A couple trying to move from employer-based insurance to Medicare ran into an expensive timing complication. Apparently, Part A can be backdated by up to six months, which can turn late-career HSA contributions into a retirement problem.
Here's what to know
The original poster presented their dilemma in a post on Reddit's r/medicare. They explained that they and their wife are both on the wife's employer-provided health insurance, but their wife intends on retiring in the coming months.
At that time, they plan to transition their health insurance coverage to a Medicare plan.
"With Nov 15 as her presumptive last day at work, we want to ensure that she and I both are covered under Medicare (all parts) immediately and seamlessly the day after her last day of the work," the OP said.
One challenging issue, however, involved the OP's wife's contributions to her HSA. If Medicare Part A is given a retroactive start date, contributions made during that lookback period can count as excess amounts.
The OP was concerned that some of their wife's HSA deposits could lead to a continuing 6% excise tax unless the money was taken out of the HSA or her retirement date was pushed back.
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As an alternative, the OP asked whether it would make sense to go on COBRA for a period of time.
Commenters quickly shut down this suggestion.
"COBRA is always secondary to Medicare even if you don't enroll, so they might not pay her medical bills because she is Medicare eligible," said one person.
"COBRA is not considered qualified coverage under Medicare," added another. "This could expose you to penalties depending on when you enroll in Part B."
What can be done?
The most specific path suggested in the thread was to set the Medicare process in motion before the end of the wife's employer coverage in November. They should then take care of any excess HSA contributions directly.
One reply laid out a schedule of enrolling in October for a Nov. 1 start for Part A and Part B, then applying in November for a Dec. 1 start for Plan G and a drug plan. That way, the commenter reasoned, the employer coverage would stay primary during November.
That same advice depended on checking the prorated HSA limit carefully. In the example given in the thread, a July 1 retroactive Part A start would mean the wife could keep only half of the family HSA maximum for the year, or $5,375.
For excess contributions, commenters suggested either having payroll reverse the overage or asking the HSA custodian to remove the extra amount along with any interest gains.
"I'd just apply for medicare, back out the funds as needed, and be done with it," another commenter shared.
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