Suit against Social Security may shake up planning for LGBT clients

As two gay couples take the Social Security Administration to court for the alleged failure to recognize their marriages, advisers with LGBT clients may want to take a closer look at their Social Security benefits.
On March 10, lead plaintiffs Hugh Held of Los Angeles and Kelley Richardson-Wright of Athol, Mass., filed suit against Carolyn W. Colvin, acting commissioner of Social Security in the U.S. District Court in the Central District of California.
Mr. Held and his husband got married in 2008 in California, and both men are receiving Supplemental Social Security on the basis of disability. Meanwhile, Ms. Richardson-Wright, who legally married her wife in the Bay State in 2007, has been receiving SSI on the basis of disability, but her wife is the representative payee.
The U.S. Supreme Court struck down Section 3 of the federal Defense of Marriage Act on June 26, 2013, which paved the way for Social Security to begin recognizing same-sex marriages for the purpose of determining benefits. However, Mr. Held and Ms. Richardson-Wright say that the federal agency failed to recognize their marriages — even though both had notified Social Security — and both had received benefits they’d otherwise receive if they were single.
Last summer, Social Security began notifying some Social Security recipients about how the administration would calculate their benefits as married, close to a year after the so-called Windsor decision, according to the complaint. Shortly after, Mr. Held and Ms. Richardson-Wright were notified by the Social Security Administration that the agency had overpaid their benefits and was now demanding repayment — which will be financially debilitating to the couples, according to the suit.
The agency eventually reduced the benefit payments to reflect the marital status of Mr. Held and Ms. Richardson-Wright, the plaintiffs say. Though the couples don’t dispute the benefit adjustments, they do take issue with the demand to repay benefits for an error they believe was made by Social Security.
“In order to recoup the claimed overpayment, SSA plans to deduct funds from Mr. Held’s SSI benefits each month,” the plaintiffs claimed. “He will be approximately 81 years old before he pays off this overpayment.” The amount of the overpayment to Mr. Held, who is 55, adds up to just over $9,000.
Ben Stump, a spokesman for the Social Security Administration, did not immediately provide comment.
Even though this case centers on benefits received for disability, same sex married couples ought to explore every option they can to maximize their benefits for retirement income, and make sure that the government is treating them fairly.
NEW STRATEGIES
Advisers working with lesbian, gay, bisexual and transgender clients have likely spent nearly two years reading up on Social Security claiming strategies for those very clients.
Vickie L. Henry, an attorney with the Gay & Lesbian Advocates & Defenders and a lawyer representing the plaintiffs in the suit against Social Security, suggested that those advisers ensure that their clients are able to partake in survivor and spousal benefits.
“I think a lot of LGBT people don’t know much about spousal benefits; we could never get them,” she said. “There are ways to maximize Social Security benefits, and there are people who might have applied and weren’t able to take advantage of that.”
In one scenario, Ms. Henry encountered a same-sex married couple where one woman, who retired at 67 and would have otherwise delayed receipt of her own benefits and taken spousal benefits until age 70, had to draw on her own record. After Windsor, the woman was eventually able to fight Social Security and have the agency make up the difference and maximize her benefit at age 70.
“She ended up with a check for $4,000 and she was ecstatic, but what was more important was that she’d get close to $400 more [in each benefit payment] for the rest of her life,” Ms. Henry said. “These are people who work for 30 or 40 years and who paid into the system, and all they need to do is make sure it’s treating them fairly.”
BE ON THE LOOKOUT
Advisers working with LGBT couples have had to pursue corrections with the Social Security office in the past. In light of the suit against the agency, it makes sense to keep an eye out for any overpayment notices and to attempt to rectify them immediately.
“Certainly in my past I’ve had clients collecting what seem to be erroneous calculations,” said Nan P. Bailey, an adviser at NPB Wealth Management. “My guidance has been to go to the Social Security office, have them rerun the figures, and make sure they use the correct assumptions.”
“This case is highlighting that [those errors] can still come back to you later,” Ms. Bailey added. “It’s a very upsetting premise from a planning point of view.”