Medicare and HSA Eligibility

October 2023

Background

A common topic with questions coming into any compliance department is health savings accounts (HSAs) in general, but more specifically the question of how HSAs interact with Medicare. This article is meant to address the question of how a spouse’s eligibility for or enrollment in Medicare could affect an employee’s HSA eligibility.

Let’s break the answer down into three parts:

The impact to the spouse’s HSA eligibility;

The impact to the spouse’s health plan eligibility; and

The impact to the employee’s HSA eligibility

Impact to the Spouse’s HSA Eligibility

It’s important to distinguish between “eligibility for” Medicare and actual “entitlement to” (i.e., enrollment in) Medicare.

Merely being “eligible” for Medicare does not make somebody ineligible to establish/contribute to an HSA. Therefore, simply turning 65 does not interfere with a person’s HSA eligibility*. If an individual who turns 65 delays enrollment in Medicare, then that person may still contribute to an HSA if otherwise eligible to do so.

*Medicare Part A enrollment is automatic for some individuals (e.g., those already receiving Social Security benefits when they turn 65). Other individuals become eligible for Medicare but must file an application in order to become enrolled in benefits or may opt-out and delay enrollment (e.g., working individuals who have attained age 65 and who are eligible – but have not applied – for Social Security benefits).

However, individuals that become “entitled” to (i.e., who enroll in) Medicare become ineligible to contribute to an HSA as of the first of the month following Medicare enrollment. For example, if an individual enrolls in Medicare mid-January, they become ineligible for an HSA on February 1st. And an individual whose Medicare effective date is the first of the month simultaneously loses HSA-eligibility. (However, any funds that have already been contributed to that person’s HSA remain available to use for qualifying medical expenses.)

Impact to the spouse’s health plan eligibility

Second, neither Medicare eligibility nor Medicare entitlement alone will make a spouse ineligible to continue coverage under the HDHP. Unless the employer’s plan specifically excludes Medicare-eligible or Medicare-entitled spouses from coverage (and most will not, due to Medicare Secondary Payer requirements), then as long as the spouse otherwise meets the plan’s eligibility criteria, they may remain enrolled on the group health plan.

Impact to the employee’s HSA-eligibility

Finally, a spouse’s Medicare entitlement (and resulting HSA-ineligibility) does not impact the employee’s ability to contribute to an HSA if the employee is otherwise eligible to do so. And if the spouse (or other dependent) remains enrolled on the employee’s HDHP, then the employee will be able to contribute up to the statutory annual maximum amount for family HDHP coverage ($8,300 for 2024). Moreover, funds from the employee’s HSA may be used to reimburse the HSA-ineligible spouse’s qualifying medical expenses.

^{While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.}