Signing Up For Medicare Explained
This presentation is designed to help individuals approaching age 65 or thinking about retiring through the process of signing up for Medicare benefits. It covers whether or not they need to apply or will be automatically enrolled, an overview of the election periods, the late enrollment penalty, and what to do if they need to delay enrolling.
The first thing to consider when enrolling in Medicare is whether or not you will be automatically enrolled. Individuals that are already collecting their Social Security income payments and have worked their 40 quarters to qualify for premium-free Part A, will automatically be enrolled starting the month they turn 65.
If the beneficiary has not yet elected to receive their Social Security payments, they will be required to sign up for their Medicare Part A and Part B benefits. This can be done during the Initial Enrollment Period (IEP), General Enrollment Period (GEP), or Special Enrollment Period (SEP), if applicable.
When to Sign Up
The Initial Enrollment Period is the first opportunity for a beneficiary to sign up for benefits. It begins 3 months before the month they turn 65, includes the month the turn 65, and three months after the month they turn 65.
Depending on when they sign up during this 7-month period will determine when their benefits go into effect. Best advice, sign up prior to the month they turn 65 to avoid any delays. Here is the chart that Social Security and Medicare use to determine when benefits begin for those that sign up during the IEP:
This is important to understand, especially those who are trying to align the date they are retiring or losing group employment, as their desired Medicare start date may not be feasible based on the chart.
If an individual does not enroll during their IEP, they can sign up during the General Enrollment Period. The GEP happens every year, from January 1st through March 31st, with any coverage applied for starting on the first of the next month you signed up (as of 2023 – previously the coverage would start July 1).
Late Enrollment Penalty
If beneficiaries do not sign up during their IEP, they may be subject to a Late Enrollment Penalty (LEP). The LEP equals 10% for each 12-month period they could have had Part B, and is paid for as long they are active with Part B. Also, the penalty is based on the current Part B premium, so when the Part B premium changes so will the LEP.
Special Enrollment Period
As the last option to enroll in Medicare, there exists a Special Election Period (SEP) for individuals who were covered under employer or union coverage based on their or their spouse’s current employment. In other words, the individual or their spouse needs to be actively employed and working and covered by employer coverage to use the SEP. They can apply any time they are working and covered under group/union coverage, and up to 8 months after (whichever happens first):
• The month after employment ends
• The month after group/union health insurance ends based on that employment
Even if they elect to take their COBRA coverage, which can run for 18 months after loss of coverage, they are still limited to only 8 months after loss of employment/group coverage.
Individuals that are working and covered under employer coverage may choose to delay enrolling in Medicare Parts A and/or Part B depending on the size of their employer. The number of employees as it relates to delaying Medicare is based on the TEFRA law passed in 1982, and are:
• If the employer has fewer than 20 employees:
• They should sign up for Part A and Part B when they’re first eligible
• If they don’t enroll, they may be subject to the LEP
• If the employer has 20 employees or more:
• They should ask their benefits manager whether they have group health coverage as defined by the IRS, and if so:
• They can delay enrolling in Medicare when they’re first eligible, as their group is considered primary insurance coverage.
How to: Delay Enrollment
If the beneficiary is already receiving Social Security payments, they will receive their Medicare information 3 months prior to the month they turn 65 and their Medicare card shortly thereafter. Once they receive their card, they should fill out the included form indicating that they would like to delay their Part A and/or Part B benefits and mail it back with the card.
If the beneficiary is not already collecting their Social Security payments, they would simply skip the enrollment process and either sign up during the General Enrollment Period or the Special Enrollment Period.
Delaying Enrollment – How to Sign Up
After delaying their Medicare enrollment, they will need to complete two forms in order to sign up for their benefits:
• CMS-40B: Application for Enrollment in Medicare, and
• CMS-L564: Request for Employment Information
The employer will need to complete the 2nd section on form L564 and sign, this is to certify that the client was covered under group insurance based on active employment for the purpose of avoiding the Late Enrollment Penalty. Once completed, both forms need to be submitted to Social Security.
Delaying Enrollment – Start Dates
Applying for Medicare after delaying enrollment has a big impact on when Part A and Part B benefits will take effect.
Part A will be backdated 6 months from the date they sign up, but not earlier than their 65th birthday month. It’s important to note, if they are contributing to a Health Savings Account, they will need to stop their contributions 6 months prior to signing up for Part A or they could be penalized by the IRS.
If the beneficiary signs up for Part B while they are still working, or during the first full month they no longer have group coverage, they can choose to have the first of the month in which they sign up as their effective date, or the first of any of the following 3 months. If they sign up during any of the remaining 7 months of their SEP, the coverage will start the 1st of the month after they sign up.
IEP vs. SEP
Sometimes, a beneficiary may find themselves in a situation where they are applying for coverage during their 7-month IEP, but are also eligible for their SEP due to group insurance. In this situation, the IEP will trump the SEP and Social Security & Medicare will follow the IEP chart to determine effective dates. If a client is going to be retiring any time during their IEP, it’s important that they sign up for their Medicare benefits at the right time, or they could run into issues of non-coverage.
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