Understand how Medicare will affect your HSA

Health savings accounts (HSA) may be beneficial for paying health care expenses. You can build up your HSA with pre-tax contributions and use it for qualified health expenses. But did you know that by enrolling in Medicare, you can no longer make contributions to your HSA account.

For individuals with employer health insurance who may qualify to delay Medicare enrollment past age 65, it’s important to understand how getting Medicare coverage impacts your HSA.

An important thing to remember about your HSA when enrolling in Medicare: once you enroll in any part of Medicare, you’re no longer eligible to make HSA contributions. This includes Medicare Part A or Medicare Part B – either one will prevent you from contributing further to your HSA.

Many people turning 65 who continue to work consider getting Medicare Part A since it’s premium-free. But, as stated above, once you enroll in Part A, you can’t make any more pre-tax contributions to your HSA. If you plan to keep working and want to continue building your HSA up, check to see if you’re eligible to delay Medicare enrollment. However, if you’re receiving Social Security benefits, Medicare Part A is mandatory.

If you have to (or choose to) enroll in Medicare Part A, the coverage is retroactive for up to 6 months, but no earlier than your eligibility date. Because of this, you should plan to stop HSA contributions around 6 months before enrolling in Medicare.

You can contribute to your HSA for the months that you were eligible for Medicare and were not yet enrolled.

When you enroll in Medicare Part A, the coverage may be retroactive for up to 6 months, but will not go into effect any earlier than your eligibility. Because of this, you should plan to stop HSA contributions around 6 months before enrolling in Medicare.

You can contribute to your HSA for the months that you were eligible for Medicare and were not yet enrolled.

Now for the good news! Even after you enroll in Medicare and stop HSA contributions, you are still able to withdraw funds tax-free for qualified medical expenses. You can even use your HSA to pay for some Medicare expenses including your Medicare Part B, Part D, and Medicare Advantage plan premiums, deductibles, copays, and coinsurance.

In addition to the traditional Medicare expenses, your HSA may also be used to cover a number of items and services that may not be covered by your Medicare plan. This may include long-term health care coverage; expenses associated with dental, hearing or vision; and other costs that that the IRS considers qualified medical expenses.

If you are receiving Social Security benefits and are 65 years old or older, you may have been automatically enrolled in Original Medicare (Part A and Part B). If you are enrolled in Medicare, this means that you are no longer eligible to contribute to an HSA account but can continue to use your HSA funds to help cover the qualified medical expenses outlined above.

In summary, once you get Medicare, you’re no longer able to keep contributing to your HSA. You are still able to use the HSA funds for qualified medical expenses, including some Medicare costs. Knowing this, it’s important to think carefully about your Medicare enrollment decisions once you become eligible.