Taking your HDHP into retirement – Part 4 of 4
Scott Horstman, Product Development Manager | November 15, 2018
Many people think a High Deductible Health Plan (HDHP) is designed for those who are young and rarely use their health benefits. Younger HDHP participants — in particular — have the best opportunity to fully leverage the triple tax advantages of a health savings account (HSA). However, an HDHP can also uniquely serve the needs of those in retirement.
One way an HDHP is different in retirement is that Medicare disqualifies making continued contributions to an HSA. In this instance, where Medicare prevents additional HSA contributions, the plan administrator may convert the participant to a Health Reimbursement Arrangement (HRA). An HRA consists of funds set aside by the plan that the participant may use to pay for qualified expenses, including their Medicare premium.
An HDHP tailored specifically to retirees may coordinate benefits with Medicare Part A and Part B. Because the HDHP pays secondary to Medicare, expenses like deductibles and co-insurance are often waived for participants in Medicare Parts A and B. As a result, qualifying HDHP participants may have a no-deductible plan with a generally low premium that picks up most of the costs that Medicare doesn't.
For retirees who have an HSA balance, the HSA can continue to be used for qualified medical expenses. Or the money can be left in the account until age 65, at which time it converts to the rules of a traditional IRA. This makes the HDHP a versatile plan for many life stages!
Information shared in this article should not be taken as legal or tax advice as HDHPs may not be the best choice for everyone. To help you determine if an HDHP is right for you, consult with a trusted tax or legal adviser and review IRS publications 502 and 969.