Retiring After 65 in Arizona? Leaving Employer Coverage
If you kept working past 65 on a group health plan, you can usually sign up for Part B later without a penalty, but only inside an 8-month window and only with the right paperwork. Here is how to time it in Arizona.
Key takeaways
- If you are covered through current employment (yours or your spouse's), you get an 8-month Special Enrollment Period for Part B that starts when the job or the coverage ends, whichever comes first.
- Employer size matters: with 20 or more employees, the group plan usually pays first. With fewer than 20, Medicare usually pays first, so you generally need Part B at 65 even while working.
- COBRA and retiree coverage do not count as current employment coverage for the Part B window. Waiting until COBRA runs out is the most common costly mistake.
- Miss the window and the Part B penalty is 10% for each full 12 months you could have had Part B, for as long as you have it. The Part D penalty is 1% of $38.99 (2026) per month without creditable drug coverage.
- Two forms do most of the work: CMS-40B (the Part B application) and CMS-L564 (your employer confirms your coverage).
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The short answer: if you have health insurance from a job you or your spouse still hold, you can usually delay Part B past 65 and sign up later with no penalty. The catch is timing. Your penalty-free window is 8 months from the day the job or the group coverage ends, and it does not wait for COBRA to run out.
This is one of the most common reasons people in Chandler and across the East Valley call us. Someone retires from a hospital system, a school district or a tech company, picks up COBRA because it keeps the same doctors, and only learns a year later that the clock for Part B started on their last day of work.
Below is how the rules work, what to send Social Security, how drug coverage fits in, and the order we suggest doing things in the last few months before you leave work.
Do I need Part B at 65 if I still have insurance from work?
It depends on the size of the employer. If the employer has 20 or more employees, the group health plan generally pays first and Medicare pays second, so many people delay Part B without any harm. If the employer has fewer than 20 employees, Medicare generally pays first, and the group plan may pay very little until you have Part B.
| Your situation | Who usually pays first | Do you need Part B at 65? |
|---|---|---|
| Employer with 20 or more employees | The group health plan | Usually no; you can delay and use the 8-month window later |
| Employer with fewer than 20 employees | Medicare | Usually yes; ask the plan in writing before you delay |
| COBRA after the job ends | Medicare | Yes; COBRA does not extend your window |
| Retiree coverage from a former employer | Medicare | Yes; retiree plans are built to pay after Medicare |
Most people take premium-free Part A at 65 even while working, because it costs nothing if you or your spouse paid Medicare taxes for about 10 years. The exception is anyone contributing to a Health Savings Account: once any part of Medicare starts, HSA contributions must stop. We cover that in our HSA before Medicare article.
How does the 8-month Special Enrollment Period work?
The window opens the month after your employment or your group coverage ends, whichever happens first, and lasts 8 months. Any month inside that window, you can sign up for Part B with no late penalty.
Here is the part people miss. If you retire on June 30, your window is July through February, even if your employer coverage technically runs to the end of the month and even if you elect COBRA through December of the following year. COBRA is a continuation of the old plan, not current employment, so it does not move the start date.
- Part B Special Enrollment Period after work or coverage ends
- 8 months
- Longest gap allowed without creditable drug coverage
- 63 days
- Medigap Open Enrollment, starting with Part B
- 6 months
Practical advice: do not wait for the window. Sign up for Part B so it starts the first day of the month after your group coverage ends. That way there is no month where neither plan pays as primary.
What does it cost if I miss the window?
Missing the window costs you twice. First, you may have to wait for the General Enrollment Period (January 1 to March 31 each year) to sign up, with coverage starting the month after you enroll. Second, you pay a Part B late enrollment penalty of 10% of the standard premium for each full 12 months you were without Part B when you could have had it, and the penalty usually lasts as long as you have Part B.
| Gap | Part B penalty added per month | Part D penalty added per month |
|---|---|---|
| 12 months late | $20.30 (10%) | $4.70 (12%) |
| 24 months late | $40.60 (20%) | $9.40 (24%) |
| 36 months late | $60.90 (30%) | $14.00 (36%) |
Those figures look small month to month, but they never stop. Someone who is 24 months late on both pays the extra every month for the rest of their life, and the dollar amount rises as the base premiums rise. You can test your own numbers with our Part B penalty calculator and Part D penalty calculator.
Does my employer drug coverage count for Part D?
Usually, but you need to confirm it. Your employer plan must send you a notice each year saying whether its drug coverage is "creditable," meaning it is expected to pay at least as much as standard Medicare drug coverage. If it is creditable, you can delay Part D with no penalty.
When the employer coverage ends, you have 63 days to join a Medicare drug plan or a Medicare Advantage plan with drug coverage. Go past 63 days without creditable coverage and the Part D penalty starts counting: 1% of the national base beneficiary premium ($38.99 in 2026) for every month without coverage, added to your premium for as long as you have Part D.
What paperwork do I send Social Security?
Two forms. Form CMS-40B is the application for Part B. Form CMS-L564 is completed by your employer to confirm when you had group coverage based on current employment. Social Security uses the L564 to waive the late penalty. You can find both on our resources page, alongside official CMS videos that walk through enrollment.
- About 3 months before you leave work: ask HR to complete CMS-L564 and confirm your last day of coverage.
- About 2 months before: submit CMS-40B with the L564 to Social Security, asking for Part B to start the first of the month after group coverage ends.
- Same time: decide between Medicare Advantage and Original Medicare with a Medigap plan, and choose drug coverage so it starts the same day.
- Last: decline or cancel COBRA if Medicare now covers you. Keep copies of everything.
If your employer has closed or HR cannot complete the form, Social Security accepts other proof of coverage, such as pay stubs showing health premiums or insurance statements. Keep them together.
When should I buy a Medicare Supplement?
Your Medigap Open Enrollment Period is the 6 months that start the first month you have Part B and are 65 or older. During those 6 months, a company cannot refuse to sell you a Medicare Supplement or charge you more because of your health.
That is why delaying Part B while working is useful: your Medigap window does not start until Part B starts, so it lines up with your retirement rather than your 65th birthday. After the 6 months, insurers in Arizona can generally ask health questions. Our Medigap in Arizona article explains what that means if you want to switch later.
The bottom line
Working past 65 on a large employer plan usually lets you delay Part B safely, but the 8-month window starts when work or coverage ends, not when COBRA does. Get the L564 from your employer early, start Part B the day group coverage stops, and line up drug coverage and any Medigap plan to begin the same day.
Frequently asked questions
Can I delay Part B if I am still working at 65 in Arizona?
Yes, if you have group health coverage through current employment, yours or your spouse's, and the employer has 20 or more employees. With fewer than 20 employees, Medicare usually pays first, so you generally need Part B at 65.
Does COBRA count as creditable coverage for Part B?
No. COBRA does not count as coverage based on current employment, so it does not extend your 8-month Part B Special Enrollment Period. The window starts when the job or the group coverage ends, whichever is first.
What forms do I need to sign up for Part B after leaving my job?
Form CMS-40B, the Part B application, and Form CMS-L564, which your employer completes to confirm your group coverage. Send both to Social Security.
How long do I have to get Part D after employer coverage ends?
63 days. After that, a Part D late penalty of 1% of the national base premium ($38.99 in 2026) per month without creditable coverage is added for as long as you have Part D.
Sources
- Medicare & You 2027 handbook Centers for Medicare & Medicaid Services
- Medicare 2026 Parts A and B premiums and deductibles Centers for Medicare & Medicaid Services
- Form CMS-40B, Application for Enrollment in Medicare Part B Centers for Medicare & Medicaid Services
- Form CMS-L564, Request for Employment Information Centers for Medicare & Medicaid Services
Please note: We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options.Rise Up Benefits Group is not connected with or endorsed by the United States government or the federal Medicare program. Medicare has neither endorsed nor reviewed this information. This article is general information, not medical, tax or legal advice.
