Treatment of Retirement Funds

Treatment of Retirement Funds A. The terms IRA and Keogh refer only to the type of retirement account and do not identify the underlying investment vehicle for the account, which may be a bank account, Certificate of Deposit, mutual fund, etc. 1. If retirement benefits are being received out of such accounts, the principal is not considered a resource. 2. Otherwise, IRAs and Keogh accounts are developed according to the resource policy applicable to the underlying investment vehicle. B. Retirement benefits are payments made at some regular interval (i.e., monthly) and result from entitlement to a retirement fund. Periodic payments must be of uniform rate, principal and interest (principal must equal or exceed amount of interest) and are counted as unearned income. C. If an individual owns a retirement fund and is not eligible for periodic payments, determine whether he can make a lump sum withdrawal. If he can withdraw any of the retirement fund, the value of the fund is a resource in the month the funds become available for withdrawal. D. The value of the retirement fund is the amount that can currently be withdrawn. If there is a penalty for early withdrawal, the fund’s value is the amount available after the penalty is deducted. However, any taxes which may be due are not deductible in determining the fund’s value. E. A retirement fund is a resource when the individual has the option of withdrawing a lump sum, even if he is not eligible for periodic payments. When this is the case: 1. If the individual applies for periodic payments and is denied, the value of the fund becomes a countable resource the month after the month periodic payments are denied. 2. A delay in payment beyond the individual’s control (e.g., an organization’s processing time) does not mean the fund is not a resource since the individual is legally able to obtain the money. F. A retirement fund is not a resource when a person must terminate employment to obtain payment or when a person is eligible for and receiving periodic payments. G. Retirement funds owned by an ineligible spouse or parent are excluded from resources for deeming purposes. H. A previously unavailable retirement fund is subject to resource rules in the month after the month the funds first become available.