We have our guest, Danielle K Roberts, for writing this detailed article on a, “Big Retirement Mistake”. Danielle K Roberts is the co-founder of Boomer Benefits where she and her team help baby boomers navigate their Medicare insurance options. She is a member of the Forbes Finance Council and writes frequently about Medicare, retirement and personal finance.
Because of the baby boom that started back in 1946, it’s said that there are 10,000 baby boomers who are turning 65 every day. You might think this would cause an alarming number of retirees. However, according to The Motley Fool, 65% of boomers have planned to continue working past 65 years old.
With the desire to work past 65, some baby boomers have made a common retirement mistake without even knowing it. They aren’t familiar with how Medicare coordinates with their group coverage and they sometimes delay enrollment into Medicare when they should have enrolled at 65.
If you work past 65 for a large employer and you’re enrolled in their group insurance plan, you can delay Medicare past 65 with no problem. However, if you work for a small employer, you aren’t as lucky.
They assume that because they have employer coverage of any kind, they can delay Medicare without a penalty. We’re here to tell you that that just isn’t the case, and we hope that we can help you avoid the same fate.
Working for a Small Employer Past 65
The difference between a large employer and a small employer could be one person. To classify as a large employer, the employer must have 20 or more employees. If the employer has 19 or fewer employees, they are considered a small employer in Medicare’s eyes.
If you work for a small employer, you must enroll in both parts of Original Medicare during your initial enrollment period. This is because a small employer group health plan pays secondary to Medicare. If you assume your small employer coverage is primary and delay Medicare Part B, you could end up facing a hefty lifelong late penalty on top of your premium later on when you do finally enroll.
To avoid this penalty, enroll in both Medicare Parts A and B as early as three months before your 65th birthday month or as late as three months after your 65th birthday month.
If you like your employer group coverage, you can still keep it as secondary coverage. The two will coordinate to help cut down your out-of-pocket expenses. Also, you may still be able to delay Medicare Part D since your employer group health coverage likely covers medications.
COBRA and Other Retiree Coverage
The reason why you can’t delay Medicare without penalty when you have a small group health plan is that Medicare doesn’t consider the group health plan to be creditable coverage. To be creditable coverage, the plan’s coverage needs to provide just as Medicare.
Another form of coverage that isn’t considered creditable is COBRA. COBRA offers the opportunity to extend your former health plan for up to 18 months after you have stopped
However, if you don’t enroll in Medicare within the first 8 months you have COBRA, you too will owe a late penalty for Medicare. This is because COBRA isn’t creditable coverage, so you must enroll in Part B during your Special Enrollment Period which only lasts for 8 months after you last active day of work.
Similarly, to COBRA, basic retiree coverage is also not creditable coverage for Medicare. Be sure to enroll in Medicare when you first become eligible if you have basic retiree coverage because that coverage is secondary to Medicare.
Always Confirm with Your Employer
If you choose to delay retirement, be sure to ask your employer how your group health plan works with Medicare. If it pays primary and Medicare pays secondary, you can delay Medicare. However, if your group plan pays secondary to Medicare, you’ll know you’ll need to enroll in Medicare at 65.
Because most people have earned premium-free Part A, workers who are able to delay Medicare should still consider enrolling in Part A. This coverage can supplement the hospital benefits you get through your group health plan.
You’ll also want to verify with your employer if your drug coverage through your group plan is up to par with Medicare Part D. If it is, which is usually the case, you can at least delay that to save on the premiums.
Another option for people working past 65 is to simply drop their group plan altogether and rely on Medicare for their coverage. This may be an option you consider if it would be more cost effective than staying on your group coverage.
Let us thank Danielle for her contributions, feel free to check her site (linked above) and leave comments below!