The New Face Of Advisory

Clients Over 65 and Still Working? Beware!

Social Security and Medicare Collide with Employer Group Health Plans

by Marcia Mantell, RMA®, NSSA®

Ms. Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business development, marketing & communications, and education company supporting the financial services industry, advisors, and their clients. She is author of “What’s the Deal with Retirement Planning for Women?”, “What’s the Deal with Social Security for Women?” and blogs at

In a November 2020 Advisor Magazine article, I covered how younger retirees can be caught off-guard when trying to figure out Medicare and Social Security, and how there are points of intersection between the two programs that influence one another. At that time, there were millions of early retirees due to the COVID-19 pandemic. Whether for health concerns or the company went out of business, many clients nearing age 65 decided to call it quits. And, they were figuring out the integration of Medicare and Social Security.

Now, let’s turn to another group of clients: those over age of 65 but still working. Many baby boomers plan to and are working well past traditional retirement age. Some will work longer because they enjoy their job. Others because they have to financially. And, still others because they have no idea what else they would do.

Regardless, there are millions of 65+ people in the workplace today. And, they are on a collision course if they aren’t properly planning for Social Security and Medicare while still getting employer group health plan (EGHP) insurance. There are several important factors among and between these programs for advisors to know about as more and more clients retain their status as “active employees with benefits.”

To Work after 65, Employment Laws Had to Allow for the Opportunity

There are many different laws that govern older workers’ employment. For most of the twentieth century, there was a mandatory retirement age of 65. So, the first order of business was to pass laws to allow older workers to continue to work. And, you may be surprised by the definition of “older.”

The Federal Age Discrimination in Employment Act of 1967 (ADEA) passed, prohibiting age discrimination after age 40. This law also promotes employment of older workers based on ability, not age. Two other employment laws furthered the opportunities for baby boomers and future generations to work until much older ages:

  • Extension of the ADEA in 1978 – Outlaws mandatory retirement before the age of 70
  • Amendment to the ADEA in 1986 – Abolished mandatory retirement ages altogether. (However, several job functions still have mandatory retirement, and several states require judges to retire by age 70.)

It wasn’t until the 1980’s that workers had the option to work as long as one wanted. But, working longer didn’t mean access to benefits. Specifically, older workers generally lost access to their employer health insurance at age 65. Even though these older workers would be eligible for Medicare, it set up a discriminatory situation in the workplace. Next up was a law to address the health insurance situation:

  • Older Worker’s Benefit Protection Act of 1990 (OWBP). This law made it illegal for employers to use age to discriminate against offering benefits. The OWBP makes it possible for older workers to keep their employer-provided health insurance rather than enrolling in Medicare at age 65.

Social Security Laws Add to the Mix

There were two significant areas of the Social Security Act that added to the mix of being an older worker. The first occurred with the Social Security Amendments of 1983. Here, Full Retirement Age (FRA) increased from 65 to between 65 and 2 months to age 67. Yet, Medicare’s entry age remained at 65.

Those who continued to work past FRA could claim their Social Security benefit. However, in the 1980s, the earnings limit test applied even to workers who reached FRA. As a practical matter then, older workers could work full-time after FRA, but some or all of their Social Security benefits were withheld.

To remedy this discrepancy, the Senior Citizen’s Freedom to Work Act of 2000 (SCFWA) was enacted into law. This law repealed the Social Security earnings limit test for workers who reach their FRA while still employed. This law allows older workers who are at or beyond FRA to earn any amount of wages with no clawback to their Social Security benefit.

And, Let’s Not Forget About Medicare Secondary Payer Laws and Health Savings Accounts

You begin to see how making changes to one set of laws unconsciously impacts a completely different set of laws. For older workers, another unintended consequence came when receiving health insurance from an employer after age 65. Who should pay the claims for a Medicare-aged worker? Shouldn’t they really be Medicare expenses?

Enter the Medicare “Secondary Payer” laws. Under these laws, added to the Social Security Act in 1980, ordering rules determine who pays for what depending on the age of an employee and the types of health insurance coverage he has. For example, if a 68-year-old employee working full-time keeps his EGHP and enrolled in Medicare Part A, the employer’s group plan pays first, and Medicare Part A picks up any residual costs as the “secondary” payer. So long as the employer has more than 20 employees and the claims are for hospitalization charges normally covered by Medicare.

It wasn’t until the 1980’s that workers had the option to work as long as one wanted. But, working longer didn’t mean access to benefits. Specifically, older workers generally lost access to their employer health insurance at age 65. Even though these older workers would be eligible for Medicare, it set up a discriminatory situation in the workplace...

Seems innocent enough until you look at all the possible configurations a client might have while working:

  • EGHP until he retires or loses his job; then has COBRA.
  • EGHP until he retires or loses his job; then offered “retiree” health insurance.
  • EGHP is a High-Deductible Health Plan and she has an HAS, but she’s claimed Social Security.
  • EGHP is a High-Deductible Health Plan and he has an HSA and he enrolled in Medicare Part A.

There are many more possible configurations for workers and their spouses or partners. And Medicare Secondary Payer laws are different for companies with fewer than 20 employees. Or if the employer is a union shop offering health benefits. Or the Federal Government or certain states who have their own health plans for retired employees. And, let’s not forget disabled employees who have access to Medicare before age 65 and also have EGHPs.

To say this all gets wildly complicated is an understatement.

The Current Lay of the Land for Older Clients who Continue to Work

Significant issues can arise for clients who work well past age 65. And they often have no idea of the collision course they are on. There are many points of intersection that cause unintended consequences. Let’s look at a few common situations:

  • A client is working, covered under an EGHP, has an HSA, and claims Social Security at 69. He doesn’t realize Medicare Part A comes automatically attached. His contributions to his HSA needed to stop 6 months prior to having any part of Medicare. But, he didn’t know about this intersection. He now has excess contributions in his HSA that need to be corrected.
  • Your client decides to retire at 72 and will lose EGHP at the end of his last month of active employment. His benefits handbook states that he can opt for retiree health insurance. It does not explain he only has an 8-month Special Enrollment Period to get into Medicare Part B. If he does not enroll during this window, he’ll lose primary coverage for doctor visits, outpatient services, etc. He’ll only be able to enroll in Part B during the next General Enrollment Period, January 1 – March 31. His primary coverage won’t begin until July 1st. And, he’ll be assessed a permanent Part B penalty of 10% per 12-month period that he should have been in Part B.
  • A different client retires at 75, enrolled in Part B during her 8-month Special Enrollment Period, and decided to stay on the employer’s retiree health plan, which pays secondary to Medicare. A year later, she finds a less expensive Medigap plan and wants to switch. But, she’s beyond her 6-month Medigap guaranteed issue period. When she calls the insurance company for a price quote, she learns he must undergo medical underwriting and may be denied coverage or charged a higher premium due to her health issues.
  • Another client is 73 and has continued to work in a senior role at his company. She has an EGHP and is contributing to an HSA. She decided not to enroll in Social Security because it would trigger Medicare Part A. She wanted to keep saving in her HSA and maximize Social Security with “delayed retirement credits (DRCs).” Unfortunately, she didn’t know DRC’s stop at age 70. When she claims Social Security, she’ll only get a 6-month retroactive payment, leaving 2 ½ years of benefits on the table. In addition, since Medicare Part A starts retroactively 6 months earlier, she now has excess HSA contributions that must be corrected.
  • Common among older clients is to retire from a corporate job and join a small non-profit. Assume this client is 67 and the 8-person non-profit he started working for offers health insurance for him and his wife (age 64). He plans to wait until 70 to claim Social Security and start his Medicare Part A. His wife will then be at her FRA and she will claim her full Social Security and start Medicare Part A as well. He doesn’t realize that his new employer’s EGHP won’t pay primary for him. With fewer than 20 employees, Medicare pays primary and the EGHP secondary. He must enroll in Medicare Parts A and B first, at age 67, then his EGHP will pick up as secondary payer. If he keeps the EGHP, he may lose his guaranteed issue period for a Medigap plan once he is fully retired.

You and Your Clients Need a Ph.D. in Working after 65

Employer benefits groups have been making health insurance decisions for their workers for decades. As a result, workers have no insights into this level of health insurance complexity. Ordinarily, there is no reason why they would know any of these crazy rules. Leave it to the experts.

But that needs to change for older workers. As more and more clients work longer, they need to understand their EGHP, Medicare, and Social Security both as individual programs and at the collision points. Mistakes, penalties, and gaps in coverage can derail even the best laid retirement income plans.

Financial advisors who can help clients get ahead of the collision will be invaluable to their clients. Start the conversation about working after 65 with clients early. You don’t have to know all the ins and outs of what their employer’s health plans offer, but you do need to get clients on the road to knowledge. Trying to figure this out last minute simply doesn’t work.