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Title 8: Medicaid Page 32 Iowa Department of Health and Human Services Employees’ Manual Chapter D: Resources Transfer of Assets Revised September 13, 2024 Transfers That Cause a Medicaid Penalty In that case, the annuity is not actuarially sound and a transfer of assets for less than fair market value has taken place. The penalty is assessed based on a transfer of assets that is considered to have occurred at the time the annuity was purchased or the date the annuity became available as a countable resource, whichever is later.

1. Mr. W, at age 65, purchases a $10,000 annuity to be paid over the course of ten years. His life expectancy according to the table is 17.19 years. Thus, the annuity is actuarially sound. 2. Mr. A, at the age of 80, purchases a $10,000 annuity to be paid over the course of ten years. His life expectancy is only 7.9 years. Thus, a payout of the annuity for approximately three years is considered a transfer of assets for less than fair market value and the amount is subject to penalty.  Purchase of an annuity on or after February 8, 2006, by a Medicaid applicant or member as the annuitant, unless the annuity also meets one of first three conditions and the fourth condition described below: • The annuity is an annuity described in subsection (b) or (q) of section 408 of the United States Internal Revenue Code of 1986, or • The annuity is purchased with proceeds from:  An account or trust described in subsection (a), (c), or (p) of section 408 of the United States Internal Revenue Code of 1986;  A simplified employee pension (within the meaning of section 408(k) of the United States Internal Revenue Code of 1986); or  A Roth IRA described in section 408A of the United States Internal Revenue Code of 1986; or • The annuity:  Is irrevocable and nonassignable;  Is actuarially sound, as determined in accordance with actuarial publications of the Office of the Chief Actuary of the United States Social Security Administration (see Annuities); and  Provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made; and