Now that I’ve reached Medicare age, does it mean the end of my health savings account?

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Dear Insurance Adviser,
I will be 65 in a few months and will continue to work and remain on my employer’s group health insurance plan. The business also provides a health savings account and makes contributions. However, I was told by human resources that if I go on Medicare and continue to work, the company will no longer be able to contribute to my HSA. Is that correct?
— Cameron

Dear Cameron,
Yes, much to my own surprise, that is true. According to Internal Revenue Service Publication 969, once you are covered by Medicare Part A hospital coverage, both you and your employer can no longer contribute to your health savings account.

You and your employer can continue to contribute to your HSA right up until you become eligible for Medicare. I recommend that you consult with a tax adviser to avoid any missteps.

It doesn’t make sense. It’s not fair. But it is what it is.

When you turn 65, you are automatically enrolled in Medicare Part A. If you’re working and are covered by group insurance, you’re usually better off to delay Part B medical coverage until you leave your job or lose your group benefits.

Although you can’t make any new contributions to your HSA, you can spend the remaining funds you have in the account toward current medical and dental expenses. You can continue to do that until the funds run out.

You might try asking your employer for a raise equal to the amount of money that the company will no longer be contributing to your HSA. Just a thought.

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