The old deemed filing rule
The current or old deemed filing rule works as follows:
When an individual who is under Full Retirement Age (FRA) is eligible for a spousal benefit in addition to a benefit based upon his or her own record files for either benefit, he or she is deemed to have filed for all benefits that he or she is eligible for at that time.
At any other time (other than the time of application for benefits) deemed filing does not apply.
For example, Anna and John are both nearing 62 years of age. Anna has a PIA (FRA benefit) of $800, and John has a PIA of $2,000. Anna is planning to file for her own benefit when she reaches 62. If John files for his benefit before Anna, deemed filing will require Anna to file not only for her own benefit but also for the spousal benefit, since she’s under FRA and she’s eligible for the spousal benefit.
On the other hand, if John had not already filed for his benefit, Anna can only file for her own benefit. Later, when John files for his own benefit, Anna has the option to file for spousal benefits, but is not required to. Deemed filing only applies upon the first month of entitlement, the month that your benefit first begins. If Anna wishes, she can delay filing for the spousal benefit in order to increase the amount of spousal benefits she can receive.
It may seem trivial, but in the example above where Anna has the choice to delay, it can mean a difference of $100 per month. If deemed filing applies, Anna will have $700 per month in benefits from her filing date through the rest of her life; if she delays filing for the spousal benefit, beginning at FRA she could receive $800 per month.
In addition, if Anna delayed filing for any benefit until she was at least FRA, then deemed filing would not apply to her at all, regardless of whether John had filed for his benefits. This would allow Anna to, at FRA, file an application for spousal benefits only, which is known as a Restricted Application. In doing so, she could receive spousal benefits while accruing delay credits on her own benefit.
The new deemed filing rule
The law in the Bipartisan Budget Act of 2015 (BBA15) changed the deemed filing so that it applies at any age, including after FRA. This means that the Restricted Application option is no longer available. The new deemed filing rule applies to anyone born on or after January 2, 1954.
So back to our example – assuming that Anna and John were born after January 2, 1954 – Anna can still file for her own benefit at age 62. If John has already filed, deemed filing applies as it did in the past. But if John has not filed for his benefit and then he files for his benefit, say 3 months later, Anna will be forced to take the spousal benefit at that time. This is due to the fact that she 1) has filed for benefits, and 2) she’s eligible for a spousal benefit, by virtue of the fact that John has filed for his benefit.
This takes away the planning strategy detailed earlier which would allow Anna to choose between receiving $700 now or $800 at FRA. She can only take the $700 now.
More significantly, if Anna had delayed until her FRA, under the new deemed filing rule, if she wants to file for benefits at FRA (or any age) she must file for all benefits which she is eligible for – in other words, no Restricted Application is allowed.
Exceptions to the new deemed filing rule
There are a few exceptions to the deemed filing rule, listed below:
- If Anna (from our example above) is under FRA and is receiving a spousal benefit based upon the child-in-care rule, meaning that she and John have child who is under age 16 and John has applied for benefits. If this is the way that Anna is receiving spousal benefits, deemed filing does not apply to Anna. When she reaches FRA or the child reaches age 16, Anna is no longer eligible for the child-in-care benefit; any benefit that she applies for will be subject to deemed filing.
- Likewise, if Anna was receiving a disability benefit (under FRA), deemed filing would not apply. Upon reaching FRA, Anna’s disability benefit will automatically switch over to a retirement benefit, and if she’s eligible for spousal benefits at that time, deemed filing will require her to receive the spousal benefit at that time.
- Deemed filing also doesn’t apply to survivor benefits. If John had died before Anna reached age 62, Anna could still file for her own benefit at 62 and then delay receiving survivor benefits until they are maximized at her FRA.