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Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 8:56 am
by northstar22
My mom turned 65 in June of last year and enrolled in Medicare part A at that time. Before this she was using a high deductible health plan at work and contributing to an HSA. In January of 2013, knowing that she would be enrolling in Medicare part A in June and would no longer be able to contribute to an HSA at that time, she had her employer double her monthly HSA contributions so that she had reached the annual limit (about $3k) before she was officially enrolled in Medicare, and had no more HSA contributions for the rest of the year while she was enrolled in Medicare part A.

I'm now wondering if this strategy is allowed and want to make sure she doesn't need to take money out of the HSA before she files her 2013 taxes. The thought crossed my mind that maybe she would only be allowed to contribute a pro-rated amount of the annual HSA contribution (so 5/12th, since she started Medicare in June).

So the question is, when starting Medicare part A mid-year, what is maximum allowable HSA contribution for that year?

Thanks for any advice.

Re: Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 11:26 am
by Spirit Rider
You are correct with your concerns. She is only able to make pro-rated contributions for the months she was eligible for HSA contributions.

NOTE: Your HSA eligibility is determined on the first day of the month. So the question is what month/day did the HDHP coverage end and what month/day did the Medicare Part A coverage actually begin?

So yes, regardless of the amount, she has to remove the excess contributions or pay a 6% tax.

Re: Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 1:36 pm
by northstar22
Thanks for the response, Spirit Rider. Her start date for medicare was June 1, 2013. She actually kept her HDHP following that (and still has it), just without the HSA contributions.

Re: Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 1:58 pm
by Spirit Rider
With that information your 5/12th's calculation is correct.

Why did she keep the HDHP and not enroll in Medicare Part B + supplement or Part C. Is she continuing to work? She can end up with a future increased Medicare Part B premium depending on the circumstances.

Re: Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 2:30 pm
by northstar22
Thanks. Yes, she still works and is planning to work at least until age 70. So her HDHP is through her employer, it is the only no-cost plan they offer. Will this present a problem in the future?

Re: Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 6:37 pm
by Spirit Rider
No, this is the circumstance that should not cause a problem. Just making sure.

You can forgo Medicare Part B while you are working and covered by insurance. There is a specific procedure and certification required from the employer when you stop working. Sometimes making sure this goes smoothly can be a challenge, but should be ok.

Re: Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 7:03 pm
by ResearchMed
Spirit Rider wrote:No, this is the circumstance that should not cause a problem. Just making sure.

You can forgo Medicare Part B while you are working and covered by insurance. There is a specific procedure and certification required from the employer when you stop working. Sometimes making sure this goes smoothly can be a challenge, but should be ok.
See if she can get the letter NOW, certifying that the Employee insurance satisfies the requirements so that there is no penalty for signing up for Part B "late".
And that it was in effect on the date she turned 65.

And then she needs to make sure not to forget to sign up for part B within the required time after she is no longer working and covered by a qualifying insurance plan.

RM

Re: Medicare part A/ HSA question

Posted: Fri Feb 07, 2014 11:36 pm
by northstar22
Thank you for the replies!

Re: Medicare part A/ HSA question

Posted: Sat Feb 08, 2014 12:29 am
by GerryL
If she is still working and insured she does not need to enroll in Part A. Is she doing it for the coverage or just because people say it's the right thing to do?

I made the mistake of signing up for Part A shortly before I turned 65. Then a few months later my company pushed us to an HDHP. I filed a form to dis-enroll from Part A, which I never used. Still waiting to get the word so I can contribute to my HSA.

It's a hassle, but if she doesn't need the Part A coverage -- and hasn't used it -- she can request to be dis-enrolled and then keep the full amount in the HSA -- and continue adding to the account as long as she doesn't need to sign up for any Medicare. I recommend she file the paper work at the SS office. I called to get the form and they sent me the wrong one. The folks in the face-to-face office know how to deal with it.

Re: Medicare part A/ HSA question

Posted: Sat Feb 08, 2014 12:30 am
by GerryL
If she is still working and insured she does not need to enroll in Part A. Is she doing it for the coverage or just because people say it's the right thing to do?

I made the mistake of signing up for Part A shortly before I turned 65. Then a few months later my company pushed us to an HDHP. I filed a form to dis-enroll from Part A, which I never used. Still waiting to get the word so I can contribute to my HSA.

It's a hassle, but if she doesn't need the Part A coverage -- and hasn't used it -- she can request to be dis-enrolled and then keep the full amount in the HSA -- and continue adding to the account as long as she doesn't need to sign up for any Medicare. I recommend she file the paper work at the SS office. I called to get the form and they sent me the wrong one. The folks in the face-to-face office know how to deal with it.

Re: Medicare part A/ HSA question

Posted: Sat Feb 08, 2014 10:33 am
by northstar22
Thanks Gerry. It turns out she had the same thought as you, and a couple months ago applied to un-enroll from Medicare A in order to keep her HDHP and HSA. Then we just found out that in order to receive SS benefits you have to be enrolled in Medicare. She's planning on starting receiving ex-spousal benefits when she turns 66 later this year (waiting until 70 for her own benefits) so it would become a problem at that time. Unless the law changes, of which I've seen rumors but nothing concrete. So she's now planning to discontinue her request to un-enroll in Medicare A (which they have yet to act on). But thanks for the tip, if she wasn't going to start receiving SS benefits this summer that's what she would do.

Re: Medicare part A/ HSA question

Posted: Sat Feb 08, 2014 12:17 pm
by ResearchMed
northstar22 wrote:Thanks Gerry. It turns out she had the same thought as you, and a couple months ago applied to un-enroll from Medicare A in order to keep her HDHP and HSA. Then we just found out that in order to receive SS benefits you have to be enrolled in Medicare. She's planning on starting receiving ex-spousal benefits when she turns 66 later this year (waiting until 70 for her own benefits) so it would become a problem at that time. Unless the law changes, of which I've seen rumors but nothing concrete. So she's now planning to discontinue her request to un-enroll in Medicare A (which they have yet to act on). But thanks for the tip, if she wasn't going to start receiving SS benefits this summer that's what she would do.
If one has medical insurance through Employer, all one needs to do to "qualify" for the SS benefits is to apply for the freebie Medicare (B?) part.

This is what we both did.

And we also got the letters from Employer that we were indeed covered by qualifying Employer plans, so there would be no penalty for getting other Medicare coverage later.

(In our case, it seems we'll have Employer retiree benefits for life; younger cohorts won't have the same coverage, but we apparently squeaked in for the "good" coverage for life. And there is very little concern that Employer won't be around long after we depart. But we've got the letters "just in case".)

RM