The new Bipartisan Budget Act of 2015 was bill signed by President Obama on November 2, 2015, which reflects changes to Social Security and Medicare laws. Here are the changes you need to know:
- File and Suspend: Currently, a married individual – normally the higher wage earner in a couple – who is at least full retirement age (67), could file for his or her own Social Security benefits. Then, that same individual could suspend his or her benefits while the spouse could file for spousal benefits. This would allow the higher wage earners benefits to grow 8% per year. This option is ending for new filers starting May 1, 2016. Individuals who are already using this approach are grandfathered in until the age of 70.
- Restricted Application: This will be lifted. Currently, state laws allow individuals (if eligible) to apply for both spousal and retirement benefits while having the option to pick which one they prefer. This would allow for individuals to collect a higher benefit later on. Only those born Jan. 1, 1954 or earlier can use this option and those who are younger will automatically get the larger of the two benefits.
- Social Security Disability: According to the Trustees of the Social Security and Medicare trust funds, the Social Security Disability trust was on pace to run out of money in 2016 which would have left millions of Americans to receive a 19% reduction in their disability benefits for the fourth quarter of 2016. In response, the new law increased the amount of payroll tax revenue allocated to the Disability Insurance Trust fund to prevent the predicted 19% drop in benefits next year. This allocation expires on December 31, 2018.
- Medicare Part B Changes: The recent change for Medicare Part B will bring a $7.5 billion loan from the U.S. Treasury to help alleviate the 52% premium hikes that one-third of Medicare beneficiaries were slated to see in 2016. Beneficiaries will also pay an extra $3 per month (more for higher income beneficiaries) to help pay down a loan the government gave to Medicare in order to offset the lost revenue. Instead, all beneficiaries can expect a 15% increase in 2016.