Although 62 is the most common retirement age, it is not unusual to consider working past 65 on Medicare. However, you may be wondering if working past 65 affects Medicare. The short answer is yes. You can even have the option to delay all parts of Medicare entirely in some cases. However, you need to meet specific requirements.
How does Medicare work with employer coverage? The rules surrounding how Medicare affects employer coverage depend on a few things. However, the most significant factor in determining your Medicare options when working past 65 is the number of employees your company has. The following information also applies to spouse coverage.
If you are actively working for a larger employer with 20 or more employees and are enrolled in their group health insurance, you can opt out of all parts of Medicare past 65.
If you sign up for Medicare while still on your employer’s health plan, your employer coverage would be primary, and Medicare would be secondary. What does this mean? This means the coverage from your work would pay first for health services, and Medicare will pay second.
You can still choose to drop your employer coverage altogether and enroll fully into Medicare. Ultimately, the decision is up to you and what you believe will be the most cost-effective.
A Word About Part A
You may consider enrolling in Medicare Part A anyway because Part A is $0 for most people. You qualify for premium-free Part A if you have worked in the United States for ten years or more and paid income taxes. However, keep in mind, Health Savings Accounts do affect Part A. You will not want to enroll in Part A is if you plan to contribute to a Health Savings Account (HSA). You would be subject to tax penalties if you did because Medicare does not coordinate with HSAs.
A Word About Part B
However, you should note everyone has to pay for Medicare Part B. What does Medicare Part B cost? You will likely pay the regular Part B premium when you enroll in Part B, which is $170.10 in 2022. However, your income level may affect the amount you pay for the Part B premium. Each year Social Security (SS) looks at your modified adjusted household gross income (MAGI) and IRS tax return from two years ago. If you earn over a certain amount, you will pay more for Part B.
For example, SS refers to your 2020 tax return to decide how much your Part B premium is for 2022. If you filed as an individual in 2020 and made $91,000 or less, you will pay the regular premium. If you filed jointly and earned $182,000 or less, you will also pay the standard amount. If, for instance, you filed individually and made $500,000 or more, you pay $578.30 for your Part B premium.
Those affected by the Part B surcharge have a way to appeal the higher premium potentially. There is a form online at the SS website you can fill out and submit to lower the premium. Although, there is no guarantee that SS will reduce it.
How does Medicare affect small employer health coverage? If you work for a company with less than 20 workers, you cannot delay Medicare without penalty. You will need to enroll in Medicare when you are first eligible at 65
You will likely be first eligible during your Initial Enrollment Period (IEP). The IEP is a set period for you to enroll in Original Medicare (Part A and Part B.) Your IEP lasts for seven months, begins three months before your 65th birthday month, and ends three months after your 65th birthday month.
You can choose to keep your employer’s health insurance as secondary insurance.
However, you also can drop your employer coverage altogether and enroll in either a Medicare Supplement plan (Medigap plan) and a Part D plan or a Medicare Advantage plan. It will depend on what you think is best for your budget. If you choose to drop your employer coverage, you will need to use your IEP to enroll in these plans.
If you miss your IEP, you will likely have to wait until the General Enrollment Period (GEP) to enroll in Medicare and be subject to late enrollment penalty fees. The effect of these late fees can add an extra burden to your funds and expenses. The GEP runs from January 1 to March 31 each year. During this period, you can enroll in Part A and Part B. However, your coverage will not start until July 1. As a result, you may go without health coverage for a while. So, make sure to enroll during your IEP when you are first eligible for Medicare.
How do COBRA benefits coordinate with Medicare’s coverage? It doesn’t. It’s important to know that COBRA coverage is not considered creditable coverage for Medicare. If you have COBRA coverage, you still need to enroll in Medicare Part A and Part B when you first become eligible during your IEP.
The bottom line is it is possible to work past 65 on Medicare. How work affects your benefits depends on different factors. The size of your employer does affect Medicare and how it coordinates with your employer coverage.