United States: Social Security Loophole Closing - Changes May Impact Your Benefits

We all are aware of the importance of the April 15 tax deadline; however, for those turning age 66 this year, April 30 may be a more significant date. Why? Glad you asked.

The Bipartisan Budget Act of 2015 (the Act) signed into law by President Obama late last year makes substantial changes to Social Security. The Act closes loopholes for claiming Social Security benefits, as it will no longer be possible to claim spousal benefits only without claiming the primary worker's benefits at the same time. The Act also effectively eliminates most of the "file-and-suspend" strategies many retirees have used. These changes will impact married couples anticipating retirement over the next few years and may require reevaluation of their overall retirement planning strategy.


As a retiree, you control when you begin to receive Social Security benefits, whether at age 62, which will be about 25-percent less than if you waited until full retirement age—this is age 66 to 67 depending on your date of birth—or at your full retirement age, or anytime between your full retirement age and age 70, where you can realize an annual kicker of 8 percent or so.

In general, your health and financial condition are the key drivers for when to begin receiving Social Security benefits. Sooner, with discounted benefits, or later with premium benefits? However, under the new rules described below, a married couple may wish to act before April 30, 2016, to allow one spouse to collect spousal benefits based on the other spouse's earnings record, while allowing retirement benefits to grow at 8 percent per year to age 70 for the other spouse.

Incidentally, in an effort to ostensibly protect Social Security, the Act extended the normal retirement age. For those born before 1937, and through 1959, normal retirement age is now 66, plus up to 10 months (was age 65 prior to the Act). For those born after 1959, the normal retirement age is now 67 (was age 66 prior to the Act). Additionally, the younger range of the boomer generation will no longer be able to take advantage of the planning opportunities that have existed since 2000, such as being eligible for full benefits at age 66 and employing the file-and-suspend strategy discussed below.

File-and-Suspend Strategy Bites the Dust as of April 30, 2016

File and suspend, while still available, is significantly restricted under the new law. This strategy has been employed by married couples to receive a benefit from Social Security while deferring one of the couple's retirement benefits and allowing those benefits to grow. Such practice has allowed married couples to take advantage of the deferral credits that increase Social Security retirement benefits by 8 percent per year after full retirement age yet still collect a Social Security benefit check each month. This strategy allowed spouse A to file for retirement benefits and immediately suspend to allow spouse B to file for spousal benefits while spouse A's retirement benefits continued to grow, which could result in a significantly larger payout of benefits.

ILLUSTRATION: Both you and your spouse have reached full retirement age at 66 and you qualify for monthly benefits of $2,500 and your spouse qualifies for monthly benefits of $2,000. To employ the file-and-suspend strategy, you would elect to do the following:

  1. You file for and then suspend the collection of your monthly benefit of $2,500 until age 70; and
  2. Your spouse requests the spousal benefit of $1,250 (one-half of your benefit) and suspends her benefit of $2,000 until age 70.

The result of this strategy would allow your spouse to collect an additional $60,000 ($1,250 x 48 months) of the spousal benefit. In addition, both you and your spouse will receive an 8-percent increase in base benefits for each year that collection is suspended. If you had the suspension in place for four years, your base would be $3,300 ($2,500 x 1.32) at age 70 and your spouse's base would be $2,640 ($2,000 x 1.32) at age 70. These higher monthly benefits would then continue for the remainder of your lives, entitling you and your spouse to significantly higher benefits.

The Act ends this strategy for those who suspend their benefits after April 30, 2016. Therefore:

  • Individuals will no longer be able to receive benefits on anyone else's work record while their own benefits are suspended; and
  • No one will be able to receive benefits on an individual's work record while that individual's benefits are suspended.

However, the original intent of the file-and-suspend benefit is still an option, as the Act allows a person who has filed for benefits but later returns to work or otherwise changes his or her mind to suspend the benefit and accumulate 8-percent annual delayed credits to age 70. Given these significant restrictions, persons who turn 66 and file prior to April 30, 2016, can still take advantage of this lucrative strategy.

Restricted Application Loophole

The second change affecting married couples is the termination of the restricted application loophole. This loophole allowed married couples to claim spousal benefits at age 66 while their own benefits continued to increase. Then, at age 70, the spouse would claim their own benefits. The Act now requires retirees to collect only the larger benefits, whether they are spousal or their own individual benefits, but not both.

The new rules for restricted application apply to those who attain the age of 62 in any calendar year after 2016. Therefore, individuals who turned 62 prior to the end of 2015 can still avail themselves of this strategy.

Divorced and Survivor Benefits

Divorced spousal benefits have been changed much like the restricted application rules. For people born January 1, 1954, and beyond, filing for an ex-spousal benefit while earning delayed retirement credits for your own benefit will no longer be permitted. Under the new rules, divorced spousal benefits are still available, but only if a person's retirement benefit is lower than their divorced spousal benefit.

Survivor benefits rules have not changed. This is good news because it means that a surviving spouse of a deceased worker can still apply for and receive survivor benefits while receiving the 8-percent roll-up on their own benefit amount, which gives them the opportunity to move to a higher payment amount at a later date.

Lump-Sum Payments

Prior to the new law, individuals (married, as well as single people) could file and suspend at full retirement age and, prior to age 70, stop the suspension. A lump-sum benefit payment would then be available for the previously suspended benefits. This strategy was, in effect, an insurance policy. Those who employed the file-and-suspend strategy at age 66 might become ill and realize that their life expectancy has been shortened. A lump sum could then be requested and all previous suspended benefits could be obtained, monthly, going forward. Another reason for the significance of the April 30 date: The lump-sum option is no longer available for anyone who is not age 66 or older before May 1, 2016.


With the expiration of the various benefit optimization options for married couples and the extension of the normal retirement age, it may be more worthwhile than ever to review your retirement plan to determine the optimal age for retirement and to ensure maximum benefits and minimum tax impact. Timing is key with the expiration of some tried-and-true planning strategies. The rules impacting these decisions are complex and should include a comprehensive review of your current tax and financial situation, as well as health considerations and family history. However, if you wish to act, you should consider doing so promptly.

If you would like more information about this topic or your own unique situation, please contact Stanley Todd, CPA, MBA; Mary Beth Lee, CPA, CFE; Steven M. Packer, CPA; or any of the practitioners in the Tax Accounting Group. For information about other pertinent tax topics, please visit our publications page located here.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Williams Benator & Libby, LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Williams Benator & Libby, LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions