Authorized Signature Issue Date: 12/21/2005

Transcription

1 Seniors and People with Disabilities Policy Transmittal James Toews Number: SPD-PT Authorized Signature Issue Date: 12/21/2005 Topic: Medical Benefits Subject: New Policy on Treatment of Annuities for OSIP, OSIPM and QMB Transmitting (check the box that best applies): New Policy Policy Change Policy Clarification Executive Letter Administrative Rule Manual Update Other: Applies to (check all that apply): All DHS employees Area Agencies on Aging Children, Adults and Families County DD Program Managers County Mental Health Directors Health Services Seniors and People with Disabilities Other (please specify): Policy/Rule Title: Annuities, Dividends, Interest, Royalties Policy/Rule Number(s): OAR Release No: OAR OAR Effective Date: January 1, 2006 Expiration: N/A References: CMS State Plan Amendment Web Address: Discussion/Interpretation: Effective January 1, 2006, the treatment of annuities for OSIP, OSIPM and QMB eligibility will change. In evaluating the affect of an annuity on eligibility, the first important step will be to determine whether the annuity was purchased before or after the effective date of this change. Annuities purchased prior to January 1, Annuities purchased prior to January 1, 2006 will be treated the same as they have been in the past. That is, the annuity is first evaluated to see if it pays out within the

2 expected lifetime of the annuitant, using the charts in SPD Worker Guide E-1. If the annuity meets this test, the income it pays out is counted as unearned income. If the annuity does not meet the test, the part of the annuity that pays out beyond the annuitant s expected lifetime is considered a disqualifying transfer of resources. The resulting penalty period must be calculated and served. Annuities purchased on January 1, 2006 or after. The change for annuities purchased on January 1, 2006 or after, has two major parts. Part 1: Annuities where the client or the community spouse is the annuitant will no longer be evaluated as disqualifying transfers of resources. Instead, if they meet the criteria specified in subsection (3)(a)(C) of OAR (attached), the payments will be counted as unearned income. If they do not meet the criteria, the value of the annuity will be counted as a resource. The rule at subsection (3)(a)(E) explains how to determine the countable resource value. Part 2: In order for the annuity to be counted as income and not a resource, the annuitant will, in most cases, be required to name a specified remainder beneficiary. The remainder beneficiary is the entity that will receive the remaining funds in the annuity when the annuitant passes away. There is no requirement in this category for a married client with an annuity, because the client s estate is automatically considered the property of the surviving community spouse and the Department defers collection on claims in that situation. However, for an unmarried client, the client will be required to name the Department or a child as the remainder beneficiary. In the few cases where the client has a minor dependent child or a child who meets the SSI disability criteria, the child can be named as the first remainder beneficiary because the Department defers collection on a claim in that situation. In most cases, there will not be any child, so the client will be required to name the Department as the first remainder beneficiary. This will allow the Department to be reimbursed from the annuity for medical assistance provided, should the client pass away before the entire annuity is paid out. Similarly, for an annuity held by the community spouse, the community spouse will be required to name specific remainder beneficiaries. In the few cases where the community spouse has a minor dependent child or a child who meets the SSI disability criteria, the child can be named as the first remainder beneficiary because the Department defers collection on a claim in that situation. In most cases, there will not be any child, so the community spouse will be required to name the client as the first remainder beneficiary, and in the event that the client does not survive the spouse, the Department must be named as the contingent remainder beneficiary. Both the client and the Department must be named as remainder beneficiaries, in this order. This will ensure that the asset is available to the client and will affect the Medicaid case, should the client survive the community spouse. If both the community spouse and the client

3 have passed, it will allow the Department to be reimbursed from the annuity for medical assistance provided to the client from funds remaining in the annuity. In addition to the designation of the remainder beneficiary explained above, the annuity must also meet the following criteria in order to be counted as income and not a resource: Be irrevocable; Pay out in equal monthly installments within the expected lifetime of the annuitant; and Be purchased from a business dealing in commercial annuities. The new requirement that the annuity be purchased from a business, is just to ensure that annuities excluded as a resource are not purchased from private parties. Eligibility staff are not expected to obtain additional verification that the business is properly licensed to issue annuities. As long as the annuity is purchased from a business and not a private party, it meets the requirement. Implementation/Transition Instructions: Use the attached rule to determine how to treat annuities for eligibility decisions made on January 1, 2006 and after. Training/Communication Plan: Recent monitoring of new cases has revealed that the small number of annuities does not justify statewide training. Staff should implement the new policy using the rule, this transmittal and technical assistance from central office staff. In addition, training on annuities is provided on a regular basis in the Advanced Eligibility Calculations and Trusts training module. Local/Branch Action Required: Use the attached rule to determine how to treat annuities for eligibility decisions made on January 1, 2006 and after. Central Office Action Required: Provide technical assistance for field staff as questions arise.

4 Field/Stakeholder review: X Yes No If yes, reviewed by: Operations Committee Filing Instructions: If you have any questions about this policy, contact: Contact(s): Joanne Schiedler Phone: (503) Fax: (503) Joanne.r.schiedler@state.or.us

5 Annuities, Dividends, Interest, Royalties (1) Interest income is counted as unearned income. (2) Dividends are counted as unearned income unless the dividends are from a trust described in OAR (10), in which case the dividends are not counted as income. (3) Annuity Annuities and annuity payments are counted as follows: (a) In the OSIP, OSIPM, and QMB programs, if: (A) (B) (C) If a client or a client s the spouse of a client purchases or transfers an annuity prior to January 1, 2006, the transaction may be subject to the rules on resource transfers at OAR and following. For an annuity that is not disqualifying but meets the criteria of OAR , the annuity payments are counted as unearned income. If a client or the spouse of a client purchases an annuity on or after January 1, 2006, the annuity is counted as a resource unless it is excluded under paragraph (3)(a)(C) of this rule. An annuity described in paragraph (3)(a)(B) of this rule is excluded if the criteria in subparagraphs (i), (ii), and (iii) are met, except that if an unmarried client is the annuitant, the requirements of subparagraph (iv) must also be met and if a spouse of a client is the annuitant, the requirements of subparagraph (v) must also be met. (i) (ii) (iii) The annuity is irrevocable. The annuity pays principal and interest out in equal monthly installments within the actuarial life expectancy of the annuitant. For purposes of this subparagraph, the actuarial life expectancy is established by the life expectancy table of the federal Centers for Medicare and Medicaid Services, State Medicaid Manual, section (B). The annuity is issued by a business that is licensed and approved to issue commercial annuities by the state in which the annuity is purchased.

6 (iv) If an unmarried client is the annuitant, the annuity must specify that upon the death of the client, the first remainder beneficiary is either of the following: (I) (II) The Department, for all funds remaining in the annuity up to the amount of medical benefits provided on behalf of the client. The biological or adoptive child of the client, but only if this child is a minor dependent or meets the SSI disability criteria based on blindness or disability, and if the Department is named as the next remainder beneficiary (after this child), up to the amount of medical benefits provided on behalf of the client, in the event that the child does not survive the client. (v) If a spouse of a client is the annuitant, the annuity must specify that, upon the death of the spouse of the client, the first remainder beneficiaries are either of the following: (I) (II) The client, in the event that the client survives the spouse; and the Department, in the event that the client does not survive the spouse, for all funds remaining in the annuity up to the amount of medical benefits provided on behalf of the client. A biological or adoptive child of the spouse if this child is a minor dependent or meets the SSI disability criteria based on blindness or disability; and the client in the event that this child does not survive the spouse. (D) (E) If an annuity is excluded under paragraph (3)(a)(C) of this rule, annuity payments are counted as unearned income. If an annuity is a countable resource under this rule, the cash value is equal to the amount of money used to establish the annuity, plus any additional payments used to fund the annuity, plus any earnings, minus any early withdrawals, and minus any surrender fees. (b) In all other programs, annuity payments are counted as unearned income. (4) Royalties are counted as unearned income unless, except that royalties are counted as earned income if the client is actively engaged in the activity from

7 which the royalties are accrued. If so, the royalties are counted as earned income. Stat. Auth.: ORS , , Stats. Implemented: ORS , ,

8 Determining if a Transfer of a Resource is Disqualifying A transfer of a resource is not disqualifying if made under one of the following circumstances: (1) Except as otherwise provided in OAR , the transferred item was an excluded resource or personal property, such as jewelry or furniture, and the financial group resource total was less than allowable limits at the time of the transfer. (2) The resource was sold or traded: (a) (b) For all programs except the Food Stamp program, for compensation equal to or greater than fair market value. For the Food Stamp program, for compensation near, equal to or greater than fair market value. (3) The resource was transferred between members of the same financial group, including members who are ineligible aliens or disqualified people. (4) The transfer settled a legally enforceable claim against the resource or client. (5) Except in the OSIP, OSIPM and QMB programs, a court ordered the transfer. (6) In the OSIP, OSIPM and QMB programs, a court ordered the transfer and: (a) (b) The transfer occurs more than 36 months or 60 months before the date of application, whichever is applicable under OAR (3)(c); or There is an institutionalized spouse who began a continuous period of care on or after October 1, 1989, and after performing the calculations required in OAR (1) the amount of resources allocated to a community spouse does not exceed the largest of the four amounts set forth in OAR (1)(f). (7) The client was a victim of fraud, misrepresentation, or coercion, and legal steps have been taken to recover the resource. (8) The resource is an annuity purchased on or before December 31, 2005, the client or the client's spouse of the client is the annuitant, and the entire amount of principal and earned interest is paid in equal installments during the actuarial life expectancy of the annuitant. For purposes of this section, the actuarial life expectancy is established by the life expectancy table of the

9 federal Centers for Medicare and Medicaid Services, State Medicaid Manual, section (B). (9) The resource is an annuity purchased on or after January 1, 2006 and the client or the spouse of the client is the annuitant. Stat. Auth: ORS , , Stats. Implemented: ORS , ,

10 Length of Disqualification Due to a Resource Transfer; GA, GAM, OSIP, OSIPM or QMB (1) A GA, GAM, OSIP, OSIPM or QMB financial group containing a member disqualified due to the transfer of a resource is disqualified from receiving benefits if the group filed an application for benefits on or after October 1, (2) The length of a disqualification period resulting from a transfer is the number of months equal to the uncompensated value (see OAR ) divided by the factor listed below in this section, rounded down to the next whole number. The first month of a disqualification period is the month the resource was transferred except as provided in section (3) of this rule. The factor used in the calculation is: (a) For an application filed prior to October 1, 2000 $3,320. (b) For an application filed on or after October 1, 2000 and prior to October 1, 2002 $3,750. (c) For an application filed on or after October 1, 2002 and prior to October 1, 2004 $4,300. (d) For an application filed on or after October 1, 2004 $4,700. (3) If disqualification periods calculated in accordance with section (2) of this rule overlap, they are applied sequentially so that no two penalty periods overlap. For instance, suppose a transfer in January results in a disqualification of three months, and a transfer in February results in a disqualification of two months. The penalty period is applied so that it starts in January and runs through May for a total of five months. (4) If a resource is owned by more than one person, by joint tenancy, tenancy in common or similar arrangement, the share of resource owned by the client is considered transferred when any action is taken either by the client or any other person that reduces or eliminates the client's control or ownership in the client's share of the resource. (5) If an annuity is purchased on or before December 31, 2005 that pays benefits beyond the actuarial life expectancy of the client, as determined by the annuity life expectancy table of the federal Centers for Medicare and Medicaid Services, State Medicaid Manual, section (B), a disqualification period will be assessed for the value of the annuity beyond the actuarial life expectancy of the annuitant.

11 (6) A single transfer of a resource may cause a disqualification for both a medical assistance program under this rule and the SSI cash grant. The period of the disqualification is likely to be longer for SSI than for the medical assistance program, so a person may be eligible again for the medical assistance program while still disqualified from receiving SSI. The provisions of this rule are applied without regard to the related disqualification for SSI. Stat. Auth.: ORS Stats. Implemented: ORS