Working past 65 and Medicare: the 20-employee rule, the 8-month Part B window, and HSAs

Do you have to sign up for Medicare at 65 if you’re still working?

Not always. If your health coverage comes from your own or your spouse’s current job, and that employer has 20 or more employees, you can usually delay Part B without a penalty. If the employer has fewer than 20 employees, Medicare generally pays first, and most people should enroll in Parts A and B at 65.

The deciding question is not your age. It is where your coverage comes from, how big the employer is, and whether you put money into a Health Savings Account. The four questions below walk you through it.

Who pays first, your employer plan or Medicare?

For people 65 and older, the employer’s size decides who pays first. With 20 or more employees, the group plan pays first and Medicare pays second. With fewer than 20, Medicare pays first and the group plan only fills in after it.

That order matters because a secondary plan expects Medicare to pay its share. If you skip Part B while working for a small employer, the plan can pay as if Medicare had paid, and you may be left with the bill Medicare would have covered. Always ask the plan, in writing, how it coordinates with Medicare.

People under 65 who get Medicare because of a disability follow a different threshold: the employer plan pays first only if the employer has 100 or more employees.

Which coverage does not let you delay Part B?

Only coverage based on current employment protects you from the Part B late penalty. COBRA, retiree plans, severance coverage and Marketplace plans do not count, even though they look like the same insurance card.

This is the most expensive mistake we see. Your 8-month window to sign up starts when you stop working or when the group coverage ends, whichever happens first. It does not wait for COBRA to run out. If you ride COBRA for 18 months and then apply, you have missed the window and may owe a penalty for life.

Should you take Part A while you’re still working?

For most people, yes. Part A usually has no monthly premium if you or your spouse worked 10 years, and it can pay second to your employer plan for a hospital stay. If you already collect Social Security, you are enrolled in Part A automatically at 65.

The exception is a Health Savings Account. Once you are enrolled in any part of Medicare, you and your employer must stop contributing to an HSA. And when you sign up after 65, Part A starts up to 6 months before the month you apply, but not before the month you turned 65. Contributions made during those backdated months become excess contributions, so stop them about 6 months before you plan to apply. You can keep using money already in the account for qualified medical costs, including Part B and Part D premiums. Our HSA and Medicare guide covers the 6-month rule, your last-year contribution limit and what your HSA can pay for after 65.

How do you delay Part B without paying a penalty later?

You decline Part B while you have job-based coverage, then sign up within 8 months after the job or the coverage ends. During that window you use a Special Enrollment Period, and no late penalty applies.

To use it, you file two forms with Social Security: form CMS-40B to apply for Part B, and form CMS-L564, which your employer completes to show you had group coverage. If your employer is gone or won’t sign, Social Security accepts other proof, such as W-2s, pay stubs, health plan cards or explanation of benefits statements. You can ask for Part B to start the month after your coverage ends, so there is no gap.

If you miss the window, the penalty is 10 percent of the Part B premium for each full 12-month period you could have had Part B but did not, and it lasts as long as you have Part B. On the 2026 standard premium of $202.90 a month, two missed years add about $40.58 a month. Since 2023, Medicare also offers extra Special Enrollment Periods for exceptional situations, including when an employer or plan gave you wrong information about your coverage.

What about your prescription drug coverage?

You can delay Part D without a penalty as long as your employer’s drug coverage is “creditable,” meaning it is expected to pay at least as much as standard Part D. Your plan sends a notice each year that says whether it is.

When the employer coverage ends, you have 2 months to join a Part D plan or a Medicare Advantage plan with drug coverage, and you should not go more than 63 days in a row without creditable drug coverage. After that, the Part D penalty is 1 percent of the national base premium for each month you went without, which is $41.33 in 2027. Our Part D page and guide to choosing a 2027 Part D plan cover the plan choice itself.

How do you protect your Medigap open enrollment?

Delaying Part B also delays your Medigap open enrollment. That 6-month window starts the month you are both 65 and enrolled in Part B, and during it any company must sell you any Medigap plan it offers, with no health questions.

That makes the timing of Part B worth planning around. If you enroll in Part B while you are still covered at work, the Medigap clock starts even though you do not need a Medigap plan yet. Many people wait and start Part B when the employer coverage ends. Some states add extra protections, so check Medigap rules in your state, and read how Medicare Advantage and Medigap compare before you choose.

Is your employer plan or Medicare the better deal?

It depends on your premium share, your deductible and how you use care. Many people keep the employer plan by habit, but once you add up premiums and out-of-pocket costs, Medicare with a Medigap plan and a Part D plan is sometimes lower, especially when the employer plan has a high deductible.

Higher earners should add one more cost. If your 2024 income was above $109,000 (single) or $218,000 (married filing jointly), you pay an income-related amount on top of the 2026 Part B and Part D premiums. See the 2026 IRMAA brackets, or run your numbers in our IRMAA calculator. Enter your own numbers below to compare.

What should you do in the 90 days before you stop working?

Work backward from the date your job or coverage ends. Most problems come from starting too late, not from the forms themselves.

If you are also deciding when to start benefits, see how Medicare works with Social Security and our turning 65 enrollment checklist.

What if you’re the employer?

If you have 20 or more employees, Medicare Secondary Payer rules require your group plan to treat workers 65 and older the same as younger workers, and you cannot offer incentives for them to drop the group plan and use Medicare instead.

Smaller employers have more room, and a reimbursement arrangement can help. A QSEHRA can reimburse an employee’s Medicare premiums, and an ICHRA can too when the employee has Medicare Parts A and B or a Medicare Advantage plan, subject to Medicare Secondary Payer limits for larger employers. See how ICHRA and QSEHRA compare, and confirm the tax treatment with your CPA.