What is the employer’s role with respect to the Medicare Form CMS-L564?
Short Answer: Age 65+ employees will often remain enrolled in the employer-sponsored group health plan and delay Medicare enrollment until retirement. Upon retirement and loss of active coverage, retirees will typically have the employer complete a portion of the Form CMS-L564 to verify key information as part of their Medicare special enrollment period process.
The Employer’s Role: Medicare Form CMS-L564
Age 65+ employees who follow the common path of delaying Medicare enrollment until retirement generally will apply for Medicare in the special enrollment period (SEP) upon retirement. As described below, retirees should complete this process for Medicare enrollment immediately, if not 90 days prior to their termination date of active coverage to avoid any potential coverage gaps.
The Application for Enrollment in Medicare Part B: Form CMS-40B
As part of the application process for the SEP, the retiree will also need to complete the Form CMS-L564 “Request for Employment Information.” This form is used to document proof of active employer-sponsored group health plan coverage that has ended as a result of the retirement (or other termination of employment/reduction in hours).
CMS describes the need to complete the Form CMS-L564 with the Form CMS-40B as follows:
If you’re signing up for Part B using a Special Enrollment Period (SEP) because you were covered under a group health plan based on current employment, in addition to this application, you will also need to have your employer fill out and return the “Request for Employment Information” form **(CMS-L564/CMS-R-297) **with your application. The purpose of this form is to provide documentation to Social Security that proves that you have been continuously covered by a group health plan based on current employment, with no more than 8 consecutive months of not having coverage.
Medicare.gov includes a useful basic overview of this enrollment process on its “Enrollment Forms” site.
The Request for Employment Information: Form CMS-L564
Retirees applying for Medicare Part B in a SEP after loss of active employer-sponsored coverage will complete the Form CMS-L564 at the same time as the Form CMS-40B. The Form CMS-L564 is used for proof of group health plan coverage based on current employment (i.e., active coverage), which is needed to process the Medicare enrollment application.
- Section A: The retiree completes the first section (Section A) of the form so that the employer can find and complete the information about the retiree’s employment and coverage periods.
- Section B: The employer is then responsible for filling in the information in the second section (Section B) and returning to the employee.
Section B asks the employer to answer the following basic questions:
- Whether the individual was covered under the employer’s group health plan;
- The date such coverage began;
- Whether such coverage has ended;
- The date such coverage ended; and
- The timeframe that the employee worked for the company.
In the rare situations where the application is based on disability (as opposed to age) or tied to an hours bank arrangement, additional questions apply.
The end of Section B the form directs a “Company Official” to sign the form, including date, title, and phone number.
The step-by-step instructions at the end of the form itself state that “An official representative of the company needs to sign this document.” However, the “Special Instructions” section on the page housing the form states “Your employer doesn’t need to sign Section B of the CMS L564 form.” It’s unclear why this discrepancy exists, but employers generally would want to sign the form in any case to avoid issue.
What Happens if the Employer Does Not Complete Section B of the Form CMS-L564?
In some cases, employers will be inaccessible (e.g., out of business), unable, or unwilling to complete the Form CMS-L564. While there are no apparent penalties or other avenues of enforcement against the employer for such failures, employers that do not cooperate will place additional burdens and hardship on the retiree.
SSA materials direct retirees to handle this situation as follows:
If your employer is unable to complete Section B of the CMS-L564, please complete that portion as best as you can on their behalf and submit one of the following forms of secondary evidence:
- Income tax returns that show health insurance premiums paid.
- W-2s reflecting pre-tax medical contributions.
- Pay stubs that reflect health insurance premium deductions.
- Health insurance cards with a policy effective date.
- Explanations of benefits paid by the GHP or LGHP.
- Statements or receipts that reflect payment of health insurance premiums.
Ultimately, the Medicare application process is daunting enough for retirees without the need to independently prove the loss of active coverage. Employers should make all efforts to timely complete Section B of the Form CMS-L564 for the retiree to facilitate the enrollment process for the retiree as much as possible.
General Rule: Medicare Enrollment at Age 65 or Upon Retirement
Employees who continue working beyond age 65 often face the choice of whether to enroll in Medicare, stay in the employer-sponsored group health plan, or both.
One option would be for employees who reach age 65 to enroll during the seven-month Initial Enrollment Period (IEP) upon first becoming eligible for Medicare based on age. This IEP begins three months before the month of reaching age 65, includes the month of the 65th birthday, and ends three months after the month of reaching age 65.
However, the Medicare Secondary Payer (MSP) rules provide significant flexibility for employees in this decision. The MSP rules for Medicare entitlement based on age (i.e., reaching age 65) apply to employers with 20 or more employees for each working day for at least 20 calendar weeks in either the current or preceding calendar year.
In general, the MSP rules prohibit the employer-sponsored group health plan from taking into account the Medicare enrollment of a current employee or a current employee’s spouse or family member.
There are a number of basic rules that flow from this general principle, including:
- For any active employee or family member covered by the employer-sponsored group health plan and Medicare, the employer-sponsored group health plan pays primary.
- The employer-sponsored group health plan must provide the same benefits under the same conditions to employee and family members who are Medicare-eligible.
- The MSP rules prohibit offering employees or family members eligible for Medicare any additional financial or other incentives (e.g., opt-out credits) beyond those made to other pre-65 employees to waive the employer-sponsored group health plan.
As a result, most age 65+ employees choose to remain in the employer-sponsored group health plan and delay Medicare enrollment until retirement.
For more details:
Another factor motivating many age 65+ employees to delay Medicare enrollment until retirement is the ability to make and receive HSA contributions. Enrollment in any part of Medicare is disqualifying coverage that causes an individual to lose HSA eligibility. Even enrollment in only the (generally premium-free) Medicare Part A hospital coverage component will block HSA eligibility. However, many employees age 65 and older who are enrolled in the HDHP continue to be HSA-eligible by delaying Medicare enrollment.
For more details:
Avoid COBRA: Age 65+ Retiree Medicare Enrollment Without Coverage Gap or Penalties
When age 65+ employees follow the more common approach of delaying Medicare enrollment until retirement, they generally will need to enroll in Medicare immediately following the loss of active employer-sponsored coverage to avoid multiple issues.
The Eight-Month Medicare Special Enrollment Period is Not Extended by COBRA Enrollment
Medicare-eligible employees qualify for an eight-month Medicare special enrollment period (SEP) upon retirement (or any termination of employment) that begins the earlier of the month after employment ends or the month after active coverage ends. Watch our quick video on COBRA red flags!
COBRA Does Not Qualify to Avoid Part B Late Enrollment Penalties
To align with the eight-month SEP, retiring employees also have an eight-month period to sign up for Medicare Part B without a late enrollment penalty. Failure to enroll in Part B during the eight-month special enrollment period after losing active coverage will result in a late enrollment penalty of up to 10% for each full 12-month period late. In most cases, this late enrollment penalty increase to the Part B premium will remain in effect for as long as the individual maintains Part B coverage.
There are a number of key points to be aware of with respect to the eight-month SEP and avoiding late enrollment penalties, including:
- COBRA coverage (including subsidized COBRA) does not extend the start date of the eight-month SEP. The SEP begins to run regardless of COBRA enrollment.
- COBRA coverage (including subsidized COBRA) also does not qualify to avoid late enrollment penalties after the eight-month SEP.
- Failure to enroll in Part B during the eight-month SEP—regardless of COBRA enrollment—will therefore result in a late enrollment penalty for as long as the individual has part B, and the inability to enroll in Part B until January 1 – March 31 (which may cause a significant coverage gap).
Medicare Pays Primary (COBRA Assumes Primary Medicare Payment—Even If Not Enrolled!)
Perhaps the most significant reason a post-65 retiree should avoid relying solely on COBRA for any period is that COBRA will likely provide only secondary coverage. In general, the MSP rules require that the employer-sponsored group health plan always pay primary to Medicare for individuals in “current employment status,” which applies to active coverage.
However, retirees enrolled in COBRA are not receiving employer-sponsored coverage based on “current employment status.” In other words, they are not enrolled in active coverage. This means that Medicare pays primary for anyone enrolled in COBRA.
In the COBRA context where the MSP rules do not apply and Medicare is primary, the plan can assume the Medicare payment rate and pay only as secondary coverage for any individual who is eligible for COBRA. This is true regardless of whether the individual is actually enrolled in Medicare.
For example, if an individual’s services would have been covered primary by Medicare if the participant were enrolled in Part B, COBRA coverage can pay only the amount that a secondary plan would pay. For individuals not enrolled in Part B, that leaves the amount that would have been paid by Part B as a coverage gap for which the participant is responsible.
Medicare-eligible retirees will therefore never want to be in a position where they fail to enroll in Medicare while enrolled in COBRA under a plan that assumes the Medicare primary payment rate regardless of actual Medicare enrollment.
The COBRA/Medicare Timing Rule
In the rare situation where a retiree is interested in maintaining both Medicare and COBRA, the retiree needs to be aware the COBRA can terminate early if the retiree enrolls in Medicare after electing COBRA.
The timing piece means that a retiree who enrolled in Medicare prior to electing COBRA will not be subject to early termination of COBRA because of the Medicare enrollment. In other words, retirees who want to have Medicare and remain on COBRA must be careful to enroll in Medicare prior to electing COBRA.
Summary: Employers Complete a Portion of the Form CMS-L564 Upon Age 65+ Retirement
Employees who do not enroll in Medicare upon reaching age 65 should enroll in Medicare upon retirement. This enrollment during the SEP will include the Form CMS-L564 that is used for proof of group health plan coverage based on current employment (i.e., active coverage). The retiree will have the employer complete Section B with some basic information addressing the retiree’s periods of employment and health plan coverage, which is needed to process the Medicare enrollment application.
Post-65 retirees not already enrolled in Medicare will in almost all situations want to enroll in Medicare immediately upon losing active coverage because COBRA coverage alone typically is not a viable option. COBRA enrollment has multiple downsides, highlighted by that fact that it generally will provide only secondary coverage (regardless of Medicare enrollment). Furthermore, COBRA will not extend the eight-month Medicare special enrollment period or qualify to avoid late enrollment penalties.
In some rare situations a retiree may consider enrolling in both Medicare and COBRA. That would generally not be the financially prudent approach compared to enrollment in Medicare with a Medicare Supplement plan (or Medicare Advantage), but there may be network-driven reasons why a retiree would consider it. In that situation, the retiree should keep in mind that the Medicare enrollment must occur prior to electing COBRA.