5633.1 Evaluation of the Contract Terms

The specific terms of the annuity contract shall determine whether the annuity is treated as a resource or as income.

Retirement Annuities - (e.g., Civil Service Annuities and Railroad Retirement Annuities) are exempt as a resource, but the income received is countable unearned income. A retirement annuity is one which meets the qualification tests of the Internal Revenue Code for tax purposes. A qualifying retirement annuity shall be one which receives favorable tax treatment and is non-transferrable. These annuities are also known as qualifying annuities.

Revocable Annuities - If the terms of the contract allow for the annuity to be surrendered or cashed-in with the issuing company, the annuity is considered revocable. An annuity which is in the accumulation phase is presumed to be revocable. The fair market value of a revocable annuity is considered an available resource because the contract can be cancelled in return for a cash payment. The fair market value is the cash value. The ES-3167A form shall be used to obtain the cash value from the issuing company. Any disbursements or withdrawals from an available revocable annuity are not countable income.

Irrevocable Annuities - If the terms of the contract do not allow the annuity to be surrendered or cashed-in with the issuing company, it is considered irrevocable. An annuity which is in the pay out phase is presumed to be irrevocable. The fair market value of an irrevocable annuity, including a non-assignable annuity, is considered an available resource because the annuity, or the right to the income stream from the annuity, may be sold on a secondary market.The fair market value is determined by considering the total amount of money used to fund the annuity as well as any additional earnings, such as interest and dividends. The value is then reduced by the total amount of withdrawals from the fund. Withdrawals include payments or assignment fees. The W-10, Annuity Evaluation Worksheet shall be used to compute that amount. The payments received from an available irrevocable annuity are not countable income.