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F-7210 Employment and Retirement-Related Annuities
Revision 09-4; Effective December 1, 2009
An annuity that meets the following guidelines is not a resource or transfer of asset:
- An annuity described in subsection (b) or (q) of Section 408 of the Internal Revenue Code of 1986; or
- An annuity purchased with proceeds from:
- an account or trust described in subsection (a), (c) or (p) of Section 408 of the Code;
- a simplified employee pension (within the meaning of Section 408(k) of the Code); or
- a Roth Personal Retirement Account described in Section 408A of the Code.
F-7220 Post-Deficit Reduction Act (DRA) Treatment of an Annuity
Revision 09-4; Effective December 1, 2009
When an annuity meets the post-DRA terms and conditions:
- do not count the annuity as a resource;
- do not consider the annuity as a transfer of asset; and
- consider the monthly payments as unearned income.
F-7230 Post-Deficit Reduction Act (DRA) Terms and Conditions
Revision 13-2; Effective June 1, 2013
The annuity meets the post-DRA terms and conditions if the annuity is irrevocable and non-assignable. The irrevocable and non-assignable annuity must also:
- be in the institutionalized person's name;
- provide for payments in equal amounts during the term of the annuity;
- not have any provision for deferral of payments or balloon payments;
- guarantee to return within the person's life expectancy at least the person's principal investment (life expectancy is calculated using life expectancy tables available from the Social Security Administration's (SSA) online Period Life Table); and
- name the state of Texas as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized person.
The annuity meets the post-DRA terms and conditions when the institutionalized person is married and the annuity:
- is in the institutionalized person's name;
- is irrevocable and non-assignable;
- provides for payments in equal amounts during the term of the annuity;
- has no provision for deferral of payments or balloon payments;
- guarantees to return within the person's life expectancy at least the person's principal investment (life expectancy is calculated using life expectancy tables available from the SSA's online Period Life Table); and
- names the state of Texas as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized person, or names the state of Texas in the second position if the community spouse or minor or disabled child is named in the first position.
The annuity meets the post-DRA terms and conditions when the institutionalized person is married and the annuity:
- is in the ineligible community spouse's name;
- is irrevocable and non-assignable;
- provides for payments in equal amounts during the term of the annuity;
- has no provision for deferral of payments or balloon payments;
- guarantees to return within the ineligible community spouse's life expectancy at least the ineligible community spouse's principal investment (life expectancy is calculated using life expectancy tables available from the SSA's online Period Life Table); and
- names the state of Texas as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized person or names the state of Texas in the second position if the institutionalized person or minor or disabled child is named in the first position.
F-7240 Treatment of an Annuity When Terms and Conditions Are Not Met
Revision 09-4; Effective December 1, 2009
When an annuity does not meet the post-DRA terms and conditions, first determine if the annuity is either revocable or irrevocable.
If the annuity is revocable:
- Consider the annuity as a countable asset based on the current fair market value.
- Consider a transfer of assets depending on how much has been paid out of the annuity.
Example:
| Annuity | Amount | Consideration |
|---|---|---|
| Purchase Price | $ 60,000 | |
| Refund Value | $ 40,000 | Countable Resource |
| Paid Out | +$10,000 | Person Received |
| $ 50,000 | ||
| Purchase Price | $ 60,000 | |
| –$50,000 | ||
| Difference | $ 10,000 | Transfer of asset |
If the annuity is irrevocable:
- For an application, consider the purchase price as a transfer of asset.
- For an action to an existing annuity that does not meet post-DRA policy, consider the remaining payout value at the time of the action as a transfer of asset.
When considering transfer of assets policy, refer to the look-back period policy for penalty start date and the calculation of penalty period.
Note: Annuities purchased on or after Oct. 1, 2006, are not subject to interest payout comparison with another company's products.
Follow regional procedures to request assistance from HHSC Legal regarding the terms and conditions of an annuity and in determining the appropriate treatment of the annuity.
F-7250 Notice Requirements for Application and Redeterminations
Revision 09-4; Effective December 1, 2009
To meet post-DRA annuity requirements, revised Form H1200, Application for Assistance – Your Texas Benefits; Form H1200-EZ, Application for Assistance – Aged and Disabled; Form H1200-PFS, Medicaid Application for Assistance (for Residents of State Facilities) Property and Financial Statement; Form H1200-A, Medical Assistance Only (MAO) Recertification; and Form H1010, Integrated Application, include the following statement:
"You must disclose if you and/or your spouse have an interest in an annuity or similar instrument. If you are determined eligible for Medicaid, the state becomes the remainder beneficiary of the instrument."
In addition, if using a streamline redetermination process, notices sent to the recipient must include the following statement:
"The DRA requires that the issuer (company) of an annuity owned by a recipient must be notified that the state is the remainder beneficiary."