Medicaid Policy
Medicaid Policy
General Information
An annuity is a financial instrument, identified as such, that is established to provide periodic income payments over a period of time. Most annuities are sold by organizations such as insurance companies. An annuity may be purchased with a single lump sum payment or through periodic payments. Annuities have long been used as a means of creating retirement income. Many established retirement plans involve the use of annuities. Annuities are also used in an attempt to convert countable assets into income so as to avoid consideration of those assets in eligibility determinations.
The following sections describe the effect of any annuity on any application for Medicaid benefits. These sections identify annuities that:
are countable or not
if countable
how to establish value
how to determine if the annuity is a disqualifying transfer
how to determine the amount of the disqualifying transfer.
Annuities may be submitted to the Office of Eligibility Policy for assistance in determining whether the annuity is countable as an asset or whether a disqualifying transfer occurred. Submit a copy of the entire annuity policy, the date of birth of the annuitant, and verification of the annuity purchase price and, if applicable, date of annuitization.
Reporting Requirements
Individuals must report any annuities in which either the individual or the spouse has any interest at application, at each review and as part of the change reporting requirements. Parents of a minor individual must report any annuities in which the child or either of the parents has an interest.
If the individual does not provide all information about annuities in which the individual or the spouse, or a parent have an interest by the requested due date, the agency will deny the application. The individual may reapply, but the original application date will not be protected.
Annuity Definitions for Medicaid Purposes
"Annuitant" means the individual whose life is considered in determining the price and payment schedule of an annuity and who is usually the payee of the annuity.
"Annuitized annuity" means an annuity subject to a contractually established schedule of payments to be made by the issuing entity, other than an immediate lump sum payment of all of the annuity's value.
"Annuity" means a policy, certificate, contract or other arrangement between two or more parties whereby one party pays money or other valuable consideration to the other party in return for the right to receive payments in the future for a fixed period of time.
"Employee Benefit Annuity" means:
An annuity that was purchased with the proceeds from an individual retirement account (IRA), a Roth IRA, a simplified employee pension, an employer or employee association retirement account, or an employer simple retirement account, as described in section 408 of the Internal Revenue code of 1986 (IRC);
An individual retirement annuity under Section 408(b) of the IRC (not to be confused with an individual retirement account); or
An annuity described in any of the following IRC sections:
Employer plan under 401(a);
Trust under 501(a);
Annuity plan under 403(a) or 403 (b); or
Deferred compensation plan under 457(b)
(These annuities are considered "qualified" annuities.)
"Issuing entity" means the individual or entity that issues and contracts to make payments provided in an annuity. This is the company that will contract with and make the annuity payments to the annuitant.
"Equal monthly payments" means equal monthly payments and does not provide for a balloon or deferred payment of principal or interest.
"Life expectancy" means the anticipated lifetimes of individuals of a given age and sex according to the appropriate life expectancy table (Table XII).
"Third party annuity" means an annuity that is purchased and owned by a third party, but in which a Medicaid application, recipient, or their spouse, is the annuitant.
"Right to Cancel Period" means that before the contract can be legally binding, there is a period of time, no less than 10 days, during which the individual can cancel the contract and return it for a refund. This right to cancel period begins on the day that the annuitant receives the final contract from the issuing entity. The annuitant cannot revoke this right to cancel period.