Social Security impacts on Health Savings Account

[Karen 3]

I just found out that I can be penalized for contributing to my HSA after pulling my Social Security.  

I started pulling my Social Security in July.  My HSA contributions have gone in every month this year. 

I have more funding than I need and less potential deductions. 

I think one solution is for me to stop my Social Security draws, pay back what I received from them and put off drawing Social Security until sometime after I'm 65.  Will I still need to withdraw the HSA contributions for those months or for the whole year?  Do you know what the penalty will be?

Are there other ways to handle this problem?  

[maureencpa · Accepted solution]

If you have applied for or are receiving Social Security benefits, which automatically entitle you to Medicare Part A, you cannot continue to contribute to your HSA. If you contribute to an HSA account and are enrolled in Medicare, you'll be accessed a 6% excise tax penalty.

You can defer signing up for Medicare and Social Security if you have an employer with 20 or more employers and and are enrolled in a HSA eligible group plan.  

You should contact the trustee, explain the situation and find out what they advise regarding withdrawal necessity and amount.

The following article provides more detail:

 https://www.journalofaccountancy.com/issues/2021/jul/medicare-rules-on-hsa-after-age-65.html