Are There Financial Penalties if You Don't Sign Up at 65 for Medicare?

Ask Rusty – My Husband Still Works; Must He Enroll in Medicare at age 65?

Dear Rusty: There is confusion between my husband and me on when he should file for Medicare. My husband will be 64 in July. While he does plan on continuing to work to age 67 and continuing with his employer's insurance plan, I believe there's a requirement that he file for a certain part of the Medicare retirement plan at age 65, otherwise there's some penalty at some point in the future after retirement. There's lots of confusion with this, and I'm hoping you can explain exactly what the process is in filing for Medicare at age 65 and after reaching full retirement age. Also, please comment on whether continuing with employers' insurance is an option or if you should file for Medicare at age 65. Signed: Confused About Medicare

Dear Confused: There are two main parts of Medicare to be aware of for this discussion - Part A which is coverage for inpatient hospitalization services, and Part B which is coverage for outpatient services (doctors, medical tests, etc.).

Medicare Part A: Assuming your husband is eligible to collect Social Security when he turns 65 (he'd needn't be collecting it, only eligible to), there will be no premium associated with Medicare Part A (thus no penalty if he delays claiming it). If his employer coverage is "creditable" (which is a group plan with at least 20 participants), then he can defer enrolling in Part A until 1) his employer hospitalization coverage ends, or 2) he starts collecting his Social Security benefits (enrolling in Part A is mandatory for those who are collecting Social Security after age 65). He may also wish to check with his employer's HR department to see if his employer plan requires him to enroll in Part A when he turns 65. However, if your husband enrolls in Part A and has a Health Savings Account (HSA) through his employer, any contributions made to his HSA account after the month before he is 65 will be subject to an IRS penalty and become taxable income.

Medicare Part B: There is a monthly premium associated with Part B, but if your husband has "creditable" healthcare coverage from his employer when he turns 65, he can simply defer enrolling in Part B until his employer coverage ends and there will be no Late Enrollment Penalty for waiting. When his employer coverage ends, he will enter an 8 month Medicare Special Enrollment Period (SEP) during which he can enroll in Part B without penalty. But if he doesn't enroll during (or before) his SEP and enrolls in Part B later, he'll be subject to a Late Enrollment Penalty which would increase his Part B premium by 10% for each full year he goes without "creditable" coverage after age 65. FYI, your husband can also enroll in Part B shortly before his employer coverage ends and specify that he wishes his Medicare coverage to start on the 1st of the month following the end of his employer coverage (to avoid any gap in coverage). When your husband enrolls in Part B, he must also enroll in Part A (at no additional cost). FYI, Part B premiums can increase yearly - the standard 2022 Part B premium is $170.10/month.

There is another Medicare element called "Part D" which is coverage for prescription drugs. Prescription drug costs are not covered by Medicare Parts A/B and such coverage must be acquired separately if desired. When your husband's prescription drug coverage from his employer plan ends, he'll need to separately acquire (through a private insurer) drug coverage during his SEP, or there will be a separate Part D late enrollment penalty for acquiring drug coverage thereafter.

The bottom line is this: If your husband's healthcare coverage from his employer is "creditable" he can simply defer enrolling in Medicare until his employer coverage ends, and there will be no late enrollment penalty for doing so (unless he waits beyond his SEP to enroll).

This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation's staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org.

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