Definitions for Annuities 510-05-70-45-10

(Revised 1/1/08 ML #3120)

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For purposes of the annuity sections:

  1. "Annuitant" means the individual whose life is considered in determining the price and payment schedule of an annuity, and who is usually the payee of the annuity;
  2. "Annuitized annuity" means an annuity subject to a contractually established schedule of payments to be made by the issuing entity, other than an immediate lump sum payment of all of the annuity's value;
  3. "Annuity" means a policy, certificate, contract, or other arrangement between two or more parties whereby one party pays money or other valuable consideration to the other party in return for the right to receive payments in the future for a fixed period of time;
  4. "Employee benefit annuity" means:
  1. An annuity that was purchased with the proceeds from an individual retirement account (IRA), a Roth IRA, a simplified employee pension, an employer or employee association retirement account, or an employer simple retirement account, as described in section 408 of the Internal Revenue code of 1986 (IRC);
  2. An individual retirement annuity under Section 408(b) of the IRC (not to be confused with an individual retirement account); or
  3. An annuity described in any of the following IRC Sections:
  1. Employer plan under 401(a);
  2. Trust under 501(a);
  3. Annuity plan under 403(a) or 403 (b); or
  4. Deferred compensation plan under 457(b).

(These annuities are considered "qualified" annuities.);

  1. "Issuing entity" means the individual or entity that issues and undertakes a promise to make payments provided in an annuity;
  2. "Level monthly payments" means substantially equal monthly payments such that the total annual payment in any year varies by five percent or less from the total annual payment of the previous year and does not provide for a balloon or deferred payment of principal or interest;
  3. "Life expectancy" means the anticipated lifetimes of individuals of a given age and sex according to the appropriate life expectancy table at 05-100-75.  
  4. "Third party annuity" means an annuity that is purchased and owned by a third party, but in which a Medicaid applicant, recipient, or their spouse, is the annuitant (i.e. an accident settlement annuity).