New ACA Subsidy In Relief Package?

[GLM]

That's how I read it, though if it were my money I'd be carefully reading what subparagraph (A) was that they are ignoring.

I was thinking about that too.

From https://irc.bloombergtax.com/public/uscode/doc/irc/section_36b



I.R.C. § 36B(f)(2) Excess Advance Payments
I.R.C. § 36B(f)(2)(A) In General — If the advance payments to a taxpayer under section 1412 of the Patient Protection and Affordable Care Act for a taxable year exceed the credit allowed by this section (determined without regard to paragraph (1)), the tax imposed by this chapter for the taxable year shall be increased by the amount of such excess.


My comments - If the above does not apply it seems the rest is also not applicable.

I.R.C. § 36B(f)(2)(B) Limitation On Increase —
I.R.C. § 36B(f)(2)(B)(i) In General — In the case of a taxpayer whose household income is less than 400 percent of the poverty line for the size of the family involved for the taxable year, the amount of the increase under subparagraph (A) shall in no event exceed the applicable dollar amount determined in accordance with the following table (one-half of such amount in the case of a taxpayer whose tax is determined under section 1(c) for the taxable year):
If the household income (expressed as a percent of poverty line) is: The applicable dollar amount is:
Less than 200% $600
At least 200% but less than 300% $1,500
At least 300% but less than 400% $2,500.
I.R.C. § 36B(f)(2)(B)(ii) Indexing Of Amount — In the case of any calendar year beginning after 2014, each of the dollar amounts in the table contained under clause (i) shall be increased by an amount equal to—
I.R.C. § 36B(f)(2)(B)(ii)(I) — such dollar amount, multiplied by
I.R.C. § 36B(f)(2)(B)(ii)(II) — the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting “calendar year 2013” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If the amount of any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.

 

[SecondCor521]

That's how I read it, though if it were my money I'd be carefully reading what subparagraph (A) was that they are ignoring.

And since it says it's starting with years after 12/31/2019, it almost seems to say that if you underestimate your income and get a larger subsidy this year, they won't take it away if your income comes out bigger and your subsidy should be smaller. That doesn't seem right to me.

I'm very surprised that this law is written to apply to 2020 and that there would be that kind of change this late in the game. People are already filing tax returns for 2020. Should I wait longer to see if this 2020 anti-clawback provision is enacted? I suppose I could always amend my return.

Usually the government doesn't act quite that retroactively - I thought most of the time the tax rules for a given year were pretty much finalized by the end of that calendar year (in this case 12/2020 or so). Although I know there were changes in the CARES Act and related legislation that did go back to 2018 and 2019, so I guess there is some precedent.

I'll be following this closely.

 

[RunningBum]

It really is odd. What they are saying is that if you made more than expected, we won't claw the subsidy back, but making more money isn't a symptom of the pandemic.

And then telling people for 2021 and 2022 to basically grab all the subsidy you can because we won't take the excess back is really wrong.

Wonder what the mindset is on this?

 

[zinger1457]

I am reading that for 2020 there is a "temporary modification of limitations on reconciliation of tax credits " (section 9662) This seems to say any overpayment of the subsidy in 2020 won't be clawed back.

Getting ready to make Ira contributions to avoid the cliff with 2020 income. If passed does this mean I don't need to avoid the cliff for 2020 as well?

I would be very careful interpreting it that way, that section (Limitations on Increases) applies to those under the 400% poverty limit.

 

[GLM]

If there is no claw back for 2020 I imagine it is mainly to avoid the situation where folks who received more on unemployment than working are shocked with a big tax bill. If they received too much subsidy or went all the way over the cliff....the political fall out would be ugly.

 

[GTFan]

I'm very surprised that this law is written to apply to 2020 and that there would be that kind of change this late in the game. People are already filing tax returns for 2020. Should I wait longer to see if this 2020 anti-clawback provision is enacted? I suppose I could always amend my return.

Usually the government doesn't act quite that retroactively - I thought most of the time the tax rules for a given year were pretty much finalized by the end of that calendar year (in this case 12/2020 or so). Although I know there were changes in the CARES Act and related legislation that did go back to 2018 and 2019, so I guess there is some precedent.

I'll be following this closely.

Yeah we already filed and our income was above estimate so we were on the hook for $650 as a return of APTC. But some of that was offset by our non-refundable foreign tax credit ($370) so I'm not concerned.

My guess is that we'd have to file an amended return to get anything back, but yeah I'll keep an eye on it.

 

[BeachOrCity]

Question: Catastrophic plan impact with this?

As I think about this, I suspect this change, while for the greater good, may eliminate my ability to use the catastrophic plan in my state. Where I live Catastrophic plans are about 1/2 the cost of bronze plans and about the same coverage. I qualify because the bronze premiums are usually >8.5% of my projected income, but I am over the subsidy cliff.

Since the subsidy cliff no longer exists, does this mean Catastrophic exemptions for those over 30 on the basis of income no longer exist?

if so, it actually increases my costs in a bizarre way.

 

[zinger1457]

Where I live Catastrophic plans are about 1/2 the cost of bronze plans and about the same coverage. I qualify because the bronze premiums are usually >8.5% of my projected income, but I am over the subsidy cliff.

Not sure about catastrophic plans but if the bronze plans offered to you are >8.5% of your income you should qualify for a decent subsidy under the new plan. The subsidy calculated is based on the cost of a silver plan but you can apply the full amount to any bronze plan.

 

[EastWest Gal]

The Senate just passed the bill and I saw no news about any changes in this part of the bill, so those of us on the ACA may very well not have to face the cliff until 2023. I'll wait until it is signed, to dance.

 

[zinger1457]

I'll wait until it is signed, to dance.

Me to, I'm on a real tight string staying under the cliff this year, I move to medicare at the end of 2022.

 

[GLM]

More news on the 2020,2021 &2022 cliff

From https://www.medpagetoday.com/infectiousdisease/covid19/91512
Bold is mine
The bill would also eliminate a "subsidy cliff" that stops subsidies abruptly for people with incomes over 400% of the poverty level, and instead would continue the subsidies beyond the 400% level, limiting the percentage of income those higher earners pay toward their premium to 8.5%, resulting in a gradual decrease in the subsidy as income rises, she said in a phone call.

A "repayment holiday." In addition, the bill addresses the miscalculations that may have occurred at the beginning of 2020, when taxpayers using the advance tax credit had to estimate their coming year's income in order to calculate the credit they would receive. Usually, if people estimate their income too low and receive too large a credit, they have to pay back the excess the following year.

"But people's income was all over the place in 2020," and they could have ended up owing the government a lot of money. So a provision in the bill says that "just for 2020, there's a repayment holiday," said Pollitz. "People can still claim additional credits if those are due, but if their income bounced around and they earned more than projected, they don't have to repay" the extra tax credits. And there is one other provision of interest in this area -- if a person received as little as 1 week's worth of unemployment insurance, any income above 138% of the poverty level would be disregarded when calculating eligibility for tax credits. The Senate version of the bill also includes a similar provision for calculating cost-sharing subsidies.


Also from https://www.healthaffairs.org/do/10.1377/hblog20210209.337315/full/
Bold is mine..
Building On The ACA
The Ways and Means proposal would make significant changes to bolster the ACA and improve marketplace access and affordability. The proposal would:

Extend ACA subsidies to higher-income people who do not currently qualify for 2021 and 2022;
Increase ACA subsidies for lower-income people who already qualify for 2021 and 2022;
Provide maximal ACA subsidies for individuals that receive unemployment benefits in 2021; and
Prevent taxpayers who misestimated their income in 2020 from having to repay excess premium tax credits at tax time.

 

[RetiredAt55.5]

From https://www.medpagetoday.com/infectiousdisease/covid19/91512
Bold is mine
The bill would also eliminate a "subsidy cliff" that stops subsidies abruptly for people with incomes over 400% of the poverty level, and instead would continue the subsidies beyond the 400% level, limiting the percentage of income those higher earners pay toward their premium to 8.5%, resulting in a gradual decrease in the subsidy as income rises, she said in a phone call.

A "repayment holiday." In addition, the bill addresses the miscalculations that may have occurred at the beginning of 2020, when taxpayers using the advance tax credit had to estimate their coming year's income in order to calculate the credit they would receive. Usually, if people estimate their income too low and receive too large a credit, they have to pay back the excess the following year.

"But people's income was all over the place in 2020," and they could have ended up owing the government a lot of money. So a provision in the bill says that "just for 2020, there's a repayment holiday," said Pollitz. "People can still claim additional credits if those are due, but if their income bounced around and they earned more than projected, they don't have to repay" the extra tax credits. And there is one other provision of interest in this area -- if a person received as little as 1 week's worth of unemployment insurance, any income above 138% of the poverty level would be disregarded when calculating eligibility for tax credits. The Senate version of the bill also includes a similar provision for calculating cost-sharing subsidies.


Also from https://www.healthaffairs.org/do/10.1377/hblog20210209.337315/full/
Bold is mine..
Building On The ACA
The Ways and Means proposal would make significant changes to bolster the ACA and improve marketplace access and affordability. The proposal would:

Extend ACA subsidies to higher-income people who do not currently qualify for 2021 and 2022;
Increase ACA subsidies for lower-income people who already qualify for 2021 and 2022;
Provide maximal ACA subsidies for individuals that receive unemployment benefits in 2021; and
Prevent taxpayers who misestimated their income in 2020 from having to repay excess premium tax credits at tax time.

So, assuming this passes, what happens to the folks that already filed their 2020 federal taxes and had to repay some of their subsidies? Will the IRS circle back on these returns, or does the person have to file an amended return?

Just curious, since I always file in April.

 

[GLM]

So, assuming this passes, what happens to the folks that already filed their 2020 federal taxes and had to repay some of their subsidies? Will the IRS circle back on these returns, or does the person have to file an amended return?

Just curious, since I always file in April.

Good question, we will probably file as close to the deadline as possible. If this passes I hope turbo tax can get updated quickly.

 

[RetiredAt55.5]

Good question, we will probably file as close to the deadline as possible. If this passes I hope turbo tax can get updated quickly.

If the politicians were thinking, if they're going to change the 2020 tax rules this late, maybe they should've extended the April 15th filing deadline.

 

[SecondCor521]

So, assuming this passes, what happens to the folks that already filed their 2020 federal taxes and had to repay some of their subsidies? Will the IRS circle back on these returns, or does the person have to file an amended return?

Just curious, since I always file in April.

From what I've received as a Tax Aide volunteer, we just don't know yet. It could go either way.

 

[mitchjav]

And Medicare at age 60 as well...

This COVID relief bill doesn't address Medicare - right?

 

[jim584672]

The subsidies are higher under 400% FPL with this bill for 2021 and 2022, and the cliff is gone.

 

[jim584672]

This COVID relief bill doesn't address Medicare - right?

I searched the bill for Medicare, it only has something about reminding people to sign up for it in a timely manner.

 

[scrabbler1]

The subsidies are higher under 400% FPL with this bill for 2021 and 2022, and the cliff is gone.

I am wondering if anyone (exchanges, someone else?) will adjust the subsidies midyear if/when the bill becomes law. And would it be retroactive to Jan 1? I would qualify for another ~$150 per month subsidy, or $1,800 per year. Otherwise, I'll have to wait until next year to get the extra money back, and I may already be getting a big refund assuming I don't get the $1,400 check if they use my 2019 return.

 

[jim584672]

I am wondering if anyone (exchanges, someone else?) will adjust the subsidies midyear if/when the bill becomes law. And would it be retroactive to Jan 1? I would qualify for another ~$150 per month subsidy, or $1,800 per year. Otherwise, I'll have to wait until next year to get the extra money back, and I may already be getting a big refund assuming I don't get the $1,400 check if they use my 2019 return.

The law is for 2021 so they should adjust the APTC and you will get some back at tax time as well.

 

[skyking1]

I am hoping for the Medicare 60 thing to happen, but envision a compromise at 62. It dovetails with the earliest SS.
Looking at the ACA and available plans, we are still going with the union offered retiree medical at retirement time in ~23 months. My wife would be more comfortable with that level of coverage.

 

[Z3Dreamer]

Will I get a revised marketplace eligibility notice that includes the 8.5% and a revised eligible amount based on the Gold Plan?

 

[zinger1457]

Will I get a revised marketplace eligibility notice that includes the 8.5% and a revised eligible amount based on the Gold Plan?

I did see in articles that they wanted to change the subsidy calculation based on the cost of a gold plan but didn't see anything in the actual plan that was submitted. Did anyone see this change in the plan?

 

[jim584672]

I did see in articles that they wanted to change the subsidy calculation based on the cost of a gold plan but didn't see anything in the actual plan that was submitted. Did anyone see this change in the plan?

Not in this bill. This is only a temporary measure that gives more subsidies.

 

[Z3Dreamer]

Not in this bill. This is only a temporary measure that gives more subsidies.

I agree with your "Not in this bill" as I looked and could not find that the Gold is replacing the SLSCP. What are you referring to when you say "This is only a temporary measure that gives more subsidies?"