The Game of
Start to Finish.
Health Care Education Unit
Health Care Eligibility and Access
Sept 28-29, 2011
Roll The Dice and
• You will be able to identify the parties associated
with an annuity.
• You will evaluate an annuity as an asset for basic
• You will determine the effect of annuitization of an
annuity on basic MA and the MA payment of LTC
• You will evaluate an annuity for uncompensated
transfers and determine that calculation.
Definition of Annuity
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.
Investing for the future
Parties (players) of an
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)
Parties of an annuity-
Owner(s) – Person(s) who may
exercise rights provided in the
The owner names the payee(s).
The owner chooses the settlement
The owner names the beneficiaries.
Parties of an annuity-
Payee – Someone to whom a benefit is
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.
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
payments begin in
the future. A
has two phases. 10
Accumulation 1. The contract is
2. The principal
Annuitization 1. Settlement
phase (payout option is chosen.
phase) 2. Defines payments
and time period.
Annuity Stage -
• Immediate or deferred
• Fixed or variable So Many Questions !!!! How
do I find the answers?
payments Do I really need to know the
answers for MA eligibility
• Term Certain or Life determination?
Verification – Annuity Data
Worksheet (DHS-5532) may help
A copy of the annuity contract.
Contract Specification page.
It may be necessary to get a
signed release. 13
Burial, Retirement, Investment.
Immediate or Deferred.
Owner, payee, beneficiary.
Has annuitization occurred.
Verify as an asset – counted or
unavailable – if asset limit.
Verify if an income source.
Verify as an asset – excluded,
counted or unavailable.
Verify as an income source.
MA Payment of Long-Term Care
Services (in addition to Basic MA
Funding source (DHS-5143)
Annuity Transaction (DHS-5143)
Date of purchase
Date of annuitization – if applicable.
Date of Annuitization
Cash value on date of
Current cash value, if available.
Current market value, if
If a commuted cash value is
Verificationof annuity is not
required as an asset if counted
assets are within the asset limit.
If income source, verify payments.
Annuity Data Worksheet
Information gathering purpose.
How far to proceed is program-
dependent; and in relation to
where the annuity is within its
Developed for when there is a
request for MA payment of LTC
Annuity Data Worksheet
Identifier – contract number
Date of purchase.
Isthere an annuity payee?
Review of Contract
Identify the parties.
Identify the type of annuity for
current policy application.
Determine asset implications.
Determine income to apply if
Apply LTC requirements.
Sinclair and Mary
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
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.
Mary Jefferson –
MA Relative Caretaker basis.
1. Annuity Issuer: 1. Transamerica Life
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
MA Considerations -
Asset and/or Income
Immediate – Deferred –
Revocable, Accumulation phase-
Assignable – cash value – asset.
determine as an
Annuitized – - available as an asset.
determine as Income stream after
income stream annuitization.
A Request for MA
Payment of LTC Services
Disclosure requirements and
treatment of certain annuities
when there is LTC services
Implemented under the federal
Deficit Reduction Act of 2005.
Three requirements to be applied.
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
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
distribution or changing
any of the parties. 30
Assist in obtaining disclosure
Not required, if information can
be obtained in contracts or other
Begins the evaluation process
for requirements 2 and 3.
Requesting LTC services
Married to Mary Jefferson.
Mary Jefferson owns an annuity.
as an asset with CSV for
Mary’s MA request.
Additional requirements for LTC. 32
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.
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.
DHS-5036A - spouse
DHS-5037 – continued.
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.
3. Evaluation under
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.
3. Evaluation of transfer
Annuities for individuals not “otherwise
eligible” for MA payment of LTC services are
not evaluated for an uncompensated
Excess assets exist.
Spenddown not met.
Home equity limit over $506,000 and not
Not cooperating to name DHS as the PRB.
The PRB and DHS
Finishing the process of naming
DHS as the preferred remainder
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.
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
Evaluate reason using HCPM 188.8.131.52.
Send documentation and release with a
HealthQuest if necessary.
Client must be cooperating.
PRB and DHS
DHS-5037 is returned and indicates the
client is not cooperating with the annuity
Deny or close MA-LTC.
Determine period of ineligibility.
Update MMIS RLVA - using A code, to
block payment of LTC services.
Notify case manager/facility with DHS-
5181 or DHS-3050. 49
Uncompensated transfer penalty
periods begin when the client is
otherwise eligible for MA-LTC.
An uncompensated transfer
could occur as an annuity is
REMEMBER – side trip
Two Possible Methods of Evaluation –
The annuity is annuitized, so there is no
access to the principal. It is an income
The annuity in the accumulation phase is
an available asset, not a transfer.
Annuity must not be assignable or
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.
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
4. The annuity is not an IRA account.
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 184.108.40.206: Evaluation of Annuities under
Transfer Policy 58
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
1. Annuity’s cash value on date of
2. Total annuity payout.
a) Annual payment amount.
b) Appropriate SSA Life Table or term-
certain length. (who is the
c) Multiply a. by b.
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
Immediate Annuity with Trivento
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.
James Annuity Data
Is James eligible for MA-LTC
through the CADI program?
Does DHS need to be named PRB?
Evaluation of annuity as a transfer?
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
Playing with Annuities
We have rolled the dice and learned
about all the players in this game of
We have explored different types of
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
Nothing to be
One step at a time!
ANNUITY VERIFICATION POLICY
Medical Assistance (MA)
The following information must be verified when verification of an annuity is
o Type of annuity.
o Cash value – current and at annuitization.
o Commuted cash value.
o Name of annuitant(s), beneficiaries, payees and owners.
o The settlement option details, if the annuity is annuitized.
o Free look period.
o Conditions under which the annuity can be sold, cashed in or assigned to
o Type of annuity issuer (commercial or private).
• Method A
Verify an annuity if it is a counted or unavailable asset when a client has an
• Method B
Annuities must always be verified, regardless of whether they are counted,
excluded or are unavailable.
• Payment of Long-Term Care (LTC)
Annuities must always be verified. In addition to MA verifications, verify the
following information, as needed, regarding an annuity:
o How the annuity was funded. (Client statement only using DHS-5143).
o Whether an annuity transaction has occurred. (Client statement only using
o Date of purchase.
o Date of annuitization.
o Cash value on date of annuitization.
o Current cash value, if revocable.
o Current market value, if assignable.
Verification of an annuity is not required for MCRE eligibility if counted assets are
within the MCRE asset limit for a person with an asset test. Verification of
income from an annuity is required.
MFWCAA Annuities presentation Handout 1
9/28/11 – Health Care Training
Clear Form Data
Minnesota Health Care Programs
Worker phone number:
Required Annuity Fax number:
Information Agency name:
Annuity contract number:
ANNUITY OWNER’S FULL NAME (1) ANNUITY OWNER’S FULL NAME (2)
SOCIAL SECURITY NUMBER DATE OF BIRTH SOCIAL SECURITY NUMBER DATE OF BIRTH
This form is used to get information about an annuity you or your spouse own.
Follow these steps:
1. Read, complete and sign the form.
2. Return this form to your worker by .
You may not get coverage or your coverage may end if we do not get the information by the due date.
Call your worker if you have questions or need help getting any of the information.
1. How did you fund the annuity listed above? Check all that apply.
l Savings or checking account
l Individual Retirement Account (Traditional IRA)
l Court-ordered settlement
l Proceeds from an employer-based retirement savings plan
l Simplified Employee Pension (SEP) IRA
l Savings Incentive Match Plan for Employees (SIMPLE) IRA
l Roth IRA
l Purchased by employer or union as part of a defined-benefit pension plan
l Deemed IRA under a qualified employer plan
l An account or a trust established by an employer, employee association or union that is not listed above.
l I do not remember.
Page 1 of 3
2. Have any transactions been made on this annuity on or after February 8, 2006? Check all that apply.
l Added to the principal of the annuity. Check this box if funds were added to the annuity or if funds were
rolled over from another source into the annuity.
l Elective withdrawals made. “Elective withdrawals” means getting money out of the annuity that is not part
of the regular payout schedule.
l Changed the way money is paid out of the annuity. List the change and the date it was made.
CHANGE DATE OF CHANGE
l Changed the annuity owner, payee or death beneficiary, including the transfer of ownership in whole
or in part to a trust. Note: DO NOT check this box if the only change made to the annuity on or after
February 8, 2006, was naming the Minnesota Department of Human Services a death beneficiary.
ACTION DATE OF ACTION
l No transactions have been made on or after February 8, 2006.
I declare that, under penalty of perjury, the information I have provided is true and correct to the best of my
knowledge. I understand what happens to people convicted of perjury (not telling the truth). They may be
sentenced to prison for up to five years, a fine up to $10,000, or both.
All of the following people must sign below:
Adults age 18 or older who are applying
Parents, caretakers and guardians applying for children under the age of 21
Children under age 18 who are applying on their own behalf and not living with a parent, caretaker or guardian
The person who you have chosen to act on your behalf as an authorized representative.
You must sign this application even if you are authorizing someone to act on your behalf.
If an applicant is unable to sign, provide copies of legal documents of conservatorship or power of attorney.
YOUR SIGNATURE DATE
SIGNATURE OF SPOUSE OR PARENT/GUARDIAN DATE
SIGNATURE OF AUTHORIZED REPRESENTATIVE DATE
ADDRESS OF AUTHORIZED REPRESENTATIVE
CITY STATE ZIP CODE
Page 2 of 3
An MA-LTC annuity transaction is a qualified action taken on an annuity, by an
annuity owner, that occurs within the lookback period or while the client is an MA-
The following actions are “qualified actions”:
• Purchase of an annuity
• Conversion of another type of asset to an annuity
• Conversion of an annuity to another type of annuity
• Exercise an annuity election including:
o Annuitizing an annuity
o Contributing to the annuity at an unscheduled time
o Electing to make withdrawals that are in addition to scheduled
o Changing the distribution
o Changing ownership, payee or beneficiary.
The following actions are not annuity transactions regardless of the date they
• Request to name DHS a preferred remainder beneficiary
• Provide updated contact information
• Notification of beneficiary’s death
• Automatic changes based on terms of contract
• Uncontrollable changes based on law, operational changes or other court
MFWCAA Annuities presentation
9/28/11- Health Care Training Handout 2
ACTUARIALLY SOUND DETERMINATION
Follow these steps to determine if an annuity is actuarially sound:
1. Determine the annuity’s cash value on the date of annuitization. Do not
consider funds contributed by someone other than the client or the client’s
2. Determine the total annuity payout. Follow these steps to determine the
total annuity payout:
a. Determine the annual payment amount.
b. Determine the appropriate SSA Period Life Table life expectancy figure
using the age and gender of the appropriate person on the date the
annuity was annuitized.
Note: When determining for a term-certain annuity, determine the length
of the term in years. Compare the length of the term figure to the
life expectancy figure. Use the smaller of the two figures in Step
Use the chart below to determine whose life expectancy should be used:
Payee Life Expectancy To Use
Method 1 Method 2
Client Client Client
Client’s Spouse N/A Client’s Spouse
Client and Longer of the two life Longer of the two life
Client’s Spouse expectancies expectancies
Other Party Only N/A – determine N/A – determine
amount transferred to amount transferred to
other party. other party.
c. Multiply the annual payment amount by the life expectancy figure (or for a
term-certain annuity, the remaining length of the term if shorter than the
life expectancy figure).
3. Compare the total annuity payout (Step 2) to the annuitized cash value
• 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. The amount of the uncompensated transfer is the
annuitized cash value minus the total annuity payout.
MFWCAA Presentation Handout 3
09/28/11 – Health Care Training