IRMAA, and How to Appeal It

How the surcharge actually works

• It is based on modified adjusted gross income from the tax return filed two years earlier, and on your filing status.

• It applies to Part B and to Part D. The Part D piece is billed to you separately by Social Security even though your drug plan premium goes to the insurance company. People often miss this and wonder why there are two bills.

• It is a cliff, not a slope. Cross a threshold by a small margin and you pay the full step. There is no gradual phase in, which makes year end income planning genuinely worth doing.

• It is recalculated every year. If your income two years ago was high and has since fallen, the surcharge falls away on its own once the lookback moves past that year. A one off spike resolves itself in time.

• Notice of the determination comes from Social Security, not from Medicare and not from your insurance agent. Read the letter when it arrives rather than filing it.

The eight qualifying life changing events

You may ask Social Security to use a more recent year, and to disregard the two year old return entirely, when your income has dropped because of one of eight specific events. The list is closed. If your situation is on it, the appeal is usually straightforward.

• Marriage.

• Divorce or annulment.

• Death of a spouse.

• You or your spouse stopped working. This is the retirement case, and it is by far the most common one we file.

• You or your spouse reduced working hours. Going part time counts.

• You or your spouse lost income producing property because of a disaster or another event beyond your control. In this county that language has done real work after fires and debris flows.

• You or your spouse lost or had reduced pension income.

• You or your spouse received an employer settlement payment because of an employer closure or bankruptcy.

What is not a life changing event

It is as useful to know what will not work, because a rejected request costs time you may not have.

Selling a house, realising a large capital gain, converting a traditional retirement account to a Roth, or taking a big distribution from an inherited account are not on the list. They raise your income for one year and they raise your Medicare premiums two years later, and Social Security will not disregard them however unwelcome the timing.

The consolation is that they are self correcting. Because the surcharge is recalculated annually against a rolling two year lookback, a single spike affects a single year of premiums and then drops off. Knowing that in advance turns a shock into a planned expense, and it is a good argument for talking to your tax adviser before you trigger a large one off gain in the years around retirement.

Form SSA-44, and how to file it

The form is called Medicare Income Related Monthly Adjustment Amount Life Changing Event, and its number is SSA-44. It is short. The parts that matter are choosing the correct life changing event from the list, giving the date it happened, and stating the modified adjusted gross income for the more recent year you want used instead.

• Pick the event precisely. Retirement is entered as work stoppage, with the date of your last day, not as a general statement that your income fell.

• Estimate the new year honestly. You are allowed to give an estimate for a year that has not been filed yet. Social Security will reconcile it against the actual return later, so an optimistic estimate only defers the problem.

• Attach evidence. A letter from the employer confirming the last day of work, a signed statement, a death certificate, a divorce decree, or a tax return or a transcript, depending on the event. Documented requests move faster.

• File it promptly. You can file as soon as the event has happened, including before the determination notice arrives. If you are asking Social Security to reconsider a determination you have already received, the window to request reconsideration is 60 days from that notice, so do not sit on the letter.

• Keep a copy of everything, and a note of the date you filed. These requests are sometimes worked slowly, and a refund of overpaid surcharge is easier to chase with your own record in front of you.

You file it with Social Security, by post or in person at a local office. This is not something your insurance carrier or your Part D plan can do for you, and it is not something that happens automatically because you told someone you had retired.