State of Wisconsin Department of Health Services

Release 26-02 April 15, 2026

View History

16.11 Retirement Funds

16.11.1 Types of Retirement Funds

Retirement funds include employer-sponsored retirement plans and individually owned retirement plans. 

Employer-Sponsored Retirement Plans

Employer-sponsored retirement plans include: 

• 401(k) or SIMPLE 401(k).  
• 403(b) Plans: For employees of public schools and certain tax-exempt organizations.
• 457(b) Plans: Deferred compensation plans available to state and local government employees.
• Thrift Savings Plans (TSPs): Similar to a 401(k) plan but only available to federal employees and military members.
• Qualified Pension Plans: Employer-sponsored pension (such as Wisconsin Retirement System’s Employee Trust Fund (ETF)).
• Profit-Sharing Plans: Employer-contributed plans.

Individually Owned Retirement Plans

Individually owned retirement plans include: 

• Keogh plans: For self-employed individuals.
• Individual retirement arrangements (IRAs): Types include traditional, Roth, SEP, and SIMPLE IRAs. 

An IRA can be in the form of an individual retirement account or an individual retirement annuity. An individual retirement account can hold a variety of asset types, including stocks, bonds, mutual funds, annuities, CDs, and other assets. An individual retirement annuity (also called “IRA annuity”) invests only in fixed or variable annuities and provides a guaranteed income stream at retirement. IRA annuities can be in accumulation or pay out status, but most often IRA annuities are annuitized at the time they are established. 

IRAs cannot be jointly owned. IRAs are not transferable and have exclusive benefits for the individual who funded the IRA (or that individual’s beneficiary after they die). In limited situations, a spouse can fund an IRA for their partner, but in that situation only the partner has access to the assets.

Other Funds Set Aside for Retirement
Funds that are intended for retirement but not held in an employer-sponsored or individually owned retirement plan are not considered retirement funds for purposes of Medicaid eligibility. They are evaluated based on the type of account in which the funds are held. For example, if funds being saved for retirement are held in a regular savings account, the funds are evaluated as a savings account.   

16.11.2 Retirement Funds as Assets 

Employer-sponsored and individually owned retirement plans must be evaluated for availability as assets.  

Retirement Funds of a Medicaid Applicant or Member
In general, individually owned retirement plans (IRAs and Keoghs) are counted as available assets. The available amount is calculated as the principal, less any penalties for withdrawal. Tax withholdings are not deducted from the available asset value. Exception: IRA annuities that are currently paying out are treated as annuities rather than retirement funds when evaluating their availability as assets (see SECTION 16.12 ANNUITIES). 

Note

For long-term care cases, annuity disclosure and remainder beneficiary designation requirements apply to IRA annuities regardless of whether the annuity is evaluated as a retirement fund or as an annuity (see SECTION 16.12.3 LONG-TERM CARE ANNUITY DISCLOSURE AND REMAINDER BENEFICIARY DESIGNATION REQUIREMENTS).

Employer-sponsored retirement plans are not counted as available assets if any of the following are true:

• The individual is currently receiving periodic payments from the plan. 
• The individual is still employed and would have to quit their job to obtain the funds.
• The individual does not have access to the account’s principal. 

If none of the above are true and the individual has the ability to cash out their employer-sponsored retirement plan, the cash value of the plan (after any penalties but before any tax withholding) is counted as an available asset. 

Retirement Funds of an Ineligible Spouse
In general, both employer-sponsored and individually owned retirement plans of an ineligible spouse (defined as a Medicaid applicant or member's spouse who is not requesting full-benefit health care) are disregarded as assets. 

However, IRA annuities owned by an ineligible spouse are only considered exempt retirement funds if the annuitant is the person who funded the IRA. Otherwise, the ineligible spouse’s IRA annuity must be evaluated as an annuity rather than a retirement fund when determining whether it must be counted as an asset (see SECTION 16.12 ANNUITIES). 

Note

For long-term care cases, annuity disclosure and remainder beneficiary designation requirements apply regardless of whether the ineligible spouse’s IRA annuity is evaluated as a retirement fund or as an annuity (see SECTION 16.12.3 LONG-TERM CARE ANNUITY DISCLOSURE AND REMAINDER BENEFICIARY DESIGNATION REQUIREMENTS).

Conversion of Retirement Funds 
Retirement funds that are cashed out or rolled over are treated as a conversion from one asset type to another.  

Example 1

Carol has a 401(k) retirement plan with her employer. When she ends her employment, she cashes out her 401(k) and rolls the funds into a newly created IRA. Once the IRA is established, the funds are assessed for asset and income availability as an individually owned retirement plan.

Example 2

Jane has a 401(k) retirement plan with her employer. When she ends her employment, she cashes out her 401(k) and deposits the funds into her checking account. The funds are assessed for asset availability as part of her checking account as soon as they are deposited into the account and are no longer treated as retirement funds.

16.11.3 Retirement Funds as Income 

Employer-Sponsored Retirement Plans
Regular, periodic payments from an employer-sponsored retirement plan are counted as unearned income in the month received.  

Example 1

Mike receives $500 per month from his 401(k) retirement fund and deposits the funds into his checking account. The $500 per month is counted as unearned income.

Individually Owned Retirement Plans
Withdrawals and distributions from individually owned retirement funds (IRAs and Keoghs) are not counted as income. These transactions are considered a conversion from one asset type to another, similar to a withdrawal or transfer from a bank account. Exception: IRA annuities that are currently paying out are treated as annuities rather than retirement funds when evaluating their availability as income (see SECTION 16.12 ANNUITIES).

Example 2

Mike regularly withdraws $500 per month from his IRA and deposits the funds into his checking account. The $500 per month is not income. It is an asset in his checking account.

---

The information concerning the Medicaid program provided in this handbook release is published in accordance with: Titles XI and XIX of the Social Security Act; Parts 430 through 481 of Title 42 of the Code of Federal Regulations; Chapters 46 and 49 of the Wisconsin Statutes; and Chapters HA 3, DHS 2, 10 and 101 through 109 of the Wisconsin Administrative Code.

Notice: The content within this manual is the sole responsibility of the State of Wisconsin's Department of Health Services (DHS). This site will link to sites outside of DHS where appropriate. DHS is in no way responsible for the content of sites outside of DHS.

Publication Number: P-10030