SSA Closes Benefits Loophole

The Social Security Administration has closed what has commonly been called a loophole in its benefits policy by limiting the period for beneficiaries to withdraw an application for retirement benefits to within 12 months of the first month of entitlement and to one withdrawal per lifetime.

In addition, under newly finalized rules, beneficiaries entitled to retirement benefits may voluntarily suspend benefits only for the months beginning after the month in which the request is made.

The agency changed its rules because its prior policies effectively allowed beneficiaries to acquire an interest-free loan by taking benefits at a point before full retirement age with a reduction, then repaying the money and claiming benefits at full retirement age with no reduction; previously, SSA had not charged interest on repayments by beneficiaries doing so. The agency changed the rule because the transaction effectively cost the Social Security trust fund an amount in lost interest, plus incurred administrative costs to the agency.