So small update, mixed feelings:
Fido will not reassess any existing tax lots of mutual funds that had the average cost basis. So the existing shares I hold are stuck forever this way. Grrr.
I did switch the total account to be actual cost basis, with the ability to choose individual shares myself. So I could do FIFO, or sell the last bought, whatever. Not a huge difference in pricing as the lots themselves are +/- $5 per share cost basis if I was doing the actual (I reviewed my actual purchase price and have them written out now so I know my REAL cost basis).
And if I do buy anything else in there going forward, they will be actual cost basis. Not that this helps me much now, but would have been nice of them to TELL people that's what they are doing and there were tax ramifications, but I do see that is really the responsibility of the investor anyway (just for folks like me that are still very green and learning, it's a gotcha that could screw things up if you're not aware).
I am going to review if I can report to the IRS differently than what Fido will report so I get true cost basis, but if I'm only looking at a few hundred difference and it is in my favor, I may not bother. Just frustrating as I know what to do now but the tax law change back in 2011/2012 switched to where the financial institutions were made responsible for reporting/tracking cost basis and not relying on the customer to self report.
It is unclear how the average cost basis will be calculated after a sell off. Will it stay frozen at the current cost basis, or will it recalculate based on the acutal cost basis of the remaining shares and then spit out a NEW averaged cost basis? The rep I spoke to was not sure either. It doesn't matter really other than for me to watch and see how it shakes out, as I'm most likely going to be doing the cost basis harvesting eventually so I'll get those things reset to actual some time in the distant future.
Bottom line tho: I get to take out like double the amount I thought I'd be able to take, pad out our savings/emergency fund that may be used to reinvest if there's a dip AND reset my cost basis for even better tax positioning down the road if I do reinvest, AND all while staying within my ACA income limits. So more liquidity, no extra taxes, still getting great subsidies, and I learned something new and exciting. :)