Can I Qualify for Medicaid in New York if I Have Retirement Accounts?

In New York, a retirement account like an IRA or 401K is considered an asset when determining Medicaid eligibility unless the account is in pay-out status. When an account is in pay-out status, the principal balance is not counted as an asset. However, any monthly distributions from the account in pay-out status are treated as income and will count towards the Medicaid income limits.

Medicaid Income and Assets Limits in New York as of 2024

Effective 2024, a single person seeking Medicaid coverage in New York must adhere to a monthly income cap of $1,732 and an asset threshold of $31,175. For married couples where both partners are applying for Medicaid, the combined monthly income limit stands at $2,351, with a total asset limit of $42,312. In situations where only one spouse is applying, the applicant's income limit remains at $1,732 per month, with an asset limit of $31,175. The non-applicant spouse, on the other hand, has an asset limit of $154,140 and a Maximum Monthly Maintenance Needs Allowance (MMMNA) of $3,853.50. While the non-applicant spouse's income typically does not impact the applicant spouse's Medicaid eligibility, the $3,853.50 MMMNA allows the applicant spouse to shift a portion of their income to the non-applicant spouse if the latter's income falls below this threshold.

Retirement Accounts and Medicaid

In New York, retirement accounts are treated differently depending on their payout status when determining Medicaid eligibility. If the account is actively distributing funds to the owner on a regular basis, it is considered to be in payout status and is exempt from being counted as an asset. Conversely, if the owner has not started receiving distributions from the retirement account, it is deemed to be in pre-payout status. In this case, the full cash value of the account is factored in as an asset for assessing Medicaid eligibility. The cash value of retirement accounts is the current balance or worth of the account.

When the cash value of non-exempt retirement accounts surpasses the state's asset threshold, it can render the individual ineligible for Medicaid benefits. To illustrate, suppose an individual's only asset is a 401(k) account with a cash value of $50,000. Given that New York's asset limit stands at $31,175, the individual would be required to spend down the surplus $18,825 to qualify for Medicaid coverage.

When retirement accounts are in payout status, the periodic distributions are regarded as income for the purpose of determining Medicaid eligibility. The monthly distributions from retirement accounts are combined with an individual's other income sources, including Social Security benefits and pensions. If the cumulative monthly income surpasses the state's Medicaid income threshold, the individual may be deemed ineligible for coverage. To illustrate, consider an individual who receives $1,500 per month from a pension plan and $500 per month from a traditional IRA in payout status, resulting in a total monthly income of $2,000. Given that New York's monthly income limit stands at $1,732, the individual would not meet the income criteria for coverage unless they spend down the surplus $268 each month on approved expenses.

Medicaid rules encompass a wide array of retirement accounts, such as Traditional and Roth IRAs, Simplified Employee Pension (SEP) IRAs, 401(k) and 403(b) plans, pension plans, and Keogh plans. It's important to note that the treatment of these different types of retirement accounts may differ depending on the specific Medicaid regulations in each state.

Treatment of Retirement Assets Held by the Non-Applicant Spouse

Under New York Medicaid rules, retirement accounts owned by the non-applicant spouse that are not actively providing distributions are deemed as countable assets when determining the Community Spouse Resource Allowance (CSRA) and establishing the applicant spouse's Medicaid eligibility.

If the community spouse is not receiving periodic payments from an available retirement fund, the entire fund is counted as a resource for both determining the community spouse resource allowance and the institutionalized spouse's Medicaid eligibility. The value of the community spouse's retirement account is included in the total countable assets of the couple, which, in New York, are then divided in half between the two spouses to determine the amount of assets each spouse has for Medicaid eligibility purposes.

As of 2024, the non-applicant spouse's asset limit (CSRA) stands at $154,140. Should the cumulative value of their countable assets exceed this limit, the surplus must be spent down before the applicant spouse can be eligible for Medicaid benefits. Conversely, if the retirement account is in payout status, its entire value is exempt from the CSRA calculation. Under these circumstances, the distributions obtained by the community spouse from the retirement account are instead considered as income when assessing whether their income surpasses the Minimum Monthly Maintenance Needs Allowance (MMMNA). In New York, the MMMNA for a non-applicant spouse is set at $3,853.50. If the non-applicant spouse's monthly income falls below this limit, the applicant spouse has the option to transfer a portion of their income to the non-applicant spouse, up to the limit, in order to optimize the MMMNA. However, the non-applicant spouse has no limit in terms of income for purposes of the applicant spouse's Medicaid eligibility.

Understanding Medicaid rules for retirement accounts is crucial for individuals who may need long-term care services in the future. Failure to properly plan for Medicaid eligibility can result in significant financial hardship and the inability to access necessary care. It is essential to be aware of how different types of retirement accounts are treated by Medicaid, including whether they are considered exempt or countable assets, and how distributions from these accounts impact income eligibility. Should you need assistance in determining Medicaid eligibility and in utliziing estate planning strategies to preserve your wealth while at the same time being Medicaid-eligible, the Law Offices of Albert Goodwin are here for you. We are located in Midtown Manhattan, New York, NY. Call us at 212-233-1233 or email [email protected] to schedule a consultation.