Social Security: Ask Rusty

Hold Harmless Provision; Benefit Payment Schedule & Payment Method

By RUSSELL GLOOR,
AMAC Certified Social Security Advisor

May 21, 2017
Sunday PM

(SitNews) - Hold Harmless Provision -- Dear Rusty:  I'm totally confused after a conversation with some friends about Social Security and Medicare.   All three of us are 68, but two of my friends are already collecting Social Security while I'm waiting to apply so I can let my benefit grow.  The confusion came in when we talked about Medicare and the premium for Part B.  My friends both say they have their Medicare premium deducted from their Social Security payment and are paying about $114 per month.  However, my Medicare Part B premium, which I pay separately, is now $134 per month.   It just doesn't seem fair.  Why is their Medicare premium so much lower than mine?  Signed:  Confused

Dear Confused:  Yes, it might seem unfair, but the difference in your Medicare Part B premiums has to do with something called the "hold harmless provision" of the Social Security Act.  This provision essentially states that a beneficiary's Social Security benefit payment cannot decrease due to an increase in Medicare's Part B premium.

This is an important provision because Medicare costs tend to rise annually often resulting in higher premiums.  However to be protected by this provision, your premiums must be automatically deducted from your Social Security benefit payments.   Since your friends' Part B premiums are deducted from their Social Security, they enjoy this "hold harmless" protection; since yours is not, you pay the standard Medicare Part B monthly premium.

About 70% of all Social Security beneficiaries enjoy this hold harmless" protection, which means that the other 30% (as well as others who are on Medicare but not collecting Social Security) bear the brunt of covering the total costs of the Federal Medicare program.  Since your premium is $134 you are paying the "standard" premium that applies to anyone earning $85,000 per year or less.  You may take some comfort in knowing that higher-earners can pay up to $428.60 per month for Medicare Part B coverage (these are 2017 numbers).   When you eventually apply for your Social Security benefits and have your Medicare premiums deducted from your payments, you will automatically become protected against significant future Part B premium increases, because the hold harmless provision will prevent your Social Security benefit amount from going down.  As a side note for awareness, it sometimes happens that when a Social Security Cost of Living Adjustment (COLA) is given, it is partially or entirely offset by an increase in the Medicare premium.  So, even with hold harmless protection, while your Medicare premium may technically go up somewhat, your Social Security payment will remain the same.

A point of information:  Any time you switch from one Social Security benefit type to another (e.g., from your own benefit to spousal benefits, from survivor's benefit to your own benefit, from spousal benefit to your own benefit, etc.), you are subject to your Medicare Part B premium amount being adjusted (increased) to the most current standard Part B premium amount.  

Benefit Payment Schedule & Payment Method

Dear Rusty:  I'm approaching my full retirement age and about to apply for my Social Security benefits, but I would like to time receipt of my payment to the first of the month when I make out my bills.  I've asked a number of friends when they get their Social Security and each one seems to have a different answer, so I'm wondering if I can specify when I apply what date I want to get my payment.  Also, though some of my friends get their payment by check, I'd really like to have mine deposited directly into my bank account.  Can this be done?  Signed:  Newbie to Social Security
 
Dear Newbie:  Well, I'm sorry to disappoint you, but you don't get to choose when you receive your Social Security benefit payment.  Rather, it's determined by Social Security's payment schedule, which is now normally based upon the day of the month you were born.  I say "normally" because there are certain exceptions which need to be explained.  
 
Social Security's payment schedule prior to May 1997 was that all OASDI (old age, survivor & disability insurance) payments were processed on the 3rd day of every month.  But in May of 1997 a new payment schedule for newly enrolled OASDI beneficiaries was enacted so that anyone who applied for benefits on or after May 1, 1997 received their payment on either the 2nd, 3rd, or 4th Wednesday of the month, depending upon which day of the month they were born.  People born between the 1st and 10th of the month are now paid on the 2nd Wednesday, those born between the 11th and 20th are paid on the 3rd Wednesday, and those born after the 20th are paid on the 4th Wednesday. 

Those whose benefits started prior to May 1997 are grandfathered into their benefit payment date of the 3rd of each month.  To somewhat complicate matters, people who receive both SSI (Supplemental Security Income) and OASDI benefits also receive their OASDI benefit payment on the 3rd day of every month and there are a few other obscure conditions which might cause OASDI payments to be made on the 3rd.  So you can see why you may encounter people who receive their benefits at different times, but the normal is now based upon the day of the month you were born.  It's important to also note that anytime a payment date falls on a weekend or Federal holiday, the benefit will be processed on the first business day preceding the weekend or holiday.  To see the benefit payment schedule for 2017, go to https://www.ssa.gov/pubs/EN-05-10031-2017.pdf
 
Now the easy part:  Yes, you can choose to have your benefit automatically deposited into your bank account instead of receiving a printed check.  In fact, the Social Security Administration encourages direct deposit and allows you to easily set that up during the online benefit application process.   

Ex-spouse benefits - When you don't get
 
Dear Rusty:  I am very confused about where I stand with Social Security.   I have been divorced twice.  First husband is 79; I was married to him for 10 years.  He is remarried and collecting Social Security.  Second husband is 69; I was married to him for 33 years.  He is not remarried and is still actively working.  I'm not sure if he collects yet.  Both husbands were professionals who had very high incomes.
 
I am 75 and have been collecting Social Security from the age of 63 based on 21 active years of teaching in the city school system, and my Social Security benefit is about $1334.  I have been working part time ever since but not making more than around $5000 a year.  I have been to my local Social Security office three times and have been told each time that I cannot collect any of my ex-spouses' Social Security until they die.  Is this correct information?  Signed:  Confused
 
Dear Confused:   As an ex-spouse you are eligible for spousal benefits if you meet certain criteria, which include being at least 62 years of age,  not currently married, married to your ex for at least 10 years (and divorced at least 2 if the other spouse is eligible for Social Security but not yet collecting).   However in order for you to collect, your benefit amount as an ex- spouse must be greater than the benefit you are already receiving on your own work record.  

The benefit you are entitled to as an ex-spouse is 50% of either of your ex-husbands' Primary Insurance Amount (or PIA, the amount they were entitled to at their full retirement age).  While both of your ex-husbands may be (or may have been) high-income professionals, they only paid Social Security FICA taxes on whatever the payroll tax limit was for each year in their respective careers ($127,200 in 2017 but less in preceding years).   There is also a maximum PIA amount which beneficiaries can earn in retirement benefits.  For 2017 that maximum is $2687, but it was less in previous years.  So let's explore the possibilities:

Husband number 1 is now 79 years old, was a high-earner and was born in 1938.  Assuming he contributed the maximum amount to Social Security over his career, his PIA at his full retirement age of 65 years and 2 months in 2003 could not have been higher than about $2,450.  As his ex-spouse (or spouse) you would be entitled to 50% of his PIA, or about $1,225.

Husband number 2 is now 69 years old, also a high-earner, and was born in 1948.  Again assuming he contributed the maximum amount to Social Security over his career, his PIA at his full retirement age of 66 in 2014 could not have been higher than $2,533.  As his ex-spouse (or spouse) you would be entitled to 50% of his PIA, or about $1,266.

Since your Social Security monthly benefit on your own work record is $1,334, and since that is more than 50% of both ex-husbands' PIA, you cannot get a "spousal boost" from their Social Security record.  The reason Social Security said that you cannot collect anything until one of your ex-husbands die is because as a surviving ex-spouse (or spouse) you are entitled to 100% of either the deceased PIA or, if they waited beyond their full retirement age to start benefits  whatever they were collecting (or were eligible to collect) upon their death.  And obviously 100% of either ex-spouse's benefit would be more than your benefit from your own work record.
 

The Foundation welcomes questions from readers regarding Social Security issues.
To submit a question, email the Foundation at info@amacfoundation.org

©2017 Russell Gloor, AMAC Certified Social Security Advisor http://amacfoundation.org

The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed in this article are the viewpoints of the AMAC Foundation's Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation's Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services.

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