Redefining Actuarially Sound

Redefining Actuarially Sound

Redefining Actuarially Sound

In most states, the term "actuarially sound" means that the owner of an annuity must receive his or her investment back within his or her Medicaid life expectancy, as determined by that state's respective life expectancy table, or the life expectancy table published by the Chief Actuary of the Social Security Administration. In other words, the annuity can almost always be shorter than the owner's Medicaid life expectancy, but never longer.

Notwithstanding the above, three states have now diverted away from the general rule, with a fourth possibly on the way, including:

North Dakota. The State of North Dakota requires that an annuity term must be within 85% of the individual's Medicaid life expectancy. See North Dakota Medicaid Policy Manual section 510-05-70-45-30.

Oregon. The State of Oregon requires that an annuity term must be within three months of the individual's Medicaid life expectancy. See Oregon Administrative Code 461-145-0020.

Washington. The State of Washington requires that an annuity must have a term that is not less than five years if the Medicaid life expectancy of the annuitant is at least five years, or have a term equal to the life expectancy of the annuitant, if the Medicaid life expectancy of the annuitant is less than five years. See Washington Administrative Code 388-561-0201.

Illinois. The Illinois Department of Healthcare and Family Services has recently provided a Note of Proposed Amendments, outlining the post-DRA annuity regulations. Within those regulations, it is proposed that an annuity must have a term exactly equal to the annuitant's Medicaid life expectancy or the purchase will be considered a transfer for less than fair market value.

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