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Is Enrolling in Medicare at 65 Required While You're Still Working?

Is Enrolling in Medicare at 65 Required While You're Still Working?

September 29, 2023

Over the past forty years, reaching the age of 65 used to signify the moment for exiting your job, initiating your pension, claiming Social Security benefits, and enrolling in Medicare. However, times have changed.

The landscape of retirement has transformed. The designated age for receiving full Social Security benefits now ranges from 66 to 67. The conventional company pension has been eclipsed by 401(k) plans, typically received as a lump sum upon leaving employment at any age rather than as monthly payments starting at 65. Even more noteworthy is the trend of numerous baby boomers extending their work lives well into their late 60s or even into their 70s.

Nonetheless, one aspect that hasn't changed is the eligibility age for Medicare, which remains firmly fixed at 65. In fact, most individuals are obliged to enroll in Medicare upon turning 65; otherwise, they may encounter potential penalties. This raises the question: Why is this the case? The answer lies in the functioning of the national health insurance system. Its effectiveness hinges on the participation of all individuals, whether healthy or ill. The system falters if everyone delays enrollment until they become sick. Medicare imposes penalties on those who fail to enroll as required to prevent this.

Coverage Provided By The Employer

There is a single exemption from the obligatory Medicare enrollment at age 65. If you or your spouse is still employed and you have coverage through an employer group plan encompassing 20 or more employees, there's no need to sign up for Medicare upon reaching 65. You can remain under your employer's group plan coverage as long as you or your spouse continues to work. Nevertheless, once this employer-provided coverage concludes, enrolling in Medicare becomes essential to avert potential penalties.

This signifies that Medicare enrollment is mandatory if you're retired and covered by a retiree plan or under COBRA upon turning 65. Similarly, Medicare enrollment is required if you're retired or self-employed with coverage from an individual health insurance policy upon turning 65. In the case of being employed and covered by an employer plan applicable to less than 20 employees at the age of 65, Medicare enrollment is also necessary. The sole exemption from the mandatory Medicare enrollment at 65 arises when you're covered by an employer group plan catering to 20 or more employees.

What Are The Consequences of Not Enrolling In Medicare at the Designated Time?

There are two significant outcomes. Firstly, you might face a late enrollment penalty when you eventually decide to enroll. This penalty will be added to your regular Part B premium and persist throughout your lifetime. This penalty amounts to 10% of the Part B premium for each 12-month period during which you were supposed to have Part B coverage but did not.

The second consequence carries more severe implications. You could find yourself without health insurance coverage. In the contemporary United States, Medicare serves as the primary payer for individuals aged 65 and above unless they are covered by an employer group plan spanning 20 or more employees. If you lack coverage from such a plan and incur medical expenses, the bill will be submitted to Medicare. However, if you are not enrolled in Medicare, the bill will go unpaid by Medicare. Additionally, any other insurance you might possess, such as an individual health insurance policy or a small group health plan, will not cover the bill, as it falls within Medicare's responsibility. This could even extend to them not paying their designated portion of the bill, typically the remaining 20% after Medicare's contribution.

If you continue working beyond 65 and are unsure about how your health insurance aligns with Medicare, it's advisable to consult your benefits administrator or your current health insurance provider. Even if you maintain coverage through an employer group plan, you might receive guidance to sign up for Part A. Alternatively, you might need to enroll in both Part A and Part B or transition to a distinct form of health insurance that complements Medicare. However, the one thing you should not overlook is Medicare once you reach 65.

Source:Elaine Floyd, CFP®, is the Director of Retirement and Life Planning, Horsesmouth, LLC.

Jason Frederico is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 5280 CARROLL CANYON ROAD, SUITE 300, SAN DIEGO CA, 92121, 619-6846400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License #0G14394 | Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. | 2023-161947 Exp. 09/25

This material is intended for general use. By providing this content Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian and its subsidiaries do not issue or advise with regard to health insurance.