The Social Security Administration just announced that Retirees will no longer be able to pay back benefits already received in exchange for higher Social Security payments going forward.

A little-known provision of Social Security law previously allowed individuals to begin payments at age 62, pay back all the benefits received at age 70 without interest, and then reclaim at a higher rate due to delayed claiming.

Under the new rules, Social Security beneficiaries may withdraw an application for retirement benefits only within 12 months of their first Social Security payment and are limited to one withdrawal per lifetime.

Another way Social Security beneficiaries were previously allowed to boost their checks was by suspending benefits already received retroactively, repaying the amount received, and then getting higher checks going forward. The new rules allow retirees to voluntarily suspend benefits only for months in which they did not receive payments. Beneficiaries may also suspend future payments beginning the month after the request is made.

These changes will be applied only to old-age benefit recipients, not survivor and disability beneficiaries.

A little-known strategy that allows Social Security recipients to boost their income by repaying retirement benefits received in earlier years and then claiming a bigger monthly retirement check based on their greater age may soon disappear. The Social Security Administration (SSA) is moving to eliminate the do-over strategy. If the agency gets its way, the rule could take effect within months. If you or someone you know might benefit from the payback strategy, now is the time to consider it and come to a decision. Putting it off could mean letting the government make the decision for you — by eliminating the opportunity. Retirees can collect Social Security benefits as early as age 62, but monthly payments are reduced by 25 percent compared with what they would be if claimed at full retirement age, which is 66 for those who claim benefits this year. Those who are willing to wait past age 66 can boost their benefits by 8 percent for every year they delay, up to age 70, increasing annual benefits to 132 percent of their base amount. In 2007, about 500 people — out of more than 37 million retirees and their dependents receiving benefits — took advantage of the payback option. By 2009, the number had nearly doubled as more retirees learned how they could repay their benefits, interest- and penalty-free, and restart them at a higher level. As a bonus, those who repay benefits can claim a tax credit or a tax deduction — whichever results in a bigger tax break — for any income taxes paid on the benefits as they received them.

Source: Washington Post (August 29, 2010)

The government is mailing $250 checks this week to seniors and the disabled who fall into the gap in Medicare’s prescription drug coverage. The first checks will be sent June 10, three weeks earlier than scheduled, to about 80,000 people. The rebates are the first step in closing the Medicare “donut hole.” The Department of Health and Human Services estimates that about 4 million seniors will get the rebates in 2010. These payments are part of the new health care reform law.

Seniors and the disabled on Medicare get stuck in the donut hole if their prescription drugs cost too much to be paid for through basic Medicare coverage, but aren’t expensive enough to qualify for catastrophic coverage.

The Social Security Administration earlier this month mailed notices that contained incorrect January 2010 payment dates. These erroneous notices went to about 6 million beneficiaries who receive their payments on either the second, third, or fourth Wednesday of each month, and are part of the annual benefit notices that go to 52 million Social Security beneficiaries. In the notice the payment date is incorrectly shown as one week before what the actual date of payment will be. The other information in the notice, including the payment amount, is correct. Social Security is sending a letter explaining the error to beneficiaries who received the incorrect one as soon as possible.

“We apologize for the inconvenience and confusion these incorrect notices will cause,” said Michael J. Astrue, Commissioner of Social Security. “The problem was caused by an unfortunate human error. We are correcting the misinformation as quickly as possible, and we are reviewing our processes closely to prevent this type of mistake from happening in the future. People receiving Social Security benefits in January 2010 should know that their payment will arrive on the same payment day that it has arrived in the past.”