Author Topic: Information on the Affordable Care Act, with a focus on early retirees  (Read 42324 times)

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4304
  • Age: 33
  • Location: Seattle, WA
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #50 on: February 25, 2018, 09:05:12 PM »
Thanks for putting this together @mathstach ! Does it basically replicate the procedure they tell you to use in the IRS instructions where you go through a bunch of loops of (deduct premium, increase tax credit because your MAGI went down, decrease premium deduction because your credit went up, decrease credit because your MAGI went up, ...) and stop when the next loop changes things by less than a dollar compared to the last loop?
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4026
  • Age: 10
  • Location: us-west-2
  • Bot - Do Not Reply
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #51 on: February 25, 2018, 09:26:48 PM »
BALLER


mathstach

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Age: 28
  • Location: NYC
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #52 on: February 26, 2018, 07:41:37 PM »
Thanks for putting this together @mathstach ! Does it basically replicate the procedure they tell you to use in the IRS instructions where you go through a bunch of loops of (deduct premium, increase tax credit because your MAGI went down, decrease premium deduction because your credit went up, decrease credit because your MAGI went up, ...) and stop when the next loop changes things by less than a dollar compared to the last loop?

Well, the method for my online calculator does stop when the next loop changes things by less than a dollar.

However, it does not always go through the same loops as the IRS instructions; because these don't always work.

The IRS says you may use any (legal) method when their method from Rev. Proc. 2014-41 doesn't work.

What do I mean when I say the IRS loops "don't always work"?

Here is an example 2017 tax return in NYC, where I live:
-self-employed earned income $52,050
-purchased Fidelis Care silver plan for NYC (second lowest cost silver), annual premium $5,478 before subsidy
-single, no dependents
-nothing else on front page of 1040 except Line 29 self-employed health insurance deduction, to keep it simple

What happens when we try following the IRS method? We get into an endless loop:

-First, IRS has us get a first attempt at MAGI: $52,050 - $5,478 = $46,572, a first guess for MAGI.
-Second, IRS has us get a first attempt at expected contribution: 9.69% gives $4,513.
-Third, IRS has us get a first attempt at the subsidy/premium tax credit: $5,478 - $4,513 = $965.
-Fourth, IRS has us calculate net insurance cost using the first attempt at the subsidy: $5,478 - $965 = $4,513.
-Fifth, IRS has us calculate a second attempt at MAGI: $52,050 - $4,513 = $47,537
-Sixth, IRS has us calculate a second attempt at the subsidy: $0, as > 4x federal poverty line for 1 person household in NY state
-Seventh, IRS has us get a second attempt at net health insurance cost: $5,478 - $0 = $5,478, and we go back to step 1.

Endless loop! How much of the $5,478 should be deducted on Line 29, and how much should be premium tax credit?

The IRS method didn't succeed in finding it, so now the IRS lets us use any method to find out.

In this case, my method comes into play: subsidy is at least $0, and at most $965.

Instead of giving up, consider the midpoint: $483, after rounding.

(What if we then went back to the IRS way at this point?
Use $483 as the second attempt at the subsidy, instead of $0.
Going through the calculation the IRS way now gives us a third attempt at the subsidy: $918.
Going through the calculation again now gives us a fourth attempt at the subsidy: $876.
Going through the calculation again now gives us a fifth attempt at the subsidy: $880.
Running this through again gives $880, so $880 is the correct answer.)

This is what happens when you put the numbers into my calculator: Input
benchmark insurance: 5478
actually purchased: 5478
poverty line: 11880
income: 52050

Output: subsidy $879 (this is because my calculator rounds down, to protect you from accidentally receiving too much)
Reading the fine print which pops up explains that in this case you can actually take $880, in agreement with the above.

Basically, my method is willing to chop intervals in half instead of plugging in things over and over as is.
This allows it to avoid "overshooting," and due to this, it always arrives at the correct answer, unlike the original IRS method.

Many people using the original method got "$0" as their premium tax credit from Turbo Tax, H & R Block, and government calculators,
due to the endless loop happening. Now that my method is out there, about 100,000 additional households can get subsidies, if they know about it.

This also helps those near 133% of the federal poverty line in states which haven't expanded Medicaid, like Texas, Florida, and South Carolina.

The original IRS method also breaks down there, due to the "subsidy cliff."

As a result, many families with self-employed income have received smaller subsidies than they were supposed to during the past three years or so.
That can now be remedied. The IRS claims it will include some reference to my method in publications that will appear in early 2019, but it can be used now.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4304
  • Age: 33
  • Location: Seattle, WA
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #53 on: February 26, 2018, 08:43:15 PM »
Wow, you actually got the IRS to agree to your interpretation and update their documentation accordingly? Nice work!
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

FiveSigmas

  • Bristles
  • ***
  • Posts: 459
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #54 on: February 26, 2018, 08:54:20 PM »
Damn. Nicely done, MathStach.

mathstach

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Age: 28
  • Location: NYC
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #55 on: February 27, 2018, 05:14:40 PM »
Yes, that is my understanding. Thank you.

The fellow who developed the old IRS procedure, Arvind Ravichandran, left the IRS and is now working at a law firm in New York.  The three folks below in IRS Office of Chief Counsel now deal with section 36B of the Internal Revenue Code (as well as many other things) --

CC:ITA:B05 Pflanz, Shareen S.      Shareen.S.Pflanz@IRSCounsel.treas.gov     (202) 317-7006
CC:ITA:B04 Toomey, Stephen J.     Stephen.J.Toomey@IRSCounsel.treas.gov   (202) 317-4718
CC:ITA:B04 Mojiri-Azad, Lisa          Lisa.Mojiri-azad@IRSCounsel.treas.gov       (202) 317-4718

If you have any questions about the new IRS documentation, I'd suggest calling Stephen J. Toomey, as he has a copy of and has accepted my solution. I think he said that he might complete that faster, or at least increase its priority, if he hears from more people about it.

mathstach

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Age: 28
  • Location: NYC
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #56 on: April 19, 2018, 07:00:30 PM »
This has been the most popular story on Time's website recently:

http://time.com/money/5237795/irs-tax-problem-obamacare-subsidy/

Exflyboy

  • Walrus Stache
  • *******
  • Posts: 5234
  • Age: 56
  • Location: Corvallis, Oregon
  • Expat Brit living in the New World..:)
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #57 on: April 19, 2018, 11:33:52 PM »
Awesome.. The approach seems simple enough but the real genius is getting the Government to actually agree.

Amazing!..:)

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4026
  • Age: 10
  • Location: us-west-2
  • Bot - Do Not Reply
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #58 on: April 25, 2018, 12:57:00 PM »
Has anyone been delayed/denied for CSRs because of documentation for forecasted income?

Assume the threshold for Medicaid is $25,000, i.e. if you make $25,001 you get the absolute best ACA subsidies complete with CSRs (which you cannot claim retroactively), but anything below you get Medicaid. So as an optimizer you state your forecasted income in the best possible band, and it's wildly different than full-time employment years.

What happens if they're not convinced this accurately reflects your income? How do you go about telling them "my income is what I want it to be, give me the bloody CSRs"? Is there some sort of appeal process, and how long does it take?

Exflyboy

  • Walrus Stache
  • *******
  • Posts: 5234
  • Age: 56
  • Location: Corvallis, Oregon
  • Expat Brit living in the New World..:)
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #59 on: April 25, 2018, 01:14:41 PM »
I was surprised not to have been asked to prove as we went from 6 figures down to $30k over 2 years.

first year of Full RE was last year and we claimed loss of job at the end of August with a final ending income of $35k. Went on the ACA 1st Sept.. No questions.

Got a refund because we actually got down to a MAGI of $29k. (Bronze plan HSA compliant)

This years signed up with a similar projection.. No questions asked so far.


jim555

  • Handlebar Stache
  • *****
  • Posts: 1634
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #60 on: April 26, 2018, 06:18:17 AM »
They must be verifying income electronically.  They just renewed me and I didn't do anything.

Roadrunner53

  • Handlebar Stache
  • *****
  • Posts: 1112
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #61 on: April 26, 2018, 07:01:58 AM »
Why are you getting renewed this time of year? My renewal starts January 1st each year.

Exflyboy

  • Walrus Stache
  • *******
  • Posts: 5234
  • Age: 56
  • Location: Corvallis, Oregon
  • Expat Brit living in the New World..:)
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #62 on: April 26, 2018, 10:04:19 AM »
Why are you getting renewed this time of year? My renewal starts January 1st each year.

All renewals start in Jan, unless you have a change of circumstance.. Including if you leave your job for any reason. That was a nice provision for us because my Wife RE'd at the end of the school year and we used her school coverage.

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4026
  • Age: 10
  • Location: us-west-2
  • Bot - Do Not Reply
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #63 on: April 26, 2018, 10:27:46 AM »
The ability to sign back up for every change in circumstances is a godsend for the young and geographically-mobile. Generally, the more complex a situation the more ripe for advanced consumer optimization it becomes.

Between the 60 day COBRA retroactive rules, marriage/divorce, birth/death, crossing state lines, being out of the country, and employment changes, there are MANY optimizations to be had. Since Obamacare became law in 2013, my wife and I have been on 8 different coverage options, jumping ship when it was most advantageous as she navigated various employment paths. We have over $25k in an HSA and tons of options for the future. I'm not worried at all about our own coverage prospects.


Exflyboy

  • Walrus Stache
  • *******
  • Posts: 5234
  • Age: 56
  • Location: Corvallis, Oregon
  • Expat Brit living in the New World..:)
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #64 on: April 26, 2018, 10:58:29 AM »
$25k in your HSA? Yeah you got about 2 years worth of HC premiums there if the ACA goes away...;)

jim555

  • Handlebar Stache
  • *****
  • Posts: 1634
Re: Information on the Affordable Care Act, with a focus on early retirees
« Reply #65 on: April 26, 2018, 12:42:53 PM »
Why are you getting renewed this time of year? My renewal starts January 1st each year.

All renewals start in Jan, unless you have a change of circumstance.. Including if you leave your job for any reason. That was a nice provision for us because my Wife RE'd at the end of the school year and we used her school coverage.
I dropped into Medicaid mid-year when my UI ran out.  So that is when they renew it.