Social Security Medicare premiums on deferred compensation after retirement, Digi Mart USA News: An executive who retires at the end of 2026 may find that his deferred compensation payments continue to raise his Medicare costs. According to a 24/7 Wall St.
analysis, his agreement would pay $150,000 a year for five years starting in 2027, and Social Security would count each payment as income when setting his premiums.
The Centers for Medicare & Medicaid Services (CMS) says income-related surcharges affect roughly 8% of Medicare Part B enrollees. A single filer with modified adjusted gross income (MAGI) at or below $109,000, or a couple at or below $218,000, pays the standard $202.90 monthly Part B premium.
Executives with deferred pay usually fall into the higher-income group.
A nonqualified deferred compensation plan lets an executive receive part of his earnings years after the work is done. Unlike a traditional 401(k), these payments generally cannot be rolled into an IRA to postpone income taxes.
Each payment counts as income in the year it is received, and the plan withholds income tax on the taxable portion.
Social Security calculates the income-related monthly adjustment amount (IRMAA) using MAGI, which is adjusted gross income plus tax-exempt interest. Interest from municipal bonds counts even though it is not taxed.
The article offers an example: a single filer with $80,000 of other MAGI plus the $150,000 payout, for $230,000 a year. Under 2026 rules, that falls in the bracket from $205,000 to $500,000, with a $649.20 monthly Part B premium and an $83.30 monthly Part D surcharge on top of the drug plan premium.
The surcharges total $6,355.20 a year, or $31,776 over five payout years. The article notes that 2026 brackets are used as a stand-in because thresholds reset annually.
Medicare premiums are generally based on income reported two years earlier. The 2027 payout would therefore set the 2029 premium, and the final 2031 payout would set the 2033 premium.
The 2027 and 2028 premiums would reflect 2025 and 2026, the executive’s last years on salary.
Filing jointly reduces the impact. A couple with $230,000 of income would fall into the first level, where each spouse pays $284.10 for Part B plus a $14.50 Part D surcharge, or $1,148.40 per person a year in surcharges.
If one spouse died during the payout years, the surviving spouse filing single on the same income would move up to the $649.20 level.
Retirement may qualify for relief. The Social Security Administration (SSA) lists work stoppage among eight life-changing events that allow a beneficiary to file Form SSA-44 and request a more recent, lower income year.
The article cites a Reddit commenter on r/medicare who said work stoppage is an accepted event for SSA-44.
The form only helps if it reduces or eliminates the income-related adjustment. If MAGI in the final salary years was between $205,000 and $500,000, a $230,000 retirement estimate would fall in the same level, and the form would change nothing.
It helps mainly if salary-year income exceeded $500,000, where the total Part B premium reaches $689.90.
The form may also help after deferred payments end. SSA can consider an earlier retirement even if the income drop occurs years later.
If MAGI falls to $80,000 after the final payment, the retiree can ask SSA to use that lower figure instead of waiting for the usual two-year lookback.
