Getting an ACA Subsidy

[AllDone]

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Originally Posted by jim584672 "good" or "bad" is in the eye of the beholder. The usual scheme for the poor is go to the ER. Get care, get bill, go bankrupt. Have hospital beg for uncompensated care reimbursement from the government. Taxpayers eventually pay or all the hospitals will go bankrupt. Pad the bills of those who can pay to make up for the losses. Indigent care gets paid for by mostly local taxpayers and some Federal money. Expanded Medicaid is paid for at 100-90% by the Federal gov. So $$$ wise it makes no sense to reject the Federal money.

The scheme is even better. Charge uninsured person rack rate, settle for insured rate, write off difference as "charity" on the taxes.

Pharmaceutical companies get a tax write off for full retail price for the samples they give to doctors.

[Texas Proud]

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Originally Posted by AllDone The scheme is even better. Charge uninsured person rack rate, settle for insured rate, write off difference as "charity" on the taxes. Pharmaceutical companies get a tax write off for full retail price for the samples they give to doctors.

It doesn't work that way...

[GTFan]

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Originally Posted by AllDone A lot of people don't seem to understand that people who get insurance through an employer get a tax break on their insurance that is absolutely equivalent to a subsidy. In fact, more highly paid people often get a larger "subsidy" than the less well paid. There is no particular reason why someone who is self employed, not offered insurance through an employer, or retired is less deserving of a subsidy.

Absolutely true, especially given how good some of these plans are - I paid $230 or so at my former MegaCorp for a very good family plan that cost the company something like $1100 a month total and all of my payments came straight off my income as non-taxable.

One of the best things about the ACA is that the playing field is much more level now between those who have work coverage and those who don't. If nothing else, this breaking of the binds that tied us to these corps was worth all the pain. I'd put it right up there with the pre-existing condition elimination rules as the two features that will go forward no matter what happens.

[elisap]

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Originally Posted by ArkTinkerer Look into the "rule of 55". Most 401K will allow you to draw penalty free if you retire the year you turn 55 or later. Your 401K withdrawals will count as income for the ACA. Depending on your account balances, you may want to pull more than the minimum amount anyway. Lots of folks here talk about doing that to avoid the tax bite when required minimum distributions (RMDs) kick in.

Hi Everyone I am new here, referred by a early retirement member. I have a question about the rule 55 rule and Obamacare. I am now learning about Ocare and that we must have income to avoid being pushed to medicaid. My husband retired from his job of 25 years at 53 and he was off for about a year until I hired him. He is now 55 and will keep working for me. If I opt to sell the business in a couple years, pre-ss, then we live off our savings/investments, what constitutes him retiring at 55 years. Even though he took a year off and is now working at 55 does the year off effect this rule?

It makes sense that since it is the 55 rule that it won't but one never knows.

[jim584672]

Sounds like he terminated at 53 so the 55 rule would not apply.

[rodi]

I googled "rule 55 ACA" - the only thing I could find was reference to chapter 55 of the law which deals with tricare stuff.
Questions and Answers on the Individual Shared Responsibility Provision

See number 4 and 5 at the link

[daylatedollarshort]

Quote:

Originally Posted by AllDone A lot of people don't seem to understand that people who get insurance through an employer get a tax break on their insurance that is absolutely equivalent to a subsidy. In fact, more highly paid people often get a larger "subsidy" than the less well paid. There is no particular reason why someone who is self employed, not offered insurance through an employer, or retired is less deserving of a subsidy.

Very true, plus the self employed are also paying double for FICA, both employee and employer portions, and do not get other subsidized benefits like dental, disability, paid vacations and sick pay.

[ziggy29]

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Originally Posted by daylatedollarshort Very true, plus the self employed are also paying double for FICA, both employee and employer portions, and do not get other subsidized benefits like dental, disability, paid vacations and sick pay.

Often true, though as we have just discovered recently with DW's ordination a couple weeks ago, ordained clergy are in a strange position. They are considered self-employed for most tax purposes, but often do receive benefits from the church they are called to and may receive income reported on a W-2 rather than a 1099. But yeah, that self-employment tax is a real gotcha. It amounts to a significant pay cut if it's not offset by a gross-up in salary to account for it.

[MichaelB]

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Originally Posted by elisap Hi Everyone I am new here, referred by a early retirement member. I have a question about the rule 55 rule and Obamacare. I am now learning about Ocare and that we must have income to avoid being pushed to medicaid. My husband retired from his job of 25 years at 53 and he was off for about a year until I hired him. He is now 55 and will keep working for me. If I opt to sell the business in a couple years, pre-ss, then we live off our savings/investments, what constitutes him retiring at 55 years. Even though he took a year off and is now working at 55 does the year off effect this rule? It makes sense that since it is the 55 rule that it won't but one never knows.

As Rodi pointed out, there is no "rule of 55" related to the ACA. You can see in the text you quoted, there is "rule of 55" that applies to taking early distributions from a 401K.

One way to generate taxable income for ACA MAGI purposes is to convert tax deferred income to Roth, just enough each year to meet your target income level.

[Animorph]

Quote:

Originally Posted by elisap Hi Everyone I am new here, referred by a early retirement member. I have a question about the rule 55 rule and Obamacare. I am now learning about Ocare and that we must have income to avoid being pushed to medicaid. My husband retired from his job of 25 years at 53 and he was off for about a year until I hired him. He is now 55 and will keep working for me. If I opt to sell the business in a couple years, pre-ss, then we live off our savings/investments, what constitutes him retiring at 55 years. Even though he took a year off and is now working at 55 does the year off effect this rule? It makes sense that since it is the 55 rule that it won't but one never knows.

The 55 rule is that you can make withdrawals from a company 401k (if that 401k allows it) if you retired from that company after age 55. I think that would have to be your business's 401k plan and would apply only to your husband's balance in that plan.

However, if you have any 401k or traditional IRA accounts for either of you, you can do a partial Roth conversion. That gives you income for ACA (with taxes to pay), no early withdrawal penalty, and keeps your retirement investments in a tax-advantaged retirement account. A lot of us do that.

[elisap]

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Originally Posted by MichaelB Don't worry about it. The OP started another thread and then announced he was going to look in another forum. (see here) Ask away. Here are some links that will help you How MAGI is determined http://laborcenter.berkeley.edu/pdf/...I_summary13.pd and http://www.fas.org/sgp/crs/misc/R41997.pdf Premium credits and cost sharing are discussed here http://www.fas.org/sgp/crs/misc/R41137.pdf The entire paper is useful, cost sharing is discussed beginning page 14.

MichaelB, the MAGI link is broke, can you update the link?

Thank you

[elisap]

Quote:

Originally Posted by Animorph The 55 rule is that you can make withdrawals from a company 401k (if that 401k allows it) if you retired from that company after age 55. I think that would have to be your business's 401k plan and would apply only to your husband's balance in that plan. However, if you have any 401k or traditional IRA accounts for either of you, you can do a partial Roth conversion. That gives you income for ACA (with taxes to pay), no early withdrawal penalty, and keeps your retirement investments in a tax-advantaged retirement account. A lot of us do that.

Ok that makes sense. What a puzzle but it's interesting, I appreciate your help in deciphering. To reiterate.. S-corp both my husband (55yo) and I (53) are payroll and max out our 401k contributions. So if I, at 55 years old I sell and we both travel, I move money out of my 401k, could you explain "apply only to your husbands balance in that plan".

We each have an IRA (post tax) with the intention of a back door Roth. We don't qualify for regular but it is to my understanding that money in Roth grows tax free. So we would have to withdrawel from my 401k to achieve a taxable income? I didn't learn much about IRA's since we didn't qualify pre-tax.

I'll get this!...

[Animorph]

Quote:

Originally Posted by elisap Ok that makes sense. What a puzzle but it's interesting, I appreciate your help in deciphering. To reiterate.. S-corp both my husband (55yo) and I (53) are payroll and max out our 401k contributions. So if I, at 55 years old I sell and we both travel, I move money out of my 401k, could you explain "apply only to your husbands balance in that plan". We each have an IRA (post tax) with the intention of a back door Roth. We don't qualify for regular but it is to my understanding that money in Roth grows tax free. So we would have to withdrawal from my 401k to achieve a taxable income? I didn't learn much about IRA's since we didn't qualify pre-tax. I'll get this!...

If you retired at 55 you'd be eligible for 401k withdrawals from your S-corp 401k also, provided the plan documents allow it. I was trying to avoid implying that just because your husband retired at 55 that had some effect for you or any older 401k's.

Yes, money in a Roth grows tax-free. There are age limits (same as traditional IRA's) and a 5 year holding rule that you should look at.

The Roth conversion part of the backdoor Roth contribution and Roth conversions themselves can be performed any time you can stand the tax hit. No age or income limits. However, if your only IRA is used only for backdoor Roth contributions you may not have much taxable gains that would count as income. Assuming all of your 401k is pre-tax then all of your Roth conversion from there would be taxable.

Of course, if you don't care about ADA subsidies you could always get health insurance directly from a carrier, bypassing the exchange. Normally the same coverage and same (full) price, just eliminating the middleman and avoiding any Medicaid problems. If you have significant taxable accounts and significant pre-tax retirement accounts you may want to think about substantial Roth conversions. That's my situation.

[rbmrtn]

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Originally Posted by elisap MichaelB, the MAGI link is broke, can you update the link? Thank you

Here's ACA MAGI link

http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

[elisap]

Quote:

Originally Posted by rbmrtn Here's ACA MAGI link http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

Thank you.