1030.030.00 Annuities

1030.030.10.10 Annuities That Were Purchased and Began Making Payments on or After August 28, 2007

IM-106 November 8, 2007

The income stream of an annuity from which a primary beneficiary (or annuitant) receives monthly income is EXCLUDED as an available resource, if the annuity:

  1. is actuarially sound as measured against the life expectancy tables published by the Office of the Chief Actuary of the Social Security Administration. These tables may be accessed at https://www.ssa.gov/OACT/STATS/table4c6.html
  2. provides equal or nearly equal payments for the duration of the annuity and excludes balloon-style final payments
  3. names the State of Missouri as the secondary or contingent beneficiary ensuring payment of MO HealthNet expenditures if the individual predeceases the duration of the annuity, AND
  4. names and pays the MO HealthNet participant as the primary beneficiary (or annuitant)

If the above 4 conditions are not met, the income stream of the annuity is considered as an available resource to the primary beneficiary (or annuitant). The value of the income stream from the annuity is the amount of the remaining guaranteed payments, unless there is documentation that the annuity could not be sold for that amount to a third party. If the annuity cannot be sold for the amount of the remaining guaranteed payments, its value is the amount it could be sold for.

EXAMPLE: Margaret Mabry entered a nursing facility on September 5, 2007. She is married and her spouse remains in the community. The Mabry’s had five separate certificates of deposit with a total value of $680,000. On September 1, 2007, the Mabry’s cashed in all of their certificates of deposit and purchased an irrevocable life annuity for $680,000 with Mr. Mabry as the owner and primary beneficiary (or annuitant). Mr. Mabry is 70 years old. His life expectancy is 12.98 years. He receives monthly annuity payments of $ 4,800 per month. The annuity policy is actuarially sound (12.98 x 12 x $4,800 = $747,648). The policy provides for equal or nearly equal payments throughout the duration. Mr. Mabry named the State of Missouri as the remainder beneficiary in an amount equal to the amount of MO HealthNet payments made on the behalf of the primary beneficiary (or annuitant). Since the policy is irrevocable, it has no cash surrender value. However, the policy does not name the MO HealthNet participant (Margaret Mabry) as the primary beneficiary (or annuitant). Therefore, the income stream is considered an available resource to Mr. Mabry. When contacted, the company that issued the annuity stated the value of the income stream is $500,000. The amount of $500,000 is counted as an available resource to Mr. Mabry.

EXAMPLE: Emily Miller bought a $40,000 irrevocable annuity on September 25, 2007. Emily is the owner of the annuity and the annuitant. The annuity is actuarially sound. It provides equal payments and names the State of Missouri as contingent/remainder beneficiary. Emily applied for MO HealthNet for the Aged, Blind, and Disabled. Since the annuity is irrevocable, it has no CSV. Because the annuity meets the requirements, the income stream from the annuity is not an available resource to Emily. Budgeting of income from the annuity must be evaluated. Use policy in 0815.030.05 Determining Adjusted Gross Income to determine whether or not income should be counted. In this situation, the income from the annuity is considered countable unearned income to Emily.