What You Need to Know About Medicare and HSAs
If you’re getting close to 65, you’re probably considering signing up for Medicare. If you have an HSA, here are a few things you need to know:
Just because you turn 65 doesn’t mean you’re automatically enrolled in Medicare. If you decide to keep working after age 65 and are covered by your employer’s health insurance, you don’t have to sign up for Medicare. And if you’re HSA-eligible, you can keep contributing to your HSA until you do decide to enroll for Medicare.
If you sign up for Medicare after you turn 65, though, your official coverage start date will go back six months from the date you signed up. This means you must prorate your HSA contributions for that tax year to reflect the number of months you were HSA-eligible.
If you’re enrolled in any part of Medicare, you aren’t eligible to open or contribute to an HSA, because Medicare isn’t an HSA-eligible high-deductible insurance plan. However, if you had an HSA before you were on Medicare, you can keep it, and any funds in your HSA are yours to spend on qualified medical expenses.
If you’re enrolled in Medicare and have existing HSA funds, you can also use your HSA funds to pay for your Medicare premiums. However, you can’t use them to pay for Medigap premiums. Medigap policies are regarded as “supplemental,” so they aren’t eligible to be covered with HSA funds.
If your spouse enrolls in Medicare, you’re still eligible for and can contribute to an HSA, because HSAs are individually-owned. And you can use your HSA funds to pay for eligible expenses for your spouse, even though he/she isn’t HSA-eligible. However, you can’t pay for your spouse’s Medicare premiums until you turn 65.
If your spouse enrolls in Medicare and you have no dependents on your health plan, you’ll need to move to an individual health plan. This means your HSA contribution limit will change from a family amount ($6,900 for 2018) to an individual amount ($3,450 for 2018). You’ll need to prorate your HSA contributions based on how many months you had family coverage and how many months you had individual coverage.
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