Thoughts on Hsa/medicare Part a Retro Enrollment

[kstein]

Client is 67 and retiring 4/1/17. He had an HSA compatible plan in 2016 and contributed about $3,000, with a Sept deposit of $1500.

He isn't on A/B yet. He is going to enroll into A/B using the ssa.gov portal (for A) and the 40b/l564 document for Part B (with 4/1 start dates). He understands that the Part A will retroactively start 6 months prior which puts him at 10/1/16.

I'm thinking he can contribute 10/12th's of the max allowable amount (which I think he is under) and could not contribute additional funds starting 10/1. His concern is if he goes onto SSA.gov and enrolls into Medicare A in March 2017, that SSA will enroll him into Medicare Part A effective 3/1 which basically screws all the timing up for his $1500 contribution in sept 2016.

I've never had SSA enroll for the 1st of the month during (so 3/1/17 if enrolled in March) rather it is always a future date. The question is since this is looking backwards, is that "start" date, 4/1, going to be different.

Let's say the part A is retro to 9/1. Based off of some reading, he will have to use an excess contribution form but it looks like he won't have any penalties as long as he does this by end of tax filing cutoff which tells me that he should be ok for a Medicare Part B effective date of 4/1. His other thought was to wait until after 4/1 to make sure he gets a 4/1 or 5/1 start date on A (retro back 6 mo) and Part B but his Cobra coverage is $800/mo which would begin 4/1 so that woulldn't be the best thing to do either.

To throw another curveball, he worked for railroad and is in both the SS and railroad retirement systems, with the bulk of his earnings being in the SS system. I'm hopeful that he will enroll into Medicare A/B in the normal fashion, rather than having to use the railroad route.

Anyone come across something like this before?

 

[TwoCents]

Client is 67 and retiring 4/1/17. He had an HSA compatible plan in 2016 and contributed about $3,000, with a Sept deposit of $1500.

He isn't on A/B yet. He is going to enroll into A/B using the ssa.gov portal (for A) and the 40b/l564 document for Part B (with 4/1 start dates). He understands that the Part A will retroactively start 6 months prior which puts him at 10/1/16.

I'm thinking he can contribute 10/12th's of the max allowable amount (which I think he is under) and could not contribute additional funds starting 10/1. His concern is if he goes onto SSA.gov and enrolls into Medicare A in March 2017, that SSA will enroll him into Medicare Part A effective 3/1 which basically screws all the timing up for his $1500 contribution in sept 2016.

I've never had SSA enroll for the 1st of the month during (so 3/1/17 if enrolled in March) rather it is always a future date. The question is since this is looking backwards, is that "start" date, 4/1, going to be different.

Let's say the part A is retro to 9/1. Based off of some reading, he will have to use an excess contribution form but it looks like he won't have any penalties as long as he does this by end of tax filing cutoff which tells me that he should be ok for a Medicare Part B effective date of 4/1. His other thought was to wait until after 4/1 to make sure he gets a 4/1 or 5/1 start date on A (retro back 6 mo) and Part B but his Cobra coverage is $800/mo which would begin 4/1 so that woulldn't be the best thing to do either.

To throw another curveball, he worked for railroad and is in both the SS and railroad retirement systems, with the bulk of his earnings being in the SS system. I'm hopeful that he will enroll into Medicare A/B in the normal fashion, rather than having to use the railroad route.

Anyone come across something like this before?

Based on some quick reading, it looks like Part A will be counted backwards based on the filing month. So you apply for Part A in March, count back 6 and you're at Sept 2016.

Source: https://secure.ssa.gov/apps10/poms.nsf/lnx/0600801022 "HI 00801.022 Application Requirement and Effective Date for Hospital Insurance for Insured Beneficiaries"

I added the parts in red and added bold to emphasize my point about the month of filing. No idea how the RRB piece impacts things. Quote:
HI (Hospital Insurance - Part A) may begin earlier than the first month of RSI benefit (SSA payment) entitlement if the individual was eligible for HI during any of the 6 months prior to the month of filing but RSI benefit entitlement is restricted to a later month. In such cases, HI begins with the first month during the 6 months prior to the month of filing in which the individual is age 65 and eligible for monthly RSI benefits.

 

[yorkriver1]

Good for the person, using up any bit of HSA possible. I assume the total divided by months not on Medicare would also include the proportional amount of the bonus $1,000 contribution allowed by age.

 

[LostDollar]

Hi, I want to preface my comments by saying I am not an agent and have taken enormous heat from Medicare experienced agents for posting as a stupid civilian into other medicare threads. Take my comments in that light.

Sitting at age 72, and starting to cope with incessant arthritic pain and some other health conditions, I would say that most definitely a time will come when your client will appreciate any medical funds he has saved up. Were I in the situation you described:

I would first sorta plan to file a tax extension. Not that that has anything to do with the financial side of things, but pressure distracts me and wouldn't want the pressure of meeting a deadline to file tax papers to distract me from evaluating the financial details.

Then I would look at the Cobra cost and Part B premiums, as you have suggested and get the difference--Maybe $600 a month?

Then I would have someone help me figure out the Max cont I can make, as you are doing--and compare that to that $600. Say it comes out to $1800. (I'm not saying that's what it is, I just need an easy math example.)
So I am going to spend 1/3 of that for one month Cobra premium.

From my perspective today, looking back, my comment would be so what?
I was up last night with pain like fire running through fingers in both hands. My wife is talking to me about something called cortisone shots. I would welcome an extra $1200 for medical expenses. The $600 cost to control the medical expense exposure in the "gap month" and to obtain an additional $1200 of future medical funds would absolutely have been worth it. (And I presume there is some kind of interest gain on the money-so even if not much, the value when needed would be more than $1200)

(And I am not just speaking academically-We recently exercised the Cobra transition principle to deal with a problem gap my wife experienced in getting from group coverage to ACA coverage.)

I would then take the necessary steps to make the contributions, obtain Cobra coverage, setup 5/1 SS initiation, and keep my tax paperwork in order.

Hope that's useful fodder for the thought process.

(Also just occurred to me, don't let your client forget that his part D sign up guidelines will be more restrictive than the part B ones.)

LD