Higher-income Medicare beneficiaries have been paying more for their Parts B and D coverage for several years now in the form of income-related monthly adjustment amounts (IRMAA). A new bill signed into law by President Obama in April of this year is going to result in more beneficiaries paying the top tier IRMAA rates in 2018 by adjusting the scale in which these top tiers begin.
The Medicare Access and CHIP Reauthorization Act of 2015, affectionately known as the “Doc Fix” law, has the primary purpose of repairing the method of paying doctors under Medicare, and securing funding for low-income and minor recipients. Along with these much-needed and bipartisan-supported changes, this law also decreases the Modified Adjusted Gross Income (MAGI) levels at which the highest IRMAAs take effect.
Notice that while this is effective for Premium Year 2018, the MAGI for determining the applicable tier is two years prior (or 2016). As such, planning can be done now to either reduce MAGI, or realize income from sources that flow outside of AGI. Distributions from Roth IRAs or Health-Savings Accounts or cash value from life insurance are examples.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Consult the appropriate advisor prior to making any tax, legal, or financial decision as tax and other financial consequences may occur upon distribution. Withdrawals from the Roth IRA may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 1/2 may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.