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Obsolete Policy |
Previous Policy
Annuities Purchased or Changed on or After February 8, 2006
Any payment received from the annuity is income, regardless of whether the annuity itself is countable as an asset or is considered a disqualifying transfer.
Consider an annuity changed on or after February 8, 2006, if any action is taken on or after that date that changes the course of payments or the treatment of the income or principal of the annuity. These actions include additions or principal to the annuity, elective withdrawals, requests to change the distribution of the annuity, elections to annuitize the contract, or similar actions. This change requires the State to be named as the preferred remainder beneficiary.
Count the annuity as an available asset unless:
The annuity is considered a disqualifying transfer and the penalty period is not finished (if the penalty period is finished and the applicant or recipient still owns the annuity, the annuity may be considered an available asset);
The annuity has been annuitized and constitutes an employee benefit annuity that cannot be surrendered; or
The annuity meets all of the following conditions:
The annuity is irrevocable and cannot be assigned to another person;
The issuing entity is an insurance company or other commercial company that sells annuities as part of the normal course of business;
The annuity provides for equal monthly payments and does not provide for a balloon or deferred payment of principal or interest;
The State Medicaid agency is irrevocably named as the primary beneficiary of the annuity, second only to the surviving spouse or minor or disabled child, not to exceed the amount of benefits paid by Medicaid;
Medically Needy Family, Child and Pregnant Woman Medicaid programs, all annuities are countable resources if the funds are available, even if the annuities are considered retirement funds or plans. If the annuity qualifies as an employer-based retirement plan, and the client would have to quit working to receive the funds, the funds are not available. See Sec. 521-13.
The annuity is considered a disqualifying transfer unless:
The payment options was selected, or the latest change to the annuity was made, prior to the individual's, or the individual's spouse's look-back date;
The annuity is a qualified employee benefit annuity, and the State Medicaid agency is named as the remainder beneficiary in the first position for at least the total amount of Medicaid paid on behalf of the annuitant or the annuitant's spouse;
The annuity:
The annuity meets all the requirements in (3)(c) above;
The annuity will return the full principal and interest within the annuitant's life expectancy; and
The State Medicaid agency is named as the remainder beneficiary in the first position for at least the total amount of Medicaid paid on behalf of the annuitant or the annuitant's spouse.
The annuity is a third party annuity. See Sec 554 for definition.
The uncompensated value of an annuity that is considered a disqualifying transfer is an amount equal to the remaining payments due from the annuity or the outstanding principal amounts due.
The date of the transfer is the date the payment option was selected on the annuity or the date the annuity was changed so the annuity could no longer be surrendered, whichever date is later.
Value of Annuities
The value of a countable annuity is:
The amount equal to the total available amount of the refund, surrender or lump sum settlement if the annuity may be surrendered to the issuing company.
For any other annuity, the amount equal to either:
The value of the payments yet to be received under the terms of the annuity; or
Following a good faith effort to sell the annuity, an amount equal to the highest amount offered by a buyer ready and able to complete the purchase of the annuity or the right to receive the stream of income from the annuity.
The owner of an annuity may demonstrate a good faith effort to sell the annuity or the right to receive the payments from the annuity by making an offer to sell to the regular market for such property. Several offers must be sought in order to establish the fair market value of the annuity.
A good faith effort to sell must include an honest effort to sell the annuity that is reasonable calculated to induce a willing buyer to believe the annuity or income stream offered for sale is actually for sale. An offer to sell an annuity or its payments includes making an offer to potential purchasers. The offer must include, at a minimum:
The annuity owner is willing to take all necessary steps to sell the annuity or relinquish the payments under it in exchange for a lump sum payment including but not limited to providing an irrevocable power of attorney, change of beneficiary, payee or address;
The amount of payments;
a description of the term of the payments (how long they will last); and
The name, address, and telephone number of a person who will answer inquiries and receive offers.
Do not exclude an annuity as an asset on the basis it is not saleable without a undue hardship determination.
Time period for changing beneficiary.
The following clarification is effective April 1, 2008.
The State will give applicants 30 days from the date of application to verify that they have requested the issuing company to name the State as the preferred remainder beneficiary on any annuities they purchased before applying for long-tern care Medicaid. (Notice to be sent to client at time of application) The applicant must verify to the agency that the change of beneficiary has been made by the date requested by the agency.
If the change of beneficiary is not completed and verified, the annuities will be treated as a transfer of resources and the State will apply the applicable penalty period. If Medicaid has been approved pending verification, the case will be closed and the agency will notify the client that the penalty period will begin effective the day after the closure date.
Once a penalty period has begun, the penalty period will not end until the client verifies to the agency that the change of beneficiary has been completed. Any portion of the penalty period that has already been assessed against the client before the change of beneficiary is completed will not be rescinded.
Refer to Section 371 for Transfer of Asset policy
Notice to the issuing company.
For all annuities purchased or changed on or after February 8, 2006, notify the issuing company of the State's position as preferred remainder beneficiary upon approval of Medicaid for nursing home or home and community based waiver services.
The State requires the issuer of the annuity to inform the State of any change in the amount of income or principal being withdrawn from the annuities, any change of beneficiaries, or sale or transfer of the annuity. The State also requires the issuer of the annuity to inform the State if a surviving spouse or surviving minor or disabled child attempts to transfer the annuity or any portion of the annuity to someone other than the State Medicaid agency.