For the recently retired how do you resolve ACA wage inconsistency, big drop in MAGI

[Tom52]

I retired in 2014 and had employee health insurance for most of the year, however, I will be without health insurance starting January 1, 2015. So this is my first experience with ACA.

I applied for subsidized ACA health insurance for 2015 and used a guestimate of 2015 MAGI of $33,000. I will have no W-2 wages in 2015. My income will come from a combination of 1099 income, and an inherited annuity. It is difficult to document all of this estimated 2015 MAGI because more than half of the $33,000 will be coming from assets via inheritance received mid 2014.

I received a letter from Dept. of Health and Human Services advising that I needed to document my estimated MAGI number, ($33,000) by mid February. Consequence of not completing this is a loss of a substantial subsidy. I may or may not have some of the 1099s that I could submit, but for the majority of the MAGI number I will not have any formal documentation to verify income. I understand that 1099s etc are not required to be sent before mid February.

I can document loss of W-2 but how do I quantify where other income comes from? About 2/3 of the $33,000 was not in my possession till the second half of 2014 and therefore did not appear on my 2013 tax return.

Anyone have any ideas what form of income documentation will be acceptable to Health and Human Services so that I can maintain my subsidy?

 

[gozer]

I retired Jan 31st of this year. My income in 2014 was about 10% of what it was in the previous year, so I had some splainin' to do. I created a PDF that contained my final pay stub and I also explained where I planned to pull money. This could only be partially documented with statements because I made some big changes the year before retiring and selling stock is not exactly consistent from year to year. At any rate I uploaded this to the federal site and waited for guys in dark suits to show up at my house.

 

[scrabbler1]

At the end of 2013 and several months into 2014 I was asked by the NY Marketplace to document my income, all of which was investment income. I sent a copy of the year-end statement from Fidelity but they kept coming back to tell me it was not acceptable.


I was not seeking to have some of my HI premium paid with the subsidy every month. I chose to pay the full premium and resolve things at the end of the year, using the overpayment to count toward my income taxes due because I had zero taxes withheld from my investment income.


After a few months, I called the NY Marketplace and they told me to ignore future requests, and they thankfully stopped coming.


The only question I have is can that HI overpayment count like W-2 or 1099-R withholding to avoid tax underpayment penalties? It isn't clear to me and I haven't seen any instruction booklet yet for 2014 Form 1040.

 

[Tom52]

Thanks both to gozer and scrabbler1 for your inputs. This appears to be an area that can create a bit of confusion for new retirees that may not have the best documentation to verify MAGI to Health and Human Services.


I also read that you can upload a pdf with documentation on healthcare.gov but when I looked at this yesterday I did not see "Report a life change" so I am a bit lost at this time.


EDIT: I did find where you upload verification at Healthcare.gov, so at least I've got that part covered.

 

[Charlotte]

In past years we made 250k+, and now in 2015, we are retired and plan about a 60k income. We put together a PDF document with a cover page that was essentially a written letter about our retirement and a summary of the 6 sources of income that we expected next year. We then created a page for each source. Some were screenshots of the mandatory distribution page in the retirement account, some were actual pages of the prior year's tax return, etc. The summary page labelled everything 1 thru 6 and each of the subsequent pages was numbered 1 - 6, so the reviewer could x-ref it back.

We just got our subsidy approval letter in the mail yesterday, so it was accepted!


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[Tom52]

Thanks Charlotte, I will try to put something together similar to what you did. Glad you got your approval already.

 

[rodi]

Interesting that you can create your own PDF explanation. I'll keep that in mind for next year.

For this year I ended up inputting out income as just above the subsidy level (and higher than our planned income) in order to allow 2 separate plans for our family. (A "feature" in CoveredCA is that if you get a subsidy you must all be on the same plan and my husband wants a different insurer than me and the kids). We'll let it wash out at tax time. This "feature" is supposed to be fixed for next year.

Like you - I'm pulling a portion from an inherited IRA - but not an annuity... so that is at my discretion how much to pull out above the minimum RMD... hard to prove that.

 

[rbmrtn]

They published a list of accepted documents for various things here

https://www.healthcare.gov/help/how-do-i-resolve-an-inconsistency/

Still somewhat gray dealing with a big change in income. I think the letter of explanation route is a good way to go. Start with last years income tax form, explain/document the differences and upload it. Maybe supplement by using one of the tax programs to complete the estimated income tax for 2015 and submit that.

I'm uploading schedules B, D and E since my income from those is about the same for 2015 as it was in previous years.

 

[John Galt III]

My eligibility statement says I need to provide 2015 income proof, but when I go to the form to upload documents and click on "verify" it talks about 2014 income.

I plan to mail them my 2013 1099's for interest income from CD's, and also 1099(?) for pension income.

The only other income will be from IRA's being converted to Roth or IRA's being distributed as income. Now that I think of it, I don't remember seeing any mention of IRA in those possibilities for income, on the HC.gov website. Hmmmm...

The only "proof" of IRA income in 2015 would be my credit union statement showing all the IRA's I have, and how much is in them. HC.gov will have to trust that I will take distributions from them in 2015.

While we're on the subject of IRA distribution... Can I take an IRA distribution as late as 4/15/2015 and still apply it to tax year 2014, for ACA purposes?

Thanks

 

[pb4uski]

In your case you need to just write a letter explaining it similar to what you have done here but in more detail and with some supporting documentation. If it were me, I would explain the major components of your expected 2015 O-MAGI and also reconcile/explain how/why it is different from your 2013 AGI (no wages, div income from inherited assets, inherited annuity benefits, etc.) and include a reasonable level of supporting documentation along with an offer to provide further details and documentation if necessary.

BTW, you would not lose the subsidy. You might lose the advance premium credits (the monthly reductions of the health insurance premiums you pay) but you would get it when you complete your 2015 tax return in 2016, so it would just be a timing/cash flow issue.

 

[Tom52]

In your case you need to just write a letter explaining it similar to what you have done here but in more detail and with some supporting documentation. If it were me, I would explain the major components of your expected 2015 O-MAGI and also reconcile/explain how/why it is different from your 2013 AGI (no wages, div income from inherited assets, inherited annuity benefits, etc.) and include a reasonable level of supporting documentation along with an offer to provide further details and documentation if necessary.

BTW, you would not lose the subsidy. You might lose the advance premium credits (the monthly reductions of the health insurance premiums you pay) but you would get it when you complete your 2015 tax return in 2016, so it would just be a timing/cash flow issue.

Thanks pb4uski - I understand that I should be able to recoup the subsidy when filing 2015 income taxes in 2016, however, would I still have the same problem in Nov 2015 when applying for health insurance with subsidy for 2016? At that time I would still not yet have a 2015 tax return to verify income. I wonder if I would still have to go thru the same income verification process without benefit of a completed tax return. I could see that applying in Nov. 2016 for 2017 subsidized health care should be a breeze because I would then have a completed 2015 tax return at that time.

Thinking about this is giving me a headache.

 

[sengsational]

You have got to figure that the default is what your 2013 income was, so all I did was upload a PDF of my last pay stub and a letter from megacorp with the words " due to the temination of your employment" circled. No cover letter. I bought a plan through the federal marketplace last week, although I never got any kind of acknowledgement of the sub itted PDF.

 

[NoMoreJob]

I just write a letter and include any available account statements from the prior year along with my estimates for the coming year (based on the prior year documents). I was sold a plan for 2014 based on those numbers and have never heard anything back about my letter. I suspect it goes into a file somewhere and may never be looked at but that's just a guess based on the non-response.

I just signed up for 2015 and was sold a policy based on my new 2015 estimate with a request for backup by February as I recall. So they want the backup but apparently just take you at your word for pricing of your policy. It all should all come out in the wash at tax time anyway with the possible exception of cost-sharing.

 

[Buck2520]

All above is good advice. I did much the same for 2014 when I retired. What I might add is be prepared to upload and/or mail the documents multiple times and expect to get several letters asking for the same info. I think I uploaded my info three times and sent it by snail mail twice before they finally got their act together and approved it. Like all government paperwork, stuff seems to get lost/overlooked a lot.


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[pb4uski]

....Thinking about this is giving me a headache.

Perhaps you are overthinking it.

 

[MRG]

All I provided was a check box, on healthcare.gov, that said my wages changed. Been almost 12 months, still have insurance and no further questions. Best wishes to you.

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[jim584672]

I haven't been asked for any documentation. I described my estimated income for 2015 (which is massively lower) on the web site. I am in NY so things may be different since they run their own exchange.

 

[Corporateburnout]

I applied for health plan through the exchange and I enrolled in a plan. I received a letter requesting proof of income to be submitted by February 19th 2015. When I called they stated that they needed proof of our 2014 income. Today I emailed our most current pay stubs and I explained in a cover letter that the drastic reduction in my income for 2015 was due to loss of employment. I listed a breakdown of my expected 2015 income and an offer to provide additional information if needed.

 

[bmcgonig]

Perhaps you are overthinking it.

I would assume that the cash flow isn't an issue for you, so why not just settle up with the IRS at tax time? Save all that thinking


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[alaska55]

I would just call the 800 number and tell them you retired. I took a RIF earlier this year had to go on ACA site for ins. Got a email to explain my income. Called them up told my estimated Income was due to layoff and retired, didn't hear from them again.

 

[GTFan]

I would assume that the cash flow isn't an issue for you, so why not just settle up with the IRS at tax time? Save all that thinking

Because if your income is low enough (less than 250% FPL), you'd lose some nice cost-sharing bennies for Silver plans doing it this way. Better to underestimate income as much as you think you can get away with (within reason) then pay the diff at tax time if you go over your estimate.

 

[photoguy]

+1

The cost sharing massively reduces max OOP (at least on covered ca).


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[bmcgonig]

Because if your income is low enough (less than 250% FPL), you'd lose some nice cost-sharing bennies for Silver plans doing it this way. Better to underestimate income as much as you think you can get away with (within reason) then pay the diff at tax time if you go over your estimate.

Thank you. Good to know!


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[BarbWire]

I applied for a BCBS bronze plan through the Marketplace on the evening of Dec 11. The website says my application is "completed" and I'm now waiting to hear from BCBS-TX (no emails yet).

My Eligibility Notice (emailed to me, as well as posted in "Messages" in my account) from healthcare.gov says that I need to send "proof of your 2015 income" by March 11, 2015.

2013 was my last year of w*rk before being "released from service." I had one month of wages, 6 weeks of unused vacation, 26 weeks of UI in 2013, as well as dividends, capital gains, and about $1000 in SE income.

2014 will have only the SE income, dividends and capital gains. 2015 should look a lot like 2014, without the SE income (business closing on 12.31.2014).

I'm assuming that I can provide my 2014 1040 (which I hope to have done by March 11) as well as a cover letter explaining the income drop from 2012 to 2013 to 2014, and that will make them happy.

Not sure how to make a PDF of these documents, though. Maybe FedEx/Kinko's can do that from printed docs?

 

[W2R]

Not sure how to make a PDF of these documents, though. Maybe FedEx/Kinko's can do that from printed docs?

Yes, most of these places can scan a document into a PDF file. If you used TurboTax, it will output a PDF of your complete tax return for you as well.

I have no idea what sort of proof is required and I don't know a thing about insurance but getting a PDF shouldn't be a problem.