SECTION 358.334. Treatment of a Nonemployment-Related Annuity with a Purchase or Transaction Date before February 8, 2006

(a) This section describes the Texas Health and Human Services Commission's (HHSC's) treatment of nonemployment-related annuities purchased or having a transaction date before February 8, 2006. In this section, a nonemployment-related annuity means a revocable or irrevocable annuity a person may purchase to provide income.

(b) A nonemployment-related annuity is not a countable resource if the annuity:

(1) is irrevocable;

(2) pays out principal in equal monthly installments and pays out interest in either equal monthly installments or in amounts that result in increases of the monthly installments at least annually;

(3) is guaranteed to return within the person's life expectancy at least the person's principal investment plus a reasonable amount of interest (based on prevailing market interest rates at the time of the annuity purchase, as determined by HHSC);

(4) names the state of Texas or HHSC as the residual beneficiary of amounts payable under the annuity contract, not to exceed any Medicaid funds expended on the person during the person's lifetime, except as described in subsection (c) of this section; and

(5) is issued by an insurance company licensed and approved to do business in the state of Texas.

(c) If a person in an institutional setting is married and the spousal impoverishment provisions of §358.413 of this subchapter (relating to Spousal Impoverishment Treatment of Income and Resources) apply, the requirement in subsection (b)(4) of this section does not apply to a nonemployment-related annuity purchased by or for a community spouse.

(d) A nonemployment-related annuity that does not meet the requirements of subsection (b) or (c) of this section is a countable resource.

(1) HHSC applies transfer-of-assets provisions in Division 4 of this subchapter (relating to Transfer of Assets) to an annuity that is a countable resource and does not meet the criterion in subsection (b)(3) of this section. The date of the transfer of assets is the date of the annuity purchase or, if applicable, the date the annuity contract was last amended in exchange for consideration. HHSC determines the amount of the transfer by assessing the difference between the life expectancy of the person and the number of years remaining until the annuity is paid out. The amount payable during that period is the amount of the transfer of assets.

(2) If the annuity is a countable resource and is revocable, HHSC:

(A) counts the amount refundable upon revocation of the annuity as the value of the resource; and

(B) applies transfer-of-assets provisions in Division 4 of this subchapter if the person sells the annuity for less than the amount refundable upon revocation.

(3) If the annuity is a countable resource and is irrevocable, HHSC:

(A) counts fair market value as the value of the resource and presumes fair market value is 80% of the annuity's total remaining payout;

(B) applies transfer-of-assets provisions in Division 4 of this subchapter if the annuity is sold for less than the purchase price minus the amount of principal already paid; and

(C) if the terms of the annuity contract are non-negotiable, applies transfer-of-assets provisions in Division 4 of this subchapter to the total remaining payout.

(e) Income from a nonemployment-related annuity that is not a countable resource under subsection (c) of this section is treated in accordance with 20 CFR §§416.1120 - 416.1124.

Source Note: The provisions of this §358.334 adopted to be effective September 1, 2009, 34 TexReg 5497