Viewpoint: Help Retiring Workers Navigate Post-Employment Benefits

​I thought I knew what to expect from the shift to post-employment benefits when I decided to retire, at age 66, near the end of 2022. After all, for almost 19 years at the Society for Human Resource Management (SHRM), my SHRM Online beat was almost exclusively employee benefits and compensation. I had also earned SHRM's Total Rewards Specialty Credential and the Certified Employee Benefit Specialist (CEBS) credential overseen by the International Foundation of Employee Benefit Plans.

Yet, I was repeatedly surprised by what I didn't know as I began the transition from employee group coverage to government and private-insurance replacements—primarily Medicare but also "Medigap" and Part D prescription drug coverage—and to make decisions about other replacement benefits.

HR staff may not be prepared to help employees navigate through the post-employment benefits maze.

Given that much of the current focus of financial wellness programs is aimed at helping employees fulfill their current and future needs, which includes preparing for a secure retirement, it can be short-sighted not to treat post-employment benefits as the concluding step in an employee's financial wellness journey.

Here's a look at some things I didn't know and how HR can help.

Medicare Is Perplexing

The initial Medicare decision individuals face is whether to go with "traditional" government-administered Medicare Part A (hospitalization) and Part B (doctor visits), with the optional additions of Part D (drug coverage) from a private insurer and a supplemental Medigap plan, which covers many expenses that Medicare doesn't.

The alternative is an all-in-one Medicare Part C (Medicare Advantage) plan, which meets Medicare specifications but is delivered through a private insurer.

Medicare Advantage (MA) plans tend to have lower premiums than traditional Medicare, but there's a hitch—MA plans reduce their costs by having exceedingly narrow health-provider networks and typically require prior authorization from an in-network primary care doctor to see a specialist. Some people aren't bothered by that, but others most definitely are.

All in all, I decided to go with traditional Medicare.

The HSA Conundrum

Medicare Part A coverage is retroactive for the six months preceding Medicare enrollment, excluding the period before an enrollee's 65th birthday. If any employee age 65 or older has been contributing to a health savings account (HSA), or if their employer has contributed on the employee's behalf, this becomes an issue because ineligible HSA contributions trigger an IRS tax penalty charged for each year that improperly contributed dollars remain in the HSA.

At a minimum, HR should advise Medicare-eligible employees who are participating in an HSA to stop contributions—and to request that the employer stop any contributions—six months before enrolling in Medicare. Otherwise, contributions made during the six-month look-back period will need to be reversed, which may also require deducting interest or investment gains that those contributions have accrued. If an employee was sent a Form W-2 at year-end showing ineligible HSA contributions, HR will need to issue an amended Form W-2. To avoid such complications, HR and payroll departments should help ensure that HSA contributions are stopped prior to the look-back period.

Planning to enroll in Medicare toward the end of the year, I contacted HR midyear and asked that payroll stop future employer contributions to my HSA. There was a slip-up, but payroll managed to recall the employer contribution that wasn't stopped. However, my final earnings statement listed employer contributions that actually hadn't been made, which could cause tax issues if the same information was on my year-end W-2, so a correction was needed.

Entering the Enrollment Maze

I didn't realize that the government can take up to two months to process a Medicare application, which is made through the Social Security Administration (SSA) online using your My Social Security account. (Those who haven't set up an account already will need to do so.) Alternatively, you can make an appointment with your nearest SSA office. Fortunately, I began the process in time to ensure Medicare was active beginning the month after my employment ended; otherwise, I would have opted for short-term COBRA coverage.

I applied online, and it seemed straightforward. The account webpage assured me that my application was received and being processed. But after four weeks, I decided to check directly with the local SSA office. Good thing I did: When I eventually reached a representative, I was told my application hadn't been processed because SSA had conflicting information about my birth year and I would need to schedule an appointment and produce my birth certificate. I did so, and despite a waiting room as crowded as the DMV, I saw a representative within 10 minutes of my scheduled time.

A few weeks later, the My Social Security webpage said my Medicare application was approved, although it would be a few more weeks before I received my Medicare card. I was now enrolled in Parts A and B, and I was instructed to register at Medicare.gov to access information about my coverage and arrange to pay monthly premiums.

Medigap and Part D Decisions

While waiting for my card, I called Medicare customer service to get my Medicare number, which I needed to apply for separate Medicare Part D drug coverage and to enroll in a Medigap plan, and to try to align these with the start of my Medicare health coverage.

After comparing available Part D drug plans online and reviewing Medigap plans (Medicare.gov has handy tools), I applied for each through separate insurers. Again, these are not required, but if you're reasonably comfortable financially, they make sense to have. If retirees are not reasonably comfortable, they'll probably opt for an MA plan. Those in financial straits have the option of Medicaid and other government assistance.

But that's not the end of it. Dental and vision coverage also ended with my employment. While these may be covered, at least to a limited extent, in an MA plan, you're on your own if you go with traditional Medicare.

I decided that $50 per month or more for a "reasonable" dental plan was not so reasonable, as it would cost more annually than I typically pay out of pocket. But I'd probably still come out ahead with $10 to $15 per month vision coverage that includes an annual exam, discounts, lenses and frames, and so I opted for one.

Where HR's Help Was Needed

In addition to stopping HSA contributions, I needed HR's assistance with other issues during this transition.

Proof of employee health coverage. When I met with the SSA representative about enrolling in Medicare, I brought a Request for Employment Information form completed by my HR department, showing that after turning 65, I had kept employer-sponsored health coverage. Fortunately, I knew that if you turn 65 and don't enroll in Medicare within an eight-month initial enrollment period, you can face ongoing late-enrollment premium penalties—unless you kept working and had employer-provided coverage during this time.

Proof of employment termination. Medicare adds an income-related monthly adjustment amount (IRMAA) to monthly premiums for those with high incomes in retirement. IRMAA is based on the two previous years' modified adjusted gross income, as reported by the IRS to the SSA. I was just over the limit, and SSA informed me that my IRMAA would add $65 per month to my Medicare premium.

Fortunately, you can apply for an exemption if you can document that your income post-retirement will fall below the IRMAA threshold because you have stopped working. Because this was true for me, I downloaded and completed Form SSA-44. I also asked my now-former employer's HR department for a signed letter stating the date that my employment had ended, attached the prior year's Form W-2 showing the amount of earned income I would no longer be receiving, and submitted these to the SSA office that processed my Medicare enrollment.

Success! While I had to pay the IRMAA add-on for December 2022 Medicare coverage because I was over the threshold for the year, the IRMAA disappeared for premiums owed in 2023 (the SSA confirmed this in a letter).

A Few Resources

HR staff understandably don't want to be in a position of offering recommendations about Medicare options, but that doesn't mean they shouldn't be prepared to steer employees to helpful resources, such as by sharing links to (or printing out) the following:

• Welcome to Medicare, a pamphlet that outlines important decisions to make about your Medicare coverage.
• Medicare and You, a publication that covers Medicare essentials with easy-to-understand explanations and graphics.

By providing basic information and being responsive to retirees' requests for needed documents and forms, HR can help ease the complicated and cumbersome transition to Medicare and related benefits.

An important reason to do so: When HR departments prepare older employees to get their retirement ducks in order, the message spreads that theirs is a caring organization. Retiring, after all, is different from jumping ship to work for another employer, which might be a competitor. "Goodbye and good luck, and expect a COBRA package in the mail while you figure things out" just doesn't cut it when workers need to navigate the world of post-employment benefits.

Stephen Miller, CEBS, is the former editor of compensation and benefits for SHRM Online.