Robert Belcuore
Suppose you turn 65 in November, aren’t yet receiving Social Security or Railroad Retirement Board benefits, and plan to work through one more tax season. The firm’s group health plan still covers you, and an HSA contribution continues to come out of payroll every month. You don’t expect to make a Medicare decision until you’re ready to step away from the practice. Then you apply for Medicare the following June and learn that premium-free Part A will begin retroactively in December. What happens to the HSA contributions made from December through the month payroll stops?
Those deposits may be excess contributions even though the employer coverage remained valid and the HSA stayed open. The tax problem comes from the dates: Medicare Part B generally has an eight-month Special Enrollment Period that begins the month after current employment ends or the related group health coverage ends, whichever happens first.4 Premium-free Part A, however, can begin retroactively for as many as six months when someone enrolls after 65.1
Who’s coordinating the HSA cutoff if payroll sees only the deposit instructions and the benefits administrator isn’t tracking a later Social Security filing? In most cases, each party sees only one part of the transition. If you’re a CPA firm owner working beyond 65, you’ll want one written timeline that brings the employer plan, Medicare application, Social Security decision, and final eligible HSA contribution month together.
Start With Your Current Health Coverage
Working after 65 doesn’t automatically make it safe to delay Medicare. The first question is whether your insurance is a group health plan based on your or your spouse’s current employment. Retiree coverage, COBRA, and an individual Marketplace policy aren’t treated the same way for Medicare enrollment purposes.
The size of the employer also affects which plan pays first. If you’re 65 or older and covered through current employment, a group plan from an employer with 20 or more employees generally pays first and Medicare pays second. When the employer has fewer than 20 employees, Medicare generally pays first.2 That distinction can change the decision for a small CPA practice. If Medicare is expected to pay first, will the firm’s group plan cover the full claim when you haven’t enrolled?
Multi-employer plans can produce a different result because another participating employer may satisfy the 20-employee threshold. If you’re self-employed, confirm that the coverage qualifies as an employer group health plan and ask the insurer which payer is primary. Having a policy associated with the business isn’t proof that delaying Medicare will be penalty-free or that the policy will remain the primary payer.
Which Coverage Is Expected to Pay First?
Confirm the answer with the plan administrator before delaying Medicare. Federal Medicare Secondary Payer rules generally determine which coverage is primary. The plan document and insurer then determine how the group plan coordinates its benefits and what it’ll pay when Medicare is primary.
The employer group plan generally pays first. Delayed Medicare enrollment may be available while the current-employment coverage continues.
Group plan firstMedicare generally pays first. Ask whether the group plan would leave claims unpaid if you don't enroll in Medicare at 65.
Medicare firstRetiree, COBRA, Marketplace, and some self-employed arrangements don't protect the Part B delay in the same way.
Verify before delayingGeneral rule for someone age 65 or older. Disability, ESRD, tribal plans, and certain multi-employer plans have separate coordination rules.
Don’t settle for a general assurance that you’re “covered.” Ask the plan administrator two direct questions: “Is this coverage based on current employment?” and “If I delay Medicare, which plan will be primary after I turn 65?” Keep the written response with the plan’s Summary Plan Description and annual creditable drug coverage notice.
The Medicare and HSA Clocks Don’t Match
An HSA remains yours after 65, and the balance can continue to grow. The restriction applies to new contributions. Once Medicare coverage begins, you’re no longer HSA-eligible, even if you remain on an HSA-qualified high-deductible health plan.
For 2026, the HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage. An eligible individual age 55 or older can contribute an additional $1,000.3 Those are annual limits. When HSA eligibility ends during the year, the allowed contribution may need to be calculated by month. Employer deposits and payroll deductions count toward the same limit.
Which date controls the HSA cutoff: the day you leave the practice, the day employer coverage ends, or the month you apply for Medicare? For someone enrolling well after 65, the Medicare application month can be the decisive date. Premium-free Part A generally begins six months before the month of the application, although it can’t begin earlier than the first month of Medicare eligibility. The 2026 Medicare & You handbook advises people in that situation to stop HSA contributions six months before the month they apply.1
If you enroll during your Initial Enrollment Period, the handbook generally points to the month before you turn 65 as the last contribution month. Someone whose birthday falls on the first day of a month has an earlier Medicare start date and may need to make the last HSA contribution two months before the birthday month. Use the specific birthday and application date to calculate the cutoff instead of relying on an age-only rule.
Work Backward From the Medicare Application
Solutions
Enroll During the Initial Enrollment Period
Part A begins around age 65, subject to the birthday and enrollment-month rules.
Apply Less Than Six Months After 65
Part A can reach back to the first month of Medicare eligibility.
Apply Six or More Months After 65
Premium-free Part A generally reaches back six months from the application month.
Consider a firm owner who plans to apply for Medicare in October after working through the September extension deadline. If the owner is already more than six months past 65, Part A may begin in April. The owner’s permitted annual HSA contribution would then generally be based only on the eligible months before April. The total deposited for the year must be compared with that prorated limit, so some or all of the payroll deposits made after March could become excess contributions. Would waiting until September to call the HSA custodian leave enough time to fix payroll, employer deposits, and the annual contribution calculation? Identifying April as the Medicare start month before those deposits are scheduled gives everyone time to act.
Excess HSA contributions aren’t deductible, and excess employer contributions are generally included in gross income. A 6 percent excise tax generally applies for each tax year the excess remains in the account. The excise tax may be avoided if the excess contribution and its associated earnings are withdrawn by the due date of the tax return, including extensions.3 The HSA custodian and tax professional should be involved promptly if a retroactive Medicare date reaches months in which contributions were made.
The Eight-Month Part B Window Doesn’t Protect HSA Contributions
Someone covered by a qualifying employer group health plan based on current employment can generally enroll in Part B while that employment and coverage continue, or during the eight months after the employment or group coverage ends, whichever occurs first.4 That Special Enrollment Period can prevent a Part B late enrollment penalty.
An eight-month Part B window might sound like eight more months to fund the HSA, but it isn’t. The HSA stop date follows the effective date of Medicare coverage, including any retroactive Part A coverage. Waiting until the seventh or eighth month of the Part B Special Enrollment Period can create a coverage or HSA problem if you assumed both clocks worked the same way.
COBRA creates another common misunderstanding. Electing COBRA after current employment ends doesn’t restart or extend the eight-month Part B Special Enrollment Period. Medicare states that the period begins when employment or the job-based insurance ends, even if COBRA is elected.5 Retiree coverage is also based on former employment, so it shouldn’t be treated as current-employment coverage.
Prescription coverage has a separate deadline. Employer drug coverage is creditable when it’s expected to pay, on average, at least as much as Medicare drug coverage. Going 63 days or more without Medicare drug coverage or other creditable coverage can lead to a Part D late enrollment penalty.6 Keep each annual creditable coverage notice because you may need it when you enroll later.
Social Security Can Trigger Part A
If you’re already receiving Social Security benefits at 65, Social Security says you’ll be automatically enrolled in Part A.4 That can end HSA contribution eligibility even if you’d planned to delay Medicare while continuing to work.
Could a Social Security filing change the tax treatment of HSA deposits you’ve already made? It can. When Social Security is claimed after 65, the application can bring premium-free Part A coverage back as many as six months, subject to the age-65 limit.1 A decision framed as “when should I claim Social Security?” can therefore reach back into the HSA contribution record.
Before filing either application, review the HSA ledger and employer payroll deposits. If a spouse contributes to a separate HSA, review that account separately. Medicare enrollment is individual, and one spouse’s enrollment doesn’t automatically end the other spouse’s eligibility. Each person still has to satisfy the HSA rules for the months in question.
Keep the HSA After Contributions Stop
Losing contribution eligibility doesn’t mean the HSA has lost its value. Stopping contributions doesn’t require you to close or spend down the account. The HSA can remain invested, and qualified medical distributions can remain tax-free. That makes the existing balance useful for a retirement budget that includes deductibles, copayments, dental care, hearing expenses, and other qualified costs.
After age 65, HSA funds can generally pay Medicare and certain other health coverage premiums tax-free. Medicare supplemental policy premiums, including Medigap premiums, are excluded from that treatment.7 The account can also be used for nonmedical spending after 65 without the additional 20 percent penalty, although those withdrawals are generally included in taxable income.
The existing balance can still support a broader strategy for using an HSA for long-term healthcare costs. The important change at Medicare enrollment is the end of new contribution eligibility, not the loss of the account.
Include IRMAA in the Enrollment Review
Medicare timing also affects household cash flow. The standard Part B premium is $202.90 per month in 2026. Higher-income beneficiaries pay more for Part B and Part D through the income-related monthly adjustment amount, commonly called IRMAA.8
What income will Medicare see when it calculates your first premium? For 2026, IRMAA begins when modified adjusted gross income from the applicable prior tax return exceeds $109,000 for most individual filers or $218,000 for married couples filing jointly. Social Security generally uses the 2024 return to set 2026 premiums.9 A CPA owner who had strong practice income two years before Medicare may enter the program with a premium based on income that no longer reflects the household’s current situation.
A work stoppage or reduction in work hours can support a request for a new IRMAA determination when it causes modified adjusted gross income to fall. Social Security uses Form SSA-44 for this request.9 The documentation and income estimate still need to support the filing. Taxable gain or ordinary income from a practice sale, pass-through income or gain from the final partnership year, a Roth conversion, or a large capital gain can keep modified adjusted gross income elevated even after regular work has ended. Gross sale proceeds and partnership distributions don’t automatically equal income for IRMAA purposes because the taxable amount and character of each item control.10
Because IRMAA affects retirement through a generally two-year tax-return lookback, someone working beyond 65 should estimate the first two Medicare years using expected filing status, practice income, taxable income or gain from a practice sale, partnership pass-through items, investment income, tax-exempt interest, and planned taxable retirement-account transactions.9
Put These Four Dates in Writing
Complete this before changing payroll, filing for Social Security, or submitting a Medicare application.
How to Sequence the Final Working Year
- Confirm the coverage classification. Ask the insurer and plan administrator whether the plan is based on current employment, whether it's a qualifying group health plan for Medicare enrollment purposes, and which payer is primary after age 65.
- Choose the Medicare application month. Base it on the expected end of current employment coverage and allow enough time to avoid a gap. Don't assume COBRA will preserve the Part B enrollment window.
- Calculate the Part A effective date. Include the six-month retroactive rule and the special rule for a birthday on the first day of the month.
- Set the HSA contribution cutoff. Adjust personal, payroll, and employer contributions. Review the annual limit by eligible month and coordinate any corrective distribution with the tax professional and HSA custodian.
- Coordinate Social Security and IRMAA. Make sure a Social Security filing doesn't unexpectedly trigger Part A, and estimate Medicare premiums using the applicable prior-year income plus any planned practice transaction or retirement-account move.
Begin this review several months before the intended transition. Benefits administrators, Social Security, Medicare, payroll providers, and HSA custodians each handle one part of the process. None of them is likely to maintain the full retirement timeline for you. If no one owns the complete calendar, who’ll catch a date that falls between two specialties?
In Conclusion
Working past 65 can give a CPA firm owner more time to earn, save, and prepare the practice for a transition. It can also preserve HSA contribution eligibility when the employer coverage and enrollment facts support the delay. But what’s the value of another year of HSA funding if a retroactive Part A date later makes several months of those deposits ineligible?
You don’t need to guess. Start with the coverage tied to current employment and confirm which payer is primary. From there, work backward from the Medicare application month to establish the HSA cutoff, coordinate Social Security, preserve proof of creditable drug coverage, and estimate the first years of IRMAA. A few months of advance coordination can protect the retirement plan from a preventable correction, enrollment penalty, or coverage gap.
If you'd like help putting those dates into one retirement plan, schedule a meeting with a CPA Retirement Solutions retirement specialist. We can help coordinate the healthcare decision with your practice transition, Social Security strategy, retirement income, and household cash flow.
Sources
1 Centers for Medicare & Medicaid Services, Medicare & You 2026, pages 19–20.
2 Medicare.gov, “Who Pays First?”.
3 Internal Revenue Service, Revenue Procedure 2025-19, 2026 HSA inflation-adjusted amounts; Internal Revenue Service, Publication 969, “Health Savings Accounts and Other Tax-Favored Health Plans”.
4 Social Security Administration, “When to Sign Up for Medicare”.
5 Medicare.gov, “Working Past 65”.
6 Medicare.gov, “Creditable Prescription Drug Coverage”.
7 Internal Revenue Service, Publication 969, “Insurance Premiums”.
8 Centers for Medicare & Medicaid Services, “2026 Medicare Parts A & B Premiums and Deductibles”.
10 Internal Revenue Service, Publication 544, “Sales and Other Dispositions of Assets”; Internal Revenue Service, Publication 541, “Partnerships”.
This article is provided for educational purposes only and does not constitute tax, legal, or investment advice. CPA Retirement Solutions does not provide tax or legal advice. Please consult a legal or tax professional for specific information regarding your individual situation.
