MAGI impact on IRMAA/ACA plus Roth conversion optimization
I am retired and came off COBRA insurance at the end of June, 2022. I am not yet eligible for Medicare. My spouse retired earlier this year and turned 65 in July. So beginning July, 2022, she transitioned to Medicare and I transitioned to an ACA policy.
My spouse was initially hit with a large IRMAA penalty on her Medicare Part B due to high 2020/2021 MAGI (pre-retirement) for the household. However, we successfully appealed the IRMAA penalty by providing proof of retirement plus an estimate of our 2022 MAGI. I used the same MAGI estimate for my ACA policy pricing. We plan to use Roth conversions this year to make sure our income is at least 100% of the FPL so I remain eligible for the ACA tax subsidy.
When I enter our actual 2020 and 2021 MAGI in the healthcare expense worksheet, Pralana utilizes the higher MAGI for the purpose of ACA tax subsidy and Part B premiums even though our 2022 MAGI will be low. Should I enter (false) low MAGI numbers to lower the Part B premium and increase the ACA tax subsidy?
At the end of the day I'd like to utilize the Pralana Roth conversion optimization for 2022 which would include the impact of Plan B/IRMAA cost and the ACA tax subsidies. We already have our 2022 policy premiums for all Medicare and ACA policy costs (based on the lower MAGI estimate) so is it better to not auto-calculate the Medicare premium and not "Assume ACA health insurance when eligible"?
For Period 3, I entered our COBRA and/or employer insurance cost
For Period 4, I entered her full Medicare and my ACA cost. I assumed I would not let Pralana auto-calculate the Part B premium but should I subtract the Part B premium from the number I entered?
For Period 5, I entered 2X full Medicare cost (should I subtract the Part B premium?)
Thanks for any help and/or guidance!
Regarding 2020 and 2021 MAGI, yes, you should enter the false low numbers so PRC can calculate IRMAA correctly.
Regarding your other questions, you could experiment some with letting PRC do the automatic calculations and see how close it gets to your actual numbers and then decide the best way to proceed. It is definitely an option to tell PRC not to calculate Medicare premiums and enter your actual numbers instead. In that case, you need the enter the full amount of your premiums in Period 4. For Period 5 when both of you are on Medicare, I think it's best to let the tool calculate the premiums. If you turn that option off, then you'll need to enter the entire premium.