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Health Savings Account (HSA) Eligibility –

Medicare Rules

An individual can become entitled to Medicare benefits O Mere eligibility for Medicare benefits (without
under Title XVIII of the Social Security Act for three reasons: enrollment) will not disqualify an individual from

– Age, HSA eligibility
– Disability, or O An employee will lose HSA eligibility as of the first day
– End-stage renal disease (ESRD) of the month the employee enrolls in Medicare
O If an employee is enrolled in an HDHP medical plan
O After enrolling in Medicare, the employee may stay
with an HSA before enrolling in Medicare, the HSA
enrolled in the HDHP medical plan, but the employee
funds will continue to be available to pay for qualified
and employer HSA contributions to the savings
medical expenses, but neither the employee nor
account must be discontinued
employer can make contributions to the HSA once
O Individuals entitled to Medicare are not eligible to
enrolled in Medicare
open or contribute to an HSA
O To be entitled to Medicare, an individual generally – The “qualified medical expenses” that can be
must be both eligible and enrolled reimbursed on a tax-free basis by HSAs are
limited to expenditures for medical care, as
– Medicare enrollment is automatic for some
defined in Code Section 213(d) for the HSA
individuals (e.g., individuals who are receiving
account holder and his or her legal spouse and
Social Security benefits) tax dependents, to the extent those expenditures
– Other individuals are eligible for Medicare, but
are not reimbursed by insurance or from any
must file an application in order to be entitled to
other source
benefits (e.g., working individuals beyond age – Health insurance premiums (other than for a
65 who are eligible to receive Social Security
Medicare supplemental policy) for an HSA holder
benefits, but have not yet applied for them)
who is age 65 or older, can be paid or reimbursed
through an HSA, on a tax-free basis, including
medical premiums for an employer’s insured or
self-insured retiree health coverage

IRS rules state that you can’t contribute to an HSA if you’re enrolled in Medicare. You draw funds already in the account
but you can’t add to them. So it’s important to know how you can get around this rule if you have an HSA at work and
want to continue working beyond age 65. For additional information, please contact the Social Security Administration
at 1-800-772-1213.

IRS Notice 2004-50 states that an employer is only responsible for determining whether the employee is covered
under HDHP or any low-deductible health plan sponsored by the employer, including Health Care Flexible Spending
Accounts (HCFSAs) and health reimbursement arrangements (HRAs). If you are unsure about whether or not you are
eligible to contribute to an HSA, please contact your tax consultant.

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