Budget Deal Changes Social Security, Prevents Disability Shortfall, Removes Spouse “Loophole,” and more


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(Photo credit Cleveland.com)

Inside the budget deal that prevented the Republican shutdown of government until after the 2016 election, the Social Security Benefit Protection and Opportunity Enhancement Act of 2015 made significant changes in Social Security (SSA).

Funding was reallocated from SSA retirement to SSA disability to make sure full benefits are paid beyond 2016 and through 2022. Spouse and auxiliary rules were changed to close a “loophole” that allowed married couples to switch from one type of benefit to another. Disability rules and procedures have been tightened-up. Experiments to find ways to promote work for disabled people were continued, and overpayment rules were tightened. Here are the important details of all these changes.

DISABILITY FUNDING

Social Security (SSA) provides monthly benefits to people who become totally and permanently disabled. As the population ages, more people become eligible for disability benefits, straining the funds available for payments. Under prior law, SSA would not have been able to pay full benefits by next year. In late 2016, just about at election time, disability benefits would have been reduced by about 20 percent.

This shortfall has been filled through 2022. SSA taxes were reallocated to insure that those who receive disability do not have benefits reduced next year. For calendar years 2016 through 2018, the portion of wages or self-employment income going to the disability fund will be increased from 1.8 percent to 2.37 percent. In 2019, the amount drops back to 1.8 percent. (§833)

SPOUSE and AUXILIARY BENEFITS and SUSPENSION RULES

Under the new rules, where the worker’s benefits are suspended, there may be no retroactive benefits, no auxiliary benefits, and no benefits on the record of another.

When a person works in employment covered by SSA, the person obtains a package of benefits with retirement for the worker and auxiliary benefits for other close relatives — spouses, ex-spouses, surviving spouses, minor children, and disabled adult children.

Generally, a person who works in covered employment may file for retirement benefits any time between about age 62 and age 70. Each month that a worker delays filing, the monthly benefit becomes permanently higher. Normal Retirement Age (NRA) is age 66. However, adjustments made for filing earlier are called reductions and those after are called delayed retirement credits (DRCs). The later a person files, up to age 70, the larger the monthly checks are.

Under prior law, workers were using the period from age 66 to age 70 to do two things that some are calling “loopholes.” First, a married worker would file-and-suspend benefits so a spouse could collect benefits on the worker’s record. Second, a married person would file only on the work record of a spouse, then file for his or her own benefits later. In each case, the person earns DRCs and ends up with a higher benefit every month for the rest of life.

These things are no longer allowed. Under the new rule, a person filing for either worker benefits or spouse benefits will be deemed to have filed for both.

Example 1. Two people are married. Only the man has worked. Both are age 66. The Normal Retirement Age (NRA) benefit for the man is $1600 The man wants to wait for DRCs while he continues to work so he may collect a higher benefit of $2112 later. He files for retirement benefits and suspends the benefit payments so that his wife can collect benefits right away. His wife collects $800 per month now. This is simply no longer allowed. Either both collect now or both collect later.

Example 2. Two people are married. Both work. Both are age 66. The Normal Retirement Age (NRA) benefit for the man is $1600 and the NRA for the woman is $1400. Under the old system, the woman could file and collect her $1400, and the man could file on the woman’s record and collect half that amount, or $700. When he turns 70, the man then files under his own work record and collects $2112 per month with DRCs. Under the new system, the man will either receive the $1600 right away, or will wait for DRCs — but he cannot collect the $700 in the meantime.

There are also new rules suspending benefits for spouses and children in cases where the worker’s benefits are suspended for prison, deportation, misrepresentations or “any other provision of law that authorizes recovery of a debt by withholding such benefits.”

STRICTER DISABILITY REQUIREMENTS

Changes have been made in the disability program that may make it more difficult to collect or maintain benefits.

1. Stricter medical reviews. SSA is now required to make “every reasonable effort to ensure” that the case is reviewed by a qualified psychiatrist, psychologist, or physician. (§832)

2. Exclusion of certain evidence. SSA may not consider certain medical evidence to decide “whether an individual is under a disability or continues to be under a disability” where the disabled person or the medical provider has been caught doing something wrong under other provisions. There is an exception for “good cause.” (§812)

3. Cooperation with law enforcement. SSA is now required to attempt to work with local law enforcement agencies in every state for “cooperative disability investigations” and issue reports about the results. (§811)

4. Stricter suspension guidelines. There are new harsher penalties for those who commit SSA fraud, those who make false representations, those who withhold material information, those who conceal working while disabled, and increased penalties including making “no benefits payable” in some cases. Each false statement becomes a “separate violation.” (§813)

5. More funding for Continuing Disability Reviews (CDRs) and work reviews. Periodically, SSA reviews those who are disabled to make sure that they are still disabled, that they have not improved to a point where they can work, and that they are not actually working over a certain income level. The new rule permits additional funding for these reviews by 18 percent in 2017, 16 percent in 2018, and about eight percent for 2019, leaving 2020 the same, and reducing 2021 by less than one percent, over the old rule. This means there will be more reviews. This provision also applies to SSI Redeterminations and adds work-related reviews into the mix. (§815)

6. Independent verification for earnings of disabled people. When a disabled person returns to work, benefits may be reduced or suspended under a complex series of work rules. Under the old work rules, SSA would rely heavily upon wage information from annual W2 reports, self-employment information reported to IRS on tax returns, questionnaires submitted during Continuing Disability Reviews (CDRs), and direct reports from disabled people, each of which came slowly. Now, SSA may go directly to “payroll data providers” to obtain more timely information. The disabled person must agree to these communications. (§824)

Some of these new disability rules apply only to Social Security Disability (SSDI), which is the earnings-based insurance benefit. Some also apply to Supplemental Security Income (SSI) which is a benefit of last resort provided for poor disabled people.

EXTENDED DEMONSTRATION PROJECT EXPERIMENTS

In the past, SSA was allowed to experiment with benefit rules of working disabled people on both SSDI and SSI to try to find systems to encourage work. Demonstration Projects were done with selected populations on trial bases and reports of results were issued. Experiments include the BOND and YTD programs. So far, these experiments have provided “mixed results.”

The new law extends these experiments through 2021 and provides stricter conditions. Participation is now voluntary for the disabled person. For those who collect SSI, there is a new “minimum threshold amount” to deduct from earnings as Impairment-Related Work Expenses (IRWEs) rather than itemizing these deductions. The amount will be determined by SSA. (§821)

TIGHTENED OVERPAYMENT RULES

When SSA pays benefits not due, this becomes an “overpayment” of benefits. Someone who receives too much in benefits may ask for forgiveness or partial withholding over a period of time, based on financial condition. The Act now allows SSA to contact third parties in many cases for independent verification of financial ability to pay. Those requesting forgiveness for overpayments or partial benefit withholding are required to authorize these requests. (§834)

OTHER

There are new provisions to match records between OPM and SSA and withhold past-due benefits from disability recipients where money is owed to OPM. (§841)

There are new processes that should speed up the hiring of new judges to decide claims.