Lump Sum Income

The Lump Sum income requirements are a result of a lawsuit, Rutan v. McMahon. The following requirements are based on AFDC rules that were in effect on July 16, 1996.

Lump Sum Income is income the child receives that is a non-recurring amount or source. The most common types of Lump Sum Income are Social Security benefits (SSI or SSA) and Veteran’s Benefits. If a lump sum is received when the child is receiving federal Foster Care, Foster Care payments may stop until the lump some money is used up. Here is how the lump sum rule works:

The lump sum income is divided by the FC rate the child is receiving and treated as income in the month received and the following month(s).

ExampleExample

“Foster Care Cash Aid and Lump Sum Income” (SCD 836)

These rules apply to both federal and state Foster Care cases:

All relatives and legal guardians caring for Foster Care children must receive both written (SCD 836) and oral explanations of lump sum requirements by the EW at application, redetermination, and when a payee change to a relative or legal guardian is made.

A child must also receive a SCD 836 and an oral explanation from the EW of the lump sum rule as he/she approaches his/her 18th birthday and at subsequent redeterminations, regardless of the payee. This explanation can be given to the child at the reinvestigation completed just prior to his/her 18th birthday or within three months of this birthday.

Failure to provide the written notice and oral explanation prevents application of the lump sum computation. If a delayed notice is given/sent, only the unspent balance of the lump sum is subject to the computation. No overpayment collection can be made except for the month of receipt.

Exception: These requirements do not apply to payments received by the Social Services Agency on behalf of a child.

Procedure

1. The EW must
   1. Give or send an “Foster Care Cash Aid and Lump Sum Income” (SCD 836) to all relatives/legal guardians:
      1. At application
      2. At redetermination
      3. When the payee is changed to a relative/legal guardian.
   2. Give or send an SCD 836 to the Foster Care child at the redetermination completed just prior to their 18th birthday or within three months of that birthday and at subsequent RE.
   3. Document in the County Use Only section of the SCD 836 the date that the form was mailed. Call the relative, legal guardian or Foster Care child to provide an oral notification when the SCD 836 has been mailed.
   4. Document in the County Use Only section of the SCD 836 the date that the follow up phone call was made to provide the oral notification.
   5. Give or send an “AFDC-FC RUTAN Notification” (SCD 836) to all relatives/legal guardians:
      1. At application
      2. At redetermination
      3. When the payee is changed to a relative/legal guardian.
      4. Give or send an SCD 836 to the Foster Care child at the redetermination completed just prior to their 18th birthday or within three months of that birthday and at subsequent RE's.
      5. Document in the County Use Only section of the SCD 836 the date that the form was mailed.
      6. Call the relative, legal guardian or Foster Care child to provide an oral notification when the SCD 836 has been mailed.
      7. Document in the County Use Only section of the SCD 836 the date that the follow up phone call was made to provide the oral notification.

Period of Ineligibility

A Lump Sum Payment is treated as income in the month received. If it exceeds the monthly placement cost, it is used to calculate a period of ineligibility. During the period of ineligibility, the child is ineligible for Foster Care. The intention of this regulation is to minimize Foster Care expenditures by mandating the use of the Lump Sum 
Income to meet the child's placement needs during the period of ineligibility.

• The period of ineligibility begins in the month the lump sum is received. Any aid received during the period of ineligibility is an overpayment. If an overpayment does occur a referral for collection must be made.
• When a lump sum payment is anticipated, the period if ineligibility shall begin in the month the lump sum income is expected to be received. Aid shall be discontinued if the lump sum income exceeds the child's needs.

Period of Ineligibility Computation

To determine the period of ineligibility, the EW must:

• Add the Lump Sum Payment to any other nonexempt income received in that month.
• Divide this amount by the child's monthly placement cost.
• The resulting WHOLE number is the number of months that the child is ineligible to Foster Care.
• Any remainder is counted as income only in the month immediately following the period of ineligibility. If the child's cash assistance is NOT transferred back to Foster Care the month immediately following the termination of the period of ineligibility, the remainder is not used as income against the Foster Care payment at a later date.

Examples

Child receives $700 Lump Sum Social Security benefits plus $100 monthly SSA benefits.Child receives $700 Lump Sum Social Security benefits plus $100 monthly SSA benefits.

Child receives $2,000 Lump Sum Social Security benefits plus $200 monthly SSA benefits. Placement Cost: $500 a monthChild receives $2,000 Lump Sum Social Security benefits plus $200 monthly SSA benefits. Placement Cost: $500 a month

Recalculation of the Period of Ineligibility

The period of ineligibility may be recalculated and shortened when one or more of the following situations occurs:

1. The cost of placement increases and the amount the child would have received also changes. This includes any general increase in the MBSAC (COLA increases), or a determination that the child would be eligible for a special need item.
2. The child incurs medical expenses, including any medical expenses that are not covered by Medi-Cal or private medical insurance.
3. All or part of the lump sum income becomes unavailable to the child for a reason beyond the control of the child. Lump sum income shall be considered unavailable when it has been spent for items which an aided child would not be expected to meet from its grant; or, when it is no longer available to the child due to loss, theft, or a similar occurrence.

Note: In situations where the ineligible child would be eligible for a special need item, the period of ineligibility is shortened first according to the provision in 1 above and if the expense of the need item is more than the specified amount, then provision 3 is followed.

Lump Sum is Unavailable (Acceptable Reasons)

Acceptable situations where the lump sum becomes unavailable include but are of limited to:

• Theft or loss of the lump sum income.
• The parent/caretaker leaves the home with lump sum income.
• The lump sum is spent on expenses to meet needs due to sudden and unusual circumstances of a life threatening nature.

Lump Sum is Unavailable (Unacceptable Reasons)

Unacceptable situations when the lump sum becomes unavailable shall include but are not limited to:

• The lump sum is spent on the repair of the home or replacement or repair of major appliances due to normal wear and tear.
• The lump sum is spent on an increase in utility costs or the lump sum is spent on the purchase of additional property (real and/or personal).

Once it is determined that the lump sum income becomes unavailable to a child for reasons beyond their control, the EW must substantiate/document their finding on the SCD 163.

Placement Costs Increase

A recalculation of the period of ineligibility may be necessary for children in Out-of-Home Care when their placement costs increase due to the child's need for an increased level of care (e.g., a child removed from a foster home and placed in an institution or a child granted a special care increment based on his/her developmental disability, physical handicap and/or emotional disturbance).

If placement costs increase, use the following computation:

1. Add the Lump Sum Income to any other nonexempt income received in the month of placement change.
2. Subtract the child's previous placement cost (amount originally used in the Lump Sum computation) from the new placement cost.
3. Multiply the increase in cost (the balance of Step “2”) by the number of months left in period of ineligibility.
4. Subtract the total increase in cost (the amount in Step “3”) from the total original lump sum (the sum of Step “1”).
5. Apply the Lump Sum Income calculation to the difference between the original lump sum and the increase in placement cost (the balance in Step “4”).

Note: When the amount in “5” is less than the new placement cost plus special needs, that amount shall be counted as income in the month immediately following the recalculated period of ineligibility.

Example

Child received $1,800 Lump Sum Social Security benefits plus $200 monthly SSA benefits:

• Placement Costs were $500 a month.
• Period of Ineligibility = 4 months.

In the second month of the period of ineligibility, the child was placed in an institution.

Placement costs beginning the first day of the second month = $1,000 a month.

Recalculation of Period of Ineligibility:

Step 1
$1,800 (lump sum SSA) +200 (monthly SSA) = $2,000

 

Step 2
$1,000 (new placement costs per month) – 500 (previous placement cost per month) = $ 500 (difference in monthly placement costs)

 

Step 3
$ 500 (difference in monthly placement costs) x 3 (number of months left in period of ineligibility) = $1,500

 

Step 4
$2,000 (amount from Step 1) –1,500 (amount from Step 3) = $ 500

 

Step 5
Apply the Lump Sum Income calculation to the $500. As the $500 is less than the child's current monthly placement cost ($1,000) the child's cash assistance would be transferred to Foster Care beginning the second month of the original period of ineligibility. The $500 remainder and $200 (monthly SSA) would be counted as income in that month.

$1000 (placement cost) – 700 (income) = $ 300

The EW must send a “Lump Sum And/or Income Exceeds Grant Notification” (SCD 780) to the Fiscal Clerk and SW/PO advising of the number of months the child is ineligible for cash, the remaining balance, and the date the SW/PO must reapply for Foster Care. The EW must attach an “AFDC-FC Rutan Notification” (SCD 836) to the SCD 780 and send to the SW/PO.

Restoring Foster Care

If the child is eligible to Foster Care the first of the month after the period of ineligibility, an application must be taken. The child's current monthly income PLUS any remainder from the lump sum period of ineligibility calculation must be counted as income against that month's Foster Care grant.

Any remainder from the period of ineligibility calculation is counted as income only in the month immediately after the period of ineligibility. If the remainder plus the child's current monthly income exceeds the child's placement cost, the child remains ineligible.

Foster Care Not Restored the Month Immediately Following Period of Ineligibility

If the child's Foster Care is NOT restored the month IMMEDIATELY following of the period of ineligibility, the remainder is not used as income against a future Foster Care payment.

For a child who is ineligible to Foster Care in the month immediately after the termination of the period of ineligibility due to excess personal property (i.e., Trust Account in excess of $1,000) an application must be taken when it appears the Trust Account will be within personal property limits.

ExampleExample

Responsibilities

1. Fiscal Clerk
   1. Notifies the EW when a lump sum is received, how much, and the source.
2. Eligibility Worker
   1. Calculates a period of ineligibility when notified by the Fiscal Clerk that a child in Foster Care has received lump sum income.
   2. Sends an SCD 780 to the Fiscal Clerk and SW/PO advising:
   3. The number of months the child is ineligible for cash and Medi-Cal,
   4. The remaining balance,
   5. To establish a sub-payee account, and
   6. The month in which the SW/PO must make an application for Foster Care to reestablish Foster Care eligibility and payments.
3. SW/PO
   1. Refers case back to FC Intake when the balance remaining is below the child's cost of care.

      1. Note: If the child's needs change during the period of ineligibility the SW/PO must contact the Eligibility Worker Supervisor to explore possible recalculation of the period of ineligibility and notify the Fiscal Clerk of the change.

Related Topics

Income