You have likely heard that the House of Representatives passed 2015 budget legislation this week. The pending bill, now with the Senate, contains several provisions designed to close perceived loopholes in social security claiming strategies. Those who appear to be most affected by this legislation are those who have yet to claim their benefits and who employ the file-and-suspend/restricted spousal application strategies. In short, this pending legislation could impact planning for your social security benefits.
The proposed changes
The proposed legislation would eliminate one of the more commonly used strategies to maximize overall married clients’ benefits. Under the proposal, the ability to file for dependent spousal benefits on a retiree’s record, if that retiree is not currently receiving his or her benefits (i.e., if he or she has suspended benefits), will be eliminated. The dependent spouse would be restricted to receiving the higher of his or her own or spousal benefit.
This is our understanding of some of the proposed changes:
If you turn age 62 after 2015, the opportunity to file a spousal-only restricted application will be eliminated. This would not impact your ability to file and suspend your own benefit in the future at your full retirement age (FRA).
If you turn age 62 by year-end 2015, you may still be able to employ a restricted application for spousal dependent benefits when you reach your FRA. This option would only be available if your retiree spouse is receiving monthly benefits. Your spouse could not currently be suspending his or her benefits.
There appears to be no impact on survivor benefit claiming strategy rules.
Many questions not yet answered
There are many questions still open regarding the law, most notably: what impact, if any, will the new law have on those already employing the current file-and-suspend/restricted application strategy? In addition, will there be any grandfathering of existing beneficiaries?
We are monitoring these proposed rule changes closely and will let you know as soon as possible the provisions of the final law and its possible impact on your social security planning.
In the meantime, if you have any questions or concerns about the information shared here, please feel free to call our office at 978-774-2266.
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