Health Savings Account (HSA)
Yes. You can open and contribute to an HSA at age 65 or later as long as you meet the following HSA eligibility requirements:
- You’re covered by an HSA-qualified medical plan, like the Health Savings Plan.
- You’re not someone’s tax dependent.
- You don’t have any conflicting coverage (for example, you or your spouse are not enrolled in a Healthcare Flexible Spending Account that can reimburse your expenses [even if your spouse works somewhere else] or you’re not enrolled in Medicare).
Yes. Medicare doesn’t offer an HSA-qualified medical plan. If you have an HSA before enrolling in Medicare, you can’t make contributions to your HSA after you enroll in any part of Medicare, even if you’re also covered by an HSA-qualified health care plan.
No. You’re enrolled in Part A (inpatient services) automatically only if you are age 65 or older and receiving Social Security benefits. You must elect enrollment in Part B (outpatient services) if you are age 65 or older and receiving Social Security Benefits.
You’re enrolled in Part A automatically if you’re collecting Social Security disability benefits or are diagnosed with amyotrophic lateral sclerosis (also known as “ALS” or “Lou Gehrig’s disease”). Otherwise, you must sign up to receive coverage through Medicare.
If you qualify for premium-free Part A, your coverage will be retroactive to 6 months before the date you sign up. So, you should stop making contributions to your HSA 6 months before you enroll in Part A and Part B (or apply for Social Security benefits, if you want to collect retirement benefits before you stop working). For more information on Medicare enrollment, please refer to Medicare & You or call the Social Security Administration customer service center: 800-772-1213.
Yes. Your spouse may continue making contributions to the HSA unless he/she also becomes ineligible to contribute. Once you enroll in Medicare, your spouse’s maximum allowable contribution amount will depend upon your situation. You should discuss this with your tax adviser.
- Mary and Joe Smith, a married couple, are covered by the Health Savings Plan; they have no disqualifying coverage during 2021.
- Mary and Joe each are age 65 in 2021—Mary in May and Joe in October.
- The Smiths have Employee and Spouse coverage under the Health Savings Plan for four months (4/12ths of a year) before Mary, who turns 65 in May, enrolls in Medicare.
The Smiths—Mary and Joe together—may contribute a total of $2,400 ($7,200 x 4/12) to an HSA. This amount can be divided between their HSAs in any way they choose.
Joe, who turns 65 in October, keeps his Healthy Savings Plan coverage through September and enrolls in Medicare in October. Joe would be allowed an additional HSA contribution of $1,500 for five months ($3,600 x 5/12). Note: Five is the number of months of Employee Only coverage that Joe had (May – September) following the four months of Employee and Spouse coverage (January – April) and before he turned age 65 and enrolled in Medicare in October.
Mary and Joe can make HSA catch-up contributions, too. Mary can make catch-up contributions for four months and Joe for nine months. These are the number of months in 2021 before Mary and Joe, respectively, reached age 65 and enrolled in disqualifying coverage.
No. You cannot contribute to an HSA once you enroll in Medicare.
Yes. If your spouse is HSA-eligible and has an HSA, you can contribute to his/her HSA. Your enrollment in Medicare doesn’t disqualify your spouse from contributing to (or accepting contribution from others into) his/her HSA.
Yes. Once you open an HSA, you can receive tax-free distributions from your account for eligible expenses for the rest of your life, up to the balance in your account at the time of a claim.
The expenses for which you can be reimbursed from your HSA once you are enrolled in Medicare are the same as the eligible expenses for which you could be reimbursed when you were not enrolled in Medicare. Eligible expenses include the following:
- Medical plan deductibles, coinsurance and copays
- Unreimbursed dental and vision care expenses, including deductibles, coinsurance and copays
- Insulin and diabetic supplies
- Over-the-counter equipment and supplies
- Over-the-counter drugs and medicine, with a doctor’s prescription.
In addition, when premiums are deducted from Social Security benefits, you can be reimbursed for certain insurance premiums, including premiums for:
You can be reimbursed from your HSA for eligible expenses you have for yourself, your spouse and any dependents listed on your income tax return (such as a disabled adult child). Your spouse and dependents listed on your income tax return don’t need to be HSA-eligible or covered under the Health Savings Plan for you to receive reimbursement.
NOTE: You can’t be reimbursed for your own or anyone else’s Medicare premiums until you, as the account owner, reach age 65.
No. You can be reimbursed for each other’s expenses from each of your respective HSAs, as long as you are married to each other. However, you and your spouse can’t combine your accounts.
No. If you use your HSA to be reimbursed for non-eligible expenses, you’ll pay income tax on the reimbursement. However if, after you turn 65 or meet the Social Security definition of disabled, you will not pay the additional 20 percent tax penalty for reimbursement of non-eligible expenses.
If you name your spouse as the beneficiary for your HSA, when you die, your HSA passes to your spouse with balances and tax advantages intact. Your spouse can then be reimbursed for his/her own eligible expenses tax-free. (You name a beneficiary when you enroll in your HSA, and you can change the designation at any time.)
If you name any other person or entity other than your spouse as the beneficiary for your HSA, the value of your HSA will be distributed to that person as cash, for which that person may need to pay income taxes.
Here are the potential tax consequences if you delay enrolling in Medicare around your 65th birthday when you’re entitled to an Initial Enrollment Period:
- Part A (inpatient services): If you (or your spouse) worked 40 employment quarters with income above the Medicare threshold, you receive no-cost Medicare Part A. You face no penalties for delaying enrollment in Part A past your Initial Enrollment Period.
- Part B (outpatient services): If you don’t enroll during the Initial Enrollment Period, you must be covered through your or your spouse’s group coverage through active employment to avoid subsequent penalties. For every 12 months past your 65th birthday that you don’t maintain group coverage, you pay a 10 percent surcharge on your monthly Part B premium for the rest of your life. In addition, you may face a gap in coverage when you do want to enroll, since you’ll have to wait until the next General Enrollment Period to enroll in benefits effective the following July 1.
- Part D (prescription drug coverage): If you don’t enroll during the Initial Enrollment Period, you must maintain group or non-group coverage that offers prescription drug benefits that are at least as rich as Part D. If you don’t, you’re assessed a permanent surcharge of 1 percent of the national base beneficiary premium for every month since your 65th birthday that your coverage isn’t “Medicare Creditable Coverage (MCC).” In addition, you may face a gap in coverage when you want to enroll. You’ll have to wait for the next General Enrollment Period to enroll in benefits effective the following January 1.
That’s a personal decision that you should discuss with your financial advisor.
HealthSafe ID is Optum’s website authentication protocol. It helps ensure your account remains safe and secure. Many Optum websites use HealthSafe ID, so you can access your information with a single username and password.
If you have not registered for a HealthSafe ID, you will need to do so before you can access your account. To register on Optum Bank:
- Visit optumbank.com.
- Follow the prompts to create your unique HealthSafe ID. You’ll provide your full legal name, birthdate, primary ZIP code, email, phone number, and Social Security Number or Employee ID.
- Confirm your email and phone number, as prompted.
Not sure if you have a HealthSafe ID? Use the “Recover my Username” feature to check.
Still having problems? Contact Optum Bank at 866.234.8913, Option 1.