Do You Need to Tell an Employee When They're Eligible for Medicare?

Today's workforce and medical advancements have made it more likely that people work later in life. While it used to be that age 65 was a hard and fast rule for retirement, that's not the case anymore. But Medicare eligibility still begins at age 65, regardless of whether an employee has retired. 

But do companies need to address this benefit with eligible employees? That is a somewhat complicated question that depends on the size of your company. Understanding the nuances and whether your company has eligible employees is key to remaining compliant. 

Medicare Eligibility 

Medicare is federal health insurance for people aged 65 and older. It also provides coverage in limited circumstances for people under age 65, like those who have disabilities. 

Both employees and employers cover the cost of this insurance, which is paid through federal tax. You'll see this as a line item on your monthly payroll reports, split evenly between your company and your employees. 

For employees at age 65 or older, your company will be able to provide employees with information about their Medicare eligibility and how that overlaps with any employer-sponsored health plans. In comparison, smaller companies have some leeway to requires employees to enroll in Medicare. As with many federal programs, however, there is a lot of nuance regarding providing information on Medicare eligibility. Before moving forward, it's best to ask a consultant or legal professional to determine where your company specifically falls in this category.

Employers with 20 or More Employees 

Companies with 20 or more employees cannot force employees at or over age 65 to enroll in Medicare. Employees are free to continue with their employer-sponsored healthcare plan. Because the company's healthcare plan is credible coverage, the employees may choose to continue with their employer's healthcare plan until they retire. 

Employees do need to provide proof they had employer-sponsored coverage once they stop working, or they may face higher Medicare premiums as a penalty. That includes providing proof of coverage at least equal to Medicare Part D.  

Larger companies cannot discriminate against older employees by forcing them off their employer-sponsored health insurance. Employees can, however, make that decision on their own and choose Medicare over their employer's health insurance. The company cannot, in any way, entice the employee to join Medicare or offer to supplement Medicare premiums and have the employee leave the company's healthcare plan. 

Employers with Fewer than 20 Employees 

Smaller companies have fewer legal limits and may require employees to join Medicare. Companies may also cancel the employee plan or make it a secondary plan to save money.  

Businesses with fewer than 20 employees may also offer to reimburse Medicare costs to eligible employees as an incentive for them to enroll in Medicare. A company cannot directly pay the employee to enroll in Medicare, but it can offer this incentive. 

If a small business partners with a Professional Employer Organization (PEO), it may be considered a larger employer. Because PEOs can get Fortune 500 benefits at Fortune 500 costs by grouping all client company employees together, that may put a small business over the 20 employee threshold. However, this shouldn't deter small companies. PEOs have many cost-savings associated with them, like lower costs on better plans. Providing more plan options to your employees and affordable prices may offset any costs you incur by being considered a larger employer. 

Addressing Medicare Eligibility 

Medicare eligibility is a complex process that requires an expert to determine whether you need to notify employees of their eligibility. If your company is under 20 employees, you may be allowed to require that eligible employees enroll in Medicare. If your company is larger, however, you cannot mandate that employees enroll in Medicare. In this instance, you may want to consider avoiding the conversation altogether with employees, so you're not seen as inducing them to leave your employer-sponsored healthcare plans. 

There are legitimate business reasons to want employees to enroll in Medicare. It can save your company money. But another way to save money while also ensuring compliance with these legal complexities is to work with a PEO. A trusted PEO can provide your business with expert HR guidance to ensure you remain compliant with your benefit regulations. 

Your PEO will also be able to provide you with additional cost savings by giving your company access to its master benefits plan. By negotiating at scale, the PEO has been able to get more health insurance options at better prices while offering higher-quality coverage. That will provide your employees with what they want while not breaking your budget. 

Complexities Trip Up Many Businesses 

Medicare is complex, and it can easily trip up your internal HR team, who, while doing their best, may not be Medicare compliance experts. Who needs to be notified and when? Should the company even tell employees? What happens if an employee decides to enroll in Medicare? All of these are complex questions that cannot be answered without first analyzing your business. That's the help a PEO can provide. 

Reaching out to your healthcare provider may lead you in the right direction and may help you answer some of the questions you have surrounding Medicare. But a PEO can offer you a comprehensive solution that maintains Medicare compliance and provides you with cost-saving techniques to provide high-quality medical insurance at costs both you and your employees can afford.