Action Needed for Social Security Changes on May 1, 2016-Mostly Truth!
Summary of eRumor:
There are warnings that action might be needed to prevent Social Security benefit changes set to take effect on May 1, 2016 under the Bipartisan Budget Act of 2015.
The Truth:
Changes to Social Security’s “file and suspend” rules are set to take effect on May 1, 2016, and some people do need to take action before that to “opt out” of new rules.
Changes to Social Security usually create a lot of panic among those who rely on it, so it’s important to note upfront that no changes will be made to how “core benefits” are calculated. In other words, if you already receive Social Security payments, these changes won’t impact your eligibility, or how much you receive.
Social Security changes set to take effect on May 1, 2016, pertain to its “file and suspend” rules. Congress approved the changes through the Bipartisan Budget Act of 2015 (HR 1314). Basically, the changes apply to spousal benefits and to switching from spousal benefits to worker benefits before the age of 70.
Under old rules, once a person reached the full retirement age (FRA) of 66, they could file for benefits and immediately suspend them until a later date. Then, a spouse age 62 or older could file for a spousal benefit and switch to a worker benefit until the age of 70. In the meantime, worker benefits for both spouses would continue to grow through delayed retirement credits.
The Bipartisan Budget Act makes to major changes to Social Security’s file and suspend rule.
First, spouses will no longer be able to change from a spousal benefit to a worker benefit before the age of 70 — the beneficiary will immediately receive the larger of the two. Second, the act ends the ability of workers to file and suspend benefits to either trigger a spousal benefit, or to protect the right to retroactive benefits.
But there is a loophole that allows some Social Security beneficiaries who are approaching retirement age to be grandfathered into the old file and suspend rule before May 1, 2016, Forbes reports:
If you will be 66 years or older come May 1, 2016, and you have not started your Social Security benefits, you should consider “filing and suspending” your worker’s benefits. If you are married, the filing part triggers your spouse’s right to begin spousal benefits. The “suspend” part signifies that you will not immediately receive your worker’s benefit and the benefit will be deferred until you choose to claim it. This will allow you to take advantage of the deferral credits, which increase your Social Security retirement benefits by 8 percent per year after full retirement age up until the age of 70. Please note that this must be done before May 1, 2016 because after this date, a married worker will have to file and begin to receive benefits in order to trigger the spousal benefit.
Click here for information about how file and suspend Social Security benefits before May 1, 2016.
At the same time, beware of scammers who could take advantage of this rule change to steal your identity or to access your bank accounts. Keep in mind that the Social Security Administration (SSA) will never send emails asking you for personal information.
Anytime your receive a suspicious phone call or email from someone claiming to represent the SSA, the agency advises that you immediately call your local Social Security office or call 1-800-772-1213 to see if it’s a scam or not.