Can HSA Funds be Used for a Spouse on Medicare?

Introduction

As you approach retirement age, your health plan needs will be changing. It is important to understand how Medicare may impact your Health Savings Account (HSA) because once you are enrolled in Medicare, you are not legally allowed to contribute to your HSA anymore. But what about your spouse who is still on the HDHP and not yet eligible for Medicare? Can HSA funds be used for a spouse on Medicare? Let's explore the rules and regulations surrounding this topic.

HSA Rules when a Spouse Goes on Medicare

When a subscriber on an employee/spouse plan goes on Medicare and the other spouse is younger and still on the High Deductible Health Plan (HDHP), there are a few considerations to keep in mind. The spouse on Medicare is no longer eligible to contribute to their own HSA, as they are no longer covered by an HDHP. However, the spouse who is still on the HDHP can continue to contribute to their own HSA. They don't have to open a separate HSA or begin contributing to their spouse's HSA.

It is important to note that the spouse on the HDHP can only contribute up to the individual contribution limit set by the IRS for that year. They cannot contribute the family contribution limit, as their spouse is no longer eligible to contribute.

Using HSA Funds for Spouse's Medicare Expenses

While the spouse on Medicare cannot contribute to their own HSA, they can still use the existing HSA funds for qualified medical expenses, including some Medicare costs. HSA funds can be used to pay for Medicare Part B premiums, Medicare Advantage plan premiums, Medicare Part D premiums, and Medicare Supplement (Medigap) plan premiums.

It is important to keep track of the eligible expenses and maintain proper documentation for tax purposes. Using HSA funds for non-qualified expenses may result in penalties and taxes.

Important Considerations

When it comes to HSA funds and a spouse on Medicare, there are a few important considerations to keep in mind:

• Enrolling in Medicare: Once you or your spouse enroll in Medicare, you are no longer eligible to contribute to your HSA.
• Spending HSA Money after Age 65: After age 65, you can withdraw HSA funds for any purpose without penalty, but you may still owe taxes on the non-qualified expenses.
• Delaying Medicare Coverage: If you are still working and have employer-sponsored health coverage, you can delay enrolling in Medicare. This allows you to keep contributing to your HSA until you retire.
• Ending HSA Contributions: Applying for Social Security benefits ends your eligibility to contribute to an HSA. It is important to plan ahead and understand the impact of Social Security benefits on your HSA.

Conclusion

In conclusion, if you have a spouse on Medicare and you are still on the HDHP, you can continue to contribute to your own HSA. Your spouse is no longer eligible to contribute to their own HSA, but they can use the existing HSA funds for qualified medical expenses, including some Medicare costs. It is important to understand the rules and regulations surrounding HSA funds and a spouse on Medicare to make informed decisions about your healthcare and retirement savings.