On November 2, 2015 the President signed the Bipartisan Budget Act of 2015, which dramatically changed Social Security’s future treatment of spousal benefits. I say “future” because the bill included important grandfathering provisions. I know these provisions very well because I may have had a hand in getting them added to the bill.
Check out this list of Social Security columns and you’ll find one I wrote on October 27th entitled “Proposed Budget Bill Would Have Devastating Effects On Millions’ Social Security Benefits.” A draft of the new Social Security provisions was made public on Sunday, October 26, 2015. When I saw the draft, I immediately wrote my column, which appeared on PBS NewsHour’s website the next morning. Later that day, the grandfathering amendments were added to the bill. I was subsequently told by several people in the know that my column had pushed Congress to add its grandfathering clauses.
Whether or not my column actually had an impact on the final law is of no importance. I mention the possibility only to convey that I was keenly aware of the grandfathering provisions, which I immediately began to write about in subsequent columns for PBS NewsHour and Forbes. Other personal finance columnists all over the country started doing the same. The list includes Janet Novack of Forbes as well as Paul Solman of PBS NewsHour and Phil Moeller (my two co-authors of our book on collecting Social Security)
From what I gather, the Social Security Administration was not, itself, directly involved in writing the new Social Security regs. But if I and other laymen could understand the grandfathering provisions, the top brass at Social Security certainly could as well. So it is passing strange (a Mark Twain expression) that Social Security spent months telling its 40,000 staff around the country something terribly wrong about these grandfathering provisions.
In particular, until February 18th its website contained this false statement, “If you and your current spouse are full retirement age, one of you can apply for retirement benefits now and have the payments suspended, while the other applies only for spouse’s benefits. This strategy allows both of you to delay receiving retirement benefits on your own records so you can get delayed retirement credits.”
The correct statement is,”If you or your current spouse are full retirement age before May 1, 2016, one of you can apply for retirement benefits now and have the payments suspended, while the other applies only for spouse’s benefits when the other reaches full retirement age provided the other is 62 or over on January 1, 2016. This strategy allows both of you to delay receiving retirement benefits on your own records so you can get delayed retirement credits.”
The incorrect statement and other instructions about the April 29, 2016 suspension deadline gave 40,000 Social Security Administration staff members the incorrect impression that married couples could pursue the file and suspend strategy but only if both were at full retirement age before May 1, 2016. As a result of this false statement, conveyed via email directly to the staff as well as posted on its website, Social Security staff on the telephone and in over 1,000 local offices around the country began to systematically tell the public this very specific wrong thing about the grandfathering provisions. They also, in many cases, refused to permit people whose spouse was “too young” to file and suspend even though the ability to file and suspend continues whether or not you meet the grandfathering provisions!
As you may know, I have a personal financial planning software company, which markets a Social Security lifetime benefit optimization tool. We reprogrammed our Maximize My Social Security software within two weeks of the new law. But after doing so we started seeing support tickets in which people who were grandfathered to still follow the file and suspend strategy and were trying to follow our program’s correct suggestions were being told by Social Security staff that they couldn’t do what our program said to do. At this point, I realized that senior management at Social Security didn’t understand the new grandfathering provisions even though they were clear to anyone who read them carefully or that senior management had somehow misinformed the staff about what the new regs said.
On February 15th, I wrote a column entitled, “Urgent Message to Social Security Staff — Please Learn the New Law!” Prior to writing this column, I began to email top people at Social Security who I know. As a result, some top brass at Social Security arranged a conference call with me on February 18th. During the call I explained that the staff was telling people the wrong thing about the grandfathering provisions and was in the process of costing what could be hundreds of thousands of people tens of thousands of dollars each. It was a very cordial phone call. The people with whom I spoke were very concerned about the problem. Within a couple hours, Social Security had their website fixed and within a day, Social Security issued an urgent instruction to their staff around the country clarifying the grandfathering provisions.
I saw the new copy on Social Security’s website and I also saw a copy of the new instructions, but was worried that Social Security’s brass still hadn’t made things clear enough. I pushed them to provide their staff with a simple example of a married couple with, say, a husband who was 66 (full retirement age) in March and a wife who would become 66 in, say, two years. They never provided an example. Hence, I was sure that many staff would continue to get things wrong and damage people’s financial futures. Consequently, I kept writing columns with titles like these: “Why Has Social Security Staff Been Breaking the New Law?” and “ Social Security Staffers Are Clueless About the New Law.”
Fast forward to the present. I am hearing just what I expected to hear. Every few days I receive an email or a question posted at Ask Larry from a married couple who met the grandfathering provisions to file and suspend but weren’t both 66 before May 1, 2016. These couples were told by Social Security staff either in November, December, January, February, March, or April that they couldn’t follow the file and suspend strategy when, in fact, they could. Other couples where one spouse did file and suspend, but the other spouse was below 66 but 62 or over on January 2, 2016 are, even today, being told that the younger spouse can’t file for a spousal benefit when she/he reaches 66. In other words, many Social Security staff to this day don’t have the grandfathering provisions straight in their heads. See, for example, horror story 3 in this column.
I will provide specific examples in future columns, but if you too were told the wrong thing by Social Security staff and, as a result, did not file and suspend by the April deadline, I recommend you file for your retirement benefit and suspend your benefit now, but request the dates for both of these requests be deemed to be the date on which you would otherwise have filed and suspended had you not been misinformed. SSA has a specific process for addressing misinformation allegations laid out here. You definitely want to include the names of the people you talked to, and specifically what they told you. If SSA refuses to establish a deemed retirement filing and suspension date prior to or on April 29th, then you have the option to file a formal appeal. Unfortunately, the appeals process could take months if not years. Meanwhile, you may end up being doubly hurt by not following the second-best strategy available for those who should have filed in time but failed to do so. (FYI, for those in this boat, my company’s software lets you tell it that you missed the deadline and figures out what’s best given this fact.)