A new federal law is changing how certain public-sector retirees manage their healthcare costs, particularly in how Social Security retirees pay Medicare premiums.
The Social Security Fairness Act, signed into law in January 2025, aims to restore benefits for approximately 2.8 million Americans whose Social Security entitlements were previously reduced or denied due to their participation in non-covered pension systems.
According to GoBankingRates, the law not only increases benefit eligibility retroactively to January 2024 but also alters how Medicare premiums are collected. For many retirees, this means transitioning from manual payments to automatic deductions directly from their reinstated Social Security benefits.
Retroactive Benefits and Medicare Payment Changes
The legislation restores Social Security benefits to roughly 2.8 million individuals who had previously seen reduced or no benefits due to pensions from non-covered employment—such as railroad workers, civil servants, and federal employees. These benefits are retroactive to January 2024.
For those newly receiving Social Security, one major operational change is the method of paying Medicare premiums. Before this act, affected retirees paid premiums directly to the Centers for Medicare & Medicaid Services (CMS).
Now, with Social Security coverage reinstated, their Medicare Part B and D premiums will be automatically deducted from their monthly benefits. This alignment brings them in line with other Social Security beneficiaries.
Transition Period and Required Actions
Despite the automatic payment transition, the Social Security Administration (SSA) advises beneficiaries to continue paying premiums directly until they receive official notice confirming the update in their Social Security records.
Once the transition is complete, automatic deductions will begin. For individuals who have prepaid premiums, refunds will be issued directly by the SSA.
Those using online payment systems or Medicare Easy Pay are encouraged to stop these services only after SSA notification. This involves completing Form SF-5510 for Easy Pay users or adjusting online banking instructions accordingly.
Potential Premium Increases Linked to Income
Beyond procedural changes, some retirees may see increases in their Medicare premiums. This is due to a provision known as the Income-Related Monthly Adjustment Amount (IRMAA), which applies higher premiums to individuals with elevated modified adjusted gross income (MAGI).
The standard Medicare premium in 2025 is $185, which covers 25% of the total cost for Parts B and D. However, retirees with a MAGI above $106,000 (or $212,000 for joint filers) may face IRMAA surcharges ranging from 35% to 85% of total premium costs.
Notably, these income assessments are based on tax data from two years prior. This means any benefit-related income adjustments in 2024 could impact premiums starting in 2026.
If retirees experience life events that significantly affect income—such as marriage, divorce, spousal death, or job loss—they may request a reconsideration of their IRMAA status. This requires contacting the SSA directly and submitting supporting documentation, including amended tax returns where applicable.
