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UPDATED: NOVEMBER 2007

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INCOME UNEARNED

RETIREMENT FUNDS

Description: Retirement funds are annuities or work-related plans for providing income when employment ends (e.g., pension, disability, or other retirement plans administered by an employer or union). Other examples are funds held in an individual retirement account (IRA) and plans for self-employed individuals (e.g., Keogh plans). Also, depending on the requirements established by the employer, some profit sharing plans may qualify as retirement funds.

Medicaid A/Rs who are eligible for periodic retirement benefits must apply for those benefits to be eligible for Medicaid. Periodic retirement benefits are payments made to an individual at some regular interval (e.g., monthly, quarterly, annually), which result from entitlement under a retirement fund. An individual commonly selects a payment plan, and, generally, only an initial filing for benefits is needed.

An individual is eligible for periodic payments if he/she is authorized to receive distributions on a regularly scheduled basis without having a penalty assessed. An individual is not entitled to periodic payments if he/she is not permitted to take regularly scheduled withdrawals penalty free. Ordinary taxes are not considered a penalty. Once periodic payments are received, the periodic payments are unearned income, and the fund is not a countable resource.

An A/R, who ordinarily might not be eligible for benefits, may be able to access his/her retirement fund sooner, without incurring a penalty under certain circumstances. The circumstances can vary, depending on the type of account and rules for the specific retirement fund. Examples of possible situations: when an A/R may be able to receive periodic benefits without incurring a penalty, when the A/R is found to be disabled (a finding of disability), or when the withdrawal of distributions are considered as part of a series of substantially equal periodic payments. If an A/R can receive distributions from a retirement fund on a regularly scheduled basis without having a penalty assessed, the individual would be considered to be eligible for periodic payments. The A/R would be required to file for maximized periodic payments as a condition of Medicaid eligibility.

(MRG)