White House and Congress Play Loose and Dangerous with Social Security Rules (Tough Luck, Divorced Women)

In their hurry to throw together a federal budget deal that both sides could agree on (and thereby avoid another government “shutdown”), Congress and the White House passed a poorly-written document.(1)  Title 8, which covers changes to Social Security, is particularly egregious.  More than a month after this Act was signed into law, Social Security officials still cannot get clarification about what Congress intended certain sentences to mean.

The result?  No guidance has been issued to Social Security employees about what the changes are or how they will be implemented.  If you are thinking of filing for benefits and call Social Security’s toll-free number or visit your local office, not a single person can tell you if or how you are affected.

A week ago I made a phone call and sent two follow-up emails to the offices of Representative Kevin Brady and Senator Dean Heller, who respectively chair the House and Senate subcommittees that focus on Social Security.  I requested clarification of the specific issues mentioned below.  Not a peep of a reply.

Which makes you wonder whether members of Congress understand, take the time to educate themselves about or even read (!) the measures they vote on.

Claiming Changes for Couples

A couple of things seem to be pretty clear:  two strategies used by married couples to enhance their joint benefit amount are being phased out.

If you are not at least age 62 by the end of this year you cannot “file-and-restrict.”  This enables an individual who is at least full retirement age to limit or “restrict” the benefit they wish to receive to just their spousal amount and delay the start of the benefit based on their own work history.  At age 70, they then switch to their own benefit.  Assuming the current full retirement age of 66, this results in an amount that is at least 32% larger.

The other disappearing strategy is called “file-and-suspend.”  Under file-and-suspend your partner can qualify for a spousal benefit based upon your record even though it is in “suspension,” i.e. Social Security is not sending you a monthly check. If your benefit remains suspended from full retirement age until you turn 70, it can be as much as 32% larger.

The last day to file-and-suspend and enable a dependent to receive a benefit based on your record is April 30, 2016.  What’s not clear is whether both partners have to meet this filing deadline.

Note: the ability to “suspend” your benefit at full retirement age will still be available after April 30th.  However, if someone else- a spouse, child, parent- is receiving a Social Security benefit based upon your record, their checks will also stop.

Important: Any couples who are currently using either file-and-suspend or file-and-restrict may continue to do so.

Back to “Days of Old” Divorced Women

While the above two claiming strategies are being phased out, the budget act is going to have a serious and more immediate impact on anyone who is divorced.  Starting May 1st- unless something is done before then- a divorced spouse is no longer eligible for a benefit based upon her/his “ex” unless their former partner has filed for Social Security.

This has not been the case since 1983 when Congress specifically changed the existing law!  As part of the Social Security Amendments passed that year, Congress specifically stated that, assuming a divorced spouse meets the requirements, she/he is eligible for a benefit based upon their former partner’s record whether or not that individual has started receiving Social Security:

Independent Entitlement of Divorced Spouses

Permits a divorced spouse who is age 62 or over and who has been divorced for at least 2 years to receive benefits based on the earnings of a former spouse who is eligible for retirement benefits, regardless of whether the former spouse has applied for benefits or has benefits withheld under the earnings test. (2)

While some have suggested that rolling back the law to where it stood more than three decades ago is not what Congress intended, this is none-the-less what this badly-written piece of legislation states.  In addition, it is not up to Social Security- or any administrative branch of the federal government- to “guess” what Congress meant when it drafted a piece of legislation; their job is to carry out the law.

Divorced women are especially hard-hit by this.  First, on average, women tend to earn less.  Estimates range from 77% (White House) to 84% (Pew Research Center) of what men earn. In addition, women spend significantly more time out of the workforce than men, primarily due to care giving responsibilities for children and/or other family members.  A federal longitudinal study of those born in the second half of the Baby Boom (1957-1964) found that, “Overall, men were out of the labor force 11 percent of weeks from age 18 to age 48; at these same ages, women were out of the labor force 25 percent of weeks.” (3)  The book Lean In presents a more updated look at the situation, but shows a similar pattern:  "43% of highly qualified women with children are leaving careers or off-ramping for a period of time." (4)

Together, lower wages and more time out of the paid workforce result in a lower Social Security benefit based upon a woman’s own earnings.  According to the Social Security Administration, in 2013, the most recent year available, “the average Social Security income received by women 65 years and older was $12,857 compared to $16,590 for men.” (5)  If a divorced woman can receive a higher benefit based upon her ex-spouse’s earnings, it can make a big different in the lifestyle she can afford.

Unfortunately, based upon the budget act, if a 62-year old divorced woman was planning to file for Social Security benefits next year, she might have to wait 8 years – until age 70!- for her “ex” to files for his benefit before she qualified for her spousal amount.

For Now We Wait

Social Security representatives are “working diligently” with congressional staffers to understand what Congress’ intent was when it wrote this legislation.  But until then, untold numbers of baby boomers on the verge of retiring are in limbo.

A Washington-based attorney who specializes in retirement issues told me, the current mess is “precisely why Congress should bring in subject-matters experts” when drafting legislation about subjects about which they have little or no understanding.

1. https://www.congress.gov/bill/114th-congress/house-bill/13142. Social Security Amendments of 1983.  H.R. 1900/P.L. 98-21.  Enacted April 20, 1983. 3. http://www.bls.gov/news.release/nlsoy.nr0.htm4. Sandberg, Sheryl.  Lean In: Women, Work, and the Will to Lead, 2013. Lean In. 5. Fact Sheet: Social Security is Important to Women.  June 2015. https://www.ssa.gov/news/press/factsheets/women.htm