Understanding the changes to Social Security that occurred because of the Bi partisan Budget Act of 2015

On October 28, 2015, the House amended and passed the Senate amendment to H.R. 1314, the Bipartisan Budget Act of 2015, by a vote of 266-167.  The Senate passed the measure on October 30, 2015 by a vote of 64-35, clearing the measure for the President.  The President signed the bill into law on November 2, 2015. 266-167? Seriously? This thing wasn’t even close. Here’s  some highlights of the key points:


Changes of the Bi-Partisan Budget Act of 2015

Change to Section 831(a)

· Extends Deeming rule to all ages for anyone born 1/2/1954 and later

o Prior to the act, when you reached full retirement age you could file for only a spousal benefit and allow your own benefit to accumulate Delayed Retirement Credits, and then switch later to your own larger delayed retirement benefit.

o Now, only people born 1/1/1954 or before can do this (must have turned 62 before 1/1/2016)

· Applies deeming for any age of eligibility, not just the month of initial entitlement

o Before, if you were not eligible for a spousal benefit because your spouse had not yet filed, you didn’t have to take it. You could later, have the choice of when you add the spousal benefit.

o Now, if you file for a retirement benefit, and later become eligible for a spousal benefit, the spousal benefit must immediately be paid upon your eligibility.

o There is no longer the month of entitlement rule that allows you to avoid eligibility and then later switch over.

· Impact

o Restricted application for only spousal benefit with ability to later switch to retirement benefits will no longer be available for people born on 1/2/54 or later, age 62.


Change to Section 831(b)—Voluntary suspension rules

· Modifies Voluntary Suspension to require suspension of all benefits payable under a wage earner’s record, not just the wage earner’s benefit

o The means that other people can’t claim benefits based on the wage earner’s work record

o If you have a spouse that is claiming off of you, and you suspend your benefit, via a voluntary suspension, in the past, only your benefit would stop and your spouse could continue to claim off of your earning record. Now if you suspend your benefits, your spouses’ benefit will stop as well.

· Eliminates ability to claim other benefits while the wage earner’s benefit is in suspense

o If you suspend your benefit, but could still claim some type of spousal benefit during the suspension, you wouldn’t be able to do that under the new rules.

· Eliminates ability to request retroactive benefits back to the beginning of suspension

o Under the old rules, you could file and suspend at FRA, wait till 70, and then request a check for all benefits, lump sum, going back to age 66.

· Applies to suspensions requested 180 days or more from the date of the enactment

o April 29, 2016 is the deadline

o If you request a voluntary suspension before the deadline, you’re grandfathered in.

· Impact

o Voluntary suspension will only be available to people who are 66 by 4/29/2016

o You can still use voluntary suspension if you claimed early, missed your one year window to withdraw the application. If you filed at 62 and receive the smaller benefit, you can still suspend your benefits at age 66, or whenever, and delay those benefits to a future date like age 70, and earn delayed retirement credits while your benefit is in suspense. No one else can claim on your record during the suspense.

Total impact on planning

· Timing options are still available

· All widow planning options are still available, as rule changes impact only spousal and retirement benefits

· No ability to request a retroactive lump sum, so the only reason to use a Voluntary Suspension is to fix a mistake

· Understanding which rule set applies to each member of a couple will be critical

o You can have two different rule sets applying to each spouse!

Key messages:

1. There are now three sets of rules

a. Until 4/29/2016

b. 4/29/2016 – 2020

For the people that are 62 today but will be 66 in 2020 and Full retirement age

c. 4 years and beyond

Those that turn 66 in 2020 and beyond

2. Age gaps for couples mean they could fall under different set of rules

3. Window of opportunity will close—they expire 4/29/2016

Learn what Social Security options you have available, and how Social Security can impact you! Find out all of your possible Social Security claiming strategy options!

SS what is at stake


Here’s the complete 2015 Bi-Partisan bill for your reading pleasure:

GENERAL.—Not later than September 30, 2017, 3 the Commissioner of Social Security shall establish and implement a system that—
(1) allows an individual entitled to a monthly insurance benefit based on disability under title II of
the Social Security Act (or a representative of the individual) to report to the Commissioner the individual’s earnings derived from services through electronic
10 means, including by telephone and Internet; and
11 (2) automatically issues a receipt to the indi12
vidual (or representative) after receiving each such re13
15 SYSTEM AS MODEL.—The Commissioner shall model the
16 system established under subsection (a) on the electronic
17 wage reporting systems for recipients of supplemental secu18
rity income under title XVI of such Act.
19 Subtitle C—Protecting Social
20 Security Benefits
25 (1) IN GENERAL.—Section 202(r) of the Social
26 Security Act (42 U.S.C. 402(r)) is amended by strik71
•HR 1314 EAH
1 ing paragraphs (1) and (2) and inserting the fol2
3 ‘‘(1) If an individual is eligible for a wife’s or
4 husband’s insurance benefit (except in the case of eli5
gibility pursuant to clause (ii) of subsection (b)(1)(B)
6 or subsection (c)(1)(B), as appropriate), in any
7 month for which the individual is entitled to an old8
age insurance benefit, such individual shall be deemed
9 to have filed an application for wife’s or husband’s
10 insurance benefits for such month.
11 ‘‘(2) If an individual is eligible (but for section
12 202(k)(4)) for an old-age insurance benefit in any
13 month for which the individual is entitled to a wife’s
14 or husband’s insurance benefit (except in the case of
15 entitlement pursuant to clause (ii) of subsection
16 (b)(1)(B) or subsection (c)(1)(B), as appropriate),
17 such individual shall be deemed to have filed an ap18
plication for old-age insurance benefits—
19 ‘‘(A) for such month, or
20 ‘‘(B) if such individual is also entitled to a
21 disability insurance benefit for such month, in
22 the first subsequent month for which such indi23
vidual is not entitled to a disability insurance
24 benefit.’’.
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1 (2) CONFORMING AMENDMENT.—Section 202 of
2 the Social Security Act (42 U.S.C. 402) is amended—
3 (A) in subsection (b)(1), by striking sub4
paragraph (B) and inserting the following:
5 ‘‘(B)(i) has attained age 62, or
6 ‘‘(ii) in the case of a wife, has in her care (indi7
vidually or jointly with such individual) at the time
8 of filing such application a child entitled to a child’s
9 insurance benefit on the basis of the wages and self10
employment income of such individual,’’; and
11 (B) in subsection (c)(1), by striking sub12
paragraph (B) and inserting the following:
13 ‘‘(B)(i) has attained age 62, or
14 ‘‘(ii) in the case of a husband, has in his care
15 (individually or jointly with such individual) at the
16 time of filing such application a child entitled to a
17 child’s insurance benefit on the basis of the wages and
18 self-employment income of such individual,’’.
19 (3) EFFECTIVE DATE.—The amendments made
20 by this subsection shall apply with respect to individ21
uals who attain age 62 in any calendar year after
22 2015.
•HR 1314 EAH
1 (1) IN GENERAL.—Section 202 of the Social Se2
curity Act (42 U.S.C. 402) is amended by adding at
3 the end the following:
4 ‘‘(z) VOLUNTARY SUSPENSION.—(1)(A) Except as oth5
erwise provided in this subsection, any individual who has
6 attained retirement age (as defined in section 216(l)) and
7 is entitled to old-age insurance benefits may request that
8 payment of such benefits be suspended—
9 ‘‘(i) beginning with the month following the
10 month in which such request is received by the
11 Commissioner, and
12 ‘‘(ii) ending with the earlier of the month
13 following the month in which a request by the
14 individual for a resumption of such benefits is so
15 received or the month following the month in
16 which the individual attains the age of 70.
17 ‘‘(2) An individual may not suspend such benefits
18 under this subsection, and any suspension of such benefits
19 under this subsection shall end, effective with respect to any
20 month in which the individual becomes subject to—
21 ‘‘(A) mandatory suspension of such benefits
22 under section 202(x);
23 ‘‘(B) termination of such benefits under section
24 202(n);
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1 ‘‘(C) a penalty under section 1129A imposing
2 nonpayment of such benefits; or
3 ‘‘(D) any other withholding, in whole or in part,
4 of such benefits under any other provision of law that
5 authorizes recovery of a debt by withholding such ben6
7 ‘‘(3) In the case of an individual who requests that
8 such benefits be suspended under this subsection, for any
9 month during the period in which the suspension is in ef10
11 ‘‘(A) no retroactive benefits (as defined in sub12
section (j)(4)(B)(iii)) shall be payable to such indi13
14 ‘‘(B) no monthly benefit shall be payable to any
15 other individual on the basis of such individual’s
16 wages and self-employment income; and
17 ‘‘(C) no monthly benefit shall be payable to such
18 individual on the basis of another individual’s wages
19 and self-employment income.’’.
21 202(w)(2)(B)(ii) of the Social Security Act (42
22 U.S.C. 402(w)(2)(B)(ii)) is amended by inserting
23 ‘‘under section 202(z)’’ after ‘‘request’’.
24 (3) EFFECTIVE DATE.—The amendments made
25 by this subsection shall apply with respect to requests
•HR 1314 EAH
1 for benefit suspension submitted beginning at least
2 180 days after the date of the enactment of this Act.
4 (a) IN GENERAL.—Section 221(h) of the Social Secu5
rity Act (42 U.S.C. 421(h)) is amended to read as follows:
6 ‘‘(h) An initial determination under subsection (a),
7 (c), (g), or (i) shall not be made until the Commissioner
8 of Social Security has made every reasonable effort to en9
10 ‘‘(1) in any case where there is evidence which
11 indicates the existence of a mental impairment, that
12 a qualified psychiatrist or psychologist has completed
13 the medical portion of the case review and any appli14
cable residual functional capacity assessment; and
15 ‘‘(2) in any case where there is evidence which
16 indicates the existence of a physical impairment, that
17 a qualified physician has completed the medical por18
tion of the case review and any applicable residual
19 functional capacity assessment.’’.
20 (b) EFFECTIVE DATE.—The amendment made by sub21
section (a) shall apply with respect to determinations of dis22
ability made on or after the date that is 1 year after the
23 date of the enactment of this Act.

Social Security File and Suspend deadline is April 29, 2016

Social Security has issued the deadline  for the file-and-suspend strategy, and it is April 29, 2016


social security claiming strategies


If you are at least 66 years of age and submit a request to file and suspend before April 29, 2016, then you and your spouse will still be able to take advantage of this valuable benefit for married couples.

File and Suspend allows one individual to “file” and then “suspend” their Social Security benefits, which allows the spouse to file and receive spousal benefits.

This all comes about because of the Bipartisan Budget Act of 2015 that President Obama signed into law in November of last year.

Starting on 4/30/2016, one spouse will have to collect on his or her benefits in order for the other spouse to be able to collect a spousal benefit. Divorced spouses who were married at least 10 years can still collect on their ex-spouses record.

Moving forward, for someone who had collected reduced retirement benefits at 62 could suspend their benefits at 66 and then increase their monthly benefits until age 70.

If you are at least 66 by 4/29/2016, then find out what your claiming strategies are by clicking on the LINK below!

SS what is at stake

How does working after retirement affect Social Security?

What happens to my Social Security income if I continue working after retirement?

It depends on how old you are…..

  • Working after retirement can impact your Social Security benefits, health insurance and taxes.
  • You can contribute to a IRA or Roth IRA with you earned income

If you decide to go back to work after you have started Social Security benefits, this could impact the amount of Social Security that you will receive and your Medicare and tax payments.

Whether your Social Security income is reduced depends on your age. For benefit purposes, the Social Security Administration (SSA) defines the full retirement age as 66 for people born between 1/2/1943 and 1/1/1955. So let’s assume that you are under age 66 and you go back to work…

social security taxes can cost thousands

How much can you make in retirement and still get Social Security benefits if I am under 66?

  • If you are under full retirement age for the entire year, Social Security is reduced $1 from your benefit payments for every $2 you earn above the annual limit. For 2016, that limit is $15,720.

Example #1:

You are under age 66 all year and you get $1,000/month from Social Security, and you make $25,720 at a part time job. This is $10,000 over the 2016 limit of $15,720.

Your Social Security benefits would now be REDUCED by $5,000, or $1 for every $2 you earned over the limit. Since you are $10,000 over this limit. Your total income is $5,000 SS + $25,770 part time job = $30,770. If you are single, your total taxable income will be, _________, and your total taxes would be __________


What happens when you reach the full retirement age of 66?

  • In the year you reach full retirement age, Social Security is reduced $1 in benefits for every $3 you earn above $41,880. Social Security only counts the money that you earn before you turn 66, so if you have an early calendar year birthday in January or February then your benefits are only reduced in the months before you turn 66.  In 2016, the limit on your earnings before you turn 66 is $41,880. Once you celebrate the big 66, you can make as much as you want without having a reduction of SS benefits! 85% of which could be included in your taxable income at a 46% rate (TAX TORPEDO), and your Medicare Part B and D premiums could quadruple, but that is for another post…..

Example #2:

Same as #1, but You turn 66 and reach full retirement age in August 2016. Your Social Security benefits should be $1,000/month or $12,000/year and you make $63,000 during the calendar year with $44,000 being paid out in the 1st 7 months of the year, January-July. You made $2,120 over the year you turn 66 limit of $41,880. Your Social Security benefits will be reduced from January to July by $706, $1 for every $3 that you made over the limit.

Limit: $41,880

You made: $44,000 before the month that you turned 66

Overage: $2,120

Reduction in SS benefits: $2,120 overage/ $3 Social Security reduction divisor = $706 total Social Security reduction

Instead of getting $12,000 of Social Security benefits for the year, you get $11,294. Your Social Security benefits are not reduced August-December. They will be taxed though….

What income counts toward my Social Security reduction of benefits if I work in retirement?

Social Security only counts the wages that you make from your job, or your net profit if you’re self-employed.

They include:

  1. Bonuses
  2. Commissions
  3. Vacation Pay

They don’t include:

  • Pensions
  • annuities
  • investment income
  • interest
  • VA or government benefits

As you continue working, your additional earnings will count towards your Social Security monthly benefit calculation, which means that your monthly Social Security payment could increase! If your benefit is wiped out before age 66 because you made a significant amount over the threshold, then Social Security will credit you for the months that you did not receive a benefit, and would increase your benefit amount.

Remember, by working in retirement, you could also could contribute to an regular IRA account, a Roth account, or even an Health Savings Account if you are not on Medicare. Sweet Deal!

What do I do now?

Comprehensive retirement income plan

Social Security is one of the largest and most valuable assets that you will have in retirement, if you look at the present value of all of your future Social Security payments in retirement for the next 25-30 years, it could be worth $900k to over $2 million dollars depending if you are single or marred. ($2,500/month X 12 X 30 years for single person)

Tragically, the vast majority of Social Security recipients do not do any type of pro-active tax planning when it comes to the amount their Social Security benefits that are included in their taxable income, and they end up paying hundreds of thousands of dollars over their retirement life in additional income taxes because of it


Let’s  look at a 66 yr old married couple who needs $100k gross income in retirement. They get $48,000 in combined Social Security income, and take $52,000 out of their IRA to equal $100,000. Their total tax payable would be $9,734. Without proper tax planning in retirement, 69% of their Social Security benefits, or $33,200 is included in their taxable income. Remember, this is the same Social Security that there were already taxed on for their entire working lives via payroll deductions, and now they’re being taxed again when they receive it?

2015-vs 2016 SS taxable

2015 shows the couple doing no tax planning. Their ordinary and adjusted gross income is $85,200 after taxing the 31% of their Social Security benefits that isn’t counted toward income out of the equation. After their standard deductions and exemptions, their taxable income is $62,100 for a tax liability of $9,734.

2016 shows that same couple, with the same $100,000 of gross income, but with a little bit of pro-active tax planning. Here instead of taking $52,000 out of their 100% taxable IRA account, they only take $26,000 out, and pull another $26,000 from one of their FIVE COMPLETELY TAX FREE accounts that they had set up in advance with their Anthony Capital advisor. Income from these accounts don’t count towards Social Security taxes or Medicare Part B &D premium surcharges. They only pay $2,878 in taxes, saving them $6,856 a year.

Over a 30 year retirement life, saving $6,856/year in taxes with a little bit of planning grows to over $845,659 at 8%!!

You should get a 2nd Opinion review to make sure that you are claiming the correct amount of Social Security—the amount that will maximize your lifetime benefit. Also, you need to integrate your Social Security income with a comprehensive tax, investment, insurance, Medicare, Long Term Care, home equity, and legacy/estate plan. Request a 2nd opinion today, it could save you thousands!

Dave Anthony, CFP®,RMA®