HSA Council-Endorsed Bill Would Allow Some Working Seniors to Contribute
By William G. Stuart | Originally posted on LinkedIn for MaxHSA
A new bill addresses a conflict between Health Savings Account law and Medicare that disqualifies some, but not all, working seniors from making and receiving contributions to their accounts.
The American bankers Association Health Savings Account Council has endorsed legislation introduced by US Rep. Michelle Fischbach (R-MN) that would permit otherwise-HSA-eligible working seniors who collect Social Security benefits to continue to accept employer contributions and deposit a portion of their own pay on a pretax basis into their Health Savings Accounts. The Hardworking Senior Act, H.R.10072 targets a Medicare rule that harms only working seniors who want to continue to fund their Health Savings Account to reimburse current qualified medical expenses or build balances to cover the same expenses and more in retirement.
Twice in the past eight years, Congress has passed a version of this legislation (with strong bipartisan support in 2018) as part of a larger bill to expand Health Savings Accounts and make technical corrections. Both times, the Senate did not bring the provision to the floor for a formal vote.
The HSA Council has been at the forefront of this issue for more than a decade. The Council, composed of the leading administrators and thought leaders in the Health Savings Account market, has supported prior legislation, educated members of Congress on the issue, and worked with regulatory agencies to seek relief for affected working seniors.
The Issue
Under current tax law, individuals cannot contribute to a Health Savings Account during any month that they are enrolled on any Part of Medicare. This restriction affects three distinct groups of people:
Those who are covered only by Medicare. They do not benefit from this bill.
Those who work in a business with 19 or fewer employees. In this case, the group insurer usually requires employees age 65 and older to enroll on Medicare Part A and Part B, even if they also are covered on the employer-sponsored plan. Medicare is the primary payer (claims are sent to Medicare first, and paid according to Medicare's policies), and commercial insurers do not want to pay claims that another payer is required to reimburse. They do not benefit from this bill.
Those who continue to work after age 65, are covered on their company's HSA-qualified medical plan and meet all eligibility requirements to contribute to a Health Savings Account, but also supplement their pay by collecting Social Security benefits. Anyone age 65 or older who receives a monthly Social Security benefit is automatically enrolled on Medicare Part A, even if the person maintains other coverage. These working seniors are disqualified from contributing additional funds to their account. This bill addresses this issue head-on.
Interestingly, Congress never passed a law tying Part A enrollment to collecting Social Security benefits at age 65 or older. This provision was added to Procedural Operations Manual System (POMS), the Medicare administrative playbook, by regulators. It does not affect any other employee benefit because eligibility for no other benefit is erased based on enrollment in any Part of Medicare.