IEP vs. SEP: Still Working at 65? Here's Exactly When to Enroll in Medicare

You are 66, still working, and your HR director just told you: “Don’t worry about Medicare, you’re covered by our plan.”

Do not trust them.

Your HR department is trained on company benefits, not federal Medicare coordination law. This gap is where most lifetime penalties happen. I have seen dozens of clients face lifetime penalties because they followed well-meaning but legally incorrect advice from their employer.

Here is the reality: “Having health insurance” is not enough to delay Medicare.

You must have Active Employment Coverage from a company with 20 or more employees. If you miss this detail, or if you fall into the “COBRA Trap“, you will face a 10% penalty on your Part B premiums for the rest of your life.

Here is the exact math to determine if you are safe to delay, the forms you need to prove it, and the one trap (COBRA) that ruins retirement plans every year.

In This Guide

Quick Decision Table: Do I Need Medicare?
The “20-Employee Rule”: The Math Your HR Misses
Case Study: The COBRA Casualty
How to Delay Safely (SEP & Forms)
The HSA Conflict: Avoiding the Excise Tax

✔️ Quick Decision Table: “Do I Need Medicare at 65 If I’m Working?”

Use this table to determine your immediate action plan.

Situation	Enroll at 65?	Reason
Employer has <20 employees	YES	Medicare is Primary Payer. Your work plan will not pay first.
Employer has 20+ employees	OPTIONAL	You have “Creditable Coverage” and can delay without penalty.
On COBRA or Retiree Plan	YES	Not “Active Employment.” Does not qualify for SEP.
Working + No Group Plan	YES	No SEP protection.

⚡ Key Takeaways

The Golden Rule: You can only delay Medicare without penalty if you have insurance based on current, active employment from a company with 20+ employees.
The COBRA Trap: COBRA and Retiree Health Plans are NOT considered “active coverage.” Delaying Medicare for these triggers permanent penalties.
The Proof: You must get your employer to sign Form CMS-L564 to prove coverage when you eventually retire.
The Small Business Risk: If your company has fewer than 20 employees, Medicare pays primary. You must enroll at 65 or you will have no primary insurance.

The “20-Employee Rule”: The Math Your HR Misses

The most common reason for penalties isn’t forgetting to sign up; it’s assuming your small company plan counts as “creditable coverage” for deferral. It might not.

Medicare Secondary Payer (MSP) rules state that for Medicare to be the secondary payer (allowing you to delay), your employer must have 20 or more employees.

The “20-Week” Calculation

It’s not just a headcount on the day you ask. The IRS and CMS define this strictly:

The employer must have employed 20 or more full-time and/or part-time employees.
This must be true for each working day in each of 20 or more calendar weeks in the current or preceding year.
Note: Part-time employees count toward the 20-person total.

🔀 The 20-Employee Decision Tree

1. How many employees?

Under 20
Medicare is PRIMARY

20 or More
Employer is PRIMARY

2. Your Action:

MUST ENROLL
Sign up for A & B at 65. Avoid the 80% coverage gap.

CAN DELAY
Keep work plan. Sign up later using SEP.

Real World Consequence:

If you work for a boutique firm with 18 employees, your workplace insurance pays secondary to Medicare. This means if you don’t sign up for Medicare Part B at 65, your workplace plan can legally refuse to pay the 80% of bills that Medicare would have paid.

You are effectively uninsured for primary care.

🚀 The “Count the Heads” Checklist

Before you delay Part B, ask HR these three specific questions:

Did we have 20+ employees on payroll for at least 20 weeks last year?
Is my specific plan defined as “Group Health Plan” under IRS Section 5000(b)?
Will you sign Form CMS-L564 verifying this “Active Coverage” when I retire?

Case Study: The “COBRA Casualty”

Let me tell you about “David.”

David was laid off at 67. His severance package included 18 months of COBRA health coverage. His HR rep told him, “You’re fully covered for a year and a half, no need to rush Medicare.”

David waited. 18 months later, when COBRA ran out, he went to Social Security to sign up for Part B.

The Rejection: Social Security denied his Special Enrollment Period (SEP).
The Reason: COBRA is not “Active Employment” coverage. The law requires you to be working.
The Penalty: Because David waited 18 months (two full 12-month periods), he was hit with a 20% permanent penalty on his Part B premiums.
The Gap: He had to wait until the next General Enrollment Period (January) to sign up, leaving him with a 6-month gap where he had zero health insurance.

⚡ Bottom Line: Never, ever use COBRA as a bridge to delay Medicare. The moment active employment ends, your 8-month Medicare clock starts ticking.

💡 AVOID THE LIFETIME PENALTY

One clear financial move each week — straight from 28 years of seeing what goes wrong.

→ Don’t let “bad advice” cost you 10% forever
→ Get the exact forms you need to prove coverage
→ Protect your retirement from hidden gaps

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How to Delay Medic are Safely (The Special Enrollment Period)

If you do meet the 20-employee rule and are actively working, you qualify for a Special Enrollment Period (SEP). This is your “Golden Ticket.”

The SEP allows you to enroll in Part B anytime while you are working, or during the 8-month window that begins the month after your employment ends (or coverage ends, whichever happens first).

⏳ The Special Enrollment Period (SEP) Clock

Employment Ends

SEP Window (8 Mo)

Penalty Zone

Coverage starts the first of the month after you enroll.

The “Golden Ticket” Form: CMS-L564

To use the SEP and avoid penalties, you must prove you had coverage. You do this with Form CMS-L564 (Request for Employment Information).

Download the form from CMS.gov.
Section B: Have your employer’s HR department fill this out before you leave. It verifies the dates you had “Group Health Plan Coverage” based on “Active Employment.”
Submit it with your Part B application (Form CMS-40B).

🔍 What if HR Won’t (or Can’t) Sign?

This is the #1 panic moment for retirees: Your old company went bankrupt, or a remote HR department ignores your emails.

Do not panic. Social Security has a “Secondary Evidence” protocol. If you cannot get a signature on Form CMS-L564, you can submit the form with Section B blank, accompanied by:

W-2 Forms: Showing pre-tax health insurance deductions.
Pay Stubs: Highlighting health insurance premium deductions.
Explanation of Benefits (EOB): From your insurance carrier showing claims paid.

Attach a cover letter stating: “Employer is unresponsive/unavailable. Secondary evidence of Active Group Coverage attached.”

⚠️ Myth Busted: “I can sign up anytime.”

If you miss your 8-month SEP window, you are locked out until the General Enrollment Period (GEP), which runs from January 1 to March 31 each year. Your coverage won’t start until the month after you sign up, creating a dangerous coverage gap.

The HSA Conflict: The “Excise Tax” Trigger

If you are working past 65 to keep your Health Savings Account (HSA), you must be precise. It is not just about stopping contributions; it is about removing “Excess Contributions” to avoid the IRS penalty.

You cannot contribute to an HSA once you have any part of Medicare (Part A or Part B).

If you take Social Security:
You are automatically enrolled in Part A. You must stop HSA contributions. This is why your Social Security claiming strategy is now inextricably linked to your health insurance planning.
The 6-Month Lookback:
When you eventually sign up for Medicare (after 65), Part A coverage will retroactively start 6 months prior. If you apply for Medicare in September, your coverage (and HSA disqualification) effectively started in March. This is a critical calculation; if you get it wrong, you face an immediate tax penalty. See my full guide on the HSA Medicare 6-Month Lookback Rule to find your exact “Safe Stop” date.
The Fix: You must contact your HSA custodian to remove contributions made during those “overlap months.” Ask for a “Return of Excess Contribution” form before tax day to avoid the 6% yearly excise tax penalty.

Frequent Reader Questions

Do I need to sign up for Medicare at 65 if I am still working?

If you have health insurance from an employer with 20 or more employees, you can usually delay enrolling in Medicare Part B without penalty. If your employer has fewer than 20 employees, you generally need to sign up for Medicare at 65 as it becomes your primary payer.

Does COBRA count as creditable coverage for Medicare?

No. COBRA is not considered ‘active employment’ coverage. If you delay Medicare enrollment while on COBRA after age 65, you will not qualify for a Special Enrollment Period and may face a permanent late enrollment penalty.

What form do I need to prove I had employer coverage?

You need Form CMS-L564 (Request for Employment Information). This form must be signed by your employer to verify that you had group health coverage based on active employment, which allows you to enroll in Medicare Part B later without a penalty.

The Bottom Line

Working past 65 gives you options, but it also removes the safety net of automatic enrollment. You are now the project manager of your own healthcare coverage.

If you work for a Small Company (<20 employees):

Medicare is Primary. Your employer plan is Secondary.

The Action: You MUST enroll in Part A and Part B at 65.
The Trap: If you delay Part B, your employer’s insurance can legally refuse to pay the first 80% of your medical bills. You will be responsible for that 80% out-of-pocket.

If you work for a Large Company (20+ employees):

You can delay Part B. Verify “Creditable Coverage” with HR annually. Get Form CMS-L564 signed before you leave.
Watch your income: Continuing to work often means a high MAGI, which can trigger IRMAA surcharges when you finally do enroll in Part B.

If you leave your job:
Sign up for Medicare immediately. Do not use COBRA to delay. Note: Being on “Severance” does not count as Active Employment.

Your Next Steps

Count the employees. Confirm the 20-person rule with HR (including part-timers).
Download Form CMS-L564. Keep a blank copy ready.
Map your HSA stop date. Calculate the 6-month buffer before your planned retirement.