Method 1 - Step 2

Step 2

The next step, if the annuity is a commercial annuity, is to determine if the annuity issues periodic payments in equal amounts

Equal payments mean that each payment throughout the life of the payment period is for the same amount. If the payments end in a balloon payment (a large payment not equal to regular payments) the annuity does not have payments in equal amounts. Variable annuities do not provide equal payments.

that are not deferred.

A deferred payment means that the payments do not start within one payment interval from the date of annuitization. For example, if the payment interval is once a month and the payments do not begin until three months after annuitization, the payments have been deferred.

If the annuity has equal payments, including not having a balloon payment, and does not defer payments, continue to Step 3.

If the annuity does not have equal payments, or payments are deferred, an annuity transfer has occurred and an uncompensated transfer amount must be calculated.

The uncompensated transfer amount is the amount of the annuitized funds less any payments already received.

Annutized Funds
- Payments Already Received
= Uncompensated Transfer Amount

The uncompensated amount is then used to determine a transfer penalty.

More information about determining and applying a transfer penalty can be found in the Health Care Eligibility Policy Manual and in the MA-LTC Transfers course.

No further annuity transfer evaluation is required.

Example:

Carlos is requesting MA-LTC today. He owns an annuity he purchased and annuitized through his insurance company for $100,000. He is currently receiving payments of $500 each month. Payments began one month after annuitization. His last payment will be in the amount of $20,000. Carlos has received payments for ten years.

Action:

Use the $40,000 uncompensated transfer amount to determine a transfer penalty, because Carlos’ annuity has a balloon payment which means payments are not equal. The uncompensated transfer amount was calculated as follows:

Annuitized funds = $100,000 (the amount used to purchase the annuity).
Payments Already Received = $60,000 (12 months X 10 years X $500 payment).
Uncompensated Transfer Amount = $40,000 ($100,000 - $60,000).

Page 6

Transfer Evaluation - Evaluation Method 1

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