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1146 Chapter 7:Worker guides • Section 7: OSIPM worker guides (07/2026) Two males, one 65 and one 80 years old, each buy $10,000 annuities in May 2005 to be paid over the course of 10 years. Looking at the tables below we find the 65-year-old is expected to live 16.67 years and the 80-year-old 7.62 years. Because the 65-year-old is expected to have the annuity paid out during his lifetime, there is no transfer of asset issue. The 80-year-old, however, is not expected to live long enough to benefit fully from his annuity. There is a transfer of asset issue with him we must explore. The question is how much of his investment is he going to get value from? He is expected to live 7.62 years, the annuity pays out over 10 years. So, there is a penalty on 26.9% of the original value. This is the percentage of the value he is not expected to receive (10-7.62 = 2.38 years. 2.38 years /10 years = 23.8%) of the original value. So, $10,000 X 23.8% = $2,380. This amount is the uncompensated value. The disqualification period is the number of months equal to the uncompensated value divided by the amount defined by rule for various time periods. For applications received after October 1, 2008, for instance, the uncompensated value is divided by $6,494 (461-140-0296). In the above example, we would have: $2,380 (Uncompensated Value) divided by $6,494 to find out how many months the disqualification period is. Since $2,380 is less than $6,494, there are 0 months of disqualification. Count the monthly annuity payments as unearned income. Example 2 This same 80-year-old individual with a $120,000 annuity with everything else the same would result in: • $120,000 X 23.8% = $28,560 • $28,560 divided by $6,494 = 4.4 So, he would be disqualified for 4 months from May 1, 2005. The disqualification period is past and there is no disqualification to serve at application. Summary If an annuity is expected to pay out longer than the person’s life expectancy, there is a potential disqualifying transfer. Figure out the percentage of time the individual isn’t expected to get the benefit of the annuity. Multiply this by the original amount of the annuity and plug this figure into the transfer of resource penalty calculation as illustrated above. Annuities purchased by individuals (or their spouses) on or after January 1, 2006 when the individual is in a standard living arrangement and purchased from January 1, 2006 through June 30, 2006 when the individual is in a non- standard living arrangement If the annuity meets the criteria of the rule (461-145-0020(4)(b)(C) or 461-145-0022(8)), count the monthly annuity payments as unearned income. If the annuity does not meet the criteria of the rule, count the annuity as a resource. Example 1 A single female individual who is 76 years old applies for Medicaid in February 2006. She purchased a $62,000 irrevocable annuity from an insurance company on January 15, 2006. The annuity will pay out $584 per month for