23 Miss. Code. R. 103-6.4 - Treatment of Annuities Purchased on or after February 8, 2006
The Deficit Reduction Act of 2005 (DRA),
P.L.
A. Disclosure
Requirement
1. At each application and annual
review for Medicaid eligibility, all long-term care applicants or beneficiaries
are required to disclose any interest the applicant/beneficiary or community
spouse may have in an annuity or similar financial instrument. Parents of a
minor child must report any annuities in which the child may have an interest.
2. This disclosure is a condition
for Medicaid eligibility for long-term care services, including nursing
facility services and home and community-based waiver services (HCBS) and
applies regardless of whether or not an annuity is irrevocable or is treated as
a resource.
3. Refusal to disclose
sufficient information related to any annuity will result in denial or
termination of Medicaid eligibility, based on the applicant or beneficiary's
failure to cooperate in accordance with existing Medicaid policies.
4. When an unreported annuity is discovered
after eligibility has been established and after payment for long-term care
services has been made, appropriate steps to terminate payment for long-term
care services will be taken, including allowing for rebuttal and advance
notice.
B.
Annuity-Related Transactions Other than Purchases Made on or after February 8,
2006.
1. In addition to purchases of
annuities, certain related transactions which occur to annuities on or after
February 8, 2006, make an annuity, including one purchased before that date,
subject to all provisions of the DRA that went into effect on February 8, 2006.
2. Any action taken on or after
February 8, 2006, by the individual that changes the course of payment to be
made by the annuity or the treatment of the income or principal of the annuity
result in the annuity being treated as if purchased on or after February 8,
2006. These actions include:
a) Additions of
principal,
b) Elective
withdrawals,
c) Requests to change
the distribution of the annuity, and
d) Elections to annuitize the contract and
similar actions.
3. For
annuities purchased prior to February 8, 2006, routine changes and automatic
events that do not require any action or decision after the effective date are
not considered transactions that would subject the annuity to treatment under
the DRA provisions. Routine changes could be notification of an address change
or death or divorce of a remainder beneficiary and similar circumstances.
4. Changes which occur based on
the terms of the annuity which existed prior to February 8, 2006, and which do
not require a decision, election or action to take effect are also not subject
to the DRA.
C.
Requirement to Name the Division of Medicaid as Remainder Beneficiary on
Annuities
1. The purchase of an annuity
within the five (5) year look back-period and in all subsequent months will be
treated as a transfer of assets unless the Division of Medicaid is named as a
remainder beneficiary in the correct position as described herein.
a) This requirement applies to annuities
purchased by the applicant or spouse and to certain annuity-related
transactions other than purchases made by the applicant or spouse.
b) An annuity must name the Division of
Medicaid as the remainder beneficiary in the first position for the total
amount of Medicaid assistance paid on behalf of the institutionalized
beneficiary who is the annuitant unless there is a community spouse and/or a
minor or disabled child.
c) If
there is a community spouse and/or minor or disabled child, the Division of
Medicaid may be named in the next position after those individuals.
d) If the Division of Medicaid is named
beneficiary after a community spouse and/or minor or disabled child, and any of
those individuals or their representatives dispose of any of the remainder of
the annuity for less than fair market value, the Division of Medicaid must then
be named in the first position.
e)
If verification is not provided which reflects the Division of Medicaid as
remainder beneficiary in the correct position on annuities purchased by the
institutionalized spouse or community spouse, the purchase of the annuity will
be considered a transfer for less than fair market value. The full purchase
value of the annuity will be considered the amount transferred.
2. An annuity purchased prior to
the five (5) year look -back period is treated as a resource and/or income
source, depending on the terms of the annuity as outlined in Miss. Admin Part
103, Rule
6.1
D. Information Provided by the Division of
Medicaid to Issuer
1. For any annuity
disclosed for the applicant or community spouse, the Division of Medicaid must
inform the issuer of the annuity of the Division of Medicaid's right to be
named as a preferred remainder beneficiary and may require the issuer to notify
the Division of Medicaid regarding any changes in amount of income or principal
being withdrawn from the annuity.
2. The issuer of the annuity may disclose
information about the Division of Medicaid's position as remainder beneficiary
to others who have a remainder interest in the annuity.
E. Treatment of Annuities in Determining
Eligibility for Long-Term Care
1. In addition
to the requirement for the Division of Medicaid to be named as a remainder
beneficiary for an annuity purchased by the institutionalized spouse or
community spouse within the five (5) year look-back period and in all
subsequent months, an annuity purchased by or on behalf of an annuitant who has
applied for medical assistance with respect to nursing facility or other
long-term care services will not be treated as a transfer of assets if
purchased within the five (5) year look-back period or any subsequent month if
certain conditions are met which are described below.
2. The annuity meets one of the following
conditions for employment-related annuities that are treated as retirement
funds:
a) It is an individual retirement
annuity according to (b) or (q) of section
408 of the Internal Revenue Code (IRC) of
1986, or,
b) The annuity is
purchased with proceeds from an account or trust described in subsection (a),
(c) or (p) of section 408 of the IRC, or,
c) The annuity is purchased with
proceeds from a simplified employee pension within the meaning of section
408 of the IRC, or,
d) The annuity is purchased with the proceeds
from a Roth Individual Retirement Account (IRA) described in section
408A of the IRC.
3. The purchase of an annuity not described
in Miss. Admin. Code Part 103, Rule 6.4.E .2. above will be considered a
transfer of assets unless it meets all of the following requirements for every
month in which elig ibility is being considered:
a) The annuity is irrevocable and
non-assignable, and,
b) The
annuity is actuarially sound as outlined in Miss. Admin. Code Part 103, Rule
6.5., and
c) The annuity is providing payments in equal
amounts during the term of the annuity with no deferred or balloon payments,
and
d) The annuity is issued by a
business licensed and approved to issue commercial annuities in the state in
which the annuity was purchased; and
e) The Division of Medicaid has been named as
beneficiary of the annuity in the correct position as outlined in Miss. Admin.
Code Part 103, Rule 6.4.C. above.
4. The purchase of a single-premium life
insurance policy, endowment policy or similar instrument which has no cash
value, and for which the individual receives no valuable consideration will be
considered a transfer of assets if purchased within the five (5) year look-back
period or any subsequent month.
5.
To determine that an annuity is established under any of the various provisions
of the IRC referenced above and/or meets all of the conditions required to be
excluded from a transfer of assets penalty or counted as a resource, rely on
verification from the financial institution, employer or employer association
that issued the annuity. The burden of proof is on the individual or
representative to produce needed documentation. The individual or
representative must produce the annuity contract in order to evaluate the
annuity. Without documentation, the purchase of an annuity will be considered a
transfer of assets subject to a transfer penalty in the amount of the full
purchase value of the annuity.
6.
An annuity that does not meet the conditions cited above, or an annuity that is
not changed to meet the necessary requirements and/or documentation that is not
provided relating to an annuity will result in the annuity being treated as a
transfer of assets if purchased within the five (5) year look-back period or
any subsequent month using the full purchase value as the amount transferred.
7. Even if an annuity is
determined to meet the requirements above and the purchase is not treated as a
transfer, if the annuity or income stream from the annuity is transferred, that
transfer may be subject to a penalty with the exception of transfers to a
spouse or to another individual for the sole benefit of the spouse, to a minor
or disabled child or to a Special Needs Trust.
F. Consideration of Income from an Annuity
1. An annuity that does not comply with the
requirements described in this chapter will be treated as a transfer of assets.
During the penalty period, the income produced by the annuity counts as income
to the individual or spouse, as appropriate, in determining eligibility and
post-eligibility cost of care and spousal allocation, as applicable.
2. The income produced by an annuity that
complies with the requirements in this chapter counts as income to the
individual or spouse, as appropriate, in determining eligibility and
post-eligibility cost of care and spousal allocation, as applicable.
G. Requirements for the Community
Spouse
1. Annuities purchased by the
community spouse on or after February 8, 2006, must name the Division of
Medicaid as the preferred remainder beneficiary.
2. The institutionalized spouse may not be
named as a beneficiary ahead of the Division of Medicaid.
3. However, if there is a minor or disabled
child, the child may be named as first beneficiary and the Division of Medicaid
must be named in the next position after those individuals.
4. It does not matter if the community
spouse's annuity is actuarially sound or provides payments in approximately
equal amounts with no deferred or balloon payments. These provisions apply only
to annuities purchased by or on behalf of the individual who has applied for
medical assistance, not a community spouse.
H. Estate Recovery
1. Annuities purchased on or after February
8, 2006, will be subject to estate recovery.
2. The rules for the institutional spouse and
the community spouse are the same for annuities purchased prior to February 8,
2006.
Notes
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