Can I Have Medicare and an HSA?

If you’re turning 65 and still working, one of the most important Medicare questions you may not even realize to ask is: “What happens to my Health Savings Account (HSA) when I enroll in Medicare?”  This is an area where many people accidentally make costly mistakes.

First, What Is an HSA?

A Health Savings Account (HSA) allows people with qualifying high-deductible health plans to contribute pre-tax money to help pay for medical expenses.  Many working adults continue contributing to an HSA right up until Medicare age.

Here’s the Important Rule

Once you enroll in any part of Medicare, you generally can no longer contribute to an HSA.  That includes:

• Medicare Part A

• Medicare Part B

• Medicare Advantage Plans

• Medicare Part D

Even though Medicare Part A is often free, enrolling in it still affects HSA contribution eligibility.  If you contribute to an HSA while enrolled in any part of Medicare, you may be subject to an IRS tax penalty on the extra contributions.

Why This Confuses So Many People

Many people continue working past 65 because full retirement age for SS is now 67.  These people sometimes  assume they should automatically enroll in Medicare Part A because “It’s free” or they mistakenly think they are required to when turning 65. Many don’t realize that enrolling in Part A may prevent future HSA contributions.  This becomes especially important for people who are still actively working, covered under employer insurance and contributing to an HSA through payroll deductions.

Can You Keep the Money Already in Your HSA?

Yes.  You do not lose the money already in your HSA when you enroll in Medicare.  You may still use existing HSA funds for qualified medical expenses, including:

• Medicare deductibles

• Copays

• Coinsurance

• Medicare premiums in some situations

The rule applies to new contributions, not the money already in the account.

What About Delaying Medicare?

If you are still working for an employer with 20 or more employees and have qualifying employer coverage, you may be able to delay Medicare enrollment without penalties.

The Bottom Line

The relationship between Medicare and HSAs can be confusing, and mistakes may create unexpected tax issues.  If you’re approaching 65 and still working, reviewing your options carefully can help you avoid penalties, tax problems, and enrollment mistakes.

ABC Medicare Plans Broker - Diane Andree

631-337-3625 ABCMPB.com

Medicare and HSA