How to challenge your IRMAA premium

Did you know that, if you have a significant loss of income after you retire, there is an appeal process for IRMAA?  In other words, you might not be locked into paying higher premiums just because you were a high-income earner before retiring.  Before we get into this, we thought it would be helpful to do a quick flyover of Medicare basics.  Here are the five parts of Medicare:

  • Medicare Part A – also known as “hospital insurance.” For most (having worked 40 quarters or more), there is no premium.
  • Medicare Part B – also known as “medical insurance.” For 2020, the base premium is $144.60 per month.
  • Medicare Part D – also known as “prescription drug coverage.” Premiums vary from $13.20 to $89.60 per month through a Medicare approved carrier. We like to say, “You date your Part D,” as you can change this every year during the annual enrollment period (Oct.15- Dec.7).
  • Medicare Supplements – purchased through an insurance provider, given plan names of “Plan A, B, C, D, G, K, L, M and N.” (We know! More letters!) Premium prices vary per month depending on what plan you pick. We like to say, “You marry your supplement,” as changing plans can be costly due to mandatory underwriting by the insurance carrier.
  • Medicare Part C – also known as “Medicare Advantage Plans.” You see advertisements on television for these all the time, especially in the fall months. You must be enrolled in Part A and Part B and pay those applicable monthly premiums on top of a Medicare Advantage Plan premium, if they charge one. Part C usually bundles in Part D prescription drug coverage (but not always) and adds on features like vision, dental and hearing benefits. It’s very similar to “work coverage insurance” with regards to HMO & PPO networks as well as out-of-pocket maximums. Coverage can be very territorial depending on the insurance carrier.

What is IRMAA and how does it apply to you?

IRMAA stands for Income-Related Monthly Adjustment Amount.  Basically, high-income earners will pay a higher premium amount for Parts B and D.  Medicare will look at your tax returns from two years prior to determine if IRMAA applies and what bracket you fall into for the current year.  So, if you retire in 2020, your 2018 tax return is used for IRMAA purposes.  This time drag can push you into a high IRMAA bracket due to the income you generated in your working years.  For 2020 Parts B & D premiums, there are six brackets related to income levels.  More information about these brackets can be found here.

What can you do if you have a significant loss of income when you retire?

There is an appeal process that might allow you to avoid paying higher IRMAA premiums just because your income was high before you retired.  We have heard some success stories with this!  The steps are as follows:

  • Fill out Social Security Form SSA-44. It is called the “Medicare Income-Related Monthly Adjustment Amount – Life Changing Event” form.
  • Answer three questions.
  • Provide evidence (ex: final paycheck, more recent tax return) and deliver to the Social Security Office.

Full disclosure: Social Security and Medicare can be very complicated subjects. Each person’s situation is different. We recommend meeting with your financial advisor as well as your accountant to determine a plan of action specific to your individual situation.  If you are a current P&A client, we are always happy to help you with this form.

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Since 1995, Pittenger & Anderson has guided individuals and families going through money-in-motion events. We are a fee-only Registered Investment Advisor and a full-time fiduciary providing investment management, financial planning, and complimentary services to 800+ clients in over 30 U.S. states.

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