HSA and Medicare

[WCMason]

Just finished up a series of Medicare seminars for a financial services firm's clients. They do monthly client education seminars and I'm their Medicare presenter. Given the make-up of attendees, I include a section on HSA and Medicare, pointing out that those who continue to work and have an HSA EGHP must stop contributing to it once they take Part A. This topic dominated the Q and A, as several still working, Part A beneficiaries were still contributing to their HSA. Some were not told of this requirement, others told there was no issue so long as they didn't use their Medicare benefit. Of course, the employer benefits adminstrator isn't having to pay the 6% excess contribution penalty for that bad advice. For those unfamiliar with this rule, the penalty is assessed on contributions and earnings on those contributions, and there is no statute of limitations. Penalties and interest accrue and some won't find out until they get audited, if they do.

 

[yorkriver1]

I like this Medicare & HSA summary: http://bit.ly/ZxM7x5
To follow on your comments, WC, the linked article says that employees are required to have Medicare Part A if they are drawing SS benefits. Check/mate for HSA contributions unless they are not getting SS income, which some employees may be delaying. They are lucky to have you doing these seminars!

 

[somarco]

required to have Medicare Part A if they are drawing SS benefits.

Most people (including agents) don't know you must have both. If you postpone or opt out of A you are prohibited from receiving SS until Part A begins.

Re-starting Part A is a PITA.

 

[yorkriver1]

HSA question: My client is planning to drop the group for their business, and enroll with spouse on individual coverage 12/1/14. I have advised an HSA to make most OOP into a tax deductible expense, extending into Medicare costs. The HSA would be able to get 3 years funding before he turns 65. With the complicated situation of plans changing for 2015 that are best for them, we'd have one month on 2014, then do new apps for 2015. Is that worth the approx. $7000 HSA contribution for 2014, or just keep it simple, move the change to 1/1/15 & get 2 years into the HSA? I believe the tax savings would make it attractive, but still may not be a big priority over simplicity. The owner won't want to have to think too hard about the question, not his style. There's at least some risk of a serious unexpected claim in December, which would have a new OOP, then another for 2015, not to mention the additional hassle of new apps if 2015 options are better, which certainly for the one on Medicare will be true. New plans coming.

 

[case1]

HSA question: My client is planning to drop the group for their business, and enroll with spouse on individual coverage 12/1/14. I have advised an HSA to make most OOP into a tax deductible expense, extending into Medicare costs. The HSA would be able to get 3 years funding before he turns 65. With the complicated situation of plans changing for 2015 that are best for them, we'd have one month on 2014, then do new apps for 2015. Is that worth the approx. $7000 HSA contribution for 2014, or just keep it simple, move the change to 1/1/15 & get 2 years into the HSA? I believe the tax savings would make it attractive, but still may not be a big priority over simplicity. The owner won't want to have to think too hard about the question, not his style. There's at least some risk of a serious unexpected claim in December, which would have a new OOP, then another for 2015, not to mention the additional hassle of new apps if 2015 options are better, which certainly for the one on Medicare will be true. New plans coming.

I would try to push it to Jan. 1- why Dec?

 

[WCMason]

HSA question: My client is planning to drop the group for their business, and enroll with spouse on individual coverage 12/1/14. I have advised an HSA to make most OOP into a tax deductible expense, extending into Medicare costs. The HSA would be able to get 3 years funding before he turns 65. With the complicated situation of plans changing for 2015 that are best for them, we'd have one month on 2014, then do new apps for 2015. Is that worth the approx. $7000 HSA contribution for 2014, or just keep it simple, move the change to 1/1/15 & get 2 years into the HSA? I believe the tax savings would make it attractive, but still may not be a big priority over simplicity. The owner won't want to have to think too hard about the question, not his style. There's at least some risk of a serious unexpected claim in December, which would have a new OOP, then another for 2015, not to mention the additional hassle of new apps if 2015 options are better, which certainly for the one on Medicare will be true. New plans coming.

It sounds like the Dec 1 strategy is to use the "last month" rule so they can make a full year HSA contribution for 2014. That works so long as they have an HSA plan for all of 2015, which it sounds like they're planning to do. That doesn't seem to complicate things.

To avoid enrolling in a plan for one month then switching, I'd look at the 2015 plans and enroll them in the plan that fits best for next year to start the last month of 2014 and let it roll into the next year; the price will likely change some after the first month, but they'll be eligible for the max HSA contribution for both years.

As for the decision between the certainty of a full year contribution vs the possible out-of-pocket if an expensive health need arises in Dec given the new deductible, that's a judgement call. I'd take the extra contribution. Others are more risk averse.

 

[yorkriver1]

Thanks, big help! Yes, for individual health plan/owner's HDHP, can carry plan over to 2015. Owner is probably fine with the risk of one month MOOP. Not to overburden with TMI, it's likely the MAPD plan I would have to use 12/1 could be a bit of a lame duck for 2015. The new, improved options in this market are 1st available for 1/1/15. I can help the MAPD spouse sign up for a plan through medicare.gov for December, then go with the one that works best for 2015 once I have carefully reviewed the options/providers. In my state, no Med/Supp for under 65 Medicare beneficiaries. One big reason for the HSA is that the client was hoping for a Med/Supp, but can't do that for about 5 years until spouse is /T65.
HSA--MOOP is tax deductible, FTW!