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The Game of Annuities Start to Finish Roll The Dice and Advance

VIEWS: 4 PAGES: 31

									                                                             10/17/2011




           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




                                                                     1
                                      10/17/2011




 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




                                              2
                                                10/17/2011




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




                                                        3
                                                                        10/17/2011




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




                                                                                4
                                               10/17/2011




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




                                                       5
                                                    10/17/2011




          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




                                                            6
                                          10/17/2011




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
       Date   of purchase.
       Purchase    price.
     Annuity Owner
     Isthere 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




                                                  7
                                                                             10/17/2011




 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




                                                                                     8
                                                   10/17/2011




   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




                                                           9
                                                                  10/17/2011




       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




                                                                         10
                                          10/17/2011




    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




                                                 11
                                                10/17/2011




                                           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




                                                       12
                          10/17/2011




Flowchart 3




                     37




DHS-5036A - spouse




                     38




                     39




                                 13
                             10/17/2011




DHS-5037




                        40




                        41




DHS-5037 – continued.




                        42




                                    14
                                                              10/17/2011




         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




                                                                     15
                                                     10/17/2011




                                                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




                                                            16
                                                   10/17/2011




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




                                                          17
                                                     10/17/2011




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




                                                            18
                                                             10/17/2011




      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




                                                                    19
                                                           10/17/2011




            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




                                                                  20
                                                     10/17/2011




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




                                                            21
                                                                      10/17/2011




                                                                 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




                                                                             22
                           10/17/2011




 Annuities:
  Start to
   Finish

   Annuities…

  Nothing to be
    afraid of!

One step at a time!



                      67




                                  23
                   ANNUITY VERIFICATION POLICY

Medical Assistance (MA)
The following information must be verified when verification of an annuity is
required:

    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
      someone else.
    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
    asset test.

•   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
      DHS-5143).
    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.



MinnesotaCare (MCRE)
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
Blank Page
Clear Form Data
  FILLABLE FORM

                                                                                                                      DHS-5143-ENG   6-09




                                                                                    Case number:
                                                                                    Case name:
                                                                                    Worker name:
     Minnesota Health Care Programs
                                                                                    Worker phone number:
     Required Annuity                                                               Fax number:

     Information                                                                    Agency name:
                                                                                    Agency address:
      Date:
      To:
                                                                  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




     Client Instructions
     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                         .
                                                           DATE

               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 Other:
            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
                        ANNUITY TRANSACTIONS
Definition
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-
LTC enrollee.


Qualified Actions
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
         disbursements

       o Changing the distribution

       o Changing ownership, payee or beneficiary.


Non-Qualified Actions
The following actions are not annuity transactions regardless of the date they
were taken:

   •   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
       judgments




MFWCAA Annuities presentation
9/28/11- Health Care Training                                                    Handout 2
Blank Page
              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
   spouse.

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
             2c.

       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
   (Step 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. 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
Blank Page

								
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