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

(Revised 7/1/09 ML #3183)

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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 principal of the annuity.  These actions include additions of principal 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 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);

  2. The annuity has been annuitized and constitutes an employee benefit annuity that cannot be surrendered; 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 principal 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 $2739 effective January 2009 ($2610 for 2008) and, when combined with the annuitant’s other income at the time of application for Medicaid, does not exceed $4109 effective January 2009 ($3915 for 2008); 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.

NOTE:  This subsection applies to determining whether an annuity is a countable asset.  The provision in paragraph (vi) above allows a community spouse to name an institutionalized spouse (IS) or HCBS spouse as the primary beneficiary ahead of the Department.  If the annuity, however, was purchased or changed within the individual’s or the individual’s spouse’s look back period, ONLY a community spouse (not an IS or HCBS spouse) can be named ahead of the Department to avoid a disqualifying transfer as discussed in subsection 4 below.

 

Example:  Mr. White, who is in LTC, has an annuity that meets the criteria above and names Mrs. White, the community spouse, as the primary beneficiary and the Department as the secondary beneficiary.  The annuity is excluded as an asset and is not considered a disqualifying transfer because Mrs. White is a community spouse.

 

Mrs. White also has an annuity that meets the criteria above and names Mr. White as the primary beneficiary and the Department as the secondary beneficiary.  The annuity is excluded as an asset because it meets the criteria above, however, it may be considered a disqualifying transfer because Mr. White is not a community spouse.  It is necessary to determine whether Mrs. White’s annuity was purchased or changed within Mr. or Mrs. White’s look back period.  If it was, then her annuity is a disqualifying transfer equal to the annuity value.  If the annuity was last changed prior to their look back periods, then it is not an issue.

  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, 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; and

  4. The annuity is a third party annuity.

  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 (or the applicant or recipient can show the outstanding principal amounts due, if that information can be attained).

  2. The date of the disqualifying transfer is the date the payment option was selected on the annuity, or if later, the date the annuity was changed so the annuity could no longer be surrendered.

  1. 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.