I have read that a pension is not counted towards Medicaid’s asset limit. I have also read that a pension is counted towards the asset limit. Which is it?
The answer is that it depends. Essentially, whether or not a retirement pension plan is counted towards Medicaid’s asset limit is a question of the availability of funds to the Medicaid applicant / beneficiary. Generally, most companies restrict access to the pension’s principal (the amount of money invested) and do not allow pensioners (persons receiving a pension) to take a lump sum. However, at the time of retirement, one may be given the option of taking his / her pension as a lump sum of cash instead of as monthly payments. If a lump sum option is taken, it will count as assets towards Medicaid’s asset limit. That said, become of most companies restriction to the pension’s principal, a pension is nearly always counted as income in the amount of the monthly pension payment.
Defined, a pension is an employer funded retirement plan that provides a monthly income upon the retirement of an employee. Please note that the majority of companies no longer provide pension plans, although common alternatives are 401(k) plans and IRAs. Unfortunately, as touched on above, a pension is treated as income or assets towards one’s Medicaid long term care eligibility. This could potentially cause one to be ineligible for Medicaid benefits.
Being over the income and / or asset limits does not mean that one cannot become Medicaid eligible. Some states, which are called medically needy states, allow applicants to spend their “excess” income on care and medical expenses, and once they have reached the medically needy income limit in their state, they will qualify for benefits for the remainder of the medically needy period. Other states, called income cap states, allow qualified income trusts (QITs), in which Medicaid applicants / beneficiaries deposit their “excess” income, no longer counting as income for Medicaid purposes. With a QIT, a trustee is named to manage it, and the funds are used for only very specific purposes, such as supplementing the care and medical costs of the applicant / beneficiary.
Assets over Medicaid’s limit can be “spent down” in a variety of ways, but one must exercise caution to avoid violating Medicaid’s look back rule. This is a period of 60-months, with two exceptions; in CA and NY. In California, the look back period is 30-months. During the “look back,” which immediately precedes the date of one’s long term care Medicaid application, the Medicaid agency is checking for asset transfers under fair market value (i.e., giving money to family or selling one’s house for less than it is worth). Violating the “look back” results in a penalty period in the form of Medicaid disqualification.
Professional Medicaid planners can assist persons in determining if their pension plan will impact their Medicaid eligibility, and if so, can help to implement Medicaid planning strategies to become Medicaid eligible.