Call to close two Social Security loopholes

[Niuatoputapu]

The linked article calls for fixing two spousal benefits "mistakes".

The first is the "lack of deeming between FRA and age 70". The second is "claim and suspend" to allow one spouse to collect spousal benefits while the other continues working. I expect both to be "fixed" before I or DW ever reach FRA, so not an issue for me. But for others who are closer to FRA, this may interest you.

Time to Close Two Social Security Loopholes | Committee for a Responsible Federal Budget

[Htown Harry]

If I was forming a group with a goal of being perpetually frustrated because they wouldn't be listened to by their target audience, I'd name it the Committee for a Responsible Federal Budget.

Thanks for posting, though. It is interesting to get a sense of the overall impact of the strategies we see mentioned here frequently.

[RetireBy90]

I have to admit, claiming a spousal at FRA then claiming your benefit at 70 with accompanying gains, smacks of double dipping. I would agree that closing that loophole would save some $$ and seems reasonable. However there will be those that oppose it and would fight to keep it.

[pb4uski]

Quote:

Closing off these loopholes might only have a small impact, but with a significant shortfall to close, addressing these claiming strategies would be a good first step. To make Social Security solvent, though, lawmakers will need to bring benefits and revenue in line with the type of options in our Social Security Reformer.

Why realistically address the real problem when we can just nibble at the edges.....

[NW-Bound]

If nibbling at the edges already causes teeth like this, who can chomp to the center?

[unno2002]

Loopholes?

Why are people not screaming about a spouse, who potentially never worked or paid a cent in SS tax, collecting after ten years of marriage to someone who did work?

My wife and I both worked. I earned more than she. She therefore paid SS tax, for nothing. She gets more as a spouse on my earnings, than on hers. It is a SICK system.

[NW-Bound]

Why not screaming? Because they are collecting, maybe. Not just the current spouse, but also the ex(es) can collect.

Anyway, be careful or the piggy will pay a visit.

[nate2953]

"My wife and I both worked. I earned more than she. She therefore paid SS tax, for nothing. She gets more as a spouse on my earnings, than on hers."

Not quite. She's being paid according to her earnings, then as an added unearned bonus she is receiving a little extra from your record. Granted, yes, if she had never worked then she would be fully paid from your record. But then again she would've had to forego a lifetime of earnings, all just to save that pesky 6.2% SS tax. Doesn't make much sense. Bottom line is benefits are not going to change that drastically, at least not for current beneficiaries.


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[athena53]

Well, the originators of SS would claim that the cost for spousal coverage was built in to the contributions. This is good public policy since it protects full-time parents. That means, though, that I get no benefit from paying for spousal coverage. My Ex and my current husband collected on their own records. So has my current husband's Ex. Now I might not be able to file for Spousal at 62- which means that the Spousal benefit was useless for all 4 of us. (My Ex is dead, DH's never remarried.)

[Texas Proud]

It takes them a long time to close a loophole....

There used to be one that allowed a person who was not able to collect SS on their own because they were under a teacher or state pension plan... as long as you did your last day of work with an entity that took out SS you qualified.... they knew about this and did nothing for many many years... there was an industry in Texas where teachers would spend their last day working for a school district that took out SS... you had to pay the district some money for them to put you on payroll etc... and work one day... and then retire from that district... thousands (if not tens of thousands) took advantage of this loophole....

Now you have an offset, so it is even worse today...

[donheff]

Quote:

Originally Posted by Texas Proud It takes them a long time to close a loophole.... There used to be one that allowed a person who was not able to collect SS on their own because they were under a teacher or state pension plan... as long as you did your last day of work with an entity that took out SS you qualified.... they knew about this and did nothing for many many years... there was an industry in Texas where teachers would spend their last day working for a school district that took out SS... you had to pay the district some money for them to put you on payroll etc... and work one day... and then retire from that district... thousands (if not tens of thousands) took advantage of this loophole.... Now you have an offset, so it is even worse today...

Yeah, I can never remember which is which, The "windfall elimination" and the "offset." I think the offset cuts down on earned SS and the windfall elimination prevents me from claiming a spousal benefit. The changes made sense but that spousal benefit would be a nice undeserved benefit.

[Midpack]

Quote:

Originally Posted by pb4uski Why realistically address the real problem when we can just nibble at the edges.....

Not to mention Medicare/Medicaid is the far bigger deficit issue, yet most of the discussion/hand wringing is about but Social Security (where the fixes are easier). "Fixing" Soc Sec does much less to address the overall deficit issue.

[marko]

Quote:

Originally Posted by NW-Bound Why not screaming? Because they are collecting, maybe. Not just the current spouse, but also the ex(es) can collect.

I didn't scream about "lack of deeming between FRA and age 70" because it had nothing to do with me.
I didn't scream about "claim and suspend" because it had nothing to do with me.

When they came talking about means testing and benefit reductions........................

[Chuckanut]

Quote:

Originally Posted by Texas Proud Now you have an offset, so it is even worse today...

I have had some heated conversations with teachers who somehow think the windfall rules are unfair. They make the usual mistake of not realizing they must look at the entire compensation package, not just one element.

[Texas Proud]

Quote:

Originally Posted by Chuckanut I have had some heated conversations with teachers who somehow think the windfall rules are unfair. They make the usual mistake of not realizing they must look at the entire compensation package, not just one element.

I agree.... the loophole should have been closed...

But, I can see the other side...

One couple has a SAHM the whole marriage.... they get 1 1/2X of SS due to spousal payments...

The second couple has one on SS and one a teacher (or other gvmt employee that does not pay SS).... they now only get 1X of SS.... so there is a penalty for the spouse working their whole life.... but they also get 1X of state pension....

The problem is that this argument also applies to a couple who both work under SS.. where they get 1X of SS under one spouse earnings and 1X of SS under the other....


The only way to 'fix' the problem is to eliminate spousal benefits... you can keep paying after death if you do not want to be too unfair, but paying the extra 1/2 is the real problem...

[timo2]

Quote:

Originally Posted by Texas Proud It takes them a long time to close a loophole....

First people have to agree on if something really is a loophole or an intended benefit. Sort of like in software development, is it a bug or a feature?

[NW-Bound]

Quote:

Originally Posted by marko ...When they came talking about means testing and benefit reductions........................

I am screaming in advance now. ARGHHHH...

[NW-Bound]

All joking aside, the truth is that SS is not really personal pension, but a tax levied to implement a welfare program. In Flemming v. Nestor, in 1960 the US Supreme Court already ruled that SS was never a contract. Congress can do whatever it wants with SS.

From Wikipedia:

Ephram Nestor challenged this Section after he was denied Social Security payments as a deported member of the Communist Party. He argued that a contract existed between himself and the United States government, since he had paid into the system for 19 years.

Nestor, an alien, became eligible for Social Security payments in 1955. In July 1956 he was deported for having been a member of the Communist Party from 1933 to 1939. Section 202(n) of the Social Security Act provided for the termination of Social Security payments when an alien is deported for being a member of the Communist Party.

Opinion of the Court
The Court ruled that no such contract exists, and that there is no contractual right to receive Social Security payments. Payments due under Social Security are not “property” rights and are not protected by the Takings Clause of the Fifth Amendment.

[athena53]

Quote:

Originally Posted by marko When they came talking about means testing and benefit reductions........................

What is taxation of SS benefits but means testing? And raising the FRA, although it makes sense because people are living longer, is a benefit reduction. That train has left the station.

[marko]

Quote:

Originally Posted by NW-Bound the truth is that SS is not really personal pension, but a tax levied to implement a welfare program.....the US Supreme Court already ruled that SS was never a contract. Congress can do whatever it wants with SS.

There's another thread running right now saying "take SS at 62".

I'm finding it harder and harder to see how waiting 8 years to age 70 can be viewed as a wise choice.

tick, tick, tick, tick.....

Get what you can, while you can.