In today’s world more and more people over the age of 65 continue to work. Medicare, the health insurance program designed for older Americans and people with disabilities, can be complicated even under normal circumstances. When you add income from working to the equation, things can get a bit more complicated.
There are a number of reasons many people aged 65 and over continue to work. These might include:
- They need the income from working.
- They are waiting until they reach their full retirement age (FRA) to collect Social Security benefits. Full retirement age is 66 years and 10 months for those born in 1959 and 67 years for those born in 1960 or later.
- Longer life expectancies makes it more feasible to work longer.
- They enjoy the work and the camaraderie of their co workers.
Regardless of the reason(s), there are some issues to consider surrounding Medicare if you are age 65 or older and working.
Are you covered by an employer health insurance plan?
If you’re covered by your employer’s plan, you have options to consider. You can:
- Go with the employer cover and delay Medicare.
- Decline the employer coverage and go with Medicare.
- Have both the employer coverage and Medicare in place at the same time.
The last option can be pricey, as in this case, the employer coverage will be primary, and Medicare coverage will only kick in when the employer coverage doesn’t cover a charge.
A common strategy here is to sign up for Medicare Part A which is free while still covered by your employer’s plan, then wait to enroll in Medicare Part B until you are no longer covered by the employer plan.
If your employer has fewer than 20 employees, their coverage is generally secondary to Medicare so fully enrolling in Medicare is generally required at age 65 during the initial enrollment period that runs from three months prior to the month you turn 65, three months after and includes the month of your birthday.
COBRA and retirement health benefits
If you are covered by COBRA from a former employer or have retiree health coverage from a former employer, you will need to enroll in Medicare once you reach age 65. Both types of coverage are considered secondary to Medicare.
A typical situation where someone might be covered by COBRA or a retiree health plan and still working might arise from having left an employer and then moving to self-employment.
HSAs
If you are contributing to a health savings account (HSA) via an employer’s plan or through your own HSA, you should strongly consider stopping these contributions at least six months prior to your 65th birthday. The reason is that once you enroll in any part of Medicare you are prohibited from contributing to an HSA.
Many people sign up for Part A coverage at age 65 even if they are still covered by an employer’s plan. Part A is free. However, Part A coverage is often backdated by six months, hence the reason to cease HSA contributions six months prior to enrolling in Part A.
Money already in an HSA is yours and can be accessed at any point to help cover medical expenses.
Drug plan coverage
The criteria as to whether or not you need to enroll in a Medicare prescription drug plan (Part D) is whether or not you are covered by what Medicare deems to be a “creditable” drug plan. If you are covered under a larger employer’s health plan, the drug coverage is likely considered to be creditable. If you are 65 it’s best to check with the plan provider to determine whether or not the plan meets the criteria as creditable.
If you are not covered by a plan, or if the plan is not deemed to be creditable, you then have 62 days from the time you lose drug coverage to enroll in either a prescription drug plan that is compatible with Medicare or obtain coverage as part of a Medicare Advantage plan. Failure to obtain this coverage in a timely manner will result in penalties that will remain in effect for life, moving forward in the form of higher premiums.
Medicare IRMAA
Income-Related Monthly Adjustment Amount (IRMAA (I) is a Medicare premium surcharge that is assessed against Medicare beneficiaries whose earnings exceed a certain level. IRMAA is assessed on income from the two tax years prior and applies to premiums for Medicare Parts B and D.
Earnings from working could easily trigger an IRMAA surcharge. In some cases, if your situation has changed drastically, you may be able to appeal the IRMAA surcharge.
With more people working longer, the issue of Medicare coverage while working will continue to be more prevalent. Be sure to look closely at your health coverage situation to be able to make the best choices for you at age 65 and beyond.
Related: Medicare vs. HSA: the costly mistake to avoid at 65
