Contributing 6 months before Medicare A&B & HSAs

[Devin01]

Here is one for the group and wondering how folks have dealt with this in the past.......

Client retiring in November and going off their group plan. They currently have an HSA in the group plan and would like to continue contributing to that until November but the below is a concern for them (and me) and we’re wondering why this is the case and what would trigger this penalty?

HAs anyone been through this and does Medicare/Social Sec actually look back 6 months and impose the penalty ????

The below came from https://www.medicareinteractive.org/…/health-savings-accoun…

“Finally, if you decide to delay enrolling in Medicare, make sure to stop contributing to your HSA at least six months before you do plan to enroll in Medicare. This is because when you enroll in Medicare Part A, you receive up to six months of retroactive coverage, not going back farther than your initial month of eligibility. If you do not stop HSA contributions at least six months before Medicare enrollment, you may incur a tax penalty.”

 

[kstein]

It's more of a math problem vs a timing of the contribution.

Let's say you sign her up for A and B in October (B starts 11-1). Her A effective date goes backwards to 4-1 due to that random rule. She is allowed to contribute 3-12ths of the total amount ($4500 this year) due to her being has eligible until 4-1.

It doesn't matter what month those funds were deposited or if they are employer contributions the math just needs to add up.

If she overcontributed then she'll need to call the HSA custodian to have the excess funds removed (I believe by 4-15 of following year) to avoid penalities. I think each vendor has a slightly different form and process to remove the funds.

The closer they wait in the year the higher the contribution but then you run the risk of not having your Medicare/PDP card on the effective date.

 

[Medicare Momma]

This is not a question for Medicare, it is for the IRS! Yes, they look back and yes, your client can have a negative tax consequence when he continues to contribute to his HSA!

 

[LostDollar]

(Caveat, not an insurance agent.)

... we’re wondering why this is the case ...

Because the laws and/or regulations are written that way.

.... does Medicare/Social Sec actually look back 6 months ...

Yes. The retroactive part A enrollment has been discussed any number of times in threads over the last couple of years. Soc Sec does look back if you enroll in hospital insurance (Medicare part A) after your 65th birthday.

The HSA contributions are reported on form 8889 of the tax return, don't remember if the penalties are computed there too, or elsewhere.

 

[LostDollar]

Health Savings Accounts (HSAs) and Medicare - Medicare Interactive

3rd party comments, maybe they will help a bit.