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Definition
For Medicaid purposes, an annuity is an investment from which a person receives, or may receive in the future, a regular (monthly, quarterly, etc.) stream of income in periodic payments. A person may buy an annuity by making payments over a long period of time, or a person may purchase an immediate annuity. When a person purchases an immediate annuity, he or she pays to the entity issuing the annuity (e.g., a bank or insurance company) a lump sum of money all at one time. The annuitant is the person who will receive the payments during the term of the annuity. The annuity contract should identify the purchaser and the annuitant.
Reporting Requirements
Clients must report any annuities in which either the client or the spouse has any interest at application, at each review and as part of the change reporting requirements. Parents of a minor client must report any annuities in which the child or either of the parents has an interest.
If the client does not provide all information about annuities in which the client 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.
Annuities Purchased on or After February 8, 2006
Effective with policy published May 1, 2006, as required by the Deficit Reduction Act of 2005, any annuity purchased on or after February 8, 2006, in which the client or the client's spouse has any interest, must name the State Medicaid agency as the preferred remainder beneficiary in the first position, or in the second position after a surviving spouse or a surviving minor or disabled child. If the annuity does not name the State as the remainder beneficiary, the purchase of the annuity will be treated as a transfer of assets for less than fair market value.
Annuities treated as if purchased on or after February 8, 2006.
Treat an annuity that was purchased before February 8, 2006 as if it were purchased on or after February 8, 2006 when one or more of the following transactions occur on or after February 8, 2006.
any action that changes the course of payments to be made or the treatment of the income or principal of the annuity
additions of principal
elective withdrawals
requests to change the distribution of the annuity
electing to annuitize the contract, or other similar actions.
Routine changes and automatic events that do not involve an action or decision from the client or spouse do not cause an annuity purchased before February 8, 2006 to be treated like one purchased on or after February 8, 2006.
(See 554-1 for information about changing the beneficiary to name the State.)