Employee Benefits Blog

Human resources personnel are used to helping older employees transition into retirement. But now that baby boomers are retiring en masse, it seems to be happening all the time. In fact, as many as 10,000 baby boomers are putting in their retirement papers every single day, and while not all 10,000 will be in your company, you’ll probably be dealing with quite a few.

As all these boomers retire, your employee benefits package may need to undergo some changes and you may experience a shift in the cost of providing medical benefits as well. Here are some of the things you need to keep in mind as the baby boomers on your staff begin to retire.

Employee Benefits and Medicare

As your baby boomer employees near retirement age, some of their spouses might be a step ahead of them. The way employee benefits work with Medicare is sometimes complicated — especially when it comes to HSAs, which may be a major theme of the bulk of questions posed by those looking to retire. If your employees need to learn more about how to navigate Medicare, and if they should drop their spouse from your employer-sponsored coverage, make sure you’re as informed as possible regarding the regulations at hand before advising them.  

A frequently asked question by those turning 65 concerns penalties. People who are still working and enrolled in an employer-sponsored health plan aren’t likely to incur penalties for enrolling in Medicare late. However, it’s common for people turning 65 to enroll in Medicare Part A even if they’re still enrolled in their employer-sponsored program because it’s free (provided that the person has worked and paid into Medicare for at least ten years).

Around 10,000 baby boomers turn 65 every single day, which means 10,000 more people become eligible for Medicare. If your human resources department hasn’t yet been inundated with questions from your older employees about Medicare eligibility, they will at some point — and soon.

After all, many boomers are choosing to work a bit longer than the standard retirement age of 65 for a variety of reasons — some are still physically able to work, so they’re taking advantage of it, others are trying to save more for retirement (because so many people haven’t saved nearly enough, if anything), and others just aren’t ready to give up their day jobs yet.

It’s possible that some of your employees have deferred Medicare eligibility because they haven’t actually retired yet, but some people who are still employed find it’s cheaper to take the leap into Medicare (and all its parts) than to stay on their employer-sponsored health plan (though many choose to enroll in both). That said, it’s not quite that cut and dry when it comes to those enrolled in health savings accounts (HSAs) through high deductible health plans (HDHPs).

Here are the things that need to be considered when an employee or covered spouse turns 65:

Medicare Part A

With the exception of those employees actively contributing to an HSA, there’s really no reason for them not to enroll in Part A, which covers hospitalization, home health care, care at nursing homes, and hospice care. As long as employees have worked and paid Medicare taxes during a minimum 10-year period of time (the period of time deemed long enough by the government), Medicare Part A comes premium-free (however, it does come with coinsurance). The situation gets a bit more complicated when employees who are ready to enroll in Medicare are also contributing to an HSA.

Health savings accounts (HSAs) have grown in popularity in recent years for a variety of reasons. Many employers are looking to cut employee benefit costs due to the rapid and seemingly never ending increasing cost of healthcare, while others are looking to avoid the ACA’s hefty Cadillac Tax (an ACA-related 40% tax, set to go into effect in 2020 which impacts “rich” health coverage that exceeds predetermined threshold amounts).

High deductible health plans (HDHPs) allow both employers and employees to save on premiums and are a simple way to accomplish both goals. They also fit with a growing trend towards consumer-driven healthcare. Most importantly, as HDHPs become more prevalent, so do HSAs as they go hand-in-hand.

Enrollment in HSAs has exploded in the past decade, growing from 3.2 million people in 2006 to 20.2 million in 2016 and once the data is in for 2017, this number is expected to be even higher. Even with all their pros and cons, it appears that HDHPs with HSAs are here to stay as more and more companies make the transition to less expensive health insurance options.

HSAs may be a good deal for businesses and workers alike, but it’s important for employers to be informed of HSA regulations so they can ensure the HSA they offer is compliant with federal law. Here are four common mistakes employers make when offering an HSA.

4 Common HSA Mistakes to Avoid

Mistake #1: Setting Up An HSA with a Non-Qualified High Deductible Health Plan

Employers are only allowed to offer an HSA when it’s set up in conjunction with a qualified high deductible health plan. Note that this doesn’t simply mean a health insurance plan with a high deductible — many comprehensive plans are now being built to have higher deductibles so they can boast lower premiums, which is another common money saving strategy among employers these days. Rather, the term “High Deductible Health Plan” is specific to health insurance plans that not only have high deductibles, but also conform to other established federal guidelines.