Medicare and HSAs Don't Mix. But for Married Couples, There's a Twist.

Individuals who enroll in Medicare later in the year may be entitled to make HSA contributions for months when they are not enrolled in Medicare coverage. In other words, a prorated contribution for the year may be allowed. Clients, though, should remember the six-month retroactive window when calculating their HSA contribution limit for the partial year.

Even when clients aren’t eligible to fund an HSA, they can continue to use existing HSA funds. Those funds are available tax-free as long as they are used to pay for qualifying medical expenses, including traditional Medicare premiums for Parts A, B, C and D, but excluding premiums for supplemental Medicare programs.

Taxpayers can use HSA funds to reimburse themselves for Medicare premiums that are withdrawn directly from their Social Security benefits, but it’s important to keep records to substantiate the HSA withdrawals.

Continuing Spousal Contributions

While someone who enrolls in Medicare is no longer able to fund an HSA, that individual’s enrollment doesn’t affect a spouse’s ability to fund their own HSA. Individuals who choose to continue working after enrolling in Medicare can elect to maintain their employer-sponsored plan for the benefit of their spouse and other dependents who are not eligible for Medicare.

In these cases, the actual employee remains ineligible to fund an HSA. The spouse, however, can open and fund their own HSA based on their spouse’s employer-sponsored high-deductible health plan coverage. That spouse can fund their account up to the contribution limits for family coverage for the year.

By definition, the employee-spouse has elected family health coverage in order to provide coverage for their spouse. In 2024, the spouse can contribute up to $8,300 to their HSA (increasing to $8,550 in 2025). If the spouse is age 55 or older, they can also take advantage of a $1,000 catch-up contribution.

Note that while joint HSAs don’t exist, the two spouses can use the funds in each other’s HSAs without any limitations.

When a high-deductible health plan participant’s spouse enrolls in Medicare, the participant can continue to fund their HSA. However, it’s possible that their contribution limit may change from the family to individual coverage limit ($4,300 in 2025 and $4,150 in 2024) if the participant-spouse no longer maintains family coverage. If the participant-spouse maintains family coverage, they continue to enjoy the family coverage contribution limit even though their spouse cannot contribute after enrolling in Medicare.