The surging popularity in Health Savings Accounts (HSAs) is for good reason as these accounts can be very helpful in paying for out of pocket medical expenses. Also, as noted in our March Elder Law Today newsletter, HSAs can also be used as a tax shelter for retirement. However, like any program, it is not for everyone. As discussed in a Time article titled, “Health Savings Accounts Have Hidden Problems for Seniors”, HSAs may not be the best plan for seniors.
An HSA is available only to those enrolled in high-deductible insurance plans. The minimum deductible for HSA qualified accounts is $1,300 for an individual or $2600 for a family. Medicare however is not considered a high deductible plan.
Enrollment in Medicare Part A and B is automatic if someone files a claim for Social Security benefits. Not only would the individual need to stop contributing to the HSA, he or she would need to do so six months before the Social Security claim due to the retroactive nature of Medicare Part A. Failure to do so can result in a tax penalty.
This “Medicare problem” has been identified by Congress with legislation introduced in February to allow HSA eligible seniors to continue to contribute to their HSA after enrolling in Medicare Part A.