Guest Column: Major Policy Changes Close Social Security Loophole

By Frank Cardenas

In one of the most far-reaching policy changes in the last two decades, the Bi-Partisan Budget Act of 2015 eliminated the File-And-Suspend Strategy as an unintended loophole in social security law. The File & Suspend Strategy was put in place during the Clinton administration to assist stay-at-home mothers and fathers by allowing them to receive Social Security retirement benefits while the breadwinner continued to work and accrue retirement credits.

The strategy works like this: The primary bread winner files and then suspends benefits so that they may increase at a rate of 8 percent per year from full retirement age until age 70 (which would be the maximum receivable under Social Security Policy [132 percent]). This file and suspension on the primary’s record would then allow the other spouse to start to receive benefits. If the spouse was also at full retirement age, then they may elect not to start their own benefits and let theirs also accrue the 8 percent per year credits. The benefit loophole makes it possible for one spouse to start to receive a benefit off the other’s record while their own independent benefits continue to grow, thus getting a maximum benefit up to $60,000 over time. This strategy also applies if the primary spouse is at full retirement age and the other spouse is at least 62.
 
The new Budget Act will go into effect approximately 180 days from the date it was signed. With this deadline quickly approaching, the Social Security Administration has struggled to give field offices processing guidelines and details about how this strategy may be employed. 
 
After April 29, 2016, the File & Suspend strategy will no longer exist. Any family that files before this deadline will be grandfathered-in and will be able to receive these benefits. The ideal candidates for this filing strategy would be:
  • A married couple OR divorced spouse (if marriage lasted for more than 10 years)
  • One spouse at least 66 or older before May 1, 2016
  • AND their spouse is at least age 62

If you or someone you know are in this category, they MAY be qualified candidates for these benefits.

Frank Cardenas, MPA, is the owner of FedLogic Group, a consulting firm that helps financial advisors, accountants, benefit coordinators, individuals, and families navigate and maximize Social Security and Medicare benefits. Contact him at frank@fedlogicgroup.com, (615) 830-4630, or visit www.fedlogicgroup.com.~

 

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