Annuities & Countable Resources for Medicaid Purposes: Nebraska Lawby Frank Heinisch, Christin Lovegrove on 12/12/12
469 NAC 2-009.07A-6c(2)(a) "Annuities Excluded from Resources" states:
An annuity which has been annuitized will be excluded from countable resources if it meets the following conditions:
1. The annuity is considered either an individual retirement annuity according to the Internal Revenue Code (IRC) or a deemed Individual Retirement Account under a qualified employer plan; or
2. The annuity is purchased with the proceeds from a simplified employee pension; and
3. The annuity is irrevocable and non-assignable, the individual who owned the retirement account or plan is receiving equal monthly payments, and the scheduled payout period is actuarially sound based on the individual’s life expectancy.
The applicant or recipient must verify that the annuity meets these requirements.
469 NAC 2-009.07A-6c(2)(b) deals with "Deprivation of Resources for Annuity Transactions" and provides:
For long term care services (see 469 NAC 2-009.10B), an annuity transaction after February 8, 2006, is treated as a disposal of an asset for less than fair market value unless the State of Nebraska is named as the remainder beneficiary in the first position for at least the total amount of Medicaid expenditures paid, or is named as the remainder beneficiary in the second position after the community spouse and/or minor or disabled child. An annuity is also treaded as a disposal of assets for less than fair market value unless it is irrevocable and non-assignable, actuarially sound, and provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments. This provision also applies to the community spouse.
The issuer of an annuity must notify the Department when there is a change in the amount of income or principal withdrawn from the annuity.
In order for an annuitized annuity to not count as a resource we must be able to satisfy one of the two requirements of 469 NAC 2-009.07A-6c2 (the annuitized annuity is considered an individual retirement annuity per IRC or a deemed Individual Retirement Account under a qualified employer plan OR the annuity is purchased from the proceeds from a simplified employee pension [which we may not be able to meet]) AND the annuity is:
- irrevocable and non-assignable;
- the individual who owned the retirement account or plan is receiving equal monthly payments with no deferral or balloon payments;
- the scheduled payout period is actuarially sound based on the individual’s life expectancy; and
- the applicant or recipient verifies that the annuity meets the above requirements.
Even then, the annuitized annuity must not be considered a "Deprivation of Resources," which seems to require that:
- The State be named as the remainder beneficiary in the first position at least up to the total amount of Medicaid expenditures, or in second position behind a community spouse and/or Minor or disabled child;
- The annuitize annuity must be irrevocable and non-assignable;
- It must be actuarially sound;
- It must provide for payments in equal amounts during the term of the annuitized annuity; and
- It must have no deferral or balloon payments.
Web research confirms that an annuity that the owner can withdraw is a countable resource. Nothing in the web (or the NAC (below)) speaks to whether a private annuity vs. a commercial (though and insurance company) is a countable resource for Medicaid purposes; although, most all web-based articles speak to commercial annuitized annunities are non-countable. The NAC (below) is unclear on this point (but leaves the door open to a private annuitized annuity may be uncountable where actuarially sound and the applicant or recipient verifies that the annuity meets the requirements of the NAC. Some of the web articles indicate that an annuitized annuity for a fixed number of years is not a countable resource, but the NAC (below) does not address this specifically. The purchase of an annuitized annuity is not a resource for medicaid unless (under the NAC (below), it runs afoul of the "Deprivation of Resources for Annuity Transactions."
To get more specific answers to the above issues that the NAC (below) does not specifically address, I will have to call a specialist in the Nebraska Medicaid department and ask the questions. Even then, I may not get the answers, but just be referred to the provisions of the NAC I have already found.
NEBRASKA ADMINISTRATIVE CODE (NAC):
NAC 2.009.07 [Effective 5/8/05] "Types of Resources deals with various things which are and are not countable resources for Medicaid purposes (hereinafter "countable resources"). The general provision NAC 2.009.02 [Effective 5/8/05] "Definitions of Available Resouces" deals with various things were are countable resources as well; it lists 21 things that are countable resources, but annuities are not included in the definition unless it comes under:
12. Income received annually, semi-annually, or quarterly which is prorated on a monthly bases and included in the budget. This income is excluded as a resource over the period of time it is being considered as income.
Generally, annuities are countable as "liquid resources." 469 NAC 2-209.07 and 469 NAC 2-009.07A-6c ("Annuities"). The administrative code distinguishes between "Purchased or Annuitized Before February 8, 2006,"469 NAC 2-007.07A-6c(1), and "Annuity Transaction On or After February 8, 2006. 469 NAC 2-007.07A-6c(2). 469 NAC 2-007.07A-6c(2) provides that the following annuities are countable as follows:
- Revocable and assignable annuities are a countable resource.
- A salable annuity which has not been sold is a countable resource for the amount annuitized, less the payment(s) amount already received.
- A saleable annuity which has been sold for a value consistent with the secondary market is a countable resource in the amount of the proceeds.
- If a saleable annuity is sold for less than a value consistent with the secondary market, it will be valued at the current secondary market amount and the difference will be subject to deprivation of resources regulation.