How enrolling in Medicare can affect your Health Savings Account (HSA)
If you have an HSA when you turn 65, and you become eligible for Medicare, what should you do? Here are some facts to help you weigh your options:
- To remain eligible for the HSA past age 65 you must not enroll in Medicare or apply for Social Security benefits.
- Contrary to popular belief, enrolling in Medicare Part A when you first become eligible is not required to avoid a late enrollment penalty. As long as you continue working and remain covered by an IU-sponsored group medical plan, you can delay Medicare enrollment without penalty until you retire.
- When you apply for Social Security benefits, you are automatically enrolled in Medicare Part A and do not have the option to dis-enroll. You will be ineligible for tax-free HSA contributions as of the date your Medicare Part A coverage begins and should stop your HSA contributions prior to that date.
- Once you enroll in Medicare, you are no longer eligible to make or receive tax-free contributions to your HSA, and any ineligible contributions could be subject to a 6% excise tax.
- When you stop making contributions, any eligible funds in your HSA account continue to roll over each year until you use them for qualified health expenses.
- Your spouse’s enrollment in Medicare or Social Security has no effect on an HSA held in your name.
