LUMP SUM INCOME SR 97-03, 02/97 (FAM-A)

Nonrecurring payment. Lump sum payments are not counted for the gross income test. The following are examples of earned and unearned lump sum payments:

• retroactive earned income

• retroactive lump sum social security benefits

• retroactive lump sum railroad retirement benefits

• unemployment compensation lump sum payments

• insurance settlements

• lump sum retirement benefits

• windfalls (lotteries, inheritances, and other prizes)

To distinguish lump sum income from lump sum resources, see also Chapter 400, Resources, Lump Sum Payment: Nonrecurring, especially for sale of personal property, earned income tax credits, corrective payments, and retroactive SSI payments.

Treatment: differs according to program.

TANF MA

Treatment: See Chapter , Resources.

TANF Financial Assistance (PA)

Lump sum policy applies to all current recipients. However, lump sum policy affects applicants only if the lump sum is received in or after the month of application. A lump sum received prior to the month of application is treated as a resource. For a lump sum payment to be treated as income instead of a resource, the payment must have been received in or after the month of application.

Treatment: Unearned Income.

REDUCING LUMP SUM PAYMENTS

The countable amount of a lump sum payment may be reduced for the following reasons:

Lump Sums in the Month of Application

If the applicant receives a lump sum in the month of application, reduce the lump sum according to when assistance begins, as below:

• If the applicant’s assistance begins on the first of the month of application, do not reduce a lump sum.

• If the applicant’s assistance begins on the 16th of the month of application, reduce the lump sum by an amount equal to one-half of the standard of need.

• If the applicant’s assistance begins in the month after the month of application, reduce the lump sum by the full standard of need.

Directly Related Expenses

Reduce lump sum income by any expenses directly related to its receipt. Examples of such expenses include:

• medical expenses,

• funeral expenses,

• legal fees, and

• the portion of the lump sum used for repair or replacement of the resource for which the lump sum was paid.

Example

An individual received an insurance settlement of $1,000 for damage done to her car. Actual verified expenses for repairing the car were $800. The $800 is deducted from the lump sum income. The remaining $200 is countable unearned income.

Employment Expense Disregard

If appropriate, reduce earned lump sum income by the 20% employment expense disregard and any child care deduction. *Use the following calculation:

1.  Determine the number of months the earned lump sum is intended to cover. Round to the nearest month.

2.  Determine if the employment expense disregard or child care deduction applies or if these have already been allowed for any other income. If applicable, subtract these for the months covered by the earned lump sum. See Chapter 600, Standards and Budgets, , for information on employment expense disregard and child care deduction.

CONSEQUENCES OF LUMP SUM PAYMENTS

When individuals receive lump sum income, their TANF grant may be decreased or they may become ineligible. For lump sum purposes, Standard of Need is defined as the current standard of need for the assistance group plus any other person whose income is counted in determining eligibility. None of these individuals and their income may be removed from the assistance group, but must be computed into the decrease or period of ineligibility.

Exception: New members, such as newborn children, may be opened separately for TANF financial assistance during the period of ineligibility. The ineligible case head may act as a caretaker relative not included. Income of the parents—but not the lump sum—is considered available to the child.

Whether the consequence of a lump sum is a decreased grant or ineligibility, the consequence is determined automatically by EMS as described below. After reducing the lump sum, enter it on EMS as Code 156. When a parent has been excluded from the case but remains the caretaker relative, provide manual processing because EMS cannot include these individuals in the standard of need.

Decreasing Grants

If the reduced lump sum income is no greater than the standard of need, EMS will decrease the grant for 1 month (2 payroll periods).

Period of Ineligibility

If the lump sum income is greater than the standard of need, EMS will close the case for at least 1 month (2 payroll periods). Determine the number of months for which the case is ineligible in the following manner:

1.  Divide the net lump sum income by the standard of need. Whole numbers in the result are the number of ineligible months.

2.  EMS computes any fraction and enters it as Code 157, counting it as unearned income in the month after ineligibility ends.

3.  If the case reopens after ineligibility, remove the lump sum income Code 156 from EMS. If the case reopens the first month after ineligibility ends, any fraction of the lump sum payment remaining as Code 156 must be counted. If the case reopens later than the first month after ineligibility ends, remove the Code 156 and do not count the fraction.

Begin Date of Decrease or Ineligibility

Decrease: A decrease in an TANF grant begins with the first payroll following the ten-day advance notice period.

Ineligibility: Ineligibility affects the payroll prior to the payroll period in which the ten-day advance notice period expires.

Late Decrease or Ineligibility: If a lump sum payment was reported or processed late, treat the lump sum in the following manner:

1.  Determine the date the lump sum payment was actually received.

2.  Using the actual date of receipt, calculate the decrease in the grant or the period of ineligibility using the maximum time frames (10 days reporting, 10 days processing, 10 days advance notice period).

3.  If the term of the decrease or ineligibility has not expired, institute the remainder of that term.

4.  If, due to the late reporting or processing, the assistance group has already received unentitled grant money, treat .

End Date of Decrease

For all decreases, remove the lump sum income amount manually prior to the cut-off date for the next payroll period. This ensures that the grant is decreased for only 2 payroll periods. EMS cannot automatically remove the lump sum income.

End Date of Ineligibility

TANF payments cannot resume during a period of ineligibility.

Exceptions:

1.  Change in the Standard of Need: Increases in shelter costs or an TANF cost-of-living increase may change the standard of need. The assistance group may request recalculation of the period of ineligibility due to such a change. The recalculation begins in the payroll period after the payroll period in which the change was reported.

Reduce the original lump sum by the amount budgeted for ineligible months already gone by at the old standard of need. Divide the remainder of the lump sum by the new standard of need to determine the number of ineligible months remaining.

2.  Life-Threatening Circumstances: The end date of a period of ineligibility can be shortened when events occur which cannot be reasonably predicted and which result in the unavailability of the lump sum. Such life-threatening circumstances include:

- natural disasters such as floods, fires, hurricanes, and earthquakes,

- eviction, loss of owned residence, arson, theft of clothing/food/money,

- medical emergencies or serious illness of a group member or of a person for whom a group member is legally liable under state law to support,

- discontinuance of utilities or heat,

- peril to the physical or mental well-being of a child, and

- any other circumstance considered life-threatening by the DFA supervisor.

To shorten the period of ineligibility, the individual must show the lump sum income is being spent in connection with life-threatening circumstances because of both the following:

- there is no other income or resource available, and

- until the lump sum is spent on such a circumstance, it was used to meet essential needs.

3.  Medical Expenses Incurred during Ineligibility: Shorten the end date of a period of ineligibility if an assistance group member incurs approved medical expenses during the period. The medical expenses must have been paid by an assistance group member.

Approved medical expenses include any of the following:

- expenses Medicaid would pay if the assistance group were eligible for Medicaid, regardless of any service limits,

- medical services, supplies, or equipment which are not covered by Medicaid but are prescribed by a licensed physician,

- health care insurance premiums,

- prescription drugs, or

- any other medical expense considered appropriate by the DFA supervisor.

Reduce the original lump sum amount by approved medical expenses and recalculate the period of ineligibility. Advise the assistance group of the result.