(b)lines Ask the Experts – 403(b) Assets and Medicaid Eligibility

“I did not have the faintest idea as to the answer, or even where to look for the answer! Can the Experts help?” 

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:

Excellent question. Since nursing home expenses can be substantial ($5,000-$8,000 per month, according to some estimates) obviously there is a concern that most, or all of the funds that were accumulated over an individuals working career would simply go to the nursing home in the event of a long-term stay. Medicaid could pay for such expenses without depleting retirement plan assets, but, in order to be eligible for Medicaid, income and asset limits apply. So the basic question is, “Do retirement plan assets impede my ability to qualify for Medicaid?”

The short answer is yes: retirement plan assets, such as 403(b) plan assets, are counted when determining Medicaid eligibility. Does this mean that in general, retirement plan assets would disqualify an individual and his/her spouse for Medicaid coverage, forcing the couple to pay directly for nursing home costs if not covered by private insurance? According to this HHS article (http://aspe.hhs.gov/daltcp/reports/spouses.htm), this is not always the case, since the spouse of a nursing home resident is permitted to receive a certain amount of income in order to prevent impoverishment.

Furthermore, it is possible that retirement plan assets may be structured to provide spousal income within the Medicaid limits. In addition, certain states provide Medicaid solutions that may allow for retention of certain retirement plan assets. However, as the article indicates, planning strategies with respect to retirement assets can be complex, and the advice of counsel with specific expertise in this area should be sought.