the Bi-Partisan Budget Act in 2016 and she is filing in her FRA month, the wife will receive unreduced spouse’s benefits (1/2 husband’s PIA). The husband does not have to request reinstatement of his retirement benefit for his wife to receive benefits on his record.”

On 2/24/16 the SSA published the following on its website:

“If you voluntarily suspended benefits prior to April 30, 2016, you may remain in voluntary suspense status, and the new law will not affect you. Also, if you submit your request before April 30th 2016 and your spouse or children become entitled to benefits either before or after that date they will not be affected by the new rules and will continue to receive payment.”

The last sentence in the quote seems to resolve the uncertainty mentioned above. In particular, the husband, who is 67, can file and suspend by April 29 and the wife can file a restricted application when she turns 66 in July 2016.

Go here and here for earlier posts that lay out our understanding of the new law.

For the SSA’s summary of the relevant section of the law, see Section 831 here.

[NOTE: Our software has been updated to reflect the new claiming rules, so reports are now available. Caveat: if you think you still qualify for the file-and-suspend option, you should first order our new custom report and then contact us for an additional custom report (free) that fully addresses the file and suspend issue.]

[Also note that if you are filing and suspending so that your spouse can use the restricted application (or free spousal) option at a later date, you are the only one affected by this April 29 deadline. The other spouse does not need to file for spousal benefits until they turn 66.]

If you want to use the file and suspend strategy for getting spousal benefits for your spouse while letting your own benefits continue to grow, you must have filed and suspended by April 29, 2016. If you suspend after that date (even though you may have filed earlier), spousal benefits paid on your record will also be suspended. (Keep in mind that if you file and suspend, that eliminates any opportunity for you to use a restricted application strategy to get “free” spousal benefits.)

There are two circumstances in which you (or your spouse) might want to file and suspend. In either circumstance, the person filing and suspending must be age 66 or older by no later April 29, 2016.

If you fall into this circumstance, and you want our help, you should do the following. Order a married persons report from us for $39.99. Then contact us for further free assistance and an additional free report.

CIRCUMSTANCE 1:

This case involves using file and suspend in order to set up a restricted application strategy for the other spouse.

In this circumstance, the spouse (let’s say the wife) who stands to receive spousal benefits must have been born in 1953 or earlier. She can claim spousal benefits at age 66 while letting her own retirement benefits continue to grow, provided the husband has filed prior to her filing for spousal benefits.  That is, she can use the restricted application strategy.

In order for her to get spousal benefits, he needs to have filed for his own benefits. If he wants ,to file and suspend, then he must meet the following two conditions: 1) he is at least 66 years old by April 29, 2016, and 2) he is not four or more years older than his wife. If he is more than four years older, there is no need to suspend. He will be 70 before his wife can file a restricted application.

CIRCUMSTANCE 2:

This case does not involve a restricted application strategy.  Rather, the file and suspend strategy is used to allow the wife to claim spousal benefits and her own retirement benefits (if any) at the same time. To simplify the discussions, assume the wife has no retirement benefits.

The husband wants to wait until 70 to claim benefits. However, if he is 66 or older by April 29, 2016, he can file and suspend and let his own benefits grow until age 70.

In order to claim spousal benefits, the wife must be at least 62. The husband could file and suspend by April 29 provided he is at least 66 but less than 70. This means that the age gap between the husband and the wife in this example could approach 8 years (versus 4 years in Circumstance 1).  For example, if the husband is 66 in March 2016, he could file and then suspend payments until he reaches age 70 in March 2020. Suppose the wife is 8 years younger, so she turns 62 in March 2020. She could claim spousal benefits for one month while his benefits remained suspended. Of course, if the age gap was less than 8 years, she could receive spousal benefits for up to 4 years while his were under suspension. If the age gap is greater than 8 years, nothing is gained by filing and suspending.

If you fall into this circumstance, and you want our help, you should do the following. Order a married persons report from us for $39.99. Then contact us for further free assistance and an additional free custom report that deals with file and suspend.

[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

2) Widowers

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.

[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.