HSA rules when a spouse goes on Medicare and the other spouse is younger

By Kelly Holland

July 30, 2021

When an employee of a corporation has medical coverage as Employee & Spouse, and the employee turns Age 65 and goes on Medicare, below is some FAQ’s regarding the spouse’s medical & HSA coverage.

Q: If a subscriber on an employee/spouse plan goes on Medicare and now the spouse is on the HDHP, does the spouse have to open his/her own HSA and begin contributing to that one?  If yes, does she have to worry about the year-to-date family contributions?

A: Yes to both. Since the policy holder is no longer eligible and HSAs are individually owned accounts, it will mean the spouse needs to enroll in her own HSA.  The IRS will look at the combined contributions of their 2 accounts for the year, which cannot exceed the family limit.  If she’s over 55, she is also eligible for the $1000 catch up option.

Q: Can the subscriber continue to pay the spouse’s eligible medical claims using the HSA funds?

A: Yes, funds can cover eligible expenses for himself, spouse and any other dependents.

Q: Can that subscriber pay Medicare premium or Medicare Supplement premium with his HSA funds?

A: If he’s over 65, premiums are eligible, but supplemental insurance like Medigap is not.  One perk of being over 65 with an HSA, is even if something is ‘not eligible’, you can still pay for the item, bill, premium, etc. and there’s no penalty. He’ll only pay regular income tax on the amount(s) that fit this criteria.

Q: How else can the Medicare employee use his/her HRA funds?

A: Funds can continue to be used for eligible medical expenses and pay for or reimburse Medicare Premiums. If he’s 65 and older, he can use his HSA dollars for non-eligible items, without penalty, but he’ll pay regular incomes taxes when filing.