Navigating Your Later Years For Dummies
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A lot can happen in the two years that pass between the year on which your income is assessed and the year in which surcharges are applied. For example, in the former (call it year A), you may be working and pulling in high earnings, while in the latter (year B) you’re retired with a greatly reduced income.

In year A you’re married; in year B you’re widowed or divorced. In year A you’re doing okay with your stocks and shares; by year B, the market has crashed and you’ve lost your shirt.

In any of these cases, can you have the surcharges waived? The following sections explain events that qualify as life changes and other instances in which you may be able to secure a waiver from Social Security. (The Social Security Administration, not Medicare, assesses higher-income surcharges.)

Know what qualifies as a life-changing event

In certain specific circumstances when your income has recently gone down, you may be able to avoid paying a higher-income premium surcharge. The Social Security Administration calls the following circumstances life-changing events:

  • You marry, divorce, have your marriage annulled, or are widowed.

  • You or your spouse stops work for example, you retire or lose your job.

  • You or your spouse has your work hours reduced.

  • You or your spouse loses income because your former employer’s pension plan ends or is altered.

  • You or your spouse receive a settlement as a result of your current or former employer’s closure, bankruptcy, or reorganization — so in this case, the increased income doesn’t count toward a premium surcharge.

  • You or your spouse loses income-producing property (such as a house you rent out; farmland and crops; or animals you’d otherwise have sold) due to a disaster or other event beyond your control.

If any of these events has happened to you, resulting in reduced income, and you’re already paying the premium surcharge or have been told that you must pay it soon, contact Social Security (at 800-772-1213 or TTY 800-325-0778) immediately and ask for a new initial determination, which is the phrase Social Security uses in this situation. Social Security decides whether you need to pay the surcharge without your having to go through a formal appeal.

If you request a new initial determination, you need to provide proof of the life-changing event on which it’s based, such as a death certificate or a letter from your former employer confirming that you’re no longer in your job.

If Social Security agrees that one of the life-changing events on the list applies to you, it will revise its records. You don’t have to pay the premium surcharges, and any you’ve already paid will be refunded.

Check out some example scenarios:

  • Kate had a well-paying job with health benefits and worked until she turned 68 in the fall of 2012. On retirement, she was dismayed to find that her Medicare Part B and D premiums included hefty high-income surcharges. The amounts had been based on her latest tax return, filed early in 2012, which reflected the large salary she had earned in 2011. But in retirement, her income had fallen sharply.

    However, retirement counts as a life-changing event, so Kate was able to apply to Social Security for a reassessment. Her premiums were reduced to the standard amounts, and Social Security refunded the excess payments she’d made.

  • Jose and Maria didn’t grumble too much about paying the higher-income surcharges because, though well into his 70s, Jose was still earning good money as a self-employed consultant. That ended abruptly with his sudden death from a heart attack.

    Without his earnings, Maria’s income more than halved. Acting on a friend’s advice, she asked Social Security to reduce her Medicare premiums to the standard rate. Because Jose’s death counted as a life-changing event, Maria’s request was granted.

Verify whether other situations qualify for a waiver

What if your income went down for other reasons? For example, what if you lost investment income after being wiped out in a stock market crash? Social Security doesn’t count this occurrence as a life-changing event, even if it seems like one to you, so you can’t apply for a new determination.

All you can do is file an amended tax return to the IRS and then, if that is accepted, submit it to Social Security as proof that your MAGI is now much lower.

One other situation is worth mentioning. If your income is reduced by fraud or other criminal activity — such as being duped in a Ponzi scheme — Social Security will consider a request to waive a premium surcharge.

But you have to provide proof that a fraud or crime has been committed and show that the perpetrator has been convicted for it.

Finally, what if you simply can’t afford to pay the surcharge because of lost income but don’t qualify for a life-changing event waiver? In most cases, you just have to suck it up and pay the higher premium until your next tax return shows your true income.

Still, Social Security says it will consider waiving the surcharge “if payment of the premiums would create severe financial hardship.” If that’s the case, call Social Security and request a waiver.

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