HSA Contributions, Medicare Enrollment, and a 45-Employee Employer Plan at Age 65

No. Part A is automatic only for people already receiving Social Security or Railroad Retirement benefits. Nadia has not filed, so nothing happens automatically at 65 - Medicare will not enroll her unless she applies.

Options if she wants to keep funding the HSA

• Do nothing now. Keep the employer HDHP, which stays primary because the employer has 45 employees (well over 20), and keep contributing. She remains an eligible individual as long as she is covered by a qualifying HDHP and is not enrolled in Medicare.
• Delay both Part A and Part B. Enrollment in Medicare - Part A or Part B - ends HSA eligibility. Delaying is penalty-free while she is working and covered by the group plan.
• Enroll in Part A only if she needs it, accepting that contributions must stop the month Medicare begins. She can still spend the existing HSA balance on qualified medical expenses tax-free; she just cannot add to it.
• At retirement (68) she gets an 8-month Part B special enrollment period and a 2-month Part D SEP. COBRA and retiree coverage do not create those rights.

The benefits manager is right about the HSA rule and wrong about automatic enrollment - and the two errors point in opposite directions.

Math

• She is an eligible individual only for January through May, because Medicare entitlement begins June 1: 5 months.
• Maximum 2025 contribution = 5/12 x $9,550 = $3,979 (rounded down).
• Already contributed: $9,550.
• Excess: $5,571.

The last-month rule cannot help her: it requires eligibility on December 1 and continued eligibility for 13 months. She fails both, so full proration applies.

Consequences

• The excess is not excludible or deductible; if it ran through a cafeteria plan it becomes taxable wages.
• A 6% excise tax applies to the excess for each year it remains - about $334 for 2025 and again for 2026 if uncorrected.
• Correction: withdraw the $5,571 plus attributable earnings before her tax-filing deadline including extensions, and the excise tax disappears; the earnings are taxable and may be subject to the 10% additional tax if she is under 65.
• She may instead leave the excess in place and pay the 6%, but the excise repeats every year until corrected.

Better path: delay Medicare, contribute the full $9,550 for 2025, and enroll at retirement with no late-enrollment penalty - worth more than the prorated amount she would otherwise get.

At retirement

1. Part B - 8-month special enrollment period. It begins the month after she stops working, or the month group coverage ends, whichever comes first. Enrolling inside it avoids the 10% late-enrollment penalty that otherwise applies for each 12-month period of delay. COBRA and retiree coverage do not extend this window.
2. Part D - 2-month SEP measured from the later of the end of employment or the loss of group coverage. Missing it triggers a 1%-per-month penalty based on the national base beneficiary premium, lasting as long as she has Part D.
3. Part A is premium-free at any time if she has 40 quarters; she can take it when she enrolls in Part B.
4. Product choice: at that point she compares original Medicare with a Medigap policy plus Part D against a Medicare Advantage plan with drug coverage. She will have a six-month Medigap guaranteed-issue open enrollment when she first enrolls in Part B at 65 or older, and she should use it - afterward, Medigap insurers can medically underwrite.

While still working: if she does enroll in Medicare mid-employment, Medicare is secondary to the 45-employee group plan and the employer plan still pays first. But HSA contributions must stop - there is no way to hold Medicare and contribute to an HSA in the same month.