The basic rule
At 65 you become eligible for Medicare whether or not you have retired. Whether you should sign up for Part B right away depends on one question: do you have group health coverage based on current work, yours or your spouse's? If so, and the employer is large enough, you can usually delay Part B without a penalty and sign up later during a special enrollment period. If not, sign up during your Initial Enrollment Period to avoid gaps and penalties.
Most people get Part A with no premium, so many people still working take Part A at 65 even when they delay Part B. The main exception is if you contribute to a health savings account (see below).
Who pays first: employer size
When you have both Medicare and a job-based plan, federal rules decide which pays first (primary) and which pays second (secondary). The answer depends on how many people the employer has.
| Your situation | Employer size | Who pays first |
|---|---|---|
| 65 or older, coverage from your or your spouse's current job | 20 or more employees | The job-based plan; Medicare pays second |
| 65 or older, coverage from your or your spouse's current job | Fewer than 20 employees | Medicare; the job-based plan pays second |
| Under 65 with a disability, coverage from your or a family member's current job | 100 or more employees | The job-based plan; Medicare pays second |
| Under 65 with a disability, coverage from your or a family member's current job | Fewer than 100 employees | Medicare |
| End-stage renal disease, any group health plan | Any size | The group plan for the first 30 months of Medicare eligibility; then Medicare |
| Retiree coverage or COBRA | Any size | Medicare |
Small employers: if Medicare should pay first and you don't have Part B, your job-based plan may pay only what it would have paid as secondary coverage, leaving you with large bills. If you work for a small Arizona business, or are covered by a spouse's small-employer plan, ask the benefits office in writing whether you need Part B.
Signing up later: the 8-month special enrollment period
If you delayed Part B because you had job-based coverage from current work, you can sign up any time while you still have it, or during the 8 months after the job or the coverage ends, whichever comes first. You won't owe a late penalty. To use this period, you send Social Security the Part B application (form CMS-40B) together with form CMS-L564, on which your employer confirms your coverage dates. Both can be filed online at ssa.gov.
Your Medigap open enrollment period also starts when your Part B begins, so delaying Part B preserves that 6-month window. To join a Medicare Advantage or Part D plan after job-based coverage ends, you have 2 full months after the month the coverage ends.
COBRA and retiree coverage
COBRA and retiree health plans are not coverage based on current work. They don't extend your time to sign up for Part B, and Medicare pays first when you have them. If you leave a job at 65 or older and take COBRA, sign up for Part B within the 8 months after your job ends; don't wait for COBRA to run out. Many retiree plans also expect you to have Part A and Part B and pay only after Medicare.
Health savings accounts
You can't contribute to a health savings account (HSA) once any part of Medicare starts, including premium-paying Part A. For 2026, the HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, plus a $1,000 catch-up contribution if you're 55 or older; in the year Medicare starts, you can contribute only for the months before it begins.
- Part A can be backdated. When you sign up for Part A after 65, coverage usually starts up to 6 months earlier (but not before the month you turned 65). Stop HSA contributions, yours and your employer's, 6 months before you sign up for Medicare or start Social Security benefits, which enrolls you in Part A automatically, to avoid a tax penalty on excess contributions.
- You can keep spending the HSA. Money already in the account can pay Part B, Part D and Medicare Advantage premiums and other qualified medical costs without tax. It can't pay Medigap premiums.
Drug coverage and the creditable coverage notice
Each year before October 15, an employer or union plan with drug coverage must tell you whether that coverage is "creditable," meaning expected to pay at least as much as Medicare's standard Part D coverage. If it is, you can delay Part D without a penalty. If it isn't, or you go 63 days or more in a row without creditable drug coverage after your Initial Enrollment Period, you may owe a Part D late penalty. Keep every notice. See Part D in Arizona.
Arizona state employees and ASRS retirees
State of Arizona employees get health coverage through the Arizona Department of Administration's Benefit Services Division (Benefit Options). The State is a large employer, so while you are actively working for the State, its plan pays first and the usual delay rules for Part B apply.
Retirement changes the picture. Medicare-eligible State retirees may be able to get retiree health coverage through the Arizona State Retirement System (ASRS) or keep coverage through ADOA. Keep in mind:
- ASRS Medicare plans require Part A and Part B. ASRS says you must enroll in and keep both to join its plans for Medicare-eligible retirees. If you are in a non-Medicare ASRS plan when you become eligible for Medicare, you must move to one of its Medicare plans to keep ASRS coverage. ASRS suggests contacting Medicare about 3 months before your 65th birthday.
- The ASRS health insurance premium benefit (A.R.S. § 38-783) helps pay retiree health premiums for retirees and disabled members with at least 5 years of credited service: a partial amount from 5 to 9.9 years and the full amount at 10 years or more. It can apply to ASRS retiree plans, the State's ADOA plan, or certain employer-provided retiree plans, and the amounts set in law are lower for members who are Medicare-eligible. For members who retired on or after August 2, 2012, it generally isn't paid while you are covered by an employer's plan for active employees.
- Retiree coverage is not current-work coverage. Medicare pays first, so missing Part B can mean gaps and a lifetime penalty.
Plan details and enrollment deadlines change each year, so read the current ASRS or ADOA retiree enrollment guide before you retire.
Other Arizona employers, TRICARE and FEHB
Cities, counties, school districts, universities, hospital systems and private companies across Arizona each set their own rules for workers and retirees who reach 65. Ask your benefits office three questions: does the plan pay first or second at 65, is its drug coverage creditable, and what does it require of retirees once they are eligible for Medicare?
If you have TRICARE, you generally need Part A and Part B to keep TRICARE For Life once you're eligible for Medicare, with different rules while you or your spouse are on active duty. Federal employees and retirees with FEHB have their own choices about Part B. See veterans and military families.
Higher earners: IRMAA
If you're still earning a salary, check whether your income is high enough for an income-related surcharge on Part B and Part D. In 2026 it applies when modified adjusted gross income from two years earlier was above $109,000 for a single filer or $218,000 for a joint return. Retiring counts as a life-changing event that can let you ask Social Security to use your newer, lower income. Try the IRMAA calculator.
Getting help
Social Security handles Part A and Part B sign-up: ssa.gov or 1-800-772-1213. For how Medicare works with your job-based plan, call 1-800-MEDICARE (1-800-633-4227, TTY 1-877-486-2048). When you are ready to look at coverage for after you retire, see plans in your ZIP code or call (602) SENIORS (602-736-4677), TTY 711 to reach a licensed insurance agent with Benefits Life, at no cost to you. See also Do I need Part B if I'm still working?
Sources
- Medicare.gov — Working past 65
- Medicare.gov — Which insurance pays first
- CMS — Coordination of benefits and recovery overview
- Medicare.gov — Avoid late enrollment penalties
- IRS — Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
- Arizona Legislature — A.R.S. § 38-783, retired members; health insurance; premium payment
- Arizona State Retirement System — Becoming Medicare eligible
- Arizona Department of Administration, Benefit Services Division — Retiree eligibility
- TRICARE — TRICARE For Life
Frequently asked questions
Do I need Part B if I'm still working in Arizona at 65?
Not always. If you have health coverage from your own or your spouse's current job and the employer has 20 or more employees, that plan pays first and you can usually delay Part B without a penalty. If the employer has fewer than 20 employees, Medicare usually pays first, so you generally need Part B to avoid gaps. Ask your employer's benefits office how its plan works with Medicare.
Can I keep contributing to my HSA after I turn 65?
Only if you are not enrolled in any part of Medicare. Once Part A starts, you can't contribute to an HSA. Because Part A can start up to 6 months before the month you sign up (but not before you turn 65), stop contributions 6 months before you sign up for Medicare or Social Security. You can still spend money already in the HSA, including on Part B, Part D and Medicare Advantage premiums.
Does COBRA count as employer coverage for Medicare?
No. COBRA isn't coverage based on current work, so it doesn't let you delay Part B. Your 8-month Part B special enrollment period starts when your job or job-based coverage ends, whichever comes first, not when COBRA ends. If you wait until COBRA runs out, you may face a gap and a lifetime late penalty.
I'm retiring from the State of Arizona. Do I need Medicare Part B?
If you want to keep retiree health coverage through the Arizona State Retirement System once you're eligible for Medicare, ASRS requires you to enroll in and keep both Part A and Part B to join its Medicare plans. Retiree coverage doesn't count as coverage from current work, so Medicare pays first. Check the current ASRS or ADOA retiree enrollment guide before you retire.
What is a creditable coverage notice?
Employers that offer drug coverage must tell you each year, before October 15, whether their coverage is at least as good as Medicare's standard Part D coverage. If it is creditable, you can wait to join Part D without a penalty. Keep the notice; you may need it later to show you had coverage.
