ACA/unemployment/capital gains

[pirsquared]

DH was laid off in 2020 and received unemployment for the first 4 months of 2021. At that point, he decided to stop looking for work and retire (at age 63) and thus stopped collecting unemployment. We started health insurance through the ACA on 1/1/21 and recently got a reduced rate due to the American Rescue Plan because he had been on unemployment at some point in 2021. Although the SLCSP is now $0 for us, we are continuing the policy we started at the beginning of the year that now costs us ~$400/mo for 3 of us (down from ~$600/mo and with even better CSRs) because the $0 options do not cover all of our doctors.

So here is my question: would an increase in our (relatively low) income now have no effect on our ACA premium/CSRs for 2021 due to the ARP unemployment provision? Would this then be a good year to realize some capital gains? There is an old account I would really like to close but it would involve selling stocks and realizing ~$20K of capital gains. We would still be well under the ~$80,000 MFJ 0% capital gains limit so it seems it would only involve state taxes. The biggest factor, however, is the effect on ACA premiums. If I am understanding this correctly, this year may be a unique opportunity. Although DH will go onto Medicare in a little over a year, I am 14 years younger and will be using the ACA for 15 years if it still exists. I work 3/4 time, but am not offered health insurance. Also, DH will likely eventually pre-decease me, which will halve our/my 0% capital gains rate limit.

Also, if this plan does work, should I go in and update our income in healthcare.gov even though it will not affect anything? I know we are supposed to update when we have income changes and I have done that already (once when income increased, once when it decreased, and once when the unemployment discount became available). However, in this case, I am not sure if it is required. if not required, should I update anyway so that I am continuing to give them a good faith estimate?

Thanks for reading all of this. I appreciate any insight/advice you may have.

[pirsquared]

Quote:

Originally Posted by SecondCor521 I am assuming that the ~$400 per month premium is your fully subsidized premium amount and that you are taking the APTC (aka subsidy) monthly. The proper thing to do is to update your estimated income with your marketplace. Some people do not do so. If you update your estimated income with your marketplace, then your APTC/subsidy will likely go down and your monthly premium will likely go up. If your estimated income relative to your FPL changes into a different CSR bracket, then your CSRs will also be affected for the rest of the year. To get an idea of how much your premium would change, you can use this subsidy calculator: https://www.kff.org/interactive/subsidy-calculator. I'd check it with your current information to make sure it calculates your current subsidy correctly. If that matches, then you can change your income and see the change in your subsidy. The CSR breakpoints are at 150%, 200%, and 250% of FPL. If you do not update your estimated income, then your CSRs will not be affected. Your APTC/subsidy will also not change. When you go to file your taxes next year, your APTC/subsidy will be reconciled on Form 8962 - if you got too much subsidy, you'll have to pay back some; if you didn't receive enough subsidy, then you'll get the additional amount which will be added into your tax refund or reduce the amount you owe. HTH.

Yes, the $400/mo is with the subsidy and we are taking the APTCs monthly.

However, we are currently benefitting from the American Rescue Plan provision that states that anyone who received unemployment in 2021 will have their household income considered to be 133% FPL, and thus will receive maximum subsidies. Thus, I think our income no longer matters (for 2021). But I am trying to confirm that. And, yes, I feel like I should update our income in healthcare.gov even if it has no effect so that we are being as honest as possible. I guess I am trying to confirm that I am reading the ARP unemployment ACA provision correctly before realizing any capital gains.

https://www.healthinsurance.org/blog...to-unemployed/

[SevenUp]

Roth Conversion and Capital Gains On ACA Health Insurance might be useful to you.

[pirsquared]

Quote:

Originally Posted by SevenUp Roth Conversion and Capital Gains On ACA Health Insurance might be useful to you.

Thanks! I skimmed this and it looks like it will be very helpful in the future but does not mention my specific current issue, that of how the ARP income cap for those with 2021 unemployment income may or may not affect our situation.

Here is an excerpt from one article addressing the topic (link below):

"And although there are three levels of cost-sharing reductions, the strongest – which result in added benefits that make Silver plans more robust than regular Platinum plans – are available to people who earn no more than 150% of FPL. Since counted income will be capped at 133% of the poverty level for people receiving unemployment compensation, all of the available Silver plans will have the strongest level of cost-sharing reductions built into their benefits.

In order to qualify for the enhanced premium tax credits and cost-sharing reductions, applicants only need to receive (or be approved to receive) unemployment compensation for at least one week in 2021. The legislation states that eligible enrollees will have to attest to the fact that they’re receiving or have received unemployment compensation this year, and that HHS will issue guidance clarifying what documentation will have to be submitted to the marketplace as proof."

https://www.healthinsurance.org/blog...to-unemployed/

[SecondCor521]

Quote:

Originally Posted by pirsquared Yes, the $400/mo is with the subsidy and we are taking the APTCs monthly. However, we are currently benefitting from the American Rescue Plan provision that states that anyone who received unemployment in 2021 will have their household income considered to be 133% FPL, and thus will receive maximum subsidies. Thus, I think our income no longer matters (for 2021). But I am trying to confirm that. And, yes, I feel like I should update our income in healthcare.gov even if it has no affect so that we are being as honest as possible. I guess I am trying to confirm that I am reading the ARP unemployment ACA provision correctly before realizing any capital gains. https://www.healthinsurance.org/blog...to-unemployed/

Right. I deleted my post after you quoted it because after I had reread your original post, I remembered that you mentioned the unemployment provision.

So my revised answer is:

I think updating your income with the marketplace is the proper thing to do, even if it doesn't make a difference. Some people don't do this even though it is the proper thing to do, because it can create problems and make completing Form 8962 a bit harder to do.

I checked the text of the law, and it turns out that the 2021 only / 133% FPL / unemployment clause applies to both APTC/PTC and CSRs. CSRs are covered in section 2305 of the law, and APTC/PTC is in section 9663.

You can read the text here (search for 2305 or 9663):

https://www.congress.gov/117/bills/h...7hr1319enr.pdf

[SevenUp]

Quote:

Originally Posted by pirsquared Thanks! I skimmed this and it looks like it will be very helpful in the future but does not mention my specific current issue, that of how the ARP income cap for those with 2021 unemployment income may or may not affect our situation.

The article itself may not, but I believe the tax estimation tool mentioned in the article does, at least for the non-CSR effects.

[pirsquared]

Quote:

Originally Posted by SecondCor521 Right. I deleted my post after you quoted it because after I had reread your original post, I remembered that you mentioned the unemployment provision. So my revised answer is: I think updating your income with the marketplace is the proper thing to do, even if it doesn't make a difference. Some people don't do this even though it is the proper thing to do, because it can create problems and make completing Form 8962 a bit harder to do. I checked the text of the law, and it turns out that the 2021 only / 133% FPL / unemployment clause applies to both APTC/PTC and CSRs. CSRs are covered in section 2305 of the law, and APTC/PTC is in section 9663. You can read the text here (search for 2305 or 9663): https://www.congress.gov/117/bills/h...7hr1319enr.pdf

Thanks for the link! It was extremely helpful! I looked at both sections that you mentioned and I think I am understanding it correctly and, thus, could realize some capital gains this year without affecting our PTC/CSRs. Thanks also for your input that updating our income on healthcare.gov is the correct thing to do, even if it has no effect on our cost. I have already updated it each time it would change anything (including when it increased our costs) and I really want to do the right thing as far as that's concerned.

I think once I decide to sell the stock, I will go into healthcare.gov and do the update before actually selling. That way I can confirm that it will work out the way I am thinking before I do something irrevocable. I can always go back in and re-update if I decide not to sell, but I can't un-sell stock once it's sold

[pirsquared]

Quote:

Originally Posted by SevenUp The article itself may not, but I believe the tax estimation tool mentioned in the article does, at least for the non-CSR effects.

Thank you! I did not realize that! I will investigate it further.

[SecondCor521]

Quote:

Originally Posted by pirsquared Thanks for the link! It was extremely helpful! I looked at both sections that you mentioned and I think I am understanding it correctly and, thus, could realize some capital gains this year without affecting our PTC/CSRs. Thanks also for your input that updating our income on healthcare.gov is the correct thing to do, even if it has no effect on our cost. I have already updated it each time it would change anything (including when it increased our costs) and I really want to do the right thing as far as that's concerned. I think once I decide to sell the stock, I will go into healthcare.gov and do the update before actually selling. That way I can confirm that it will work out the way I am thinking before I do something irrevocable. I can always go back in and re-update if I decide not to sell, but I can't un-sell stock once it's sold

Yes, I think you are understanding it correctly.

Of note is that those two sections only apply for 2021. I'm sure you noted that.

It looks like you're using the federal exchange, which is not used in my state (we have our own). If I were in your shoes, I'd feel more comfortable if there were a checkbox or something for unemployment so they could take that into account.

[pirsquared]

Quote:

Originally Posted by SecondCor521 Yes, I think you are understanding it correctly. Of note is that those two sections only apply for 2021. I'm sure you noted that. It looks like you're using the federal exchange, which is not used in my state (we have our own). If I were in your shoes, I'd feel more comfortable if there were a checkbox or something for unemployment so they could take that into account.

Yes, there is a checkbox for the unemployment. It was added as of July 1. And, yes, we are using the federal exchange. I have actually found it quite user-friendly, but I am still a little nervous when I hit submit after updating some information

I did know that it only applies to 2021, but I appreciate your pointing that out just in case! That is why I am trying to figure this out now, as we won't have a similar opportunity for many years.

I really appreciate your help!

[Go Bolts]

Quote:

Originally Posted by pirsquared Yes, there is a checkbox for the unemployment. It was added as of July 1. And, yes, we are using the federal exchange. I have actually found it quite user-friendly, but I am still a little nervous when I hit submit after updating some information I did know that it only applies to 2021, but I appreciate your pointing that out just in case! That is why I am trying to figure this out now, as we won't have a similar opportunity for many years. I really appreciate your help!

Basically for 2021, you can get a free silver plan if you have one week or more of unemployment. You can make a million dollar income as long as you have a week of unemployment. This is for 2021 only, unless the government would extend.

Going back to 2020, if you underestimated your income and had to pay back some of your Advanced Premium Tax Credits when you filed your tax return, this was forgiven and later refunded to You. This was part of the Rescue Act.

For those who didn’t get unemployment, the situation is that for 2021 and 2022, the ACA “Cliff” is eliminated. It is more of a slope for these two years. The Cliff is where your income is one dollar too high and you lose your entire subsidy. The Cliff is scheduled to come back in 2023.

This may give you some opportunities to have more income in 2021 and 2022, whether it’s Roth conversions, realizing capital gains or whatever.

Harry Sit, who writes The Finance Buff, has very good articles on this and one of them is referenced in this thread.

[pirsquared]

Quote:

Originally Posted by Go Bolts Basically for 2021, you can get a free silver plan if you have one week or more of unemployment. You can make a million dollar income as long as you have a week of unemployment. This is for 2021 only, unless the government would extend. This may give you some opportunities to have more income in 2021 and 2022, whether it’s Roth conversions, realizing capital gains or whatever. Harry Sit, who writes The Finance Buff, has very good articles on this and one of them is referenced in this thread.

So we will probably realize some capital gains this year because of the unemployment benefit. I will, of course, update our 2021 income on healthcare.gov, and I will probably do the update BEFORE actually selling the stock to make sure it updates correctly.

My remaining question is whether that will send up a red flag to the healthcare.gov system. Our income for 2022 will be even lower than our 2021 income (even before realizing the gains). Will they question my estimate for 2022? I did not need to provide any income verification for 2021 (although I absolutely could have backed up my estimate if requested).

Thanks to all who have responded!

[cathy63]

Quote:

Originally Posted by pirsquared So we will probably realize some capital gains this year because of the unemployment benefit. I will, of course, update our 2021 income on healthcare.gov, and I will probably do the update BEFORE actually selling the stock to make sure it updates correctly. My remaining question is whether that will send up a red flag to the healthcare.gov system. Our income for 2022 will be even lower than our 2021 income (even before realizing the gains). Will they question my estimate for 2022? I did not need to provide any income verification for 2021 (although I absolutely could have backed up my estimate if requested). Thanks to all who have responded!

Probably not. Nobody can know for sure, but the number of people who get questioned about their estimated income is relatively small, especially in states using healthcare.gov. If they do ask for income verification, I believe you have until March to send it in, so you can do your 2021 tax return early and send that with an explanatory note that says for 2022 you won't have any cap gains or unemployment (or whatever else has changed).

[SecondCor521]

Quote:

Originally Posted by pirsquared My remaining question is whether that will send up a red flag to the healthcare.gov system. Our income for 2022 will be even lower than our 2021 income (even before realizing the gains). Will they question my estimate for 2022? I did not need to provide any income verification for 2021 (although I absolutely could have backed up my estimate if requested).

Almost certainly not.

My impression, after five years of this stuff, is that (a) they don't compare year-over-year, and (b) they only care that your estimate is accurate because they don't want you griping that you had to pay back a subsidy at tax time.

That's my state. Although other states might behave differently, it seems that most are the same way.

At the very worst, they'll ask you to explain your 2022 estimate. If you have a reasonable explanation they'll accept it.

[pirsquared]

Quote:

Originally Posted by SecondCor521 Almost certainly not. My impression, after five years of this stuff, is that (a) they don't compare year-over-year, and (b) they only care that your estimate is accurate because they don't want you griping that you had to pay back a subsidy at tax time. That's my state. Although other states might behave differently, it seems that most are the same way. At the very worst, they'll ask you to explain your 2022 estimate. If you have a reasonable explanation they'll accept it.

Okay thanks. I have made very accurate estimates and can definitely back them up if needed. Just hoping to avoid extra hassle. But so far I have found healthcare.gov to be reasonably use-friendly.

[pirsquared]

UPDATE! We decided to go ahead and sell some stock so that we could realize the capital gains during 2021 when we have the special ACA unemployment rate due to the American Rescue Plan. So I went into healthcare.gov and updated our 2021 info to reflect that. I was nervous about doing this as I thought it might really mess things up somehow, but it worked! There was a drop-down menu under income that had "capital gains" as an option. Then, under frequency, there was a "one time only" option. I was relieved to see that as it explains why our 2021 income will end up higher that what I will put in for our 2022 estimate. Oddly, our PTC went up by $20 when I expected it to stay the same. That was confusing, but it was close enough to what I understood should have happened that I am not worried about it. Our CSRs and out-of-pocket max remained the same as expected. I have honestly found healthcare.gov to be quite use-friendly!