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Understanding what employment quarters are and how they are calculated is useful because this can determine whether or not you need to pay a premium for Medicare Part A. This part of Medicare covers many hospital services and is typically premium-free for people over 65 years of age if they are also eligible for retirement benefits from Social Security or the Railroad Retirement Board.
Employment quarters are a period of time used as part of the calculation for your Social Security or Railroad Retirement Board benefits when you retire. In general, you may qualify for these benefits by earning credits when you work in a job and pay Social Security or Railroad Retirement Board taxes.
Most of the time, you are also paying Medicare taxes, so the same employment quarters or credits add up to your contribution towards Medicare when you reach age 65. Medicare Part A is funded largely by payroll taxes paid by employees, employers, people who are self-employed, and Medicare Part A premiums.
The Social Security Administration calls employment quarters by several names, such as “quarter of coverage” and “Social Security credits” or simply “credits.”
How credits for Social Security retirement benefits (and thus, Medicare benefits) have been calculated has changed over the years. Today, Social Security credits are based on your total income during the year, and the year is divided into four employment quarters.
The dollar amount needed to earn credits may go up slightly each year, according to the Social Security Administration, as average earnings increase. For more information on the current earnings needed to earn Social Security or Medicare work credit, visit the Social Security website.
There are special rules for certain types of jobs, such as domestic work, farm work, and work for a church or similar organization that does not collect Social Security and Medicare taxes. Employment of this sort may count towards your employment quarters for retirement and Medicare benefits, but you should contact the Social Security Administration to confirm. Conversely, some people may not qualify for Social Security retirement credits, such as federal employees hired before 1984, railroad employees with more than 10 years of service, and employees of some state and local governments. Other factors may be used to determine their eligibility for premium-free Medicare Part A.
If you worked for a railroad, your retirement benefits are calculated by how many calendar months you worked. Beginning at age 60 and with a minimum 360 months of railroad service, you may qualify for a retirement annuity.
For the Social Security Administration, the number of employment quarters that qualify you for retirement and premium-free Medicare Part A depends on your date of birth. If you were born in 1929 or later, you need 40 credits (equal to 10 years of work). If you were born in 1928, you need 39 credits, and the amount decreases as the date goes further back — those born in 1927 need 38 credits, etc.
If you were a railroad employee and you qualify for the minimum railroad retirement annuity noted above, you’re likely to qualify for premium-free Medicare Part A. That length of service should provide equivalent employment quarters and Medicare taxes.
If you have never worked or have not worked enough employment quarters to qualify for premium-free Part A and you’re married, you might gain this benefit through your spouse’s employment history. If your spouse receives Social Security retirement benefits or Railroad Retirement Board benefits, you can apply to Medicare when you’re eligible, and you may get Part A without paying a premium.
While Part A often has no premium, Medicare Part B usually does, whether you apply based on your employment history or your spouse’s. Together, Part A and Part B make up Original Medicare. You can get these benefits through the federal program or through private insurance companies that offer Medicare Advantage plans, also called Medicare Part C. There is also Medicare Part D prescription drug coverage (Medicare Prescription Drug Plans) and Medicare Supplement insurance (Medigap) sold by private insurance companies, and you can add these to your Original Medicare, if you wish.
Because Medicare has many parts, it’s important to understand how they work together and what benefits may be right for you. To get help choosing a Medicare plan option that might be right for you, contact an eHealth licensed insurance agent today.
eHealth's Medicare website is operated by eHealthInsurance Services, Inc., a licensed health insurance agency doing business as eHealth. The purpose of this site is the solicitation of insurance. Contact may be made by an insurance agent/producer or insurance company. eHealth and Medicare supplement insurance plans are not connected with or endorsed by the U.S. government or the federal Medicare program. We offer plans from a number of insurance companies.