What is a Life-Changing Event and How Does it Impact My Medicare?
Social Security Insurance Planning Retirement PlanningIf you’ve received an IRMAA (Income-Related Medical Adjustment Amount) letter in the mail, warning you of higher premiums for Medicare Part B and Part D because of your income level, you might be wondering whether you can reduce, or even eliminate your IRMAA. One of the most common scenarios in which you could do this is if you’ve had a life-changing event.
If that’s the case, you can file Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount-Life-Changing Event). Assuming the form is accepted, then your IRMAA would be adjusted based upon the new information that you’ve given. But there are some nuances to this, so it’s worth looking at a couple of things.
What is a Life-Changing Event?
According to the Social Security Administration (SSA), there are 8 qualifying life-changing events that would allow you to request a new initial determination:
Death of Your Spouse
Marriage
Divorce/Annulment
Work Reduction
Work Stoppage
Loss of Income-Producing Property
Loss of Pension Income
Employer Settlement Payment
So what is not a life-changing event? Pretty much every other type of event, according to the SSA. The SSA states that anything not on the list of life-changing events does not qualify. The website goes on to cite some examples (not a complete list):
Ordinary loss of dividend income
Higher medical expenses
Higher living expenses
Loss of child support
Loss of alimony
Voluntary sale of income-producing property
It doesn’t mean that you might not be able to reduce your IRMAA, but you won’t be able to do so using Form SSA-44.
What is a New Initial Determination?
Before we jump into the details of how to fill out SSA-44, there’s another fairly important point to consider—the ‘new initial determination.’ Technically, the SSA-44 is not an appeal, as many people might think. Rather, it’s a request for the Social Security Administration to consider new information about your life that the government did not have.
According to the Social Security Program Operations Manual System (POMS), if you meet the criteria for a new initial determination, there is no need to appeal the prior determination. While the SSA must always accept a request for an appeal, it is in everyone’s best interest to find the least difficult option. Seeking a new initial determination as a result of a life-changing event, if you qualify, is much easier than the appeals process.
Let’s then look at the policy for each of the life changing events, and see what is required.
Life-Changing Event #1: Death of spouse
Policy: Having a spouse pass away could result in a significant reduction in modified adjusted gross income (MAGI), particularly if that person was still working, a pension annuitant, or otherwise had income that would not transfer to their spouse.
What to submit:
Proof of death for the year to be used. A copy of a death certificate will suffice.
Tax information for the year to be used. This can either be:
An estimate of the MAGI & tax filing status for the year you are requesting to use
A signed copy of that year’s tax return (or amended return) if that tax return shows a significant reduction in MAGI.
Life-Changing Event #2: Marriage
Policy: The threshold and ranges applicable to the IRS tax filing status of “Married, Filing Jointly” are double that of single. A marriage could cause the beneficiary’s tax filing status and MAGI to change. Reports of the marriage only apply to the reporting spouse. If the non-reporting spouse is also affected by the life-changing event, it is that individual’s responsibility to contact SSA.
What to submit:
Proof of marriage for the year to be used. A copy of a marriage certificate will suffice.
Tax information for the year to be used. This can either be:
An estimate of the MAGI & tax filing status for the year you are requesting to use
A signed copy of that year’s tax return (or amended return) if that tax return shows that the MAGI has changed to a lower amount under the IRMAA tables.
Life-Changing Event #3: Divorce/Annulment
Policy: A divorce could cause the tax filing status and MAGI to change. This might mean. Reports of the divorce only apply to the reporting spouse. If the non-reporting spouse is also affected by the life-changing event, it is that individual’s responsibility to contact SSA.
What to submit:
Proof of marriage termination, like a copy of the annulment or divorce decree.
Tax information for the year to be used. This can either be:
An estimate of the MAGI & tax filing status for the year you are requesting to use
A signed copy of that year’s tax return (or amended return) if that tax return shows a significant reduction in MAGI.
Life-Changing Event #4: Work Reduction
Policy: A beneficiary may qualify for use of a more recent tax year to determine IRMAA based upon a reduction in either beneficiary’s or spouse’s work hours. This might include a partial retirement or shift from a full-time to part-time job. However, this only applies to the reporting spouse—each spouse must make this request separately.
What to submit:
Proof of work reduction. This could be:
An employer statement
Past and present pay stubs reflection a reduction in hours
Corporate minutes
A record of business transfer (for self-employed individuals)
Attestation, under penalty of perjury, regarding the reduction in work hours.
Tax information for the year to be used. This can either be:
An estimate of the MAGI & tax filing status for the year you are requesting to use
A signed copy of that year’s tax return (or amended return) if that tax return shows a significant reduction in MAGI.
Life-Changing Event #5: Work Stoppage
Policy: A beneficiary might qualify for a new determination based upon a reduction in income after the beneficiary, their spouse, or both of them, stop working. This might be because of retirement, lay-off, or a sale of a business or company. However, this only applies to the reporting spouse—each spouse must make this request separately.
What to submit:
Proof of work reduction. This could be:
An employer statement
A retirement letter
Corporate minutes
A record of business transfer (for self-employed individuals)
Attestation, under penalty of perjury, regarding the reduction in work hours.
Tax information for the year to be used. This can either be:
An estimate of the MAGI & tax filing status for the year you are requesting to use
A signed copy of that year’s tax return (or amended return) if that tax return shows a significant reduction in MAGI.
Life-Changing Event #6: Loss of Income-Producing Property
Policy: A significant reduction of income due to lost income-producing property beyond the beneficiary’s or their spouse’s, control, which reduces MAGI, might qualify that beneficiary for a new initial determination. For SSA’s purposes, examples of income-producing property include:
Real property (like rental property or farmland)
Crops
Livestock
Vehicles used for business
However, property that does not generate income will not be considered, and loss of that property does not qualify as an LCE. Examples include:
Property held for investment that does not generate income (i.e. coin collection, stamps)
Real property used for purposes other than rental income, such as vacation homes and condos used for personal use.
The other stipulation is that the loss must be beyond the beneficiary’s control. Donating, selling, or a voluntary transfer of income-producing property is not considered a loss and does not qualify for a new initial determination. Examples of circumstances that could be considered as out of a beneficiary’s control include:
Natural disasters
Disease affecting crops, livestock, or other animals
Arson
Buy-out of the property by a government under Eminent Domain
Theft
However, this only applies to the reporting spouse—each spouse must make this request separately. What to submit:
Evidence that clearly documents the event. This could include:
A filed tax return that documents loss of income from the property
A statement from the beneficiary stating that they are not insured and will provide a filed tax return documenting the loss of income
Insurance claims regarding the loss of income producing property
An insurance adjuster’s statement
Formal statement made by a policy owner to their insurer regarding the loss of income from the property
In cases of investment fraud (theft), proof of conviction of the theft is required and the only acceptable proof.
Tax information for the year to be used. This can either be:
An estimate of the MAGI & tax filing status for the year you are requesting to use
A signed copy of that year’s tax return (or amended return) if that tax return shows a significant reduction in MAGI.
Life-Changing Event #7: Loss of Pension Income
Policy: A significant loss of income due to the reduction or cessation of certain pension types might qualify a beneficiary for a new initial determination.
To qualify, the pension must be:
A traditional defined benefit pension plan or cash balance plan AND
Loss of income is due to:
Plan failure (through bankruptcy restructuring) OR
A scheduled cessation that was a past beneficiary decision (i.e. a 20-year pension that recently ceased, instead of taking a lifetime pension option).
What to submit:
Proof of the loss or reduction in MAGI due to pension plan failure. This could either be:
A letter advising the beneficiary of the change in the annuity amount or cessation
Signed copy of the filed federal tax return for a more recent year showing the lower income
Life-Changing Event #8: Employer Settlement Payment
Policy: A beneficiary may qualify for a new initial determination based upon a settlement payment from a current or former employer. This payment has to be the result of an employer’s (or former employer’s) closure, bankruptcy or reorganization. However, this only applies to the reporting spouse—each spouse must make this request separately.
What to submit:
Proof of settlement. This could be:
A statement from the employer
Court documents reflecting the settlement and terms
Statement from the employer’s attorney stating settlement and terms.
Tax information for the year to be used. This can either be:
An estimate of the MAGI & tax filing status for the year you are requesting to use
A signed copy of that year’s tax return (or amended return) if that tax return shows a significant reduction in MAGI.
Conclusion
Hopefully, if you’ve made it to this point, you’ve found something that relates to your situation. If that’s the case, filling out the SSA-44 and providing the supporting documentation is pretty straightforward. This can be done through your local Social Security office, or perhaps with assistance from your financial advisor.