Author Topic: ACA in Texas - Qualifying income for subsidies  (Read 1608 times)

Pex

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ACA in Texas - Qualifying income for subsidies
« on: October 04, 2016, 03:19:58 PM »
I went through the stickied thread but I am still baffled on this one.

My wife is retired and I plan on joining her in 3 months.  I'm 49, she's 47 and we've got 1.55mm in Stocks, bonds and cash.  We can easily get by on 45k a year, provided health insurance is a reasonable cost...and there lies the rub.  We live in Texas.

Texas did not take the expanded medicaid, so there's a Gap for qualifying for Silver Plan subsidies.  We need to make $16,020 or we pay full price for a Silver plan.  Full price is 7k in premiums and 10k deductible.  If anything goes wrong, we can go 17k in the hole pretty fast.  It's survivable but ugh.

We have 1MM in 401k, 550k in non-tax deferred non-retirement accounts.

My Question is: Is there SOME WAY we can use Roth-IRA conversion to "make" enough to get taxed, or do we basically have to work part time if we want the subsidy?  Is there any other option out there for us? 

I am just lost.

Spork

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Re: ACA in Texas - Qualifying income for subsidies
« Reply #1 on: October 04, 2016, 03:28:00 PM »
Hey there... I am FIRE in Texas as well....

Sure, you can use Roth conversions as income.

You should have some income from your $550k.  That counts.
You take your $1M in the 401k and roll it into a traditional IRA.  Then you can convert some portion of that to Roth.  Do as much or as little as you want to hit the subsidy target you want.  This counts on the bottom line for your AGI.

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All this aside... you will have 2 issues with ACA healthcare:
1) It is hard as hell to get the morons that manage it to understand what you are doing.  You will have to make multiple passes at it.  They will temporarily accept you and ask for more information that you don't have.  You will go round and round and round with them.  They don't understand their own system for the normal case... and you are not the normal case.  I included statements of my taxable accounts and non taxable accounts AND included a plan showing (both annual and monthly) amounts I would be "earning" via dividends and Roth conversions.  It was painful.
2) As far as I can tell, Blue Cross HMO is really the only viable option.  (If you find another SAY SOMETHING!)  I have historically liked BCBS, but the HMO is awful.  The docs I want are not in their system.

Pex

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Re: ACA in Texas - Qualifying income for subsidies
« Reply #2 on: October 04, 2016, 03:51:54 PM »
Thanks - here's what concerns me.

I might have taxes on dividends on the 550k, but the taxes on the capital gain won't be counted because we won't make the 77k needed to hit the taxable level.

I'm somewhat new to the idea of moving the 401k over - I always assumed we'd hit 60 no problem on the 550k.  Now I may need it just to get the silver plan.

Q1: How much would I have to move to hit the $16000 taxable income dollars?  $16000? More?

Q2: Also, what do you hate about the BCBS HMO?

I've had the PPO for years (via work).  Is it just that you don't have your doctors?  If so, the ACA site has a tool now that let's you enter your docs and each plan shows you if they are in or out of network.

Thanks!

seattlecyclone

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Re: ACA in Texas - Qualifying income for subsidies
« Reply #3 on: October 04, 2016, 04:37:33 PM »
I might have taxes on dividends on the 550k, but the taxes on the capital gain won't be counted because we won't make the 77k needed to hit the taxable level.

This doesn't matter. Every dollar of dividends and gains from your taxable accounts counts as income for ACA purposes, even if that income is taxed at a 0% rate.

Quote
I'm somewhat new to the idea of moving the 401k over - I always assumed we'd hit 60 no problem on the 550k.  Now I may need it just to get the silver plan.

Q1: How much would I have to move to hit the $16000 taxable income dollars?  $16000? More?

Every dollar you convert pre-tax to Roth counts as a dollar of income for ACA purposes.

If I were you I might aim to keep the income just below 200% of the poverty level. The 150-200% silver plans are subsidized almost as much as the 138-150% silver plans, and with $1 million in pre-tax retirement accounts you'll probably do well to convert as much as you can prior to RMDs kicking in, but not so much that you get above the 200% of poverty level threshold where your health insurance subsidy goes way down.

Pex

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Re: ACA in Texas - Qualifying income for subsidies
« Reply #4 on: October 04, 2016, 05:14:11 PM »
Thanks so much- I got on with a rep at one of the 401Ks I have, and we walked through the process.
I'll talk with my CPA just too feel safe about it all.

Love the idea of getting free of the RMD.

Thanks Spork and Seattle for the pointers!

Spork

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Re: ACA in Texas - Qualifying income for subsidies
« Reply #5 on: October 05, 2016, 11:19:38 AM »

Q2: Also, what do you hate about the BCBS HMO?

I've had the PPO for years (via work).  Is it just that you don't have your doctors?  If so, the ACA site has a tool now that let's you enter your docs and each plan shows you if they are in or out of network.

Thanks!
\
Seattlecyclone answered Q1...  so here's my take on Q2

Last year the BCBS plans had both HMO and PPO options.  This year, it is ALL HMO.  This means
1) every single stinking doctors appointment has to go through your primary care physician.  What a royal pain in the ass.  If you know you need to go to a specialist, do not pass go.  Go to your primary care doc.
2) Where I live the doctors I know and are familiar with are pretty much 100% not on the HMO plan.  I grew up in a physician's family, so I have a fairly large network of doctors I know/trust from listening to Dad.  Those guys are not in the HMO. 

Spork

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Re: ACA in Texas - Qualifying income for subsidies
« Reply #6 on: October 05, 2016, 11:23:06 AM »
Also... if you haven't read Seattlecyclone's blog on ACA, stop now, go there and read it.

https://seattlecyclone.com/optimizing-the-affordable-care-act/

I will say, I made several passes through several blogs.  I had to read some of them two or more times before I started understanding it. 

jim555

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Re: ACA in Texas - Qualifying income for subsidies
« Reply #7 on: October 05, 2016, 11:28:32 AM »
In Texas you need at least 100% FPL to get a subsidy.