ACA Questions

[NewEnglander]

My DW and I are both retiring on 12/31/20. I assume that we can apply for ACA now even though we are still working? Or do we have to wait until we actually leave the workforce?

We plan on keeping annual income below the 67K so we can apply for premium tax credits. I assume that we will have to explain why our income will be declining so much? I plan on sending a letter indicating that we are retiring and will be living off of our retirement accounts.

Also we are 58 and 55 year old. I won't be able to access my retirement accounts until August when I'm 59.5 years old. We plan on living off savings until then so we won't have any income at all until we get access the account after August. Will this cause any issue? I saw somewhere that the ACA wants to see quarterly income? What happens if we won't have much of any income for the first 2 quarters of the year?

 

[Born2Fish]

Go to Healthcare and enter your information. You can change income levels and see how income effects the tax subsidy.

https://www.healthcare.gov/see-plans/#/steps

You can call and talk to a representative about your income. 800.318.2596

I have talked to them a few times and received good information.

I believe you are fine with the income requirements but it may make you feel better to talk with a rep.

 

[garyt]

If you're in an expanded Medicaid state and can't show any income they will put you on Medicaid.

 

[Fermion]

Open a google spreadsheet and put in your IRA balance, then make some fancy looking monthly Roth conversion with the amount recognized as income in a column. Run the numbers down so that your yearly income is whatever you need it to be.

Submit this as income documentation.

Done.

 

[RunningBum]

I think you'll be able to sign up now, for 2021. They ask if you will be under an employer's plan, and you can answer No to that.

I had to send a letter explaining my change in income, and that was it. Another option is to pay the full premium and get the credit back when you file taxes, but most people don't like what's essentially an interest free loan to the govt. I'm just pointing out that even if you can't get your subsidy credit now, you can still get it later.

I've never seen anything about the ACA and quarterly income. Perhaps you have this confused with quarterly estimated tax payments? That has nothing to do with the ACA. The IRS wants even quarterly payments, but you make uneven payments based on when you recognize income. You'll just have to fill out form 2210 with your taxes to show when you got the income. Or you could do enough withholding on your IRA/401K withdrawal to pay the income tax. Using withholding, you don't have to use form 2210, they just assume it's right. There's also "safe harbor" but assuming you have more income and taxes this year, you don't want to use that.

You probably want to make sure you have enough income this year to avoid Medicaid.

 

[PaunchyPirate]

My DW and I are both retiring on 12/31/20. I assume that we can apply for ACA now even though we are still working? Or do we have to wait until we actually leave the workforce?

We plan on keeping annual income below the 67K so we can apply for premium tax credits. I assume that we will have to explain why our income will be declining so much? I plan on sending a letter indicating that we are retiring and will be living off of our retirement accounts.

Also we are 58 and 55 year old. I won't be able to access my retirement accounts until August when I'm 59.5 years old. We plan on living off savings until then so we won't have any income at all until we get access the account after August. Will this cause any issue? I saw somewhere that the ACA wants to see quarterly income? What happens if we won't have much of any income for the first 2 quarters of the year?

You can and should start the process now on the healthcare.gov website (or your state may have its own exchange). You should also investigate the price of COBRA coverage from your employers. COBRA may or may not be less expensive and/or it may or may not be better coverage. So you should look into it.

On the ACA exchange, initially, you will simply be asked what your estimated income is for 2021. In previous years, they didn't necessarily ask for anything further. They may or may not. I've been on ACA for 2 years (and just signed up for the 3rd year) and they have never asked me to supply income validation details. And in my first year, I estimated income at a subsidy level and then blew way past it and had to repay the subsidy. They still didn't make me verify the next year. No one really knows when they ask or don't ask for it. It could be random selection.

Many of us early retirees are living off savings and keeping our income low enough for subsidies. If you are asked for validation, as said by others above, I would start by simply writing a letter or sending a spreadsheet indicating you have $XX,XXX in savings and will be primarily living off that this year and that you anticipate your income to come from these other sources and only amount to $XX,XXX. They'll ask for more proof if they feel it's needed. I've never heard anyone refer to any special need to prove or document quarterly income levels.

 

[Aerides]

In most states you will at least need a bit more than the poverty line. If you report zero income you'd be pushed to medicaid.

You should have interest income, and be able to do roth conversions or just take income distributions after august. You are asked to input monthly estimates but the important number is the annual sum. The ACA doesn't track your actual monthly income - but they do look at tax returns.

 

[pb4uski]

My DW and I are both retiring on 12/31/20. I assume that we can apply for ACA now even though we are still working? Or do we have to wait until we actually leave the workforce?

We plan on keeping annual income below the 67K so we can apply for premium tax credits. I assume that we will have to explain why our income will be declining so much? I plan on sending a letter indicating that we are retiring and will be living off of our retirement accounts.

Also we are 58 and 55 year old. I won't be able to access my retirement accounts until August when I'm 59.5 years old. We plan on living off savings until then so we won't have any income at all until we get access the account after August. Will this cause any issue? I saw somewhere that the ACA wants to see quarterly income? What happens if we won't have much of any income for the first 2 quarters of the year?

Yes, you can sign up now though even if you don't you could after you leave the workforce since losing job-based health insurance is a qualifying event.

And yes, you will likely have to explain how your income will be lower in 2021. I think you should only have to do this once.

However, since your income will be so low if you have tax-deferred money that is an ideal time to do low-tax cost Roth conversions and manage your income to qualify for ACA subsidies. Also, Roth conversions will increase you income enough that you won't be on Medicaid (though some early retiree have used Medicaid and are happy with it).

If you kept your income to $67k and had $5k of interest and no other income, you could do $62k of Roth conversons and would only pay $4,630 in tax... only 7.5% of the $62k conversion amount... IMO a screaming deal. but you should also factor in how much you would lose in ACA subsidies in making a decision.

Another alternative would be to convert the excess of $25,100 in standard deductions over your interest income.. $20,100 in our example... the cost for that would be zero!

And obviously, you need to consider CT taxes... I'm only referring to federal taxes above.

 

[SecondCor521]

The ACA doesn't track your actual monthly income - but they do look at tax returns.

This may differ from state to state, but in my state the ACA marketplace does not see my tax returns.

Of course, I do need to reconcile my APTC every year on Form 8962; perhaps that is what you're referring to.

But each year, the ACA marketplace folks assume my income will be the same as what I told them the previous year unless I tell them otherwise. They do not somehow obtain a copy of my tax return and say, "Oh, you made $X on your tax return so we're going to use that instead of the estimate you gave us."

In other words, there is no connection between the "Estimate your income for next year" process and the "File your taxes and reconcile your PTC" process. Perhaps there should be, but currently in my state there is not.

 

[jim584672]

Also we are 58 and 55 year old. I won't be able to access my retirement accounts until August when I'm 59.5 years old. We plan on living off savings until then so we won't have any income at all until we get access the account after August. Will this cause any issue? I saw somewhere that the ACA wants to see quarterly income? What happens if we won't have much of any income for the first 2 quarters of the year?

If your state expanded Medicaid you would go on that, some people may want to be on it, others don't for various reasons. In my state you are locked in for at least a year until the Medicaid recert date. Since we are in a declared public health emergency no one on Medicaid will lose coverage while the PHE is in place, even if your income goes up. Medicaid is monthly based while ACA is yearly based.

 

[sengsational]

Since you are going to engineer your 2021 income, so you'd just enter that on healthcare.gov. As mentioned, it should be at least 250% of FPL and probably nearer 350% because I presume you have tIRA funds that are subject to the RMD tax torpedo.

 

[Rianne]

I wish I had access to a health insurance broker when we signed up in 2014. The income frustration went on for 2 years after that, a spreadsheet and a letter seemed to suffice. Our healthcare group has brokers available at no cost. I did not know that in 2014. Make some calls, it saves a few headaches. It is confusing at first.

We now use the broker every year. She can answer any and every question. Actually, she saved us from paying $500/month by switching to an HSA High Deductible plan. We now pay $7.66/month and in 2021 will pay $8.08/month. Our deductible is $6500/individual and $13K family. But we're pretty healthy so far so used minimal healthcare. And we get the tax break on the HSA plan AND can write off the HSA contributions which keep our MAGI from going over the cliff.

 

[Aerides]

This may differ from state to state, but in my state the ACA marketplace does not see my tax returns.

Of course, I do need to reconcile my APTC every year on Form 8962; perhaps that is what you're referring to.

But each year, the ACA marketplace folks assume my income will be the same as what I told them the previous year unless I tell them otherwise. They do not somehow obtain a copy of my tax return and say, "Oh, you made $X on your tax return so we're going to use that instead of the estimate you gave us."

In other words, there is no connection between the "Estimate your income for next year" process and the "File your taxes and reconcile your PTC" process. Perhaps there should be, but currently in my state there is not.

True the marketplace doesn't "see" your taxes. But your taxes see your ACA credits and calculate a true-up of your subsidies with your annual filings (refund if you made less, owe if you made more, etc.) That's why monthly income isn't really anything to consider, other than in the calculation sheets which are designed for 80/20 rule.

 

[NewEnglander]

thanks everyone!
We applied online on the Connecticut ACA marketplace we didn't need to speak to anyone. The website was very good, it asked many questions including estimated 2020 and 2021 income. If we stay below the cliff we can get a Bronze HSA plan for about $14.40/month after the $1620/month premium tax credit.

 

[Rianne]

thanks everyone!
We applied online on the Connecticut ACA marketplace we didn't need to speak to anyone. The website was very good, it asked many questions including estimated 2020 and 2021 income. If we stay below the cliff we can get a Bronze HSA plan for about $14.40/month after the $1620/month premium tax credit.

Yey!! Good job. I like the $14.40 a month.

 

[retire-early]

I had read in years past that it is better to go on a Silver Plan because of Cost-Sharing Reduction.
https://www.healthreformbeyondtheba...in-marketplace-health-insurance-plans-part-2/

 

[VanWinkle]

I had read in years past that it is better to go on a Silver Plan because of Cost-Sharing Reduction.
https://www.healthreformbeyondtheba...in-marketplace-health-insurance-plans-part-2/

Cost sharing in my state(expanded Medicaid) starts at 138% of poverty and
phases out at 200% of poverty level.

 

[retire-early]

Cost sharing in my state(expanded Medicaid) starts at 138% of poverty and
phases out at 200% of poverty level.

Is this information available online for each state?

My state does have expanded Medicaid.

 

[VanWinkle]

Is this information available online for each state?

My state does have expanded Medicaid.

https://www.healthcare.gov/lower-costs/save-on-out-of-pocket-costs/

Try this link for more info.

VW

 

[retire-early]

https://www.healthcare.gov/lower-costs/save-on-out-of-pocket-costs/

Try this link for more info.

VW

Thanks!

Darn.
My state switched to having its own website for 2021.
I will have to read up on what my state did.

.

 

[aaronc879]

My DW and I are both retiring on 12/31/20. I assume that we can apply for ACA now even though we are still working? Or do we have to wait until we actually leave the workforce?

We plan on keeping annual income below the 67K so we can apply for premium tax credits. I assume that we will have to explain why our income will be declining so much? I plan on sending a letter indicating that we are retiring and will be living off of our retirement accounts.

Also we are 58 and 55 year old. I won't be able to access my retirement accounts until August when I'm 59.5 years old. We plan on living off savings until then so we won't have any income at all until we get access the account after August. Will this cause any issue? I saw somewhere that the ACA wants to see quarterly income? What happens if we won't have much of any income for the first 2 quarters of the year?

You don't have to wait until you are 59.5, you have to wait until the year you turn 59.5. If you turn 59.5 in August of 2021 then you can take a distribution on Jan 1st 2021 with no penalty.

 

[SecondCor521]

Cost sharing in my state(expanded Medicaid) starts at 138% of poverty and
phases out at 200% of poverty level.

Cost sharing reductions and expanded Medicaid are two different things.

Cost sharing reductions are part of the ACA law, and are the same across the entire country. There are breakpoints at 150%, 200%, and 250% of FPL. In order to benefit from CSRs, you must have an income below the applicable breakpoint, and buy a Silver metal level plan via the marketplace.

Expanded Medicaid is usually below 133%/138% of FPL, and is on a state-by-state basis, although more than half the states have it now.

Some individual states, such as California and New York, have their own health insurance affordability programs which are in addition to CSR and EM.

 

[gauss]

You don't have to wait until you are 59.5, you have to wait until the year you turn 59.5. If you turn 59.5 in August of 2021 then you can take a distribution on Jan 1st 2021 with no penalty.

Do you have a reference for this?

I thought I looked it up at the IRS not too long ago and got the impression that the distribution had to be taken after you had attained 59 1/2 years to avoid the penalty.

edit:

Here is a link and a snippet from IRS Pub 590b that talks about this.

Age 59½ Rule
Generally, if you are under age 59½, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your traditional IRA. Distributions before you are age 59½ are called early distributions.

The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.

A number of exceptions to this rule are discussed later under Exceptions. Also see Contributions Returned Before Due Date of Return in chapter 1 of Pub. 590-A.

After age 59½ and before age 70½.
After you reach age 59½, you can receive distributions without having to pay the 10% additional tax. Even though you can receive distributions after you reach age 59½, distributions aren't required until you reach age 70½.

-gauss

 

[VanWinkle]

Cost sharing reductions and expanded Medicaid are two different things.

Cost sharing reductions are part of the ACA law, and are the same across the entire country. There are breakpoints at 150%, 200%, and 250% of FPL. In order to benefit from CSRs, you must have an income below the applicable breakpoint, and buy a Silver metal level plan via the marketplace.

Expanded Medicaid is usually below 133%/138% of FPL, and is on a state-by-state basis, although more than half the states have it now.

Some individual states, such as California and New York, have their own health insurance affordability programs which are in addition to CSR and EM.

Not sure if you were explaining to OP, but my meaning was only that I am in a medicaid expansion state. I am aware the two(cost sharing reductions and medicaid espansion) are two different things. One governed by the Federal Law, the other controlled by the states.

VW

 

[SecondCor521]

Not sure if you were explaining to OP, but my meaning was only that I am in a medicaid expansion state. I am aware the two(cost sharing reductions and medicaid espansion) are two different things. One governed by the Federal Law, the other controlled by the states.

VW

I did misinterpret what I quoted from you. I thought your parenthetical comment applied to "Cost sharing in my state", not just "my state", which is what led me to clarify.

That being said, your statement that cost sharing phases out at 200% is incomplete. There are three levels of cost sharing, and the phaseouts are 150%/200%/250% of FPL.