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Revision 21-4; Effective December 1, 2021
§358.333. Treatment of Employment- and Retirement-Related Annuities
(a) In this section:
(1) an employment-related annuity means an annuity that provides a return on prior services, as part of or in a similar manner to a pension or retirement plan; and
(2) a retirement-related annuity means an annuity purchased by or on behalf of an annuitant in an institutional setting.
(b) An employment-related annuity or a retirement-related annuity established before February 8, 2006, is not a countable resource. Income from such an annuity is treated in accordance with 20 CFR §§416.1120-416.1124.
(c) An employment-related annuity established or having a transaction on or after February 8, 2006, is not a countable resource. Income from such an annuity is treated in accordance with 20 CFR §§416.1120-416.1124.
(d) A retirement-related annuity with a purchase or transaction date on or after February 8, 2006, is not a countable resource, if the annuitant's income eligibility is determined under the special income limit. Income from such an annuity is treated in accordance with 20 CFR §§416.1120-416.1124, if the annuity:
(1) is an annuity described in subsection (b) or (q) of §408 of the Internal Revenue Code of 1986; or
(2) is purchased with proceeds from:
(A) an account or trust described in subsection (a), (c), or (p) of §408 of the Internal Revenue Code of 1986;
(B) a simplified employee pension (within the meaning of §408(k) of the Internal Revenue Code of 1986; or
(C) a Roth IRA described in §408A of the Internal Revenue Code of 1986.
§358.334. Treatment of a Nonemployment-Related Annuity with a Purchase or Transaction Date before February 8, 2006
(a) This section describes the Texas Health and Human Services Commission's (HHSC's) treatment of nonemployment-related annuities purchased or having a transaction date before February 8, 2006. In this section, a nonemployment-related annuity means a revocable or irrevocable annuity a person may purchase to provide income.
(b) A nonemployment-related annuity is not a countable resource if the annuity:
(1) is irrevocable;
(2) pays out principal in equal monthly installments and pays out interest in either equal monthly installments or in amounts that result in increases of the monthly installments at least annually;
(3) is guaranteed to return within the person's life expectancy at least the person's principal investment plus a reasonable amount of interest (based on prevailing market interest rates at the time of the annuity purchase, as determined by HHSC);
(4) names the state of Texas or HHSC as the residual beneficiary of amounts payable under the annuity contract, not to exceed any Medicaid funds expended on the person during the person's lifetime, except as described in subsection (c) of this section; and
(5) is issued by an insurance company licensed and approved to do business in the state of Texas.
(c) If a person in an institutional setting is married and the spousal impoverishment provisions of §358.413 of this subchapter (relating to Spousal Impoverishment Treatment of Income and Resources) apply, the requirement in subsection (b)(4) of this section does not apply to a nonemployment-related annuity purchased by or for a community spouse.
(d) A nonemployment-related annuity that does not meet the requirements of subsection (b) or (c) of this section is a countable resource.
(1) HHSC applies transfer-of-assets provisions in Division 4 of this subchapter (relating to Transfer of Assets) to an annuity that is a countable resource and does not meet the criterion in subsection (b)(3) of this section. The date of the transfer of assets is the date of the annuity purchase or, if applicable, the date the annuity contract was last amended in exchange for consideration. HHSC determines the amount of the transfer by assessing the difference between the life expectancy of the person and the number of years remaining until the annuity is paid out. The amount payable during that period is the amount of the transfer of assets.
(2) If the annuity is a countable resource and is revocable, HHSC:
(A) counts the amount refundable upon revocation of the annuity as the value of the resource; and
(B) applies transfer-of-assets provisions in Division 4 of this subchapter if the person sells the annuity for less than the amount refundable upon revocation.
(3) If the annuity is a countable resource and is irrevocable, HHSC:
(A) counts fair market value as the value of the resource and presumes fair market value is 80% of the annuity's total remaining payout;
(B) applies transfer-of-assets provisions in Division 4 of this subchapter if the annuity is sold for less than the purchase price minus the amount of principal already paid; and
(C) if the terms of the annuity contract are non-negotiable, applies transfer-of-assets provisions in Division 4 of this subchapter to the total remaining payout.
(e) Income from a nonemployment-related annuity that is not a countable resource under subsection (c) of this section is treated in accordance with 20 CFR §§416.1120-416.1124.
§358.335. Treatment of Annuities with a Purchase or Transaction Date on or after February 8, 2006
(a) This section describes the Texas Health and Human Services Commission's (HHSC's) treatment of nonemployment-related annuities purchased or having a transaction date on or after February 8, 2006. In this section, a nonemployment-related annuity means a revocable or irrevocable annuity a person may purchase to provide income.
(b) A nonemployment-related annuity is not a countable resource if the annuity:
(1) is irrevocable;
(2) is nonassignable;
(3) provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made;
(4) is guaranteed to return within the person's life expectancy at least the person's principal investment (that is, it is actuarially sound, as determined in accordance with actuarial publications of the Office of the Chief Actuary of the United States Department of Health and Human Services); and
(5) names the state of Texas as the remainder beneficiary in the first position for at least the total amount of Medicaid paid on behalf of a person in an institutionalized setting.
(c) If a person in an institutionalized setting is married and the spousal impoverishment provisions of §358.413 of this subchapter (relating to Spousal Impoverishment Treatment of Income and Resources) apply, a nonemployment-related annuity is not a countable resource if the annuity meets the requirements of subsection (b)(1) - (4) of this section and the annuity:
(1) names the state of Texas as the remainder beneficiary in the first position for at least the total amount of Medicaid paid on behalf of the person in an institutional setting; or
(2) names the state of Texas in the second position if the community spouse or a minor or disabled child is named in the first position.
(d) A nonemployment-related annuity that is revocable is a countable resource. For a revocable nonemployment-related annuity, HHSC:
(1) uses fair market value to determine the value of the resource; and
(2) applies transfer-of-assets provisions in Division 4 of this subchapter (relating to Transfer of Assets) based on the amount already paid out of the annuity.
(e) A nonemployment-related annuity that is irrevocable is not a countable resource. For an irrevocable nonemployment-related annuity, HHSC:
(1) applies transfer-of-assets provisions in Division 4 of this subchapter to the purchase price of the annuity; and
(2) for a transaction involving an existing annuity, applies transfer-of-assets provisions to the remaining payout value at the time of the transaction.
(f) Income from an annuity that is not a countable resource is treated in accordance with 20 CFR §§416.1120 - 416.1124.