Reader Q&A

Medicare Enrollment Problem

How to File for Social Security Benefits

Medigap Effective Date

Tax Treatment of Health Savings Account Contributions

Medicare Enrollment Problem

Question: My wife and I are running into some issues in getting her qualified to participate in a special enrollment period (SEP) for Medicare due to her loss of employment coverage. She was born in 1948 and thus turned 65 in 2013. Since turning 65, she has had employer health insurance except for a 10-month period in 2015-2016. Medicare is saying this break in coverage prevents her from qualifying for an SEP and wants to charge her a late-enrollment penalty that will add 10 percent to her monthly Part B premium. This is bad enough, but they also say her inability to get a SEP means the earliest she can get Medicare in next July, leaving her without any health insurance at all!

Does this sound right to you?

Mike and Karen

Answer: Unfortunately, it does sound plausible. Her break in coverage in 2015 triggered an SEP but because she did not enroll then, her efforts to enroll now will trigger a late-enrollment fee and cause her to forego the quick-enrollment benefits of an SEP. Of course, you probably were unaware of Medicare’s rules but Medicare couldn’t function if it had to grant exceptions to its often complex rules because people didn’t know about such rules.

I suggest calling a Medicare counselor at the State Health Insurance Assistance Program (SHIP) or the Medicare Rights Center and see if they have any ideas for getting Medicare to change its mind, or to find your wife temporary health coverage until next July.

How to File for Social Security Benefits

Question: I want to thank you from the bottom of my heart for your Social Security book, Get What’s Yours. It has changed my life. Thanks to your book, I learned two years ago that I could collect on my previous husband’s Social Security while, per your instructions, I continued to allow my benefits to increase. I turn 70 soon and understand that I must begin taking my Social Security at that age. I am sheltering at home during this pandemic. What do you recommend I do in order to CORRECTLY notify the Social Security Office, and how should I best do that?


 Answer: Given the complexities of Social Security that were presented in the book, my answer may surprise you. Enroll online! If this doesn’t work for any reason, call your local Social Security office and enroll over the phone or, if requested, make an appointment to enroll in person. I used online enrollment to sign up for my benefits and it was a snap. Your enrollment should be no problem as well. When you enroll, make sure that you receive your benefits under your own Social Security number and not your husband’s, which most likely was the number assigned to you when you began getting spousal benefits. Having your own My Social Security online account is also a good idea.


Medigap Effective Date

Question: Since I can’t purchase Medigap supplement coverage until I am already enrolled in Part B of Medicare, how do I avoid a gap in coverage between the time I am enrolled in Part B and the time my Medigap coverage begins?  By the way, your books are great.  Looking forward to the new one in January.


 Answer: This should not be a problem. Once you’ve selected the Medigap plan you’d like to purchase, call the insurance company you select and a representative (or an insurance broker, if you use one) will make the effective coverage date the same as your Part B coverage date.


Tax Treatment of Health Savings Account Contributions

Question: I am wondering if the years donating to a health savings account (HSA) prior to retirement will reduce my Social Security payments? Does the government base benefits on the gross salary I earn prior to my HSA deduction or the net figure?


Answer: Your HSA contributions are not subject to payroll taxes so I suppose you could say this will reduce the earnings base used to determine your Social Security benefits. However, I cannot conceive of a situation where shielding your HSA contributions from taxes would not produce a financial gain greater than any future benefit reductions.

Here’s more on the topic from the Society for Human Resource Management (SHRM):

“Among employees’ common misperceptions about health savings accounts (HSAs) is a lack of awareness that payroll-deferred HSA contributions are not subject to Social Security and Medicare (FICA) and federal unemployment (FUTA) taxes. So when employees contribute to their HSA through a payroll deduction, the money is excluded from federal income taxes and FICA/FUTA taxes.

“Two states—California and New Jersey—impose state income taxes on wages contributed to HSAs. Other states allow deductions on state income taxes for HSA contributions.

“HSA funds withdrawn for qualified medical expenses are not treated as taxable income.

“In comparison, with a traditional 401(k) plan account, no income taxes are deducted on employees’ payroll-deferred contributions, although FICA and FUTA taxes will be taken from amounts deferred; income taxes are then owed on withdrawals made during retirement. For a Roth 401(k) account, income and FICA/FUTA taxes are deducted from contributions, while withdrawals during retirement are tax free.”