How to avoid Medicare Part B late enrollment penalties

Federal annuitants enrolling in Medicare Part B face many healthcare expenses: FEHB and Part B premiums, potential Part B and Part D Income Related Monthly Adjustment Amounts (IRMAA), and out-of-pocket costs when using healthcare services. 

One expense you’ll want to avoid is the Part B late-enrollment penalty. I’ll walk you through what you need to know to steer clear of that costly mistake.

What is the Part B late enrollment penalty?

It’s an extra 10% of the Part B premium for every year you were eligible for Part B but didn’t enroll.

Example: If you went five years without Part B and then decided to enroll, your penalty would be 50%. 

2025 Part B premium: $185/month

Part B penalty: $92.50/month

Total: $277.50/month

The late enrollment penalty stays with you as long as you remain enrolled in Part B. 

Initial Enrollment Period

If you’re a federal employee who retires before age 65, your Medicare Initial Enrollment Period (IEP) occurs around your 65th birthday. Signing up during this window ensures you avoid late enrollment penalties.

The IEP lasts seven months: It begins three months before the month you turn 65, includes your birthday month, and ends three months after.

Example: If you turn 65 on July 15, your IEP runs from April 1 to October 31.

When you enroll affects when your coverage begins:

• If you enroll before the month of your 65th birthday, Part B coverage starts the month you turn 65.
• If you enroll during your birthday month or in the three months after, coverage begins the month after you enroll. 

Medicare enrollment is done through the Social Security Administration. 

Working Past Age 65

Federal employees who continue working past age 65 can delay enrolling in Medicare without incurring a late enrollment penalty. That’s because federal employees with FEHB coverage are eligible for a Medicare Special Enrollment Period (SEP), which begins at retirement and lasts eight months. If you enroll in Medicare during this time, you’ll avoid any late enrollment penalties.

While you continue working, FEHB coverage remains primary. If you decided to enroll in Part B while working, that would mean paying the Part B premium right away and you wouldn’t be receiving many of its benefits. Additionally, enrolling in any part of Medicare, including Part A, makes you ineligible to contribute to a Health Savings Account (HSA). This includes both receiving HSA contributions from your FEHB plan or making your own. If you're enrolled in a High Deductible Health Plan (HDHP) and want to continue building your HSA, it's important to delay Medicare enrollment.

Spousal Coverage

If your spouse is covered under your FEHB plan, it’s important to understand how Medicare enrollment rules interact with group health coverage to avoid late-enrollment penalties.

In most cases, a spouse must enroll in Medicare when they turn 65. However, there’s one key exception: If you continue working past age 65, and both you and your spouse are covered by FEHB as an active employee, you both will qualify for a Medicare SEP upon your retirement.

But there’s a catch: Your spouse only qualifies for an SEP if you’re still actively employed. If you’re retired and your spouse continues working past 65 while remaining on your retiree FEHB coverage, they will not qualify for an SEP. In that case, they would need to enroll in Medicare at age 65 to avoid a late enrollment penalty.

That’s because the Social Security Administration requires health insurance coverage through active employment to qualify for an SEP, and retiree coverage does not count.

The Final Word

With the rising cost of health insurance, it’s essential to avoid costly mistakes when it comes to Medicare enrollment.

• If you retire before age 65, be sure to enroll in Medicare during your IEP to avoid late enrollment penalties.
• If you continue working past 65, you can delay Medicare enrollment without penalty. You’ll qualify for an SEP that lasts up to eight months after you retire.
• For spouses covered under FEHB, they’ll only qualify for an SEP if the federal employee is still actively working. If the FEHB coverage comes from a retired spouse, the covered spouse must enroll in Medicare at age 65 to avoid penalties—retiree coverage does not meet the SEP requirement.

Understanding these rules now can help you make informed decisions later.

Kevin Moss is a senior editor with the Guide to Health Plans for Federal Employees provided by Consumers’ Checkbook. Watch more of his free advice and check here to see if the Guide is available for free from your agency. You can also purchase the Guide and save 20% with promo code GOVEXEC.