The transition from employer coverage to Medicare usually happens while the employee is still on the payroll, so the job often falls to HR to help employees navigate this critical change.
When employees look to their HR department for help, knowing how and when to enroll in Medicare will allow you to go above and beyond. However, you can’t treat every employee the same; each employee’s situation is different.
Here are the important things to know about how to transition from employer coverage to Medicare at retirement:
For those retiring at 65
The transition from employer coverage to Medicare is quite simple when retiring at 65. Instruct your employees who plan to retire at 65 to apply for Medicare Part A and Part B (Original Medicare) during their Initial Enrollment Period.
Initial Enrollment Periods are unique to each Medicare beneficiary. This period happens during the months surrounding the beneficiary’s 65th birthday. If the beneficiary’s birthday is in June, his Initial Enrollment Period will start on March 1st and end on September 30th.
When beneficiaries apply during the first three months of their Initial Enrollment Period, their Medicare Part A and Part B start on the 1st of their birthday month. However, if they apply during their birthday month or the last three months of their Initial Enrollment Period, their Medicare will start a couple of months later.
For example, if the employee applies for Medicare one month after turning 65, his Medicare would start about two months later. If the employee applies for Medicare two or three months after turning 65, then his Medicare would start three months later. Therefore, let your employees know to apply within the first three months of their Initial Enrollment Period.
Some Medicare beneficiaries get an 8-month-long Initial Enrollment Period instead of just seven months. These people have a birthday on the 1st. For example, if an employee has a birthday on June 1st, his Initial Enrollment Period would start on February 1st instead of March 1st. If he applies for Medicare during February, March, or April, then his Medicare Part A and Part B would start on May 1st instead of June 1st.
For those retiring after 65
When employees decide to work past 65, they may be able to delay Medicare until retirement. They can delay Medicare if they continue to have creditable coverage through an active employer. The size of the employer determines whether or not the coverage is creditable.
Large employer coverage
If you work for a company that has over 20 employees, then those employees who work past 65 can delay Medicare until retirement. The large employer group plan they hold serves as creditable coverage for Part A, Part B, and Part D. However, Part A is $0 per month for most people, so you can advise your employees to enroll in at least Part A unless they have a health savings account.
After retirement, these employees will have special enrollment periods to enroll in Medicare. Your employees need to apply during these periods to avoid late penalties. They will have eight months from the day they lose employer coverage or employment, whichever happens first, to enroll in Part A and Part B. However, they only have 63 days from the day they lose employer coverage or employment to enroll in Part D, and you have to have Part A or Part B to enroll in Part D.
You will need to provide these employees with letters of creditable coverage.
Small employer and other forms of coverage
If the company is a small employer with fewer than 20 employees, the employees who work past 65 will still need to apply for Medicare Part A and Part B during their Initial Enrollment Periods. The same goes for those who have retiree insurance or COBRA. This is because these forms of coverage aren’t creditable for Part A and Part B. However, the drug coverage may be creditable for Part D.
The Initial Enrollment Period trumps all others
Some employees work a few months after turning 65. If you have any employees who have employer coverage for a couple of months after turning 65 but will lose coverage while still in their Initial Enrollment Period, they will use their Initial Enrollment Period to apply for Medicare, not a Special Election Period.
For example, if one employee’s Initial Enrollment Period is March 1st until September 30th, and he will lose employer coverage on September 30th, he must use his Initial Enrollment Period to sign up for Medicare.
That means if he applies for Medicare in September, his Medicare will start three months later. However, if he applies for Medicare in July, he shouldn’t have any gap in coverage.
When helping employees transition from employer coverage to Medicare, be sure to learn their specific situation. Once you know which scenario matches their situation best, you’ll be ready to instruct them on how and when to enroll in Medicare.