405 IAC 2-3-1.2 Annuities

Sec. 1.2. (a) For purposes of this section, "annuity" means a policy, certificate, contract, or other arrangement between two (2) or more parties whereby one (1) party pays a lump sum of money or other valuable consideration to the other party in return for the right to receive payments in the future and shall include any similar financial instrument, as may be specified by the Secretary of Health and Human Services. An annuity not purchased from an entity described in subsection (b) will be considered a transfer for inadequate consideration. (b) The purchase of an annuity, any instrument purporting to be an annuity, or any other arrangement that meets the definition of an annuity in subsection (a) shall be considered an uncompensated transfer of assets resulting in a penalty under section 1.1 of this rule unless the annuity is purchased from one (1) of the following: (1) An insurance company or another commercial company that sells annuities as part of the normal course of business. (2) A nonprofit organization qualified under Section 501(c) of the Internal Revenue Code as amended. (c) An annuity described in subsection (a) is not an asset for purposes of section 1.1 of this rule if: (1) the annuity is: (A) an annuity described in subsection (b) or (q) of Section 408 of the Internal Revenue Code of 1986, as amended; or (B) purchased with proceeds from an account or trust described in subsection (a), (c), or (p) of Section 408 of such Code, a simplified employee pension within the meaning of Section 408 of the Code, or a Roth IRA described in Section 408(A) of such Code; or (2) the annuity: (A) is irrevocable and nonassignable; (B) is actuarially sound; and (C) provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made. (d) An annuity shall be treated as a transfer of property for less than fair market value under section 1.1 of this rule unless: (1) the state is named as the remainder beneficiary in the first position for at least the total amount of Medicaid paid on the behalf of the applicant for Medicaid; (2) the state is named as such a beneficiary in the second position after the community spouse or minor or disabled child and is named in the first position if such spouse or a representative of such child disposes of any such remainder for less than fair market value; or (3) the individual purchased a long term care insurance policy that protects the annuity. (e) Individual retirement accounts (IRAs), Keogh Plans, 401K Plans, pensions, annuities, and other work related plans are considered retirement accounts and are an available resource to an individual if there is an option of withdrawing an amount for any reason, even though the member may not yet be eligible for periodic payments unless: (1) the applicant or member must terminate employment in order to obtain any payment from the retirement account; or (2) pursuant to (c)(2) [subsection (c)(2)], when the retirement account has been annuitized and regular, periodic payments are being received, the account is no longer a countable resource and the payments are considered unearned income. If the IRA has sporadic withdraws, then this is a conversion of resources and is not income, but remains a resource.