More people than ever before are deciding to delay their Medicare enrollment and continue to work. While working past 65 can help you put away additional savings for retirement, you could inadvertently be penalized for not enrolling in Medicare at the proper time. Before you make this important decision, you should know what the impact could be. We’ve put together the following information to help you better understand your options.
For more in-depth information, we encourage you to speak with your benefits representative at work, call Social Security at 800-772-1213, or contact American Senior Resources, who will be happy to help, 1-866-448-0160, TTY 711, Monday through Friday, 8 a.m. to 8 p.m., Pacific Time.
Number 1: Once you turn 65 and continue to work, your employer cannot require you to take Medicare or offer you a different type of insurance.
The Employee Retirement Income Security Act of 1974 (ERISA) is a law mandating that people who work beyond age 65 must still be offered the same health insurance benefits as younger people working for the same employer. (This law also applies to their dependents.) However, the law only applies to employers with 20 or more workers. If your current employer has fewer than 20 employees, you may be required to enroll in Part B at age 65.
Number 2: Even if you plan to keep working, it’s a good idea to sign up for Part A.
Part A can provide extra coverage for hospital stays in addition to your group insurance. If you’re receiving Social Security benefits, you are automatically enrolled at age 65. If you’re not receiving benefits, you would need to sign up for Part A.
Chances are you or your spouse has worked long enough that sufficient payroll taxes have been paid, so there would be no premiums. This is called “premium-free Part A.” If you didn’t contribute enough payroll taxes, you may qualify for premium-free Part A through the work record of a current, divorced, or deceased spouse.
Some people consider delaying Part A until a later date. These are people who contribute to a Health Savings Account (HSA) or those who must pay a premium for Part A. CMS (Centers for Medicare & Medicaid Services) recommends that you contact your employer or union benefits administrator before delaying Part A or Part B to find out how your current insurance works with Medicare. Your employer coverage may require that you enroll in Part A and Part B to get your full coverage.
And keep in mind, if you don’t enroll in Part A or Part B during your Initial Enrollment Period, you will have to wait to sign up. This could cause a gap in coverage. What’s more, if you must buy Part A and you don’t buy it when you first become eligible for Medicare, your monthly premium may go up 10% for each 12-month period you could have had Part A but didn’t enroll. And, you’ll have to pay the high premium for twice the number of years you didn’t sign up.
Number 3: You can sign up for Part A during your Initial Enrollment Period.
This is a seven-month window that includes the three months before you turn 65, your birthday month, and the three months following your birthday. Just call Social Security, which handles Original Medicare enrollment, at 800-772-1213 and schedule an appointment for an interview. The interview can be done on the phone or at your local Social Security office.
Number 4: You cannot continue to contribute to a Health Savings Account (HSA) if you are enrolled in Original Medicare or even just Part A.
If you intend to keep working after you enroll in Medicare, and you have an HSA through your employer, you should know there are some restrictions and plan accordingly.
Once you enroll in Medicare, that coverage is retroactive up to six months before you sign up. HSAs cannot be funded if you’re in a Medicare plan, so you’ll need to stop contributing to your HSA six months before you enroll. You must also stop contributions to your HSA before you apply for Social Security benefits because, once you do that, you’re automatically enrolled in Parts A and B. If you don’t stop your HSA contributions in time, you could face a tax penalty.
IRS rules state that you can draw on funds already in your HSA account, but you cannot add to them.
Number 5: It is possible to delay signing up for Part B.
It depends on a few things, though. You or your spouse must still be actively employed by the employer that provides your health insurance. When you have your interview with Social Security during your Initial Enrollment Period, ensure that an official puts into your record that you have declined Part B because you have health insurance through the current employment of you or your spouse. When you do retire, you’ll be entitled to a special eight-month enrollment period to sign up for Part B without incurring a late penalty. If you don’t sign up during this time, your Part B premiums may increase by 10% for each 12-month period you were eligible for Part B but didn’t claim it.
However, if you or your spouse works for a company that has fewer than 20 employees, the employer may require you to sign up for Part B when you turn 65. If so, Medicare would become your primary coverage and your employer’s group insurance would become secondary. It’s a good idea to discuss this with your benefits representative before you make your decision.
Number 6: If your employer’s group health insurance has a prescription plan that’s considered “creditable,” you don’t have to sign up for Part D.
Your employer plan can tell you whether your coverage is creditable, which means that your coverage is expected to pay on average as much as the standard Medicare prescription drug plan. If that’s the case, you won’t need to enroll in a Part D drug plan at age 65. When your employer coverage ends, you’ll be entitled to a two-month special enrollment period to sign up for a Part D plan without penalty. If it’s not creditable, you would need to enroll in Part D during your Initial Enrollment Period at age 65 to avoid late penalties.
Number 7: How do COBRA or retiree benefits factor in?
If you’re employed and intending to delay enrolling in Medicare and then were to get laid off from your job, you would be able to enroll in Medicare during an eight‑month special enrollment period, starting the month after your employment ends or your group health insurance ends, whichever happens first. But, you should know that if you were to elect to use COBRA for your insurance for more than eight months (COBRA coverage can last for up to 18 months), then you could incur significant penalties in the form of higher premiums for missing the special enrollment period and enrolling late into Medicare. And these higher premiums would be lasting.
You can’t delay Part B due to COBRA coverage or retiree benefits. You can only delay Part B if you or your spouse is actively employed and part of a group health plan.
COBRA and Postponing Part D As long as your COBRA or retiree drug coverage is considered creditable by Medicare, you won’t need to enroll in Part D until these benefits end. And again, you’ll be entitled to the two‑month special enrollment period mentioned previously.
We hope this information helps you make an informed decision about working past 65 and your Medicare coverage. If you have any questions, don’t hesitate to call or visit Medicare.gov, a SHIP representative, or our preferred broker partner, American Senior Resources at 1-866-448-0160 TTY 711 | medicare@asrconnect.com | Mon-Fri 8am – 5pm.