HSA & Medicare Tax Issue

[Michelle44]

Hello;

I am nearing the time I need to enroll in Medicare and my question concerns the transition from a health plan with an HSA to Medicare. It is really clear that you can not contribute to an HSA if you have any health insurance that is not a high deductible plan - which includes Medicare. What I would like to nail down is exactly when I need to stop making HSA contributions.

Looking at various HSA websites, I came to the following understanding:

Assuming I start medicare A and B on Oct 1, I should not make contribs after Sept 30. If I do, then IRS would require that I withdraw those contribs and pay reg income tax on that amount. The second issue for the IRS is the amount of contributions - since I would be eligible to make contribs for only part of the year, I can only make a pro-rated amount of contribs. If I exceed that amount, I would need to withdraw the excess or face penalties.

So it looks like I could contribute $3,975 ([$4,300 + $1,000 catchup] / 12 * 9] before Sept 30 without penalty. Not that I ever have done that much in the past but you never know.

Can someone verify this? Or know someone who can?

Sincerely;

Michelle

[KrisD15]

Yes, if you enroll when eligible.

However, it can get even a bit more complicated if you enroll in Medicare after 65.  

In that case, the coverage can be back-dated up to six months depending on when you were eligible for coverage.

So if you apply at 65.5, the coverage will be backdated to the month you turned 65. 

If you apply at 70, the coverage will be 6 months prior to that date.

If you apply at 65 and 3 months, the coverage would be back-dated three months. 

[NCperson]

@Michelle44 your calculations are correct, but the timing is a little off.  You can contribute the $3975 up through April 15 of the following year.  You do not need to make the contributions prior to Sept 30.  But certainly the calculation of how much you can contribute is limited to the 9 months that you state in your case.  See the difference? 

It also presumes you are turning 65 in October. @KrisD15's response explains that,