Priya Turns 65 Mid-Year With an HSA and an HDHP

Eligibility ends with Medicare entitlement. Once her Part A coverage is effective August 1, she is no longer an eligible individual and cannot contribute for August through December - continuing her payroll deferrals would create excess contributions subject to a 6% excise tax each year until corrected.

Prorated limit. Her eligibility period is January through July, seven months.

• 2025 self-only limit: $4,300
• Age 55+ catch-up: $1,000
• Total annual limit if eligible all year: $5,300
• Prorated: $5,300 × 7/12 = $3,091.67, rounded to $3,091

Her position. She has contributed $2,800, so she has $291 of remaining room ($3,091 − $2,800). If the employer's $800 is funded through a cafeteria plan and counted in her limit, the arithmetic changes materially - employer contributions count toward the same maximum, so she would already be over the limit and need to remove the excess plus earnings.

The action item is to stop payroll deferrals effective August 1 and reconcile the total of employer plus employee contributions against $3,091.

Qualified.

• Medicare Part B premiums and Part D premiums may be paid from the HSA tax-free - these are explicitly qualified.
• Her husband's qualified medical expenses, including the prescriptions and copays she is paying now. HSA distributions are tax-free for qualified expenses of the account holder, spouse, and tax dependents even if those individuals are not covered by the HDHP. So his non-HDHP coverage is irrelevant to whether she may reimburse his costs.
• Her own out-of-pocket costs, including dental and vision, subject to the HDHP deductible.

Not qualified.

• Medigap (Medicare supplement) premiums - never HSA-qualified.
• Medicare Part A premiums, which she does not pay anyway given her work history.
• Any expense already reimbursed by another plan - no double-dipping, and the HDHP must be satisfied before it pays non-preventive care.

Also note: she can still spend HSA dollars after Medicare enrollment; only contributions stop. She should keep receipts, since distributions can be taken years later for expenses incurred while the HSA existed.

She was not required to take Part B. Because her employer has 40 employees (20 or more), the group health plan is primary to Medicare for her, and she may delay Part B without penalty while she is actively working and covered by that plan. She would then get a special enrollment period when she retires.

But her Part A decision has already ended her HSA eligibility - Part A entitlement alone disqualifies her, even though Part A is premium-free and even if she never uses it. That is the trap in her reasoning: she thought only Part B mattered.

Options going forward:

1. Stay on the HDHP without contributing to the HSA. She keeps the lower premium and the employer's plan design, but the $800 employer HSA contribution and her own contributions stop. If the employer funds the HSA automatically, she must decline or correct it.
2. Enroll in Part B and move to the employer plan's non-HDHP option or Medicare Advantage, accepting the Part B premium as the price of broader coverage and no deductible resets.
3. Delay Part A if she has not already begun Social Security - but she has already filed, so this door is closed for this year.

Since premiums, not the HSA, drive her budget, staying on the HDHP and simply ceasing contributions is usually the cleanest fix - provided payroll stops the deferral before August and the excess is reconciled.