How Would Family Benefits Be Calculated In This Case?

Oct 18 2018 - 8:06pm

JOE has a FRA benefit of $2754; wife Mary receives a pension where she did not pay into SS of $1400 a month; Mary has a small WEPPED SS benefit of her own at $156. Daughter Ann on SSI of $735. Joe wants to file at FRA. Family max is $4875. How is family max calculated.? What amount does each family member receive? I realize that when Joe files, daughter Ann becomes DAC and get 50%. Confusion comes because wife Mary has her SS benefit reduced by the WEP and, if she files for a spousal, reduced by GPO. VERY COMPLEX AND CONFUSING TO ME!


Assuming that Joe's wife wouldn't meet an exception to the Government Pension Offset (GPO) provision, she wouldn't be able to draw much if anything in the way of spousal benefits. Mary's (Joe's wife) unreduced spousal rate without considering any reduction resulting from the family maximum would be calculated by subtracting her primary insurance amount (PIA) from 50% of Joe's PIA. I don't know if the $156 amount you mention is Mary's PIA, or if it's higher than that because she started drawing prior to her full retirement age (FRA).

In any case, though, it sounds like Mary's unreduced spousal benefit would likely be no more than roughly $1221 (i.e. $2754/2 - $156). And, if Joe's daughter qualifies for disabled adult child's (DAC) benefits, she and Mary would have to split the difference between Joe's PIA and the family maximum amount potentially payable on his record. Based on your figures that difference would amount to $2121 ($4875 - $2754), which would reduce the maximum benefit rate payable to Joe's wife and daughter to roughly $1060 each assuming that both of them file for benefits on Joe's record. However, if Mary's own PIA is $156, that would make her maximum potential benefit rate as a spouse roughly $904 (i.e. $1060 - $156). And, assuming that GPO applies, Social Security would subtract 2/3rds of the amount of Mary's non-covered pension from her spousal rate, which would likely knock her spousal rate down to zero.

So, it might be best for Joe's wife not to even apply for spousal benefits so that his daughter could receive a full 50% of Joe's PIA. I can't say that for sure, though, without knowing more details about Joe and his family. I should also point out that Joe's daughter's DAC benefits would offset her SSI (Supplemental Security Income) benefits basically dollar for dollar, so she'll likely no longer be eligible for any SSI benefits once her DAC benefits start.

There's also the potential for a combined family maximum in the case of Joe's family, but only if Joe's daughter qualifies for DAC entitlement on both of her parent's records. That probably wouldn't help Joe's wife qualify for spousal benefits, though, due to the arcane Social Security regulations regarding the distribution of family benefits. And, since Joe's daughter couldn't be paid any more than 50% of his PIA, a combined family maximum would probably only help her if Mary does end up filing for spousal benefits.

Bottom line, you're definitely correct about Joe's case being complicated and confusing. Fortunately, our software is programmed to handle cases like Joe's, so it would likely behoove Joe to use our software in order to determine the optimal filing strategy for him and his family.

Best, Jerry