5632 Disclosure of Annuity Ownership - Individuals requesting medical assistance must disclose any interest in an annuity as part of the application for benefits. Failure to do results in ineligibility for medical assistance due to non-cooperation (see 2120).
All applicants or recipients, or their spouses, reporting an annuity shall be asked for additional information on the annuity. The ES-3167A and ES-3167 shall be used to obtain the information from the individual. It also serves as a tool for capturing necessary information to determine if a transfer penalty is applicable per 5720.
5633 Treatment of the Annuity - Each annuity must be evaluated to determine the terms of the contract. Those terms will determine if the annuity is an available resource and the potential fair market value of the annuity.
NOTE: All annuities (except for Retirement Annuities) must also be evaluated under the Transfer of Property provisions of 5720. Any annuity has the potential to be counted as a resource or income, including those not subject to a transfer penalty. A determination that the purchase of an annuity is an appropriate transfer does not prevent it from being considered as a resource or income.
5633.1 Evaluation of the Contract Terms – The specific terms of the annuity contract shall determine whether the annuity is treated as a resource or as income.
1. Retirement Annuities - Retirement Annuities (e.g., Civil Service Annuities and Railroad Retirement Annuities) are exempt as a resource, but the income received is countable unearned income.
A retirement annuity is one which meets the qualification tests of the Internal Revenue Code for tax purposes. A qualifying retirement annuity shall be one which receives favorable tax treatment and is non-transferrable. These annuities are also known as qualifying annuities.
2.
Revocable Annuities - If the terms of the contract allow for the annuity
to be surrendered or cashed-in with the issuing company, the annuity is
considered revocable. An annuity which is in the accumulation phase is
presumed to be revocable. The fair market value of a revocable annuity
is considered an available resource because the contract can be cancelled
in return for a cash payment. The fair market value is the cash value.
The ES-3167A form shall be used to obtain the cash value from the issuing
company. Any disbursements or withdrawals from an available revocable
annuity are not countable income.
3. Irrevocable Annuities
- If the terms of the contract do not allow the annuity to be surrendered
or cashed-in with the issuing company, it is considered irrevocable. An
annuity which is in the pay out phase is presumed to be irrevocable. The
fair market value of an irrevocable annuity, including a non-assignable
annuity, is considered an available resource because the annuity, or the
right to the income stream from the annuity, may be sold on a secondary
market.
The fair market value is determined by considering the total amount of
money used to fund the annuity as well as any additional earnings, such
as interest and dividends. The value is then reduced by the total amount
of withdrawals from the fund. Withdrawals include payments or assignment
fees.
The W-10
shall be used to compute that amount. The payments received from an available
irrevocable annuity are not countable income.
5633.2 Assessment Process - The agency shall determine the availability and fair market value for each annuity as described above. See Policy Memo, 2008-03-02, Re: Availability of Non-assignable Annuities
Availability - All annuities (except Retirement
Annuities) are presumed to be an available resource, including
those reported to be non-assignable. The right to either the principal
or income stream from an annuity is considered a countable resource
for purposes of this provision. If the annuity can be sold, assigned,
encumbered or structured so that the benefit of the annuity can
be received by someone other than the designated beneficiary,
the annuity is considered available and will be assigned a value.
If the individual can furnish evidence from a reliable source that
the annuity or the income stream from the annuity is not able
to be received by someone other than the designated beneficiary,
the annuity will be reevaluated. Reliable sources concerning the
availability of the annuity or income stream include banks and
other financial institutions, insurance companies, brokers, and
others who are involved in the purchase or sale of annuities or
the income stream from an annuity as part of their business or
profession.
An alternate determination of availability provided by the individual
which is accepted by the agency shall replace the initial agency
determination for all purposes. The agency may choose to reject
the alternate determination offered if it appears there has been
a lack of good faith by the individual.
Should the agency disagree with the alternative determination of
availability provided by the individual; additional determinations
may be solicited from the sources described above. If the agency
can determine that the annuity would be able to be sold, assigned,
encumbered or the benefits transferred to someone other than the
designated beneficiary of the annuity, the annuity shall be considered
available and subject to valuation as described below.
Valuation - Each annuity shall initially
be assigned a fair market valuation by the agency as described
above:
Revocable Annuity - The fair market value of a
revocable annuity is the cash value of the annuity. The ES-3167A form shall be used
to obtain the cash value from the issuing company.
Irrevocable Annuity - The fair market value of
an irrevocable annuity is the amount yet to be paid out under
the terms of the contract. The W-10 shall be used to calculate
that amount.
If the individual can furnish evidence from a reliable source demonstrating
the annuity has a lesser fair market value than that determined
by the agency, the value shall be reevaluated. Reliable sources
concerning valuation of the annuity include banks and other financial
institutions, insurance companies, brokers and others who are
involved in the purchase or sale of annuities or the income stream
from an annuity as part of their business or profession.
An alternate valuation provided by the individual that is accepted
by the agency shall replace the initial agency valuation for all
purposes. The agency may choose to reject the alternate valuation
if it is determined there has been a lack of good faith by the
individual.
Should the agency disagree with the alternate valuation provided
by the individual, additional valuations may be solicited by the
agency from the sources described above. The highest value of
those valuations shall be used to replace the initial agency valuation
for all purposes.
NOTE: An annuity shall not be excluded or exempted
from consideration as a resource simply because the cancellation
of the annuity contract or the sale of the annuity, or the income
stream from the annuity, may result in a financial hardship for
the individual.
5633.3 Spousal Impoverishment - Income attributed solely to the community spouse is not considered available in determining the eligibility of the long term care spouse. An irrevocable annuity in the pay out phase which is owned by the community spouse shall be countable as a resource and not as income for purposes of spousal impoverishment. Only after the annuity has been excluded as a resource may it be considered income. See 8143(1) and 8243(1).
5634 Reserved