Tax Tip of the Week | No. 373 | What You Need to Know About Medicare - Part 2

Tax Tip of the Week | September 21, 2016 | No. 373 | What You Need to Know About Medicare - Part 2

We keep getting more and more questions about Medicare from people who are planning for retirement. This two part series will hopefully give you a start in knowing what to do—and what NOT to do. The following is some seminar material put together by the Tax Speaker, a publication we receive.Medicare Enrollment-continuedThe special enrollment period (SEP-see example below) is used any time after the initial enrollment period (IEP) when an eligible individual loses coverage in an employer sponsored group health plan. Medicare B coverage begins the month following enrollment. An employee only qualifies for the SEP if he or she is losing coverage under a group health plan offered by their employer or their spouse’s employer because the individual was actively working. It does not apply to insurance under a retiree health plan, a COBRA plan, an individually purchased plan, a VA plan or a plan provided by a former employer.Example: Some folks turning 65 elect to continue with coverage through their employer as active employees, as retired employees or through COBRA. Once you leave the job at 65 however, you must enroll in Part B within 8 months after the month you retire, even if you continue to be covered by the employer’s plan or COBRA under the Special Enrollment Period rules. If you miss enrollment during this time, you will be forced to wait until the general enrollment period (1/1-3/31) during which time you will be uninsured.Even worse, most employers consider Medicare B a primary payer and will only pay those things Medicare B will not cover, and if the employer plan doesn’t realize it, they could ask for repayment of any incorrect payments. For each 12-month period you delay in enrolling in Part B, you will pay a 10% penalty of your Part B premium forever!The general enrollment period is available January 1-March 31 each year when the above two periods do not apply, usually for late enrollment. Medicare participation does not begin until July 1. This period is also called the late enrollment period because the late penalty discussed previously may apply.The open or annual election period (AEP) is available from October 15-December 7 for the next year. The AEP is used to change types of coverage to/from Medicare Advantage, Part D prescription coverage, etc.Most people MUST enroll in Medicare at age 65 during the IEP or face a late enrollment penalty, except for those still working and covered by an employer group plan of 20 or more employees. Unless you meet the exception, late enrollees will be subject to a 10% of Part B premium penalty for each 12-month period they go without applying after becoming eligible, and the penalty will continue for the rest of their life!Individuals who sign up for Social Security benefits by age 65 must watch this Medicare signup rule very closely so as not to miss the age 65 deadline. They should sign up 3 months before their 65th birthday (1-800-772-1213). Enrollment applies to Parts A and B automatically but not Part D, which is voluntary. Whenever the Medicare Part B premium increases,  the late enrollment penalty (LEP) will also increase, without a dollar limit!Let us know if you have any retirement planning questions.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504, or visit our website.Rick Prewitt – the guy behind TTW...until next week.