post-65 contributions to HSA

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Bill M
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Joined: Sun Dec 30, 2012 10:10 pm

post-65 contributions to HSA

Post by Bill M »

Continuing to work past 65, being covered by employer-provided high-deductible insurance, and we'd like to continue contributing to our HSA. But there are some strange wrinkles. I'm wondering if anyone has had experience with this.

The HDHP enables us to delay enrollment in Medicare. It turns out the deductible for the HDHP plan through work is less than the deductible for Part A, so there seems little or no benefit to taking Medicare Part A even though it is free. And delaying Medicare Part A enables contributions to the HSA.

Retiring (or layoff) triggers a "Special Enrollment Period"; we can then enroll in Medicare. COBRA coverage doesn't extend/change the dates. But I think we can use COBRA to cover the paperwork gap in case of a layoff.

The strange part.... On retiring, and enrolling in Medicare, Medicare considers us to be enrolled for 6-months prior to the date we enroll. I just don't see any reason for this, or any problem that they are trying to solve by doing this. So the last six months of HSA contributions are disallowed (see note at bottom of page 4 of https://www.cms.gov/Outreach-and-Educat ... -and-B.pdf). It seems the strategy for us is to wait until the end of the year to make the HSA contributions, just to make sure they are all allowed, instead of at the beginning of the year like we have been doing.

There is no mention in the HSA wiki about this 6-month "no-HSA" period. Should there be?

A further strange part.... An AARP article about post-65 HSAs makes the claim that Social Security gives "back pay" for six months prior to the application (see final paragraph of http://www.aarp.org/health/medicare-ins ... on_53.html). Never heard of such a consequence of delaying SocSec until 70. Has anyone had this happen?
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tfb
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Re: post-65 contributions to HSA

Post by tfb »

Bill M wrote:The strange part.... On retiring, and enrolling in Medicare, Medicare considers us to be enrolled for 6-months prior to the date we enroll. I just don't see any reason for this, or any problem that they are trying to solve by doing this.
That's the way the rules are. There's nothing you can do about it.
Bill M wrote:A further strange part.... An AARP article about post-65 HSAs makes the claim that Social Security gives "back pay" for six months prior to the application (see final paragraph of http://www.aarp.org/health/medicare-ins ... on_53.html). Never heard of such a consequence of delaying SocSec until 70. Has anyone had this happen?
The "back pay" is an option, at the cost of a lower delay credit. You can decline the "back pay" and get a higher check going forward. However, because Medicare Part A is free, they don't give you the option to decline it.
Harry Sit, taking a break from the forums.
Spirit Rider
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Re: post-65 contributions to HSA

Post by Spirit Rider »

There really is a simple and benevolent explanation for the automatic and possibly up to six month retroactive Medicare enrollment. There are so many moving pieces to the tax code, it isn't easy to catch every interaction.

This extra benefit was extended to late Medicare enrollment (> age 65) to help seniors. Many seniors only enrolled in Social Security and/or Medicare after a significant medical event. The six month retroactive coverage was a godsend for many of them. Very few people even knew you could enroll in Medicare without enrolling in SS.

This was already established when the HSA was created, but clearly Medicare is other insurance coverage making you ineligible for an HSA The drafters of the legislation were probably not even aware of the inadvertent negative interaction. It just hasn't affected enough people to cause congress to make a technical correction, such as to decline the retroactive enrollment.
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