For MAGI individuals, lump sums must be counted as income in the calendar month it is received. The exception to this rule is lottery and gambling winnings of $80,000 or more that are paid in a single payout. See Section 357.43.
For all other MA categories, if it will help the applicant/recipient group to treat the lump sum as income, the CAO will count the payment in the calendar month that it is received. The CAO will allow certain deductions from the lump sum income that are not allowed when the payment is counted as a resource.
Example: For TANF-related categories, burial expenses can be deducted from an insurance benefit, and proven medical expenses can be deducted from a personal injury award. For SSI-related MA, attorney fees incurred in obtaining unearned income can be deducted.
NOTE: The treatment of a lump sum payment as income usually happens during a retroactive period or when a lump sum is exempt as income.
After the month that a lump sum is counted as income, any amount that is left over will be counted as a resource.
The CAO will allow certain deductions from a lump sum when it is counted as income. The deductions depend on whether the lump sum is earned or unearned and the category of MA that the applicant/recipient group receives. 55 Pa. Code § 181.31(c) For MAGI MA, verified tax deductions may be used.
If the lump sum is received by a legally responsible relative (LRR) who lives in the household, the CAO will determine how much of the lump sum is deemed available to the applicant/recipient group. (See Chapter 355, Deeming Income and Resources.) The amount deemed available will be counted as unearned income.
For MAGI MA, the lump sum is available and counted for the household if the individual is included in household composition with the exception of lottery and gambling winnings of $80,000 or more received in a single payout. See Section 357.43.
If a lump sum is earned, the CAO will count the lump sum in the month the individual received it. The CAO must follow these guidelines:
Confirm the date, amount, and source of the payment. If the lump sum is received by an LRR living in the household, determine how much of the lump sum is deemed available to the applicant/recipient group. (See Chapter 355, Deeming Income and Resources.)
For MAGI MA, count the lump sum for the tax household, or household if non-filer rules are used.
Do not count a lump sum payment that is excluded as either income or a resource.
Add the lump sum to other earned income received by the applicant/recipient group in the calendar month.
Subtract all of the earned income deductions allowed for the category of MA. (See Chapter 360, NMP Deductions, and Chapter 361, MNO Deductions.)
NOTE: Verified tax deductions are allowed for MAGI MA. For MAGI MA, if the five percent income disregard is needed it should be applied to the total household income.
Reminder: The TANF-related category for both NMP and MNO includes the PD and TD parent or stepparent of a child receiving TANF, MA, or SSI.
Count the total net income, including the lump sum, as income available in the calendar month.
For NMP and MAGI MA, if the total net income is more than the monthly income limit, the applicant/recipient group or individual is not eligible in the calendar month in which they received the lump sum.
NOTE: If the CAO cannot meet the deadline to close MA in the month when the lump sum is received, MA will continue. An overpayment does not occur if the individual reports the lump sum in time.
For Healthy Horizons, if the total net income is more than the monthly income limit, determine the income for the calendar year. Include the lump sum. If the total net income for the calendar year is more than the annual limit, the applicant/recipient group is not eligible.
NOTE: If the Healthy Horizons applies again in a month after receiving the lump sum payment and the month is in a different calendar year from when the payment was counted as income, then the CAO will count the amount of the lump sum that is left over as a resource when determining eligibility for the current calendar month or calendar year. The CAO will include any interest that has built up from the lump sum payment.
Example: An individual receives a lump sum payment of $12,000 on September 1, and applies for Healthy Horizons on September 15. The application is denied, because the applicant's total net income for September and the calendar year is over the Healthy Horizons income limit. The individual applies again on February 4 in the next year and has $6,500 left of the lump sum in a savings account. The account paid $97.50 in interest on January 16, in the previous month and will pay interest quarterly. The caseworker will count $6,500 (the amount that is left over from the original lump sum) as a resource in February and will count the interest in the eligibility determination.
For MNO, if the total net income is more than the six-month income limit, the applicant/recipient group is not eligible. If the lump sum is received in a retroactive month, eligibility is affected for the calendar month when it is received.
NOTE: If an individual applies again at any time after the month when the lump sum is received, the CAO will determine eligibility using a new six-month period.
If the total net income, including the lump sum, is not over the income limit, the applicant/recipient group is eligible.
After the first month when a lump sum is received, any amount left over will be counted as a resource.
If the CAO determines, at any point before they take action, that it would benefit the applicant/recipient group, they will count the lump sum as a resource.
Example: Mr. Gomez applies for MA on June 6 to pay a hospital bill from April. In April, his total resources were $150 less than the one-person TD limit. In April, his only income was a final paycheck of $67 from his job and a late lump sum payment of $430 for wages he earned in January. Mr. Gomez chooses to have the lump sum counted as income for April after the CAO explains that it would put him over the resource limit. The CAO counts the lump sum as follows:
|
Other earned income |
$67 |
|
Earned lump sum |
+430 |
|
Total earnings |
$497 |
|
Work expenses |
-107 |
|
|
$390 |
|
Personal expenses (transportation) |
-32 |
|
Total net earned income |
$358 |
|
|
x6 |
|
Six month Income |
$2,148 |
Mr. Gomez is eligible for MNO for the month of April because his total income, including the lump sum, is less than the one-person monthly limit, and continues to be eligible for MNO since his semi-annual income is within limits. The CAO approves MNO for April 1 through April 30.
If the lump sum is unearned, the CAO will count the lump sum, following these guidelines:
Confirm the date, amount, and source of the payment. If the lump sum is received by an LRR living in the household, determine how much of the lump sum is deemed available to the applicant/recipient group. (See Chapter 355, Deeming Income and Resources.)
For MAGI MA, count the lump sum for the tax household, or household if non-filer rules are used with the exception of lottery and gambling winnings of $80,000 or more received in a single payout. See Section 357.43.
Do not count a lump sum that is excluded as either income or a resource.
Add the lump sum to other unearned income received in the calendar month.
Deduct expenses that the individual must pay to be eligible for or to receive the lump sum, such as attorney fees and court costs.
For MAGI MA, deduct verified tax deductions. The 5% income disregard must be deducted when applicable.
For TANF/GA-related categories, deduct expenses directly related to the type of income. For example, deduct burial expenses from an insurance settlement, and deduct medical expenses from a personal damage award.
For SSI-related categories, deduct up to $1,500 of the money from a life insurance policy that was used for burial expenses and the expenses of the insured's last illness. Only deduct expenses that are verified.
For TANF/GA-related categories, deduct any replacement costs of real or personal property from a personal damage award or insurance settlement using:
The proven cost of repair of the property.
The replacement cost of the property.
Deduct the largest of the following costs:
The value set by the payer or insurance company.
The value set at the last renewal before the damage occurred, minus the value after the damage.
The value that would have been assigned in a way that is acceptable to DHS, such as Kelly blue book value of a motor vehicle.
The proven value of the property when the loss took place.
For SSI-related categories, deduct the first $20 of unearned income.
Exception: Do not allow the $20 if the lump sum is from a need-based program funded totally or in part by the federal government or by a nongovernmental agency.
Count the total net income, including the lump sum, as income available in the calendar month.
For NMP, if the total net income is more than the income limit, the applicant/recipient group is not eligible in the calendar month in which they received the lump sum.
NOTE: If the CAO cannot meet the deadline to close MA in the month when the lump sum is received, MA will continue. An overpayment does not occur if the individual reports the lump sum in time.
For Healthy Horizons, if the total net income is more than the monthly income limit, determine the income for the calendar year. Include the lump sum. If the total net calendar year income is more than the annual limit, the applicant/recipient group is not eligible.
NOTE: If the Healthy Horizons individual applies again in a month after receiving the lump sum payment and the month is in a different calendar year from when the payment was counted as income, then the CAO will not count the lump sum or any part of it that is left over as either income or a resource when determining eligibility for the current calendar month or calendar year. The CAO will include any interest that has built up from the lump sum payment.
Example: An individual receives a lump sum payment of $12,000 on September 1, and applies for Healthy Horizons on September 15. The application is denied, because the applicant’s total net income for September and the calendar year is over the Healthy Horizons income limit. The individual applies again on February 4 in the next year and has $6,500 left of the lump sum in a savings account. The account paid $97.50 in interest in the previous month on January 16, and will pay interest quarterly. The caseworker will count $6,500 (the amount that is left over from the original lump sum) as a resource in February and will count the interest in the eligibility determination.
For MNO, if the total net income is more than the six-month income limit, the applicant/recipient group is not eligible. If the lump sum is received in a retroactive month, eligibility is affected for the calendar month it is received.
NOTE: If an individual applies again at any time after the month when the lump sum is received, the CAO will determine eligibility using a new six-month period.
If the total net income, including the lump sum, is not over the income limit, the applicant/recipient group is eligible.
After the first month a lump sum is received, any amount left over will be counted as a resource.
Example: Ms. Phillips, a single adult, age 30, is eligible for MNO for a six-month period beginning in April. In June, she receives a lump sum payment of $6,000. She has no plans to spend the money. The CAO counts the lump sum as unearned income for June. Because total income for the six-month period of April through September is over the limit, the CAO stops MA. On July 25, Ms. Phillips applies for MA again. She still has $5,200 of the lump sum in a separate bank account. The CAO determines her eligibility for a new six-month period beginning in July. The amount of the lump sum that is left over is counted as a resource. The CAO denies Ms. Phillips for MNO because she is over the limit for resources.
For non-MAGI MA, if the CAO determines, at any point before they take action, that it would help the applicant/recipient group, they will count the lump sum as a resource.
Examples:
1. Mr. Kelly, age 35, is reviewed for MNO (TD). He has net earned income of $300 a month from a part-time job. He has $2,400 in total countable resources. In the calendar month of application, he also received an unearned lump sum payment of $500. Mr. Kelly chooses to have the lump sum treated as income because it would put his resources over the one-person resource limit. The CAO counts the lump sum as follows:
|
Mr. Kelly is eligible for MNO for six calendar months beginning with the month of application, because his total income is less than the one-person MNO income limit.
2. On July 7, Mr. Lee, age 42, is reviewed for retroactive MNO to cover a hospital bill for June 3 to June 10. He presents an unpaid hospital bill of $3,000. He had no income in June, but he received a lump sum payment of $500 in June. His total countable resources were $2,200 for June.
If the CAO counts the lump sum as a resource, Mr. Lee's total resources will be $300 more than the resource limit of $2,400, and he will not be eligible. If he uses the amount that is over the limit ($300) to pay a part of the hospital bill, the CAO will approve MNO to cover the rest of the medical expenses for June. He has unearned income of $300 a month, beginning in July. The CAO approves retroactive MNO for June, and ongoing MNO for the period July – November.
|
For MAGI MA, a lump sum is always counted as income, but only in the month it is received. (with the exception of lottery and gambling winnings of $80,000 or more that are received in a single payout). See Section 357.43.
Examples:
1. Ms. Jackson, age 32, a single adult without dependents, receives a lump sum in June. In July, she applies for MA. The CAO will not count the lump sum because it was received in the month prior to the month of application.
2. Mr. Michaels, a 53 year old tax filer who files jointly with his wife and claims as tax dependents his two children, ages 15 and 9, applies for MAGI MA in March for his family. In the same month, he receives a lump sum payment of $42,000. The $42,000 will count for the month of March for the tax household and will be added to the rest of the household income, $1,500 per month in wages from Mrs. Michael’s job. Mr. Michael’s, his wife and children will not be eligible for MA during the month of March. MA eligibility would begin April 1.
357.43 Lump Sum Lottery and Gambling Winnings for MAGI MA
Lump sum lottery and gambling winnings that are $80,000 or greater and received in a single payout must be treated a certain way for MAGI MA. The rules for MAGI MA lump sum lottery and gambling winnings apply to winnings claimed on or after January 1, 2018.
When the CAO receives information about lottery and gambling winnings, from an individual or from a source other than Exchange 11, the CAO must verify:
Amount of winnings
Claim date
If individual received winnings in a single payout or installments
If the lottery and gambling winnings information is received from Exchange 11, the amount and the claim date are considered verified upon receipt. The CAO must still request verification from the individual of how they received the winnings: in a single pay out or installments.
If the individual fails to provide the requested verification, the CAO will reject or close MA for failure to provide verification.
Unreported or untimely reported lottery or gambling winnings are subject to overpayments in accordance with current overpayment policy in the Supplemental Handbook Chapter 910.
357.431 Counting Lottery and Gambling Winnings for MAGI MA
Lump sum lottery and gambling winnings received as a single payout are counted for MAGI MA using the following rules:
Winnings less than $80,000 are counted as income in the month they are received
Winnings of $80,000 but less than $90,000 are counted as income over two months, with an equal amount in each month
For every additional $10,000, one month is added to the period over which the winnings are divided, in equal installments, and counted as income
The maximum time period over which winnings may be counted is 120 months. This applies to winnings of $1,260,000 and above.
See Appendix A for a chart showing the amount of counted monthly income and the number of months over which the winnings are counted.
When the CAO has verification of the winnings, the CAO will count:
The lump sum winnings only for the individual who receives the winnings based on the chart in Appendix A.
The full amount of the lump as income only in the month received for other MAGI household members.
Winnings paid out in installments as recurring income.
The CAO will enter lottery and gambling winnings received in a single payout in the Claimed Amount field on the Lottery/Gambling Winnings screen in eCIS. If the individual provides verification that they spent any amount of the winnings, the CAO will enter the amount of the winnings that is left in the Amount Remaining field.
Lottery and gambling winnings received in installments should be entered as recurring income on the Unearned Income screen and follow the existing policy for counting recurring income as outlined in MAEH Chapter 312.4.
Examples:
Example 1: In November 2020, the CAO is processing an MA renewal for a married couple Jason and Maria who are enrolled in MG 91. Jason claimed $100,000 from the PA Lottery in a single payout in November 2020. No other income is reported.
The caseworker enters the information on the Lottery/Gambling Winnings screen. Winnings of $25,000 are counted as income each month for four months beginning with the claim month of November 2020 for Jason only. Jason is not eligible for MA from November 2020 to February 2021. Maria is not eligible for MA in November 2020 and is eligible for MA in the MG 91 category from December 2020.
Example 2: The CAO received an Exchange 11 hit on August 25, 2020 for Peter in the MG91 budget. The CAO verified that Peter claimed $250,000 from the lottery in a single payout on August 5, 2020. Winnings of $13,157.89 are counted each month for 19 months beginning with the claim month of August 2020.
In March 2021, Peter claimed $120,000 winnings from a scratch-off lottery ticket in a single payout. The $120,000 is counted concurrently with the previous winnings for six months beginning with March 2021 through August 2021. Peter remains ineligible for MA for 19 months from August 2020.
Example 3: The CAO receives an application for Maria and her two children, Violet, age six, and Ian, age 10, on September 15, 2020. Maria claimed $200,000 in lottery winnings from MegaMillions on July 2, 2020, in a single payout.
Winnings of $14,285.71 a month are counted as income for 14 months, beginning in July 2020 for Maria. The application is processed with a begin date of September 15, 2020. Maria is determined ineligible for MAGI MA until August 2021. Her two children are authorized for MAGI MA.
If the individual fails for MAGI MA, notice 966 Option L (Ineligible) or 966 Option M (Discontinue) will be systematically generated. The PA 1827 L, Application for Undue Hardship Exemption Application, will be included with these notices.
If the individual fails for other MA, in addition to the system-generated MA notice, the CAO will send a manual PA 162 LTRY notice and include the Undue Hardship Exemption Application, the PA 1827 L and a return envelope.
357.432 Undue Hardship Exemption:
Individuals who were determined to be ineligible for MAGI MA due to excess income from lottery and gambling winnings may apply for an undue medical or financial hardship exemption.
In order to qualify for a hardship, they must indicate that they are experiencing:
a severe medical hardship, or
financial hardship that is not mitigated by the lottery or gambling winnings.
If the individual requests an Undue Hardship Exemption (UHE):
The individual must complete the UHE Application, the PA 1827 L, return it to the CAO within 30 calendar days from the date on the notice, and provide verification such as a letter from a doctor demonstrating an urgent medical need or documentation of overwhelming financial obligations.
The CAO will review the UHE application and verification and decide to approve or deny the UHE. The CAO must consider all facts presented by the individual before approving or denying the undue hardship exemption.
An Undue Hardship exists when a denial of MA due to lottery or gambling winnings of $80,000 or more would deprive the individual of:
Medical care, endangering the person’s health or life, or
Food, clothing, shelter or other basic necessities of life.
NOTE: An undue hardship does not exist when a denial of MA due to lottery or gambling winnings of $80,000 or more causes restrictions or inconveniences in an individual’s lifestyle.
The CAO must consider other relevant information including, but not limited to:
Factors such as the individual’s age, health and financial situation
Circumstances of the individual’s household
Health of the lottery or gambling recipient and members of the individual’s household
Previously scheduled medical procedure or treatment needed to address a medical need
Catastrophic events which may cause severe financial hardship, such as the death of a spouse, a fire, accident, or other disastrous event
Outstanding expenses from an accident or illness that are higher than the amount of winnings
Purchased or paid off their residential property
Used the money to pay off a loan
The CAO will not consider gifting of the lottery or gambling winnings to another individual as a reason to approve an undue hardship exemption.
The CAO should request documentation from the individual that would be helpful in the evaluation of the undue hardship exemption request giving the individual 15 calendar days to return the information. Documentation includes, but is not limited to:
Medical records
Financial records
Court filings and/or documents
The UHE Application and verification must be scanned into the case record,
The CAO will email all UHE Applications and verification, along with their decision, within five business days to the Bureau of Policy, Division of Health Services to PW, Lottery Undue Hardships
The Bureau of Policy will make the final determination of whether to approve or deny the Undue Hardship Exemption and return the UHE decision to the CAO within 30 calendar days.
If a UHE has been approved, the individual must be reviewed for eligibility without counting the lottery/gambling winnings from the date of application or the date after the MA budget closed. The CAO will check the Undue Hardship “Approved” box and the Undue Hardship Decision Date on the Lottery/Gambling Winnings screen. In addition to the eligibility notice, the system will generate notice 966 Option N to let the individual know that the UHE was approved.
If a UHE has been denied, the CAO will issue a manual notice PA 162 LUHD. The CAO must enter the BOP reason for denial from the UHE Application (PA 1827 L) on the UHE denial notice (PA 162 LUHD). No other CAO action is required.
Updated February 13, 2025, Replacing May 3, 2024