State of Wisconsin
Release 19-02 September 10, 2019
17.11.1 Treatment of Revocable Annuities
17.11.2 Evaluating Irrevocable Annuities for Divestment
18.104.22.168 Irrevocable Annuities That Are Not Considered Divestment
22.214.171.124 Irrevocable Annuities that are considered divestment
17.11.5 Remainder Beneficiary Designation
The following policy applies to both an annuity An annuity conveys a right to receive fixed, periodic payments, either for life or for a term of months or years. purchased by a member A recipient of Medicaid; formerly referred to as a "client." and an annuity purchased by a community spouse Someone who is 1) Married to an institutionalized person and 2) Not living in a nursing home or other medical institution for 30 or more consecutive days..
Irrevocable annuities that are not considered divestment must name the “Wisconsin Department of Health Services Estate Recovery Program” (hereafter referred to as “the State”) as the remainder beneficiary Beneficiary means the person(s) entitled to any remaining pay-out of an annuity upon the death of the annuitant. if purchased or created on or after January 1, 2009. In cases where there is a spouse, disabled child, or minor A minor is a person less than age 18. child, the State must be the beneficiary in the second position.
In addition, the annuity must be one of the following:
Note: Annuities that provide for indefinite “lifetime payments” may not return the full principal and interest within the member’s life expectancy and are not actuarially sound.
Example 1: The member applies for HBCW. He had invested in a Roth IRA while he was working. He converted the IRA to an irrevocable annuity when he retired 6 months ago and named the State as the beneficiary. Since the annuity meets the conditions above, the purchase of the annuity is not considered divestment.
Example 2: The member applied for Institutional Medicaid on 7/28. This is a community spouse case. On 7/18, the community spouse used $126,500.00 of the couple’s resources to purchase an irrevocable 9-year period certain immediate annuity from the XYZ Life Insurance Company. The community spouse is the annuitant. The community spouse was 74-years-old on the date the annuity was purchased and had a life expectancy of 9.75 years (117 months). The annuity will issue regular monthly checks of $1,488.75 for a set period of 9 years or 108 total months. The insurance company will pay out a total of $160,785.00 over the period of the annuity contract.
The annuity names the State as the beneficiary in the position after the institutionalized spouse. The contract date of the annuity was 7/18 and the first monthly payment was issued on 8/18. The annuity, which was purchased by the community spouse, names the State as the beneficiary, was purchased from a life insurance company, will issue regular monthly payments, is currently issuing payments and will provide for full return of principal and interest during the community spouse’s life expectancy. Therefore, since the annuity meets the requirements above, the purchase of the annuity is not considered divestment. The monthly annuity payments count as income to the community spouse.
When the annuity does not meet the criteria in Section 126.96.36.199 above, the annuity is considered as a divestment. The value of the annuity is considered a divestment as of the date the annuity was purchased, or the date it became irrevocable, whichever is later.
Example 3: The member applied for HCBW on 9/15. Also on 9/15, the member used $20,000 of his cash resources to purchase an immediate annuity from the ABC Insurance Company. The contract date is 9/15 and the first payment will be issued on 10/15. The annuity will issue payments of $200 per month for 10 years (120 monthly payments). This would result in a return of $24,000 over the proposed period of the contract. The member is currently 79-years-old and has a life expectancy of 7.40 years (88.8 months). The annuity does not name the State as the primary beneficiary.
In this example, the annuity was purchased from a life insurance company, will issue regular monthly payments and is currently issuing payments. However, the annuity does not meet the requirements because the state is not named as the primary beneficiary and the proposed period of payments (10 years) exceeds the member’s life expectancy (7.40 years). Therefore, the full purchase price of the annuity is considered divestment. (See MEH 17.5 for policy regarding the penalty period begin date.) The $200 per month annuity payments are also counted as income in determining eligibility.
Beginning January1, 2009, all applicants for Medicaid long term care services and all members of Medicaid long term care services undergoing an eligibility review are required to disclose information about any annuities purchased on or after January 1, 2009, in which they or their community spouses have an interest.
This requirement also applies to annuities purchased before January 1, 2009, if any action is taken by the individual that changes either the course of payment from the annuity or the treatment of the income or principal of the annuity. These transactions include:
The following types of changes and events would not subject an annuity purchased prior to January 1, 2009 to treatment under the new policy rules:
A separate annuity disclosure form (Annuity Information - Disclosure F-10192) must be completed by applicants for each annuity owned by the applicant A person who has submitted a request for coverage for whom no decision has been made regarding eligibility or the applicant’s community spouse in order to meet the disclosure requirement. This form must also be sent to SSI Supplemental Security Income. A program based on financial need operated by the Social Security Administration that provides monthly income to low income people who are age 65 or older, blind, or disabled. recipients who are applying for HCBW and MLTC programs. The Disclosure form must be sent to all applicants and recipients who indicate that they have an annuity. A copy of the completed form and any documents verifying the status of the annuity must be scanned into the electronic case file (ECF).
The Wisconsin Medicaid for the Elderly Anyone 65 years old or older, Blind, and Disabled Application (F-10101) has been updated to collect additional information about annuities and provide information about the requirement to designate the State as a remainder beneficiary of the annuities owned by applicants for LTC Medicaid or their spouses.
If the applicant/ member or his or her spouse (or representative) refuses to disclose the required information related to the annuity, the applicant/member is ineligible for Medicaid for the failure to cooperate in providing requested information.
The local agency must then send a copy of the completed and signed beneficiary designation form(s) to the annuity issuer with the cover form (Issuer of Annuity - Notice of Obligation, F-10190) that instructs the issuer to make the state a remainder beneficiary. Allow the issuer up to 30 days to confirm the designation has been made.
When the issuer responds and indicates that the State has been designated the remainder beneficiary, or that there is no death benefit available under this annuity, treat this annuity as meeting the designation requirement and proceed with the LTC eligibility determination.
If the issuer does not respond within 30 days of the date the Notice of Obligation form was sent, the IM income maintenance agency must contact the issuer by phone and request that the issuer respond within 10 days. If the issuer does not respond 40 days after the Notice of Obligation form was sent, contact the CARES Call Center for further guidance.
If the form from the annuity issuer indicates that the remainder beneficiary designation change is in process and provides a date by when the designation will be completed, the IM agency should treat this annuity as meeting the designation requirement and proceed with the LTC eligibility determination. If the issuer fails to confirm that the designation change has been completed by the date indicated on the form, the IM agency must contact the issuer and request that they confirm within 10 days that the changes have been completed. If the issuer has not responded 10 days after the request was made, contact the CARES Call Center for further guidance.
Once the state has been designated as the remainder beneficiary, the annuity issuer must notify the local agency about any changes made to that annuity to ensure the annuitant does not change the terms of the annuity beneficiary designation at a later date. The issuer acknowledges this obligation by completing and returning the Issuer of Annuity - Notice of Obligation (F-10190).
Copies of all of these completed forms must be scanned into the ECF.
Pend the Medicaid LTC application until one of the following occur:
A divestment penalty period must be imposed for applicants and members who refuse to cooperate in this annuity beneficiary designation process. The divestment date is the date the annuity was purchased, or the date of the latest annuity transaction. The amount of the divestment is the full purchase price of the annuity.
This page last updated in Release Number: 17-02
Release Date: 06/08/2017
Effective Date: 06/08/2017