If you are planning on working past the age of 65, it’s important to understand what that means for your healthcare coverage. Whether you decide to just stay with your employer’s coverage or enroll in Medicare as well, there are things to consider that can help reduce stress and avoid penalties when you do retire.
This article will give you general information about working past 65, but every person’s situation is unique. Therefore, we highly encourage you to talk to a licensed Medicare agent who will be able to walk you through your options and help you decide what is best for you.
Do I need to sign up for Medicare even though I am still working?
Once you turn 65, you become eligible to enroll in Medicare. However, if you are still working, you may not have to enroll at this time. If your company has more than 20 employees and offers health care coverage through which you receive benefits, you do not have to enroll in Medicare when you turn 65.
People who are still working often decide to enroll in Part A when they become eligible because they can receive benefits without having to pay a premium. However, enrolling in Part A can impact your Health Savings Account (HSA) if you have one. The details about how Part A affects your HSA can be found below.
Should I defer Part B?
The decision to delay enrollment in Part B depends on each individual’s situation, but here are a few reasons you might want to defer Part B:
- You or your spouse is still working for a company with 20 or more employees
- You receive your health insurance through you or your spouse’s employer
If you decide to defer Part B, you will not have to pay the monthly premium until you enroll. However, it is important that you delay coverage correctly to avoid possible penalties when you eventually enroll. Read more about why you might want to delay Part B and how to avoid penalties here.
How does Medicare work with my Health Savings Account (HSA)?
Once you enroll in Medicare Part A, you and your employer can no longer contribute to your Health Savings Account (HSA). Therefore, if you have a High Deductible Health Plan (HDHP) that includes an HSA, you might want to delay your enrollment in Part A.
Another thing to keep in mind is that you must stop contributing to your HSA six months before you enroll in Medicare. This is because once you enroll in Medicare, it retroactively covers you for six months. The money you contribute to your HSA is tax-free except if you contribute to it while you are covered by Medicare, which includes the six-month retroactive period.
Many people who are still working past 65 and have an HSA choose to maximize this benefit by not enrolling in Part A. This allows them to continue saving as long as they can in their HSA and have as much savings as possible for medical expenses in retirement.
How does Medicare work with my employer’s health insurance?
If you are self-employed or you work for a company with less than 20 employees, it makes sense to enroll in Medicare Part A and Part B when you turn 65. Medicare will become your primary provider and payer while your company’s health care plan will be secondary. This means Medicare will pay medical bills first and your employer’s insurance will pay second.
Secondly, it’s important to make sure that your employer’s Part D plan is creditable when you are deciding whether to enroll in Medicare. If it is not, you need to enroll in a Part D prescription drug plan when you are first able in order to avoid penalties in the future. A plan is deemed “creditable when you are deciding” if it is as good as or better than a Medicare plan.
If your company has more than 20 employees, you have the option of staying on your employer’s plan or signing up for Medicare. This should be determined on a case by case basis. If you do decide to sign up, Medicare will become your primary provider and you should disenroll from your employer’s program.
Can I be penalized for not taking Medicare at 65?
Yes, if you do not follow all the right steps to delay Medicare. Here are the basics of the penalties you may be subject to if you do not defer Medicare correctly.
Part A Penalty
If you are receiving Social Security benefits, you will be automatically enrolled in Part A and are not eligible to defer. If you are not receiving Social Security benefits, you may want to delay signing up for Part A if you have an HSA through your employer. However, you could incur a late enrollment penalty if you do not have active coverage through your employer and delay signing up for Part A when you are first eligible.
The penalty for Part A is 10% of your monthly premium for every 12 month period you choose not to enroll. You will also have to pay this higher premium for twice the number of years you could have had Medicare Part A but didn’t sign up for it. For example, if you waited a year to enroll in Part A, you would be required to pay the 10% penalty for two years. Lastly, your Part A premium and subsequent penalty will also be different depending on how may months you have worked throughout your lifetime.
Part B Penalty
While the Part A penalty only lasts for a certain amount of time, the Part B penalty will stay with you for the rest of the time you are enrolled in Medicare. If you do not take the right steps to delay Part B, you will have to pay the penalty plus the premium every month.
An exception to this rule is if you enroll in Medicare during a Special Enrollment Period (SEP). A SEP is typically the eight months after you no longer have employer coverage if you worked past the age of 65. If you enroll during this time period, you might not be subject to a penalty.
The Part B penalty will increase your premium by 10 percent for each full 12-month period that you did not have Part B but were eligible.
Part D Penalty
If you do not have creditable prescription drug coverage when you first become eligible for Medicare, you will be penalized when you do purchase a Part D plan. The Part D penalty is tricky to understand because of questions around what makes drug coverage creditable. If you have prescription drug coverage from your employer, check with HR to ensure it is a creditable plan according to Medicare.
The Part D penalty acts in a similar way to the Parts A and B penalties by adding to your monthly premium. The fee is 1% of the average monthly prescription drug premium multiplied by the number of months you were late to enroll, rounded to the nearest 10 cents. This penalty lasts as long as you have Part D coverage.
How do I delay Medicare Part A and B?
If you are receiving Social Security benefits, you will be automatically enrolled in both Part A and Part B. When you receive your Medicare card in the mail, you can follow the instructions on the card to delay Part B coverage, but you cannot defer Part A.
If you are not receiving Social Security benefits, you don’t have to do anything to defer your Medicare Parts A and B coverage. However, you cannot defer Medicare for anything other than active employer healthcare coverage. When you do apply for Medicare after you retire, you will have to provide proof of your prior coverage to avoid penalties.
This is simply an introduction of things to consider for Medicare when you are working past the age of 65. For more information about working past 65 and how it affects Medicare, contact us for help uncomplicating Medicare.