IRMAA, or the Income-Related Monthly Adjustment Amount, is a charge high-income earners pay in addition to their regular monthly premium for Part B (medical coverage) and Part D (drug coverage). Recent changes have been announced for the coming year based on the passage of the Medicare Access and CHIP Reauthorization Act of 2015. IRMAA affects less than 5% of Medicare beneficiaries, but it is still important to understand these charges as the taxable income used comes from years prior.
Why am I paying IRMAA?
IRMAA is charged if your adjusted gross income is over a certain amount. Right now, that amount is $85,000 for individuals and $170,000 for couples. These amounts can change. If your income is above this amount, you will pay a surcharge on your Part B and Part D premiums. The surcharge is based on what tier of income you’re in. There are currently four tiers, ranging from tier 1, the lowest surcharge, to tier 4, the highest surcharge.
What is happening to IRMAA in 2018?
In 2018, the tiers will be shifted. It will be much easier to reach tier 4 and pay the highest surcharge. The defined amounts for tier 2 and tier 3 are being lowered. Some people who would’ve been in the first 3 tiers are now moved into tier 4. For example, in 2017, an individual who made $160,000 would be in tier 3, in 2018, they will be in tier 4.
The surcharge can range from $66.50 monthly to as much as $369.40 monthly. This is in addition to the base premiums already being paid for Part B and Part D coverage.
Can I do anything about IRMAA charges?
IRMAA is based on your taxable income from 2 years ago. In the first months of 2018, 2016 is the last tax return on record. It is possible that your income has decreased in 2 years, usually due to retiring, and for that reason, those affected by this can submit an appeal to request a reduction in IRMAA surcharges.
Besides retirement, you can appeal IRMAA surcharges for other life-changing events. These are defined as:
- Your marital status has changed
- You or your spouse have reduced the hours you are working
- You or your spouse lost property that was producing income due to disaster or other uncontrollable circumstance
- You or your spouse received a settlement from an employer due to closure, bankruptcy, or organization
- You or your spouse were scheduled for cessation, termination, or reorganization of an employer’s pension plan
If any of the above applies to you, you may submit Form SSA-44 to request a reduction in IRMAA charges. The Social Security Administration needs to see documentation verifying the event and the reduction in your income. The documentation you provide should relate to the event and may include a death certificate, a letter from your employer about your retirement, or something similar.
Tax planning is another way to plan to minimize IRMAA surcharges. Retirement withdrawals, like taking money from IRAs or 401(k)’s, can push your income into the IRMAA tiers. These do not qualify as a life-changing event. Keeping your income below the IRMAA thresholds can be planned for.
Cardinal Advisors can help you with Medicare and tax planning. If you have any questions about IRMAA and how it might affect you, fill out the form below or call us at 919-535-8261.
Hans Scheil is the author of “The Complete Cardinal Guide to Planning for and Living in Retirement” and the accompanying workbook. He can be reached at Hans@CardinalGuide.com.
