If you’re still working past 65 and have health insurance through your employer, you can defer Medicare enrollment without paying a late penalty. The key requirement: your coverage must come from an active employer group health plan, and in most cases, the employer must have at least 20 employees. Getting this right protects you from penalties that would otherwise follow you for life.
Who Can Defer Medicare
You qualify to defer Medicare if you have group health plan coverage based on current employment, either your own job or your spouse’s. The critical detail is employer size. If the employer has 20 or more full-time or part-time employees, the employer plan is considered your primary insurance, and Medicare takes a back seat. This makes deferral straightforward.
If your employer has fewer than 20 employees, the rules flip. Medicare becomes the primary payer, meaning your employer plan only covers what Medicare doesn’t. In that situation, deferring Part B could leave you underinsured because your employer plan expects Medicare to pay first. You’d be responsible for the portion Medicare would have covered.
There’s a nuance for small employers that participate in a multi-employer or multiple-employer plan. If even one employer in that group has 20 or more employees, the large-employer rules apply to everyone in the plan. However, multi-employer plans can request an exception for workers at the smaller companies.
For people under 65 who qualify for Medicare through disability, the employer size threshold is higher: at least 100 employees for the large group health plan to be primary.
What You Can Actually Defer
Medicare has multiple parts, and the deferral rules differ for each.
Part A (hospital coverage): Most people get Part A premium-free because they or a spouse paid Medicare taxes for at least 10 years. Since it costs nothing, many people enroll in Part A at 65 even while still working. There’s no penalty for late Part A enrollment if you’re entitled to it for free. However, enrolling in Part A has a significant side effect if you have a Health Savings Account, which is covered below.
Part B (medical coverage): This is the part most people mean when they talk about deferring Medicare. Part B has a monthly premium, and if you enroll late without qualifying for a special enrollment period, you’ll pay an extra 10% on that premium for every full 12-month period you could have signed up but didn’t. That penalty lasts for as long as you have Part B, which for most people means the rest of their life. Having qualifying employer coverage lets you avoid this entirely.
Part D (prescription drugs): You can also defer Part D if your current drug coverage is “creditable,” meaning it’s expected to pay at least as much as a standard Medicare drug plan on average. Employer plans, union plans, TRICARE, VA coverage, and Indian Health Service plans can all qualify. Your plan is required to notify you each year whether your drug coverage is creditable. If you go 63 or more consecutive days without creditable drug coverage after becoming Medicare-eligible, you’ll face a Part D late enrollment penalty when you eventually sign up.
COBRA and Retiree Plans Do Not Count
This catches many people off guard. COBRA continuation coverage and retiree health plans do not qualify as “coverage based on current employment” for the purpose of deferring Medicare Part B without penalty. The clock on your special enrollment period starts when you stop actively working or lose your employer group coverage, whichever comes first. COBRA that begins after you leave your job does not extend that window.
There’s a practical risk here too. If you have COBRA but haven’t enrolled in Medicare even though you’re eligible, your COBRA plan may pay only a small portion of your medical costs. The plan may treat Medicare as your primary insurer regardless of whether you’ve actually enrolled, leaving you with most of the bill.
The 8-Month Enrollment Window
Once you stop working or lose your employer group health coverage (whichever happens first), you have 8 months to sign up for Part B without a penalty. This is called a Special Enrollment Period, and it runs regardless of whether you elect COBRA.
If you miss this 8-month window, you’ll have to wait for the General Enrollment Period, which runs from January 1 through March 31 each year. Coverage wouldn’t start until July 1 of that year, creating a potentially long gap. And the late enrollment penalty would apply to your premiums going forward.
How to Prove Your Coverage
When you’re ready to enroll in Medicare after deferring, you’ll need to submit Form CMS-L564, officially titled “Request for Employment Information.” This is the document that proves you had qualifying group health plan coverage through active employment, which is what entitles you to enroll during a Special Enrollment Period penalty-free.
Your employer fills out the form, not you. They’ll need to provide the dates your group health plan coverage began and ended, your employment dates, and whether you’re still employed. For disability-related situations involving a large group health plan, the employer also lists the months their plan was the primary payer. If your coverage involved an hours bank arrangement (common in union plans), the form asks whether you have reserve hours remaining and when they’ll run out.
You submit this form alongside your Medicare enrollment application. Keep copies of everything your employer provides, including any letters confirming your coverage dates. If your employer closes or is acquired before you enroll, having documentation already in hand saves significant hassle.
HSA Contributions and Medicare Part A
If you have a Health Savings Account, this is one of the most important details to get right. The IRS rule is clear: starting with the first month you’re enrolled in Medicare, your HSA contribution limit drops to zero. You can still spend money already in the account, but you cannot add new funds.
This matters because Medicare Part A enrollment can be backdated up to six months. If you sign up for Part A at 66, your coverage could be retroactively applied to when you were 65 and a half. Any HSA contributions you made during those retroactive months become excess contributions, which are subject to a 6% tax penalty for every year they remain in the account.
The practical takeaway: if you want to keep contributing to your HSA, defer Part A as well, not just Part B. And if you do eventually enroll in Part A with retroactive coverage, you’ll need to withdraw any excess contributions and their earnings before your tax filing deadline to avoid the penalty. Some people stop HSA contributions six months before they plan to enroll in Part A, specifically to create a buffer against the retroactive coverage issue.
Steps to Defer Medicare
Deferring Medicare isn’t a formal application process. You simply don’t enroll when you first become eligible. There’s no form to file declaring your intent to defer. But there are things you should do to protect yourself:
- Confirm your employer plan qualifies. Verify the company has 20 or more employees and that your group health plan covers you based on active employment.
- Save your creditable coverage notices. Each year, your employer plan should tell you whether your prescription drug coverage is creditable. Keep every one of these letters. You’ll need them as evidence when you enroll in Part D.
- Track your employment and coverage dates. Write down when your coverage started and when it ends. These dates determine your Special Enrollment Period.
- Coordinate with your employer early. Before you leave your job or lose coverage, ask your HR department to complete Form CMS-L564. Getting this done while you’re still employed is much easier than chasing it down later.
- Adjust HSA contributions if needed. If you plan to enroll in Part A, stop HSA contributions with enough lead time to account for potential retroactive coverage.
Once your employment or coverage ends, move quickly. You have 8 months, but the enrollment process takes time, and a gap in coverage can leave you exposed to large medical bills. Most people aim to have Medicare coverage start the month after their employer plan ends.