ACA questions

[walkinwood]

My income puts me in the 24% tax bracket for this year. The amount I expect to withdraw next year would be about $120,000 which would put me right at four times the federal poverty level so no subsidy. (FPL is significantly higher for Hawaii).

There is no cliff in 2025. IIRC, you pay up to 8% of your MAGI as the max in premiums for an ACA plan. Like a previous poster explained, you can decrease MAGI by any HSA contributions if you have a compatible plan.

 

[MichaelB]

Thanks, that's excellent news!

In our case, both DW and I are end of month babies so we got a good deal. We had unsubsidized ACA policies so being eligible on the first day of the month saved us each over $1k.

 

[SecondCor521]

On a semi related matter, next year I will have the ACA for 2 months and Medicare for 10 months.
When the MAGI is reconciled at the end of the year, does it just include the MAGI for the first 2 months or the whole year?
Logic would tell me only the first 2 months.

The other poster gave you inaccurate information.

ACA subsidies are calculated by starting with your AGI for the year, but it is essentially pro-rated on a month-by-month basis in cases like yours.

You can see this for yourself by looking at the instructions for Form 8962 line 10, and then the "Monthly calculation" on lines 12 through 23 of Form 8962.

 

[Dtail]

Well, if you’re going on Medicare there’s good news, it is retroactive to the first of the month you turn 65.

Okay good news for me too, as that means only 1 month of ACA for me.

 

[Dtail]

The other poster gave you inaccurate information.

ACA subsidies are calculated by starting with your AGI for the year, but it is essentially pro-rated on a month-by-month basis in cases like yours.

You can see this for yourself by looking at the instructions for Form 8962 line 10, and then the "Monthly calculation" on lines 12 through 23 of Form 8962.

Great catch. Just checked it out myself and in agreement. Kind of a big deal error in the other post.
So now unto the next question.
I have a 53k pension lump sum that I will be taking next year. If I take it in Jan or let's say in March, is it effectively prorated as one twelfth for the month of Jan?
I am trying to avoid taking out additional monies in Jan, in order to hit the FPL in Jan?

 

[SecondCor521]

Great catch. Just checked it out myself and in agreement. Kind of a big deal error in the other post.
So now unto the next question.
I have a 53k pension lump sum that I will be taking next year. If I take it in Jan or let's say in March, is it effectively prorated as one twelfth for the month of Jan?

Yes.

I am trying to avoid taking out additional monies in Jan, in order to hit the FPL in Jan?

Irrelevant / pointless. If you walk through the calculations in Form 8962, you'll see that it starts with your AGI for the whole year, then calculates your portion of your health insurance premium Congress has decided you contribute on line 8a. If you end up having month to month variations, that 8a amount is divided by 12 on line 8b and then used to fill in lines 12c through 23c.

So it won't matter when you take the lump sum because it will be included in AGI (on line 2a) regardless of which month in 2025 you take it.

I guess the only thing that comes to mind is that it might make sense, if you have the option and it works with the rest of your tax picture, to take the pension lump sum this December so it shows up on your 2024 taxes. Obviously a tradeoff between your 2024 and 2025 taxes, so you'd have to figure both years both ways. Figuring 2025 taxes will be tricky since you're new to the tax implications of ACA and it's a moderately complicated calculation to do in terms of how it interacts with the rest of the tax return.

 

[Dtail]

Yes.



Irrelevant / pointless. If you walk through the calculations in Form 8962, you'll see that it starts with your AGI for the whole year, then calculates your portion of your health insurance premium Congress has decided you contribute on line 8a. If you end up having month to month variations, that 8a amount is divided by 12 on line 8b and then used to fill in lines 12c through 23c.

So it won't matter when you take the lump sum because it will be included in AGI (on line 2a) regardless of which month in 2025 you take it.

I guess the only thing that comes to mind is that it might make sense, if you have the option and it works with the rest of your tax picture, to take the pension lump sum this December so it shows up on your 2024 taxes. Obviously a tradeoff between your 2024 and 2025 taxes, so you'd have to figure both years both ways. Figuring 2025 taxes will be tricky since you're new to the tax implications of ACA and it's a moderately complicated calculation to do in terms of how it interacts with the rest of the tax return.

Thank you again. My 2024 taxes has already been managed for the subsidies and thus have already taken out monies from the TIRA and can't play anymore. Still a little confused though.
So let's say that the FPL is 15k for the 2025. Let's round my lump sum pension at 48k, so it is 4k monthly.
So by taking out the 48k pension any month, am I already qualified for the 15k FPL effectively for Jan and not have to take out any other monies for the year?
I assume I don't have to have my "average" for Jan being 15k, which would equate to 180k yearly.

 

[SecondCor521]

Thank you again. My 2024 taxes has already been managed for the subsidies and thus have already taken out monies from the TIRA and can't play anymore. Still a little confused though.
So let's say that the FPL is 15k for the 2025. Let's round my lump sum pension at 48k, so it is 4k monthly.
So by taking out the 48k pension any month, am I already qualified for the 15k FPL effectively for Jan and not have to take out any other monies for the year?

Yes.

I assume I don't have to have my "average" for Jan being 15k, which would equate to 180k yearly.

Correct. The $15K FPL number sounds like it is for a single person for the entire calendar year; it is definitely not a monthly minimum. Are you single with no dependents? Where did you get the $15K number?

 

[Dtail]

Yes.



Correct. The $15K FPL number sounds like it is for a single person for the entire calendar year; it is definitely not a monthly minimum. Are you single with no dependents? Where did you get the $15K number?

Yes, I am single (engaged) with no dependents. I know the FPL for a single person for the whole year is around 15k. Even if it is off a little, based on your response above, it would not matter.

I believe I am set that I don't need to take out any further monies in 2025 besides my pension effectively for tax and ACA calculations. So I will suck up a non subsidized premium in Jan 2025 for just one month. A victory overall.
Thank you so much for your knowledge in this area.

 

[SecondCor521]

Yes, I am single (engaged) with no dependents. I know the FPL for a single person for the whole year is around 15k. Even if it is off a little, based on your response above, it would not matter.

If you're in Tampa, then yeah, the exact number is $15,060 for 2025.

If you get married before the end of 2025, then the situation changes.

I believe I am set that I don't need to take out any further monies in 2025 besides my pension effectively for tax and ACA calculations. So I will suck up a non subsidized premium in Jan 2025 for just one month. A victory overall.

Subsidies exist up to and possibly past 400% of FPL, which would be $60,240 for next year. Depending on your opinion on hassle factor, you could sign up via the exchange, then maybe get a small subsidy for that one month premium.

Thank you so much for your knowledge in this area.

You bet.

 

[sengsational]

This is a problem in states with no Medicaid But tax time comes and they have no real income, it is a form of fraud. So the crack down is on the fraud of a false estimate.

If there is a discrepancy year after year, maybe they would have a case, but what if, each November you tell yourself, excitedly, "This next year is when I'm going to turn my life around! I'm going to get a good paying job, despite my disabilities and criminal record!" Then the year goes by and your life doesn't turn around after all. But the next November, you think "This next year is when I'm going to turn my life around..." Let's throw the book at the guy for being optimistic

 

[GenXguy]

I was reading some anecdotes elsewhere that if you underestimate your income two years in row to get CSR (along with the PCT), and you made too much to qualify, that you get blacklisted and won't be eligible to apply for a plan with CSR again and will not get the PCT in advance, either. Not sure how true that is.

 

[cathy63]

I was reading some anecdotes elsewhere that if you underestimate your income two years in row to get CSR (along with the PCT), and you made too much to qualify, that you get blacklisted and won't be eligible to apply for a plan with CSR again and will not get the PCT in advance, either. Not sure how true that is.

That's not currently true as far as I know, but it is a proposal that's been floated by some legislators.

The study I read recently said that in general, the states with the highest fraud levels are the ones that use the Federal exchange (the worst one has the number of people estimating income in the 100% to 150% FPL range at 4x the number that are actually eligible); and states with the least fraud are those that built their own exchanges. States that did their own thing tend to have more staff and interact with the consumers to verify their information more rigorously.

 

[SecondAttempt]

Chiropractic is based on pseudoscience so not surprising they wouldn't cover it.

While I would agree, the chiropractor has helped my partner enormously after she fell and twisted her back from after her blood pressure went critically low because she was prescribed an overdose of blood pressure meds. After passing out she started having back pains.

Chiropractic is based on pseudoscience so not surprising they wouldn't cover it.

While I might agree with you in principle, my partner collapsed in front of me a few years ago for no reason. It was shortly after she was prescribed meds for high blood pressure. After the event Kaiser cut her back to a very minimal dose and she has been fine since at an even lower dose. After her collapse she started having back pains. Kaiser said it could not possibly be related to her low BP fall and offered opioids for pain. That's when she started seeing a chiropractor who eliminated the pain entirely.

So frankly, I'll take living with a women who has been helped by pseudoscience if that's what it is over living with an opioid addict caused by the pharmaceutical industry's push of annuity drugs rather than actual cures. In my personal opinion pharmacoeconomics is why we have no cures for cancer, AIDS, and many other diseases.

 

[Flieger]

I think I know the answer, but:

If I am on DW's coverage starting Jan 2025, then she retires in April/May 2025, is that a qualifying event for us to apply for ACA coverage (due to loss of job coverage)?

Flieger

 

[cathy63]

I think I know the answer, but:

If I am on DW's coverage starting Jan 2025, then she retires in April/May 2025, is that a qualifying event for us to apply for ACA coverage (due to loss of job coverage)?

Flieger

Yes, losing employer coverage is a qualifying event. She'll be offered COBRA but she's not required to take it. If she does take it, then she needs to wait for the next open enrollment period to switch to ACA.

 

[Flieger]

Yes, losing employer coverage is a qualifying event. She'll be offered COBRA but she's not required to take it. If she does take it, then she needs to wait for the next open enrollment period to switch to ACA.

Thanks Cathy! - If you have seen my previous post, I left job about a month ago and we are currently on company subsidized COBRA. I am deciding whether to try and return to work, or just retire (working part time at a brewery is an option). We would then go on DW's healthcare through her company where she is modified FT and qualifies for their insurance. She will work until she hits the magic number for SS income in 2025 (she will start collecting SS Jan 2025) which will be around April or so. I'm only a kept man for 4-5 months . At that point, or just prior, we will switch to ACA based on the above eligibility!

Flieger

 

[GenXguy]

The other poster gave you inaccurate information.

ACA subsidies are calculated by starting with your AGI for the year

It uses MAGI for the full year. That's what the previous posts responding stated, and that was correct.

Looks like @Dtail was asking if it only went by the income he earned during the 2 months he's using the ACA plan and was confused by your follow up stating the previous poster was inaccurate about it using MAGI for the full year (unless there was some other response that was deleted and I didn't see).

 

[jim584672]

The recon is full year MAGI, but since you only have 2 months insurance only those 2 months would get a low to none subsidy due to high income.

One way around this is to drop into Medicaid for two months, since Medicaid has no subsidies and is monthly based having high income for the year makes no difference.

 

[GenXguy]

The recon is full year MAGI, but since you only have 2 months insurance only those 2 months would get a low to none subsidy due to high income.

One way around this is to drop into Medicaid for two months, since Medicaid has no subsidies and is monthly based having high income for the year makes no difference.

For Medicaid, I thought it was "current monthly income" which includes reasonably predictable income rather than "current month" based on past discussion about this.

When to do ACA sign up?

If you’re filling this in during annual enrollment for coverage to start Jan 1, are you supposed to fill in current year income amounts or estimate of next year income? Specifically, if 2023 is final year employed, income is very high but will drop drastically in 2024 when retired. If I use the...

www.early-retirement.org

 

[jim584672]

For Medicaid, I thought it was "current monthly income" which includes reasonably predictable income rather than "current month" based on past discussion about this.

When to do ACA sign up?

If you’re filling this in during annual enrollment for coverage to start Jan 1, are you supposed to fill in current year income amounts or estimate of next year income? Specifically, if 2023 is final year employed, income is very high but will drop drastically in 2024 when retired. If I use the...

www.early-retirement.org

I'm not getting into the weeds again on this issue. You are misinterpreting the rules.

 

[GenXguy]

I'm not getting into the weeds again on this issue. You are misinterpreting the rules.

Well, I wasn't wanting to get in the weeds. But I did quote the resource you referenced in the other thread. It's seemed pretty clear. It's not going to matter for me since I'm on an ACA marketplace plan, not Medicaid.

 

[jim584672]

Well, I wasn't wanting to get in the weeds. But I did quote the resource you referenced in the other thread. It's seemed pretty clear. It's not going to matter for me since I'm on an ACA marketplace plan, not Medicaid.

Whatever. This is the third time on this topic for you.

 

[GenXguy]

Whatever. This is the third time on this topic for you.

?? I wasn't the one who brought Medicaid & monthly income. I don't have anymore to say on the matter.

 

[Dtail]

It uses MAGI for the full year. That's what the previous posts responding stated, and that was correct.

Looks like @Dtail was asking if it only went by the income he earned during the 2 months he's using the ACA plan and was confused by your follow up stating the previous poster was inaccurate about it using MAGI for the full year (unless there was some other response that was deleted and I didn't see).

Actually I was not confused by SecondCor521's response. He made it clear that it was monthly prorated, thus it didn't matter what month I took the full pension. He answered this question fully plus a few follow ups.
I trust his responses plus cathy63's opinions on tax issues.