Help With Staying Above The ACA 138% Poverty Level

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averagedude
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Joined: Sun May 13, 2018 3:41 pm

Help With Staying Above The ACA 138% Poverty Level

Post by averagedude »

I have a close family member who has health insurance under ACA. We live in Virginia, where you need to be above 138% of the federal poverty level. We are also wanting to be below 200% of the poverty level to qualify for out of pocket expenses. This means my family member needs to keep their MAGI between $17000 and $24000 for 2019. This is a list of their projected income for 2019.
1. $8000 in widow benefits from Social Security. I assume this counts toward MAGI.
2. $3500 in interest income and dividends. I assume this counts toward MAGI.
3. $4000 in long term disability payments where my family member paid the premiums. I assume this doesn't count toward MAGI since the premiums were paid to the insurance company by my family member.

According to my assumptions, it appears my family member will be short $5500 for ACA, but my family member is fortunate to have a traditional IRA where they could do a ROTH conversion or a IRA distribution. So my questions are:
1. Are my MAGI assumptions correct?
2. Would a $5500 Roth conversion before December 31st count toward MAGI so my family member would be above the 138% poverty level in 2019?
Last edited by averagedude on Sun Oct 20, 2019 12:17 pm, edited 2 times in total.
inverter
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Joined: Mon Jul 27, 2015 1:40 pm

Re: HELP WITH STAYING ABOVE THE ACA 138% POVERTY LEVEL

Post by inverter »

Why is the title in caps?
earlyout
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Re: HELP WITH STAYING ABOVE THE ACA 138% POVERTY LEVEL

Post by earlyout »

Your assumptions about what is included in ACA MAGI are correct and yes, a distribution from a tradiotional IRA that is converted to a Roth IRA would be included in the ACA MAGI.
Topic Author
averagedude
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Re: HELP WITH STAYING ABOVE THE ACA 138% POVERTY LEVEL

Post by averagedude »

inverter wrote: Sun Oct 20, 2019 12:06 pm Why is the title in caps?
Sorry about that. Fixed.
Topic Author
averagedude
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Joined: Sun May 13, 2018 3:41 pm

Re: HELP WITH STAYING ABOVE THE ACA 138% POVERTY LEVEL

Post by averagedude »

earlyout wrote: Sun Oct 20, 2019 12:17 pm Your assumptions about what is included in ACA MAGI are correct and yes, a distribution from a tradiotional IRA that is converted to a Roth IRA would be included in the ACA MAGI.
Thank you earlyout. I just don't want my family member to not make a mistake, as it would be costly.
mnnice
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Re: Help With Staying Above The ACA 138% Poverty Level

Post by mnnice »

Looking to 2020, without knowing the specifics don’t assume that the ACA plan is superior to Medicaid.
DetroitRick
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Location: SE Michigan

Re: Help With Staying Above The ACA 138% Poverty Level

Post by DetroitRick »

averagedude - everything you stated in your post is correct. Be wary of your "rounding" though, since you are cutting it close. FPL for single for 2019 ACA coverage is $12,140. So 138% is $16,753. 200% is $24,280.

We've done the same, Roth conversions to raise income some years (and deductible IRA contributions to reduce in other years). As you can see, things get radically "different" when you travel outside those 138% (for Medicaid expansion states) and 200% of federal poverty level boundaries. At 250% cost-sharing reductions go away completely (those lower deductible and out of pocket max from otherwise). At 400%, the advance premium tax credit stops. And of course, under 138% = Medicaid, in Medicaid expansion states.

You've probably already seen this, but here's are decent link from healthcare.gov itself covering the income issues:
https://www.healthcare.gov/income-and-h ... on/income/

Think of it this way (which you probably already have): MAGI for ACA is simply Federal AGI, with 3 potential adjustments. Period. As that link shows, those 3 adjustments are excluded foreign income (probably irrelevant for this case), any non-taxable social security (relevant) and tax exempt interest.

Roth conversions have to be done in the calendar year to increase MAGI/AGI, as you said. Deductible IRA contributions to lower income could be done through April 15 of the following year.

The only potential trip-up I can think of is the ACA concept of "household income". Healthcare.gov has a clear chart explaining that too, just in case:
https://www.healthcare.gov/income-and-h ... hold-size/
megabad
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Re: Help With Staying Above The ACA 138% Poverty Level

Post by megabad »

mnnice wrote: Sun Oct 20, 2019 3:59 pm Looking to 2020, without knowing the specifics don’t assume that the ACA plan is superior to Medicaid.
+1 assuming your state has expanded (it has in OP's case).
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