Human Resources

No. As long as you are not drawing Social Security, and remain covered by an active group health plan (like IU’s medical plans), you can postpone enrollment in Medicare until you are no longer employed (i.e. retired). Remaining on an active group medical plan allows you to be eligible for a “Special Enrollment Period” once you leave, an 8-month period to sign up for Medicare penalty-free.

An important exception is if you begin drawing Social Security. When you apply for Social Security benefits (yours or a spouse’s) you are automatically enrolled in Medicare Part A, and do not have the option to dis-enroll.

Postponing enrollment in Medicare also extends the time you have to make and receive tax-free HSA contributions. However, it’s important to note that when you delay your Medicare enrollment to after your initial eligibility period (age 65), when you do eventually enroll in Medicare your Part A coverage will begin retroactively to 6 months prior to the date you applied for Medicare, or your 65th birthday, whichever is closest. This means you will be retroactively ineligible for the HSA, and any HSA contributions made when ineligible (yours or the university’s) could be subject to income and excise taxes. You can avoid the excise tax by removing the ineligible (“excess”) contributions in the same tax year they are made, then reporting them as taxable income on your federal income tax return.

For more information review the Medicare & HSA web page or the “Medicare and You” handbook.

According to IRS regulations, enrolling in any part of Medicare makes you ineligible for tax-free HSA contributions. You can, however, continue to use your HSA funds tax-free for your qualified healthcare expenses as long as you own the account.

To potentially avoid making excess contributions, or being liable for excise taxes, you can stop HSA contributions before you enroll in Medicare.

• If you enroll in Medicare during your initial eligibility period (at age 65), you should stop contributing to your HSA prior to the first day of the month you turn 65 (eligibility is based on your coverage status on the first day of the month).
• If you enroll in Medicare during your Special Enrollment Period (after age 65) you should stop contributing to your HSA at least six months before you plan to enroll in Medicare. When you enroll in Medicare, your coverage will be backdated by six months or to your 65th birthday, whichever is closest.
• If you apply for Social Security benefits (age 65 or older), you should stop contributing to your HSA at least six months prior to applying for Social Security. When you apply, you will be automatically enrolled in Medicare Part A (with no option to dis-enroll), and your coverage will be back-dated by six months or to your 65th birthday, whichever is closest.

Depending on when you stop your HSA contributions, it’s possible that you may still have excess contributions in the year that you enroll in Medicare. In this instance, you should calculate your prorated contribution maximum for the year. Any contributions made above that prorated maximum are considered excess, and must be withdrawn to avoid penalties.

You may request a distribution of your excess contribution by completing the HSA Distribution Request Form and submitting it to WEX via email at , fax 888-887-9961, or by mail at:

WEX
c/o HSA
P.O. Box 2905
Fargo, ND  58108

Review IRS Publication 969 and Instructions for IRS Form 8889 for further details or you can speak with a personal tax advisor.

When you apply for Social Security benefits, you are automatically enrolled in Medicare Part A, and do not have the option to dis-enroll. Your Medicare Part A coverage begins retroactively six months prior to the date you applied for Social Security benefits, or your 65th birthday (whichever is closest).

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. When losing HSA eligibility mid-year, the IRS requires that you prorate your annual HSA contribution maximum to reflect only the months you were eligible. To calculate your prorated maximum, you can follow the Instructions for IRS Form 8889, or speak with a tax advisor.

Any contributions made to your HSA (yours and the university’s) above your prorated HSA contribution maximum are considered ineligible and may be subject to a 6% excise tax. You can avoid this excise tax by removing the ineligible (“excess”) contributions in the same tax year they are made, then reporting them as taxable income on your annual tax return (unless made by you on an after-tax basis). Learn more about Excess Contributions.

Note, your spouse’s enrollment in Medicare or Social Security has no effect on your HSA.

Yes!  For however long you maintain a balance in your HSA account you can continue to use that balance tax-free for IRS-qualified health expenses.

Additionally, at age 65, the IRS allows you to use the funds in your HSA for other expenses as well.  Any funds that you use for non-qualified health expenses (i.e. rent, groceries, vacation, etc.) you would need to report at year end as taxable income and pay taxes on the amount spent. However, you do not have to pay any penalty for using those funds for non-health related expenses.

You must pay a 6% excise tax on any excess contributions and on any earnings on excess contributions. If in the next year you decreased your maximum contribution by the amount of your excess contributions made the year before, you do not have to pay the 6% excise tax again. However, for as long as you leave the excess contributions in your HSA, you will need to pay an annual 6% excise tax on this amount and its earnings.

Please contact your tax advisor if you have additional questions.

You may request a distribution of your excess contribution by completing the HSA Distribution Request Form and submitting it to WEX via email at , fax 888-887-9961, or by mail at:

WEX
c/o HSA
P.O. Box 2905
Fargo, ND  58108

Review IRS Publication 969  and Instructions for IRS Form 8889 for further details.

No. If you are drawing your or your spouse’s social security benefits, your enrollment in Medicare Part A will be automatic and you will no longer be eligible for tax-free HSA contributions as of the effective date of your Medicare enrollment.

You can stop your contributions at any time by submitting an HSA Enrollment / Change form or by submitting an Optional Benefit Change online through the Employee Center.

Next, you should determine if you have excess contributions for the year that you have already been contributing to the HSA. Details on the calculation of the IRS prorated maximum can be found in IRS publication 969. If your contributions have exceeded the IRS maximum, you must work with WEX to resolve the excess contribution issue.

Each year you participate in the HSA when you are ineligible for tax-free contributions, you must complete an HSA Distribution Request Form to remove all ineligible contributions (IU’s contribution and your contributions) and any earnings on those contributions and then claim those dollars on your annual income tax return as taxable income.

Submit the completed HSA Distribution Request Form to WEX via email at (email address wil change 5/1), fax 888-887-9961, or by mail at:

WEX
c/o HSA
P.O. Box 2905
Fargo, ND  58108

Review IRS Publication 969  and Instructions for IRS Form 8889 for further details.