How to Avoid an IRMAA Medicare Premium Surcharge 2022

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Modern public policy has painted a bullseye on the pockets of the wealthy and productive. Throughout the tax code, there always seems to be yet another progressive tax targeting the highest income earners.

One such progressive taxation is the Income Related Monthly Adjustment Amount or IRMAA.

If your modified adjusted gross income (MAGI) from two years ago is above a certain amount, you are faced with an Income Related Monthly Adjustment Amount (IRMAA). This IRMAA is a surcharge you must pay in addition to the standard premiums.

The base Medicare Part D premium varies based on which plan you pick. However, Medicare Part B is a standard plan with a base price.

For 2022, the standard Medicare Part B premium is $170.10 per month. This is up $21.60 per month or 14.5% from last year.

While the base Medicare Part B premium is up $21.60 per month or 14.5% from last year, the surcharge MAGI thresholds barely moved. With recent inflation, this likely means more people will see more expensive Medicare premiums in 2022 than in prior years.

2022 IRMAA Medicare Premium Surcharge Rates

MAGI in 2020 was lower or equal to You pay each month in 2022 Monthly Part B Surcharge per Person Monthly Part D Surcharge per Person
Individual Joint
$91,000 $182,000 $170.10 $0 $0
$114,000 $228,000 $238.10 $68.00 $12.40
$142,000 $284,000 $340.20 $170.10 $32.10
$170,000 $340,000 $442.30 $272.20 $51.70
$500,000 $750,000 $544.30 $374.20 $71.30
above $500,000 above $750,000 $578.30 $408.20 $77.90

 

When you are faced with an IRMAA surcharge, you receive an Initial IRMAA Determination Notice from the Social Security Administration (SSA) in the mail. If you were working or did a large Roth conversion two years ago, then you are more likely to be issued with an IRMAA surcharge this year even though your current MAGI may be lower.

To avoid getting issued an IRMAA, you can proactively tell the SSA of any changes your income has seen in the past two years using a “Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event form or by scheduling an interview with your local Social Security office (1-800-772-1213). Even if you are married, file jointly, and only had one spouse experience the precipitating event, both spouses should submit an individual appeal.

For example, if you were working at age 63, you will need to use the form to report your “Work Stoppage” before enrolling in Medicare when you turn 65.

If your MAGI was higher in the past due a Roth conversion, then officially the Social Security Administration will not remove the IRMAA. In the “Sample Annual Income-Related Monthly Adjustment Amount (IRMAA) Notice the SSA writes:

MAGI may include one-time only income, such as capital gains, the sale of property, withdrawals from an Individual Retirement Account (IRA) or conversion from a traditional IRA to a Roth IRA. One-time income will affect your Medicare premium for only one year.

In some situations, we can make a new decision about your income-related monthly adjustment amounts. Contact us to request a new decision if your MAGI has gone down at least one range in the table above or has gone below the lowest amounts in the table since you filed your 20xx tax return, AND the decrease in MAGI was caused by any of the following life-changing events:

  • You married,
  • You divorced, or your marriage was annulled,
  • You became a widow or widower,
  • You or your spouse stopped working or reduced work hours,
  • You or your spouse lost income-producing property due to a disaster or other event beyond your control,
  • You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan, or
  • You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy or reorganization.

We will use the new lower MAGI to see if we can make a new decision about your income related monthly adjustment amounts. We cannot make a new decision if your income has changed for a reason other than those listed above, such as receiving one-time income from capital gains.

You will need to submit proof of the event listed above that caused your income to go down (such as a death certificate, a letter from your pension fund administrator, or a letter from your employer about your retirement).

That is their official policy: no reconsideration for one-time income changes. However, we have several anecdotal stories from clients asking for the IRMAA to be reconsidered because of a Roth conversion and the SSA doing so.

For a large Roth conversion, you can explain that the conversion income on your tax return isn’t money that you can spend because it is in your Roth IRA. If you did a total conversion, you can explain that you don’t have any traditional IRA assets any more and won’t have that income on any future returns. If you were doing a relief cut conversion, you can explain that later Roth conversions will be much smaller.

Depending on your particular case and Social Security agent, you may get your surcharge waived, lowered, or upheld.

If you skip the proactive notification of a life changing event though, you instead have to “Question the Determination and go through a “Reconsideration Process after the fact to get out of the surcharge. These may be more cumbersome, so the advance notice gives you a better chance of having lower premiums.

Photo by Ronald Cuyan on Unsplash

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Chief Operating Officer, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 700 financial articles. Her most popular post is "The Complete Guide to Your Washing Machine" while one of her favorites is "Funding a 3-Year-Old’s Roth IRA."