Over 60 million people rely on Medicare for their health insurance. The services Medicare provides can be confusing to navigate, with their “Alphabet Soup” of programs. Amid the lettered programs is a special and, for some, very costly group of letters: IRMAA.
What is IRMAA?
IRMAA stands for Income-related Monthly Adjustment amount. It is a surcharge that people with income above a certain amount must pay in addition to their Medicare Part B and Part D premiums. IRMAA was first enacted in 2003 as part of the Medicare Modernization Act. It applied only to high-income Medicare Part B beneficiaries. In 2011, the Affordable Care Act expanded IRMAA to include high-income enrollees in Medicare Part D.
How is the surcharge calculated?
The Social Security Administration (SSA) determines who pays an IRMAA based on the income reported on your tax return from two years prior. Income is measured based on your modified gross income. IRMAA is calculated every year. That means if your income is higher or lower year after year, your IRMAA status can change.
Below are the monthly Part B and Part D IRMAA surcharges for 2023:
| 2023 RMAA Surcharges for Medicare Part D and Part B | |||
| Single | Married Filing Jointly | Part B Premium | Part D IRMAA |
| $97,000 or less | $194,000 or less | $164.90 | $0 + your plan premium |
| $97,000 to $123,000 | $194,000 to $246,000 | $230.80 | $12.20 + your plan premium |
| $123,000 to $153,000 | $246,000 to $306,000 | $329.70 | $31.50 + your plan premium |
| $153,000 to $183,000 | $306,000 to $366,000 | $428.60 | $50.70 + your plan premium |
| $183,000 to $500,000 | $366,000 to $750,000 | $527.50 | $70.00 + your plan premium |
| $500,000 or above | $750,000 and above | $560.60 | $76.40 + your plan premium |
As you can see, these monthly surcharges can be substantial. If you are married and both you and your spouse are enrolled in Medicare, the surcharges are charged to both of your Medicare premiums. This can really add up over years of retirement.
FAQS
We’re happy to answer any questions you have about our firm and our processes. Here are answers to some of the questions we receive most frequently.
How can I avoid Medicare Surcharges?
The best way to reduce or eliminate the surcharges is to have lower gross income on your tax return. If you are still working, you can do this by deferring income to a 401K, IRA, or SEP IRA plan. In retirement, reducing your Required Minimum Distributions from IRAs is very effective. Qualified Charitable Distributions (QCDs) from IRAs can help with this. QCDs send money directly from your IRA to charities, which are not included as income on your tax return.
A more strategic way to lower your RMDs is to put as much of your retirement savings in Roth IRAs as possible. During your working years, you can contribute to Roth 401(k)s, which has become easier thanks to the passing of the SECURE Act. In retirement, you can do Roth Conversions to put more of your retirement accounts into Roth’s.
GUIDES
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What if surcharges have already been assessed?
If you receive an IMRAA determination letter, you can appeal it by applying for a redetermination. This is a one-time option to delay the surcharges by proving that your most recent year’s income is lower than what the Social Security Administration is seeing on your tax return (from two years ago.)
You can call 1-800-772-1213 to file your appeal, or you can use Form SSA-561-U2, called “Request for Reconsideration.”
Part of your complete financial plan
Understanding IRMAA is part of the full retirement picture that a financial advisor should consider. Medicare, Social Security, executive benefits, and pensions should all be considered as part of your tax planning and financial planning. As providers of financial planning services in San Diego, we look at all the pieces of your retirement puzzle in order to integrate them into one cohesive plan.
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