What Do I Need To Know About Medicare?

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Presentation transcript:

What Do I Need To Know About Medicare? Presented by: Trenton Olson Senior Benefits Insurance Services

This May Be Your Employees’ Mailbox

How Does An Employee Qualify For Medicare? Turn 65 years old Disabled for 24 consecutive months Lou Gehrig’s Disease (ALS) End Stage Renal Disease (Kidney Failure)

Is Medicare Automatic? If an employee is receiving Social Security benefits prior to age 65, their Medicare card will automatically arrive in the mail approximately 90 days before their 65th birthday If the employee hasn’t signed up for Social Security benefits, they must proactively sign up for Medicare Part A or both Parts A and B Employees can sign up via phone, on-line, or in person through the Social Security office

Original Medicare Coverage Medicare Part A / Hospital Medicare Part B / Medical Covers inpatient care in hospitals, skilled nursing facilities, home health care and hospice care Covers doctor services, outpatient care, labs & x-rays and various therapies

Original Medicare Premiums Medicare Part A / Hospital Medicare Part B / Medical Since Medicare Part A is paid through Medicare Tax, most people pay no monthly premiums For 2016 new Medicare Part B enrollees will pay a minimum of $121.80 each month Monthly charge varies based on adjusted gross income (AGI) Employees may face a 10% penalty for life for not signing up

Higher Premiums For Higher Income Individual income bracket Couples income bracket Part B premium Additional Part D premium ≤$85,000 ≤$170,000 $121.80 n/a >$85,000 but ≤$107,000 >$170,000 but ≤$214,000 $170.50 $12.70 >$107,000 but ≤$160,000 >$214,000 but ≤$320,000 $243.60 $32.80 >$160,000 but ≤$214,000 >$320,000 but ≤$428,000 $316.70 $52.80 >$214,000 >$428,000 $389.80 $72.90

Let’s Talk About HSAs And Medicare An employee SHOULD NOT contribute to an HSA if they have Medicare An employer SHOULD NOT contribute to an employee’s HSA if they have Medicare Funds previously accumulated by the employee may be used for future qualified expenses Little known fact: Social Security may back date Medicare Part A up to 6 months Encourage employees to plan ahead!

How Do Medicare Recipients Fill The Gaps? Medicare Supplement / “Medigap” policies 10 plans A, B, C, D, F, G, K, L, M & N Medicare Advantage Plans / Medicare Part C HMOs, Preferred Provider Organizations (PPOs), Private-Fee- For-Service Plans (PFFS), Special Needs Plan (SNPs) Part D Prescription Drug only Plans / Rx

Difference Between Medicare Advantage and Medigap Coverage Generally, low or no premiums Usually includes drug coverage Has cost sharing / co-pays and co-insurance Usually has a provider network Benefits provided by an insurance company, not Medicare Often includes extra benefits not covered by Medicare such as vision and hearing benefits Generally, premiums age based Does not include drug coverage Can have very little cost sharing Accepted by all Medicare providers Medicare is primary / Medigap pays 2nd Does not include extra benefits such as vision or hearing

Medicare Part D / Prescription Drug Voluntary Part D helps lower Rx costs Guarantee issue during certain enrollment periods

Creditable Rx Coverage Penalties for late enrollment 1% of the base beneficiary premium for each month enrollment is delayed unless, beneficiary has creditable drug coverage The 1% penalty can change from year to year Medicare Part D recipients must pay this penalty as long as they have Medicare prescription drug coverage

Documents Employers Provide Employees over age 65 must prove they have had creditable drug coverage since turning age 65 Notification is provided by the employer / broker to these employees before October 15 each year Creditable Coverage and Rx Disclosure Letter Company Letterhead Name of employee, spouse and possibly dependents States benefit details (i.e. medical, dental) Coverage period

I’m Turning Age 65! Now What? Should an employee enroll onto Medicare? Part A only, Parts A and B or neither…? Compare coverage and costs Why would it be better for employees to choose Medicare coverage? Why would it be better for the group? An employer cannot force or encourage an employee to drop their group medical insurance You can educate!

Retiring After Age 65 Now What? Start the process 90 days in advance! Determine if the employee needs to sign up for Medicare Part A and/or Part B If an employee has not signed up for Parts A or B, they can do so on medicare.gov or ssa.gov If an employee has Medicare Part A, they will need to go into Social Security

Retiring After Age 65 Now What? If an employee already has Medicare Part A, they need to complete CMS Form 40B – Application For Enrollment In Medicare Part B When terming group medical coverage the employee and the employer need to complete CMS Form – L564 – Request For Employment Information Best to make an appointment with Social Security and take in both CMS forms at the same time

Senior Benefits Insurance Services No Cost Consultation 801-523-6081 Trenton@srbenco.com www.srbenco.com 1.800.MEDICARE www.medicare.gov 1.800.772.1213 www.socialsecurity.gov We’re Here To Help!

Savvy Social Security Planning: What Baby Boomers Need to Know to Maximize Retirement Income Copyright © 2016 Horsesmouth, LLC. All Rights Reserved.

Baby boomers want to know: Will Social Security be there for me? How much can I expect to receive? When should I apply for Social Security? How can I maximize my benefits? Will Social Security be enough to live on in retirement?

Understanding the value of Social Security

Social Security offers income you can't outlive If your monthly benefit is $2,000 today and you live: 10 more years you'll receive a total of $302,689 in lifetime benefits 20 more years $666,456 30 more years $1,141,276   Assumes 2.7% annual cost-of-living adjustments

Social Security offers annual inflation adjustments If your monthly benefit is $2,000 today and annual cost-of-living adjustments are 2.7% : In 10 years Your monthly benefit will be $2,611 In 20 years $3,408 In 30 years $4,448 Assumes 2.7% annual cost-of-living adjustments

Baby Boomer Social Security Question #1 Will Social Security be there for me?

OASDI Trust Fund still growing Trust fund balance on 12/31/14: $2.789 trillion 2015 results Total income: $920 billion Total expenditures: $897 billion Net increase in assets: $ 23 billion Trust fund balance on 12/31/15: $2.812 trillion Source: Social Security Administration, Office of the Chief Actuary 26 26

Long-term projections: without reform, benefits fall to 79% in 2034 OASDI Income, Cost and Expenditures as Percentages of Taxable Payroll [Under Intermediate Assumptions] Cost: Scheduled but not fully payable benefits Cost: Scheduled but not fully payable benefits Cost: Scheduled and payable benefits Income Expenditures: Payable benefits = income after trust fund exhaustion in 2034 Payable benefits as percent of scheduled benefits: 2014-2033: 100% 2034: 79% 2089: 73% Source: 2015 OASDI Trustees Report 27 27

What would it take to restore solvency to the system? Reform proposals being studied Increase maximum earnings subject to Social Security tax (currently $118,500 in 2016) Raise the normal retirement age (currently 66 for individuals born between 1943 and 1954; 67 for those born in 1960 or later) Lower benefits for future retirees (escalate benefits based on increases in consumer prices rather than wages) Reduce cost-of-living adjustments (COLAs) for all retirees

The bottom line for baby boomers Your benefits are not likely to be affected by Social Security reform

Baby Boomer Social Security question #2 How much can I expect to receive?

Your benefit will depend on: How much you earned over your working career The age at which you apply for benefits

Full Retirement Age (FRA) Year of Birth Full Retirement Age 1943-54 66 1955 66 and 2 months 1956 66 and 4 months 1957 66 and 6 months 1958 66 and 8 months 1959 66 and 10 months 1960 and later 67

What if you apply for early benefits? You will receive a percentage of your PIA Apply at age If FRA = 66 If FRA = 67 62 75.0% 70% 63 80.0% 75% 64 86.7% 80% 65 93.3% 66 100% 67

What if you apply after FRA? You will earn 8% annual delayed credits Apply at age Benefit will be % of PIA if FRA = 66 if FRA = 67 66 100% 93.3% 67 108% 68 116% 69 124% 70 132%

How to estimate your Social Security benefits Obtain your annual Social Security statement at www.socialsecurity.gov/mystatement OR Go to www.socialsecurity.gov, click on "Estimate Your Retirement Benefits“ OR Use one of the calculators on the SSA website: www.ssa.gov/planners/benefitcalculators.htm  

Spousal benefits Spousal benefit = 1/2 the primary worker's PIA if started at full retirement age Example: John's PIA is $2,000 Jane's PIA is $800 If Jane applies at FRA, her benefit will be $1,000 (50% of John’s PIA)  

Rules for spousal benefits Primary worker must have filed for benefits Spouse must be at least 62 for reduced benefit or 66 for full benefit No delayed credits on spousal benefits after 66

Divorced-spouse benefits Same as spousal benefits if: Marriage lasted 10 years or more Person receiving divorced-spouse benefit is currently unmarried The ex-spouse is at least age 62 If divorce was more than two years ago ex-spouse does not need to have filed for benefits

Rules for divorced-spouse benefits More than one ex-spouse can receive benefits on the same worker's record Benefits paid to one ex-spouse do not affect those paid to the worker, the current spouse, or other ex-spouses Divorced-spouse benefits stop upon remarriage of spouse collecting benefits (not upon remarriage of primary worker spouse)  

Survivor benefits If spouse dies while both are receiving benefits, widow(er) may switch to the higher benefit Example: Joe and Julie are married. Both are over full retirement age. Joe's benefit is $2,000, Julie's benefit is $1,200. Joe dies. Julie notifies Social Security and her $1,200 benefit is replaced by her $2,000 survivor benefit.  

Rules for survivor benefits Couple must have been married at least 9 months at date of death (except in case of accident). Survivor must be at least 60 for reduced benefit (50 if disabled), or FRA for full benefit. Survivor benefit not available if widow(er) remarries before age 60 (or 50 for disabled survivor), unless that marriage ends. Divorced-spouse survivor benefit available if the marriage lasted at least 10 years.  

Baby Boomer Social Security Question #3 When should I apply for benefits?

Factors to consider when deciding when to apply Health status Life expectancy Need for income Whether or not you plan to work Survivor needs  

Baby Boomer Social Security Question #4 How can I maximize my benefits?

Strategy #3 for Maximizing your benefits Coordinate spousal benefits

“Claim now, claim more later” At FRA, higher-earning spouse restricts his application to his spousal benefit (lower-earning spouse must have filed for benefits on her record) At 70, higher-earning spouse switches to his own maximum benefit Example: Mike and Mary are 66 Mike’s PIA is $2,000; Mary’s PIA is $800 Mary files for her benefit at 66 Mike files for his spousal benefit at the same time and begins collecting $400 (half of Mary’s PIA) When Mike turns 70, he switches to his maximum benefit of $2,640. Mary adds on her $200 spousal benefit (total $1,000) Caution: Higher-earning spouse may not do this before FRA Only one spouse may do this (both spouses can’t receive spousal benefits on each other’s record at the same time) Spousal planning analysis can determine which of the various spousal strategies will work best for your situation New legislation: Not available after 2019  

Strategy #4 for maximizing your benefits Minimize taxation of benefits

How much of your SS will be taxable? Taxes in retirement How much of your SS will be taxable? 0% 50% 85% Provisional Income = 50% of SS + Tax Exempt Interest+ AGI

Taxation of Social Security benefits Filing status Provisional income* Amount of SS subject to tax Married filing jointly Under $32,000 $32,000 - $44,000 Over $44,000 Up to 50% Up to 85% Single, head of household, qualifying widow(er), married filing separately & living apart from spouse Under $25,000 $25,000 - $34,000 Over $34,000 Married filing separately and living with spouse Over 0 85%   *Provisional income = AGI + one-half of SS benefit + tax-exempt interest

Ways to minimize taxes on Social Security benefits Reduce other income with tax-advantaged investments (but not municipal bonds!) Anticipate IRA RMDs, which may put you in a higher tax bracket; consider drawing down IRAs before 70-1/2 Convert traditional IRA to Roth Delay Social Security: reduces number of years benefits are subject to tax Reduce expenses: pay down debt, adopt simpler lifestyle Continue to manage taxes throughout retirement

Strategy #5 for maximizing your Social Security benefits Coordinate Social Security with your overall retirement income plan

What Social Security personnel can and can’t do They CAN Estimate individual benefits Tell you the amount you are entitled to now They CAN’T Project future benefits through scenario planning Help with innovative strategies designed to maximize benefits

Consider Social Security in the context of: Pensions IRAs and 401(k)s Required minimum distributions at age 70-1/2 Investment portfolio Work  

You have questions. We can help. When should I apply for Social Security? What if I want to keep working? What if I've already applied? How much will my benefit be? How can I coordinate spousal benefits? What's the best long-term strategy for my situation? What do I do next?  

Social Security is too important for guesswork. Michael Littledike 801-566-5058