Prevent IRMAA From Raising Your Out-of-Pocket Health Care Costs

Los Angeles City employees covered by LACERS have received a bulletin from Commissioner Annie Chao alerting them that their health care subsidy will likely dramatically increase when they retire due to a program called IRMAA, or Income-Related Monthly Adjustment Amount. As Annie Chao explains:

“If you are a 63-year-old Management Analyst with 30 years of service, and you are at the top step making $118K annually and you decide to retire at the end of this year, in two years, you will be moved from the LACERS health plan to Medicare. At that time, you would be collecting about 2/3 of what you made when you were working, but you would be required to pay IRMAA based on your tax filings when you were making $118K, which would be approximately $230 a month. That means that in addition to only having 2/3 of the income, you are also required to pay more for health benefits simply because you are now over 65.

What happens if you decide you want to downsize because you are retired and living on a pension check that’s only 2/3 of your highest earning years? Your capital gains from selling your house would be part of your tax filings and could boost your IRMAA to as high as $560 a month. You won’t know this immediately, because the SSA bases their IRMAA for Part B and Part D on a sliding scale and uses the adjusted gross income amount you reported on your IRS tax return from two years prior to the current year. That’s right: Two to three years after you sell your home, win the lottery, start drawing from your deferred compensation account, etc., you could receive a retroactive bill from the SSA for thousands of dollars AND be required to pay a new monthly Medicare amount in the hundreds! Although the IRMAA increase on the sale of the house presumably would only be temporary, any other scenario may not.”

L.A. City employees who wish to comment about this increase should visit Public Comment Form for Council File No. 23-1131 or comment in public at the L.A. City Council meetings starting at 10 a.m. on Tuesday and Wednesday; please visit the city’s website to check their agenda.

For an in-depth explanation of how the switch to Medicare works and how it affects city employees, please watch this video: IRMAA Informational Webinar