Social Security “Do-Over” Now Limited

The Social Security Administration issued a final rule that limits beneficiaries’ ability to stop their Social Security retirement payments, repay their cumulative past benefits, and start receiving higher payments available to older applicants. The SSA said the restrictions were necessary to prevent abuse of the option, which has been called the “do-over” (see “Social Security for Two,” JofA, Jan. 2009, page 30) and to protect the solvency of the Social Security Trust Fund.

Effective Dec. 8, 2010, the date of the final rule (RIN 0960-AH07, docket no. SSA 2009-0073), recipients of retirement benefits may cancel them only once during their lifetimes and only within the first 12 months after they begin receiving benefits. The rule also specifies that recipients who previously could obtain the same result by suspending their benefits retroactively now may make such suspensions only prospectively.

Primary beneficiaries may start receiving benefits as young as age 62, but at only 75% of benefits available to them at full retirement age (66, for applicants born between 1943 and 1954). The percentage increases to 100% as applicants approach full retirement age. They may also delay applying past full retirement age up to age 70 and receive still higher benefits. Although the Social Security Act does not explicitly permit it, a “longstanding policy” has allowed retirees to stop their benefits, repay them—without interest—and resume them at a higher amount.

“Recent media articles have promoted the use of our application withdrawal process as a means for retired beneficiaries to increase their benefits or acquire an ‘interest-free loan,’ ” the SSA said in describing the amended rules (Fed. Reg. 75:235, page 76257, Dec. 8, 2010). The SSA said its field offices reported that such repayments and reapplications had increased in recent years. Other reasons recipients sometimes stop their benefits include continuing to work after they had planned to retire and thereby exceeding an annual earnings limit.

Although the rule is final, the SSA requested comments, which it said will be considered as it prepares another final rule. Comments must be received by Feb. 7, 2011, online at regulations.gov, or by fax (410-966-2830) or postal mail (Office of Regulations, Social Security Administration, 107 Altmeyer Building, 6401 Security Blvd., Baltimore, MD 21235-6401).

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