HSA and Medicare

Certain rules apply to Health Savings Accounts if you’re enrolled in Medicare or TRICARE.

What you need to know

It’s important to understand how Medicare and TRICARE enrollment affects your HSA. 

If you are enrolled in the Consumer Choice Plan and Medicare or TRICARE,
 be aware that you are no longer eligible to:

  • Contribute to your HSA.
  • Receive Employer Contributions into your HSA. 
However, you may be eligible to receive a Core Contribution from BMO in the form of taxable cash in your paycheck based on your salary tier:

2021 Core Contribution
Base salary tier Taxable Cash Amount (EE Only/Family)
$70,000 or less $500/$1,000
$70,001 – $130,000 $250/$500
$130,001 or more $0

Email BMO U.S. Benefits for more information.

The month Medicare coverage begins, change your HSA contribution to zero dollars to avoid a tax penalty. Keep in mind that after you enroll in Medicare, you may continue to withdraw money tax-free from your HSA to help pay for qualified medical expenses such as deductibles, premiums, copayments, and coinsurance. Note: If you made HSA contributions after your Medicare coverage started, email BMO U.S. Benefits for important information.

Delay enrolling in Medicare if you want to continue contributing pre-tax to your HSA. You will also need to delay collecting Social Security retirement benefits to avoid automatic enrollment in Medicare Part A and B.

If you delayed enrolling in Medicare on your initial eligibility date, Medicare Part A may be backdated up to 6 months prior to your actual enrollment date. HSA contributions are not allowed during this backdated coverage period.*

If your covered spouse/domestic partner is ineligible for an HSA, but you are eligible, you must limit your election to the single HSA limit minus the employer contribution if you receive one. Keep in mind, you can still use your HSA to pay for your spouse/domestic partner’s eligible expenses. 

*For questions about taxes, please consult a tax professional.

Approaching Medicare eligibility? Be sure to review the Approaching Medicare & HSA Guide.

Age 65 Distributions

Once you reach age 65, you can take penalty-free distributions from your HSA for any reason. However, in order to be both tax-free and penalty-free the distribution must be for a qualified health care expense. Withdrawals made for other purposes will be subject to ordinary income taxes.

    Using HSA Funds

    If you have an existing balance in your HSA while you are covered by Medicare, you can continue to use your available funds to pay for your eligible medical, prescription, dental and vision expenses tax and penalty-free.

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