Social Security Benefits Planning & The Bipartisan Budget Act of 2015

In the past week, I heard from 2 clients in their 60’s who recently received what I will call
“scare tactic” marketing emails or calls from firms advising them of drastic changes in social
security benefits that could affect them. What was this all about?

They appeared primarily to be solicitations for financial newsletters or financial products.
However, these solicitations referred to recent legal changes to social security benefits
planning. Specifically, on November 2, 2015, the Bipartisan Budget Act of 2015 (the “BBA”)
became law. While the BBA covers many topics relevant to federal budget matters, the
relevant topic covered here is the BBA’s impact on certain social security benefits planning
techniques.
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Core social security benefits are not affected by the BBA. However, the BBA does end two
specific strategies (referred to as “unintended loopholes” in the text of the law), commonly
known as the “restricted application” strategy and the “file and suspend” strategy.

The “restricted application” strategy permits a married worker who reaches the age of 62
to opt to elect the spousal benefit and then switch to the worker’s benefit at age 70,
deferring the worker’s social security benefit and allowing those benefits to grow over
time with deferral credits. Under the BBA, the “restricted application” strategy has been
eliminated meaning that a married worker filing for benefits will receive the larger of either
the worker or the spouse’s benefit. There is, however, a grandfathering provision,
allowing anyone who reached age 62 by the end of 2015 to continue to take
advantage of this “restricted application” strategy.

The “file and suspend” strategy permits a married worker who reaches the age of 66 to apply
for retirement benefits and then voluntarily suspend his or her benefits to allow those
benefits to grow over time with deferral credits. In the meantime, the worker’s spouse could
start collecting spousal benefit payments. According to some financial advisors with social
security planning experience, this “file and suspend” strategy can result in a significant

increase in your social security benefits. The BBA provides a deadline after which this
strategy will no longer be available. Unfortunately that deadline is April 29, 2016.

Note that divorced persons and widows/widowers may be affected differently by these
changes. If you or a spouse are at an age where either of these social security
benefits planning strategies could impact you, we recommend that you promptly
speak with your financial advisor or your local Social Security office.

For more information on our estate planning services please contact our office at 215-572-8111.