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What to Know - Social Security & Medicare IRMAA Thumbnail

What to Know - Social Security & Medicare IRMAA

It is that time of year again when the Social Security Administration (SSA) reviews your Medicare premium costs and alerts you of any changes.

Certain income levels allow an adjustment to your Medicare premium(s), called an “Income-Related Monthly Adjustment Amount” (IRMAA). According to HHS.gov around 4% to 5% of all Medicare beneficiaries are subject to an adjustment.

If there is a new adjustment, you will be notified or near the end of the current year for the upcoming year.

Surprised to receive an IRMAA letter? 

If you're surprised to receive this letter, you're not alone. Premium adjustments, and the factors leading to this determination can arrive unsolicited by mail. The Social Security Administration uses the data you've submitted to the IRS and applies your information to a government form letter that notifies you of a premium adjustment . The letter can be vague while referring to potentially higher costs. No one likes uncertainty in that regard. 

These letters can come as a surprise even for those who already know about IRMAA since Medicare premiums for this year (2020) are based on income from 2018. There is a two-year lag. 

Premium adjustments

The income used to determine an IRMAA is your adjusted gross income plus municipal bond interest, all from two years ago.

Your 2018 income determines your IRMAA in 2020. Your 2019 income determines your IRMAA in 2021, etc.

IRMAA brackets

Just as your income can be taxed at different levels, there is a tiered system of income brackets used for determining a Medicare premium adjustment.

IRMAA premium adjustments are divided into five additional income brackets. Each bracket can adjust your Part B (hospital) premium and potentially your Part D (prescription drug) premium. 

In addition to Medicare's original base Part B premium of $1,735.20 yearly ($144.60 monthly) premiums for higher-income individuals can potentially increase the cost of Medicare by 48%, 122%, 195%, 268%, or 293%!

2020 Rounded Medicare Brackets (for IRMAA Adjustments)

2020 Premiums are based on 2018 Modified Adjusted Gross Income [MAGI]

Approximate Single Filer MAGI

Approximate Joint Returns MAGI

Monthly Part B Premium

Monthly Part D Premium

Annual IRMAA Premium Increase (+$1,735.20 base premium)

< $87,000

< $174,000

$144.60 

$0.00

+ $0

$88,000-$109,000

$175,000-$218,000

+ $57.80

+ $12.20

+ $840.00 

$110,000-$136,000

$219,000-$272,000

+ $144.60

+ $31.50

+ $2,113.20 

$137,000-163,000

$273,000-326,000

+ $231.40

+ $50.70

+ $3,385.20 

$164,000-$499,999

$327,000-749,999

+ $318.10

+ $70.00

+ $4,657.20 

> $500,000

> $750,000

+ $347.00

+ $76.40

+ $5,080.80 


Unlike income tax brackets where only the dollars in the next bracket are taxed at that higher bracket, the lines between IRMAA brackets represent an "all or nothing" line in the sand. That is, if you cross into a new bracket by just $1.00 you face a sudden jump in the entire premium you pay for the entire year!

Appealing an IRMAA decision

If you disagree with a premium adjustment you have the right to appeal the decision. 

You might be successful in appealing a decision if you believe that there was an error in the IRS data, or perhaps you filed an amended tax return and the IRS is using older or incomplete data.

Otherwise, appeals must be related to several qualifying "life-changing events", including:

  • Work reduction
  • Work stoppage
  • Death of spouse
  • Marriage
  • Divorce or annulment
  • Loss of income from income producing property
  • Loss or reduction of certain kinds of pension income

Your appeal options are worth reviewing with us here: www.openwindowFS.com/connect.

Many eligible appeals tend to occur in the initial years of retirement (or after a break from employment) when your income reported to the IRS declines compared to previous. For example, if your income was higher two years ago because you were working and today your income is significantly lower you can appeal the IRMAA assessment due to "Work reduction" or "Work stoppage".  

To appeal the decision, first, you must request a reconsideration of the initial determination. A request for reconsideration can be done by calling the SSA 1-800 number (800-772-1213) as well as by writing to SSA

Next, file an appeal by filling out form SSA-44. In the example above, you'll show that although your income was higher two years ago, your income is now reduced due to a "life-changing event". For additional information on the appeal, see Medicare Part B Premium Appeals.

IRMAA is re-evaluated each year

Are you stuck with an IRMAA premium increase? If you can't qualify for an appeal, you will pay the higher Medicare premium(s) for one year. Fortunately, IRMAA is re-evaluated each year. 

Concerned about your IRMAA exposure?

If you're concerned about your IRMAA exposure, contact us today. We are well aware of these brackets, their potential impact, and the tools available to plan for these costs.

If you received an IRMAA letter, feel free to share your letter with us for discussion, or if you have any questions. 

You can securely share your IRMAA letter with us here: www.openwindowFS.com/share.