How Does A Combined Family Maximum Work?

Jan 25 2017 - 5:00am

Will you explain Combined Family Maximums (different than the Family Maximum), as it would apply to a husband receiving retirement benefits, a disabled adult child receiving benefits on the husband's record, and a wife who is receiving child in care benefits and who will soon be eligible on her own work record also. Her PIA is much less than 50% of her husband's PIA.
My understanding is that a Combined Family Maximum is not just the Family Maximum of one wage earner added to the Family Maximum of the second wage earner. The SSA puts limits on the amounts that can be paid when combining maximums, and for Combined Family Maximums first combined in 2017 that limit is $5268. So if the total entitlement of benefits for three people in a family exceeds $5268, benefits will be reduced for the auxiliary recipients.
I bought the software available here, but whenever it runs a maximized plan, the total it shows that we can receive in benefits is over that $5268 a month (yearly = $63216) Social Security will not pay that much in benefits to one family, because of the Combined Family Maximum.
Thanks for your expertise.

Hi,

If a child qualifies for benefits on more than one parent's Social Security record, the family maximums on those parent's records can be combined if necessary when determining the rates to pay to family members. The maximums are normally combined on the record of the parent with the higher full retirement age benefit rate (PIA).

Here is an example: John has a PIA of $2500, and his wife Jane has a PIA of $1000. The family maximum on John's record is $4375, and the family maximum on Jane's record is $1500. John and Jane file at full retirement age, and their disabled sons Joe & Jim qualify for child benefit on both of their records.

Benefits for a child and spouse are normally 50% of the worker's PIA. So, in our example, Jane, Joe and Jim would normally qualify for a monthly benefit of up to $1250 each on John's record. But, the family maximum must be considered in determining their actual rates. In this case, John and Jane's family maximums can be combined, so Jane's $1500 maximum is added to John's $4375. However, the combined family maximum is limited to $5268 this year, so that becomes the combined maximum that can be paid on John's record.

The auxiliary rates payable in our example, rounded to even dollars, would be calculated as follows: $5268 minus John's PIA of $2500 = $2768. The $2768 available for auxiliaries would be apportioned 3 ways among Jane, Joe and Jim, or $922 each. Since this amount is lower than Jane's own retirement rate of $1000, she would not get any spousal benefits. Jane's share of the maximum can then be redistributed to Joe & Jim, allowing them to draw their full $1250 each.

So, in our example, the following benefits are payable:
John = $2500
Jane = $1000
Joe = $1250
Jim - $1250
Total benefits = $6000

You might think from the terminology involved that total family benefits would be limited to $5268, but that's only the limit payable on one parent's record. Since Jane is entitled to benefits on her own record, her benefit amount does not count toward the $5268 limit. That's why this family can be paid more than that limit in this example. You might also think that Jane could be paid an excess spousal benefit of $250, but that isn't payable under Social Security's rules (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615768) since she is dually entitled.

Best, Jerry