Still working at 65 — when to take Part B and when to wait

This is the question we get asked most often, and the one where a confident wrong answer does the most damage. If you are approaching 65 and still working with employer coverage, read this before you decline anything.

Why it is not a simple yes or no

Medicare Part A is usually premium-free if you or a spouse worked enough quarters, so taking it at 65 is often uncontroversial. Part B carries a monthly premium, so the question people actually ask is whether to take Part B or delay it while they still have employer coverage.

The answer depends on a fact about your employer that has nothing to do with you: how many people work there.

The size rule, in plain terms

Above a certain employer headcount, the employer group plan generally pays first and Medicare pays second. In that situation, delaying Part B is usually safe, and a Special Enrollment Period will let you take it later without a penalty when the employment or the coverage ends.

Below that headcount, Medicare generally pays first and the employer plan pays second. If you have not enrolled in Part B, there is no primary payer. The employer plan can process your claims as though Medicare had already paid its share — and refuse the part it expects Medicare to cover.

The result is claims that nobody pays, sometimes discovered months later and applied retroactively.

We are not printing the headcount threshold here, because thresholds change and a stale number on an agency website is worse than none. Ask us, ask 1-800-MEDICARE, or ask a free SHIP counselor for the current figure.

The question to ask, in writing

Do not ask your HR department “can I stay on the plan?” They will almost always say yes, and they will be answering a different question.

Ask this instead, and ask for the answer in writing:

Is this coverage creditable for Medicare purposes, and for an employee of my age at a company of this size, does it pay primary or secondary to Medicare?

Those are two distinct facts and you need both. Keep the reply. If you later need to prove you had creditable coverage in order to avoid a penalty, that document is what does it.

COBRA and retiree coverage are not the same thing

A common and expensive assumption: that COBRA counts as employer coverage for the purpose of delaying Part B. Generally it does not. Neither does most retiree coverage.

If you are relying on either, the safe assumption is that your Special Enrollment Period is already running or has run, and you should check rather than assume. This is one of the situations where a phone call today is worth more than any amount of reading.

Health Savings Accounts

If you contribute to an HSA, there is an interaction worth knowing about: enrolling in Medicare generally ends your ability to contribute. There can also be a look-back on Part A that catches people who enroll later than 65.

The details are tax rules rather than insurance rules, which means the right person to ask is a tax adviser, not an insurance agent. We will flag it; we will not advise on it.

What to do, in order

1. Find out your employer’s size, and get the primary/secondary answer in writing.
2. If you contribute to an HSA, speak to a tax adviser before you enroll in anything.
3. If the employer plan is secondary, take Part B during your Initial Enrollment Period.
4. If it is primary and you delay, keep the creditable-coverage letter safe. You will need it.
5. When employment or coverage ends, act inside the Special Enrollment Period rather than waiting for the next general window.

Get the answer in writing, and get the right answer

Almost every mistake on this page traces back to a conversation with the wrong person.

The people who know are your employer’s benefits administrator or the plan’s own documentation. Not a colleague who retired last year, not the receptionist at your doctor’s office, and not, in most cases, a Social Security representative — who can tell you about Medicare but cannot tell you how your employer’s plan coordinates with it.

Ask for this in writing:

Is this group health plan primary or secondary to Medicare for an employee aged 65 or over, and how many employees does the company have for the purpose of that determination?

That sentence answers both halves of the question at once, and having it in writing matters. If the answer later turns out to be wrong, a written statement is the difference between a fixable problem and an unwinnable argument.

HSAs change the timing

If you contribute to a Health Savings Account, this deserves attention before you do anything else.

You cannot contribute to an HSA once you are enrolled in any part of Medicare. That includes Part A, which many people treat as automatic and free and therefore harmless. It is not harmless here.

There is a further trap: when you eventually enroll after 65, Part A coverage can be backdated by a defined number of months. Contributions made during a backdated period can become excess contributions with tax consequences attached. The usual advice is to stop contributing several months before you intend to enroll, but the exact timing depends on your circumstances and it is worth getting specific advice rather than a rule of thumb.

If you are choosing between continuing HSA contributions and taking Part A, that is a real decision with money on both sides, not a formality.

Your spouse’s coverage may be on a different clock

Two people in one household can be in entirely different positions, and the household tends to plan as though they are in the same one.

If your spouse is covered through your employment and they reach 65 before you retire, their protection generally rests on your current employment, not theirs. When you retire, that protection ends for both of you — and their Special Enrollment Period starts running at that point.

Work out both timetables together before you set a retirement date. A retirement date chosen without reference to a spouse’s Medicare timing is one of the more common ways a household ends up with a gap.

COBRA and retiree coverage are not the same as working

This is worth its own heading because it catches so many people.

The Special Enrollment Period that lets you delay Part B without penalty is tied to coverage from current employment. COBRA is not current employment coverage. Neither is retiree coverage. Both feel like a continuation of what you had, and neither reliably protects you.

Taking COBRA and delaying Part B has left people with a penalty and a gap in the same year. If you are leaving a job at or after 65, the Medicare decision generally needs making then, not when the COBRA runs out.

A sequence that works

1. Confirm in writing whether the group plan is primary or secondary, and the employer’s size.
2. If you contribute to an HSA, decide the contribution stop date before anything else.
3. Check whether your spouse’s coverage depends on your employment, and when their own clock starts.
4. If the plan is secondary, or the employer is below the threshold, enroll in Part B on time.
5. If it is primary and you are staying, confirm your drug coverage is creditable and keep the letter.
6. When you do retire, treat that date as the trigger — not the date the last paycheck clears, and not the date COBRA ends.

If any of that is unclear for your situation, telephone us — no cost, and if the answer is “your employer coverage is fine, do nothing yet”, that is what we will say. A SHIP counselor will give you the same answer for free and sells nothing at all.