How Medicare Enrollment Affects Your Health Savings Account (HSA) Eligibility
Americans aged 55 and older collectively hold an estimated $52 billion in Health Savings Accounts (HSAs), according to the latest research from an HSA investment firm. As individuals approach Medicare enrollment, their interest in continuing to contribute to HSAs grows, recognizing the value of these accounts in covering both current and future healthcare expenses.
However, guidance on how HSA contribution rules interact with Medicare enrollment is limited, often leading to confusion. Many individuals receive conflicting information from HSA providers, Medicare and Social Security representatives, and even their own tax professionals. This blog aims to clarify three of the most frequently asked questions regarding HSA contributions and Medicare.
Question 1: I’m enrolling in Medicare but continuing to work and keeping my employer-based health plan for my spouse/family. Can I still contribute to my HSA?
Answer 1: The short answer is no, however, your spouse covered under your health plan may still be able to fund their own HSA once you become ineligible.
Once you enroll in Medicare, you lose eligibility to contribute. However, if your spouse is covered under your high-deductible plan, they may contribute up to the family amount to their own HSA.
Example:
Kevin turned 65 on March 18, and while continuing to work, is enrolling in Medicare, as his employer’s plan is not considered qualifying coverage for purposes of deferring Medicare Part B enrollment. His enrollment date would be effective March 1, meaning he would now have other health coverage as of that date, rendering ineligible for HSA contributions after March 1. However, he plans to continue family coverage of his HDHP through his employer so that his spouse, Winnie, who is 62, is covered until she reaches Medicare eligibility.
Kevin is permitted to contribute for two months: $1,592 ($8,550 is the family limit for 2025, plus $1,000 for catch-up, calculated as $9,550 × (2/12)). What about Winnie? She can fund her own HSA with the remaining balance, $7,958, and then make a full family level contribution in subsequent years.
At first glance, it might seem like Winnie would not qualify for family coverage because Kevin is no longer eligible to contribute, and Winnie must adhere to the individual coverage limits. However, the determining factor for the contribution limit is the type of high-deductible health plan (HDHP) in place— whether family or individual.
Since Kevin is the covered individual, he must elect family coverage to include Winnie (spouse). Because of this, Winnie remains eligible for the family-level contribution limits.
Another way to understand this is by considering the reasoning behind different contribution levels for various coverage types. Family health plans typically come with higher deductibles and co-insurance limits. Logically, someone subject to these higher costs should have access to a higher HSA contribution limit to help manage out-of-pocket expenses.
In summary, Kevin and Winnie can continue contributing up to the full family HSA limit until Winnie enrolls in Medicare. However, we recommend shifting contributions from Kevin’s HSA to Winnie’s, as joint HSA accounts do not exist.
Question 2: Can I still contribute to my HSA if I continue to work and my spouse enrolls in Medicare?
Answer 2: This may seem similar to Question 1, but in this case, the person who is not yet 65 is the one carrying the employer-provided health insurance.
The short answer is yes—you can continue contributing to your Health Savings Account (HSA) as long as you remain an eligible individual, even if your spouse enrolls in Medicare. The key question then becomes: How much can you contribute?
Your contribution limit depends on the type of coverage you maintain once your spouse transitions to Medicare.
If you continue with family coverage, you can still contribute at the higher family limit, ensuring that your spouse (who is now enrolled in Medicare) and/or other eligible dependents remain covered under your private insurance.
If you switch to individual coverage, your contribution limit for 2025 will be $4,300, or $5,300 if you are 55 or older.
What happens if you change coverage mid-year?
If you start the year with family coverage but later switch to individual coverage, your annual contribution limit will be prorated based on the number of months you were enrolled in each type of coverage.
Question 3: I contributed to my HSA after my eligibility stopped
Answer 3: HSA contribution limits are based on the calendar tax year. Individuals have until the April tax deadline to make additional contributions or withdraw excess contributions by the due date, including extensions.
A taxpayer’s excess contributions to an HSA are subject to the 6% excess tax. However, a taxpayer can avoid this tax by withdrawing the excess contributions and earnings by the due date (including extensions).
Example
Bob, aged 68 and single, retired on December 1, 2025. On November 1, he applied for Social Security and Medicare benefits. During his 2025 employment period, he contributed $4,000 to his HSA through pre-tax payroll deductions.
For 2025, the HSA contribution limit for single coverage is $5,300 (including the catch-up contribution). Based on the six-month rule, Bob can contribute up to $1,767 ([5,300 ÷ 12] × 4 months). This results in excess contributions of $4,000 − $1,767 = $2,233.
Option available for Bob:
Withdraw the excess contributions and any earnings on the excess before the due date (including extensions). The withdrawn contributions are included as “other income” on his 2025 tax return and earnings as “other income”. The 6% excise tax won’t apply.
Instead of contributions through payroll, Bob decided to make a $4,000 direct deposit contribution (outside of payroll) in January 2025? As long as Bob withdraws the excess and any earnings on the excess before the due date, including extensions, the excess contributions are not reported as “other income”. The earnings on the other hand will be “other income”, reported on the 2025 tax return.
If Bob had already spent the $4,000 on qualified medical expenses before the tax filing deadline (including extensions), the funds would be considered withdrawn. As long as the funds are removed from the account before the tax filing deadline—whether by return of contribution or by distribution— the result is the same.
Fun facts to remember:
There is a six-month lookback period (but not before the month of reaching age 65) when enrolling in Medicare after age 65, so a best practice is for workers to stop contributing to their HSA six months before the month they apply for Medicare.
Funds already in your HSA can be used for qualified medical expenses upon Medicare enrollment. This includes reimbursement for Medicare premiums (but not for Medicare supplemental insurance, aka 'Medigap'), as well as payments for long-term care costs and insurance premiums.
If a worker is already collecting Social Security at age 65, they will be automatically enrolled in Medicare and will no longer be able to contribute to their HSA. The only way to opt out is to rescind the Social Security election within 12 months and repay all benefits received.
Signing up for Medicare Part B when first eligible avoids penalties. Generally speaking, taxpayers are able to defer Medicare past age 65 if they work for an employer with 20 or more employees while also enrolled in a group health plan based on that employment. However, they will need to take action to enroll upon leaving that plan in order to avoid lifetime penalties for late enrollment in Medicare Part B.
Super HSA' applies when a young adult is covered by their parents' HDHP but is no longer a tax dependent on their parents' return. In this case, they can fund their own HSA up to the family limits.
Navigating HSAs and Medicare can be complex, so be sure to consult with our Trusted Advisors to determine the best strategy for your individual circumstances. Planning ahead will help you maximize your benefits and ensure a financially secure future.
Chris Olson, Shareholder
Chris specializes in the construction, real estate, manufacturing, and retail industries. He has more than 10 years of experience in assisting clients with their tax consulting and compliance needs. Chris strives to provide clients with responsive and innovative approaches to identifying issues, recognizing opportunities, and formulating custom solutions. Chris is an active participant on several committees to stay up to date on the latest changes in Federal and State(s) taxation.