Rules For Keeping an HSA After Turning 65
Many Americans are working past age 65. Many assume that they can continue to contribute to their HSA, unaware that there are tax consequences for not following the IRS guidelines. We'll review the rules for HSA contributions for those 65 and over in this blog.
Health Savings Accounts (HSA) have grown in popularity because deposits are tax-free when used for qualified medical care. The tax benefits are three-fold: income tax deduction for contributions, tax-free growth and tax-free distributions, provided these distributions are used for out-of-pocket health care costs.
However, you can NOT enroll in ANY Part of Medicare if you plan to work past 65 and want to continue contributing to your HSA without facing tax consequences. HSA rules require that you must have a High Deductible Health Insurance Plan (HDHP) to contribute to an HSA account. Neither Medicare Part A or Part B is considered a High Deductible Healthcare Plan, and therefore disqualify you from continuing to contribute to your HSA. Prior savings contributed to your HSA can be used after going on Medicare. Continuing to contribute additional savings once on any part of Medicare is not allowed.
Be aware that if you start taking your Social Security prior to age 65, you will be automatically enrolled in Medicare Parts A and B on the first day of month of your 65th birthday. Automatic enrollment also applies if you are receiving Disability income. In either case, you can not continue contributing to your HSA because of your enrollment in Medicare Part A & B.
If you are 65 or older working for an employer with 20 or more employees and want to continue contributing to your HSA, you must communicate to Social Security your desire to delay your enrollment in Medicare Part A and Part B. You can communicate your desire to delay your enrollment online at .SSA.com, by calling 1+800-772-1213 or visiting your local Social Security branch office.
f you work with an employer with less than 20 employees, you MUST take Medicare Part A and B. You don't have the option of delaying your enrollment. Medicare is your Primary insurance when you work for an employer with less than 20 employees. Not enrolling in Medicare A and B and remaining on your employer's health insurance will give you only "secondary" insurance coverage paying about 20% of your medical bills.
- You should not sign up for Medicare Part A or B if you want to continue contributing to your HSA.
- You don't have the option of delaying enrollment in Medicare if you work for an employer with less than 20. employees.
- You can not contribute to an HSA because Medicare without a High Deductible Healthcare Plan.
- If you already signed up for Medicare, you can opt back our by submitting CMS form 1763 to your local Social Security Office.
- You must stop your HSA contributions 6 months prior to signing up for Medicare Part A because CMS will retroactive the Part A Effective Date 6 months.
Can You Use HSA Funds to Pay for Health Insurance Premiums?
Yes, you can use HSA funds tax and penalty-free to pay for some insurance premiums.
Those qualifying for tax-free favor include Medicare Part A, Part B, Part D and Medicare Advantage plans (Part C).
Q: Since Medicare Part B is automatically deducted from your Social Security check, how can you use HSA funds to pay Part B?
A: You can write yourself a check from your HSA account and reimburse yourself for monthly Part B premiums.
Q: Can you pay your Medicare Supplement premium with HSA funds?
A: No...even though I don't understand why not.
Q: Can you pay for your dental insurance with HSA funds?
A: Not at this time.
Q: Can you pay your Long Term Care Insurance premium with HSA funds?
A: Yes, plus there's also a tax-deduction for paid premiums on qualified Long Term Care Insurance'
For further questions, you can contact me at:
Medicare Plans & Education