Fighting the IRMAA

[bill3173]

I have a long time client that is now aging into Medicare and has been unfairly slapped with the IRMAA. It isn't just based on consistently high income. If you're familiar with how it works they hit you with it based on your income two years prior to Medicare. He sold a commercial building, and the way it was done, put his income at the highest Adjustment Level.

It is beyond Ludicrous that he will pay this adjustment on top of Capital Gains, and the income tax that he paid that year. Has anyone here had a client that successfully fought it, based on a one time blip in income?

Word to the wise, if you have u65 clients that are 63 years old and tell you they are selling commercial property, you may want to let them know that in addition to paying back subsidy, they will also be paying the irmaa two years later.

 

[somarco]

A few years ago a T65 client had a similar situation. Two years prior to his 65th birthday he sold his medical practice for $1.5M and was going to be assessed IRMAA at the highest bracket.

He appealed based on the one time increase and his IRMAA was reduced significantly. His regular income for that year and years following still made him responsible for IRMAA but at a much lower bracket.

I have also had others who took an early retirement buyout that triggered IRMAA. Many of those had IRMAA reduced to $0.

Request to lower an Income-Related Monthly Adjustment Amount (IRMAA)

If you've had a life-changing event that reduced your household income, you can ask to lower the additional amount you'll pay for Medicare Part B and Part D.

www.ssa.gov

When this comes up I always encourage them to file an appeal. The worst that can happen is the IRS says no.

Also, I don't get directly involved because this is a tax issue. I encourage them to use their accountant or financial advisor to assist.

 

[Chazm]

If they've had a life event change, they can fill out the SSA44 form. If they don't agree with the charge, they can appeal. I guess in this guys situation he'd need to appeal, and not fill out the ssa44 form.

 

[LostDollar]

I have a long time client that is now aging into Medicare and has been unfairly slapped with the IRMAA. It isn't just based on consistently high income. If you're familiar with how it works they hit you with it based on your income two years prior to Medicare. He sold a commercial building, and the way it was done, put his income at the highest Adjustment Level.

It is beyond Ludicrous that he will pay this adjustment on top of Capital Gains, and the income tax that he paid that year. Has anyone here had a client that successfully fought it, based on a one time blip in income?

Word to the wise, if you have u65 clients that are 63 years old and tell you they are selling commercial property, you may want to let them know that in addition to paying back subsidy, they will also be paying the irmaa two years later.

Caveat, I am not an agent.

Your comment is too narrowly phrased. It applies to any financial action a person wants to take which increases income for age 63 and later and which is not a life changing event as described in form SSA-44.

In one way or another the conceptual issue, resultant IRMAA, and "how can my client make the unfair IRMAA go away?", comes up in threads here 2-3 times a year.

It is a commonly known income tax and Medicare premium issue discussed regularly by financial planners. There are lots of financial planner's youtube videos which talk about the need to remember IRMAA brackets and penalties when planning for items that create extra income.

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Here is a recent site thread discussing an IRMAA appeal.

Dispute IRMAA after 401k withdrawal

First: Previous threads on IRMAA and underlying income have pointed out there is a procedure to ask SSA to use the income from one year ago, rather than two years ago, for the income base for IRMAA determination. (This does require the tax return for that year to have been filed.) It would only...

www.insurance-forums.com

Two specific comments which may be of interest to you:

Comment 11 (Part of which was made to me):

It would only require a tax return to be filed if the income being used in the change of circumstances form isn't income that would otherwise show up in the IRS database. They get copies of 1099's, W2's, and in this case a 1099-R for retirement fund withdrawals. As a result even if you didn't file a tax return they'd still know how much you had coming in if all your income (and in the case of the current issue being discussed here it would be on a 1099-R) resulted in 1099's, W2's etc at the end of the year).

As an FYI to you:
There are two different forms someone needs to look at to decide which best fits their circumstances to appeal the higher Medicare Premiums (B and D) to get them adjusted. If someone's circumstances don't fit what is on Social Security Form SSA-44 they can file Form SSA-561-U2, Request for Reconsideration. See the websites for the two different forms (and the income dependent premium amounts).

https://www.ssa.gov/forms/ssa-44.pdf

https://www.ssa.gov/forms/ssa-561-u2.pdf

And comment 19 made by kgmom:

The 401K is not the issue. They don't care how you got the money.

They care if you have a qualified appeal scenario.

So if he took the 401K money in 2023 AND has an appeal reason AND projects a lower income in 2025, he's golden.

(If it was my situation, given that it is late March, I think I would try to have my 2024 return showing lower income already filed prior to appealing, as well as doing a lower income projection for 2025.)

 

[LostDollar]

Also, I don't get directly involved because this is a tax issue. I encourage them to use their accountant or financial advisor to assist.

I just wanted to emphasize this, both for OP and others coming along and reading the thread.

It is something I see you emphasizing repeatedly, It is something I would not think of, and in today's litigious world, I think it is something agents eager to help their clients should strongly consider prior to acting.

 

[GoPokes]

It is indeed beyond ludicrous.

 

[LostDollar]

It is a confluence of Income Tax Laws and Health Insurance Laws which one cannot necessarily expect to make sense.

 

[sman]

A few years ago a T65 client had a similar situation. Two years prior to his 65th birthday he sold his medical practice for $1.5M and was going to be assessed IRMAA at the highest bracket.

He appealed based on the one time increase and his IRMAA was reduced significantly. His regular income for that year and years following still made him responsible for IRMAA but at a much lower bracket.

I have also had others who took an early retirement buyout that triggered IRMAA. Many of those had IRMAA reduced to $0.

Request to lower an Income-Related Monthly Adjustment Amount (IRMAA)

If you've had a life-changing event that reduced your household income, you can ask to lower the additional amount you'll pay for Medicare Part B and Part D.

www.ssa.gov

When this comes up I always encourage them to file an appeal. The worst that can happen is the IRS says no.

Also, I don't get directly involved because this is a tax issue. I encourage them to use their accountant or financial advisor to assist.

For what it's worth, I've never had a client be denied when their current or future income is below the levels needed to have the standard rate.

 

[bill3173]

If they've had a life event change, they can fill out the SSA44 form. If they don't agree with the charge, they can appeal. I guess in this guys situation he'd need to appeal, and not fill out the ssa44 form.

Yes, I am familiar with that form, and it doesn't really fit his situation, so he is appealing, and the next step would be a hearing, if necessary.

 

[bill3173]

It's a great situation the U65 agent is in these days. We have to inform, or hear about their loss and repayment of subsidy after a sudden boost in income in any given year. Next we need to advise them if they're ~63 that there will be another attack in two years.

Fortunately, they keep raising our commissions to compensate for all of the extra advice and exposure to client dissatisfaction. Winning.