ACA Subsidy and new job

[rpguy4]

I started a new job that offers health care benefits starting 6/1/2018.
However, my wife and I have been on a ACA plan since January 1, 2018, and receiving a substantial subsidy due to having a no/low income for the past 6 months. We were receiving about $1900 per month towards the premium. Our ACA coverage is now cancelled and will end 6/1/1018.

The new job pays well, and by the end of the year, I'll probably
be close to the 400% poverty level maximum for 2 people.

Question: Will the ACA ask for all or any part of the subsidy back that we received for the 1st 6 months of 2018 even though I was not working ? What happens at tax time, when I am filing my 2018 taxes ?

 

[VanWinkle]

I could not find a definite answer to your question, but #4 in the link from the IRS suggests to discuss with the ACA if a substantial change in income is occurring. I would think the subsidies would be based on your income while insured in the ACA, but I have not found anything yet to confirm that. I would call the ACA and ask that question.

https://www.irs.gov/affordable-care...estions-and-answers-on-the-premium-tax-credit

 

[MBSC]

If actual MAGI for the year ends up below 400% FPL, there are caps on the amount of premium subsidy you repay. You can find the repayment limits on page 16 in Table 5 of IRS Form 8962 instructions here: https://www.irs.gov/pub/irs-pdf/i8962.pdf

If actual MAGI for the year ends up over 400% FPL, you repay the entire premium subsidy. Make sure you have paid at least 100% of your prior year's tax to avoid an underpayment penalty.

If you had a Silver Plan with CSR, the CSR is not reconciled at tax filing.

Look into ways of keeping MAGI below 400% FPL such as contributing to a tIRA or 401K and choosing the employer's HDHP (if available) to make HSA contributions. Congratulations on the new job.

 

[rpguy4]

We are enrolled in an ACA Silver Plan (I believe). It's BCBS Silver Value Enhanced plan. Just to confirm, I think we do get a CSR, but we still need to keep our MAGI below 400% FPL ?

I was planning on contributing the max to a tIRA.

Thanks for your help.

 

[VanWinkle]

We are enrolled in an ACA Silver Plan (I believe). It's BCBS Silver Value Enhanced plan. Just to confirm, I think we do get a CSR, but we still need to keep our MAGI below 400% FPL ?

I do have access to a company 401k plan with no match, but I wasn't that impressed with the fund choices. However, if it saves us from repaying some
of the subsidies, then perhaps that's the way to go. At least I'll get to hold on to the money.

It appears that for 2018, 400% FPL Max for 2 people is $65,840.

Thanks for your help.

Cost sharing subsidies(lower deductible and out of pocket) are not reconciled at tax time.

Premium subsidies are reconciled at tax time so you have to stay under the cliff (65840) to keep from losing all subsidy of premium. You may have to pay back some anyway if your subsidies are based on 35,000 income and you end up with 60,000.

 

[VanWinkle]

Not much difference in premium subsidies, just difference in cost subsidies as income increases. In Illinois, premium subsidy for 35000 and 60,000 are almost the same.

 

[jim584672]

Unfortunately ACA PTC is based on calendar year MAGI. Only Medicaid is based on monthly income and is not reconciled since it is not considered to be insurance.

 

[rpguy4]

Just ran the numbers through TT using my 2017 return. I adjusted my MAGI to be just under the 400% FPL and just over the 400% FPL. WOW, what a difference. My goal will be to make sure we stay under the 400% FPL for 2018. Appreciate the GREAT advice and help ! Thank you

 

[zinger1457]

You'll definitely want to take advantage of everything available to reduce your MAGI (IRA, 401K, HSA, FSA, etc.). When you're at or close to the ACA cliff a difference of just $1 in income could end up costing you over $10K.

 

[Newventurer]

If you haven’t already, you will want to check on the rules for contributing to the companies 401k, sometimes these plans have waiting periods, you don’t want to get caught up in that if this is a substantial means of staying under the ceiling

 

[ivinsfan]

So someone actively looking for employment could be better off lowing their income to the Medicaid level if possible, because the 400% rule is so punitive.

It seems like the OP started their job at the worst possible time of year and could pay the first 10K of wages could go directly to the government. Kind of discourages people from actively looking for work at certain times of the year.