Benefits Buzz

Medicare and HSAs

Posted on February 19th, 2014

When it comes to Health Savings Accounts (HSAs), one of the most common questions we hear is, “Can people aged 65 and older contribute to an HSA?” Many people would answer no to this question, but that is not always the case.

The fact that someone turns 65 does not automatically disqualify him from making contributions to an HSA, but enrollment in Medicare does.

Individuals must meet certain guidelines in order to be eligible to contribute to an HSA:

  • Must be a US taxpayer
  • Must be covered by a qualified high deductible health plan
  • Must not be covered by any other plan that is a non-qualified high deductible plan (Medicare, Medicaid, HMO, Most FSAs, Some HRAs)
  • Must not be claimed as a dependent on someone else’s tax return

Medicare Parts A and B are not qualified high deductible health plans, so anyone who is enrolled in either plan would be disqualified from contributing to an HSA. However, if someone were to waive coverage in all parts of Medicare—and remain covered on a qualified high deductible health plan—he or she would still be eligible to contribute to an HSA. Many seniors might be willing to delay their Medicare enrollment in order to receive the tax benefits of an HSA.

Here are a few things to keep in mind when it comes to Medicare and HSAs:

  • Individuals who are receiving Social Security Income (or who have elected to receive it at age 65) will be automatically enrolled in Medicare when they turn 65. They will not be able to opt out of Part A, and therefore will be ineligible to make HSA contributions.
     
  • Individuals covered by an employer sponsored HSA-qualified plan, and working for an employer with less than 20 employees, should enroll in Medicare Parts A and B. Due to Medicare Secondary Payer Rules, Medicare would be considered primary to the employer coverage. Those who choose not to enroll in Medicare would then be responsible for covering a significant portion of their medical claims. Keep in mind that, by enrolling in Medicare, they will be ineligible to make HSA contributions.
     
  • Individuals covered by an employer sponsored HSA-qualified plan, and working for an employer with more than 20 employees, may want to consider delaying enrollment into Medicare Parts A and B. The group coverage would be primary in this situation, and they could still make contributions to the HSA. However, keep in mind that Part A is premium free for most people; so many seniors will enroll in it for secondary coverage. If this occurs, they would be ineligible to make HSA contributions.

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The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.  

 

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