New Savings Accounts Exempt from Medi-Cal Asset and Spend Down Rules (2024)

One of the vexing issues for people attempting to qualifyfor Medi-Cal are the limits on a person’s assets. And when they do have assets,such as a savings account, the Medi-Cal rules necessitate that the individualmust spend down those assets in order to qualify for conditional or Non-MAGIMedi-Cal eligibility. Medi-Cal will now recognize CalABLE savings accounts whereindividuals and others can contribute up to $15,000 annually and still qualifyfor Medi-Cal.

ABLE account beneficiaries can contribute their own income or property to their ABLE account. A beneficiary may transfer countable property to their ABLE account to spenddown excess property. – ACWD letter 19-21

CalABLE Accounts Help With Spend Down and Medi-Cal Asset Tests

The CalABLE (California’s Achieving A Better Life Experience) program does not apply to expanded Medi-Cal under the ACA where adults and children can become eligible for Medi-Cal based solely on their household MAGI (Modified Adjusted Gross Income) monthly income. The special CalABLE account is for individuals who may be eligible for conditional or Non-MAGI Medi-Cal based on a disability or blindness. However, there may be considerations for MAGI Medi-Cal households. Under the current rules, an individual applying for Non-MAGI Medi-Cal can have no more than $2,000 in liquid personal property assets (MC007-ENG_0415).

The ABLE program had its beginnings in 2014 when PresidentBarack Obama signed the Stephen Beck, Jr. ABLE legislation into federal law.This allowed states to decide whether to move forward with establishing ABLE accountsfor disabled individuals. Governor Brown signed California ABLE act into law in2015. In the All County Welfare Directors Letter (19-21) of September 20, 2019,California county Welfare Directors were given guidance on how to recognize,verify, and treat the new CalABLE savings accounts.

The CalABLE program allows individuals, trusts, estates, partnerships, associations, company, or corporation to contribute funds into a CalABLE account administered through the California Department of Treasury. Those funds will then be excluded from the personal property asset calculation used to determine eligibility for Medi-Cal. The total annual contribution cannot exceed $15,000 for a lifetime maximum amount of $529,000. For individuals receiving Supplemental Security Income, their accounts are capped at $100,000.

However, if qualified income is contributed to the CalABLEaccount, it is still considered monthly income for the individual for the monthin which it was received. Third party contributions, usually considered gifts, arenot considered as income.

Distributions from the CalABLE account are not considered income as long as they are spent on Qualified Disability Expenses. Withdrawals from the CalABLE account that are not spent on Qualified Disability Expenses may be counted as taxable income and may affect eligibility. Furthermore, there was no guidance in the Department of Health Care Services letter as how the CalABLE account may be treated under the Estate Recovery provisions of Medi-Cal.

Qualified Disability Expenses

What are some examples of Qualified Disability Expenses?

QDEs do not have to be merely medical expenses. They can include basic living expenditures. While the following list is not exhaustive, some examples of QDEs are:

Education: Tuition for preschool through post-secondary education, Books, Supplies and educational materials

Housing: Expenses for a primary residence, Rent, Purchase of a primary residence, Mortgage payments, Real property taxes, Utility charges

Transportation: Use of mass transit, Purchase or modification of vehicles, Moving expenses

Employment Support: Expenses related to obtaining and maintaining employment, Job-related training

Health, Prevention and Wellness: Premiums for health insurance, Mental health, medical, vision, and dental expenses, Habilitation and rehabilitation services, Durable medical equipment, Therapy, Respite care, Long term services and supports, Nutritional management, Communication services and devices, Adaptive equipment • Personal assistance

Assistive Technology and Personal Support: Expenses for assistive technology and personal support (e.g., a smart phone for a child with autism)

Miscellaneous Expenses: Financial management and administrative services, Legal fees, Oversight and monitoring, Home improvement, modifications, maintenance and repairs, Funeral and burial expenses

CalABLE.ca.gov

The CalABLE program, like all Medi-Cal programs, has manyrules and restrictions. They can be complicated. Below are excerpts from theAll County Welfare Directors letter and the document is attached fordownloading. Carefully review the letter and then consult with your countyeligibility worker if you think you might be eligible for the CalABLE program.

Department of Health Care Services, All County Welfare Directors, Letter No.: 19-21, September 20, 2019

The California ABLE Act allows qualified individuals withdisabilities to open tax-advantaged ABLE accounts in California underCalifornia’s ABLE program, which is called CalABLE. The CalABLE program and theCalABLE accounts are administered through the California Department of Treasuryvia the California ABLE Act Board. The CalABLE program was launched in December2018.

Who is eligible to open an ABLE account?

Under Section 102(a) of the ABLE Act (codified at 26 U.S.C.§ 529A(e)), an individual is eligible for an ABLE account if the individual isdisabled or blind with onset prior to age 26 and meets certain criteria. ABLEprogram administrators are responsible for determining eligibility for openingan ABLE account. County Eligibility Workers (CEW) are not responsible fordetermining if an individual is qualified to open an ABLE account. Also, per Section102(a) of the ABLE Act (26 U.S.C. § 529A(e)(2)(B)), no inference may be drawn froman ABLE account disability certification for purposes of establishingeligibility for Medi-Cal.

Who can contribute funds?

ABLE account beneficiaries can contribute their own income or property to their ABLE account. A beneficiary may transfer countable property to their ABLE account to spenddown excess property. Income received by the beneficiary and then contributed to his or her ABLE account is counted as income in the month received. For example, a beneficiary has their income of $500 directly deposited into their ABLE account each month; the $500 is still countable income in that month even though it is directed to an ABLE account. The result is the same if the beneficiary first deposits their income into a Non-ABLE checking account and then transfers that income to an ABLE account. The income is counted one time, when it is received.

Third party contributions (made by persons other than thedesignated beneficiary) to an ABLE account are disregarded in determiningMedi-Cal eligibility. A transfer of funds from a trust, such as a special needstrust (SNT) or pooled trust, to the beneficiary’s ABLE account, are treated thesame as third-party contributions. Distributions from an SNT or pooled trustthat would normally be counted as income are disregarded if they arecontributed into the beneficiary’s ABLE account.

Limits on Contributions

The total annual contribution that an ABLE account canreceive from all sources is currently $15,000. This amount is based upon thefederal gift-tax exclusion and, therefore, is subject to change. Beneficiariesmay save up to the lifetime maximum of $529,000 and still be eligible forfederal means-tested public benefit programs, including Medi-Cal. CEWs are notresponsible for determining if an individual has exceeded ABLE account contributionlimits, except as needed to verify spend down of excess property.

Supplemental Security Income/State Supplementary Payment(SSI/SSP) recipients are subject to a $100,000 contribution limit. If therecipient exceeds the $100,000 limit, their SSI/SSP eligibility will besuspended until the ABLE account balance is brought within the $100,000 limit.For individuals with SSI/SSP-linked Medi-Cal, the suspension of the SSI/SSPdoes not result in a loss of their Medi-Cal eligibility. The SSI/SSP linkedMedi-Cal eligibility will continue unless the SSI/SSP eligibility isterminated.

Out-of-State ABLE Accounts

Federal law granted states the option to expand their state ABLE program nationwide. California residents who meet the ABLE account criteria may open an ABLE account in any state that offers a national plan. Each state will have their own program administrator for their state ABLE program. The ABLE National Resource Center is a helpful resource on current state ABLE programs. CEWs will see ABLE accounts from other states as well as CalABLE accounts. ABLE accounts are treated the same for Medi-Cal eligibility purposes regardless of the state in which they are opened.

Verification and Documentation of an ABLE Account for Medi-Cal Eligibility

The CEW shall verify the ABLE account by documenting whichstate ABLE program the account is from, the designated beneficiary, accountnumber assigned by the state program, account open and closed dates, name ofperson with signature authority and account balance. Individuals are onlyallowed one ABLE account at a time. An ABLE account statement is an acceptableform of verification and documentation. If a statement is not available fromthe applicant or beneficiary, follow the Medi-Cal verification process to get asigned release from the applicant or beneficiary to obtain a statement from theapplicable ABLE administrators and, if necessary, accept self-attestation.

Counties are not responsible for reviewing the ABLE accountcontributions and distributions, or for evaluating whether or not distributionswere for “qualified disability expenses” (QDEs). QDEs are broadly defined asany expenses related to the eligible individual’s blindness or disability. Thesemay include, but are not limited to, education, housing, transportation,employment training and support, assistive technology and related services,health, prevention and wellness, financial management and administrativeservices, legal fees, expenses for ABLE account oversight and monitoring,funeral and burial, and basic living expenses. Beneficiaries will be requiredto report to the county any distributions that are used for a Non-QDE, or whena beneficiary no longer intends to use a QDE distribution for a Non-QDE. Thecounty will be required to evaluate whether a reported Non-QDE accountdistribution affects Medi-Cal eligibility. For example, when the beneficiarymakes a deposit of the distribution to other financial institution account(s),such as a checking account, and the county is evaluating property eligibilityor when the county is determining whether such a distribution is countableincome.

Medi-Cal Treatment of ABLE Account Funds

Under federal law, funds in, contributions to, and specifieddistributions from an ABLE account must be disregarded, and income earned onthe funds in the ABLE account and retained in the ABLE account are not countedas income, when determining eligibility for federal means-tested public benefitprograms, such as Medicaid. California law is aligned with federal law fortreatment of an ABLE account when determining eligibility for Medi-Cal.

Modified Adjusted Gross Income (MAGI) Eligibility

Funds held in an ABLE account are not subject to federal orstate income tax; therefore, they are not counted as income for MAGIeligibility. Similarly, contributions to an ABLE account by a third party areconsidered a gift, and are not counted as income in the MAGI determinationbecause the amount is under the annual federal gift tax exclusion. Incomereceived and contributed or directly deposited into an ABLE account is countedas income in the month received.

Non-MAGI Eligibility

Property: All funds in an ABLE account must be disregarded in determining property eligibility for Non-MAGI Medi-Cal eligibility. Third party contributions and contributions from an SNT or pooled trust to an ABLE account are not included in the property reserve.

Income received and contributed or directly deposited into an ABLE account is counted as income. Contributions such as third-party contribution funds and distribution(s) from an SNT or pooled trust contributed into ABLE accounts are excluded as income for Non-MAGI purposes.

Example: Sam received State Supplemental DisabilityInsurance (SSDI) income and had it directly deposited into his ABLE account inthe same month. Sam’s SSDI income is counted as income in that month.

Treatment of ABLE Account Earnings

ABLE accounts can accrue interest, earn dividends, andappreciate in value. These ABLE account earnings are excluded from income ofthe designated beneficiary for both MAGI and Non-MAGI Medi-Cal.

Medi-Cal Eligibility Treatment of Distributions from ABLE Accounts

Distributions from ABLE accounts are not counted forMedi-Cal eligibility purposes when they are used for QDEs. Distributions forNon-QDEs may affect Medi-Cal eligibility and, therefore, must be reported bythe beneficiary to the county and the county must determine if the distributionis countable as income or property.

Medi-Cal Eligibility Treatment of Retained Distributions for QDEs

The ABLE Act does not require that distributions from anABLE account be used within the month the distribution is made, or within anyspecific period. The retained distribution from an ABLE account should continueto be disregarded after the month of receipt unless it was used fornon-qualifying expenses.

It is not the responsibility of the CEW to trackdistributions for QDEs. If a distribution is retained for a future QDE, thecounty may inquire whether or not the distribution is for a QDE in order todetermine how the retained distribution is treated for Medi-Cal eligibilitypurposes. Please see example below.

Example: A designated beneficiary takes out $1,000 fromtheir ABLE account in June and reports that it is for a health-related QDE butdoes not spend the $1,000 until November when the health-related QDE is due.The $1,000 is not counted as income or as part of the property reserve fromJune through November as long as it is used to pay for the QDE.

Treatment of Previously Excluded QDEs Distribution Used for Non-Qualified purpose

MAGI Eligibility

Funds distributed from an ABLE account and used fornon-qualified expenses are taxable and the amount that is taxable is countableincome for the eligibility determination. The taxable amount is calculatedusing a formula established by the Internal Revenue Service. Counties mustaccept self-attestation of the amount of taxable income received due todistribution of ABLE account funds for non-qualified expenses. If the reportedtaxable income cannot be electronically verified, the income must beadministratively verified.

Non-MAGI Eligibility

The amount of funds distributed from an ABLE account thatare used for non-qualified expenses are included in the property reserve.However, if the funds are spent down or returned to the ABLE account, thebeneficiary may still be property eligible for that month if they are withinthe property limits at some point during the month. Similarly, a distributionthat was previously excluded or retained for a QDE counts as property if usedfor a Non-qualified expense. CEWs should counsel applicants with an ABLEaccount that using funds from an ABLE account for non-qualified expenses mayaffect their Medi-Cal eligibility, and inform them of their duty to report. Itis not the responsibility of the CEW to track QDEs. It is the beneficiary’sresponsibility to report a change of circ*mstances to the county if they usefunds in an ABLE account for non-qualified expenses. The CEW should applyregular property rules for Non-MAGI eligibility to determine if the reportedfunds used for non-qualified expenses would affect the beneficiary’s Medi-Caleligibility.

Example 1: John takes out $10,000 from his ABLE account fora pre-ordered medical device in July. He pays a $5,000 deposit. While waitingfor the medical device to be available, John gives his sister $1,000 from hisABLE distribution for her personal use in September. The $1,000 that John gavehis sister is countable property and must be reported to the county. The countymust follow 10-day notice requirements for adverse action, if appropriate. Theremaining $4,000 that is retained is still an excluded resource if used to payfor a QDE.

Once the beneficiary no longer intends to use thedistribution, or a portion thereof, for a QDE, it is counted as property.

Example 2: Mary takes out $6,000 from her ABLE account to pay for her educational expense that is a QDE. Before school started, Mary got a job, decided not to go to the school, and reports her change of intent to the county. The $6,000 would count as property starting in the month that she decided to use it for a Non-QDE. The county must counsel Mary about spend down. Mary may spend down the $6,000, use it for another QDE or return the funds to her ABLE account before the end of the month in order to spend down any excess property.

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