Although Medicare Open Enrollment is right around the corner, starting October 15, 2019 and running through December 7, 2019, if you aren’t yet 65 (or even if you’re close to it) this is not the period in which you need to sign up. In fact, the process for initial enrollment in Medicare is different from enrolling/changing your plans in subsequent years.
Your initial enrollment period (IEP) is seven months long, and rather than being a set time period, like the above mentioned fall Open Enrollment, it is based on your month of birth. The seven month IEP includes the three months before you turn 65, plus the month you turn 65 and the following three months after that (Exception: If your birthday falls on the first day of the month, the whole IEP moves forward one month. For example, if your birthday is May 1, your IEP begins January 1 and ends July 31). You can sign up for Parts A, B, C, & D during your IEP.
If you plan to continue working past age 65, the first step you should take once your IEP begins is to ask your employer if you have creditable coverage. Creditable coverage relates to your employer’s plan prescription drug coverage and whether it is as good as, or better, than what Part D would offer. It also indicates whether your employer’s plan will act as the primary or secondary insurer to Medicare. Lastly, having creditable coverage may allow you to bypass penalties for not enrolling in Medicare during your IEP and provide for a Special Enrollment Period at a later date.
If you DO NOT have creditable coverage, sign up for Medicare within the first three months of your IEP to avoid gaps in coverage and potential penalties. Typically, if your employer's insurance coverage is for less than 20 people, it is not creditable, and will end once you reach age 65, or become secondary to Medicare. Most COBRA coverage is also not creditable.
If you do have creditable coverage, but do not contribute to a Health Savings Account (HSA), sign up for Part A, again within the first three months of your IEP. For most people, Part A is free as long as you or your spouse has been working and paid taxes for at least 40 quarters. Generally, your employer coverage will remain your primary insurance coverage.
If you have creditable coverage AND want to continue contributing to a HSA, do not sign up for any Medicare Plan Parts. Making HSA contributions while on Medicare will result in tax penalties. Be sure to stop contributions to your HSA at least 6 months before you plan to enroll in Medicare. This is specific to HSA contributions, and does not impact Flexible Spending Account (FSA) contributions.
Likewise, if you have creditable coverage and contribute to an HSA, but have filed or plan to file for Social Security benefits within six months, you should stop making HSA contributions, and opt out of Part B. Once you start receiving Social Security benefits, you will automatically be enrolled in Parts A & B, retroactive to the lesser of six months or age 65.
Navigating Medicare enrollment while continuing to work may be tricky, and is dependent on your specific situation. A certified Medicare broker in your area can assist in finding the best fit for your needs and ensure you avoid gaps in coverage and penalties.
The information in this paper is not intended as legal or tax advice. Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.
