ACA subsidy and MAGI number for 2019

[fh2000]

DW and I left Megacorp (same company for both of us) after the first week of January. We received family HSA group insurance for January. We enrolled in ACA family HSA plan starting on February with subsidy. We have just completed 2018 tax and have also received the final paycheck for 2018 bonus.

We have few days before Cobra deadline if we wish to sigh up, but I think we are safe to stay in ACA. Here are the numbers:

1. Per the last paychecks from Megacorp, our YTD earnings combined: $74,000
2. Interest/dividend on 2018 tax: $10,000 (very little year end mutual fund capital gain distribution)
3. We have no other income.

Deduction:
1. 401K: $11,000
2. HSA: we enrolled in family HSA ACA plan so will contribute: $9,000
3. Traditional IRA: we will both contribute $7,000, so total: $14,000

Our MAGI number for 2019 therefore is: $50,000. This is below the family of 2 cliff, $65,840. We should be safe to say in ACA for 2019.

Since we enrolled in ACA for 11 months, does the family of 2 cliff gets prorated for 11 months as well, so it gets reduced by $65,840 * 11/12 = $60,353? Even that, we are still under the cliff, correct?

[Smitty700]

Quote:

Originally Posted by fh2000 Since we enrolled in ACA for 11 months, does the family of 2 cliff gets prorated for 11 months as well, so it gets reduced by $65,840 * 11/12 = $60,353? Even that, we are still under the cliff, correct?

Premium Tax Credits for the ACA are based on annual income, not monthly, so it doesn't matter if how many months you are actually enrolled in the ACA.

You get PTCs only for the months that you are enrolled in ACA coverage, of course. But those PTCs are based on your full year MAGI.

[SecondCor521]

Quote:

Originally Posted by fh2000 We should be safe to s[t]ay in ACA for 2019.

I'm a little unclear about your meaning behind this sentence.

Your ACA subsidies for 2019 will originally be based on your estimated income for 2019, and will be reconciled based on your actual income on your 2019 tax return that you will file about a year from now.

I mention this only because your statement above is embedded in a post that seems to describe a fair amount about your 2018 income.

Your sentence above could be construed in two different ways:

1. We should be safe to stay in ACA for 2019 because our income in 2018 was below the ACA subsidy cliff and since we retired our income will be even lower in 2019, and since our income is going down and the cliff goes up a little bit each year, by inductive logic we should be OK.

2. We should be safe to stay in ACA for 2019 because our income in 2018 was below the cliff, and somehow 2018 income affects ACA eligibility or subsidies for 2019. (<- This is untrue.)

[fh2000]

Quote:

Originally Posted by SecondCor521 I'm a little unclear about your meaning behind this sentence. Your ACA subsidies for 2019 will originally be based on your estimated income for 2019, and will be reconciled based on your actual income on your 2019 tax return that you will file about a year from now. I mention this only because your statement above is embedded in a post that seems to describe a fair amount about your 2018 income. Your sentence above could be construed in two different ways: 1. We should be safe to stay in ACA for 2019 because our income in 2018 was below the ACA subsidy cliff and since we retired our income will be even lower in 2019, and since our income is going down and the cliff goes up a little bit each year, by inductive logic we should be OK. 2. We should be safe to stay in ACA for 2019 because our income in 2018 was below the cliff, and somehow 2018 income affects ACA eligibility or subsidies for 2019. (<- This is untrue.)

Thanks for correcting my typo. I do mean to say that we should be safe to stay in ACA, so we do not need to sign up Cobra right now (and cancel ACA). The Megacorp gave us 60 day+15 days to allow their notification letter to be mailed to home when we left in January.

Our 2019 income will be around $50,000 which is below the $65,840 cliff. Our 2018 income was much higher and CoveredCalifornia approved our 2019 ACA policy according to my initial estimated income, and did not seem to look at past income? Now that my tax is done, and the final bonus has arrived, my actual income will be very close to my estimated income.

Hope this clears up a bit. My post is simply trying to see if there are any other matters that might cause any issues with staying in ACA.

[SecondCor521]

It wasn't clear to me from your original post if you left your jobs in January 2019 or January 2018. Based on your followup, it sounds like you left in January 2019.

Initially signing up for ACA is always based on an estimated MAGI for that year. So if you signed up for ACA sometime in early 2019 after leaving your job, then CoveredCalifornia is approving your eligibility based on your estimated MAGI for 2019.

You are correct in that your eligibility for 2019 has nothing to do with your 2018 income or 2018 income tax return. (Some states will ask for old tax returns in an effort to validate that your estimated MAGI is reasonable - I don't think CA is one of those. New York seems to be IIRC.)

As long as you pay your premiums, you can stay on ACA through all of 2019. The only risk you face is going over the subsidy cliff. Assuming there are two of you and you live in CA, then you have correctly calculated the subsidy cliff at $65,840 for 2019. Note that the subsidy cliff goes up slightly each year with inflation.

It sounds like you have also reasonably accurately estimated your MAGI for 2019 and that it will be below the subsidy cliff. About the only thing I would suggest is to keep track of any other income you might receive, such as taxable dividends or capital gains at the end of this year. But it doesn't sound like you'll get enough of those to push you over.

It all makes more sense after you go through it for a year or two.

Good luck!