LUMP SUM INCOME (INCOME) (FAM)
Nonrecurring payment. The following are examples of earned and unearned lump sum income 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 Chapter 400, RESOURCES, Lump Sum Payment: Nonrecurring, especially for sale of personal property, earned income tax credits, corrective payments, and retroactive SSI payments.
Lump sum policy applies to all current recipients. For applicants, lump sum policy applies 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.
Treatment: Unearned Income.
• Verified retroactive lump sum supplemental security income (SSI) payments are excluded income.
• Verified refunds of the recipient’s own money, such as a returned security deposits on rental property or utilities, are excluded income.
REDUCING LUMP SUM INCOME
The amount of a lump sum payment may be reduced for the following reasons. Take reductions below in the order below:
1. Expenses directly related to receipt of the lump sum.
2. The Begin Date of financial assistance, if the payment was received in the month of application.
3. The employment expense disregard, if the lump sum is earned income.
Reduction Based on 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.
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.
Reduction Based on the Begin Date of Assistance
If the applicant receives a lump sum in the month of application, reduce the lump sum according to when assistance begins, as follows:
• If the applicant’s assistance begins on the first of the month of application, no additional reduction of the lump sum is allowed.
• 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 FANF Standard of Need (SON). For lump sum purposes, “Standard of Need” (SON) is defined as the current FANF SON for the assistance group plus any other person whose income is counted in determining eligibility.
• If the applicant’s assistance begins in the month after the month of application, reduce the lump sum by the full FANF SON.
Reduction Based on the Employment Expense Disregard
Reduce lump sum earned income by the 20% employment expense disregard and any child care deduction. Use the following calculation:
1. Determine the number of months the lump sum is intended to cover. Round to the nearest month.
2. Subtract the employment expense disregard or child care deduction for the months covered by the earned lump sum. See Chapter 600, Standards and Budgets, PART 603, for information on employment expense disregard and child care deduction.
CONSEQUENCES OF LUMP SUM PAYMENTS
Individuals who receive lump sum payments are ineligible for assistance for the number of months resulting from dividing the lump sum amount, less any allowable reductions, plus any other monthly income, by the FANF SON. As a result, individuals who receive lump sum income may have their FANF grant decreased or they may become ineligible. 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: Individuals who were not receiving FANF financial assistance at the time of the receipt of the lump sum may apply and be determined eligible for financial assistance during the period of ineligibility. The ineligible casehead may act as a caretaker relative not included. Income of the parents—but not the lump sum—is considered available to the child.
Lump Sum Amount Does not Exceed the FANF SON
If the reduced lump sum income, in combination with any other countable income, is no greater than the FANF SON, there is no grant decrease or period of ineligibility due to the lump sum. Count the actual lump sum received as a resource in the month received.
Lump Sum Amount Exceeds the FANF SON, and:
The Excess Amount is No Greater than the FANF Payment Standard -- Count the amount in excess of the FANF SON as unearned income for 1 month (2 payroll periods).
The Excess Amount is Greater than the FANF Payment Standard -- If the excess amount is greater than the FANF payment standard, close the case for at least 1 month (2 payroll periods). Determine the Period of Ineligibility (the number of months for which the case is ineligible for financial assistance) in the following manner:
1. Divide the reduced lump sum income by the FANF SON. Whole numbers in the result are the number of ineligible months.
2. Count any fraction remaining as unearned income in the month after ineligibility ends.
3. If the case reopens later than the first month after the period of ineligibility ends, do not count the fraction.
Mr. Smith received $8,000 in lump sum unearned income. There is no other income. The FANF SON for the assistance group is $3,800. $8,000 divided by $3,800 = 2 months ($7,600) plus $400. The $400 is applied to the financial assistance case as unearned income in the first month after the 2-month period of ineligibility.
Begin Date of Decrease or Ineligibility
Decrease: A decrease in the FANF 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, the assistance group has already received unentitled grant money, treat it as recoupment. (For information on recoupment, see Chapter 600, Standards and Budgets, PART 621.)
End Date of Decrease
For all decreases, remove the lump sum income amount prior to the cut-off date for the next payroll period. This ensures that the grant is decreased for no more than 2 payroll periods.
End Date of Ineligibility
FANF payments cannot resume during a period of ineligibility.
1. Change in the FANF SON: The FANF SON is reviewed annually in July and adjusted as necessary. An assistance group may request recalculation of the period of ineligibility due to a change in the FANF SON if they reapply for financial assistance. An increase in the assistance group size is not considered an increase in the FANF SON.
- Reduce the original lump sum by the amount budgeted for ineligible months already gone by at the old FANF SON.
- Divide the remainder of the lump sum by the new FANF SON to determine the number of ineligible months remaining.
2. Shelter Costs Have Increased: An assistance group may request recalculation of the period of ineligibility due to a verified increase in shelter costs.
3. Life-Threatening Circumstances: Shorten the end date of a period of ineligibility when events occur which cannot be reasonably predicted and which result in the loss or 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, or money (including the lump sum);
- Medical emergencies or serious illness of an assistance group member or of a person for whom an assistance 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; or
- Any other circumstance considered life-threatening by the District Office 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 or was spent in connection with the life-threatening circumstance, it was used to meet essential needs.
If the above conditions are met, reduce the original lump sum amount by expenses related to the life-threatening circumstance and recalculate the period of ineligibility. Advise the assistance group of the result.
4. 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 and verified 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 which are prescribed by a licensed physician;
- Health care insurance premiums;
- Prescription drugs; or
- Any other medical expense considered appropriate by the District Office supervisor.
Reduce the original lump sum amount by approved medical expenses and recalculate the period of ineligibility. Advise the assistance group of the result.
References: He-W 601.06(i), He-W 606.58, He-W 654.03, He-W 654.04(b)(7), He-W 654.13(f), 45 CFR 233.20(a)(3)(ii)(F)