Working Seniors Get a Tax Break: Bill Allows Part A Enrollees to Keep Contributing to HSAs Starting 2025

This bill, officially titled the “Stop Penalizing Working Seniors Act,” makes a targeted but significant change to the tax code regarding Health Savings Accounts (HSAs). Starting with the 2025 tax year, individuals aged 65 and older who are enrolled only in Medicare Part A will be allowed to continue making contributions to their HSAs. Currently, the IRS rules prohibit any HSA contributions once a person enrolls in Medicare, which often creates a financial hurdle for seniors who continue working and rely solely on the essential hospital coverage provided by Part A.

The Medicare Catch-22 for Workers

Right now, if you’re still working at 65, you might be covered by your employer’s high-deductible health plan (HDHP)—the prerequisite for an HSA. However, most people enroll in Medicare Part A (Hospital Insurance) when they turn 65 because it’s premium-free for most and provides foundational coverage. The moment you enroll in any part of Medicare, the current law considers you ineligible to contribute to an HSA, effectively cutting off a valuable tax-advantaged savings tool for medical expenses. This bill amends Section 223(b)(7) of the Internal Revenue Code to carve out an exception, stating that the prohibition doesn't apply if the individual's only Medicare benefit is the entitlement to hospital insurance benefits under Part A.

What This Means for Your Finances

For the working senior who wants to keep their employer's HDHP and continue saving for future medical costs, this is a big deal. Imagine a 66-year-old software developer who continues to work full-time and loves the tax triple-advantage of an HSA (contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free). Under current law, enrolling in Part A shuts down their ability to contribute. This legislation removes that barrier, allowing them to maximize their tax-advantaged savings right up until they decide to enroll in comprehensive Medicare coverage (Part B, C, or D).

Implementation and Real-World Impact

This change is scheduled to apply to taxable years beginning after December 31, 2024, meaning it will impact contributions made in 2025 for the 2025 tax year. This is a clear benefit for those who are still in the workforce and rely on employer coverage, allowing them to coordinate their employer health benefits with their basic Medicare Part A coverage without losing access to their HSA. It acknowledges the reality that many people are working longer and need all the financial tools they can get to manage healthcare costs, particularly those who have proactively saved in an HSA for years.