So, you need to sign up for Medicare and you’re in a mild panic because you didn’t plan ahead? You know you’ve paid into the system but that’s about it, which is understandable as Medicare has a lot of components.
Maybe you’ve worked for some form of Federal, State, or local government and you didn’t pay into Social Security; are you still eligible for Medicare?
Are you over age 65, retiring soon, and going to lose your employer health coverage?
- Maybe your parents are approaching age 65 and would never find this blog because they aren’t too tech savvy (they need to know this stuff!).
If you are one of these individuals, read on! We won’t get into minutia details on all aspects of Medicare, but rather some insight on when/how to sign up for Parts A & B and some things to consider.
First thing’s first, are you eligible?
Generally speaking, Medicare eligibility starts at age 65. Some exceptions are: you are disabled and have been collecting Social Security or Railroad Retirement disability benefits, have end-stage renal disease (ESRD), or amyotrophic lateral sclerosis (ALS). If you have worked the majority of your life (at least 10 years) either as an employee or self-employed, you are eligible for Medicare. All those years you paid FICA payroll taxes included 1.45% for the Medicare Tax. Your employer paid another 1.45% on your behalf, for a total of 2.9%. If you have been self-employed at any point you probably know that you have been paying the entire 2.9% since you are considered both employer and employee.
This Medicare Tax pays for the Part A coverage of Medicare, which is therefore premium-free for most people once they eventually enroll in Medicare. If you haven’t paid the Medicare Tax for at least 10 years, you can still be eligible at 65, but you may have to pay a premium for Part A. If you are a spouse that has spent most of your time at home taking care of the kiddos (the most challenging career of all) and don’t have enough earned credits, you may still be eligible for premium-free Part A coverage at age 65 if your spouse does have enough credits, and is at least age 62.
California State Teachers’ Retirement System (CalSTRS)
As of April 1986, CalSTRS employees do not pay into social security, but do pay the Medicare payroll tax of 1.45%. The same lifetime 40 credit rules apply (10 years). If a member retires prior to attaining age 65, CalSTRS sends an enrollment packet approximately three months prior to his or her 65th birthday. If a member retires on or after his or her 65th birthday, CalSTRS sends an enrollment packet within a month of retirement.[i]
California Public Employees' Retirement System (CalPERS)
As a member of CalPERS, you also pay into Medicare. A few months before you turn 65, CalPERS will send you notifications of the requirements to continue your health coverage. The notifications request information about your eligibility or ineligibility to enroll in Medicare.
When you enroll in Medicare Part A and Part B (required to sign up for both) two to three months prior to your 65th birth month, CalPERS will work with the CMS to obtain your Medicare information and automatically transfer you from a CalPERS Basic (non-Medicare) health plan to a CalPERS Medicare health plan. If CalPERS is unable to obtain your Medicare information from CMS, you'll need to complete and submit the Certification of Medicare Status (PDF) form to CalPERS with copies of supporting documentation for manual processing.
Please review your CalPERS current year plan options before making the transition. Transitioning from a Basic (non-Medicare) health plan into a Medicare health plan is an opportunity to change health plans. Not all Basic (non-Medicare) health plans have a corresponding Medicare health plan available. You may request to change health plans when you provide your Medicare eligibility information. If you do not choose a Medicare health plan, CalPERS will automatically enroll you in a Medicare health plan.[ii]
When can you Sign Up?
Initial Enrollment Period (IEP)
Your window to enroll in Medicare starts 3 months before your 65th birthday and ends 3 months after, for a total 7 months. This is called your Initial Enrollment Period (IEP). If you are already receiving Social Security or Railroad Retirement benefits, you will be automatically enrolled in Part A and receive your Medicare card in the mail with the option to opt-out of Part B. Why opt-out of Part B? If you are still employed and covered under an employer health plan, you can delay signing up for Part B and continue your current health coverage.
If you think Medicare Parts A and B combined with a supplement or advantage plan will be better than your employer’s current plan, you can sign up for Parts A and B, and end your employer’s coverage. Sometimes we see this happen. If this is the case, always do your homework on what coverage is available in your area, and make sure you align your coverage so that you don’t have a gap being uninsured. Check with your human resources department to see if your employer’s coverage on you ends on a specific day of the month, or if you can request it end on the day your Medicare benefit begins.
If you continue to work and remain on your employer’s group plan, then you will have a Special Enrollment Period (SEP) when you decide to begin Medicare coverage or leave that employer. *NOTE: If your employer’s group health plan has <20 people covered in the plan and you reach age 65, then you should sign up for Medicare Parts A & B as it will be your primary coverage.
Special Enrollment Period
Once your Initial Enrollment Period ends, you may have the chance to sign up for Medicare during a Special Enrollment Period (SEP). If you're covered under an employer’s health plan based on current employment, you have a SEP to sign up for Part A and/or Part B anytime as long as:
You or your spouse (or family member if you're disabled) is working.
- You're covered by a group health plan through the employer or union based on that work.
You also have an 8-month SEP to sign up for Part A and/or Part B that starts at one of these times (whichever happens first):
The month after the employment ends.
- The month after group health plan insurance based on current employment ends.
Usually, you don't pay a late enrollment penalty if you sign up during a SEP.[iii]
General Enrollment Period
You can sign up for Part A and/or Part B during the General Enrollment Period between January 1–March 31 each year if both of these apply:
You didn't sign up when you were first eligible (Your IEP or SEP for example).
- You aren’t eligible for a Special Enrollment Period.
You must pay premiums for Part A and/or Part B. If you sign up during the General Enrollment Period, your coverage will start July 1. You may have to pay a higher premium for late enrollment in Part A and/or a higher premium for late enrollment in Part B.[iv]
How to Sign Up
As we mentioned earlier you may be automatically signed up for Parts A and B if you’re already receiving retirement benefits from Social Security or Railroad Retirement. If you’re not, we highly suggest signing up online here, at Medicare.gov. It only takes about 10-15 minutes and you can do it at your own convenience, and in the comfort of your own home.
There is actually a link to get you there faster however, we encourage you to read through different areas of the Medicare.gov website before beginning as it is extremely informative.
Start by going to the top right tab on the home page and clicking the “Sign Up/ Change Plans” button.
Scroll down and click “Apply for Medicare Online”.
Scroll down again until you see the “Apply for Medicare Only” button and click there.
You can actually return to a saved application if you have started one and was not able to complete it.
You can also check your application status.
Read through the “Getting Ready” heading, then once you have the required information in front of you, click the “Start a New Application” button under the “Apply and Complete” heading.
Then, just follow the on screen instructions!
- Social Security will process your application and contact you if they need more information. Otherwise, you’ll receive your Medicare card in the mail. You will also receive a decision letter in the mail.
You can also apply:
- By phone - Call Social Security at 1-800-772-1213 from 7 a.m. to 7 p.m. Monday through Friday. If you are deaf or hard of hearing, you can call them at TTY 1-800-325-0778.
- In person - Visit your local Social Security office. (Call first to make an appointment).
Once you are done signing up online, Social Security should call in around 2 days to say you have been assigned to someone and that you are in their system. Part A may be retroactive to the 1st of the month in which you apply. Part B starts according to what month of your enrollment period you applied, this is why aligning coverage becomes important.
That's it!...well, no. Actually that is just the beginning. We hope this helped clarify some common misconceptions around Medicare parts A & B.
Contact us if you want additional information, or want to know how transitioning to Medicare will impact your overall financial plan.
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Cameron Valadez is a CFP® Practitioner located in Riverside, CA.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.
[i] (Overview of the California State Teachers' Retirement System and Related Issues, 2017)
[ii] (CalPERS Health & Medicare, 2018)
[iii] (Part A & B Sign Up Periods)
[iv] (Part A & B Sign Up Periods)