Social Security Rules change

The Bipartisan Budget Act of 2015, which was signed into law on November 2, 2015, has a provision in Subtitle C, Section 831, which is designed to “close unintended loopholes”.

One of those “loopholes” is called “File and Suspend”. This technique currently allows the spouse of a person who has reached Full Retirement Age (FRA), to receive his or her Spousal Benefits when he or she has also reached FRA, while leaving their own benefit to be suspended, and to continue accruing delayed retirement benefits. The new rules will not allow a person who has suspended their own benefit to draw a spousal benefit.

This new rule will affect anyone who reaches Full Retirement Age and tries to File and Suspend their benefit after April 30, 2016. In other words, if you and your spouse are now at FRA, one of you could File and Suspend, and earn delayed retirement credits on your benefit, while the other of you could file for Spousal Benefits off the first spouse’s benefit.

The second “loophole” is similar to the first. One spouse, who has reached their FRA files for a restricted spousal benefit, while allowing their own benefit to grow with delayed retirement credits.

This technique will be unavailable for anyone turning 62 after January 1, 2016, i.e. anyone born before 1954. So if you were born in 1953 or earlier, when you reach your FRA, you will still be able to file a restricted spousal application.

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