The Social Security COLA increases benefits 1.7% for 2015. While the increase isn’t large, the good news is that Social Security recipients get to keep their entire COLA as Medicare Part B rates remain the same.
Starting in January, Social Security benefits will rise by 1.7%. The COLA is applied to all benefits for all beneficiaries over age 62—whether or not they have started receiving benefits.
● Maximum benefit
The maximum benefit for a person turning 62 in 2015 will be $2,663, up from $2,642 for those who turned 62 in 2014, a rise of less than 1%.
To be more precise, $2,663 is the primary insurance amount (PIA) for individuals turning 62 in 2015 who have earned the taxable maximum each year for 35 years.
The $2,663 is the amount they will receive if they apply for Social Security at their full retirement age (FRA) of 66, which is four years from now. Of course, by then the $2,663 will have earned four more years of COLAs, so their actual benefit will be higher.
If they apply next year at age 62, they will receive 75% of the $2,663, or $1,997. Future COLAs will then be applied to that reduced amount. If they delay their benefit to age 70, four years of 8% annual delayed credits (DRCs) will be applied to the $2,663, giving them a benefit of $3,515, plus eight years of COLAs.
For everyone over 62, benefits are adjusted based on
For everyone under 62, future benefits are adjusted based on wage increases. That is, the indexing factors and bend points that will eventually be used to calculate their average indexed monthly earnings (AIME) and primary insurance amount (PIA) are inching up each year based on the increase in the average annual wage index.
Historically, wages have risen faster than prices. This is one reason baby boomers are seeing rather generous benefits today compared with previous age cohorts. However, the latest increase in the average wage index was just 1.28%. This compares to 3.12% the previous year, and as much as 4% to 5% in earlier years. If this trend continues, benefits for future retirees will grow at a slower pace than they have in the past.
●
Earnings test
The earnings test threshold rises to $15,720, up from $15,480. For everyone under FRA, $1 in benefits will be withheld for every $2 earned over $15,720 in 2014.
For those who turn FRA in 2015, the threshold is $41,880, up from $41,400 in 2014. In the months preceding their 66th birthday, $1 in benefits will be withheld for every $3 earned over $41,880.
1

The Social Security wage base rises to $118,500, up just 1.28% from this year’s $117,000, and again reflecting the small rise in the average annual wage index. This means a maximum earner will pay $7,342 (6.2% of $118,500) in payroll taxes, with the same amount being paid by the employer. Self-employed individuals will pay 12.4%, to a maximum of $14,684. An additional Medicare tax of 1.45% (2.9% for self-employed) is paid on all earnings.
●
Medicare
The good news is that Social Security recipients will get to keep their entire COLAs, as Medicare Part B premiums will remain unchanged at $104.90 per month in 2015. The Part B income-related monthly adjustment amounts will remain unchanged as well.
The Part B annual deductible stays at $147 per year.
The Part A deductible for the first 60 days of hospitalization rises to $1,260 (up from $1,216). The deductible for days 61-90 rises to
$315 (from $304) and for 90+ days $630 (up from $608). If your clients have comprehensive Medigap policies or Medicare
Advantage plans, these Part A deductibles are likely covered by private insurance.
Part D coinsurance amounts under the standard Medicare model will be going up a bit. The deductible rises to $320 from $310. The donut hole begins when total costs exceed $2,960 (up from $2,850), and the out-of-pocket maximum rises to $4,700 in 2015 (up from $4,550).
The donut hole is gradually being closed: Medicare beneficiaries in the coverage gap are expected to pay 45% of covered brand name drugs (down from 47.5%) and 65% of covered generic drugs (down from 72%) in 2015. By 2020 the donut hole should be closed.
Of course, individual drug plans differ widely, which is why it’s so important for your Medicare clients to review their drug plan information for 2015 and take advantage of this open enrollment period, which lasts until December 7, to make changes.
Some 44% of Part D prescription drug plans have the standard deductible, while 42% have no deductible. According to Medicare
Part D: A First Look at Plan Offerings in 2015, most Medicare beneficiaries have about 30 standalone prescription drug plans to choose from.
The average premium across all plans will be rising by about 4%, to $38.83 per month from $37.27. However, this average masks the wide variation among plans. Enrollees in six of the 10 most popular drug plans will see double-digit premium increases if they stay in the same plans in 2015.
References
2015 Social Security Changes
2015 Medicare Part B premiums and deductibles to remain the same as last two years
701.852.8002 - 2010 4th Ave NW, Minot, ND 58703 www.schonfinancial.com
2

3