I’m almost 65. I have medical insurance at work, and won’t retire until at least age 66. I’m told the penalty for not enrolling in Medicare during the window period is a higher premium. If I enroll, do I lose my employer’s contribution to my Health Savings Account (HSA)?

Medicare enrollment disqualifies you for HSA contributions. But if your company employs 20 or more people, you can postpone Medicare enrollment without incurring a penalty.

HSA contributions are tax-deductible, earnings are tax-free, and distributions are tax-free if used for qualified medical expenses. But an HSA must be coupled with a high-deductible health insurance policy. Getting other coverage — like Medicare — ends your contribution eligibility. Any subsequent employer contribution is added to your taxable income and is subject to a 6 percent annual excise tax until you remove it from the HSA.

But your Medicare sign-up deadline depends partly on where you work. If your company employs fewer than 20 people, your penalty-free Medicare enrollment window closes three months after your 65th birthday. If your employer has 20 or more workers, that window stays open until eight months after you leave your job or lose coverage in your employer’s plan, whichever comes first.

Two caveats: Anyone who applies for Social Security after age 65 is automatically enrolled in Medicare. And if you apply when you’re six months or more past your full retirement age — i.e., at 66 1/2 or older — your Medicare coverage is backdated by six months. So if that’s your timetable, be sure to stop contributing to your HSA six months before you apply for Social Security.

THE BOTTOM LINE Even if you don’t have an HSA, triple-check your Medicare enrollment deadline as you near age 65. Missing it means a permanently higher premium, and could leave you temporarily uninsured.




ASK THE EXPERT Send questions to Ask the Expert/Act 2, Newsday Newsroom, 235 Pinelawn Rd., Melville, NY 11747. Email act2@newsday.com. Include your name, address and phone numbers. Advice is offered as general guidance. Check with your professional consultants for your specific needs.

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