Medicare premiums are the most predictable retiree medical expense and the most common single use of §401(h) distributions. For a married couple in the IRMAA brackets, total Medicare premium spend can exceed $14,000 per year per spouse.
What is reimbursable
All federally administered Medicare premiums qualify:
- Part B (medical insurance) — including IRMAA surcharges
- Part D (prescription drug) — including IRMAA surcharges
- Part C (Medicare Advantage)
- Medigap / Medicare Supplement plans
Sequence in retirement
Most retirees authorize the §401(h) plan to reimburse premium payments quarterly or annually. Some plans coordinate directly with Medicare for premium payment, depending on TPA capabilities.
IRMAA interaction
§401(h) distributions are not includible in AGI, so they do not increase Medicare premiums in subsequent years. This makes the §401(h) a particularly clean source of premium payment for high-AGI retirees.
Educational only. This page is for general education on §401(h) accounts and qualified retirement plan design. It is not individualized investment, tax, or legal advice. Consult a qualified fiduciary advisor, enrolled actuary, and ERISA counsel before adopting a §401(h) sub-account.