February 2016 : November 2015 Changes to Social Security Law Affect Divorcing Spouses

Michigan Family Law Journal : TAX TRENDS AND DEVELOPMENTS Feature

by Joseph W. Cunningham, JD, CPA


The Bipartisan Budget Act of 2015 (Act), enacted November 2, 2015, includes significant changes which limit two strategies previously used by spouses and divorcing spouses to maximize Social Security benefits.

Though Social Security benefits are not subject to division in divorce, they are a source of income often taken into account in determining “money available” with respect to spousal support.

“File and Suspend”
Law Prior to the Bipartisan Budget Act of 2015

Since 2000, a worker – assume H – could file for benefits at full retirement age – currently 66 – then suspend payment until age 70 while continuing to work and accumulate additional retirement credits, thus increasing the benefit payable at age 70.

However, because H led for benefits – notwithstanding that his benefit payments are suspended – his spouse (W) – or ex-spouse married to him for 10 years – could then draw a spousal benefit based on his earnings record. The spousal benefit is 50% of the worker’s benefit.

And, if W is working, she may continue accumulating additional retirement credits based on her earnings while collecting the spousal benefit. Then, when she retires, she can draw the higher of the spousal benefit or the benefit based on her own earnings record.

Revision by the Bipartisan Budget Act

Under the Act, the “file and suspend” option remains intact. But, during the suspension period, no benefits may be paid to a spouse or a child based on the worker’s earnings record.

So, in short, any benefits based on the worker’s earnings record – including the spousal benefit – may not be paid until the worker begins receiving benefits.

Effective Date and Planning Opportunity …

Continued in PDF file below… “November 2015 Changes to Social Security Law Affect Divorcing Spouses”
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