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					    The Game of
     Annuities :
   Start to Finish.

        Melody Sanders
   Health Care Education Unit
Health Care Eligibility and Access
        Sept 28-29, 2011
Roll The Dice and
Advance




                    2
Objectives:

• You will be able to identify the parties associated
  with an annuity.

• You will evaluate an annuity as an asset for basic
  MA.

• You will determine the effect of annuitization of an
  annuity on basic MA and the MA payment of LTC
  services.

• You will evaluate an annuity for uncompensated
  transfers and determine that calculation.

                                                         3
 Definition of Annuity
 HCPM Glossary:
is a purchased
contract in which one
party agrees to pay the
purchaser, or a
designee (payee), a
return on money
deposited with them
according to the terms
of the contract.
HCPM 19.25.30 Annuities   4
Types of annuities
 Burial – Contract with an issuer
  to fund a burial.
 Retirement – Employer-funded or
  Pension plan (Defined Benefit).
 Investment – self-funded IRA, or
  a personal savings plan.

                                 5
Investing for the future




                           6
Parties (players) of an
annuity (game).
   Issuer – a person or entity (an
    insurance company) who
    manages the annuity. The
    annuity issuer accepts the funds
    from the owner during the
    accumulation phase and issues
    payments after the funds have
    been annuitized. (The Banker)
                                       7
    Parties of an annuity-
          continued
   Owner(s) – Person(s) who may
    exercise rights provided in the
    annuity contract.
     The owner names the payee(s).
     The owner chooses the settlement
      option.
     The owner names the beneficiaries.


                                           8
     Parties of an annuity-
           continued
   Payee – Someone to whom a benefit is
    paid.
   Beneficiary – The person, trust or entity
    named by the annuity owner to receive
    death benefits from the annuity.
   Annuitant – The person upon whose life
    expectancy annuity payments are based…
    Not all annuity payments are based upon a
    person’s life expectancy.
                                            9
Stages of an annuity
   Purchase the            Immediate: the
    annuity by setting       periodic payments
    up a contract with       begin within one
    the issuer.              payment interval of
                             the purchase.
                            Deferred: periodic
                             payments begin in
                             the future. A
                             deferred annuity
                             has two phases. 10
Deferred Annuity
   Accumulation    1.   The contract is
    phase                purchased.
                    2.   The principal
                         accumulates funds.

   Annuitization   1.   Settlement
    phase (payout        option is chosen.
    phase)          2.   Defines payments
                         and time period.
                                             11
            Annuity Stage -
             Annuitization
Payments Begin

• Immediate or deferred

Nature of
Payments
• Fixed or variable       So Many Questions !!!! How
                          do I find the answers?
Period of
payments                  Do I really need to know the
                          answers for MA eligibility
• Term Certain or Life    determination?

                                                     12
Verification – Annuity Data
Worksheet (DHS-5532) may help
   A copy of the annuity contract.
     Contract   Specification page.
   Account statements.
     Current   values.
   Settlement Statement.
     Payment    terms.
   It may be necessary to get a
    signed release.                    13
 Annuity Verification
       Policy
 Burial,   Retirement, Investment.
   Issuer.

   Immediate    or Deferred.
 CurrentCash value.
 Owner, payee, beneficiary.

 Has annuitization occurred.
   Annuitant.


                                      14
Program Areas
   Medical Assistance:
     Method     A
       Verify as an asset – counted or
        unavailable – if asset limit.
       Verify if an income source.

     Method     B
       Verify as an asset – excluded,
        counted or unavailable.
       Verify as an income source.
                                          15
          Program Areas-
            continued
   MA Payment of Long-Term Care
    Services (in addition to Basic MA
    verifications):
     Funding source (DHS-5143)
     Annuity Transaction (DHS-5143)

     Date of purchase

     Date of annuitization – if applicable.


                                               16
Annuitized Annuity
 Date of Annuitization
 Cash value on date of
  annuitization.
 Current cash value, if available.

 Current market value, if
  assignable.
 If a commuted cash value is
  available.
                                      17
          Program Area-
           continued
   MinnesotaCare:
     Verificationof annuity is not
      required as an asset if counted
      assets are within the asset limit.
     If income source, verify payments.




                                       18
Annuity Data Worksheet
 Information gathering purpose.
 How far to proceed is program-
  dependent; and in relation to
  where the annuity is within its
  life span.
 Developed for when there is a
  request for MA payment of LTC
  services.
                                    19
Annuity Data Worksheet
   General Information:
     Annuity  Issuer
     Identifier – contract number
       Dateof purchase.
       Purchase price.

     Annuity  Owner
     Is there an annuity payee?

     Beneficiary

                                     20
        Begin with
    Review of Contract
 Identify the parties.
 Identify the type of annuity for
  current policy application.
 Determine asset implications.

 Determine income to apply if
  annuitized.
 Apply LTC requirements.
                                     21
Sinclair and Mary
Jefferson Application
 Mary Jefferson is applying for
  MA for herself, her husband, and
  her grandson- Dion.
 She is income eligible.

 She has an annuity and a small
  checking account.

                                 22
 Mary Jefferson Annuity
      Owner          Mary Jefferson

• Found on the Contract Specification Page.

     Issuer        Transamerica Life Insurance Company

• Found throughout the contract: front page, also specification page.

     Payee         Mary Jefferson

• Found on Contract Specification Page as the Proposed annuitant.


                                                                        23
          Mary Jefferson –
     MA Relative Caretaker basis.
1.    Annuity Issuer:     1.   Transamerica Life
                               Insurance Co.
2.    Owner:              2.   Mary Jefferson
3.    Identifier:         3.   A102-SJ
4.    Date of Purchase:   4.   3/1/10- n/a
5.    Purchase price:     5.   $1,000 – n/a
6.    Payee:              6.   Proposed – Mary
7.    Beneficiary:        7.   JoAnn Larson
                                               24
   MA Considerations -
  Asset and/or Income
Immediate –         Deferred –
 Revocable,            Accumulation phase-
  Assignable –          cash value – asset.
  determine as an
  asset                Revocable/Assignable
 Annuitized –          - available as an asset.
  determine as         Income stream after
  income stream         annuitization.

                                              25
26
27
   A Request for MA
Payment of LTC Services
   Disclosure requirements and
    treatment of certain annuities
    when there is LTC services
     Implemented  7-1-08.
     Implemented under the federal
      Deficit Reduction Act of 2005.
     Three requirements to be applied.
                                          28
1. Disclosure
   Information to determine whether an
    annuity transaction occurred in the 60
    month lookback period, for all annuities
    owned by person requesting MA payment
    of LTC services and their spouse.
   Report all source information for annuities
    for which either the spouse or the
    applicant is an owner, annuitant, payee, or
    beneficiary.
                                              29
Definitions
   Annuity transaction:     Definition:
• Purchase of an annuity.
• Conversion of another         A qualified action taken
  type of asset to an            by an annuity owner on
  annuity.                       an annuity.
• Conversion of annuity to          Occurred within the
  another type of annuity.           lookback period- 60
• Exercising an annuity              months.
  election: annuitization,          Or occurred while the
  contributing additional            client is an MA-LTC
                                     enrollee.
  funds, additional
  withdrawals, changing
  distribution or changing
  any of the parties.                                        30
    Required Annuity
 Information (DHS-5143)
 Assist in obtaining disclosure
  information.
 Not required, if information can
  be obtained in contracts or other
  related information.
 Begins the evaluation process
  for requirements 2 and 3.
                                  31
Sinclair Jefferson
 Requesting LTC services
    (CADI waiver).
 Married to Mary Jefferson.

 Mary Jefferson owns an annuity.
              as an asset with CSV for
     Evaluated
     Mary’s MA request.
   Additional requirements for LTC. 32
33
34
MA-LTC Information
 Information about funding – we
  have a verbal client statement
  from Mary. The DHS-5143 is not
  a required form.
 An annuity transaction occurred
  with the purchase of the annuity.

                                  35
2. Naming DHS as PRB
   Preferred Remainder Beneficiary
       Requesting LTC services.
       At least one annuity transaction
        within lookback period.
       Annuity provides for a death
        benefit and allows someone other
        than a spouse to be named.
                                       36
Flowchart 3




              37
DHS-5036A - spouse




                     38
39
DHS-5037




           40
41
DHS-5037 – continued.




                        42
Step by step: 1. Gathered information.
              2. Confirmed necessary action.
              3. Received signatures DHS-5036.
              4. Sent off the DHS-5037.
              5. Transfer evaluation - side trip.
                                                43
3. Evaluation under
Transfer Policy
   Uncompensated Transfer policy is
    applied when the individual applies for
    MA-LTC, not when the transfer occurred.

   The individual must be “otherwise
    eligible” for MA payment of LTC services
    to begin the penalty period.


                                           44
3. Evaluation of transfer
Annuities for individuals not “otherwise
eligible” for MA payment of LTC services are
not evaluated for an uncompensated
transfer.
     Excess assets exist.
     Spenddown not met.
     Home equity limit over $506,000 and not
      excluded.
     Not cooperating to name DHS as the PRB.
                                                45
46
The PRB and DHS
Finishing the process of naming
DHS as the preferred remainder
beneficiary.
      The DHS-5037 is returned and DHS
       has been designated the PRB or the
       death benefit could not be assigned.
      Send a copy of the DHS-5037 to DHS
       Special Recovery Unit.
                                          47
PRB and DHS
The DHS-5037 is returned but indicates
DHS cannot be named as PRB for a reason
other than the death benefits are not
assignable.
     Evaluate reason using HCPM 19.25.30.10.
      Send documentation and release with a
       HealthQuest if necessary.
      Client must be cooperating.


                                                48
PRB and DHS
DHS-5037 is returned and indicates the
client is not cooperating with the annuity
issuer.
    Deny or close MA-LTC.

    Determine period of ineligibility.

    Update MMIS RLVA - using A code, to
     block payment of LTC services.
    Send DHS-4915.

    Notify case manager/facility with DHS-
     5181 or DHS-3050.                        49
50
     Annuity Transfer
       Evaluation
Remember:
 Uncompensated transfer penalty
  periods begin when the client is
  otherwise eligible for MA-LTC.
 An uncompensated transfer
  could occur as an annuity is
  annuitized.
                                 51
REMEMBER – side trip




                       52
         Annuity Transfer
           Evaluations
Two Possible Methods of Evaluation –
          Consider Both:
   The annuity is annuitized, so there is no
    access to the principal. It is an income
    stream.
   The annuity in the accumulation phase is
    an available asset, not a transfer.
   Annuity must not be assignable or
    revocable.
                                                53
54
IF at any point you cannot answer “YES”, an
uncompensated transfer period will need to be
determined using the total amount of annuitized
funds, less any compensation already received.
                                                  55
        Annuity Transfer
          Evaluation :
          Method One
1.    Annuity was purchased with the funds
      of the LTC client.
2.    The LTC client is the payee.
3.    An annuity transaction occurred in the
      lookback period.
4.    The annuity is not an IRA   account.
    HCPM 19.25.30.15
                                               56
57
       Annuity Transfer
         Evaluation :
                Method Two
1.   Annuity was purchased with funds of LTC
     client or their spouse.
2.   Annuity was annuitized during lookback period
     or while client was an MA-LTC enrollee and not
     evaluated under Method 1.
3.   Annuity provides for equal monthly payments
     and these are not deferred.
4.   Actuarially sound.

HCPM 19.25.30.15: Evaluation of Annuities under
Transfer Policy                                   58
     Actuarially Sound
HCPM Definition:
An annuity is actuarially sound if
the cash value on the date of
annuitization is expected to pay
out in full within the expected
lifetime of the person requesting
MA-LTC services or of their
spouse.                              59
            Actuarially Sound
             Determination
1.        Annuity’s cash value on date of
          annuitization.
2.        Total annuity payout.
     a)     Annual payment amount.
     b)     Appropriate SSA Life Table or term-
            certain length. (who is the
            annuitant/payee)
     c)     Multiply a. by b.
                                                  60
Determination – continued
3.   Compare the total annuity payout (2) to
     the annuitized cash value (1).
       • If the total annuity payout is greater
         than or equal to the annuitized cash
         value the annuity is actuarially sound.
       • If the total annuity payout is LESS
         than the annuitized cash value the
         annuity is not actuarially sound and
         an uncompensated asset transfer has
         occurred.
                                               61
       James Kingfield
    Settlement Agreement
   Immediate Annuity with Trivento
    Financial.
   James is 59 and making application
    for MA-LTC (CADI waiver).
   Screened for CADI, and referred to
    SSA and SMRT.
   He has no other income but annuity
    income and he has no other assets.
                                         62
      James Annuity Data
         Worksheet
Is James eligible for MA-LTC
through the CADI program?
     Assets?
     Income?
     Annuity Disclosure?
     Does DHS need to be named PRB?
     Evaluation of annuity as a transfer?



                                             63
64
James must cooperate in naming DHS as PRB before
approval of MA-LTC services (CADI program) by
completing and signing a DHS-5036.

      • Referral for SSI/ RSDI would be required, as assets
        are $0 and income is currently below the SSI
        standard.




                                                          65
Playing with Annuities
We have rolled the dice and learned
about all the players in this game of
annuities.
    Issuer
    Owner
    Payee
    Beneficiary

We have explored different types of
annuities.

We have evaluated two annuities as an
asset for MA.

We have determined the effect of
annuitization on basic MA and the MA
payment of LTC Services.

We have reviewed the Transfer
Evaluation Flowcharts and determined if
an annuity was actuarially sound.         66
 Annuities:
  Start to
   Finish

   Annuities…

  Nothing to be
    afraid of!

One step at a time!



                      67

				
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