HSAs (Health Savings Accounts) are accounts for individuals with high-deductible health plans (HDHPs). Contributions to HSAs are tax deductible up to an annual limit, and distributions made to cover out-of-pocket medical costs are not taxed.
If you enroll in Medicare Part A and/or B during the year, you can no longer contribute pre-tax dollars to your HSA. However, if you are approaching Medicare enrollment, we suggest you make your full annual contribution before Medicare begins. You will be able to utilize all of your funds, just not make any additional contributions.
If you choose to delay Medicare enrollment because you are still working and want to continue contributing to your HSA, you must also wait to collect Social Security retirement benefits. This is because most individuals who are collecting Social Security benefits when they become eligible for Medicare are automatically enrolled into Medicare Part A. You cannot decline Part A while collecting Social Security benefits.
Finally, if you decide to delay enrolling in Medicare, make sure to stop contributing to your HSA at least six months prior to Medicare enrollment. When you enroll in Medicare Part A, you receive up to six months of retroactive coverage, not going back farther than your initial month of eligibility. If you do not stop HSA contributions at least six months before Medicare enrollment, you may incur a tax penalty.