This past November, the Bipartisan Budget Act of 2015 was signed into law and instituted sweeping changes to the Social Security system.
In some cases, the application of the law will continue for almost eight more years, and in others, claimants may lose benefits if they do not take action by April 29, 2016. Through all of this, individuals continue to knock on the door of the Social Security Administration (SSA) in record numbers to file claims.
We are hearing from our advisors that some individuals are facing significant hurdles when dealing with the Social Security Administration. Advisors are reporting that they are being told or have experienced the following:
- There is no new law in place.
- There is no particular deadline that affects the file and suspend strategy that is properly referred to as Voluntary Suspension of benefits.
- The ability to file and suspend with an online application has been terminated. Claimants are being told that they must go into the office where they are then told that they cannot suspend benefits.
Understand that the SSA is a rather large organization that is tasked with helping millions of Americans file for a broad range of benefits. However, they are under significant pressure to deliver accurate and timely advice to all of their customers. In a response to recent press releases about claim denials, the SSA released an emergency communication to the field on Friday, February 19, 2016 that includes the following:
“Continue to process voluntary suspension requests submitted prior to April 30, 2016 per existing POMS instructions in subchapter GN 02409.000.”
Additionally, perhaps anticipating an overload on their systems, the SSA has agreed to honor suspensions that are not processed by deadline: “Note: If a NH, who is full retirement age, submits his or her request to suspend benefits prior to the change on April 30, 2016; and we do not process the request until on or after April 30, 2016, we will honor the NH’s request and process the voluntary suspension based on the policy in effect prior to the change on April 30, 2016.”
To put this emergency communication in context, the SSA is an organization that is overwhelmed. In June 2014 the United States Senate Special Committee on Aging released a report entitled “Reduction in Face-to-Face Services at The Social Security Administration” that summarized some of the changes that have occurred over the past several years. Their executive summary states the following:
“At a time when Baby Boomers are retiring and filing disability and retirement claims at record numbers, SSA has shed 11,000 workers agency-wide over three years. Hiring freezes resulted in disproportionate staffing across the nation’s 1,245 field offices, with some offices losing a quarter of their staff. These past five years have also served witness to the largest five-year decline in the number of field offices in the agency’s 79-year history as 64 field offices have been shuttered, in addition to the closure of 533 temporary mobile offices known as contact stations. SSA has also reduced or eliminated a variety of in-person services as it attempts to keep up with rising workloads and shift seniors and others online to conduct their business.”
In 2003, approximately 6% of Social Security applications were filed online. By 2013, the SSA reports that that number has grown to approximately 50%.
One of the specific problems that our advisors encounter is that dual income families often have more complicated filing issues. In some cases, claiming strategies may overwhelm a client or require the claimant to go into the local office to file his or her claim.
When a member of the SSA deals with the myriad issues surrounding filing for a retirement claim, their in-house procedure manual is the Program Operations Manual System, or POMS for short. It is “a primary source of information used by Social Security employees to process claims for Social Security benefits. The public version of POMS is identical to the version used by Social Security employees except that it does not include internal data entry and sensitive content.” The POMS public site can be accessed at this web address: https://secure.ssa.gov/apps10/
Faced with a particular claiming strategy, the SSA could open the POMS and read materials that have not been updated. Not only might the November changes to the law be missing, but think about the fact that the SSA is having to face structural changes related to the Obergefell v. Hodges decision that has changed the face of claiming decisions relative to benefits to spouses and married individuals. In some cases, it may take years for legal challenges and regulations to be written and distributed throughout the SSA.
As advisors, you should be aware that parts of the Bipartisan Budget Act of 2015 have been challenged in the press as having the opposite effect of the intended legislation. That argument focuses on the issue of a Voluntary Suspension of benefits that has been recommended as a claiming strategy for single individuals. With respect to this very narrow piece of the law, some very knowledgeable commentators have stated that retroactive benefits for single individuals were not only eliminated, but also, in fact, cemented into place by the new law.
As you can imagine, lawyers for the SSA and the public are looking at both the law and the intent of Congress as they try and figure out the practical issues of this legislation.
We at Social Security Timing® are painfully aware that mistakes are sometimes made by the SSA on a variety of issues. We have seen mistakes made concerning eligibility for spousal benefits, for divorced spouse benefits, for children’s benefits and a host of other claiming problems. As we teach in The School, we believe that good advice prior to making a Social Security claim may prevent some of the problems that we have seen.
For example, one of the most common and painful interactions that claimants have with the SSA revolves around the earnings test. An individual may file for Social Security retirement benefits and then months or years later they reenter the workplace without notifying the SSA.
When that happens, ultimately the worker will receive an “oops” letter, stating that the worker has been overpaid and now he or she owes the SSA money. Often the repayment request comes after the worker has left the workplace a second time and relies on Social Security benefits for a significant portion of his or her retirement income. Having those benefits stop because of a repayment claim can be overwhelming and financially disastrous.
In other cases, a worker may go into the office and claim a benefit for which he or she is not eligible. For example, a worker claims early retirement at age 62, goes back to work at 63 and has benefits suspended due to the earnings test. At Full Retirement Age (FRA), the worker reads an article that suggests that a spousal benefit might be available on the work record of an ex-spouse. The worker files for benefits, is awarded a claim and receives a check for retroactive benefits going back to the filing of the claim. A month or two later an “oops” letter arrives claiming an overpayment and requesting repayment of benefits.
Claiming mistakes are going to happen. We know that, and we know that they are impossible to avoid when you are dealing with millions of individuals and many different claiming options. Our purpose today is not to suggest that you become experts in dealing with mistakes, but that you become experts in laying the foundations for good claiming advice. That way, workers can file for the benefits to which they are entitled the first time that they encounter the SSA.
Understand also that the April 29, 2016, deadline is real, and it is valid. Additionally, it is valid not only for individuals that turned 66 by May 1, 2016, but also, equally as important, it is valid for older individuals as well.
Consider the following: A high wage earner with a Primary Insurance Amount (PIA) of $2,500 at age 66, turned 68 years old on February 1, 2016. She has decided to delay claiming her Social Security retirement benefit until age 70. Her spouse is 65 years old and turns 66 in December of 2016. Her spouse has his own work record and the best strategy for the family is for him to file a restricted benefit on his wife’s earnings record. The restricted filing for a spousal benefit in December of 2016 cannot happen unless his wife files and then suspends benefits by April 29, 2016.
In a totally different direction, a single-income household presents a different dynamic that may trigger lost benefits if a high-wage earner does not file and suspend by April 29, 2016. There are going to be situations where a high-wage earner is married to a younger spouse and the high wage earner wants to delay benefits to age 70. Depending on the age difference, missing the April 29, 2016, deadline could cost that family thousands upon thousands of dollars of lost spousal benefits. If you encounter a situation where an older individual is married to a younger spouse without a work record, that younger spouse will not be able to claim any spousal benefits until the older worker files at age 70.
The bottom line is that we need to be aware of not only the new law, but also the way the changes in the claiming provisions will play out in the next eight years. The law allows for restricted claiming for benefits for everyone who had turned 62 by January 1, 2016. The mix of new and old law, coupled with major changes mandated by Obergefell v. Hodges and cuts in staffing to the SSA, presents a significant challenge to you as advisors to be accurately prepared in order to assist your clients in their claiming decisions.
As always, Social Security Timing is here to help walk you through the challenges that you encounter in the marketplace. If you do not feel that you have a strong understanding of the claiming strategies, register for The School, an online training course.