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HSA and Medicare

You cannot make contributions to a Health Savings Account if you are enrolled in Medicare Part A

Can I disenroll from Medicare Part A?

It is prudent to NOT enroll in Medicare Part A as long as you are still actively working and covered under a large group (over 20 employees) HSA health insurance plan.  However, if you accidentally enrolled in Part A, you may be able to dis-enroll if you act quickly.

You Cannot collect social security income and withdraw/unenroll in Part A

  • If you withdraw/dis-enroll after turning 65, you are required to pay back all of the money received from Social Security as well as any Medicare benefits paid.
  • You cannot dis-enroll from PREMIUM FREE ($0) Medicare Part A.  If you accidentally enrolled in Medicare Part A and don’t want it, you have a short window of opportunity to withdraw your application for Medicare Part A.  We cannot guarantee that you will be approved to withdraw from Part A unless you request withdraw prior to the effective date of coverage.  You MAY have up to 12 months after your effective date to withdraw, but we have found that it really depends on who you work with at your local social security office.
  • To withdraw your application for Part A, use Form SSA 521. Please complete and take to your local Social Security office to meet with a rep.  You do not need an appointment, but we do recommend that you show up early in the morning (prior to open at 9am), so you can be one of the first people in line once the doors open.

CMS Reference: For additional information, please scroll down to “Termination of Enrollment”

Read More from AARP

What can I use my HSA funds for once I am on Medicare?

  • Many out-of-pocket expenses qualify for tax-free HSA withdrawals even after you’re on Medicare. You can use the money to pay premiums for Medicare Part B, Part D prescription-drug coverage or all-in-one private Medicare Advantage plans (but not for Medigap/Medicare supplement premiums). You can also use the money for co-payments and deductibles you pay for medical expenses, out-of-pocket costs for prescription drugs, vision and dental

Read more from Kiplinger

If my spouse is on Medicare, can I still contribute to my HSA Account (assuming the spouse is the dependent on the plan)?

  • What if you are covered under your spouse’s health savings account at work? The IRS rule affects only employees age 65 or older who have HSAs through their employment, because they are the ones who contribute out of their respective income.  The rule does not affect covered/dependent spouses over age 65, who can continue to use funds from the working spouse’s HSA for approved medical purposes.

Warning for when you retire – 6 month backdating rule

  • Even if you deferred your Medicare at age 65, when you enroll in Medicare later (after age 65), your enrollment in Part A will be backdated by six months (but no earlier than the 1st of the month of your 65th birthday).  Under IRS rules, that leaves you liable to pay six months’ of tax penalties if you over-funded your HSA for that tax year.  To avoid the penalties, you cannot contribute more than the prorated maximum into your HSA for the tax year in which you apply for Medicare Part A (see below).

Read More from AARP

How is my contribution limit impacted if I lose my eligibility during the year?

  • You lose your eligibility to make an HSA contribution as of the first day of the month you enroll in Medicare. You can make a pro-rated contribution for the year to your HSA for the months before you became ineligible due to your enrollment in Medicare. This contribution can be made until the HSA contribution deadline, which is generally April 15, of the following year. You must pro-rate your contribution based on the number of months during which you were HSA-eligible on the first day of the month.
  • Read more from IRAHelp.com

Mid Year Part A Effective Dates and Maximum HSA Contributions

Here is some additional details on the HSA Deposits and tax year

You lose your eligibility to make an HSA contribution as of the first day of the month you are enrolled in Medicare Part A. You can make a pro-rated contribution for the year to your HSA for the months before you became ineligible due to your enrollment in Medicare. This contribution can be made until the HSA contribution deadline, which is generally April 15, of the following year.

Partial Year Eligibility Details

The contribution limits imposed by the Internal Revenue Service (IRS) are tracked on the calendar year. These 2020 limits are:

  • Self-only coverage: $3,550 in 2020
  • Family coverage: $7,100 in 2020
  • Catch-up: $1,000 additional annually if age 55 or older

How is my contribution limit impacted if I lose my eligibility during the year?

You must pro-rate your contribution based on the number of months during which you were HSA-eligible on the first day of the month.

  • Example:
    • You enroll in Medicare Part A (a disqualifying event) effective February 1, 2020
      • (likely will be the effective date if you enroll for Social Security Income on 8/1/20 and they back date it 6 months).
    • You were covered on a family contract during the first 1 months of the year.
    • Total maximum prorated 2020 contribution: $674.
      • Your maximum contribution for 2019 is 1/12 of $7,100, or $674.
      • In addition, since you are age 55 or older, you can contribute 1/12 of $1,000 catch up, or $83.
    • You will have until 4/15/2021 to deposit your maximum amount for tax year 2020.