The proposed 2016 budget  makes two highly significant changes to Social Security claiming rules. Section 831(a) eliminates the restricted application strategy by requiring that anyone who files for any benefit be “deemed” as though they are filing for all benefits for which they are eligible. Section 831(b) modifies voluntary suspension by requiring that any benefits for any auxiliary be stopped when the primary wage earner suspends his own benefit. Under prior rules, a voluntary suspension only stopped the checks of the person who suspended their benefits, while auxiliaries such as spouses and children could continue to collect their checks.

I believe eliminating the restricted application does indeed close an unintended consequence of prior legislation. Although the restricted application is an unintended consequence, it shouldn’t be evaluated as to whether it was intended, but instead, whether it serves the ends Social Security is designed to serve. As I argued in my letter to President Barack Obama last year, the option to restrict an application to only spousal benefits gives the higher wage earner in a couple an incentive to delay benefits, building a larger survivor benefit for the often younger and lower-earning surviving spouse. Multiple academic research papers, such as this Federal Reserve piece and this Center for Retirement Research paper, outline both the importance of delayed claiming to the widow’s standard of living and the non-responsiveness of husbands to the later-in-life financial security needs of their spouses. They indicate that this accidental incentive may be more important than we think and that removing it could have a significant unintended consequence in the form of lowered survivor benefits for widows. The changes in Section 831(a) only apply to people who are 62 or younger today. Under current law, “deeming” would apply to them until they reach Full Retirement Age, so this provision of the new law is effectively phased in over the next four years.

Although there may be some merit to the changes in Section 831(a), the changes in Section 831(b) are patently misguided and will have significant, negative consequences. Under current law, a lower-earning spouse is eligible for spousal benefits only after the primary wage earner under whose record she is filing has filed for benefits. Further, benefits that are payable to a surviving spouse are limited by the amount the deceased was receiving. Currently, in order for a lower-earning spouse to claim a spousal benefit, the higher wage earner would file, then immediately request that he not receive checks. This allows the lower-earning spouse to collect the spousal benefit. Social Security has made this process incredibly easy to do, as you can now simply check a box on the online application for benefits.

Section 831(b) will prove particularly nasty for those who have pursued this option. Because this provision is not phased in, families will be faced with a choice within six months of the bill’s passage: either un-suspend the higher wage earner’s benefit immediately, which will permanently reduce the amount that will be available to his widow upon his death, or keep his benefit suspended and watch her checks stop. This family is likely already relying on the checks they are receiving to meet their monthly household income need, so this is really a choice between two bad options. To see something like this negotiated behind closed doors and then rushed to a vote is a disgusting abuse of the political process. 

The House could vote as soon as Oct. 29, and the Senate cloture vote could come as early as Oct. 30. The bill was published only a couple of days ago, so the window of time to have an impact on this issue is extremely short. Please call and email your Congress and Senate representatives and help them understand that these provisions are at best misguided and at worst a potential nightmare for a significant number of your clients.

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