70-Year-Old Federal Retiree With $1.1 Million Discovers One RMD Disqualified Him From the Hold-Harmless Rule

A 70-year-old retired federal employee has a seemingly simple question: won’t his Social Security cost-of-living adjustment offset any Medicare Part B premium increase? Won’t the hold-harmless rule protect him? With roughly $1.1 million in his Thrift Savings Plan, a $40,000 FERS pension, and Social Security income, he assumed the same protection that shields most retirees would shield him too.

It will. But only until he turns 73.

The Social Security hold-harmless provision caps the dollar increase in a beneficiary’s Part B premium at the dollar increase in their Social Security check from the annual COLA. In practice, your net Social Security deposit cannot fall from one year to the next because Medicare premiums outpaced your COLA. In 2026, the COLA came in at 2.8%, and the standard Part B premium settled at $202.90 per month, up $17.90 from the 2025 level of $185.00. For most beneficiaries, hold-harmless absorbed the gap.

The rule carves out two groups, though: new enrollees, and anyone subject to an Income-Related Monthly Adjustment Amount (IRMAA). According to the Medicare Trustees Report, about 5.1 million beneficiaries paid Part B IRMAA surcharges in 2025, roughly 7 to 8% of all enrollees. That exclusion is the one that catches high-balance TSP holders.

The RMD at 73 That Changes the Math

Under current law, required minimum distributions from the TSP begin at age 73. The moment that first RMD lands, the income picture shifts significantly.

His FERS pension runs about $40,000 annually. Add the taxable portion of his Social Security. Add a first-year RMD calculated against a $1.1 million balance. For a single filer, the first IRMAA tier begins when MAGI crosses $109,000. The RMD alone is likely to lift him over that line.

Once he crosses it, Part B climbs from $202.90 to $284.10 per month, an IRMAA surcharge of $81.20 on top of the standard premium. Part D adds another $14.50 monthly surcharge on top of whatever his drug plan charges. If the RMD pushes him into Tier 2 (MAGI above $137,000 for a single filer), Part B totals $405.80 monthly and the Part D surcharge grows to $37.50. Critically, crossing a threshold by even one dollar triggers the full surcharge for the entire year — there is no partial or graduated phase-in.

Because he is now an IRMAA payer, hold-harmless no longer applies. Any future Part B increase lands in full, regardless of what his COLA does. The system uses a two-year lookback: income earned in 2026 drives 2028 premiums, so the first RMD year sets the surcharge two Januarys later.

The TSP-Specific Wrinkle

The TSP does not permit qualified charitable distributions, a detail that trips up many federal retirees. A QCD lets someone aged 70½ or older send money directly from a traditional IRA to a qualified charity, with the distribution capped at $111,000 per person in 2026 and excluded entirely from MAGI. That makes it one of the most powerful tools for trimming RMD-driven income before it crosses an IRMAA cliff. But it works only from an IRA. TSP funds must be rolled to a traditional IRA first before a QCD is possible.

Roth conversions face the same friction. In-plan Roth options inside the TSP offer limited flexibility on conversion size, timing, and withholding. A traditional IRA gives full control over all three.

Three Actions Before 73

The first move is rolling a meaningful portion of the TSP to a traditional IRA. That single step unlocks QCDs at age 70½ and opens clean Roth conversion mechanics. Some balance can stay in the TSP if the G Fund plays a role in the fixed-income sleeve, but enough should move to execute the next two steps.

The second move is running partial Roth conversions between now and age 73. Every dollar converted at today’s brackets is a dollar that will not sit in the traditional balance generating a future RMD. The practical target is filling the 22% or 24% federal bracket while staying below the $109,000 single-filer MAGI line. A conversion that crosses that line may save RMD tax later, but it also triggers the first-tier IRMAA surcharge two years out.

The third move is modeling MAGI against IRMAA cliffs every October, before year-end moves are locked in. A retiree who lands even $500 over a threshold pays the full tier surcharge for the entire year. If projected MAGI sits within roughly $10,000 of a cliff, the options are to defer discretionary income (delay a capital gain, pause a Roth conversion) or accelerate a deduction (a QCD from the IRA, bunched charitable giving) to stay below the line.

Hold-harmless is real protection, and it will do its job for most beneficiaries for most of their retirement. For the federal retiree with a seven-figure TSP, it is a floor with a built-in expiration date at age 73. What he does in the three years between 70 and 73 will determine whether he pays $202.90 a month or considerably more.

Editor’s note: This article was updated to reflect that about 5.1 million Medicare beneficiaries paid Part B IRMAA surcharges in 2025 (roughly 7 to 8% of all enrollees, per the Medicare Trustees Report), and to add the 2026 QCD annual cap of $111,000 per person. The 2026 Part B premium increase of $17.90 from the prior-year level of $185.00 was also incorporated.

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