ANNUITY EXAMPLE ANSWERS 122022 Example One Maximizing Annuity

ANNUITY EXAMPLE ANSWERS 1/2/2022

Example One Maximizing Annuity Payments § § Male Applicant, Age 71 Applied January 2018 Principal = $73, 000 (Current amount) Determine the Maximized Payment 1/2/2022

Example One Maximizing Annuity Payments Answer $73, 000. 00 ÷ 13. 66 $ 5, 344. 07 ÷ 12 $ 445. 34 Principal Life Expectancy, Male 71 Maximized Yearly Payments Months Maximized Monthly Payment

Example Two Annuity & Transfer § January 2018, Female Applicant (age 68) § Purchased a Deferred Annuity November 2005 § Elected payments to begin November 2016 @ $847 per month § Payments of $847 began November 2016 @ 66 years of age, as selected § Principal amount at purchase was $186, 000 § Current principal is $160, 600 § How do you treat this annuity? 1/2/2022

Example Two Annuity & Transfer Answer § The annuity was purchased prior to 2/8/06 and payments began as selected, therefore this annuity has no transactions on or after 2/8/06 and within the five year lookback § The annuity is reviewed to determine if payments are maximized $160, 600. 00 Current Principal Amount ÷ 18. 06 Life Expectancy @ 68 years of age $ 8892. 58 Yearly Payments ÷ 12 Months $ 741. 05 Maximized Payment § The payments are maximized and since annuity was purchased prior to 2/8/06 and no transactions have taken place within the five year lookback, no transfer penalty is imposed

Example Three Annuity & Transfer § Male Applicant 72 years old, Nassau County § Otherwise eligible Feb 2018 § Purchased a $190, 000 annuity in 2005 (with nonretirement fund money) § Payments of $1, 100/m deferred until July 2009 § Started payments Feb. 2014, $300/Month @ 68 y/o (value of annuity at time of transaction was $200, 000) § Applicant has an irrevocable Funeral Agreement with $1500 of non-burial space items included § Countable resources are $13, 450 1/2/2022

Example Three Annuity & Transfer cont’d § Is this annuity treated as a pre or post DRA annuity? Why? § Is the payout actuarially sound? § How is this annuity treated? 1/2/2022

Answer Three Annuity & Transfer Answer $200, 000. 00 ÷ 15. 70 $ 12738. 85 ÷ 12 $ 1, 061. 57 Value at time of transaction Life Expectancy @ 68 Yearly Payments Months Actuarially sound payout Since the payments on this annuity did not start as scheduled, the annuity is considered to be an annuity with a transaction on or after 2/8/06 and this has occurred within the five year lookback. Therefore, the annuity must be irrevocable non-assignable, actuarially sound, with equal payments and no deferral and no balloon payments. This annuity does not meet these requirements because it is not actuarially sound. The value of the annuity at the time of the transaction will be treated as a transfer. A transfer penalty would be calculated as follows: $200, 000. 00 Value at time of transaction - 14, 400. 00 Payments Received ($300 x 48 payments) $185, 600. 00 uncompensated Transfer - 1, 700. 00 Resource Deficit $183, 900. 00 Uncompensated Value ÷ 13, 053 Nassau Co Regional Rate 14. 09 Monthly Penalty $ x $ 13, 053 Nassau Co regional rate 14 Full months of penalty 182, 742 Average Cost for 14 months of Services $183, 900. 00 Gross Uncompensated Value - 182, 742. 00 Average Cost for 14 Months of Services $ 1, 158. 00 Partial Monthly Penalty

Example Four Annuity & Transfer § Female applicant, Broome Co, applies and is otherwise eligible Jan. 2018 § Purchased a $110, 000 irrevocable, deferred annuity in April 2015 with non-retirement funds § Payment of $383/m deferred until October 2016 § Payments began, as selected, on October ‘ 16 at 59 years of age, payment amount = $383/m § Countable resources @ application = $12, 600 § $12, 000 irrevocable funeral agreement which includes $1500 of non-burial space items

Example Four Annuity & Transfer cont’d § Does this annuity have a transaction within the five year lookback? § How is this annuity treated?

Example Four Annuity & Transfer Answer $110, 000. 00 Purchase Price ÷ 25. 40 Life Expectancy, Female @ 59 $ 4, 330. 71 Yearly Payment ÷ 12 Months $ 360. 89 Actuarially sound This annuity is a deferred annuity purchased after 2/8/06, within the five year lookback and subject to DRA rules. Since it is a deferred annuity, the purchase of the annuity would be considered a transfer. However, a transfer penalty is not imposed because the payment amount is actuarially sound. Applicant must name the State as remainder beneficiary.

Example Five MEC Dollar For Dollar Plans For Annuities That are Countable Resources § A/R has $120, 000 Total Countable Resources § $70, 000 “Other Resources” § $50, 000 Annuity § Dollar for Dollar Plan has paid out $100, 000 § What is the transfer amount? 1/2/2022

MEC Dollar For Dollar Plans For Annuities That are Countable Resources Answer: $ 50, 000 + 70, 000 120, 000 100, 000 $ 20, 000 15, 150 $ 4, 850 Annuity “Other” Resources Countable Resources Protected Assets Resources Counted Toward Eligibility MA level for 1 Excess Resources Since this annuity is a countable resource at time of application for MEC, the Dollar for Dollar Partnership policy/certificate holder may use the asset protection earned by the Partnership insurance to establish resource eligibility The applicant would not be required to maximize his/her payments on the annuity even though the Dollar for Dollar asset protection is not sufficient to disregard the entire value of the annuity

Example Six Annuity In Payment Status For MEC Dollar For Dollar Plan § 72 year old female Applicant for MEC has $150, 000 paid out by plan § Otherwise eligible February 2018 § Purchased an $80, 000 deferred annuity, July 2014 § Receiving maximized payments of $400/month that started January 2017, and refuses to name the state as beneficiary § $110, 000 total countable resources 1/2/2022

Annuity In Payment Status For MEC Dollar For Dollar Plan Answer This annuity was purchased on or after 2/8/06, therefore, the applicant must name the state as beneficiary or the purchase of the annuity is considered an uncompensated transfer. $150, 000 Paid by Plan $110, 000 Countable Resources $ 40, 000 Remaining Asset Protection $ $ $ $ 80, 000 Annuity Transfer 5, 200 Payments Received (13 months at $400 per month) 74, 800 Uncompensated value 40, 000 Remaining Asset Protection 34, 800 Uncompensated Transfer 15, 150 MA level for 1 19, 650 Uncompensated Transfer The district must note in the case record that $40, 000 of the DDAP was used to offset a transfer of assets as this amount cannot be reused at renewal. At renewal, resource eligibility will be determined using a DDAP of $110, 000 ($150, 000 -40, 000).