Turning 65 is a major milestone, typically associated with retiring and enrolling in Medicare health insurance and prescription drug coverage. However, with more people choosing to continue working, many employees face a complex question: Should I apply for Medicare if I am still working and covered by an employer plan?

The short answer is: It depends on the size of your company and your specific plan. For many, delaying Medicare enrollment is a smart move, but for others, not signing up on time can lead to lifetime penalties and coverage gaps. Employees should talk to their employers HR department when making this decision.

1. The 20-Employee Rule: A Key Point

The most important factor in deciding whether to enroll at 65 is the size of your employer.

• 20 or More Employees: If you (or your spouse) work for a company with 20+ employees and have health coverage that is creditable (coverage considered as good as Medicare), you can generally delay Medicare Part B without penalty. Your employer plan usually acts as the primary payer, meaning it pays first.
• Fewer Than 20 Employees: If you work for a company with fewer than 20 employees, you generally need to enroll in Medicare Parts A and B at 65. In this case, Medicare is primary, and your employer plan is secondary. If you don't enroll, your employer plan may refuse to pay claims.

2. Why You Might Delay Enrollment (The "Pros" of Employer coverage)

If you have "creditable" employer coverage (coverage considered as good as Medicare) and work for a large company, staying on your company plan often makes sense:

• Lower Immediate Costs: In general, employers pay a part of the premium, so this is often the more cost-effective option than paying both the employer-plan premium and Medicare Part B premiums.
• Avoiding Part B Premiums: For 2026, the standard Medicare Part B premium is $202.90 per month, which you can avoid if you remain on your employer's plan.
• Health Savings Account (HSA) Contributions: If you have an HSA-qualified high-deductible health plan (HDHP), you cannot continue to make pre-tax contributions to your HSA if you enroll in any part of Medicare. Delaying Medicare allows you to continue contributing to your HSA but you must stop contributions six months before you start Medicare benefits due to backdating or face tax penalties

3. Why You Might Apply Anyway (The "Pros" of Medicare)

Even if you work for a large company, there are reasons to consider enrolling:

• Part A is Free: If you have worked for at least 10 years (40 quarters) and paid Medicare taxes, Medicare Part A (hospital insurance) is free. It is almost always recommended to sign up for Part A at 65, as it can act as secondary coverage, paying for items your employer plan doesn't, such as inpatient hospital stays or hospice.
• Lower Deductibles/Out-of-Pocket Costs: Sometimes, Medicare offers better value but not often. For 2026, Part B has a low annual deductible of $283, which may be lower than your employer plan's deductible.
• Better Provider Network: If your employer plan has a limited network, Original Medicare offers the freedom to see any doctor or hospital in the US that accepts Medicare.

4. The Pitfalls: What to Watch Out For

• Enroll during the Special Enrollment Period (SEP): You get a special 8-month period to sign up for Medicare after your employment ends or coverage stops. If you miss this, you may wait months to enroll and pay a 10% penalty for every year you delay.
• COBRA and Retiree Coverage: If you are over 65, and your only coverage is COBRA or a retiree plan, you must sign up for Medicare within the 8-month SEP (see bullet above). These do not qualify as "current employment" health insurance coverage, and you will face lifelong Part B penalties if you wait beyond the SEP.
• Part D (Prescription Drug) Penalty: You must ensure your employer drug coverage is "creditable" with your HR department. If it is not, you may face penalties for not signing up for Part D.

Working and Medicare Summary Checklist

Help your employees make smarter retirement decisions

These kinds of questions are becoming more common as the workforce ages. Employees want to understand their options, avoid penalties, and maximize their benefits. The problem? The rules for working and Social Security or working and Medicare aren’t simple. And misinformation can lead to expensive mistakes.

That’s where you, their HR or benefits manager, come in. When you’re equipped with up-to-date, easy-to-understand resources, you become a trusted guide in helping your team navigate the transition to retirement.

Want to offer resources like this to your employees?

Our Social Security and Medicare booklets are designed to take the guesswork out of retirement planning. Whether your team is approaching age 62 or nearing Medicare eligibility at age 65, these clear and concise guides help answer their biggest questions. They also help prevent mistakes that lead to delayed benefits or unexpected costs.

Call us at 855-286-5302 or email us at surveys@mercer.com to help your employees start planning for retirement.