HSA contribution v Medicare part A

Signed up for Medicare (part A only) upon reaching age 65 in Oct 2021. I continued to work, pay into a high deductible health care plan and contribute to my HSA until Dec 31.
Must I have my contributions (Oct - Dec) returned because I was on Medicare part A or am I exempt because I contributed to a High deductible healthcare plan?

Signed up for Medicare (part A only) upon reaching age 65 in Oct 2021. I continued to work, pay into a high deductible health care plan and contribute to my HSA until Dec 31.
Must I have my contributions (Oct - Dec) returned because I was on Medicare part A or am I exempt because I contributed to a High deductible healthcare plan?

You overcontributed and must remove the HSA contributions (adjusted by any gains/losses) for the months that you were also covered by Medicare. While you had a High Deductible Health Plan (HDHP), it was not the only insurance you carried, and the eligibility requirements for HSA contributions specifically require that you not be enrolled in Medicare. From IRS Pub 969 https://www.irs.gov/pub/irs-pdf/p969.pdf

Qualifying for an HSA Contribution
To be an eligible individual and qualify for an HSA contribution, you must meet the following requirements.
• You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You have no other health coverage except what is permitted under Other health coverage, later.
• You aren’t enrolled in Medicare.
• You can’t be claimed as a dependent on someone else’s 2021 tax return.

AJ

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One more thing about getting your excess contributions returned - be sure to have your HSA custodian do this, and figure out any adjustments. That will ensure that the 1099-SA you get documenting the withdrawals will correctly call out that the withdrawal was returning an excess contribution, rather than a regular withdrawal.

AJ

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I have a question about Medicare, HDHP and HSAs. I will be 64 this year and I am thinking about the requirement to register for Medicare when I am 65. I am still employed and have an HDHP (High Deductible Health Plan) with my employer and I contribute to an HSA. I thought the way it worked was that you had to register for Medicare when you were 65 (3 months before until 3 months after) but it was not your primary insurance until you actually stopped working and had no other health insurance.

Since I intend to continue working for 2 more years until I am 67, I thought that I would still continue my HDHP with my employer and the Medicare would not be active until I left employment at 67. I would still be able to contribute to the HSA until I left employment at 67 because I was not really using Medicare as my primary insurance but only registering for it because of the penalties if you don’t register.

Do I have a correct understanding of how this works?

From AJ485’s answer it sounds to me like once you register for Medicare you can’t contribute to an HSA no matter what.

ScouterDad: This may be of interest to you!

https://www.cms.gov/Outreach-and-Education/Find-Your-Provide…

If you enroll in Medicare Part A, you or your employer cannot contribute to an HSA. Apparently, you can now delay enrolling in Medicare Part A and Part B until you lose coverage to your employer’s health plan. This wasn’t an option when my former employer first offered an HDHP and HSA. It was to be the default health care option until I pointed out that a number of employees weren’t allowed to participate in a HSA due to enrolling in Medicare Part A at age 65. Interestingly, the firm that was to manage the HSA didn’t know about the restriction until I notified them.

One thing noted in the above Fact Sheet is that you need to stop contributions to the HSA 6 months before enrolling in Medicare or before claiming Social Security benefits.

Thank you, McCrockett. Seems that what you are saying is true. You delay signing up for Medicare until you are no longer covered by your previous insurance (mine is a large company with more than 20 employees). Then you can register for Medicare in a special enrollment period which is within 8 months of losing your previous insurance. You also need to plan for the 6 month no HSA contribution period. My plan is to work until I am 67 and my birthday is in July so in the year I turn 67 I would just not contribute to the HSA that year. Benefits renew in November so in the previous November I would decline participation in the HSA and so would have no contributions for the next year. I guess I only have a little less than 3 years left to contribute to my HSA; this year, the year I turn 65 and the year I turn 66. Thanks as I didn’t know about the 6 month period so I will plan for that.

Also, be careful about the 6 months before enrolling in Part A. Part A is retroactive for 6 months or when you turned 65 when less than 6 months ago.

Your employer should provide you with a statement that the plan is credible for Part D coverage. Keep a copy. You may need that for when you enroll in Medicare.

Also, keep proof that you have an employer plan and the company providing the coverage for the time that you are over 65. My understanding is that Medicare doesn’t care the quality of your employer plan. Only that you were covered by an employer plan.

A friend had a issue because she didn’t keep proof. Her employer changed but the job didn’t. The county contract and employees were transferred to another company twice.

I thought the way it worked was that you had to register for Medicare when you were 65 (3 months before until 3 months after) but it was not your primary insurance until you actually stopped working and had no other health insurance.

Doesn’t matter if it’s not your primary insurance. It’s still insurance coverage whether it’s primary or secondary.

Since I intend to continue working for 2 more years until I am 67, I thought that I would still continue my HDHP with my employer and the Medicare would not be active until I left employment at 67. I would still be able to contribute to the HSA until I left employment at 67 because I was not really using Medicare as my primary insurance but only registering for it because of the penalties if you don’t register.

Do I have a correct understanding of how this works?

Sorry, you do not have a correct understanding. Once you enroll in Medicare, you are considered covered by it. Under current law, you will not be able to contribute to an HSA while you are covered by Medicare, whether it’s primary or secondary.

That said, since you will still be employed and covered by your employer’s group policy, you don’t have to enroll in Medicare during the IEP (Initial Enrollment Period) of 3 months before and after the month you turn 65. You would be able to enroll in Medicare during a SEP (Special Enrollment Period) which is an 8 month period that begins with the month your employment ends or the month that your group policy ends, whichever comes first. So as long as you are working, and you’re covered by your employer’s insurance, you shouldn’t have to sign up for Medicare. You should be sure to confirm that your employer will still cover you after you turn 65, though.

From AJ485’s answer it sounds to me like once you register for Medicare you can’t contribute to an HSA no matter what.

Correct, although since you can enroll in Medicare 3 months before coverage starts, it would probably be more correct to say “once you are covered by Medicare you can’t contribute to an HSA no matter what.” A couple of years ago, there was a bill that was going to allow Medicare recipients to contribute to HSAs, but it also took away the use of HSAs to pay for Medicare premiums. It never passed, and as far as I know, it hasn’t been brought back up again.

AJ

Social Security will try to “automatically” enroll you in Social Security. How do you avoid the Medicare enrollment? Contact Social Security before turning 65?

My brother-in-law is low income and is a veteran. He is covered under the VA medical and doesn’t want to enroll in Medicare part B/D or an Advantage Plan. I understand that the VA isn’t considered covered for part B but is creditable for part D.

Social Security will try to “automatically” enroll you in Social Security. How do you avoid the Medicare enrollment? Contact Social Security before turning 65?

I think you meant that SS will automatically enroll you in Medicare at 65 if you are receiving SS. (If you aren’t receiving SS yet at 65, you actually have to manually enroll in Medicare to receive it.)

My brother-in-law is low income and is a veteran. He is covered under the VA medical and doesn’t want to enroll in Medicare part B/D or an Advantage Plan. I understand that the VA isn’t considered covered for part B but is creditable for part D.

He needs to call SS https://faq.ssa.gov/en-us/Topic/article/KA-02713 and they will help him fill out the form https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/C… They will probably also look into potential other programs to pay his Part B premiums if that’s the only reason he doesn’t want to get Part B.

AJ

I think you meant that SS will automatically enroll you in Medicare at 65 if you are receiving SS. (If you aren’t receiving SS yet at 65, you actually have to manually enroll in Medicare to receive it.)

Yes.

He needs to call SS https://faq.ssa.gov/en-us/Topic/article/KA-02713 and they will help him fill out the form https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/Downloads/C…… They will probably also look into potential other programs to pay his Part B premiums if that’s the only reason he doesn’t want to get Part B.

AJ

Yes, the major reason is that he is low income.

Thank you

Sorry, you do not have a correct understanding. Once you enroll in Medicare, you are considered covered by it. Under current law, you will not be able to contribute to an HSA while you are covered by Medicare, whether it’s primary or secondary.

My spouse is covered by my high deductible insurance and I have been making HSA contributions up to the family max. They are now on Medicare as secondary insurace but I am not. Can I still make the contributions up to the family limit or am I restricted to the self-only limit?

My spouse is covered by my high deductible insurance and I have been making HSA contributions up to the family max. They are now on Medicare as secondary insurace but I am not. Can I still make the contributions up to the family limit or am I restricted to the self-only limit?

Hmmm…that’s an interesting question. From IRS Pub 969 https://www.irs.gov/pub/irs-pdf/p969.pdf

Other health coverage.
If you (and your spouse, if you have family coverage) have HDHP coverage, you can’t generally have any other health coverage. However, you can still be an eligible individual even if your spouse has non-HDHP coverage, provided you aren’t covered by that plan.
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The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2021, if you have self-only HDHP coverage, you can contribute up to $3,600. If you have family HDHP coverage, you can contribute up to $7,200.
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Rules for married people.
If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If each spouse has family coverage under a separate plan, the contribution limit for 2021is $7,200. You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses’ Archer MSAs. After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division.
The rules for married people apply only if both spouses are eligible individuals.

As long as you, individually, have ONLY the family HDHP coverage for the entire year, you would still be considered an eligible individual for that year. So, as an eligible individual with family HDHP coverage, I would say that you can contribute up to the family limit, plus, if 55 or older, you can contribute the additional $1,000 for yourself. Your spouse’s $1,000 allowable contribution for being over 55 would be dependent on when they started being covered by Medicare, and would have to be contributed into their own separate HSA.

I will point out that this is similar to domestic partners who each file single, but who have family HDHP coverage, so they each contribute the family coverage amount. It seems to be a loophole that hasn’t been closed yet.

AJ

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Apparently, you can now delay enrolling in Medicare Part A and Part B until you lose coverage to your employer’s health plan.

Spelled out here …
https://www.medicare.gov/basics/get-started-with-medicare/me…

As long as you, individually, have ONLY the family HDHP coverage for the entire year, you would still be considered an eligible individual for that year. So, as an eligible individual with family HDHP coverage, I would say that you can contribute up to the family limit, plus, if 55 or older, you can contribute the additional $1,000 for yourself. Your spouse’s $1,000 allowable contribution for being over 55 would be dependent on when they started being covered by Medicare, and would have to be contributed into their own separate HSA.

Thanks!