Medicare 2026

The Social Security Fairness Act and Medicare: What to Know About Premiums, Back Pay and Taxes

If you spent part of your career in a job that didn't pay into Social Security — think some federal, state or local government positions — the Social Security Fairness Act of 2023 may have changed your monthly benefit, your Medicare premium payment method, and even what you owe at tax time. Here's a plain-English look at how the pieces fit together.

What the law changed

Signed into law on January 5, 2025, the Social Security Fairness Act (Public Law 118-273) repealed two long-standing rules:

• The Windfall Elimination Provision (WEP) had reduced a worker's own Social Security benefit by replacing the 90 percent factor in the benefit formula with a factor ranging from 85 to 40 percent, depending on years of substantial Social Security earnings.
• The Government Pension Offset (GPO) had reduced a spouse's or surviving spouse's Social Security benefit by two-thirds of the monthly government pension from non-covered work.

Both repeals are effective for benefits payable for months after December 2023. Under SSA's rules, that means beginning with benefits due for January 2024 (paid in February 2024), SSA no longer reduces benefits because of a non-covered pension. The 2026 Social Security Trustees Report noted that net benefit payments from the Old-Age and Survivors Insurance trust fund rose 9.3 percent from 2024 to 2025, pointing to the Fairness Act's implementation as one of the main drivers (along with more beneficiaries and higher average benefits).

How this affects your Medicare premiums

Many people pay their Part B premium through automatic deduction from their Social Security check. If you weren't collecting enough Social Security to cover Part B before — because WEP or GPO reduced your benefit — you may have been paying Medicare directly, through Easy Pay, or through a bank's online bill payment.

Here's what Medicare.gov advises after a Fairness Act adjustment:

• If Social Security sends you a notice saying your record has been updated and your benefit is now enough to cover your Medicare premium, the premium will be deducted automatically from your Social Security payment.
• If you've been paying through Medicare Easy Pay or your bank's online bill pay, stop those payments once you get the notice — otherwise you could end up paying twice.
• If you haven't received a notice yet, keep paying your Medicare bill as usual.

Under SSA's rules, Part B premiums must be deducted from Social Security or Railroad Retirement benefits when you receive them. They can be deducted from a federal civil service (OPM) annuity only if you're not entitled to Social Security or Railroad Retirement. You can ask OPM to deduct Part B as long as you're not getting Social Security or RRB benefits.

Back pay and your taxes

If your record was corrected, SSA may have sent a lump-sum payment covering months going back to January 2024. That retroactive check has tax implications.

According to IRS Publication 915 (for 2025 returns), the taxable part of a lump-sum Social Security payment received in 2025 must be included in your 2025 income — even though some of it covers an earlier year. The IRS does offer a lump-sum election method: you can refigure the earlier year's share using that year's income, which may lower the taxable amount. You don't file an amended return for the earlier year, and once made, the election can be revoked only with IRS consent. A tax professional can help you decide whether the election saves you money.

The IRMAA ripple effect

Higher-income Medicare beneficiaries pay an income-related monthly adjustment amount (IRMAA) on top of the standard Part B and Part D premiums. SSA bases IRMAA on your modified adjusted gross income (adjusted gross income plus tax-exempt interest), generally from your tax return two years before the premium year — so 2026 premiums are generally based on your 2024 return.

A large lump-sum payment landing on your 2025 return could nudge your income across an IRMAA threshold two years later. The 2027 IRMAA brackets and the 2027 Part B standard premium haven't been announced yet; CMS typically releases those figures in the fall. Watch Medicare.gov for updates.

What's confirmed for 2027

A few program-level numbers are already set:

• Part D out-of-pocket cap: $2,400 in 2027 (up from $2,100 in 2026).
• Maximum Part D deductible any plan may charge: $700 in 2027.
• Part D base beneficiary premium: $41.33 (used for the late-enrollment penalty; actual plan premiums are set plan by plan).
• Annual Enrollment Period: October 15 – December 7, 2026, with choices taking effect January 1, 2027.
• COLA: SSA announced a 3.6 percent cost-of-living adjustment for benefits payable beginning January 2027.

Enrollment flexibility if you have Medicaid or Extra Help

If you have Medicaid or qualify for the Part D Low Income Subsidy (Extra Help), you have a monthly Special Enrollment Period to move to Original Medicare with a stand-alone Part D plan, or to switch stand-alone Part D plans. Full-benefit dual-eligible individuals can also join an integrated Dual Eligible Special Needs Plan (D-SNP) in any month.

Choosing coverage: a neutral look

As you review your options, remember that Original Medicare with a Medigap policy and Medicare Advantage are structured differently. Original Medicare plus Medigap generally offers broad provider choice and predictable cost-sharing, often paired with a separate Part D plan. Medicare Advantage bundles hospital, medical and (usually) drug coverage, often with extra benefits, but typically uses provider networks and prior authorization. Neither is "better" — the right fit depends on your doctors, medications, travel patterns and budget.

Where can you get help with Medicare questions?

For official information, visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227), available 24/7. For Social Security questions about your benefit record or back pay, contact SSA directly.