Q&A: Are IRMAAs for Life?

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Medicare Part A is generally free to seniors, Medicare Part B has a standard base premium which all enrollees pay, and Medicare Part D has a variable premium based on which plan you pick.

Instead of these base costs, if your modified adjusted gross income (MAGI) from two years ago is above a certain threshold, then you pay the higher Income Related Monthly Adjustment Amount, abbreviated IRMAA. These plus-sized premiums are incurred on Medicare Part B and Part D premiums.

On the topic of IRMAAs, I recently received the following reader question (paraphrased):

I appreciate the information in your article “How to Avoid an IRMAA Medicare Premium Surcharge 2023.” Although I am confused about one thing: When an IRMAA surcharge is imposed for a one-time high income year and it can’t be removed, does the IRMAA stay for one year only or does it stay that way for life?

Fortunately, the size of your IRMAA is constantly being reevaluated; it does not stay the same for life.

The size of your Income-Related Monthly Adjustment Amount (IRMAA) for Medicare fluctuates due to various factors.

One factor is changes in the IRMAAs themselves. Both the IRMAA and the base premium are set based on projected costs for Medicare. As these costs change, the various premium amounts change also. Some years the premiums increase, as they did from 2021 to 2022, and some years they decrease, as they did from 2022 to 2023.

Another factor is changes in the IRMAA MAGI thresholds. The MAGI thresholds are inflation-adjusted. This means that even if your MAGI stays the same, you may find that your IRMAA is reduced as the thresholds themselves are adjusted from year to year.

In addition to these two external factors, your own taxable income also obviously affects your IRMAA. As your income increases and decreases, you may move into a different IRMAA tier and thus receive a different required premium amount.

The Social Security Administration (SSA) sets your IRMAA each year. To do this, they use the latest tax information they have available.

Most taxpayers file their tax returns for a given year in the next year, but the SSA sets your new IRMAA for the new year at the end of the year prior. This means that generally the latest tax return the SSA has access to is your tax return from two years ago. For example, the IRMAA for 2023 would be set using a taxpayer’s 2021 MAGI by default.

However, the SSA may consider more recent information if it is available. For example, if the SSA has a life-changing event form that reports an estimated 2022 income, that income would be used to calculate the taxpayer’s new IRMAAs instead of a 2020 or 2021 tax return.

In summary, Income Related Monthly Adjustment Amounts (IRMAAs) are not permanent. They will change from year to year according to the latest SSA tiers and the most recent MAGI given to the SSA.

Photo by Agence Olloweb on Unsplash

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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 800 financial articles and is known for her expertise on tax planning.