Still Working but Near Retirement? These Medicare Rules Are a Big Deal

Key Takeaways

• If you’re a USPS employee nearing retirement but still working, Medicare enrollment decisions can impact both your current health benefits and your future retirement costs.

• The Postal Service Health Benefits (PSHB) Program has new rules for 2025 that affect how Medicare and your postal health coverage work together.

Understanding the Medicare Milestone at 65

Turning 65 is a key moment when Medicare eligibility begins. Even if you’re still employed by USPS and covered under the PSHB Program, Medicare decisions can’t be ignored. For most, Medicare Part A becomes available premium-free if you’ve worked and paid Medicare taxes for at least 10 years.

Should You Enroll in Medicare Part A?

Yes, most USPS employees choose to enroll in Medicare Part A at age 65 because:

• It’s generally premium-free.

• It may act as secondary coverage if you’re still working.

• It can reduce your out-of-pocket costs for hospital stays.

What About Medicare Part B?

Here’s where it gets more complicated. Medicare Part B comes with a monthly premium, and the new PSHB rules for 2025 require some retirees and their family members to enroll in it.

Under the PSHB Program, you must enroll in Medicare Part B if you’re Medicare-eligible and retire on or after January 1, 2025, unless you qualify for an exception.

What Happens If You Delay Part B?

If you’re still working and have health coverage through USPS, you can delay Medicare Part B without penalty. But once you retire, things change:

• You have eight months from the end of your USPS employment to sign up for Part B without a late penalty.

• If you miss that window, you may have to wait for the General Enrollment Period (January 1 to March 31), and your coverage won’t begin until July.

• A lifetime penalty could be added to your premium.

Exceptions to the Medicare Part B Requirement

The PSHB Program includes specific exceptions for those who do not need to enroll in Part B:

• You retired on or before January 1, 2025.

• You’re still an active USPS employee.

• You’re overseas or covered under Veterans Affairs (VA) or Indian Health Services (IHS).

If you qualify for any of these exceptions, you may keep your PSHB coverage without enrolling in Medicare Part B. However, choosing to enroll may still reduce your overall costs.

Why It Matters Even If You’re Still Working

Even as an active USPS employee, planning ahead is essential. Here’s why:

• Your spouse or dependent family member might be Medicare-eligible before you retire.

• Failing to coordinate their Medicare enrollment with PSHB could lead to denied claims or higher out-of-pocket costs.

• If you plan to retire within a year or two, enrolling in Part B during your Initial Enrollment Period (IEP) could avoid future issues.

Your Initial Enrollment Period (IEP) and Special Enrollment Period (SEP)

When you turn 65, your Initial Enrollment Period spans seven months: three months before, the month of, and three months after your 65th birthday.

If you delay enrolling in Medicare because you’re still working, you get a Special Enrollment Period of eight months after employment ends or your USPS coverage ends.

No Overlap Allowed

Keep in mind:

• The Special Enrollment Period cannot be used while you still have active employee coverage.

• Once you retire, if you miss this SEP, you may face penalties and delays.

Coordination Between PSHB and Medicare in 2025

As of 2025, PSHB coverage is required to coordinate with Medicare if you’re retired and Medicare-eligible. Here’s how it works:

• Medicare pays first, and PSHB acts as secondary coverage.

• If you don’t enroll in Part B and are required to, your PSHB plan may not cover your costs the same way.

• You may also lose prescription drug coverage tied to PSHB if you opt out of Medicare when required.

Prescription Drug Coverage Rules

The PSHB Program integrates with Medicare Part D in 2025 through an Employer Group Waiver Plan (EGWP). Here’s what that means:

• If you enroll in both Medicare Part A and Part B, your PSHB plan includes Medicare Part D coverage.

• There is a $2,000 annual out-of-pocket cap for prescription drugs under Part D.

• If you choose to opt out of the Medicare Part D EGWP, you may lose access to drug coverage under PSHB.

Preparing for the PSHB-Medicare Integration

Start preparing early if you plan to retire soon. Here are some steps to take:

• Review your retirement timeline and plan Medicare enrollment accordingly.

• Check if your dependents will be Medicare-eligible and how that affects their coverage.

• Make sure your address and contact details are current with Social Security and OPM.

Common Pitfalls to Avoid

• Waiting too long to enroll in Medicare Part B after retirement.

• Assuming your working spouse’s coverage exempts you from PSHB Medicare requirements.

• Failing to review how Medicare coordinates with your future PSHB plan.

• Opting out of Medicare Part D EGWP, which may result in losing PSHB drug coverage entirely.

How Costs Could Change After You Retire

Once retired, your out-of-pocket costs may shift based on whether you enrolled in Medicare:

• If enrolled in Part A and B, many PSHB plans offer:

  • Reduced deductibles

  • Lower copayments

  • Better drug pricing

• If you don’t enroll in Medicare as required:

  • You may face higher deductibles

  • Some costs may not be covered at all

  • You might lose integrated drug benefits

Understanding these cost implications ahead of time helps you avoid surprises.

Important Timelines to Track

• April to September 2024: Special Enrollment Period for Medicare Part B for eligible USPS annuitants.

• November to December (annually): Open Season for PSHB to review or change your health plan.

• January 1, 2025: Medicare Part B requirement applies to new retirees.

Make sure to mark these dates on your calendar and take action during these windows.

Final Thoughts on Getting Medicare Right While Still Employed

Even if retirement feels like it’s a few years away, your Medicare choices start to matter at 65. For USPS employees and annuitants, the 2025 PSHB rules are a game changer. Not planning ahead can lead to late penalties, gaps in coverage, and higher medical bills.

Make informed decisions now so you can transition smoothly into retirement. If you’re unsure about your situation, speak with a licensed agent listed on this website to receive guidance tailored to your timeline and needs.