October 18, 2013
The insurance exchanges associated with the Affordable Care Act opened up October 1, and while the impact of the new marketplace remains to be seen, one thing is certain. Many people aren’t aware of the tax implications of the Affordable Care Act.
We’ve listed a few frequently asked questions about taxes and the Affordable Care Act to help clear some things up:
Q: I’m a 56 year-old retiree (lucky me!), and I’m planning to sign up for coverage through one of the new exchanges that just opened up. Is there an opportunity for me to receive tax credits to help with my premiums?
A: Maybe. If you exceed the income limits below, you can still receive coverage through the new health care exchanges, but you will not be eligible for premium assistance via federal tax credits. If you fall within these ranges, the insurance exchange websites provide tools to help you calculate your total premium assistance tax credit.
Q: What is considered income in the equation to see if I qualify for premium assistance tax credits?
A: Income is considered:
- Adjusted Gross Income, plus:
- Non-taxable Social Security benefits
- Excluded foreign earned income
- Tax-exempt interest
Income is not
- Certain Roth IRA distributions
- Withdrawals from savings or basis (Cost basis of an investment is the initial amount deposited, plus any additional capital gains or dividends that have been reinvested into the investment, which have already been included on your tax return.)
- Life insurance loan proceeds
- Line of credit proceeds
Q: What if I’m close to the income thresholds, but I’m not sure exactly where I land?
A: Come and see a financial advisor who can help you both determine your income AND develop a tax-efficient income distribution strategy to help you qualify for premium assistance tax credits.
Q: What else do I need to know about tax implications of the Affordable Care Act?
A: If you have a high household income (>$250k for those married, filing jointly), you should be aware of a Net Investment Income tax of 3.8% that went into effect 1/1/2013, as well as an additional Medicare surtax of 0.9%.
January 20, 2011
2010 –New Coverage Options
• Health care tax credit for small employers
• Children covered to age 26
• High-risk pools
2011 –New Taxes
• Medicare tax rate increases 0.9% for higher-income taxpayers
• New 3.8% tax on unearned income for higher-income taxpayers
2011 –Medicare Changes
• Part D
• Medicare Supplement
• Medicare Advantage
2014–Exchanges and Subsidies
• State Health Insurance Exchanges
• Premium subsidies for individuals with incomes below $47K (based on CBO estimate for 2016)
2014–Individual and Employer Coverage Requirements
• Employers with more than 50 employees
• Individuals who can find workplace, exchange, or other policies that cost less than 8% of their income
With the recent elections, we’ll have to watch and see what happens in the meantime, there is new legislation, which goes by the name Patient Protection and Affordable Care Act.
There are two main pieces of Health Care Reform
• One piece aims to make health coverage nearly universal by requiring employers to provide insurance and requiring individuals to buy it (tax credits & subsidies help pay for it).
• Part two tries to make Medicare, a popular and effective, but expensive, program that serving people 65 and older, more efficient.
January 18, 2011
6. Medicare doesn’t cover all your expenses.
You may find that each part of Medicare has some things it doesn’t cover.
7. Start by looking at what you have now.
Look at your current health coverage. For example, if you have group coverage from your job, or retiree insurance from a former employer, you’ll want to see how this coverage fits with Medicare.
8. You won’t want to put this off.
Timing matters when you’re choosing Medicare coverage.
Your enrollment window begins just before you turn 65 or when you become eligible for Medicare due to disability.
9. It’s smart to review your choices once a year.
Once you choose your Medicare coverage, you’re not locked into that choice. You’ll have the chance to change your choices at least once a year. That’s why it makes sense to check your coverage every year to make sure it still fits your health needs.
10. Don’t be afraid to ask for help.
There’s help available for everyone making Medicare choices. And there’s extra help with the cost of Medicare for people with little income and few assets.
Open enrollment starts on November 15. You are limited in when you can change your Medicare health plan during the year. You can switch during the Annual Coordinated Election Period which runs from November 15 through December 31 every year.
New coverage starts January 1. During this period you can change your choice of health coverage, and add, drop or change Medicare drug coverage.
A licensed broker can help you with these specifics.
January 13, 2011
1. There are two ways to get Medicare, turn age 65 or become disabled.
Your biggest decision is choosing between Original Medicare (Part A and Part B) and the Medicare Advantage plan. If you choose Original Medicare, decide whether to buy a stand alone prescription drug plan or Medigap (Medicare supplemental insurance) policy. If you choose Medicare Advantage, pick a specific plan from a specific company.
2. There is drug coverage available.
Medicare now includes prescription drug coverage also known as Part D.
This coverage is optional. You can get prescription drug coverage through a Medicare Advantage plan. Some of them include drug coverage. Or you can enroll in a standalone Part D prescription drug plan to go with your Original Medicare coverage.
This is important to know: If you don’t sign up for Part D prescription drug coverage as soon as you become eligible for Medicare, you may pay a penalty on your premium unless you qualify for an exception.
3. Even for covered expenses, you’ll pay a share of the cost.
Medicare helps you get the health care you need when you’re sick, but you’ll still be expected to pay a share of the cost. You contribute to Medicare by paying taxes while you work. When you start to use your Medicare benefits, you’ll pay a share of the costs of the care you receive.
4. Your share may be larger than you expect.
If you choose Medicare Parts A and B, you’ll find that there are some expenses Medicare doesn’t cover. If you are seriously ill, these gaps create big bills. Some people who choose Medicare Parts A and B also buy a Medicare supplement insurance policy. Another alternative is to choose a Medicare Advantage plan that can also help you avoid these gaps.
5. Where you live makes a difference.
Medicare Parts A and B are the same across the United States. But other parts of Medicare (Parts C and D) are offered by private companies and may be available in specific counties, states, or regions, and not in others. There are Part C or Part D plans that offer nationwide coverage.
January 11, 2011
Traditionally, there have been 5 things that may impact retirement savings during retirement:
• Market volatility
• Health care costs
A comprehensive study by LPL Financial, United HealthCare, Age Wave and Northstar Research found that health care expenses are the #1 worry for people nearing and in retirement.
Why? People feel unprepared, overwhelmed and frustrated. Health care planning is one of the things you need to think about and understand how it may impact your financial situation, especially your distribution planning. Consider overall health, you should plan for good health and you should plan for not-so-good health, also called planning for the “certainty of uncertainty.”
It also helps to understand the types of available insurance, such as Medicare, Medicaid and Supplemental.
AgeWave, LPL Financial and UnitedHealthcare, Health and Wealth Planning in Retirement Survey, July 2010
LPL Financial and Northstar Research Partners, Advisor Health Insurance Study, May 2010