Purpose: 4/09. This section of the EAZ manual is currently under construction based on changes in annuities established on or after 4/1/2009. Thank you for your patience
WAC 388-561-0201 Annuities established on or after April 1, 2009
The department determines how annuities affect eligibility for medical programs. Applicants and recipients of medicaid must disclose to the state any interest the applicant or spouse has in an annuity.
A revocable annuity is considered an available resource.
The following annuities are not considered an available resource or a transfer of a resource as described in WAC 388-513-1363, if the annuity meets the requirements described in (4)(d), (e) and (f) of this subsection:
Purchased with proceeds from a simplified employee pension (within the meaning of section 408 of the Internal Revenue Code of 1986); or
Purchased with proceeds from a Roth IRA described in section 408A of the Internal Revenue Code of 1986.
The purchase of an annuity not described in subsection (3) established on or after April 1, 2009, will be considered as an available resource unless it:
Is immediate, irrevocable, nonassignable; and
Is paid out in equal monthly amounts with no deferral and no balloon payments:
Over a term that is not less than five years if the actuarial life expectancy of the annuitant is at least five years; or
Over a term not less than the actuarial life expectancy of the annuitant, if the actuarial life expectancy of the annuitant is less than five years.
Actuarial life expectancy shall be determined by tables that are published by the office of the chief actuary of the social security administration (http://www.ssa.gov/OACT/STATS/table4c6.html).
Is issued by an individual, insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established;
Names the state as the remainder beneficiary when the purchaser of the annuity is the annuitant and is an applicant for or recipient of medicaid, or a community spouse of an applicant for or recipient of long-term care or waiver services:
In the first position for the total amount of medical assistance paid for the individual, including both long-term care services and waiver services; or
In the second position for the total amount of medical assistance paid for the individual, including both long-term care services and waiver services, if there is a community spouse, or a minor or disabled child as defined in WAC 388-475-0050 (b) and (c) who is named as the beneficiary in the first position.
Names the state as the beneficiary upon the death of the community spouse for the total amount of medical assistance paid on behalf of the individual at any time of any payment from the annuity if a community spouse is the annuitant;
Names the state as the beneficiary in the first position for the total amount of medical assistance paid on behalf of the individual at the time of any payment from the annuity, including both long-term care services and waiver services, unless the annuitant has a community spouse or minor or disabled child, as defined in WAC 388-475-0050 (b) and (c). If the annuitant has a community spouse or minor or disabled child, such spouse or child may be named as beneficiary in the first position, and the state shall be named as beneficiary in the second position:
If the community spouse, minor or disabled child, or representative for a child named as beneficiary is in the first position as described in (f) and transfers his or her right to receive payments from the annuity for less than fair market value, then the state shall become the beneficiary in the first position.
If the annuity is not considered a resource, the stream of income produced by the annuity is considered available income.
An irrevocable annuity established on or after April 1, 2009 that meets all of the requirements of subsection (4) except that it is not immediate or scheduled to be paid out in equal monthly amounts will not be treated as a resource if:
The full pay out is within the actuarial life expectancy of the annuitant; and
The annuitant:
Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the annuitant; or
Requests that the department calculate and budget the payments as equal monthly payments within the actuarial life expectancy of the annuitant beginning with the month of eligibility. The income from the annuity remains unearned income to the annuitant.
An irrevocable annuity, established on or after April 1, 2009 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource.
An irrevocable annuity established on or after April 1, 2009 that meets all of the requirements of subsection (4) or (5) is considered unearned income when the annuitant is:
The client;
The spouse of the client;
The blind or disabled child, as defined in WAC 388-475-0050 (b) and (c), of the client; or
A person designated to use the annuity for the sole benefit of the client, client's spouse, or a blind or disabled child of the client.
An annuity is not considered an available resource when there is a joint owner, co-annuitant or an irrevocable beneficiary who will not agree to allow the annuity to be cashed, unless the joint owner or irrevocable beneficiary is the community spouse. In the case of a community spouse, the cash surrender value of the annuity is considered an available resource and counts toward themaximum community spouse resource allowance.Nothing in this section shall be construed as preventing the department from denying eligibility for medical assistance for an individual based on the income or resources derived from an annuity other than an annuity described in subsections (3), (4), and (5).
WAC 388-561-0200 Annuities established prior to April 1, 2009
The department determines how annuities affect eligibility for medical programs.
A revocable annuity is considered an available resource.
An irrevocable annuity established prior to May 1, 2001 is not an available resource when issued by an individual, insurer, or other body licensed and approved to do business in the jurisdiction in which the annuity is established.
The income from an irrevocable annuity, meeting the requirements of this section, is considered in determining eligibility and the amount of participation in the total cost of care. The annuity itself is not considered a resource or income.
An annuity established on or after May 1, 2001 and before April 1, 2009 will be considered an available resource unless it:
Is irrevocable;
Is paid out in equal monthly amounts within the actuarial life expectancy of the annuitant;
Is issued by an individual, insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established; and
Names the department as the beneficiary of the remaining funds up to the total of medicaid funds spent on the client during the client's lifetime. This subsection only applies if the annuity is in the client's name.
An irrevocable annuity established on or after May 1, 2001 and before April 1, 2009 that is not scheduled to be paid out in equal monthly amounts, can still be considered an unavailable resource if:
The full pay out is within the actuarial life expectancy of the client; and
The client:
Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the annuitant; or
Requests that the department calculate and budget the payments as equal monthly payments within the actuarial life expectancy of the annuitant. The income from the annuity remains unearned income to the annuitant.
An irrevocable annuity, established prior to May 1, 2001 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource transferred without adequate consideration at the time it was purchased. A penalty period of ineligibility, determined according to WAC 388-513-1365, may be imposed equal to the amount of the annuity to be paid out in excess of the annuitant's actuarial life expectancy.
An irrevocable annuity, established on or after May 1, 2001 and before April 1, 2009 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource transferred without adequate consideration at the time it was purchased. A penalty may be imposed equal to the amount of the annuity to be paid out in excess of the annuitant's actuarial life expectancy. The penalty for a client receiving:
Long-term care benefits will be a period of ineligibility (see WAC 388-513-1365).
Other medical benefits will be ineligible in the month of application.
An irrevocable annuity is considered unearned income when the annuitant is:
The client;
The spouse of the client;
The blind or disabled child, as defined in WAC 388-475-0050 (b) and (c), of the client;
A person designated to use the annuity for the sole benefit of the client, client's spouse, or a blind or disabled child, as defined in WAC 388-475-0050 (b) and (c), of the client.
An annuity is not considered an available resource when there is a joint owner, co-annuitant or an irrevocable beneficiary who will not agree to allow the annuity to be cashed, UNLESS the joint owner or irrevocable beneficiary is the community spouse. In the case of a community spouse, the cash surrender value of the annuity is considered an available resource and counts toward the maximum community spouse resource allowance.
Civil Service Annuities are considered pension benefits. These pension benefits are unearned income. We do not count the value of Civil Service Annuities.
The Information following applies to both annuity WACs
If the annuity doesn't pay out in equal payments
Not an available resource if:
Meets all other exemption criteria
And the annuitant:
Changes the scheduled pay out to equal monthly payments or
Requests DSHS to calculate and budget payments as equal monthly payments beginning the first month of eligibility
Revocable Annuities
Available resource
Value is the amount the person would receive back if cashed in
Value may be reduced due to early cash out penalties
No asset transfer penalty if it is revocable and can be cashed in even if cash out is reduced due to early cash out penalties
Annuity payouts are not income-they are a conversion of one form of resource for another
Revocable annuities are available resources. Count the value that the annuitant would receive if cashed in. This may be less than the face value because of early cash out penalties.
Do not impose a transfer penalty on the portion that the person would lose if the annuity is cashed in.
Because the annuity is an available resource, if the value does not put the person over the resource limit and it is retained, any payouts are a conversion of one resource (the annuity) for another resource (cash). We don’t count it as both a resource and income in the same month.
Not an available resource if the joint owner, co annuitant, or irrevocable beneficiary refuses to allow the annuity to be cashed
Unless
The joint owner, co-annuitant, or irrevocable beneficiary is the community spouse
Then, the cash surrender value is considered an available resource
Available irrevocable annuities- Saleable
Available resource if the annuity, right to payments, or the beneficiary designation can be sold on the open market
Value is the amount the person would receive if sold on the open market
Generally, this will be less than the original investment
If sold for less than the original investment-No transfer penalty if they receive fair market value (FMV)
If retained, payouts are not income- they are a conversion of one type of resource for another
An irrevocable annuity is saleable?
There are a number of companies that purchase the stream of income the annuity produces. In order to determine a fair market value for an annuity that does not meet the criteria needed in the WAC, 2 quotes by a company that purchases annuity stream of income should be received to determine the fair market value of the annuity.
Available Irrevocable Annuities-Unsaleable
Transfer of asset if:
The annuity is not saleable or
The annuity precludes transfer of rights to payment or beneficiary designation
The annuity is sold for less than fair market value (FMV)
Washington State tax ID and address when naming the department as beneficiary
Field staff have received inquiries as to the Washington State tax ID and address from companies specializing in annuities.
Washington State Tax I.D.: 91 6001088
Address: Washington State DSHS-OFR
Attn: Estate Recovery
PO Box 9501
Olympia WA 98501
WORKER RESPONSIBILITIES
Look at the face page of the annuity to determine:
The type of annuity;
The owner, the annuitant, and the beneficiary, if any;
When and how monies will be paid into the annuity (premiums);
When and how monies will be paid out of the annuity; and
Whether the annuity is revocable or irrevocable
The date the annuity was established. For annuities established prior to 4/1/2009 use WAC 388-561-0200. For annuities established on or after 4/1/2009 use WAC 388-561-0201.
To determine the countable resource value of a revocable annuity :
Verify the current value of the annuity with the company/group that issued the annuity or a company that purchases annuities;
Deduct early withdrawal penalties and taxes due; and
Add accrued interest.
When a client can withdraw any part of the annuity, or a previously unavailable annuity becomes available, count it as income in the month it becomes available.
Use the social security actuarial life expectancy tables to determine whether annuity payments will exceed the actuarial life expectancy of the annuitant. If the payment schedule does exceed the life expectancy, count the uncompensated value of the annuity that exceeds the client’s life expectancy as a transfer of resources and establish a period of ineligibility as described in WAC 388-513-1363 through WAC 388-513-1366 for long-term care assistance.
Consider income received from an annuity as unearned income.
When the client is the annuitant and you are counting the annuity toward the resource limit, use either Type Code “AI” Annuity Irrevocable or “AR” Annuity Revocable. ACES will count the value toward the resource limit when either code is used.
If the client is the annuitant and you want to count the annuity – use either code
UNER
If the client is the annuitant and receiving monthly payments as income, code the annuity payment as "OC" Countable Income on the UNER screen
LTCD- Counting the payments as spouse's resource
If the community spouse is the annuitant and you do not want the annuity to count toward the resource limit, code it as "AN" Annuity on the LTCD screen
If the community spouse is the annuitant and you do want to count it as a resource, code it as "OC" Other Countable Resource on the LTCD screen.
LTCD-Counting the payments as spouse's income
If the community spouse is the annuitant and is receiving payments as income, code the annuity payments as "OC" Other Countable Income on the LTCD screen
Modification Date: September 21, 2009
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