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2017-08-17

Health Savings Account & Enrolling in Medicare

Contributed

Ms King:
I am confused about whether I should sign up for Part A when I turn 65 in 3 months, since I am working full-time for a major corporation with company health insurance. My benefit has a Flexspend contribution/reimbursement benefit for my low deductible PPO health plan. Now, I am not enrolled in a HSA, but may be my option for 2018.
The benefits staff for my employer suggested I sign up for part A, but wait for part B. A co-worker, who turns 65 soon, has the high deductible health plan PPO with a Health Savings Account. He called Social Security and they said if he signs up for Part A he can NOT contribute to his Health Savings account once he is on Part A. We both think we should just wait until we retire before signing up for Part A and B.
What are the rules on the Flex and Health Saving plans and Medicare? Should we wait to sign up for Part A or sign up now and stop contributing to our Flex and Health Savings accounts?
Your weekly articles in the Katy Rancher have really helped me prepare for these decisions.
Thank you,
Frank

Frank:
I can see in your question that you are confused regarding Medicare rules and you and your co-worker are wise to wait to enroll in Medicare Part A. On page 25 of the 2017 Medicare & You handbook, it discusses Health Savings Accounts (HSA) regarding enrolling in Medicare. Everyone should view this page and if you do not have a 2017 Medicare & You handbook, go to www.medicare.gov and download the handbook.
The handbook reads that once one even enrolls in Part A of Medicare and contributes to their HSA, then one may receive a tax penalty. It also states “if one is contributing to a HSA, you should not apply for Medicare, Social Security or Railroad Retirement Benefits.
The handbook also states that you should not contribute to a Health Savings Account at least 6 months before applying for Medicare and enrolling in Medicare Part A is applying for Medicare. Most do not realize that when they apply for their Social Security or Railroad Retirement checks that they have automatically applied for Medicare Part A.
Your friend was smart to call Social Security to ask about his HSA. You are not the first person to ask me about a Health Savings Account (HSA) because HR departments seem to be confused about HSAs and employee benefits.
It is a good idea to get a second option when exploring your Medicare enrollment options.
Medicare rules have evolved healthcare reform and many Baby Boomers are working past 65. HSAs seem to be a more cost effective option because health insurance premiums are exploding.
For those already enrolled in Medicare Part A from bad advice, if you are still working full-time with true company benefits and funding a HSA, I would call Social Security at 1/800-772-1213, explain to the agent how you were misinformed since you have been enrolled and funded your HSA before you turned 65 and now you cannot contribute to the plan. Ask if you can appeal what was advised to you and want to schedule an appointment with your local Social Security office to delay your Medicare Part A.
Frank, you asked about flexible spending account rules and Medicare. Flexible spending accounts are an employer-related plan and not involved in the Medicare program or Medicare rules. You are fine funding your FSA for medical premiums with pre-tax dollars.

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