The standard deduction for a person filing Married filing separately (MFS) is $13,850 (more of over age 64). If their individual SS (plus any other little income) is less than that, they would normally not need to file.
But, I think you said they are being claimed as a dependent. The filing requirement for a dependent with unearned income is only $1250 ($2750 if over 64). So, they would have to file a tax return, report their social security (the more than $0 rule) and actually pay tax if they file separately.
Since they will owe no tax, if they file as Married filing Jointly (MFJ), they can still be claimed as dependents even if they file as MFJ. So, they can be claimed as dependents and not have to file as MFS to be dependents.
BOTTOM LINE (I think): They do not have to report their SS as income, they do not have to file tax returns and they can still be dependents.
Nontaxable Social security doesn't count as income, for the income test, but social security money they spends on themselves does count as support not provided by you, for the support test. Money they put into savings & investment does not count as support they spent on themselves.
