Long Term Care Medi-Cal (“LTC Medi-Cal”) helps pay for residential skilled nursing care for eligible persons. Persons who are age 65 or older, disabled (under the Social Security disability rules) or who receive Supplemental Security Income (“SSI”) are all categorically linked to LTC Medi-Cal. LTC Medi-Cal also requires that the applicant and applicant’s spouse, if any, meet asset (needs based) limitations.
The applicant’s own “non exempt assets” cannot exceed the two-thousand dollars ($2,000) Personal Reserve Allowance. For married applicants, the spouse’s own “non exempt assets” cannot exceed the Community Spouse Resource Allowance (“CSRA”), i.e., $ 123,600.00 in 2018.
Exempt assets include one’s residence, one’s personal effects and household furnishing, one vehicle, and a burial plot, burial insurance or a burial fund. Non-Exempt assets count unless they are “unavailable”.
Work related retirement plans owned by the applicant if payments are being deferred are considered to be available – and so count for determining LTC Medi-Cal eligibility. Work related retirement plans includes Pensions, Individual Retirement Accounts (“IRA’s”), 401(k) accounts, and Keogh accounts.
Work related retirement accounts belonging to the applicant’s spouse are exempt assets and so do not count as part of the spouse’s CSRA. The applicant’s own retirement accounts, however, are non exempt assets that count unless they are “unavailable”.
If the applicant is aged seventy and one-half years old and is receiving the Required Minimum Distributions (“RMD’s”), required under IRS regulation, then any undistributed portion of the retirement account is unavailable (not counted). The annual RMD’s go to the applicant’s Share of Cost – i.e., what the applicant pays from the applicant’s own income to the skilled nursing facility.
For example, say John who is 73 years old owns a house, a car, a joint bank account with his wife Jane that has $100,000, and John has an IRA account with a balance of $50,000. Jane can transfer $98,000 from the joint account into a separate account in her name. So long as John is receiving his RMD’s each year then John is eligible to receive LTC Medi-Cal as he is above age 65 and both John and Jane meet their resource limitations.
If the applicant is under age seventy and one-half (70 ½) years old, however, then he or she must either receive Periodic Payments, or make Systematic Withdrawals, from each work related retirement account. Such payments and withdrawals must include both interest and principal from each retirement account.
For example, now say that John is 62 years old but is disabled. John is not yet receiving RMD’s. If John requests to receive periodic distributions of principal and interest then the undistributed portion of John’s IRA is unavailable as of when John provides proof that he made the request.
With Roth IRA’s, which never require any RMD’s, the applicant must either received Periodic Payments or make Systematic withdrawals of principal and interest regardless of the applicant’s age.
Alternatively, a LTC Medi-Cal applicant can request that the retirement plan administrator distribute the entire retirement account in a single lump sum. So long as the applicant makes a bona fide attempt, i.e., takes all necessary steps required to make the withdrawal, then any undistributed retirement assets are treated as unavailable. The “unavailable” status remains so long as the applicant continues to make good faith bona fide efforts to receive payment and continues to provide verification. Distributions received go towards Share of Cost.
Although Work Related Retirement Plans are not exempt assets they can still become unavailable assets — and not be counted — if the applicant follows certain rules. The rules discussed above come from the California Department of Health Services’ All County Welfare Directors (“ACWD”) Letter No. 02-51 (dated October 18, 2002) and from 22 CCR §50458, a DRAFT Regulation itself attached to ACWD Letter 90-01 (dated January 5, 1990).