I have an employee who is turning 65 next July. He will be taking Medicare. He is currently on the CDHP plan. Does he need to change his plan now or will that be a SQE in July?

He may stay enrolled in the CDHP plan for 2020, and once he enrolls in Medicare you can notify Benefits Administration that he wishes to cancel his coverage through the state-sponsored plan completely by submitting a cancel request form.  What is important for him to know, however, is that he may not provide the full IRS-approved HSA contribution to his HSA for 2020 since he will not have HSA-approved coverage for the full 12 months of 2020.  The full HSA contribution amounts for 2020 are (and these include any employer contribution as well, if your agency provides such):

Single coverage       $3,550 + $1,000 catch up contributions if over 55 =$4,550                           

Family coverage       $7,100 + $1,000 catch up contributions if over 55 =$8,100

The final year’s HSA contribution is pro-rated in the year you turn 65. 

Example:

Jim was covered by a self-only CDHP and eligible for an HSA in 2020 but turned 65 on July 2, 2020, and enrolled in Medicare. Jim lost eligibility for an HSA as of July 1, 2020. For 2020, Jim was eligible for six months of the year. The federal HSA limit for Jim is $4,550 ($3,550 individual HSA limit plus a $1,000 catch-up). Accordingly, Jim’s calculation is 6/12 X $4,550 = $2,275. Jim’s maximum contribution for 2020 is $2,275.

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