Important To Be Clear On New Rules…
It can be very important to not confuse the rules allowing a spouse to still access spousal benefits with the new rules regarding their ability to file a restricted application going forward– there are two different sets of rules as you can see by the example illustrated below.
Hypothetical Example: Mary is 66 and her husband Tom will be 61 at the end of 2015. Tom never worked enough to qualify for his own Social Security worker’s benefit and had always planned on taking a spousal benefit based on Mary’s work history. Mary plans to wait until age 70 to collect her benefits. However, Tom who is not currently working wants the option to claim spousal benefits as soon as he turns 62 in August of 2016. If Mary, “files-and-suspends” her workers benefits between now and April 30, 2016, Tom can file a claim for spousal benefits in August of 2016 while Mary may continue to defer her workers benefits until the age of 70. However, if she fails to file-and-suspend before the April 30, 2016 deadline, Tom cannot receive the spousal benefit until she actually claims her worker’s benefits.
Explanation: The new law changes did not amend the spousal benefit rules; the change merely extended the deemed filing provision to post FRA filings. The effect however, was an end to the opportunity to utilize the restricted application claiming strategy.
The spousal benefit rule remains as follows: If an applicant has a PIA that is less than ½ the PIA of their spouse, they are entitled to collect their own benefit and the difference between their PIA and half of their spouse’s as a ‘spousal benefit’. In the instance where one person does not have enough credits, the spousal benefit ends up being the full 50% because (1/2 the spouse’s PIA – zero) equals ½ the spouse’s PIA.
In the instance where the applicant has a benefit, the spousal benefit is (1/2 the spouse’s PIA – their PIA) and the difference is paid as the ‘spousal benefit’.
So, can the spouse be under the age of 62 by January 1, of 2016 and potentially still have the ability to collect spousal benefits?
THE ANSWER IS YES!
To be clear, in order for the scenario to work as stated above, the “worker” must either (1) be taking a benefit or (2) have filed and suspended prior to the effective date for the “62 year old” to file the restricted application, given that one of the requirements for eligibility for the spousal benefit is that the person upon whose record you are requesting benefits is also entitled to those benefits. Entitlement requires filing…which can no longer include filing and then suspending under the new rules unless it is done by April 30, of 2016.
After the April 30, 2016 deadline (assuming the spouse met the criteria and filed), the spouse will now be subject to fall under the old rules; a spouse can do this only for as long as the other spouse is not collecting on their own benefit at the same time (letting their own benefit grow through delayed retirement credits). Only individuals who are a minimum of 62 years of age by January 1, 2016, will be allowed to restrict their application at FRA. Everyone else will fall under the new deemed filling rule(s) which precludes taking only one type of benefit at a time.
Here is where, in the example stated above, the importance of the wife filing and suspending by the April 30th deadline came into play–by doing so, she opened the door to enable them to fall under the old rules. Without having done so, they would have been subject to the new rules; her husband would have had to wait until she started collecting benefits at age 70 before he could collect spousal benefits amounting to ½ her benefit.
This is because under the old rules, when people hit FRA, they were filing an application asking for only the spousal benefit, because they could…deemed filing (take all or nothing) didn’t apply post-FRA. By amending the rule and extending deemed filing to all ages, Congress did away with the opportunity to so file. However, the opportunity to collect a benefit based on your spouse’s record has not been changed.