Some Medicare beneficiaries with higher incomes may need to pay a surcharge for Medicare Part B and Part D premiums due to an IRMAA, which stands for income-related monthly adjustment amount.
An IRMAA is added to a Medicare premium when a beneficiary’s modified adjusted gross income (MAGI) is higher than a certain threshold.
IRMAA was first enacted for Part B in 2003 as a provision of the Medicare Modernization Act. In 2011, IRMAA was expanded under the Affordable Care Act to include high-income enrollees of Medicare Part D drug plans to strengthen the financial stability of the Medicare program.
Typically, the government pays about 75% of your Part D and Part B premium. If you have a larger income, you’ll have to pay a larger percentage share of your coverage for coverage under those parts. Part A and Part C Medicare Advantage plans are not affected by IRMAA.
The Social Security Administration determines your IRMAA based on information provided by the Internal Revenue Service (IRS).
Also, note that you could receive a notice from the SSA regarding an IRMAA any time of the year.
If Social Security decides that an IRMAA applies to your Medicare premiums, you’ll receive a predetermination notice in the mail. This will be followed by an initial determination notice about 20 days later. It will include information about the IRMAA, when it goes into effect, and steps that you can take to appeal it.
Unless you dispute the determination, you won’t need to take additional actions to pay the surcharges associated with the IRMAA. They will be automatically added to your premium bills.
IRMAA is determined by income from your income tax returns two years prior. For example, to see if you must pay an IRMAA for your 2022 Medicare premiums, your 2020 income tax return is used.
The IRMAA surcharge would be added to your 2022 premium if your 2020 income was over $91,000 or $182,000 if you’re married. This threshold is recalculated annually.
The income used to determine IRMAA is a type of MAGI, but it’s specific to Medicare. It is different from your Adjusted Gross Income because some people have additional income sources that must be added to their AGI to determine their IRMAA-specific MAGI.
In 2022, the standard Medicare Part B premium is $170.10. You may have an additional IRMAA surcharge under the following guidelines:
Source: Centers for Medicare and Medicaid Services (CMS)
There’s no standard monthly premium for Part D plans since rates are set by each company offering policies. As with Part B, your income thresholds and filing status will impact the surcharge amount.
The additional surcharge for Part D is paid directly to Medicare, not your plan’s provider. Part D IRMAA surcharges for 2022 are as follows:
Source: Centers for Medicare and Medicaid Services (CMS)
If you have a Medicare Advantage Part C policy that includes prescription drug benefits, then both Part B and Part D IRMAAs are added to the plan premium.
If you think your IRMAA determination is wrong, you can file for a redetermination.
There are two situations you can appeal an IRMAA.
The first situation involves the tax information used to determine the IRMAA. Some examples that might warrant an appeal include:
The second situation involves life-changing events that significantly impact your income. There are seven qualifying events:
If you think you qualify in either of these situations, you can refile or file for a redetermination using Form SSA-44.
If you disagree with a redetermination, there is a formalized appeal process called the Decision by Office of Medicare Hearings and Appeals (OMHA).
Further complications have been introduced due to the SECURE Act of 2019 (Setting Every Community Up for Retirement Enhancement Act of 2019).
The SECURE Act allows IRA contributions after age 70½ if you’re still earning an income – and it extends the minimum age that one must receive RMDs (Required Minimum Distributions) from 70½ to 72.
This may be important because delaying receiving RMDs may also reduce IRMAA if your Modified Adjusted Gross Income is close to the limits in the tables above.
When people withdraw from qualified funds such as a 401(k), IRA, or 403(b), these funds are taxable after they are transferred to your checking, savings, or brokerage account.
In other words, the distributed amount is added to your taxable income, raising the possibility of an IRMAA trigger.
Tax planning and retirement can be complicated. It’s best to talk with an experienced financial planner to minimize your tax hits and the increased possibility of an IRMAA notification.
DISCLAIMER: Medi-Solutions Insurance Agency, LLC is not affiliated or endorsed with the Social Security Administration or the Federal Medicare Program. Information is for educational purposes only and should not be construed as an offer of insurance, advice, or recommendation. The information provided is not intended as tax, financial, investment, or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
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