If you’re turning 65 and still working, you don’t necessarily need to sign up for all parts of Medicare right away, but you do need to make some deliberate choices to avoid penalties and coverage gaps. The right move depends largely on the size of your employer and the type of health insurance you have. Getting this wrong can mean paying higher premiums for the rest of your life, so it’s worth understanding the details.
Your Employer Size Changes Everything
The single most important factor is whether your employer has 20 or more employees. This determines which insurance pays first when you have a medical claim.
If your employer has 20 or more employees, your employer-sponsored health plan remains your primary insurance. Medicare becomes secondary, meaning it only picks up costs your employer plan doesn’t cover. In this situation, you can typically delay enrolling in Medicare Part B (which covers doctor visits and outpatient care) without penalty, as long as you stay on your employer’s plan. You may still want to enroll in Part A (hospital coverage) since it’s premium-free for most people and can serve as a backup layer behind your employer plan.
If your employer has fewer than 20 employees, the rules flip. Medicare becomes your primary payer, and your employer plan only covers what Medicare doesn’t. This means you generally need to enroll in both Part A and Part B when you turn 65, or you risk your employer plan refusing to pay full benefits. Your employer insurance might cover very little if you don’t have Medicare in place, leaving you responsible for most of the bill.
There’s a wrinkle for people at small employers who participate in multi-employer or union health plans. If any employer in that group plan has 20 or more employees, the large-employer rules apply to everyone in the plan, even workers at the smaller company.
When You Can Safely Delay Part B
You can delay Part B enrollment without a penalty as long as you have group health insurance through your own or your spouse’s current employment. The key word is “current.” The coverage has to be tied to active employment, not retiree benefits, not COBRA, not a marketplace plan.
Once you stop working or lose your employer coverage (whichever comes first), you get an 8-month Special Enrollment Period to sign up for Part B. This clock starts ticking the day your employment or coverage ends. Miss that window and you’ll have to wait for the General Enrollment Period, which runs January through March each year, with coverage not starting until July. That gap could leave you uninsured for months.
To enroll during the Special Enrollment Period, you’ll need two forms: the CMS-40B (your Medicare enrollment application) and the CMS-L564 (proof of employer coverage). You fill out your section of the L564, then hand it to your employer to complete their part confirming your coverage dates. Both forms go to your local Social Security office together.
The Late Enrollment Penalty
If you go without Part B coverage and don’t qualify for the Special Enrollment Period, you’ll pay a permanent surcharge. The penalty is an extra 10% added to your Part B premium for every full 12-month period you were eligible but didn’t enroll. Someone who waited two years would pay 20% more on every Part B premium for life.
Medicare drug coverage (Part D) has its own penalty: 1% of the standard premium for each month you went without creditable drug coverage, which adds up to 12% per year. This also lasts for as long as you have Part D.
Both penalties are avoidable if you have what Medicare calls “creditable coverage” through your employer. Your employer is required to send you a notice each year telling you whether your prescription drug coverage is creditable, meaning it’s at least as good as a standard Part D plan. Save that letter. You may need it as proof when you eventually enroll.
What Part B Costs in 2025
The standard Part B premium for 2025 is $185 per month. But if you’re still working and earning a higher income, you may owe more through income-related surcharges known as IRMAA. These are based on your tax return from two years prior.
For individual filers, the surcharges kick in at modified adjusted gross income above $106,000. For joint filers, the threshold is $212,000. The extra monthly amounts range from $74 to $443.90 on top of the standard premium, depending on your income bracket. At the highest tier (individual income of $500,000 or more, or joint income of $750,000 or more), you’d pay $628.90 per month total for Part B.
If your income will drop significantly once you retire, you can request that Social Security use a more recent tax year to calculate your premium. This is done through a “life-changing event” form and can save you hundreds per month.
HSA Contributions and the 6-Month Trap
If you have a Health Savings Account tied to a high-deductible health plan, Medicare enrollment creates a problem you need to plan for. You cannot contribute to an HSA once you’re enrolled in any part of Medicare, including Part A.
Here’s the part that catches people off guard: when you apply for Medicare after 65, the government automatically gives you six months of retroactive Part A coverage. That means any HSA contributions you made during those six months become excess contributions, which trigger tax penalties. The IRS treats them as ineligible.
The practical solution is to stop contributing to your HSA at least six months before you plan to enroll in Medicare. Be especially careful if you’re also applying for Social Security benefits, because signing up for Social Security after 65 automatically enrolls you in Part A. You can’t have one without the other.
If you’ve already over-contributed, you can usually contact your HSA administrator to withdraw the excess before you file your taxes for that year. After that, you’d need to file an amended return.
Don’t Count on COBRA
Some people plan to use COBRA after leaving their job as a bridge to Medicare. This is risky. COBRA does not count as coverage based on current employment, so it won’t protect you from late enrollment penalties. Your 8-month Special Enrollment Period is based on when your employment or employer coverage ended, not when your COBRA runs out.
If you’re eligible for Medicare but not enrolled, COBRA may only pay a small portion of your medical costs. You could be responsible for nearly everything. The safest approach is to enroll in Medicare when your employment ends and treat COBRA as supplemental if you use it at all.
A Checklist for Turning 65 at Work
- Ask your employer’s benefits department whether you need to enroll in Part A, Part B, or both while still working. Some employer plans require it, and your company should be able to tell you.
- Confirm your employer size. If fewer than 20 employees, plan to enroll in both Part A and Part B at 65.
- Check your drug coverage. Look for the annual creditable coverage notice from your employer and keep it filed away.
- Review your HSA situation. If you want to keep contributing, you may need to delay Part A, which means not claiming Social Security yet either.
- Mark your calendar. Your Initial Enrollment Period spans seven months: three months before your 65th birthday month, your birthday month, and three months after. Even if you plan to delay Part B, enrolling in Part A during this window keeps things simple.
- Plan your exit. When you do leave your job, remember the 8-month Special Enrollment Period and get the CMS-L564 form completed by your employer before you lose access to their HR department.