441-2        UNEARNED INCOME

 

Unearned income is any income that is not earned.  Unearned income includes but is not limited to the following types:

 

441-2 A.   BENEFITS PAID UNDER TITLE II OF THE SOCIAL SECURITY ACT

 

Retirement, survivors, and disability insurance (RSDI) monthly benefits count as unearned income.  The amount of any premiums deducted for Supplementary Medical Insurance (SMI) under Medicare from RSDI benefits is included in unearned income.

 

441-2 B.   ANNUITIES, PENSIONS, RETIREMENT, OR DISABILITY PAYMENTS

 

Annuities, pensions, retirement benefits, and disability benefits count as unearned income.  

 

Annuity.  An annuity is a sum paid monthly, yearly, or at other specific times in return for the payment of a fixed sum.  Annuities may be purchased by an individual or an employer.

 

Pensions and retirement benefits.  Pensions and retirement benefits are payments to a worker following his or her retirement from employment.  These payments may be paid directly by a former employer, a trust fund, an insurance company, or other entity.

 

Disability benefits.  Disability benefits are payments made because of injury or other disability.  Disability benefits are unearned income, except that certain accident disability benefits paid within 6 months after the month an employee last worked are earned income.  (See manual section 441-1C.)

 

441-2 C.   DEPARTMENT OF VETERANS AFFAIRS PAYMENTS

 

1.  Needs based VS not Needs based

 

The Department of Veteran Affairs (VA) compensation payments are based on a service-connected disability or death.  VA compensation payments may or may not be based on need.  VA compensation payments are countable unearned income.  If they are needs based, the $20 general income exclusion does not apply.

 

Needs Based:

 

 

Not Needs Based:

 

 

Special Monthly Compensation (also known as aid and attendance) is not countable income.

 

If the veteran or their spouse is receiving extra compensation designated for the veteran's dependent, the augmented portion of the payment that is designated for the dependent is not countable income.  An augmented benefit is an increase in the benefit payment to a veteran or a veteran's surviving spouse because of a dependent.  We do not count the dependent's portion of the benefit as income to the veteran or the veterans surviving spouse.  The dependent's portion is income to the dependent.

 

All VA Pension payments are countable income (except for the Medal of Honor Pension).  If they are needs based, the $20 general income exclusion does not apply.

 

Needs Based:

 

 

Not Needs Based:

 

 

2.  EDUCATIONAL PAYMENTS:

 

The VA provides educational assistance under a number of different programs, including vocational rehabilitation.  Depending on the nature of the VA program, different income and resources policies apply.  Payments are usually made on a monthly basis only for months in which the veteran is in school.  However, if school attendance is less than half time, the payments may be made less frequently.  Dependents and survivors of veterans may also be eligible for educational assistance.  Some programs are "contributory"  That is, the money is contributed by the active service-person to an educational fund and the government matches the money when it is withdrawn while the veteran is pursuing an education.  The portion of funds contributed by a veteran are treated as an available resource because the veteran has the right to withdraw this contribution at any time.

 

Any VA educational benefit payment, or portion of such payment, which is funded by the government, and is not part of a program of vocational rehabilitation, is unearned income for APA purposes.  Payments made as part of a VA program of vocational rehabilitation are not income.

 

Any portion of a VA educational benefit payment which is a withdrawal of the veteran's own contribution is a conversion of resource and is not income.  Because of this, only that portion of an educational payment which is income to the individual obtaining the education is subject to the income exclusion for educational expenses.  (Refer to manual section 442-3A(7)(b).

 

Any portion of a VA educational benefit payment that is augmented for a dependent is counted as income to the dependent if the dependent is living with the veteran.  If the dependent is not living with the veteran, the augmented portion is disregarded as income to both the veteran and the dependent.  However, if the veteran gives any portion of the augmented benefit payment to the absent dependent, that portion is counted as income to the dependent.

 

Verification.

A VA check, award letter, or other documentation in the individuals possession may be used to verify VA benefit amounts.  IN the absence of such proof, the case worker MUST contact the VA to obtain the information.

 

3.  VA CLOTHING ALLOWANCE

 

A VA clothing allowance related to the use of prosthetic or orthopedic appliance is not income.  This type of payment is considered as cash received in conjunction with medical and social services from a governmental or private agency.  (Refer to manual section 440-3B)

 

Verification.

Accept the individual's allegation concerning a VA clothing allowance received by a veteran who uses a prosthetic or orthopedic appliance.  

 

4.  VA PAYMENT ADJUSTMENT FOR UNUSUAL MEDICAL EXPENSES

 

Any increase in a needs-based VA compensation or pension payment which is the direct result of unusual medical expenses is not counted as income.

 

Verification.

A VA check, award letter, or other documentation in the individual's possession may be used to verify VA benefit amounts.  In the absence of such proof, the case worker MUST contact the VA to obtain the information.

 

 

441-2 D.   INCOME BASED ON NEED

 

Needs-based income received by an eligible individual or couple (or by an alien sponsor) is counted as unearned income.  However, needs-based income received by an ineligible spouse (except for SSI benefits, or income taken into account in determining eligibility for and the amount of SSI benefits) is excluded from the eligible individual's income.  (Refer to section 460-6 for the policy on this exclusion for ineligible spouses).

 

Needs-based income is income that is:

 

  1. Funded either wholly or partially by the Federal government or by a private non-governmental agency, such as the Salvation Army or Catholic Charities, and

 

 

  1. Provided under a program which uses income as a factor of eligibility.

 

Programs that provide needs-based income include Bureau of Indian Affairs General Assistance ( BIA GA ), most Veteran's Administration ( VA ) pensions, Refugee Cash Assistance and Supplemental Security Income ( SSI ) payments.  (Refer to Administrative Procedures Manual section 128-4 for more information about Refugee Assistance.)

 

Note:  

Refugee Cash Assistance payments are budgeted like Alaska Temporary Assistance payments.  Please see section 452-10 for budgeting information.

 

The $20 general income exclusion does not apply to needs-based income.

 

Needs-based income is not the same as needs-based assistance.  Certain needs-based assistance is excluded from income; needs-based income is not.  (See section 442-3B for policy on the needs-based assistance income exclusion.)

 

441-2 E.   WORKERS' COMPENSATION PAYMENTS

 

Workers' Compensation payments are awarded to an injured employee or to the employee's survivors because of a job-related injury are counted as unearned income.  However, any portion of a Workers' Compensation award designated by the payor for medical expenses or legal or other expenses of obtaining the award is not income.  To be disregarded as income, the portion designated for medical, legal, or other expenses must be verified by the payor.

 

441-2 F.   UNEMPLOYMENT INSURANCE BENEFITS

 

Unemployment insurance benefits are counted as unearned income.  Unemployment insurance benefits, also known as unemployment compensation, means payments received under a state or federal unemployment law, as well as additional amounts paid by unions or employers as unemployment benefits.

 

441-2 G.   DEATH BENEFITS

 

A death benefit is payment received as the result of another's death.  Examples of death benefits include:  proceeds of life insurance policies, lump sum death benefits from SSA , Railroad Retirement burial benefits, inheritances, and cash gifts from relatives, friends, or community groups to "help out" with expenses related to death.  Recurring survivor benefits, such as those received from SSA or from a private pension, are not death benefits.

 

Death benefits are income to an APA applicant or recipient to the extent that the total amount received by the applicant or recipient exceeds the amount paid, or obligated to be paid, by the applicant or recipient toward the deceased person's last illness and burial.

 

Last illness and burial expenses include:  related hospital and medical expenses, funeral, burial plot, interment expenses, and other expenses related to last illness and burial.  Other expenses may include such items as :  new clothing to wear to the funeral; food for visiting relatives; taxi fare to and from the hospital or funeral home; etc.

 

To determine the amount of income derived from death benefits, the total expenses are subtracted from the total death benefits.  The countable portion of a death benefit is income in the month it is received.  If death benefits are received in more than one month, the case worker will assume that the funds first received are the first spent.  For example, if death benefits of $1000 are received in January, and another $1000 is received in February, and the allowable expenses are $1500, $500 is counted as income in February.

 

Verification.  

Verify all last illness and burial expenses.  Such verification may include: bills, receipts, contact with the provider, etc.  If verification cannot be obtained, the case worker may accept a signed statement from the individual.  If an expense has been incurred but not yet paid, the case worker will assume that the individual will pay the expense unless there is reason to question the situation.

 

441-2 H.   AWARDS

 

An award is usually something received as the result of a court decision, board of arbitration, settlement of a civil issue, etc., and is counted as unearned income in the month of receipt.

 

In some cases, some or all of an award may not count as income.  For example, the portion of an award that is a reimbursement for medical or other expenses incurred in getting the award or for the legal cost of obtaining the award is not counted as income.  Such expenses are deducted from the first and from any following payments until the expense is completely offset against the income.

 

Note:  

The case worker must notify the Division of Health Care Services (DHCS), Third Party Liability (TPL) Unit at Office-ANC-HSS-HCS TPL whenever he or she becomes aware of an award which includes reimbursement for a medical expense which may have been paid for by Alaska's Medicaid program.

 

Verification.  

It is the client's responsibility to provide proof of the amount of an award.  Acceptable proof may consist of documents from the court or source of the award which show the amount of the award, the date it was paid, and the purpose of the award.

 

441-2 I.     CASH GIFTS

 

A cash gift is considered as countable unearned income.

 

A cash gift is cash that a person receives that is not a repayment for goods or services the person provided and is not given because of a legal obligation on the giver's part.  To be a gift, the cash must be given irrevocably (the giver relinquishes all control).  Donations and contributions may meet the definition of a gift.

 

Small cash gifts may be excluded as infrequent/irregular income.  (Refer to section 442-1A for the policy on this income exclusion.)

 

Verification.  

If questionable, the amount of a cash gift must be verified.  Acceptable proof of a cash gift may consist of a check stub, deposit slip, written statement from the giver, or other documentary evidence that verifies the amount of the gift.  A collateral contact with the giver is also acceptable.

 

441-2 J.   PRIZES

 

A prize is something won in a contest, lottery, or game of chance such as bingo winnings or pull tabs.  Cash prizes are unearned income in the month of receipt.  Gambling losses are not subtracted from gambling winnings when determining an individual's countable income.

 

Prizes such as bingo winnings or pull tabs are not anticipated when determining eligibility or payment amount.  Only income that can reasonably be expected to be received is counted when anticipating income.  Since bingo or pull-tabs are a game of chance, winnings cannot reasonably be anticipated, even if the individual has a previous pattern of winning.  

 

Prize income is only counted after it is received.  For example, bingo winnings that an applicant reports receiving in an application month will count in determining APA eligibility and payment for that month.

 

Small cash prizes may be excluded as infrequent/irregular income.  (Refer to section 442-1A for the policy on this income exclusion.)

 

Verification.  

It is the client's responsibility to provide proof of income from prizes.  Acceptable proof may consist of a prize receipt, letter, or oral or written statement from the source of the prize.  If proof is not available from the source of the prize, a statement from the client which specifies the amount and date received is acceptable.

 

441-2 K.   INHERITANCE

 

An inheritance is cash or any other type of asset that is received as the result of someone's death.  An inheritance that is received in the form of cash, or any other liquid asset that can readily be converted to cash, is considered as unearned income.

 

An inheritance that is received in the form of real or personal property is considered as in-kind support and maintenance, and is not counted as income.  Unless otherwise excluded, an inheritance is subject to evaluation as a resource the month after it is received.

 

441-2 L.   SUPPORT AND ALIMONY PAYMENTS

 

Support and alimony payments received by an individual, or by someone acting on the individual's behalf, which are provided to meet the individual's own needs are counted as unearned income to the individual.  Support and alimony payments, which are provided for the support and care of another person are not income to the individual, unless the individual uses the money for his or her own needs.

 

Verification.  

Support and alimony payments may be verified by viewing a divorce decree, support order, money order, check, or any other documentation in the individual's possession.  Unless there is reason to question the situation, the case worker may presume that support and alimony payments provided for the support and care of an individual are being used by or for that individual.

 

There is a limited income exclusion for child support payments received by or for an individual who is eligible for SSI or APA .  This exclusion does not apply to alimony payments.  Refer to section 442-3I for an explanation of this limited income exclusion.

 

441-2 M.   RENTAL INCOME

 

Net rental income counts as unearned income unless it is earned income from self-employment (that is, the recipient is actively involved in the business of renting properties).

 

Rental deposits are not income to the landlord if they are subject to return to the tenant.  Rental deposits used to pay rental expenses become income to the landlord at the point of use.

 

Rent.  Rent is a payment which an individual receives for the use of real or personal property, such as land, housing, machinery, or fishing permits.

 

Net rental income.  Net rental income is gross rent less the ordinary and necessary expenses paid in the same taxable year.  Deduct expenses when they are paid, not when incurred.

 

Ordinary and necessary expenses.  Ordinary and necessary expenses are those necessary for the production or collection of rental income.  In general, these expenses include:

 

    1. interest and escrow portions of a mortgage payment on the rental property (at the point the payment is made to the mortgage holder);

 

    1. real estate insurance;

 

    1. property taxes;

 

    1. expenses of managing or maintaining property, such as repairs, lawn care, snow removal, and advertising for tenants; and

 

    1. the cost of attorney or other agent services needed to collect rents.

 

Ordinary and necessary expenses do not include:  tax depreciation or depletion of property; the principal portion of a mortgage payment; capital expenditures such as an expense for an addition or increase in the value of property.

 

Verification.  

Use documents in the individual's possession (bills, receipts, etc.) to verify the rent and the dates received, and the expenses and dates paid.  The individual's most recent tax return, including Schedule E, may be helpful in identifying past expenses and in estimating future rental income.

 

 

Note:

Income received from the lease of a limited entry fishing permit is considered unearned rental income.

 

 

 

441-2 N.   HOME OWNER INCOME FROM ROOM RENTAL

 

When a client receives income from renting a room out in their own home, determine countable income by prorating allowable expenses based on the number of rooms designated for rent compared to the number of rooms in the house.  Do not include bathrooms.  Do include basements and attics if they have been converted to living spaces.

 

Allowable expenses:

 

 

Expenses not allowed:

 

 

Example:

Ozzie owns his own home.  He rents a room to Abbie for $400 per month.  His house has 3 bedrooms, 2 bathrooms, 1 kitchen, 1 living room and 1 converted basement for a total of 6 rooms (not including the bathroom).  Ozzie's countable mortgage payment is $937.00 and his utilities (water, electricity, and gas) average $450 per month.  Total household expenses are $1387 per month.

Rental Income                                                  $400.00
Allowable expenses $1387/6                       -$231.17
Total countable income                                  $168.83

 

441-2 O.   ROYALTIES

 

Royalties are payments to the holder of a copyright or patent.  Royalties may also be paid to the owner of a mine, oil well, timber tract, or other resource, for the extraction of a product.  Royalty payments are unearned income unless they are received in connection with any publication of an individual's own work, or they are received as part of a trade or business, in which case they are treated as earned self-employment income.

 

Verification.  

Royalty payments may be verified by viewing any receipts or royalty agreements in the individual's possession which indicate the amount and frequency of the royalty payments.  If this documentation is not available, the individual is responsible for providing proof of the royalty payments from the company or source of the royalty payment.

 

441-2 P.   DEPOSITS MADE TO A JOINT ACCOUNT

 

An APA applicant or recipient may sometimes own a joint bank account with other individual(s) whose income and resources are not considered available (deemed) to meet the needs of the applicant or recipient.  The entire amount of deposits made to the joint account by the other individual(s) are income to the applicant or recipient.

 

The only exception to this rule is that if each owner of a joint account is eligible for SSI or APA , deposits made to the joint account by one account owner are not income to the other account owner(s).  This exception does not apply to situations where the other joint owner receives another type of assistance such as Temporary Assistance.

 

An APA applicant or recipient who is an owner of a joint account may argue that some or all of the funds deposited to the joint account do not belong to him or her.  To establish non-ownership of the funds, the APA client must:

 

  1. Provide a written statement that explains why some or all of the funds in the account do not belong to him or her.  If the client indicates that only some of the funds do not belong to him or her, the client must specify what portion of the funds are not his or hers; and

 

  1. Provide a corroborating statement from the other account owner(s).  If the other owner(s) of the account is (are) not competent to provide such a statement, a statement from a third party who is familiar with the situation is acceptable; and

 

  1. Change the account designation to either remove the individual's name from the account, or show that the owner(s) have restricted access to the account.

 

Once all three of these things are done, any funds determined to be owned by the other account holder(s), and that the individual can no longer withdraw from the account, were not and are not counted as income to the individual.  When this happens, the case worker shall redetermine APA eligibility and benefit amounts for any affected months.  

 

Interest earnings are counted as unearned income to the applicant or recipient in proportion to the percentage of funds that are considered to be a resource to the applicant or recipient.

 

This policy does not affect the treatment of the funds in a joint account as a resource.  Refer to section 431-2A for the resource policy on joint accounts.

 

441-2 Q.   RETROACTIVE PAYMENTS

 

Except for retroactive SSI and SSA Retirement, Survivors, and Disability Insurance ( RSDI ) benefits, retroactive benefit payments are counted as income in the month of receipt.  Examples of retroactive benefit payments that are considered countable income the month they are received include:  Retroactive Unemployment Insurance benefits, retroactive VA benefits, etc.  Refer to section 440-2 for the income counting policy on retroactive SSI and RSDI benefits.

 

 

Previous Section

 

Next Section

 

 

MC #47 (07/16)