IRS rules regarding contributing to an HSA
Enrolling in Medicare
If you already get benefits from the Social Security Administration or the Railroad Retirement Board, you are automatically entitled to Medicare Part A and Part B starting the first day of the month that you turn 65. You do not need to do anything to enroll.
If you are not receiving Social Security, Railroad or disability benefits, you can enroll in Medicare and a Medicare drug plan up to 3 months before your 65th birthday and no later than 3 months after the month of your birthday. You will need to submit an application to the Social Security Administration.
On the first day of the month you turn 65 and enroll in Medicare, you can no longer contribute to an HSA. This is because to contribute to an HSA, you must have a High Deductible Health Plan (HDHP). Medicare is not an HDHP, so you can't contribute to your HSA after enrolling in Medicare
Making a prorated contribution
Medicare coverage begins on the first day of the month in which you turn 65. You can make a prorated contribution for the year you enrolled in Medicare that covers the months before you enrolled. This contribution can be made up until the HSA contribution deadline, typically April 15th of the following year.
To prorate your contribution, take the allowed contribution for the year (including any catch-up contribution) and divide it by 12, then multiply it by the number of months for which you can contribute. For example, if you turn 65 in April, you can contribute January-March; three months. You would multiply your monthly prorated rate by three to get your maximum allowed contribution amount.
The impact of Medicare on HSA
If you met the requirements to qualify for Medicare part A, but have not yet applied continue to contribute to your HSA past age 65 and postpone applying for Social Security and Medicare until you stop working. There is no penalty for this delay as long as you maintain your current health coverage.
If you are entitled to Medicare because you signed up for Medicare Part A at age 65 or later and have applied for Social Security Benefits you cannot continue to contribute to an HSA. You can continue to withdraw any remaining funds in your account.
If you are entitled to Medicare because you signed up for Medicare Part A at age 65 or later but have not yet applied for Social Security Benefits, you can withdraw your application for Part A. There are no penalties or repercussions and you are free to reapply for Part A at a future date. This will allow you to continue to contribute to the HSA until you decide to reapply for Part A.
If you have applied for, or are receiving, Social Security Benefits – which automatically entitles you to Part A – you cannot continue to contribute to an HSA. You can continue to withdraw any remaining funds in your account.
Spouses with Medicare
Being eligible to contribute to the HSA is determined by the status of the HSA account holder; not the dependents of the account holder. If your spouse enrolls in Medicare, this does not automatically affect your ability to contribute. It may change your contribution limits, however.
In order to contribute the maximum family contribution limit, you must have family coverage with an HDHP. If your spouse enrolls in Medicare and this changes your HDHP coverage to single, this will affect your yearly contribution limit.
If your spouse enrolls in Medicare partway through the year, you can prorate your contributions.
Your spouse enrolls in Medicare as of March 1st and your HDHP coverage changes from family to single at that time. You would:
Monthly coverage is based on your HDHP status on the first of the month.
Withdrawing HSA money after age 65
At age 65, there is a significant change in the HSA rules: You can take money out of your HSA for any reason without penalty. However taxes may apply, depending on what you use the money for.
Spending your HSA money after enrolling in Medicare
There are several that Medicare doesn't cover but that your HSA might. The funds in your HSA can pay for expenses like Medicare premiums, deductibles, copays, and coinsurance under Medicare.
If you're over 65 and have retiree health benefits through your former employer, your HSA can pay for retiree medical insurance premiums.
Below are some examples of expenses your HSA covers, but Medicare does not:
See Eligible Expenses for a searchable list of expenses that your HSA covers.
HSA funds cannot be used to pay premiums for a Medicare supplement or “Medigap” plan.
Frequently Asked Questions
Have questions about how Medicare works with an HSA?