COBRA vs ACA at $100K MAGI: Subsidy Phase-Out Decision Math

You earned $75,000 in W-2 wages before the layoff, received a $20,000 severance lump sum, and your spouse has $5,000 in part-time income. Total projected 2026 MAGI: $100,000. With two kids under 18, you have a family of four at roughly 320% of the 2026 Federal Poverty Level. COBRA wants $2,040/month for the same employer plan you had. The Marketplace, under IRC §36B, caps your premium contribution at about 8.5% of household income. That is the entire decision in one line — but the dollar exposure, the clawback risk, and a few edge cases are worth walking through carefully.

The quick answer: At $100K MAGI for a family of four (~320% of 2026 FPL), the PTC caps Marketplace premiums at 8.5% of income — about $708/month. COBRA runs $2,040/month. Marketplace wins by $1,332/month unless you cross the $124,800 cliff.

The 2026 FPL math for a family of four at $100K MAGI

For 2026, the Federal Poverty Level for a family of four is approximately $31,200 (the 2025 figures published by HHS in January 2025, used for 2026 Marketplace eligibility). The PTC eligibility thresholds are:

• 100% FPL: $31,200 — minimum threshold for PTC in non-Medicaid-expansion states
• 138% FPL: $43,056 — Medicaid expansion ceiling in expansion states
• 250% FPL: $78,000 — cost-sharing reduction (CSR) cutoff for enhanced Silver plans
• 400% FPL: $124,800 — the hard cliff; above this, PTC drops to zero with no cap on repayment

At $100,000 MAGI, you sit at 320% of FPL — solidly in the PTC zone but in the highest contribution-percentage band. Under IRC §36B(b)(3)(A)(ii), the maximum required premium contribution for households between 300% and 400% FPL is 8.5% of household income.

8.5% of $100,000 = $8,500/year, or $708/month. That is the most you should pay for the benchmark Silver Marketplace plan. If the benchmark Silver plan in your area costs $2,180/month unsubsidized (typical 2026 family-of-four pricing in higher-cost metros), the PTC covers the gap: $2,180 − $708 = $1,472/month in advance PTC.

COBRA at $2,040/month vs Marketplace at $708/month

COBRA under ERISA §601-608 and IRC §4980B(f) entitles you to continue your existing employer plan for up to 18 months after an involuntary termination. The premium you pay is the full cost — your share, your former employer's share, plus a 2% administrative fee. National average employer-sponsored family coverage in 2026 runs approximately $24,000/year total, making COBRA ~$2,040/month for family coverage.

At $100K MAGI, the monthly gap between COBRA and Marketplace looks like this:

Almost $12,000 in saved premium over nine months at this income level. That is the gross savings — but the cliff is the real question.

The 400% FPL cliff and what it means for your clawback exposure

For 2026, the 400% FPL cliff for a family of four sits at $124,800. Above that, the Premium Tax Credit drops to zero — and there is no cap on repayment. If you claim advance PTC based on projected income of $100,000 and your actual 2026 MAGI comes in at $130,000, you repay every dollar of PTC received during the year on Form 8962, line 27.

At a projected $1,472/month in advance PTC, over nine months that is $13,248 in subsidies you would owe back at tax filing if income crosses the cliff. The math:

• Projected 2026 MAGI: $100,000
• Cliff: $124,800
• Cushion: $24,800 before clawback exposure begins

$24,800 is the room you have for unexpected income — a freelance gig, a 401(k) withdrawal, a spouse's hours increasing, investment gains realized during a rebalance. If any of those exceed $24,800, you are over the cliff and owe back the full advance PTC.

Where the cliff bites most: 401(k) withdrawals, severance timing, spouse income

Common ways MAGI creeps above $124,800 after a layoff:

• Rule of 55 distributions. If you are 55+ and tap your former employer's 401(k) under IRC §72(t)(2)(A)(v) to bridge the gap, distributions count toward MAGI as ordinary income. A $30,000 withdrawal moves you from $100K to $130K — over the cliff.
• Traditional-to-Roth conversion. Converted amounts are taxable under IRC §408A(d)(3) and count toward MAGI. The conversion strategy that makes sense in a normal low-income year (after a layoff) can wipe out your PTC entirely if it pushes you past 400% FPL.
• Capital gains realization. Tax-loss harvesting that produces net realized gains, mutual fund capital-gain distributions in December, or a brokerage rebalance can quietly add MAGI without producing cash.
• Unemployment insurance. UI is taxable income (the $10,200 federal exclusion from 2020 was a one-year COVID provision, now expired). At $2,400/month in benefits for 8 months = $19,200 of additional MAGI.
• Severance paid late. A severance lump sum received in December — landing in the current tax year rather than next — can be the difference between $115K and $135K MAGI.

When COBRA still wins at $100K MAGI

Despite the headline $1,332/month gap, COBRA can be the right call at $100K in a few specific situations:

• Mid-treatment with an in-network specialist on the employer plan. Cancer treatment, pregnancy, scheduled surgery — switching to a Marketplace plan disrupts the care team. Most Marketplace networks are narrower than employer PPOs.
• Met your deductible. If you have already paid $5,000 toward your family deductible in Q1, switching to a Marketplace plan in April resets to $0. COBRA preserves the deductible progress.
• Likely to cross the 400% FPL cliff. If your projected $100K income is fragile — a freelance gig in negotiation, a spouse's commission income — and crossing $124,800 is plausible, taking the safer COBRA path avoids the $13K+ clawback risk.
• Job offer pending in 30–60 days. If you expect new employer coverage to kick in soon, COBRA bridges the gap without the SEP whiplash of enrolling in Marketplace and then dropping it.

For the median family at $100K MAGI with no active medical situation and stable projected income, Marketplace is the right call — the savings are too large to leave on the table, and the clawback risk is manageable if you monitor MAGI quarterly.

The conservative play: COBRA for months 1–3, then Marketplace

If your projected $100K MAGI is within 15% of the 400% FPL cliff ($124,800 − $100K = $24,800 cushion, which is well above the 15% safety zone), you can comfortably go straight to Marketplace. But if you are at $110K projected MAGI ($14,800 cushion, ~12% of the cliff), the conservative approach is:

1. Month 1–3: Elect COBRA. Pay the $2,040/month premium. Use the time to clarify your income picture — does a new job materialize? Does a freelance contract come through? Does the spouse pick up hours?
2. Month 3: Reassess projected MAGI with three months of clearer data. If you are still under $124,800 with comfortable margin, drop COBRA — which triggers a new Marketplace Special Enrollment Period — and enroll in Marketplace.
3. Months 4–12: Pay Marketplace premiums with PTC. Reconcile at year-end on Form 8962.

Three months of COBRA costs ~$6,120 — but it eliminates the risk of a $13K clawback that would dwarf the savings. For households within 15% of the cliff, this is cheap insurance against bad data.

Worked example: Tampa engineer, family of four, $100K MAGI

A Tampa-based software engineer is laid off in March 2026. Household:

• Engineer W-2 wages (Jan–Mar): $52,500
• Severance lump sum (April): $25,000
• Spouse part-time wages: $12,500
• Unemployment benefits (5 months): $10,000
• Projected 2026 MAGI: $100,000

FPL position: 320% (cliff is $124,800; cushion of $24,800). Max premium contribution under IRC §36B: 8.5% of $100,000 = $8,500/year or $708/month.

Local benchmark Silver plan for a family of four in the Tampa area runs approximately $1,950/month unsubsidized. Advance PTC: $1,950 − $708 = $1,242/month, or $11,178 over 9 months.

Decision: Marketplace Silver. Net annual cost difference vs. COBRA: $11,988 saved. The $24,800 cushion above current projected income is large enough that crossing the cliff would require unexpected ordinary income — a $30K Roth conversion, a $25K capital-gain realization, or a much higher new-job salary kicking in mid-year. The engineer monitors MAGI quarterly and avoids any voluntary income recognition (no Roth conversions, no Rule of 55 withdrawals) until 2027 to preserve the PTC.

What if MAGI projection changes mid-year?

The PTC is reconciled on the tax return based on actual MAGI. You can — and should — update your Marketplace application during the year when income changes. The mechanics:

• Income goes down: Update the application; advance PTC increases to reflect lower MAGI. You may also become eligible for cost-sharing reductions (CSRs) if income drops below 250% FPL.
• Income goes up but stays under $124,800: Update the application; advance PTC decreases. At year-end you reconcile on Form 8962 — small adjustments either way.
• Income heads toward the cliff: Update the application to zero out advance PTC. Pay full Marketplace premium for remaining months. If you stay under $124,800 by year-end, claim the PTC at filing as a refundable credit. If you cross the cliff, you owe nothing back.

The advance-PTC mechanic is a smoothing tool, not a penalty trap — as long as you keep the Marketplace updated when income changes.

The 60-day windows: how to use both clocks at $100K MAGI

Two parallel 60-day clocks under ERISA and the ACA:

• COBRA election: 60 days from receipt of the COBRA election notice (typically arrives 14 days after coverage termination). Election is retroactive to the termination date.
• Marketplace SEP: 60 days from loss of employer coverage. No retroactive enrollment — coverage starts the first of the month following enrollment.

At $100K MAGI with a comfortable cushion below the cliff, you can use the 60-day window strategically. Wait until day 30–45 to gather income data, confirm projected MAGI is well under the cliff, and enroll in Marketplace. If a medical event occurs in the gap, retroactively elect COBRA covering you back to day one (you owe back premiums but the event is covered).

The asymmetry: once you decline COBRA or let the window close, COBRA is gone. Marketplace can always be re-entered via SEP triggers later in the year (new qualifying events: marriage, birth, move). So default to using the COBRA window as a free option — wait, gather data, then decide.

Key takeaways

• At $100K MAGI for a family of four (~320% of 2026 FPL), the Premium Tax Credit under IRC §36B caps your Marketplace premium contribution at 8.5% of income — about $708/month. COBRA at full cost averages $2,040/month. Marketplace wins by ~$1,332/month, or $12,000 over 9 months.
• The 400% FPL cliff for a family of four in 2026 is $124,800. Above the cliff, PTC drops to zero with no cap on repayment. A $24,800 cushion above projected $100K MAGI is comfortable but not bulletproof — Roth conversions, Rule of 55 withdrawals, and unexpected gains can push you over.
• If projected income is within 15% of the cliff, take COBRA for 3 months and reassess. Three months of COBRA (~$6,120) is cheap insurance against a $13K+ PTC clawback.
• The family-glitch fix (TD 9968, 2022) means family coverage above 9.02% of household income makes the family PTC-eligible even if the employee-only contribution is affordable. Check this before defaulting to a spouse's plan.
• Use the parallel 60-day windows strategically. COBRA election is retroactive; Marketplace enrollment is not. Wait, gather income data, then decide.