Will a 2026 COLA change retiree health insurance premiums or Medicare premiums withheld from annuities?
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Executive summary
The 2026 Social Security COLA is 2.8%, which will raise the average retiree’s check by about $56 per month, and Medicare Part B’s standard premium will rise $17.90 to $202.90 — a change that will be withheld from Social Security checks for most beneficiaries and will therefore shrink the visible COLA (often by roughly $17.90) [1] [2]. Federal and private annuity timing rules mean the COLA takes effect Dec. 1 and normally appears in the January payment; Medicare Part B premiums are generally deducted after the COLA is applied to Social Security/annuity checks [3] [4].
1. How the math works: COLA first, premiums come off the top
Social Security and many federal annuities receive the COLA that is effective Dec. 1 and paid in the January check; the announced 2.8% raise is applied to the benefit amount and then Medicare Part B premiums are typically deducted from the net check, so the premium increase reduces the practical boost beneficiaries see in hand [3] [1] [4]. Multiple outlets calculate that a $56 average COLA minus the $17.90 Part B increase leaves roughly $38–$39 of net extra monthly cash for the typical retiree [5] [6] [7].
2. Who actually has premiums withheld from annuities or checks
Most people enrolled in Original Medicare have their Part B premiums deducted directly from Social Security benefits; therefore the premium change directly trims the COLA for those recipients [2] [8]. Available sources do not detail every annuity contract, but for federal retiree annuities OPM and common practice mirror Social Security timing and deductions — the COLA is reflected in annuity payments in January and health‑insurance/Medicare deductions apply after the COLA is calculated [3] [4]. Sources note federal retiree FEHB premiums will also change for 2026, but specific withholdings vary by plan [9].
3. The legal “hold‑harmless” safeguard and its limits
A “hold‑harmless” rule prevents Part B premium increases from reducing a Social Security beneficiary’s monthly check below the prior year’s amount; that protects low‑benefit recipients whose COLA is smaller than the premium hike [10] [11]. But most beneficiaries won’t be held harmless; analysts and organizations such as KFF and AARP say the $17.90 bump will effectively erase a significant slice of the average COLA for the majority of enrollees rather than eliminate the increase entirely [8] [12].
4. Impact varies by income, benefit size and IRMAA
How much of the COLA disappears depends on your baseline benefit and whether you pay additional income‑related Medicare surcharges (IRMAA). Higher‑income beneficiaries who already pay IRMAA tiers face larger total Medicare withholdings, and beneficiaries with smaller checks can see the COLA fully consumed or the hold‑harmless rule triggered — examples in reporting show a $600 monthly benefit would get a $16.80 COLA vs. a $17.90 premium rise, producing no net increase [13] [14] [15].
5. Federal retirees and annuity nuances: FERS vs CSRS timing and “diet COLA”
Federal annuitants receive COLA adjustments differently: CSRS annuitants generally get the full COLA while FERS retirees are subject to the FERS cap that can reduce the COLA to 2% when inflation falls between 2% and 3% [16] [17]. OPM applies COLA to annuities effective Dec. 1 and the higher annuity appears in the January payment; subsequently, retiree health insurance premiums for federal annuitants are deducted according to OPM rules — sources show health‑insurance premium increases can be substantial and will erode real income gains for federal retirees [3] [9].
6. Competing takes among analysts and advocacy groups
Advocates and analysts agree the Part B increase will eat into the COLA, but they disagree on scale and blame. Some coverage emphasizes the arithmetic reality that most beneficiaries still receive a net increase after premiums are withheld (AARP, MedicareResources) while others stress that rising health costs make the COLA inadequate and that premiums and deductibles will “consume much” of the raise (KFF, NYT, Morningstar, 401k Specialist) [7] [12] [8] [14] [6]. Policy arguments also appear: Medicare trustees’ projections, recent CMS rules and prior actions to curb certain provider payments are cited by CMS and reporters as reasons the Part B hike was smaller than some forecasts — an implicit political element in how premiums are calculated [11] [18].
7. Bottom line for retirees and annuitants
If you receive Social Security or a federal annuity and have Part B deducted from a benefit check, expect the 2026 COLA to be applied first and then the higher Part B premium to be withheld, leaving many beneficiaries with a noticeably smaller net increase than headlines suggest — roughly $38–$39 on average after the $17.90 Part B rise, though exact effects depend on your benefit amount, IRMAA status and whether hold‑harmless rules apply [1] [5] [8] [14]. For specific numbers, the Social Security COLA notices, your OPM annuity statement or your Medicare plan notices are the authoritative sources to consult [19] [3].