MEMORANDUM

DISCUSSION:

On April 20, 2010, the Missouri Court of Appeals Western District issued a decision in the J.P. v. MO State Family Support Division which changes how annuities that were purchased or began making payments on or after that date are evaluated for MO HealthNet for the Aged, Blind, and Disabled (MAHBD) when an applicant is requesting vendor or Home Based Community Waiver benefits and there is a community spouse.

Annuities that were purchased or began making payments on or after April 20, 2010 will not be considered as a resource or subject to a transfer penalty for either the community spouse or institutionalized spouse if the annuity meets all of the following requirements:

• Is irrevocable and non-assignable;
• Is actuarially sound as measured against the Period Life table published by the Office of the Chief Actuary of the Social Security Administration, based on the life expectance of the annuitant,
• Provides equal or nearly equal payments for the duration of the annuity with no deferral and no balloon payments; and
• Provides for the appropriate beneficiary options. Beneficiary means the person that takes the funds from the annuity after the death of the annuitant. There are three qualifying beneficiary options:

Option one for annuities owned by the community spouse:

• The annuity must provide that the institutionalized spouse is the primary beneficiary in the event of the community spouse's death; and
• The annuity must provide that in the event of the death of the institutionalized spouse the state of Missouri is named as the secondary or contingent beneficiary for the amounts of medical assistance (can also state Medicaid or MO HealthNet) expended by the state of Missouri on the institutionalized spouse's behalf.  The annuity beneficiary designation must contain the following language to insure that the state of Missouri is repaid - "Proceeds of this annuity shall be paid to the State of Missouri for the amount of Medicaid funds expended on behalf of (name of the institutionalized spouse)."

Option two for annuities owned by the institutionalized spouse:

• The annuity must provide that the State of Missouri is the primary beneficiary for at least the total amount of medical assistance (can also state Medicaid or MO HealthNet) paid on behalf of the institutionalized individual.  The annuity must contain the following language to insure that the state of Missouri is repaid - "Proceeds of this annuity shall be paid to the State of Missouri for the amount of Medicaid funds expended on behalf of (name of the institutionalized spouse)";

Option three for annuities owned by the institutionalized spouse:

• The annuity must provide that the State of Missouri is named as secondary or contingent beneficiary after the community spouse or minor or disabled child and is named as primary beneficiary if the community spouse, minor or disabled child, or a representative of such child disposes of any remainder for less than fair market value.  The annuity beneficiary designation must contain the following language to insure that the state of Missouri is repaid - "Proceeds of this annuity shall be paid to the State of Missouri for the amount of Medicaid funds expended on behalf of (name of the institutionalized spouse)."

The annuity may be purchased from the institutionalized spouse's share of assets for the community spouse because there is no transfer penalty between spouses. The community spouse's annuity income stream cannot be considered an available resource in determining an institutionalized spouse's eligibility for MHABD vendor benefits.  Annuity payments are included as income to the spouse who receives the payments.

A reference to Individual Retirement Annuities (IRA) has been added to the Manual.  1040.020.35.20

Designated staff in each region will review annuities to determine whether the annuity can be excluded as a resource and no transfer penalty imposed, or if further review is necessary by Central Office staff. This will provide a prompt response for pending applications. See the list of Designated Staff  who will review the annuities for each region.

An Annuity Guide is available for the designated regional staff to use in their review. If an annuity meets all of the requirements, it can be excluded as a resource or transfer of property and does not need to be sent to IM Program and Policy for review. Designated staff should follow the procedures below if all of the requirements are not met or there are questions regarding the annuity policy.

As outlined in Email Memo IM-44 dated November 2, 2010, obtain a copy of the annuity policy including the application page.  Scan and send with the Request for Clearance (IM-14) to central office for review. The subject line in the email must be "Policy Clearance – Annuity".   

If the annuity is part of a Trust, do not send a separate Request for Clearance for the annuity. Send one IM-14 for the Trust and include the annuity information.

NECESSARY ACTION:

• Review this memorandum with all appropriate staff.
• See Annuity Guide link.
• Send annuities through supervisory channels to Designated Staff for review.
• Continue to apply Sections 1030.30.20 – 1030.30.20.20 to annuities owned by MHABD applicants/participants that are not requesting MHABD vendor benefits or HCB services, or that are requesting vendor or HCB, but do not have a community spouse.

dDBH

ATTACHMENTS:

Annuity Worksheet - Communal Spouse

Annuity Worksheet - No Communal Spouse