Form 1095-A / Healthcare premium subsidy

[johnjohn6312]

I am young retiree.  My former employer provides a RMSA (Retiree Medical Savings Account) that the employer funded 100% on my [and my dependents] behalf.  I can use this account to reimburse healthcare related premiums for Vision, Dental and Medical plans.  Meanwhile, when initially speaking with the Federal Healthcare Marketplace, I mentioned the RMSA and was told that my AGI (Adjusted Gross Income) was really all that mattered and that the AGI must represent the combination of my tax form plus that of my children who also have some income but I claim them as my dependent.

In 2019, I received a premium tax credit for 7 months of coverage for medical insurance.  In 2020, I received a premium tax credit for 12 months.  In 2021 my home state opened their own exchange so now I deal with them and have 2 months of premium tax credit processed already which now includes a state subsidy.  The RMSA also pays for dental premiums which I obtain through my former employer as a retiree.  I never reimbursed any healthcare premiums that I paid out of pocket in 2019 and I reimbursed about 1/2 of the premiums that I paid out of pocket in 2020.

I recently noticed a footnote on one of the statements that I receive from the company which handles the RMSA.  An excerpt of the footnote follows:  "The Treasury Department in Notice 2013-54 (Q&A #10) provides that a retiree covered by a stand alone health reimbursement arrangement, such as the Retiree Medical Savings Account (RMSA), will NOT be eligible for a Code section 36B premium tax credit for any month there is a balance in the account."

After reading this footnote and doing some research, I am concerned.  I think I need to halt receiving the premium tax credits and then file an amended return for 2019 and return the premium tax credit as part of the 2020 return filing.  Going forward, utilize the RMSA to run the balance down to zero.  This will take a few years.  Once the zero balance occurs, then it seems I would be eligible for the premium tax credits.  Does this make sense?  Am I on the right path?

Thanks for the assistance.

[Cynthiad66]

The Premium Assistance Tax Credit is a federal subsidy available for people and families with income that falls between one and four times the federal poverty line.1 It's intended to reimburse them for the cost of health insurance that's purchased through the Marketplace.

The credit can be paid in advance directly to your insurer to defray the cost of your premiums, or you can just go ahead and pay the premiums and collect the refund personally at tax time. The amount you're actually entitled to can be something of a guessing game if you elect advance payment. 

Below is a link to IRS guide on Premium Tax Credits.

Questions and Answers About The Premium Tax Credit

Advance Premium Tax Credit (APTC)

1. If at the end of the year you've taken more premium tax credit in advance than you're due based on your final income, you'll have to pay back the excess when you file your federal tax return.
2. If you've taken less than you qualify for, you'll get the difference back.

Use the information from Form 1095-A to complete Form 8962 to reconcile advance payments of the premium tax credit on your tax return. Filing your return without reconciling your advance payments will delay your refund. You must file an income tax return for this purpose even if you are not otherwise required to do so.  Reconciling Payments on Form 8962