When the Supreme Court ruled on June 26 in Obergefell v. Hodges that state bans on same-sex marriage were unconstitutional, it didn't really answer all the lingering questions about Social Security benefits. Sure, newly married and newly covered couples have equal benefits under the law, but what about couples who lived in states where same-sex marriage was legal before that decision? What about couples who'd been receiving benefits after the Supreme Court struck down key provisions of the Defense of Marriage act as part of their Windsor v. United States ruling in 2013? What about the time-sensitive provisions for spousal benefits, divorce benefits, survivor benefits and the like?
“It is very interesting, because we are still early on in the conversation around Social Security benefits for same-sex couples,” says Mike Lynch, vice president of strategic markets at Hartford Funds. “The Social Security website says that updates will occur when more information is available. I am assuming we will see clarification soon.”
But right now, there's a whole lot of confusion. Though U.S. Attorney General Loretta Lynch stated on July 9 “that federal marriage benefits will be available to same-sex couples nationwide,” she didn't go into much detail beyond that. She did note that the Justice Department is working with the Social Security Administration and the Department of Veterans Affairs to make sure that newly married couples received the benefits they're due, but she didn't specify what that decision meant for long-married couples or couples who began receiving benefits in states that banned same-sex marriage. Mike Greenwald, a partner at Friedman LLP, says there's still confusion among both agencies and advisors about the timing of benefits and the effects of laws prior to the Obergefell decision, but he insists that couples should apply for benefits instead of waiting to see what happens.
“If they're Social Security eligible by age, I'd say go apply now,” he says. “Even if you're not sure how the transitional rules are going to be worked out, if you're eligible for benefits, go apply for benefits because you don't want to miss out on anything.”
For couples collecting benefits, there might be a whole lot to miss out on.
Darla Kashian, a financial advisor with RBC Wealth Management in Minneapolis who also serves on the board of LGBTQ advocacy group the Family Equality Council, presented a workshop in May on the changing landscape of marriage in Madison, Wis. This was before the Obergefell decision, and she says that locally, Social Security was the subject of the majority of the questions she'd received, largely because it is so intimidating to navigate.
“One of the biggest questions I've been asked is if a client would have collected some spousal benefits had they previously been married, and are now in a same-sex relationship, are they leaving anything on the table there?” she says. “I have a client who was married for nine years and seven months, and it's a 10-year threshold for benefits. They could have stayed married for ten years and they weren't racing to divorce, and her ex-husband was an incredibly high-earner and she was a social worker -- so she could have benefitted greatly.”
While it still isn't clear if same-sex couples who've been married for ten years can receive similar divorce benefits -- Massachusetts legalized same-sex marriage back in 2004 -- there are a host of other benefits now available to married same-sex couples. Kashian notes that prior to Obergefell, same-sex couples could either simply file for their benefits once they reached retirement age and take a smaller payout or defer until they reached their full benefit at 70. Now, they can file and suspend.
In that instance, once they both reach retirement age, the highest earner can file and suspend benefits until age 70, but the lower earner can file for the other's spousal benefit -- which is up to 50% of the highest earner's Social Security benefits. Each member of the couple's own benefits would go untouched and continue to grow until age 70, when the lower earner can stop taking the spousal benefit and go for the higher benefit if necessary.
“I play cards with a group of guys including a very wealthy gay man, and we got to talking about file-and-suspend one night and I don't think we've been invited back,” Kashian says. “He was so excited about this idea, so he filed and suspended, and his husband got half his benefit and he was able to get his full benefit.”
There are enormous implications for the families of same-sex couples as well.
In a recent conversation with a 70-year-old perspective female client, Kashian asked if the son of the woman and her 62-year-old wife was collecting Social Security benefits. When the answer was no, she informed the prospect that not only is her son entitled to Social Security benefits if she's receiving them but that he can also extend that benefit through college when he begins classes next year. It's a tool that many families with older parents have used to help to pay for college, and it's one that same-sex parents can take advantage of if they choose.
Beyond that, there are far more dire reasons for same-sex couples to get a better understanding of their Social Security benefits. While couples can use them to take care of their children while they are alive, Social Security benefits can also cover a child in the event of a parent's passing.
“The other component that I would add from an advisor's standpoint, and this is certainly the case for me and my colleagues at the Family Equality Council, is that many of us created families at a time when marriage wasn't an option,” Kashian says. “The other piece you want to make sure of if you're an unmarried couple with children, if you're not the birth parent or primary adoptive parent, ...[is] that your Social Security number is tied to your adopted kid. I'm hoping my family would be tragically devastated if I died, but I don't want to send them down a rabbit hole of trying to prove to the federal government that I'm the legal parent of our two children and that my number is tied to my kids so that they're able to receive their survivor benefit should anything happen to me.”
Despite the Obergefell ruling, this is still a point of contention in many states for same-sex couples. In Mississippi, for example, the Human Rights Campaign points out same-sex coupled are outright barred from legally adopting children. While same-sex parents may adopt on their own, joint adoptions are banned in Nebraska, Missouri, Louisiana, Alabama, Georgia, Kentucky, Ohio, North Dakota, South Dakota and Michigan. Second-parent adoption, in which a partner is named the legal parent of their partner's birth or adopted child, is also prohibited in many of those states.
That said, the host of other Social Security benefits now available to same-sex couples are worth applying for, and there is just about no upside to putting it off. Kashian notes that spouses have to be married for nine months to be eligible for spousal or death benefits, so postponing may leave couples without benefits should one fall ill. Both Kashian and Greenwald recommend not only speaking with folks at a Social Security office about your benefits, but also checking in with an advisor to make sure you're getting everything that's coming to you.
The Social Security Administration is going to catch up with the changing times eventually. Just make sure you're getting your full benefits once they do.
“I'd like to see a ruling from the Justice Department that says the ruling is retroactive, as if same-sex marriage was always the rule of the land,” Greenwald says. “Right now, when we're talking to clients about this, we're working the numbers, seeing what makes the most sense and then putting in an application for benefits. That way we at least preserve the filing date, even if it takes Social Security and Justice a while to sort this out.”
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.