Annuities established on or after April 1, 2009

Revised April 25, 2013

Use WAC 182-516-0200 for annuities established before April 1, 2009.

What has changed with annuities established on or after April 1, 2009?

• Unless specifically unavailable, most annuities will be counted as available resources
• Most annuities are saleable therefore transfer penalties will be rare
• Some types of retirement annuities or annuities created from retirement accounts or trusts are unavailable (section 408 and 408A Internal Revenue Code)
• Tightens pay out periods to a minimum of 5 years up to the actuarial life expectancy OR the actual life expectancy if less than 5 years
• To be unavailable requires specific beneficiary designations so Washington State can recover from the annuity.  This includes the community spouse.

Unavailable Irrevocable Annuities

• Is immediate and non-assignable
• Pays out in equal monthly payments
  • No deferrals
  • No balloon payments
• Payout must be:
  • Equal to the actuarial life expectancy of the annuitant, or
  • Not less than 5 years if life expectancy is at least 5 years, or
  • If life expectancy is less than 5 years, then not less than the annuitant's life expectancy
• Is issued by an individual or insurer licensed to do business in the jurisdiction where it is established
• Meets the beneficiary designation rules
• Pay outs are considered unearned income to the annuitant
• If spouse's are joint annuitants, then split the payment equally between the spouses

Beneficiary Designation

Annuitant is:

• The applicant/recipient of Medicaid,  or
• The community spouse of a long-term care (LTC) applicant/recipient

Annuity must name Washington State as:

• The first beneficiary, or
• The second beneficiary if one of the following is named as the first:
  • Community spouse
  • Minor child
  • Disabled child (SSA criteria)

Beneficiary Designation

• If the community spouse or minor/disabled child is the first beneficiary
• And they transfer their right as the beneficiary to receive payment for less than fair market value
• Then Washington State must be named the first beneficiary
• If Washington is not named as first beneficiary, then the annuity becomes an available resource the first of the following month

Pays out Beyond Life Expectancy

• Annuity is an available resource
• Do not establish a penalty for the amount to be paid out beyond the annuitant's life expectancy

Retirement Annuities- Section 408 and 408A Internal Revenue Code

• Individual Retirement Annuities
• Deemed IRAs under qualified employer plans
• Purchased with proceeds from:
  • An individual retirement account (IRA)
  • An employer or employee association retirement trusts
  • A simple retirement account
  • A simplified employee pension account or trust
  • A Roth IRA

If retirement annuities section 408 & 408A IRS code include the specific annuity beneficiary designations:

• Not available resources
• No transfer penalty

If retirement annuities section 408 & 408A IRS code do not have the specific annuity beneficiary designation then it is an available resource.  Do not establish a transfer penalty.

Title 26, Subsections 408 and 408A of the Internal Revenue Code