Wow! Just like that, two strategies that have helped my clients take full advantage of Social Security spousal benefits have been wiped out. As part of the budget deal struck by House Republicans and President Obama to raise the U.S. debt limit, two key Social Security “loopholes” have been closed: “file and suspend” and “restricted application” for spousal benefits.
While I’m still working my way through all of the changes (and few exceptions or some delays in taking effect). The ban on file and suspend will start with suspension requests submitted 180 days after the enactment of the bill. As to filing a restricted application, it appears that “loophole” will go away for any anyone turning age 62 in 2016 or later.
As of Wednesday evening the House had approved the bill. The Senate is expected to vote very soon, and Obama’s signature is absolutely likely.
File and suspend and restricted application for spousal benefits are going away within 180 days of the bills final passing (likely shutting the door in April 2016). Now, folks will still be able to get the 8% annual increase (delayed credits and any COLA’s) by delaying taking benefits after full retirement age, but we won’t be able to use any spousal claiming strategies.
As to filing a restricted application, it appears that “loophole” will go away for any anyone turning age 62 in 2016 or later. If you are already 62 (or will be in 2015) then we should be good to go!
Again, I’m still working the changes to fully understand all of the nuances and it will likely be weeks after the bill becomes law before the new rules are written into my Social Security software programs (yes, I have 2 of them).
If I am working on your current retirement income plan, or have already put a plan in place with you, I’ll get to these changes as soon as possible. For some of you it will be a big change (but we’ll find the best way to work around it that we can) and for others there will be no change at all.
One of two positive things that did change in the bill, is that the 30% of Medicare beneficiaries not subject to the hold harmless provision will NOT see their Part B premiums increase 52% to $159. Now it should just be 15%, to about $123 from $104.90. Forget all the tricks we were contemplating to help you be held harmless, such as filing in 2015 and suspending in 2016. Medicare premiums for 2016 still haven’t been officially announced. We’ll let you know when they are.
The other thing is for those on SSDI (disability). With the disability fund due to exhaust at the end of 2016, and considering the Republican resolution not to authorize a reallocation of funds from the old age and survivors fund without accompanying action to improve the solvency of the Social Security system, it is a relief that this temporary shortfall has been fixed and that people receiving disability benefits will not have their benefits cut by 20%.
I had planned on making the small edits to my book as I do every year, but this is going to be a major endeavor to update my book with the new rules. Stay tuned…
all the best… Mark