Annuities Purchased or Changed on or After February 8, 2006 510-05-70-45-30

(Revised 1/1/07 ML #3056)

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  1. Any payment received from the annuity is income, regardless whether the annuity itself is countable as an asset or is considered a disqualifying transfer.
  2. An annuity is considered 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 principle of the annuity.  These actions include additions of principle to the annuity, elective withdrawals, requests to change the distribution of the annuity, elections to annuitize the contract, or similar actions.
  3. The annuity is counted as an available asset in the asset test unless:
  1. The annuity must be considered a disqualifying transfer;
  2. The annuity constitutes an employee benefit that is an individual retirement annuity or is 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 (These annuities are considered “qualified” annuities); or
  3. The annuity meets all of the following conditions:
  1. The annuity is irrevocable and cannot be assigned to another person;
  2. The issuing entity is an insurance company or other commercial company that sells annuities as part of the normal course of business;
  3. The annuity provides for level monthly payments;
  4. The annuity will return the full principle and has a guaranteed period that is equal to at least 85% of the annuitant’s life expectancy;
  5. The monthly payments from all annuities that meet the requirements of this subsection do not exceed $2541 effective January 2007 ($2488 for 2006) and, when combined with the annuitant’s other income at the time of application for Medicaid, does not exceed $3811 effective January 2007 ($3732 for 2006); and
  6. If the applicant for Medicaid is age 55 or older, the Department of Human Services is irrevocably named as the primary beneficiary of the annuity following the death of the applicant and the applicant’s spouse, not to exceed the amount of benefits paid by Medicaid.  If a minor child who resided and was supported financially by the applicant or spouse, or disabled child, survives the applicant and spouse, any payments from the annuity will be provided to those individuals.
  1. The annuity is considered a disqualifying transfer unless:
  1. The payment option 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;
  2. The annuity is a qualified employee benefit annuity, as described in (3)(b) above and the department 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 department may be named as the remainder beneficiary in the second position after the community spouse or minor or disabled child and is named in the first position if such spouse or child disposes of any such remainder for less than fair market value;
  3. The annuity meets all of the requirements in (3)(c)(i) through (3)(c)(v) above and the department 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 department may be named as the remainder beneficiary in the second position after the community spouse or minor or disabled child and is named in the first position if such spouse or child disposes of any such remainder for less than fair market value;
  4. The annuity is a third party annuity;
  5. The monthly payments from all annuities that meet the requirements of this subsection do not exceed $2488 and, when combined with the annuitant’s other income at the time of application for Medicaid, does not exceed $3732; and
  6. If the applicant for Medicaid is age 55 or older, the Department of Human Services is irrevocably named as the primary beneficiary of the annuity following the death of the applicant and the applicant’s spouse, not to exceed the amount of benefits paid by Medicaid.  If a minor child who resided and was supported financially by the applicant or spouse, or disabled child, survives the applicant and spouse, any payments from the annuity will be provided to those individuals.
  1. The uncompensated value of an annuity that is considered a disqualifying transfer is an amount equal to the remaining payments due from the annuity.
  2. When the Department is entitled to be the remainder beneficiary of an annuity purchased or changed on or after February 8, 2006, the “Notice To Insurer Of Annuity” (SFN 1186) (05-100-96) must be sent to the company that issued the annuity. The notice must be sent when the Medicaid application is approved, or if an ongoing case, when the annuity is reported.