IRMAA appeal based on a one-time Roth conversion?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Lazareth
Posts: 337
Joined: Tue Nov 01, 2016 9:21 am
Location: USA

IRMAA appeal based on a one-time Roth conversion?

Post by Lazareth »

Our 2020 Roth Conversion of $188K will trigger an IRMAA (Income Related Monthly Adjustment Amount) Part B premium increase for 2022 for both my wife and me. I had calculated this into my cost/benefit analysis before doing the conversion given our tIRA-heavy savings, and I plan to keep future conversions inside the IRMAA limit so this should be a one time, one-year, IRMAA premium boost.

I read this IRMAA blog/article below which seems to imply that such a one-time Roth conversion, albeit not one of the SSA's listed "life-changing" one-time events, could justify an appeal to SSA, or at least an in-person request, to get this premium increase waived.

In the article, https://www.marottaonmoney.com/how-to-a ... arge-2021/, it says "Reporting a temporary MAGI increase from a Roth conversion (as reason for appeal) should likely be done in person."

Would any Bogleheads please have experiences to share regarding an IRMAA appeal based an out-sized Roth conversion?
Last edited by Lazareth on Tue Jun 15, 2021 9:15 am, edited 2 times in total.
a/69, retired, married, enjoy p/t employment. Three-fund portfolio, after decades of chasing active-managed fund performance.
mhalley
Posts: 10424
Joined: Tue Nov 20, 2007 5:02 am

Re: IRMAA appeal based on a one-time Roth conversion?

Post by mhalley »

I did the Irma appeal due to a divorce last year and it was relatively painless. I used boomer benefits to help make my Medicare decision (they have lots of expertise in this area) and came across this article: https://boomerbenefits.com/reconsiderat ... -MQAvD_BwE
We’ve had feedback from a number of clients about appeals and we’ve seen all sorts of outcomes. For examples, if you had a year with some captial gains or a property sale that increased your annual income, we’ve seen it be a hit or miss with approvals. It may depend on how much was gained. Sometimes they adjust your premium. Other times they say…. well, you sure did make a lot of money on that tax return, so we think you can afford this higher Medicare Part B premium for a year.

If I have one takeaway for you, it would be this: it doesn’t hurt to try as long as you can demonstrate a change in your income. An appeal costs you nothing and if you state your case well enough, you might just save yourself some money. For tips on how to file and what to send, you can also watch our Youtube video about IRMAA appeals.
tibbitts
Posts: 23588
Joined: Tue Feb 27, 2007 5:50 pm

Re: IRMAA appeal based on a one-time Roth conversion?

Post by tibbitts »

Lazareth wrote: Mon Jun 14, 2021 6:09 pm ... or at least an in-person request, to get this premium increase waived.
Given SSA's closure policy that we discussed in the card replacement thread, how do you plan on doing anything with SSA in-person before you've already paid the taxes on the conversion?
SuzBanyan
Posts: 2008
Joined: Thu Jun 02, 2016 11:20 am

Re: IRMAA appeal based on a one-time Roth conversion?

Post by SuzBanyan »

We have successfully appealed IRMAA twice: once when I went to part time work and the second time when I was laid off from that job. We were eligible for the appeals because of the change in my work status (reduced hours). But, the reason we needed to appeal the second time was because we did Roth conversions. Make sure that the reports of IRMAA appeal eligibility based on Roth conversion income you read are not confusing eligibility with need.
Topic Author
Lazareth
Posts: 337
Joined: Tue Nov 01, 2016 9:21 am
Location: USA

Re: IRMAA appeal based on a one-time Roth conversion?

Post by Lazareth »

SuzBanyan wrote: Mon Jun 14, 2021 8:42 pm We have successfully appealed IRMAA twice: once when I went to part time work and the second time when I was laid off from that job. We were eligible for the appeals because of the change in my work status (reduced hours). But, the reason we needed to appeal the second time was because we did Roth conversions. Make sure that the reports of IRMAA appeal eligibility based on Roth conversion income you read are not confusing eligibility with need.
Thank you for sharing. Am I correct… your appeal was successful because you had been laid off which created a “need” that made you eligible for the appeal?

...the income spike from your Roth conversion by itself did not make you eligible for appeal, there has to be a need, and that need was created by your work reduction which is one of SSA’s eight listed “life changing events” that justify an appeal, (1) Marriage; (2) Divorce/annulment; (3) Death of a spouse; (4) Work stoppage; (5) Work reduction; (6) Loss of income-producing property (not due to a sale or transfer of the property);(7) Loss of pension income; and (8) Employer settlement payment (due to employer’s bankruptcy or reorganization).

Question, did you wait to receive the written determination letter from SSA informing you of the IRMAA surcharge, before you filed your appeal on SSA form-44? Or did you file your appeal earlier, preemptively, once you knew that your tax return’s modified adjusted gross income (MAGI) exceeded the IRMAA threshold?
a/69, retired, married, enjoy p/t employment. Three-fund portfolio, after decades of chasing active-managed fund performance.
SuzBanyan
Posts: 2008
Joined: Thu Jun 02, 2016 11:20 am

Re: IRMAA appeal based on a one-time Roth conversion?

Post by SuzBanyan »

Lazareth wrote: Tue Jun 15, 2021 7:15 am
SuzBanyan wrote: Mon Jun 14, 2021 8:42 pm We have successfully appealed IRMAA twice: once when I went to part time work and the second time when I was laid off from that job. We were eligible for the appeals because of the change in my work status (reduced hours). But, the reason we needed to appeal the second time was because we did Roth conversions. Make sure that the reports of IRMAA appeal eligibility based on Roth conversion income you read are not confusing eligibility with need.
Thank you for sharing. Am I correct… your appeal was successful because you had been laid off which created a “need” that made you eligible for the appeal?

...the income spike from your Roth conversion by itself did not make you eligible for appeal, there has to be a need, and that need was created by your work reduction which is one of SSA’s eight listed “life changing events” that justify an appeal, (1) Marriage; (2) Divorce/annulment; (3) Death of a spouse; (4) Work stoppage; (5) Work reduction; (6) Loss of income-producing property (not due to a sale or transfer of the property);(7) Loss of pension income; and (8) Employer settlement payment (due to employer’s bankruptcy or reorganization).

Question, did you wait to receive the written determination letter from SSA informing you of the IRMAA surcharge, before you filed your appeal on SSA form-44? Or did you file your appeal earlier, preemptively, once you knew that your tax return’s modified adjusted gross income (MAGI) exceeded the IRMAA threshold?
To be clear, I was eligible for an appeal of IRMAA when I had a “work reduction”. The first time, MFJ AGI went from about $250k (in 2015) to $150k (in 2017). I appealed IRMAA in 2017 after the determination letter, to have IRMAA for 2017 based on 2017, not 2015.

We did not need to appeal for 2018 because our AGI in 2016 was low based on a one-off transaction. We didn’t need to appeal for 2019 because AGI in 2017 (due to my part time salary and even with a small Roth conversion) was below IRMAA AGI.

I was laid off in early 2020. Due to a Roth conversion in 2018, IRMAA would have been due in 2020. We appealed the IRMAA determination letter in early 2020. We were eligible for this appeal due to my work reduction. But that 2nd work reduction had nothing to do with 2018 income. Salary, dividends and rents from 2018 were below the IRMAA AGI. It was the 2018 Roth conversion that created the need to appeal IRMAA in 2020.
Topic Author
Lazareth
Posts: 337
Joined: Tue Nov 01, 2016 9:21 am
Location: USA

Re: IRMAA appeal based on a one-time Roth conversion?

Post by Lazareth »

tibbitts wrote: Mon Jun 14, 2021 6:51 pm Given SSA's closure policy that we discussed in the card replacement thread, how do you plan on doing anything with SSA in-person before you've already paid the taxes on the conversion?
Taxes on the conversion are not an issue, and they were paid in the year of the conversion 2020. A successful appeal or in-person request would become retroactive for affected 2022 IRMAA premiums if already paid.
a/69, retired, married, enjoy p/t employment. Three-fund portfolio, after decades of chasing active-managed fund performance.
Topic Author
Lazareth
Posts: 337
Joined: Tue Nov 01, 2016 9:21 am
Location: USA

Re: IRMAA appeal based on a one-time Roth conversion?

Post by Lazareth »

SuzBanyan wrote: Tue Jun 15, 2021 9:21 am
Lazareth wrote: Tue Jun 15, 2021 7:15 am
SuzBanyan wrote: Mon Jun 14, 2021 8:42 pm We have successfully appealed IRMAA twice: once when I went to part time work and the second time when I was laid off from that job. We were eligible for the appeals because of the change in my work status (reduced hours). But, the reason we needed to appeal the second time was because we did Roth conversions. Make sure that the reports of IRMAA appeal eligibility based on Roth conversion income you read are not confusing eligibility with need.
Thank you for sharing. Am I correct… your appeal was successful because you had been laid off which created a “need” that made you eligible for the appeal?

...the income spike from your Roth conversion by itself did not make you eligible for appeal, there has to be a need, and that need was created by your work reduction which is one of SSA’s eight listed “life changing events” that justify an appeal, (1) Marriage; (2) Divorce/annulment; (3) Death of a spouse; (4) Work stoppage; (5) Work reduction; (6) Loss of income-producing property (not due to a sale or transfer of the property);(7) Loss of pension income; and (8) Employer settlement payment (due to employer’s bankruptcy or reorganization).

Question, did you wait to receive the written determination letter from SSA informing you of the IRMAA surcharge, before you filed your appeal on SSA form-44? Or did you file your appeal earlier, preemptively, once you knew that your tax return’s modified adjusted gross income (MAGI) exceeded the IRMAA threshold?
To be clear, I was eligible for an appeal of IRMAA when I had a “work reduction”. The first time, MFJ AGI went from about $250k (in 2015) to $150k (in 2017). I appealed IRMAA in 2017 after the determination letter, to have IRMAA for 2017 based on 2017, not 2015.

We did not need to appeal for 2018 because our AGI in 2016 was low based on a one-off transaction. We didn’t need to appeal for 2019 because AGI in 2017 (due to my part time salary and even with a small Roth conversion) was below IRMAA AGI.

I was laid off in early 2020. Due to a Roth conversion in 2018, IRMAA would have been due in 2020. We appealed the IRMAA determination letter in early 2020. We were eligible for this appeal due to my work reduction. But that 2nd work reduction had nothing to do with 2018 income. Salary, dividends and rents from 2018 were below the IRMAA AGI. It was the 2018 Roth conversion that created the need to appeal IRMAA in 2020.
Thanks again, I appreciate the clarification. You were eligible to appeal your 2020 IRMAA premium (that was based on your 2018 MAGI that included a 2018 Roth conversion) because you were laid off in 2020.

I expect an IRMAA premium spike in 2022 based on my 2020 conversion. I expect a SSA determination letter later this year (2021) based on my 2020 MAGI reported on my April 2021 return. COVID may have changed that timetable so I will wait for the determination letter before making an appeal.

Unlike you, I cannot point a "reduction in hours" for eligibility. I am retired with a part-time School Bus Driver job that pays about $24K a year and a similar amount in SSI retirement benefits, no pension or other income. I was fortunate to have been able save 25% of my wages in a SEP-IRA/MPPP in my early career which accounts for the now large tIRA. But my 2022 AGI (and MAGI) will be well below any IRMAA threshold as will any foreseeable MAGI in future years. My wife, age 65, earns about $50K and had planned to retire later this year or in 2022.

So this leaves me still learning and trying to determine if I have a case for an appeal or request for reconsideration.
a/69, retired, married, enjoy p/t employment. Three-fund portfolio, after decades of chasing active-managed fund performance.
SuzBanyan
Posts: 2008
Joined: Thu Jun 02, 2016 11:20 am

Re: IRMAA appeal based on a one-time Roth conversion?

Post by SuzBanyan »

Lazareth wrote: Tue Jun 15, 2021 9:47 am
tibbitts wrote: Mon Jun 14, 2021 6:51 pm Given SSA's closure policy that we discussed in the card replacement thread, how do you plan on doing anything with SSA in-person before you've already paid the taxes on the conversion?
Taxes on the conversion are not an issue, and they were paid in the year of the conversion 2020. A successful appeal or in-person request would become retroactive for affected 2022 IRMAA premiums if already paid.
Your determination letter based on 2020 AGI will come in late 2021. It is possible you will have something happen in your life to make you eligible to use 2022 income to determine your 2022 IRMAA. One possibility is that you quit your part time employment or your wife quits her employment in 2021 or 2022. Wait to appeal.
User avatar
Eagle33
Posts: 2383
Joined: Wed Aug 30, 2017 3:20 pm

Re: IRMAA appeal based on a one-time Roth conversion?

Post by Eagle33 »

delete
Post Reply