03 Jan Can my wife be charged more for Medicare?

Q. My question is about an Income-Related Monthly Adjustment Amount (IRMAA) that’s been tacked onto my wife’s Medicare premium and is being deducted from her SSDI payment. She had received a lump sum after a disability appeal, so her income was artificially inflated. Is it legal for the government to implement IRMAA in this case?
— Husband

A. Let’s get to the heart of your question.

First, higher-income Medicare enrollees pay an “Income-Related Monthly Adjustment Amount” (IRMAA) surcharge in addition to the standard Medicare Part B and D premiums, said Jodi Cirignano, a certified financial planner and certified public accountant with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

Cirignano said the IRMAA surcharge is based on a household’s modified adjusted gross income (MAGI), which includes income from wages, investment income, business income, IRA distributions, pensions, Social Security and several other items.

“The IRMAA surcharge is based on a household’s prior-prior year MAGI,” she said. “So for 2019, Social Security would use information from your 2017 tax return to determine if you have to pay an IRMAA surcharge in addition to your standard Medicare Part B and D premiums.”

Your spouse won her Social Security Disability Insurance (SSDI) appeal and received a lump sum for past-due benefits. This lump sum was reportable as taxable income and substantially increased your 2017 MAGI, Cirignano said.

“Had the benefits been paid out over a multi-year period instead of a single year, you believe that the IRMAA surcharge would not have applied to your household in 2019,” she said.

She points you to IRS Publication 915, which explains federal income tax rules for Social Security benefits.

“It appears that the lump sum Social Security benefit should be reported on your 2017 income tax return, and that you would not obtain any relief from the IRMAA surcharge,” she said. “However, you may be able to obtain some income tax relief by making an election to allocate Social Security back payments attributable to prior tax years.”

She said this is a complex computation, and she recommends that you consult with your tax advisor to see if you can benefit from making this election.

With regard to IRMAA, you have the right to appeal by filing a “Medicare IRMAA Life-Changing Event Form” or scheduling an appointment with a representative from Social Security.

Cirignano said she recommends that you schedule an in-person appointment with Social Security so that you can describe the facts and circumstances and provide documentation regarding your wife’s SSDI appeal and its one-time impact on your household income.

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