Confusion over benefit-filing rules follows passage of new law in October
Some older Americans say they are getting wrong information from the Social Security Administration as they face a crucial deadline to take advantage of popular benefit-claiming strategies that are being eliminated.
At stake are tens of thousands of dollars in lifetime retirement benefits for some couples, according to Elaine Floyd, director of retirement and life planning at Horsesmouth LLC of New York, which trains financial advisers in Social Security claiming strategies.
Because the strategies-known as file-and-suspend and a restricted application for spousal benefits-are complicated and became popular only in the wake of a 2000 law, “Social Security workers have always been a little confused about them,” Ms. Floyd says. But when Congress passed a law in October that phases out the use of the two strategies starting in April, “the confusion got worse than ever,” she says.
Under the new law, those already using the combined strategies can continue to do so, while those born after Jan. 1, 1954 are generally out of luck. By and large, the confusion is over people who aren’t currently using the strategies but are entitled to do so if they act fast.
New Social Security Rules to End Key Filing Strategies (Oct. 31, 2015)
Social Security Strategies for Couples: The New Rulebook (Nov. 19, 2015)
Specifically, people who turn 66 by April 29 can still file for Social Security and suspend their benefits to allow a spouse to file a restricted application, as long as they act by that date. Doing so can make sense if your spouse was 62 or older by Jan. 1 of this year because people in that age group will continue to be able to file a restricted application for only a spousal benefit once they turn 66.
With such a coordinated strategy, one spouse can pocket the spousal benefit while both delay claiming their own benefits to take advantage of the delayed retirement credits that increase monthly payments by 6% to 8% for each year in which claiming is deferred between ages 66 and 70.
With the April 29 deadline looming, individuals eligible to take action are calling the Social Security Administration’s 800-number and visiting its 1,230 field offices nationwide to file and then suspend a claim. But some individuals have been mistakenly told they are ineligible-and some people who are at least 62 but not yet 66 have been wrongly told they need to file now to obtain only a spousal benefit-according to more than a dozen interviews with such individuals and professionals who provide Social Security advice.
Jeanne Houser, age 66, and her husband, Donald, 63, visited the Social Security office in Smithfield, N.C., twice in November, seeking to file and suspend her benefit so that Mr. Houser would be able to file a restricted application for spousal benefits when he turns 66. But during both visits, a Social Security agent told the couple that the combined strategy wasn’t available to them.
The Social Security agent “wouldn’t move forward with my application to file-and-suspend,” says Ms. Houser, a retired nurse. “She said there was no point to it because we both have to be 66.”
Barry Dunlap-who is 66 and whose wife, Kathryn Keller, is 64-says he was similarly rebuffed on two visits to the Social Security office in Santa Cruz, Calif. The couple’sfinancial adviser, Renee Snow, encouraged him to persevere. Mr. Dunlap says he filed-and-suspended his benefit on Feb. 16 over the objections of the agent, who “got heated and insisted Kathryn had to be 66″ by the end of April for the move to work.
Ms. Snow says her clients could have lost over $100,000 in lifetime benefits had they been thwarted from pursuing the two strategies.
“There definitely seems to be some kind of glitch” in Social Security’s operations, says Mr. Dunlap, a retired civil engineer. “I was educated about the strategy and I was still turned away the first time, so you can only imagine what happens to people” who aren’t as persistent, he says.
The Social Security Administration says it has made an effort to inform the 32,300 employees who staff its field offices and 800-number, with a mix of written guidance and video training since year-end. On Wednesday, the agency published new explanations of the rule changes on its website. It also issued two “emergency messages” on the new rules this month.
Such emergency messages are the “routine process used to provide employees with immediate instructions until final instructions are incorporated into” electronic operations manuals, the agency said in an emailed response to questions from the Journal. “In the coming weeks, we will be delivering comprehensive training, providing additional instructions and building on the guidance we have already published,” the agency said, adding that it doesn’t “believe there is widespread misinformation being disseminated to the public.”
Still, companies that offer Social Security advice say they are hearing from more couples having problems filing and suspending now to preserve the restricted-application option for a younger spouse.
Robin Brewton, vice president of client services at Social Security Solutions, says the Leawood, Kan., company receives calls from “a couple people a day” experiencing such problems. Lloyd Watnik, a benefits consultant in San Diego who works with clients nationwide, has received 10 such calls in the past two weeks.
Anyone rebuffed by a Social Security agent should ask to speak to a supervisor or technical agent, according to Russell Settle, co-founder of SocialSecurityChoices.com. His client, Michael Ross, 63, requested such a meeting in early February after an agent at the Elkton, Md., Social Security office told his wife, Karen Ross, 66, that she couldn’t file-and-suspend unless her husband simultaneously filed a restricted application. In fact, people younger than full retirement age can’t file a restricted application; if they file for benefits, they are deemed to have filed for their earned benefit or a spousal benefit, whichever is greater.
Mr. Ross says the supervisor overruled the agent and allowed his wife to file-and-suspend.
Avram Sacks, a Skokie, Ill. attorney who specializes in Social Security, tells clients who want to suspend their benefits to take two copies of a letter with such a request to their local Social Security office. Once there, he says, ask a clerk to stamp both copies with the date and keep one to prove you filed the request before the deadline. “You can always file the claim even if the clerk says no. They have to accept it,” he adds.
Ms. Floyd recommends filing online to “avoid human contact.”
At her suggestion, Tim Potts, 66, filed for his benefit online on Feb. 12. after his local Social Security office incorrectly told him he couldn’t file-and-suspend because his wife, Lu Conser, won’t be 66 by the April 29 deadline. On Ms. Floyd’s advice, the Carlisle, Penn. resident wrote in the application’s “remarks” section, “I want to suspend benefits to build delayed credits.”
He has yet to receive confirmation that the agency has processed his application.
Anne Tergesen, wsj.com