ACA (Obamacare) and federal retirees?

[Richard8655]

My question is how will ACA (Obamacare) affect retired federal employees who are already under FEHB retiree medical coverage?

It looks like ACA will offer higher subsidized (hence lower) premiums than what federal retirees pay for their retiree FEHB medical coverage. It seems unfair that these retirees would be ineligible to take advantage of probably lower ACA premiums.

Any clarification on the ACA law as relating to retiree FEHB premiums is appreciated.

 

[MichaelB]

My understanding is if you have insurance from your employer you are not eligible for the state insurance exchange, regardless of the cost of the policy.

 

[plex]

The ACA is better for low income very early retirees pre-65, but ACA does not continue past that, while FEHB does. So only under very limited circumstances does the ACA end up being a better option, and even then it isn't that much better in the long run.

 

[donheff]

As I understand it, no change.

 

[ziggy29]

My understanding is if you have insurance from your employer you are not eligible for the state insurance exchange, regardless of the cost of the policy.

I think there are exceptions to this if you would have to pay more than 9.5% of your income for your employer's group insurance, but I could be wrong.

 

[MichaelB]

I think there are exceptions to this if you would have to pay more than 9.5% of your income for your employer's group insurance, but I could be wrong.

You're correct.

 

[Amethyst]

My imperfect understanding is that retirees with FEHB have to take on Medicare as their first insurer once they turn 65. So another worry is how that will play with Obamacare.

Amethyst

The ACA is better for low income very early retirees pre-65, but ACA does not continue past that, while FEHB does. So only under very limited circumstances does the ACA end up being a better option, and even then it isn't that much better in the long run.

 

[martyb]

I think the FEHB insurance companies strongly encourage you to take on Medicare as first insurer, but they don't/can't "require" it. That's MY imperfect understanding.

 

[W2R]

I think the FEHB insurance companies strongly encourage you to take on Medicare as first insurer, but they don't/can't "require" it. That's MY imperfect understanding.

My understanding, which is at least as imperfect as yours and possibly lightyears ahead in its imperfection, is that Medicare is always primary and FEHB secondary. In other words, FEHB will not pay anything that Medicare would already pay. Makes sense from a business point of view.

But, as I understand it, you don't have to sign up for Medicare Part B unless you want to. You can just take the free part of Medicare, Part A, and leave it at that. Almost all federal employees do seem to sign up for Part B, though, and there is a lot of pressure to do this so I am going to get Part B in about 3 weeks when I sign up for Medicare online. Also I got a letter from BCBS a while back saying that with my present BCBS Standard, there is no reason to pay for Medicare Part D because of the prescription benefits already given. So, I am not getting part D.

As for the original question, if I was under Medicare age and qualified for FEHB, I'd keep it. I believe the FEHB plans are all adequate under Obamacare. I don't know much about Obamacare, though.

 

[martyb]

W2R,

Yep, now that I think about it (and now that you mention it) I'm sure you're correct. It's the part B I was thinking of. Thanks for setting me straight!

By the way, it's a different question, I know, but can you tell me whether Louisiana taxes your TSP withdrawals (if you've made any)? I can't find anything specific on this.... Texas does not.

 

[W2R]

W2R,

Yep, now that I think about it (and now that you mention it) I'm sure you're correct. It's the part B I was thinking of. Thanks for setting me straight!

By the way, it's a different question, I know, but can you tell me whether Louisiana taxes your TSP withdrawals (if you've made any)? I can't find anything specific on this.... Texas does not.

Absolutely, yes, my imperfect understanding has told me that YES, Louisiana does tax TSP withdrawals. There are a couple of posts on Federal Soup that give the opinion that Louisiana doesn't tax TSP withdrawals, but nothing else saying that seems to come up after all my Google searches on the topic. After doing considerable reading on the Louisiana Department of Revenue website I believe these posts to be incorrect, at least for someone my age and in my situation.

Texas doesn't even HAVE income tax, which would explain why they don't tax TSP withdrawals.

 

[martyb]

I sure hate to hear that....since there's a strong chance I'll be retiring in LA. Still, much lower property taxes in LA will make it easier to take the tax thing...I suppose. My TSP withdrawal is not likely to be more than $600 - $700 per month, and then probably for no more than 5 or 6 years, till my military pension kicks in. Thanks!

 

[martyb]

Absolutely, yes, Louisiana does tax TSP withdrawals. There are a couple of posts on Federal Soup that give the opinion that Louisiana doesn't tax TSP withdrawals, but nothing else saying that seems to come up after numerous Google searches on the topic. After doing considerable reading on the Louisiana Department of Revenue website I believe these posts to be incorrect, at least for someone my age and in my situation.

Texas doesn't even HAVE income tax, which would explain why they don't tax TSP withdrawals.

Oh...and while I realize Texas has no income tax, I thought it was still possible that only applied to earned income, but not investment income. I was happy to learn that it did include 401k/IRA type income, though. Just in case I find myself moving across the state line for some odd reason or other.

 

[W2R]

You're right - - the much lower property taxes in Louisiana will probably more than make up for a little income tax on your TSP withdrawals. You'll be fine! My property tax plus my Louisiana state income tax added together was not as much as my property/school tax in College Station, on an equivalent house. Also, my property tax assessment will be frozen at age 65. Louisiana is a pretty reasonable place for a federal retiree IMO, from a tax perspective.

But check into the sales tax. While the state part of our sales tax is only 4% in Louisiana, due to local sales tax the total comes to 9.875% in my Parish and that is where they get your money.


Regarding income tax, this might be of interest to you once you reach age 65: From the Louisiana Department of Revenue website FAQs,

Is there a list of retirement system benefits that may be excluded from Louisiana income tax.

• Annual Retirement Income Exclusion (R.S. 47:44.1(A))—Persons 65 years or older may exclude up to $6,000 of annual retirement income from their taxable income. Taxpayers that are married filing jointly and are both age 65 or older can each exclude up to $6,000 of annual retirement income. If only one spouse has retirement income, the exclusion is limited to $6,000.
• Federal Retirement Benefits Exclusion (R.S. 47:44.2)—Federal retirement benefits received by federal retirees, both military and nonmilitary, may be excluded from Louisiana taxable income.
• State Employees, Teachers, and Other Retirement Benefits Exclusion—Individuals receiving benefits from certain retirement systems listed below are allowed to exclude those benefits from their Louisiana tax-table income. In addition, R.S. 33:7203 and R.S. 40:427.2(E) provide that Municipal and State Police Employees Retirement System deferred retirement option plan funds are exempt from state income tax.
  
  [I removed the long list of state retirement benefits that can be excluded]

Since I am turning 65 later this year, I might be able to get a $6000 exclusion out of the first provision which is most general. (When slogging through state and federal code looking into what is meant by "Federal retirement benefits received by federal retirees" in the second provision above, AFAIK the TSP is not included.) IIRC my FERS is already not taxed here, though, but maybe this $6000 provision would apply to TSP income. I have a year to look into it.

 

[donheff]

M Almost all federal employees do seem to sign up for Part B, though, and there is a lot of pressure to do this so I am going to get Part B in about 3 weeks when I sign up for Medicare online. Also I got a letter from BCBS a while back saying that with my present BCBS Standard, there is no reason to pay for Medicare Part D because of the prescription benefits already given. So, I am not getting part D.

I'm Medicare eligible this summer. I do not plan to get Part B or D. A lot of Federal retirees who do the analysis conclude that the likelihood of benefitting are fairly small and the potential costs if you lose that bet are fairly small. There is a penalty if you choose to take Part B later so it is hard to walk back the decision.

 

[W2R]

I'm Medicare eligible this summer. I do not plan to get Part B or D. A lot of Federal retirees who do the analysis conclude that the likelihood of benefitting are fairly small and the potential costs if you lose that bet are fairly small. There is a penalty if you choose to take Part B later so it is hard to walk back the decision.

Whether or not to take these options is a tough question, though I think very likely you are entirely right. Six of one, half a dozen of the other.

 

[Richard8655]

I think there are exceptions to this if you would have to pay more than 9.5% of your income for your employer's group insurance, but I could be wrong.

Well, I hope this is true. As an early FERS retiree (age 61), my FEHB monthly premium will come to 12.5% of my gross monthly income. In this case, I'd go with ACA, which according to the Berkeley calculator would cost me $99/month vs. $300/month.

 

[ejw93]

Richard,

I've been wondering the same thing, so I ran the numbers here:

ObamaCare Whips Federal Employee Health Benefit, Tricare? | GubMints

Under most ObamaCare public insurance exchanges, it looks like the subsidy stops when you earn over $70K/year.

 

[Richard8655]

Richard,

I've been wondering the same thing, so I ran the numbers here:

ObamaCare Whips Federal Employee Health Benefit, Tricare? | GubMints

Under most ObamaCare public insurance exchanges, it looks like the subsidy stops when you earn over $70K/year.

Thanks ejw, great link you found here. This looks encouraging and seems to provide cost savings with ACA as an alternative. Will read it carefully in more detail.

 

[ripper1]

The ACA is better for low income very early retirees pre-65, but ACA does not continue past that, while FEHB does. So only under very limited circumstances does the ACA end up being a better option, and even then it isn't that much better in the long run.

Early empty nesters with income over 400FPL (60,000) are going to get hammered.

 

[Richard8655]

Early empty nesters with income over 400FPL (60,000) are going to get hammered.

Sounds fine and good to me. I'll be under 200FPL when I retire shortly, counting my pension. Am glad ACA is there for folks who have high medical premiums relative to income.

 

[Brat]

I am insured by Medicare, Medicare B and GEHA. What is interesting is that Kaiser's Medicare + outside of FEHB is less expensive, their high option is even cheaper when you factor in dental (Kaiser NW is the only one with dental insurance that I know of).

Didn't do that last year because returning to FEHB from Kaiser's Medicare + could be tricky. If FEHB could make that as a 'check the box' option for retirees during open season they could save a hunk of money.

 

[donheff]

Early empty nesters with income over 400FPL (60,000) are going to get hammered.

I assume you mean it will cost them more next year than equivalent coverage this year. Can you specify by how much?