Medicare and working past 65

More and more Americans are working beyond 65—the age when most people become eligible for Medicare. It’s important to understand the rules and potential Medicare penalties if you decide to delay enrollment. When it comes to Medicare, everyone’s situation is unique. Give us a call and we can help you explore your options.

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Delaying Medicare enrollment

If you plan to work past 65 and stay on your employer’s health plan, you may be able to put off enrolling in Medicare. To do so without penalty, you’ll need to meet the requirements below.

You are covered by your employer’s (or your spouse’s employer’s) group health insurance (not including COBRA)

The employer has 20 or more employees

The employer-based plan has a creditable prescription drug program

What if my employer has fewer than 20 employees?

You’ll likely need to sign up for Medicare Parts A and B when you turn 65. Medicare would become your primary coverage and your employer coverage would pay secondary to Medicare. This could leave you with higher out-of-pocket costs. For more information, reach out to your employer’s benefit manager, or contact us to discuss your specific situation.

What is a creditable prescription drug program?

Your employer drug coverage must be at least as good as what Part D coverage provides. If your employer’s drug coverage isn’t creditable, you’ll need to enroll in Part D during your Initial Enrollment Period to avoid the Part D late-enrollment penalty. You’ll also need to get either Part A or Part B in order to get Part D.

How do I find out if my prescription drug program is creditable?

Medicare requires companies with health plans that include prescription drug coverage to send a notice stating whether the coverage is creditable to Medicare-eligible employees by Oct. 15 of each year. You can also ask your employer’s benefit manager for a notice of creditable coverage. You should keep this notice in case you decide to enroll in Part D in the future.

Potential Medicare pitfalls

If you don’t meet the requirements to delay Medicare, you may face penalties down the road when you do sign up. Even if you do meet the requirements, you can still face penalties if you don’t pay attention to your Special Enrollment Period—the eight months after your employer coverage ends that you have to sign up for Medicare. Here’s a rundown of the potential penalties and when they would apply.

The Part A late-enrollment penalty

If you don’t sign up for Part A during your Special Enrollment Period—and you have to pay a Part A monthly premium—you’ll be subject to the Part A late-enrollment penalty: an extra 10% of your Part A premium for twice the number of years that you didn’t have Part A. For most people, however, there is no premium for Part A if you’ve worked 10 or more years and paid into Social Security—so this penalty wouldn’t apply.

The Part B late-enrollment penalty

If you don’t sign up for Part B during your Special Enrollment Period, you’ll be subject to the Part B late-enrollment penalty: a 10% increase of your Part B premium for each 12-month period you didn’t have Part B. For example, if your Initial Enrollment Period ended in 2015, and you waited until 2022 to sign up, your monthly premium would be 60% or 70% higher. In most cases, you’ll have pay this fee as long as you have Medicare.

The Part D late-enrollment penalty

You only have the first three months of your Special Enrollment Period to sign up for Part D. This can catch people off-guard because they think they have the whole eight months, but really only have a short timeframe to enroll. The Part D late-enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium” by the number of months you didn’t have Part D, and in most cases, you’ll have to pay this fee as long as you have Part D.

Health savings accounts and Medicare

Something many people don’t know is that once you’re enrolled in any part of Medicare, you can no longer contribute to your health savings account (HSA). So while some people enroll in only Medicare Part A since it’s usually premium-free, you’ll want to delay enrolling in Part A if you want to keep contributing to your HSA.

Retirement and your Special Enrollment Period

When you retire, you’ll have up to eight months to enroll in Medicare Parts A and/or B, and two months to enroll in Medicare Parts C and/or D. This Special Enrollment Period begins the month after either your employer-sponsored coverage (not including COBRA) or your employment ends, whichever comes first.

For personalized guidance on your timeline and when you should enroll, view our Medicare Step-by-Step guide.

Quick Tip:

To avoid a gap in coverage, enroll in Original Medicare (Parts A and B) the month before your employer-sponsored coverage will end.

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We’re here to help

Medicare and working past 65 can be confusing—and it’s a different situation for everyone. If you have questions or want to make sure to avoid a Medicare penalty, give us a call or chat with us online. You can also find answers on our Medicare FAQ.