For clients facing Social Security start-date decisions, the new Bipartisan Budget Act includes provisions with meaningful impact.

Now that President Obama has signed it the law, you may want to communicate these changes to affected clients.

1. Medicare Part D premium relief

The act provides Medicare Part D premium relief to the 30 percent of Medicare beneficiaries who otherwise would have experienced a 52 percent premium hike starting in 2016. To understand the complex reasons, see "Medicare Premium Tax on High-Income Households to Rise in 2016."

For people age 65 and older, the potential for a sharp premium hike was an incentive to start Social Security benefits in 2016, rather than wait and collect Delayed Retirement Credits.

By starting in 2016, participants would have premiums deducted from Social Security benefits and be “held harmless” against Part B premium increases.

This would have kept Part B premiums at $104.90 per month for 2016, rather than having them increase to $159.30--a $54.40 per month difference.

The Budget Act greatly reduced the difference by adding a $3 surcharge to all Medicare Part B premiums, effective in 2016, and setting the basic premium for those not held harmless at $120.

Thus, the premium difference for delaying the start of benefits shrinks to just $15.10 per month ($123.00 - $107.90).

High-income medicare participants who currently pay Part B premiums in higher tiers also received the same premium relief on a proportionate basis.

2. Elimination of file-and-suspend option

For individuals who are currently under age 62, the Budget Act eliminated the popular “file-and-suspend” option for claiming Social Security benefits.

This option has allowed married couples to file for a worker’s benefit at full retirement age, which allows the other spouse to collect a spousal benefit on that record, and then immediately suspend the worker’s benefit to let it earn Delayed Retirement Credits.

Technically, the act extended “deemed filing” from full retirement age to age 70.

It means that any filing for benefits from age 62 through 70 now will be deemed to be for both the worker and spousal benefit, with Social Security paying the larger of the two.

Also: Beginning six months after enactment of the law, when workers suspend benefits, any benefits being received by spouses, divorced spouses or children on the same record will be suspended until the worker restarts benefits.

These provisions are very controversial. Some commentators say they represent a positive step forward in eliminating loopholes and shoring up Social Security’s funding.

Others argue that they will have a devastating impact on Social Security benefits.

Instant Insights /

2 ways Social Security decisions will be affected by the new Budget Act

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