Not necessarily.

It’s true that an employee’s enrollment in (aka entitlement to) Medicare renders the employee ineligible to make or receive HSA contributions. Medicare is considered “impermissible” first-dollar coverage for HSA eligibility purposes because it pays or reimburses for medical care before the HDHP statutory deductible is met.

However, an employee who turns 65 and is eligible for but does not enroll in Medicare can continue to make or receive HSA contributions, assuming the employee is otherwise HSA-eligible. Enrollment in Medicare is not automatic for someone who turns 65 unless they start receiving Social Security benefits. Therefore, an employee may choose to delay Social Security, not enroll in Medicare, and continue to participate in the employer’s HDHP and HSA program. Accordingly, an employee aged 65 or older who is not enrolled in Medicare or other impermissible coverage could contribute up to the applicable HSA contribution limit for their HDHP coverage tier (for 2025, $4,300 for single-tier coverage and $8,550 for family coverage) plus the additional $1,000 catch-up contribution.

If instead, the employee enrolls in Medicare, their HSA contribution for 2025 must be prorated based upon their months of HSA eligibility, as determined by their Medicare coverage effective date. As explained in When does Medicare coverage start? | Medicare.gov, the Medicare coverage effective date depends on when the employee signs up for Medicare relative to their 65th birthday. Notably, an active employee who delays enrollment in Medicare Part A at age 65 and enrolls later may have a retroactive Medicare effective date of up to six months (but not earlier than the first of the month in which the employee turned 65). An employee should always confirm their coverage effective date with Medicare and calculate their HSA contribution limits accordingly.

For example, an employee enrolled in the employer’s single-tier HDHP coverage with Medicare coverage effective on July 1, 2025, could contribute up to 6/12 (½) of the otherwise applicable $4,300 annual HSA contribution limit ($2,150) and $1,000 catch-up contribution ($500) for a total of $2,650. Any HSA contributions that are made for the year in which the employee becomes Medicare enrolled that exceed their prorated annual HSA contribution limit are subject to taxation (and penalties unless timely removed); in such case, it is advisable for the employee to consult with their tax advisor regarding the correction.

An employer with 20 or more employees should also be mindful that the Medicare Secondary Payer rules prohibit a group health plan from “taking into account” the Medicare enrollment of a current employee (or their spouse or family member) when offering benefits. For example, an employer should not refuse to enroll or terminate HDHP coverage because an individual enrolls in Medicare. An employee who enrolls in Medicare may choose to drop the HDHP coverage midyear if permitted by the employer’s cafeteria plan. But the employee may also choose to maintain the HDHP coverage and Medicare, in which case the plans would coordinate benefits; for employers of this size, the group health plan would normally be the primary payer.

Accordingly, an employee’s HSA contributions and HDHP coverage should not automatically be stopped simply because an employee turns 65. Rather, an employer that sponsors an HDHP should ensure that their Medicare-eligible employees are educated regarding the impact of Medicare enrollment on their HSA eligibility and HDHP coverage so employees can make informed decisions about their medical benefits and avoid excess HSA contributions.

For further information regarding HSAs, including with respect to Medicare enrollment, download a copy of the PPI publication Health Savings Accounts: A Guide for Employers.