Enrolling in Medicare If Working Past Age 65
Do you have to enroll in Medicare at age 65 if you plan on continuing to work? Your choice to delay or start Medicare at age 65 will depend upon your company’s size and what kind of health benefits you have and want to have moving forward. Let's look at the Medicare rules regarding turning age 65 and enrolling in Medicare as your health insurance plan.
Delaying or Enrolling in Medicare
Whether you are required to enroll in Medicare at 65 depends on the size of your company. Delaying Medicare is not a “one-size fits all” deal. If you or your spouse work for an employer with 20 or more employees and you are enrolled and covered by their group health insurance plan, you can delay your Medicare enrollment without penalty. This is because you have what it is called creditable coverage.
Always do a cost comparison to see if it is financially worthwhile to keep or drop your group health insurance coverage or go onto Medicare. Medicare Part A premiums (covering in-patient hospitalization) are $0 if you have worked and paid taxes for more than 10 years. Medicare Part B premiums (covering out-patient care) in 2021are $148.50 month most. Higher income earners will pay more that the $148.50 premium amount.
In contrast, if you work for a company with less than 20 employees, do not delay Medicare. You will need to enroll in both Medicare Part A for inpatient care, Part B for outpatient care, and Part D for prescription drug coverage. Even if you have group coverage, you will want to apply for Medicare and enroll in Parts A and B to avoid penalties. Medicare will be primary insurance, and your group coverage will be secondary payer. Many group coverage plans offer prescription drug coverage. Should you choose to keep your small employer group coverage and it offers drug coverage, you may delay Medicare Part D.
Medicare Part A
You likely qualify for premium-free Part A based on your work history. Regardless of the size of your employer, enrolling in Part A is typically recommended since it is no additional cost to you. In fact, it can help you with costs as Part A will pay secondary to your large group plan if you have a hospital stay. You can apply for Part A online at ssa.gov. You’ll complete an online form, and within the form, you will have the option to delay Medicare Part B if you have creditable coverage.
Can I contribute to my HSA even with Part A?
The short answer is 'No'. If your or your employer are actively contributing to an HSA on your behalf, you do not want to enroll in Medicare Part A. However, if you work for a small employer (under 20 employees), you’ll want to enroll in Part A, and stop your HSA contributions, because again, Medicare will be primary to your small group plan.
If you have large employer group coverage (20 or more lives) and contribute to a health savings account (HSA), you should delay Part A to avoid IRS penalties. Having any part of Medicare active while also contributing to an HSA is cause for future tax penalties.
When to stop HSA contributions when applying for Medicare after 65
The main thing you need to know is that you can not contribute to an HSA in any month that you are receiving Medicare benefits. There is a bit of a caveat here. If you apply for Part A (and Social Security) and you are six months or more beyond your full retirement age, you will get six months of backdated benefits from Social Security. Since Social Security and Medicare Part A go hand-in-hand, this means your Part A effective date will also retroact six months.
If you were still contributing to an HSA in those months, the IRS could hit you with a penalty. To be safe, end your HSA contributions six months before you plan to retire.
Medicare Part B
If you work past 65 for a large employer with a group health insurance plan, you can delay Medicare Part B until retirement without penalty. As mentioned earlier, if you work past 65 for a small employer, you’ll need to enroll in Part A and Part B during your Initial Enrollment Period that coincides with your 65th birthday.
Small employer coverage is not considered creditable coverage, and delaying your enrollment results in lifelong late penalty charges.
If you do qualify to delay Part B, you will have a "Special Enrollment Period" (SEP) once you retire. The SEP for Part B is an 8-month window and starts on the day you lose employer coverage or employment, whichever happens first. This is your window of opportunity to enroll in Medicare Part A, Part B, Part C or Part D with guarantee issue rights and no late enrollment penalties.
To sum it up
Retiring is supposed to be easy, right? Unfortunately, the transition from the workforce and employer-sponsored benefits to Medicare comes with its own set of rules and complicated enrollment periods. It is not as straightforward as many of us would like it to be.
The good news is, if you plan ahead and understand what action you need to take with your Medicare and retirement plans now, you will get to enjoy (mostly) smooth sailing medical coverage later.
Give yourself plenty of time to get research and plan your Medicare. Beginning your research at least 6 months before retirement is a good rule of thumb.
I help people turning 65 figure out their Medicare options. I'm familiar with what you need to do to enroll and more importantly, how to avoid mistakes that can come up with Medicare in the future. Contact me to get started today!
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