Retirement Accounts Of the Community Spouse
When a married couple considers paying for long-term care with TennCare/Medicaid, they are split into two categories: 1. Institutionalized Spouse (IS) and 2. the Community Spouse (CS). The difference between the two is that the IS is applying for TennCare/Medicaid benefits while the CS is not. Under the same application, Medicaid always determines whether spousal resources are countable or exempt. As you would expect, countable resources can prevent eligibility, but exempt resources do not. Traditionally, retirement accounts, such as IRA’s and 401K’s, for the IS are always countable resources for qualification purposes. On the flip side, the CS’s retirement accounts did not count, if the CS was taking monthly payment that were equal to a required minimum distribution (RMD).
This rule recently changed. Now, if a CS has the option of withdrawing funds in a lump sum, no matter if an RMD is possible, the retirement account is considered a countable resource. The retirement account can be an excluded resource if the CS is required to terminate their employment to access the funds or they are receiving periodic payments (e.g., pension or annuity). However, the period payment option would require that the pension be outside the control of the CS or that the annuity be set up to meet or modified to meet exact Medicaid rules. Otherwise, distributions and systematic withdrawals from a retirement account are conversions of a resource rather than income when a lump sum amount can be withdrawn.