This is an account in which someone who has a high deductible health plan (HDHP) can contribute to on a tax free basis. HSA funds are not taxed as long as they are used to pay for qualified medical expenses. The company you work for may oversee your health savings account or you may have an individual HSA that is overseen by a bank, insurance or credit union. If you have an HSA and you will soon be eligible for Medicare, it is important to plan ahead and understand how enrolling in Medicare will affect your HSA.
How do I qualify for a Health Savings Account?
In order to qualify for an HSA, you must be a part of a high deductible health plan (HDHP). An HDHP is health insurance coverage that does not cover members until they meet their costly deductible. What this implies is that high deductible health plan members must pay in full for the first few thousand dollars of yearly health care services that you undertake. After HDHP members meet this deductible, all costs are covered by their plan. HDHPs are either offered by employers or purchased by individuals.
Can I still contribute to my HSA Account when enrolled in Medicare?
If you enroll in Medicare Part A and/or B you can no longer contribute to your HSA. The month you enroll in Medicare (typically the month of your 65th birthday), the account overseer switches the contributing balance to your HSA to zero dollars per month. Legally, people with Medicare are not allowed to put money into an HSA. This is because you generally cannot have any health coverage other than an HDHP if you are putting money into an HSA. It is possible to withdraw money from your HSA after you enroll in Medicare to help pay for medical expenses (deductibles, premiums, copays or coinsurances). If you use the account for qualified medical expenses, it will continue to be tax-free.
Can I Delay my Medicare Enrollment in Order to keep contributing to HSA?
Delaying your enrollment in Medicare or not so you can continue contributing to your HSA depends on your circumstances. If you work for a small employer (fewer than 20 employees), you typically need to take Medicare when you first qualify even though you will lose the tax advantages of your HSA.
Health care coverage from small employers pays secondary while Medicare is primary. This implies that if you fail to enroll in Medicare when you are first eligible, you may have little or no health coverage. Coverage from large health care twenty or more employee’s, takes care of current employers health expenses. So they may not need Medicare. This means that if you are currently working for a large employer and you wish to decline Medicare Part B, you can do so and enroll in Part B later when you lose your current employer coverage.
However, you cannot turn down your automatic enrollment of Medicare Part A. An exception to this fact is, if you are not collecting Social Security benefits. As long as you are not accepting Social Security benefits, you can choose to decline Part A also, which preserves your HSA tax benefit. As soon as you want to stop contributing to the HSA (and are if you are still currently working) you can enroll in Part A and get 6 months of retroactive coverage.
If you are a beneficiary of Social Security retirement benefits when you become eligible for Medicare, you will be automatically enrolled in Medicare Part A and Part B. If you are not a beneficiary of Social Security retirement benefits when you become eligible for Medicare, you must actively enroll yourself during your initial enrollment period.
How can I keep my HAS if I continue working at 65?
A Health Savings Account (HSA) is a type of health insurance offered by an increasing number of employers. It combines a high deductible health plan with a tax free health savings account to which the employee and the employer can contribute to.
IRS rules states that you cannot contribute to an HSA if you are enrolled in Medicare. You can draw on funds already in the account but you cannot add to them. So it is important to know how you can get around this rule if you have an HSA at work and want to continue working beyond age 65.
