HSA and Medicare Rules: The Open Enrollment Decisions That Catch People Working Past 65

Medicare Open Enrollment runs October 15 through December 7, and most employer benefit windows open alongside it. Most of what arrives in the packet is routine. One thing is not: the point where HSA and Medicare rules collide. People who work past 65, keep funding a health savings account, and then file for Social Security often find out the following April that months of contributions were never allowed. Payroll processed them correctly. They were still excess contributions.

What follows is how that happens, what the current limits actually are, and which fall elections are genuine decisions rather than paperwork.

Two enrollment seasons, often confused

Medicare Open Enrollment, October 15 through December 7, is for people already on Medicare. During it you can join, switch, or drop a Medicare Advantage plan; join, switch, or drop a Part D drug plan; and move between Original Medicare and Medicare Advantage. Changes take effect January 1.

Employer open enrollment is a separate window, set by the employer. It governs the health plan itself, the HSA payroll election, the FSA election, and life and disability coverage.

If you are 65 or older and still working, both can apply in the same month, and the two interact.

On the Medicare side, CMS projected on September 28, 2026 that the weighted average monthly Medicare Advantage premium will fall from $14.37 in 2026 to $12.00 in 2027, and that the average stand-alone Part D premium will rise less than $1, from $35.09 to roughly $36. Those are national averages. Formularies, networks, and tiering change more year to year than premiums do, and only the specific plan in front of you matters.

HSA and Medicare rules: the six-month Part A lookback

The rule that does the damage is short. Once you are enrolled in any part of Medicare, including premium-free Part A, you are no longer an eligible individual for HSA purposes. IRS Publication 969 puts it plainly: “Beginning with the first month you are enrolled in Medicare, your contribution limit is zero.”

The trap is in how that enrollment gets dated. Medicare.gov states that for someone signing up after 65, “Your Part A coverage starts 6 months back from when you sign up or when you apply for benefits from Social Security,” and that coverage cannot start earlier than the month you turned 65.

So Part A enrollment is routinely backdated six months, and HSA eligibility ends retroactively along with it. Contributions made during those months become excess contributions. Publication 969: “Generally, you must pay a 6% excise tax on excess contributions” — and that tax applies for each year the excess stays in the account.

A worked example

Take a 67-year-old still working at a Baton Rouge firm with 40 employees, covered by the company's family high-deductible plan, and contributing the 2027 maximum: $9,000 plus the $1,000 catch-up for those 55 and older, so $10,000 for the year, spread evenly across payroll.

He retires September 30, 2027 and files for Social Security that month. Social Security enrolls him in premium-free Part A, backdated six months to March 2027.

•      HSA-eligible months in 2027: January and February only

•      Prorated limit: $10,000 × 2/12 = about $1,667

•      Contributed through September: about $7,500

•      Excess contribution: about $5,833

He has to withdraw that excess, plus the earnings attributable to it, by his tax filing deadline, or pay the 6% excise tax for every year it remains. The figures in this example are hypothetical; the limits and the six-month rule applied to them are the published ones cited above.

The fix is a calendar, not a form

The whole problem disappears if HSA contributions stop at least six months before the month you intend to apply for Medicare or for Social Security. If a 2027 retirement date is realistic, this fall's open enrollment is when that payroll election needs to change — not the week before the retirement party.

Two related mechanics are worth knowing:

•      The last-month rule carries a testing period. Someone eligible on December 1 may be treated as eligible for the whole year, but the testing period runs through the end of the twelfth month following — and losing eligibility inside it pulls part of the contribution back.

•      The account still works after 65. HSA distributions pay Medicare Part B, Part D, and Medicare Advantage premiums tax-free, though not premiums for a Medigap or other supplemental policy. And after 65, non-medical withdrawals no longer carry the additional 20% tax; they are simply taxable income.

What you can actually contribute: 2026 and 2027

Limits from Rev. Proc. 2025-19 (2026) and Rev. Proc. 2026-24 (2027). The $1,000 catch-up is fixed in statute and does not index to inflation.

One detail that gets missed: the catch-up is per person, not per household. A married couple who are both 55 or older cannot stack two catch-up contributions into one account — the second spouse needs an HSA in their own name.

The FSA election that quietly disqualifies an HSA

For plan years beginning in 2026, the health FSA salary reduction limit is $3,400, with a maximum carryover of $680.

A general-purpose health FSA makes a person ineligible to contribute to an HSA. So does a spouse's general-purpose health FSA, because it can reimburse the other spouse's expenses. A limited-purpose FSA — restricted to dental, vision, and preventive care — does not.

That makes it an open enrollment decision rather than a technicality. One box checked on a spouse's benefits portal, in a different company's system, can invalidate a year of HSA contributions on the other side of the household. Dependent care FSAs are a separate arrangement and do not affect HSA eligibility.

What a retirement date does to Medicare premiums two years later

Fall elections usually travel with a retirement date, and a retirement date shows up in Medicare premiums on a two-year delay.

The 2026 standard Part B premium is $202.90 a month, with a $283 annual deductible. Above certain income levels an income-related monthly adjustment amount is added on top. As SSA describes it: “To determine your 2026 income-related monthly adjustment amounts, we use your most recent federal tax return the IRS provides to us” — generally the 2024 return.

The practical consequence is that a single large income year — a Roth conversion, a business sale, a deferred compensation payout, an option exercise — raises Part B and Part D premiums two years afterward. These thresholds are cliffs rather than phase-ins: one dollar over the line moves the entire premium to the next tier, for both spouses if both are on Medicare.

When income falls because of a life-changing event, Social Security allows a request to recalculate using Form SSA-44. Work stoppage and work reduction are on the list of qualifying events, which is exactly the situation of someone who retires in the year a high-income return is still driving the surcharge.

Four more items if you are working past 65

•      Who pays first. If the employer has 20 or more employees, the group health plan pays first and Medicare pays second. With fewer than 20 employees, Medicare pays first and the group plan pays second — which usually means Part B needs to be in place on time.

•      The eight-month window. A Special Enrollment Period for Part B runs “during the 8-month period that begins the month the employment ends or the group health plan coverage ends, whichever comes first.”

•      Penalties are permanent. The Part B late enrollment penalty adds 10% for each year you could have signed up and did not. The Part D penalty is 1% per month without creditable drug coverage. Both continue for as long as you hold the coverage.

•      The Initial Enrollment Period is seven months — the three months before the month you turn 65, that month, and the three months after.

A Louisiana note

Louisiana's individual income tax has been a flat 3% for taxable periods beginning on or after January 1, 2025. Flattening the rate removes something that still complicates this analysis in graduated-rate states: the state-level rate no longer varies with the size of a conversion or a sale, so bracket-stacking decisions here are close to a purely federal exercise. None of it changes the Medicare mechanics above, which are federal in every respect.

Frequently asked questions

Can I contribute to an HSA if I am enrolled in Medicare?

No. Per IRS Publication 969, beginning with the first month you are enrolled in Medicare — including premium-free Part A — the HSA contribution limit is zero. For the year you enroll, the annual limit is prorated by the number of months you were eligible.

Does Medicare Part A really go back six months?

For someone who signs up after turning 65, yes. Medicare.gov states that Part A coverage starts six months back from when you sign up or apply for Social Security benefits, and never earlier than the month you turned 65.

What happens if I over-contributed to my HSA because of Medicare?

The amount above the prorated limit is an excess contribution. Withdrawing it, along with the earnings attributable to it, by the tax filing deadline avoids the 6% excise tax. Left in the account, the 6% applies for each year it remains.

Can I use HSA money to pay Medicare premiums?

Once you are 65 or older, HSA distributions for Medicare and other health coverage premiums are qualified — Part B, Part D, and Medicare Advantage among them. Premiums for a Medicare supplemental policy such as Medigap are specifically excluded.

When is Medicare open enrollment?

October 15 through December 7 each year, with changes effective January 1.

Where this usually lands

Almost none of this is about picking a better plan. It is about sequencing: when contributions stop, when an application is filed, which income year a conversion falls in, and what a spouse elects in a different employer's portal. Those are calendar decisions, and the fall window is when most of them get locked in for the following year.

Sources

IRS Publication 969 and Rev. Proc. 2025-19 / Rev. Proc. 2026-24 — irs.gov; Medicare enrollment, costs, and coordination of benefits — medicare.gov; 2026 Medicare Parts A & B premiums and CY2027 MA/Part D projections — cms.gov; IRMAA determination and Form SSA-44 — ssa.gov; Louisiana individual income tax rate — revenue.louisiana.gov

FACT CHECK

Every figure, date, age, limit, and threshold used in the post, with the source it was verified against. All sources are primary (IRS, Medicare.gov, CMS, SSA, Louisiana Department of Revenue).

Disclosures

This material is for informational purposes only and is not intended as tax, legal, or investment advice. Neither Menard Wealth Management nor its representatives may give tax or legal advice. Please consult your qualified tax and legal professionals regarding your specific situation. Benefit amounts, thresholds, and tax provisions cited are for the 2026 and 2027 plan or tax years as published and are subject to change.

Figures shown in examples are hypothetical and for illustration only. They do not represent the experience of any client and are not a projection of any individual's results.