In the words of Matthew Allen, a
Social Security expert whose company helps financial advisers and their clients determine an optimum claiming strategy, "This has been a crazy week!"
What an understatement. The opportunity to request to file and suspend
Social Security benefits under the more-favorable existing rules expires at midnight on Friday.
As long as someone is 66 or older by April 30, 2016, they can request to file and suspend their benefits by the April 29 deadline, the
Social Security Administration said in its interpretation of the new claiming rules created by the Bipartisan Budget Act of 2015. That will trigger
Social Security benefits for eligible family members, such as a spouse or minor dependent child, while the worker's own benefit continues to grow by 8% per year up until age 70.
The file-and-suspend strategy is also valuable for single people who may want to lock in the option to request a lump sum payout of all of their suspended benefits at a later date instead of collecting the delayed retirement bonus. That can be particularly valuable if their health or financial situation changes before age 70 because single people have no spouse to collect a survivor benefit.
Starting April 30, 2016, requests to file-and-suspend benefits will be subject to a different set of rules. No one — not a spouse or child — would be able to collect benefits during a suspension and the lump-sum payout option will disappear.
Many advisers and clients who are just waking up to these facts are scrambling to book appointments at their local
Social Security offices only to be told they will have to wait weeks or months for an in-person consultation.
Meanwhile, telephone waits at the
Social Security Administration's toll-free number (800-772-1213) can be an hour or more. And the idea of
filing for Social Security benefits online simply scares many people.
Enter
Form 795. "For clients that insist they want to try to file and suspend on their own but are having a tough time scheduling an appointment, we are advising them to at least file Protective Filing Statement using Form 795," said Mr. Allen, co-founder of Social Security Advisors.
He recommends that Social Security applicants write the following statement on Form 795: "I intend to file and suspend on my own record by the April 29th deadline, however, I have been having difficulty obtaining an appointment. I would like to file and suspend as soon as an appointment is available."
"This should at least buy them an extra six months to get the actual filing done because they are making their intentions clear prior to the deadline," Mr. Allen told me in an email. For clients who want assistance filing and suspending their Social Security benefits online before Friday's deadline, his company,
Social Security Advisors, charges a one-time fee of $99.95 to file your application for you.
Meanwhile, storm clouds are gathering for possible lawsuits over who is eligible to file-and-suspend benefits by the April 29 deadline.
Joe Elsasser, founder of Social Security Timing, a company that provides Social Security software and training to financial professionals, issued a statement Tuesday clarifying his firm's interpretation of the voluntary suspension phase-out.
"In January 2016, a leading Social Security attorney Avram Sacks contributed an article to our newsletter that suggested that people born on or before Sept. 1, 1950, may be eligible to prospectively file and suspend benefits prior to April 30," Mr. Elsasser wrote in an email blast to his subscribers.
"In other words, the group born between May 2 and Sept. 1, 1950 could request filing and voluntary suspension prior to April 29, 2016, and any dependents would be able to claiming benefits during the period of suspension," he wrote.
Mr. Elsasser said his company chose to take a more conservative position when it updated its software to accommodate the new claiming rules, suggesting that a voluntary suspension to enable benefits for dependents would only be available to claimants born on or before May 1, 1950, "because we believe that advisers may not want to make recommendations that may need to be litigated if the Social Security Administration did not agree with the interpretation. (The SSA has repeatedly stated that the latest eligible birth date is April 30, 1950).
"At the same time, we believed that it was important to share attorney [Mr.] Sacks's opinion as it might be highly valuable to some people," Mr. Elsasser wrote. "If you have clients with specific circumstances that are discussed in attorney [Mr.] Sacks's article, we suggest you advise them to seek counsel or at a minimum document every conversation they have with Social Security personnel to ensure that if they tried to claim under the prior law and future interpretations of the new rules suggest they should have been eligible, that they may have recourse."
(Questions about new Social Security rules? Find the answers in my new ebook.)
Mary Beth Franklin is a contributing editor to InvestmentNews
and a certified financial planner.
