Although it won’t be official until mid-to-late October, the OASDI Trustees are projecting no cost-of-living (COLA) increase for 2016. Automatic COLA’s for Social Security recipients began in 1975 with benefits increasing every year since then except for 2010 and 2011, followed by a 3.6% increase in 2012 with nominal increases each following year.

medicareThis same is not true however, for 2016 Medicare premiums. Medicare Trustees are projecting a significant increase in Part B premiums of approximately 25%. Currently Part B base premiums are $104.90 per month and are projected to increase to $120.70 per month. About 70% of folks on Medicare pay this base premium of $104.90/month and have it deducted from their Social Security checks. There is good news for these SS recipients. There is a ‘hold-harmless’ provision which states that any increases in Part B premiums can only be passed on to SS recipients to the extent they are covered by increased SS benefits from a COLA. Since no SS COLA is projected, then no increase in Part B premiums will be deducted from SS benefits for these individuals.

But what about the 30% of folks on Medicare who pay more than $104.90 per month for their Part B premiums, or those who pay the base premium but don’t have the cost deducted from the SS check? Well, I’m afraid I don’t have good news for these individuals. For these folks, Part B base premiums are projected to increase to $159.30 per month. They will also have to pay (likely substantially higher) income-related adjustments on top of the $159.30 base. You may be asking, how does the $120.70 projected increase for Part B base premiums become $159.30? Well, it’s because the additional cost in Part B will fall on the “30% payers” because 70% on Medicare are protected by the “hold harmless” provision.

Who are the 30% not covered by the “hold-harmless” provision? These are individuals on Medicare who ARE having their Part B premiums deducted from their SS benefits but are already subject to the income-related adjustments, paying more than $104.90/month. It also includes folks who have filed-and-suspended their SS benefits, allowing it to grow at 8%/per year so a spouse and/or children can receive a benefit on their record. And it includes individuals who are already SS full retirement age but delayed filing for benefits.

As always, please feel free to call or email me if I can assist you with any of your Social Security or Medicare related questions or if we can help you in any way.

Pat

Patricia L. Burris, CFP®
Vice President
Corporate & Retirement Plan Services