_AZ_Initial.png)
I love HSA Accounts, and if you have had an HSA for a long period of time and have stayed relatively healthy, you can build up a sizeable Safety Net for yourself. But, do you completely understand how your HSA will change once you turn 65 regardless of if you enroll in Medicare at that time?
The purpose of this article is to answer some of the common questions people have regarding their HSA Account , and hopefully lending some insight and advice that will help you and keep more money in your pocket moving forward.
There are guidelines and rules you must follow when it comes to Medicare and Health Savings Accounts. A Health Savings Account is a savings account in which money can be set aside for certain medical expenses. As you get close to retiring, it’s essential to understand how Health Savings Accounts work with Medicare.
How does my HSA account work with Medicare once I am enrolled in Medicare?
Health Savings Accounts help pay for deductibles, coinsurance, copayments, and other medical expenses. Once the money goes into the Health Savings Account account, you can withdraw it for any medical expense, tax-free. Additionally, you can earn interest, your balance carries over each year, and this can become an investment for a retirement fund. Unfortunately, some restrictions come along with having a Health Savings Account with Medicare.
HSA is only for those enrolled in a high-deductible plan. Since Medicare is not considered an HDHP, enrolling makes you ineligible to contribute to an HSA.
Once you enroll in Medicare, it’s illegal to continue to contribute to a Health Savings Account. The only exception to continue contributing to your HSA is to postpone enrolling in Medicare. As long as you have creditable coverage through your employer, you won’t be penalized for delaying your enrollment.
Before you assume your employer coverage is considered creditable coverage, make sure to talk to your benefits administrator. If your employer has less than 20 employees, it won’t be considered creditable coverage.
What happens if I keep making contributions once I enroll in Medicare?
Can I use my HSA funds to pay for Medicare premiums?
What about my Medicare Advantage premiums? Can I use my HSA funds to pay for my Medicare Advantage plan?
HSA funds can be used for routine dental and vision care that is not covered under original Medicare.
Can I pay my premiums for my Medicare Supplement plan with my HSA funds?
No, Medigap premiums are not considered a qualified Medical expense. You can not use your HSA funds to pay your MEDIGAP/MEDICARE SUPPLEMENT premiums. This is purely because individuals who make the smart decision to supplement Original Medicare with a MEDIGAP or MEDICARE SUPPLEMENT Policy are doing it as voluntary, it is not considered to be "necessary" so unfortunately you are not permitted to pay for these premiums with your HSA funds.
Can my HSA be used to reimburse me for my Medicare premiums?
You can take tax-free withdrawals from your Health Savings Account to reimburse the cost of premiums you’ve paid out of pocket. Even if those premiums were an automatic deduction from your Social Security check. If this is something you didn’t know, you can still withdraw money at any time to reimburse yourself for those premiums.
Qualifying Premium Re-Imbursements include Your Medicare Part A Premiums (If you have any), Medicare Part B Premiums, Medicare Advantage Premiums (If You Have A Premium With Your Part C Medicare Advantage Plan), and Medicare Part D Premiums. As mentioned above, you are not permitted to re-imburse yourself for your Medigap or Medicare Supplement Premiums.
If I only sign up for Medicare Part A can I still make contributions to my HSA?
Sadly, the answer is no. Once you enroll in Part A of Medicare, you are not permitted to actively contribute to your HSA. Any contributions made after you’re Part A is active will be considered excess contributions by the IRS and will be taxable.
I am not enrolling in Medicare yet, but I will be later in the year. How much can I legally contribute to my HSA?
WRAPPING THINGS UP
I hope you enjoyed this quick review covering the most commonly asked questions our clients have had over the years as it relates to their HSA Accounts. If you have any questions please contact me at mike@bradenmedicare.com.
