How Annuities Affect Eligibility for Medical Programs
DSHS Home Page

EAZ

Search     for:
DSHS HomeACES ManualEAZ ManualSocial Services ManualWork First Manual

How Annuities Affect Eligibility for Medical Programs


Revised September 21, 2009


Annuities


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 388-561-0200Annuities established prior to April 1, 2009
WAC 388-561-0201Annuities established on or after April 1, 2009

Annuities established on or after April 1, 2009

WAC 388-561-0201

WAC 388-561-0201

Effective April 1, 2009

WAC 388-561-0201 Annuities established on or after April 1, 2009

  1. 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.
  2. A revocable annuity is considered an available resource.
  3. 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:
    1. An annuity described in subsection (b) or (q) of section 408 of the Internal Revenue Code  of 1986;
    2. Purchased with proceeds from an account or trust described in subsection (a), (c), or (p) of section 408 of the Internal Revenue Code  of 1986;
    3. Purchased with proceeds from a simplified employee pension (within the meaning of section 408 of the Internal Revenue Code of 1986); or
    4. Purchased with proceeds from a Roth IRA described in section 408A of the Internal Revenue Code of 1986.
  4. 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:
    1. Is immediate, irrevocable, nonassignable; and
    2. Is paid out in equal monthly amounts with no deferral and no balloon payments:
      1. Over a term equal to the actuarial life expectancy  of the annuitant; or
      2. Over a term that is not less than five years if the actuarial life expectancy  of the annuitant is at least five years; or
      3. 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.
      4. 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).
    3. Is issued by an individual, insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established;
    4. 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:
      1. 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
      2. 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.
    5. 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;
    6. 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:
      1. 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.
  5. If the annuity is not considered a resource, the stream of income produced by the annuity is considered available income.
  6. 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:
    1. The full pay out is within the actuarial life expectancy of the annuitant; and
    2. The annuitant:
      1. Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy  of the annuitant; or
      2. 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.
  7. 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.
  8. 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:
    1. The client;
    2. The spouse of the client;
    3. The blind or disabled child, as defined in WAC 388-475-0050 (b) and (c), of the client; or
    4. 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.
  9. 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).

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

Annuities established prior to April 1, 2009

WAC 388-561-0200
WAC 388-561-0200

Effective April 1, 2009

WAC 388-561-0200 Annuities established prior to April 1, 2009

  1. The department determines how annuities affect eligibility for medical programs.
  2. A revocable annuity is considered an available resource.
  3. 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.
  4. 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.
  5. An annuity established on or after May 1, 2001 and before April 1, 2009 will be considered an available resource unless it:
    1. Is irrevocable;
    2. Is paid out in equal monthly amounts within the actuarial life expectancy of the annuitant;
    3. 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
    4. 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.
  6. 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:
    1. The full pay out is within the actuarial life expectancy of the client; and
    2. The client:
      1. Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the annuitant; or
      2. 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.
  7. 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.
  8. 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:
    1. Long-term care benefits will be a period of ineligibility (see WAC 388-513-1365).
    2. Other medical benefits will be ineligible in the month of application.
  9. An irrevocable annuity is considered unearned income when the annuitant is:
    1. The client;
    2. The spouse of the client;
    3. The blind or disabled child, as defined in WAC 388-475-0050 (b) and (c), of the client; 
    4. 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.
  10. 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.

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

NOTE:

Civil Service Annuities are considered pension benefits.  These pension benefits are unearned income.  We do not count the value of Civil Service Annuities. 


Annuity Chart

Annuity Chart

Clarifying information

Clarifying Information-Annuities established prior to April 1, 2009

Clarifying Information-Annuities established on or after April 1, 2009


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.


Joint owners, Co-annuitants, irrevocable beneficiary

  • 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

  1. Look at the face page of the annuity to determine:
    1. The type of annuity;

    2. The owner, the annuitant, and the beneficiary, if any;

    3. When and how monies will be paid into the annuity (premiums);

    4. When and how monies will be paid out of the annuity; and

    5. Whether the annuity is revocable or irrevocable

    6. 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.

  2. To determine the countable resource value of a revocable annuity :

    1. Verify the current value of the annuity with the company/group that issued the annuity or a company that purchases annuities;

    2. Deduct early withdrawal penalties and taxes due; and

    3. Add accrued interest.

  3. 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.

  4. 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.

  5. Consider income received from an annuity as unearned income.


ACES PROCEDURES

See Interview - (RES1) screen (REMA)

See Interview - (TRAN) screen

See Interview - (UNER) screen

RES1:

  • 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

Back to top

Modification Date: September 21, 2009
Have comments on the manual? Please e-mail us. You can also use this link to report broken links or content problems.