The 62-Year-Old Who Kept Working: Medicare, HSA, and the Six-Month Lookback
Dana turns 65 in March and has already filed for Social Security retirement benefits, so she is automatically enrolled in Medicare Parts A and B effective the first day of her birthday month. She is still working full-time at a mid-size employer and wants to keep contributing to her Health Savings Account. Her employer's group health plan is a qualifying high-deductible health plan, and the employer has 240 employees. Dana's plan year runs January–December. She has a $2,000 balance in her HSA and had contributed $1,500 year-to-date by the end of February. She asks whether she can decline Part B, keep her HSA, and whether her group plan will remain primary. She also mentions she has a Part D prescription drug plan she enrolled in last open enrollment because a friend said it was cheap.
1. Can Dana decline Part B and continue making HSA contributions for the rest of this calendar year? Walk through the eligibility test and the timing problem.
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HSA contributions require that the individual not be entitled to Medicare. Entitlement begins the month Part A coverage starts - here, March, because she is automatically enrolled based on her Social Security filing. Declining Part B does not help; Part A entitlement alone ends HSA eligibility.
So Dana can contribute only for January and February. Her prorated limit for a self-only HDHP is 2/12 of the annual limit. She has already contributed $1,500, which likely exceeds that prorated amount, creating an excess contribution she must remove (with earnings) or correct to avoid excise tax. She should stop payroll HSA deferrals immediately, effective before March.
Also flag the last-month rule: it cannot rescue her because she will not remain HSA-eligible for the 13-month testing period.
2. What happens to her Part D enrollment and to the coordination of her group plan?
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Enrolling in a stand-alone Part D plan while covered by an employer group health plan is generally a mistake here. Because her employer has 240 employees (20+), the group plan is primary and Medicare secondary. She gains little from Part D while working, and she may be paying a premium for duplicate coverage. She can disenroll during a valid enrollment period.
Critically, she should not simply keep Part D and drop it later without checking creditable coverage status. If the group plan's drug coverage is creditable, she avoids the late enrollment penalty when she eventually enrolls in Part D after retiring. If it is not creditable, she faces a penalty that grows with each month of gap.
On coordination: the large-group plan pays first; Medicare secondary. She should confirm the plan's drug creditable-coverage notice in writing before making any change.
3. Dana later asks whether she should drop the employer plan and rely on Medicare instead. What factors drive the answer?
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Compare total cost and network, not just premiums. Employer large-group coverage is often richer (lower cost-sharing, broader network) and the employer subsidizes the premium. Medicare alone leaves her with Part B premium, possible Medigap or Advantage premium, and drug costs.
Key decision points: (1) Does the employer plan offer retiree coverage later? (2) Is her network of physicians in the Medicare network? (3) Does she have a working spouse whose coverage she could join? (4) IRMAA - her income may trigger higher Part B/D premiums. (5) If she drops the employer plan, she may face a Medigap medical underwriting window outside her initial enrollment period depending on state rules.
A defensible answer: staying on the large-group plan while working is usually the lower-cost, lower-risk path, provided drug coverage is creditable and she exits Part D cleanly.