Tag: entitlement

Turning 65 Does Not Prevent HSA Eligibility

On By Michelle Turner, MBA, CEBSIn HSA, MedicareLeave a comment

Medicare entitlement (entitlement=eligible & enroll) is no longer automatic for everyone when they turn 65, rather most will need to sign up to get Medicare Part A and Part B.  Medicare is only automatic for individuals who:

  • Are getting benefits from Social Security or the Railroad Retirement Board (RRB) at least 4 months before they turn 65
  • Are under age 65 and have disability benefits from Social Security or RRB for 24 months
  • Have ALS (also called Lou Gehrig’s Disease)

Therefore turning 65 and gaining eligibility for Medicare in and of itself, does not disqualify an employee from continuing to receive employer contributions or making their own contributions to an HSA. Only if one voluntarily enrolls in any part of Medicare would they then be disqualified. 

Employees wanting to work a few more years and delay retirement can continue to reap the triple tax advantage benefit of an HSA if they are otherwise an eligible individual.  Keep in mind however if an employee delays their enrollment in Medicare and continues to work beyond age 65, once the individual’s employment sponsored coverage ends, they have an eight-month special enrollment period to sign up for Medicare Part A. The first month of Medicare entitlement may be retroactive to the month they turned 65, or up to 6 months prior to enrollment, whichever is less. Therefore, an individual may become ineligible for an HSA & have to stop HSA contributions for up to 6 months before they apply for Medicare Part A benefits to ensure they do not over contribute to their HSA.

If you have a question on this or are stumped on another employee benefits compliance question, send us an email today! We’re here to explain complex compliance issues in layman’s terms.

The Compliance Rundown is not a law firm and cannot dispense legal advice. Anything contained in this post or on their website is not and should not be construed as legal advice. If you need legal advice, please contact your legal counsel.

COBRA extensions & Medicare

On By Michelle Turner, MBA, CEBSIn COBRA, MedicareLeave a comment

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As mentioned in a previous post Common Medicare entitlement (enrollment) COBRA mistake…are you making it too?, Medicare entitlement (i.e. eligible & enrolled) is only a COBRA qualifying event (QE) if it causes an employee to lose group health coverage (i.e. under 20 lives, or retiree plan). So due to Medicare Secondary Payer (MSP) rules, Medicare entitlement is not a COBRA QE for the employee, nor is it a QE for the spouse (or dependent) who loses the employee’s group health coverage when the employee voluntarily drops the employer’s plan and enrolls in Medicare.

However, Medicare entitlement does not have to cause the loss of coverage for the spouse or dependents when it comes to being eligible for a COBRA extension. There is a special rule, which extends the maximum COBRA coverage period for spouses and children, (but not for employees) to 36 months of COBRA coverage vs. the typical 18 months when the qualifying event (e.g. retirement) occurs after the employee becomes entitled to Medicare but remained on their employer’s group plan.

In those cases, the spouse and dependents are entitled to the longer of (i) 18 months from the date of the qualifying event (retirement); or (ii) 36 months from the date of Medicare entitlement.

For example: Jack works for Up the Hill, Inc. He and his wife Jill are covered by a group health plan which is subject to COBRA. Jack becomes entitled (enrolled) to Medicare on May 1st. Jack and Jill also remain covered under the group health plan offered by Up the Hill, Inc. On January 1st (8 months later), Jack retires and therefore Jack and Jill both experience a qualifying event (termination of employment).

Jill would be eligible for 28 months of COBRA coverage. (36 months minus 8 months)

On the other hand, if Jack waits longer than 18 months to retire after he enrolls in Medicare, Jill will just get the regular 18 months of COBRA.

Either way, Jack is only entitled to 18 months of COBRA upon retirement.

COBRA regulations appear simple on the surface but the rules are rather complex.  Best practice is for employers to work with a competent third party COBRA administrator who can help them comply with the challenging requirements.