Millions May Owe Health-Insurance Penalty

The U.S. government estimates as many as six million households may have to pay a penalty for not having health insurance last year as required under the Affordable Care Act.

About 150 million taxpayers are expected file returns this tax season, said Mark Mazur, assistant secretary for tax policy at the Treasury Department. The filing process this year is expected to be trickier because Americans will in some cases have to pay a penalty or get smaller refunds because credits they received to offset insurance premiums were too large.

Up to 20% of tax filers—or about 30 million—who weren’t insured for most or any of last year will likely request and receive an exemption from the penalty, officials said. Many exemptions can be applied for during the tax-filing process.

Government agencies are encouraging Americans to file electronically and are providing filers information via email, phone and text messages. They are also offering support tools on the Internal Revenue Service and other federal websites.

The health law requires almost all Americans to have coverage or pay a penalty, with some exemptions. Some 2% to 4% of tax filers are expected to have to pay the fine, which is $95 per adult or 1% of family income, whichever is greater.

—Stephanie Armour The Wall Street Journal

Plan for 529 Tax Dropped

The Obama administration said it will drop a plan to tax so-called 529 college-savings accounts, after the proposal sparked widespread criticism over its potential impact on the middle class.

The move followed a public call by House Speaker John Boehner (R., Ohio) for the White House to withdraw its plan. Calls also came privately from leaders of the president’s own party.

House Minority Leader Nancy Pelosi (D., Calif.) argued for dropping the plan in conversations with senior administration officials aboard Air Force One, as she flew with the president from India to Saudi Arabia, said a person familiar with the matter.

Ahead of the Jan. 20 State of the Union address, Mr. Obama proposed a set of tax changes aimed at boosting incomes for low- and middle-income households, including expanded availability of a break known as the American Opportunity Tax Credit, which provides as much as $2,500 per student for higher-education expenses.

To offset the cost of those plans, the White House plan would have narrowed or ended several other breaks, including tax-free distributions from 529 accounts, which disproportionately benefit higher-income households, according to administration officials.

—John D. McKinnon The Wall Street Journal

End to Tricare Proposed

A special commission looking at Pentagon spending called for scrapping the centerpiece of the military health-care system and trimming guaranteed retirement benefits for career officers, as part of a broad plan that could save the Defense Department billions of dollars.

After 18 months of research, the independent commission concluded that the Pentagon’s pay and benefit system “is fundamentally sound and does not require sweeping overhaul.” But the 280-page report lays out a series of charged changes that are certain to face strong resistance in Washington.

The biggest savings would come from replacing the Defense Department’s primary health-care system, known as Tricare, with an alternative that would allow three million people—primarily veterans and military family members using the services—to enroll in private plans. The report also calls for retaining the costly Tricare for Life services used by nearly two million people.

The commission also recommended revamping the retirement system to trim guaranteed benefits for career military personnel who serve 20 years. The report recommends automati- cally enrolling military personnel in a 401(k)-style system and offering bonuses for those who stay in the service more than 12 years.

—Dion Nissenbaum The Wall Street Journal

Drive Carefully

The Justice Department has been building a national database to track the real-time movement of vehicles around the U.S., a secret program that scans and stores hundreds of millions of records about motorists, say officials and government documents. The primary goal of the program, run by the Drug Enforcement Administration, is to combat drug trafficking, according to one document. But the database is being used to hunt for vehicles associated with other crimes.

—Devlin Barrett The Wall Street Journal