Over 65 and working for a company with an HSA?

Before you start contributing, you need to familiarize yourself with how this affects your Social Security benefits and how Medicare comes into play.

According to the notice issued by the IRS in 2004 (Notice 2004-50, in Internal Revenue Bulletin 2004-33 – see the end of post for exact notice):

You can contribute to an HSA if you are not enrolled in Medicare Part A or Part B.  The catch is that if you elect not to enroll in Medicare Part A, you cannot receive Social Security benefits.  This was challenged in a federal appellate court in 2011 in Hall v. Sebelius, but the court sided with the government saying that in order to receive Social Security benefits, the individual must be enrolled in Medicare Part A.  That case may be further appealed, but for now that appears to be the law.  

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IRS Notice 2004-50

Q-2.  May an otherwise eligible individual who is eligible for Medicare, but not enrolled in Medicare Part A or Part B, contribute to an HSA?        

A-2.  Yes.  Section 223(b)(7) states that an individual ceases to be an eligible individual starting with the month he or she is entitled to benefits under Medicare.  Under this provision, mere eligibility for Medicare does not make an individual ineligible to contribute to an HSA.  Rather, the term “entitled to benefits under” Medicare means both eligibility and enrollment in Medicare.  Thus, an otherwise eligible individual under section 223(c)(1) who is not actually enrolled in Medicare Part A or Part B may contribute to an HSA until the month that individual is enrolled in Medicare.   

Example (1).  Y, age 66, is covered under her employer’s HDHP.  Although Y is eligible for Medicare, Y is not actually entitled to Medicare because she did not apply for benefits under Medicare (i.e., enroll in Medicare Part A or Part B).  If Y is otherwise an eligible individual under section 223(c)(1), she may contribute to an HSA.           

Example (2).  In August 2004, X attains age 65, applies for, and begins receiving Social Security benefits.  X is automatically enrolled in Medicare.  As of August 1, 2004, X is no longer an eligible individual and may not contribute to an HSA.