HAR §17-1725.1-52. Treatment of annuities

(a) An individual who requires coverage of long-term care services or their community spouse shall disclose whether or not the individual or their community spouse has any ownership interest in annuities at the time of application and at each subsequent redetermination of Medicaid eligibility. (1) An individual shall not be eligible for coverage of long-term care services if the institutionalized individual or their community spouse fails to disclose any interest in an annuity. (2) The disclosure shall be required regardless of whether the annuity is irrevocable or treated as an asset under this chapter. (b) The portion of the funds of an annuity purchased by the institutionalized individual or their community spouse prior to February 8, 2006, that is not actuarially sound and is payable beyond the life expectancy of the annuitant shall be considered transferred. (c) All funds used to purchase an annuity on or after February 8, 2006, by the institutionalized individual or their community spouse shall be considered transferred if the department is not named as a remainder beneficiary in the first position, or in a position behind the community spouse and the institutionalized individual’s minor child under the age of twenty-one years or who is blind or disabled, UNOFFICIAL 1725.1-36 for the amount of medical assistance paid on behalf of the institutionalized individual. (1) The department shall notify the issuer of an annuity issued on or after February 8, 2006, of the right of the department to be a preferred remainder beneficiary. (2) The issuer may inform other remainder beneficiaries of the department’s remainder interest. (d) Funds used to purchase an annuity on or after February 8, 2006, by the institutionalized individual or the community spouse, or on behalf of the institutionalized individual or their community spouse, shall not be considered transferred if: (1) The annuity is considered: (A) An individual retirement annuity that meets the requirements of section 408(b) of the IRC; or (B) A deemed IRA under a qualified employer plan under section 408(q) of the IRC; or (2) The annuity is purchased with proceeds from one of the following: (A) A traditional IRA under section 408(a) of the IRC; (B) An account or trust which is treated as a traditional IRA under section 408(c) of the IRC; (C) A simplified retirement account under section 408(p) of the IRC; (D) A simplified employee pension under section 408(k) of the IRC; or (E) A Roth IRA under section 408A of the IRC; or (3) The annuity meets all of the following requirements: (A) Is actuarially sound as determined by the department in accordance with actuarial publications of the Office of the Chief Actuary of the Social Security Administration; UNOFFICIAL 1725.1-37 (B) Is irrevocable, non-assignable and cannot be sold; (C) Makes equal payments throughout the term of the contract and does not defer payments or allow balloon payments; and (D) Cannot be cancelled upon the death of the institutionalized individual or the community spouse. (e) Certain transactions or changes which occur on or after February 8, 2006, that affect the terms of a qualified annuity that was purchased by the institutionalized individual or their community spouse prior to February 8, 2006, shall be considered a transfer of asset to include, but are not limited to the: (1) Course of payment made by the annuity; (2) Treatment of income or principal of the annuity to include additions of principal, elective withdrawals or requests to change the distribution of the annuity; or (3) Election to annuitize the contract. (f) Routine changes or automatic events or both, made by the institutionalized individual or the community spouse for an annuity that was purchased prior to February 8, 2006, that are not considered a transfer of asset include: (1) Routine changes to include, but are not limited to notifications of address change, death, or divorce of a remainder beneficiary. (2) Changes based on the terms of an annuity which existed prior to February 8, 2006, which do not require a decision, election or action to be effective. (3) Changes that are beyond the control of the institutionalized individual or the community spouse to include, but are not limited to, changes in the law or the issuer’s policies. (g) Transactions or changes made for annuities purchased prior to February 8, 2006, that do not meet the criteria of subsection (f) of this section as well UNOFFICIAL 1725.1-38 as a qualified annuity that is transferred to anyone except the community spouse or to another individual for the sole benefit of the community spouse, the individual’s child, or to a trust as described in section 1917(c)(2)(B) of the Social Security Act, shall be treated as a transfer of asset. [Eff 09/30/13](Auth: HRS §346-14; 42 C.F.R. §431.10; 42 U.S.C. §§1396(a), 1396p(c) and (e), 1396r-5(c)) (Imp: 42 U.S.C. §§1396(a), 1396p(c) and (e), 1396r- 5(c)) §17-1725.1-53 Treatment of promissory notes, loans and mortgages. (a) The assets used by an individual who requires coverage of long-term care services or their community spouse, to secure a promissory note, loan or mortgage on or after February 8, 2006, shall not be considered transferred if all of the following conditions apply to the promissory note, loan or mortgage: (1) The repayment term is actuarially sound; (2) It is irrevocable and cannot be sold; (3) Equal payments are made throughout the term of the contract with no deferral or balloon payments; and (4) The balance cannot be cancelled upon the death of the institutionalized individual or the community spouse. (b) If the provisions of subsection (a) are not met, the transferred amount is equal to the outstanding balance owed as of the date of the individual’s request for coverage of long-term care services. (c) The portion of the funds used to secure a promissory note, loan or mortgage prior to February 8, 2006, that is not actuarially sound and is payable beyond the life expectancy of the owner of the funds shall be considered transferred. [Eff 09/30/13] (Auth: HRS §346-14; 42 C.F.R. §431.10; 42 U.S.C. §1396p(c)) (Imp: 42 U.S.C. §1396p(c)) UNOFFICIAL 1725.1-39 §17-1725.1-54 Treatment of the purchase of a life interest in the home property of another. (a) The funds used by the individual who requires coverage of long-term care services or their community spouse to purchase a life interest in the home property of another, on or after February 8, 2006, shall be considered transferred if the purchaser did not reside on the property for a period of at least one year after the date of the purchase. (b) For the purchase of a life interest in the property of another made on or after February 8, 2006 that meet the requirements of subsection (a), the portion of the funds that exceed the value of the life interest property based on the life estate tables published by the SSA, shall be treated as transferred assets. (c) The portion of the funds used to purchase a life interest in the property of another by the individual or the individual’s spouse prior to February 8, 2006, that exceed the value of the life interest in the property based on the life estate tables published by the Social Security Administration, shall be treated as a transferred asset. [Eff 09/30/13] (Auth: HRS §346-14; 42 C.F.R. §431.10; 42 U.S.C. §1396p(c)) (Imp: 42 U.S.C. §1396p(c)) §17-1725.1-55 Treatment of the transfer of income. (a) A transfer of asset penalty period shall be assessed if the institutionalized individual or their community spouse transferred: (1) Lump sum payments received in the month; or (2) An entitled stream of income (disclaimed or voluntarily agreed). (b) The penalty period for the transfer of income shall be calculated by dividing the amount of income by the statewide average monthly cost of nursing facility services assessed to a private patient at the time the individual requests coverage of long-term care services. Disposal of such lump sum UNOFFICIAL 1725.1-40 payments or the entitled stream of income constitutes a transfer of asset. (c) The amount of income used to calculate a penalty period shall be: (1) The gross amount of the lump sum income transferred in the month it was received; or (2) The total gross amount of income expected to be received during the individual’s lifetime when the entitled stream of income was transferred, which is calculated by multiplying the annual amount of income expected to be received during the individual’s lifetime based on the life expectancy tables established by the Social Security Administration's Office of the Actuary. [Eff 09/30/13] (Auth: HRS §346- 14; 42 C.F.R. §431.10; 42 U.S.C. §1396p(c)) (Imp: 42 C.F.R. §431.10; 42 U.S.C. §1396p(c)) §17-1725.1-56 Transfer of assets that are not subject to the assessment of a penalty. A penalty period shall not be applied when: (1) The asset transferred was the individual’s home property and title was transferred to the: (A) Spouse of such individual; (B) Child of such individual who is under age twenty-one years, or a blind or disabled child; (C) A sibling of such individual who has an equity interest in the home, and has resided in the home for at least one year immediately prior to the date the individual becomes an institutionalized individual; or (D) An adult child of such individual, other than a child described in paragraph (B), who has resided in the home with the individual for at least two years immediately prior to the date UNOFFICIAL 1725.1-41 the individual becomes an institutionalized individual and who provided care which allowed the individual to reside at home. (2) The asset, other than a home, was transferred: (A) To the individual’s community spouse or to another individual or entity for the sole benefit of the community spouse; (B) From the community spouse to another individual or entity for the sole benefit of the community spouse; (C) To the individual’s child who is under age twenty-one years, a blind or disabled child, or to a trust established after August 10, 1993, for the child; or (D) To a trust established after August 10, 1993, solely for the benefit of an individual under age sixty-five years who is disabled as defined in section 17-1719-10. (3) The individual can substantiate that the individual intended to transfer the asset: (A) At either fair market value, or for other valuable consideration by providing substantiated evidence of attempts to dispose of the asset for fair market value, as well as evidence to support the value at which the asset was disposed; or (B) The asset was transferred exclusively for a purpose other than to qualify for medical assistance by providing convincing evidence as to the specific purpose for which the asset was transferred. (4) Circumstances that meet the requirements of this subsection include, but are not limited to: UNOFFICIAL 1725.1-42 (A) The individual did not require long- term care services at the time of the transfer; (B) The individual was living independently at the time of the transfer; (C) The individual did not have a pre- existing condition that could have led to the need for long-term care or assisted living services at the time of the transfer; (D) The transfer was not within the individual's control (e.g. court ordered); or (E) A diagnosis of a previously undetected disabling condition that led to the need for long-term care services occurred after the date of transfer. (5) The asset transferred for less than fair market value has been returned. (A) The returned asset must be evaluated for the impact on the individual’s eligibility for Medicaid. (B) If the entire transferred asset has been returned, the penalty period is negated. Coverage of long-term care services shall be provided for any portion of a penalty period that was applied prior to the return of the asset. (C) If only a portion of the transferred asset has been returned, and the individual is eligible for coverage of long-term care services, the penalty period shall be recalculated based upon the balance of the unreturned asset. (i) The end date of the recalculated penalty period shall be applicable if it exceeds the amount of the penalty period already applied; and (ii) Coverage of long-term services shall be provided for the portion UNOFFICIAL 1725.1-43 of the penalty period that exceeds the end date of the recalculated penalty period. [Eff 09/30/13] (Auth: HRS §346- 14; 42 C.F.R. §431.10; 42 U.S.C. §1396p(c)) (Imp: 42 C.F.R. §431.10; 42 U.S.C. §1396p(c))