News & Events

Maximize Your Social Security Benefits

Submitted By Firm: Bond, Schoeneck & King, PLLC

Contact(s): Louis P. DiLorenzo, Thomas G. Eron

Author(s):

Date Published: 2/22/2016

Article Type:

Share This:

April, 2016 Law Change Prompts Immediate Review

The Social Security old age system is a simple concept with some very complex rules. It is a near-universal arrangement, covering working Americans and their families, which provides retirement benefits for life. The basic rules require a minimum of 40 quarters of coverage – essentially 10 years of paying into the system as an employee or self-employed person. Benefits are based on your highest 35 year average of covered earnings, which determines a "primary insurance amount" or "PIA." The PIA is payable at your "full retirement age" or "FRA" which was once age 65. For individuals born in years 1943 through 1954, FRA is age 66, and it increases to age 67 for anyone born in 1960 or thereafter.

The Social Security system has been the subject of debate and political opinion. Undoubtedly, the system will be changed in years to come. Nonetheless, it is a relatively vast and stable system that is likely to endure over time. This article will be based on current Social Security laws as well as the changes adopted in late 2015 that go into effect on May 1, 2016.

Basic Rules

For a single person, with no spouse or dependents, with sufficient Social Security coverage over a working career, the system is pretty simple. The PIA is a monthly benefit payable for life beginning at FRA. If this single person is just turning 66, the unreduced PIA can start to be paid. It is subject to a cost of living adjustment or COLA that will usually increase benefits slightly each calendar year during lifetime.

If our single person were not yet age 66, benefits may still begin on or after age 62. There is a monthly reduction of 5/9 of 1% for the first 36 months benefits begin before FRA and a 5/12 of 1% reduction for each month over 36. So a person whose FRA is 66 will have a 25% reduction at age 62. Our single person could also delay payments until after FRA, in which case benefits are increased by 2/3 of 1% for each month of delay or 8% per year. There is no increase for a delay after age 70. Thus, our single person could collect as much as 32% more than his or her PIA (plus the annual COLAs) at age 70.

Social Security election strategies are relatively simple for our single person. A delay in collecting benefits can provide greater monthly income in the future and may be desirable if current income needs can be satisfied elsewhere – such as continuing work income or other resources. Personal health and expected longevity must also be considered. If our single person is healthy with a long expected lifespan, a delay in Social Security benefits is a good option. If life expectancy is not so long, then it is advantageous to take benefits earlier.

Of course, the hypothetical single person with no current or former spouse and no children or other dependents does not frequently exist. Most of us are or were married or may have children or other dependents. The Social Security system provides benefits for spouses, dependent children, and disabled persons.

This article is not intended to be a treatise on the full scope of Social Security benefits. That is a broad and complex subject. Quite a bit of information is available at the Social Security Administration official website at www.ssa.gov. You can create your own account on the official website to review your earnings record and to explore benefit alternatives. This article will focus on a few strategies that can be used by married couples to try to maximize benefits. Some of these strategies are being eliminated as a result of a statutory change that will become effective May 1, 2016. Because of this change, some individuals may be prompted to take action now to preserve a favorable option. To be sure, there is no sure-fire benefit option that can be determined for any individual. The major unknown is our lifespan. Choices can best be made with a realistic guess about longevity and an honest assessment of other personal resources such as work income, savings and other financial resources for retirement security.

Options for Married Couples

Benefit options for married couples can be complex, confusing, and are not always well-presented by the Social Security system. Much of the complexity is because a married person can collect benefits based on his or her own earnings record and is entitled to spousal benefits based on the earnings record of a spouse. There are separate rules about when the spousal benefits may be claimed. Here are some basic ground rules:

  1. One spouse may claim spousal benefits only after the other spouse claims primary benefits.
  2. A worker’s PIA at FRA determines the spousal benefit.
  3. At FRA, one spouse may apply for benefits and immediately "suspend" those benefits. This allows the other spouse to claim spousal benefits. The spouse who has "filed and suspended" may delay receipt of the PIA until age 70, allowing the 32% increase to apply. This is the "file and suspend" strategy that is being eliminated on May 1, 2016.
  4. At FRA, one spouse may file a "restricted application" that is limited to a claim for spousal benefits. This restricted application may later be abandoned at age 70 to claim the spouse’s own PIA, along with the 32% increase for the delay in primary benefits. This option, a "restricted application," is also being eliminated by the new law. Under the new provisions, when an applicant applies for a benefit, the Social Security Administration will automatically give the applicant the highest benefit available – either the primary benefit or the spousal benefit – meaning that an applicant will not be able to delay (and increase) a higher primary benefit while collecting a lower spousal benefit. A restricted application will be available to an individual who was at least age 62 by the end of 2015, and then only if his or her spouse has filed and suspended (or has claimed benefits) by the end of April, 2016.

Here is a summary of the principal options available to married couples:

  1. Each spouse files for benefits at the desired age – age 62 up to age 70.
  2. "File and suspend" – where one spouse files for primary benefits and suspends receipt (in order the earn the delayed benefit increase), and the other spouse files for benefits.
  3. "File and restrict" – where one spouse files for primary benefits and the other spouse files a restricted application for spousal benefits only (thus allowing that spouse’s primary benefit to earn delayed credits up to age 70).
  4. "File and suspend" and "file and restrict" – one spouse files for primary benefits and suspends receipt (allowing the PIA to earn delayed credits); the other spouse files a restricted application for spousal benefits (also allowing that spouse’s PIA to earn delayed credits.

The first option above is simple, but it likely does not leverage the spousal benefit rules to the couple’s best advantage.

"File and Suspend" Tactic

In order to "file and suspend," the filing spouse must have reached FRA – age 66 for most currently eligible recipients. This strategy is best suited for the suspending spouse who has a higher earnings history than the other spouse. Using this "file and suspend" strategy, the lower-earning spouse files for and begins to receive benefits that include the spousal benefit derived from the higher-earning spouse’s earnings history. After the end of April, 2016, spouses of covered workers who "file and suspend" will no longer be permitted to claim a spousal benefit as long as the spouse’s benefit is suspended.

Further notes to the "file and suspend" strategy:

  • Under current law, a claimant who has suspended his or her benefit may undo the suspension later, claim a lump sum of retroactive benefits (foregoing the delayed commencement credits) and continue future monthly benefits. This retroactive option is useful if a person who has suspended benefits later discovers a serious health problem affecting longevity. A new rule has eliminated this ability to collect retroactive benefits for anyone who files and suspends after May 1, 2016.
  • By filing and suspending, a claimant is automatically covered under Medicare Part A. Part A, covering hospital expenses, requires no premium and is separate from the other Medicare programs covering doctor expenses and drugs. Once an individual is covered under any part of Medicare, deductions for contributions to Health Savings Accounts (HSAs) are eliminated.

"File and Restrict" Tactic

The "file and restrict" strategy is also being essentially eliminated by the new rules. Under current law, if a claimant files for benefits, the claimant is "deemed" to take the highest benefit available – either the primary or spousal benefit. At FRA, however, a claimant may restrict an application to spousal benefits only. By using this strategy, a higher-earning spouse at FRA can restrict the Social Security application to the spousal benefit and allow the primary benefit to earn delayed credits. Then, at age 70, the primary benefit is claimed. The new law ends this strategy by extending the "deeming" rule to all Social Security applicants – whether at FRA or earlier. Thus, the new rule will no longer permit a higher-earning spouse to restrict the benefit claim at FRA to the spousal benefit. The choice to the higher-earning spouse under the new law will be to either start the PIA at FRA or to delay. Under the amended rules, only persons age 62 or older by the end of 2015 will be allowed at FRA to file a restricted spousal benefit claim based on a benefit filing (including a "filed and suspended" benefit) made by the end of April, 2016.

Where To Go From Here

Under Social Security, spousal benefits, as well as survivor benefits to surviving spouses will continue to exist. Some of the strategies to maximize benefits will change, and the whole system remains complex for married couples.

The purpose of this article is not to lead anyone to a specific decision about how to maximize your benefit options under Social Security. Coming up with the best choice for any individuals requires first knowing the specifics of each person’s earnings history and a good estimate of the primary insurance amount. As noted, this basic information can be obtained and reviewed by each individual at the Social Security Administration website, www.ssa.gov. By setting up your account at the Social Security Administration website, you can get valuable information about your individual benefit.

Spousal strategies to maximize benefits start with knowing each spouse’s PIA. The other important facts, however, are realistic estimates of longevity as well as a review and estimate of overall income and resources available during retirement. As a result of unknown or unaccounted-for factors, it could be that the best-laid plans to maximize Social Security benefits turn out to be wrong. While this is true, a good deal of peace of mind can be achieved by thoughtful planning. Choosing how to take Social Security benefits ought to be accompanied by careful thinking about your health and other retirement resources – private pensions and annuities, IRAs, and accumulations in 401(k) or 403(b) plans, after-tax savings and investments, life insurance and other resources. Personal attention to these matters, especially if the law changes are affecting your options, is recommended. There are private resources that have developed modeling programs to put specific numbers to your personal options. These can be helpful. Consulting an unbiased expert and legal counsel in estate planning is also recommended. Careful planning before decisions are made provides most people with better feelings about their decisions and confidence in facing the future.

Find a Member

View or print a complete ELA member list »

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

Stephen HirschfeldAs an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel