In America today it is common for seniors to continue working beyond the day they reach age 65 (the time they become eligible to enroll in Medicare). Often, I am asked, “When should I enroll in Medicare?” The answer is, “It depends.”
It depends on whether you plan to work beyond reaching age 65.
It depends on the number of employees of your employer.
It depends on whether you are enrolled in an employer group health insurance plan.
It depends on whether you are enrolled in an employer group health insurance plan and you and/or your employer is contributing to a Health Savings Account (HSA).
If You Plan Not to Work Beyond Reaching Age 65
The government agency charged with the responsibility of administering Medicare is the Center for Medicare and Medicaid Services (CMS). CMS rules are very clear when you should enroll in Medicare Part A and Part B if you plan on retiring from work when you reach age 65.
In order to avoid a Part B late enrollment penalty, in this situation you should enroll in Part A and Part B of Medicare during your Initial Enrollment Period, which is the 7-month period that begins three months prior to the month you reach age 65 and ends three months after the month you reach age 65.
The penalty for late enrollment in Part B is two-fold; 1) the Part B monthly premium will be increased 10% for each year beyond age 65 that you fail to enroll in Part B and, 2) when you choose to enroll late, you are permitted to enroll during the General Enrollment Period only (Jan 1 thru March 31) and the effective date will be July 1 following your request for enrollment. The worst part of these penalties is the Part B premium increase never goes away.
There is no penalty for delaying enrollment in Part A, because there is no premium for Part A unless you do not qualify for premium-free Part A. This exception is so rare that it isn’t worth confusing you by discussing it.
Obviously, in this situation you should enroll in Medicare Part A and B during your Initial Enrollment Period (IEP).
Number of Employees of Your Employer
20+ Employees
Information for this “depends” assumes your employer offers a group health insurance plan to its employees AND your employer employs more than 20 employees.
If you choose not to enroll in your employer’s group health plan AND you are not enrolled in an employer group health plan through your spouse’s employment, you should enroll in Medicare Part A and B during your IEP to avoid late enrollment penalties noted above.
If you choose to continue participation in your employer’s group health plan—or as a dependent in the group health insurance plan of your spouse’s employer—you are not required to enroll in Part A or Part B to avoid late enrollment penalties.
BE AWARE, in this situation, when you are no longer enrolled in an employer group health plan, whether through your employment or through your spouse’s employment, you MUST enroll in Part A and Part B within 60 days of losing that coverage to avoid late enrollment penalties. At that time you will be required to prove the period beyond reaching age 65 that you were enrolled in employer group health plan.
Less Than 20 Employees
Easy explanation. In order to avoid late enrollment penalties, you must enroll in Part A and Part B during your IEP. You will not qualify for any of the exceptions that apply if there are more than 20 employees working for your employer.
You and/or Your Employer Contribute to a Health Savings Account (HSA)
Be very careful. Internal Revenue Service regulations require that you and/or your employer must not make a contribution to a HSA while enrolled in any healthcare plan other than a High Deductible HealthCare Plan.
Since Medicare Part A and Part B meet the definition of “other healthcare plan,” you and/or your employer should stop contributions to an HSA six months prior to enrolling in Part A or Part B. Failure to follow this rule may (probably will) result in tax penalties.
If you and/or your employer are contributing to a HSA, it is imperative that you seek guidance from your employer’s HR or Benefits Department.
Conclusion
I hope this discussion is clear. Because of varying rules affecting many parts of Medicare, understanding rules can be difficult. It is important for you to understand also, that any misunderstanding of rules will always be your fault. Governmental agencies are never at fault.
If I can assist you in clearing up confusion on any aspect of Medicare, please feel free to contact me at kenbrown@floridamedicarespecialists.com.
