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Library: Policy

OKDHS:10-1-11. Lump sum payments

Issued 4-1-98

     Monies received in a lump sum from any source are considered as income. Changing a resource from one form to another, such as converting personal property to cash, is not considered a lump sum payment.

  • (1) A non-recurring lump sum payment considered as income includes payments based on accumulation of income and payments which may be considered windfall in nature and may include but are not limited to VA or Social Security lump sum payments, inheritance, gifts, worker's compensation payments, cash winnings, personal injury awards, etc. Retirement benefits received in a lump-sum are considered as unearned income if the client is paying taxes on these benefits. A non-recurring lump sum SSI retroactive payment, made to an AFDC recipient who is not currently eligible for SSI, shall not be counted as income or a resource for AFDC purposes in the month paid and the next following month. The amount remaining in the second month after the month of receipt is a countable resource.
  • (2) The worker must ask applicants if they have received a lump sum payment during the month of application, any month during the application process or anticipate to receive a lump sum in the future. Recipients are asked at the time of periodic redetermination if the assistance unit has received or is expecting to receive a lump sum. The client is given Form FSS-C-4 (new form number 08TA019E), Important Notice About the Effect of Lump Sum Payments on AFDC Benefits, to assure knowledge of the effect of lump sum receipt on eligibility. The individual is requested to sign and date the form, retaining the original with a copy to be filed in the case record. The worker will provide an oral explanation, including examples of lump sum payments where the lump sum rule does or does not apply; the budgetary requirements of the lump sum rule; how the rule affects other benefits and the importance of reporting anticipated receipt of a lump sum payment. The worker must also offer counseling when there is indication of anticipated receipt, including voluntary withdrawal of the application or case closure and availability of free legal advice.
  • (3) If a lump sum payment is received by a non-recipient prior to the month of application, any part remaining is considered as a resource.
  • (4) The lump sum rule is not applicable if the period of ineligibility was determined by another state prior to the client establishing residence in Oklahoma.
  • (5) These lump sum payments (minus allowable deductions related to establishing the lump sum payment) which are received by AFDC recipients or applicants are considered as income. Allowable deductions are expenses earmarked in the settlement or award to be used for a specific purpose which may include, but are not limited to, attorney's fees and court costs that are identified in the lump sum settlement, medical or funeral expenses for the immediate family, etc, "Earmarked" means that such expense is specifically set forth in the settlement or award. For earned income received in a lump sum, work related expense and $30 and 1/3 disregard (if applicable) are allowed for each month that the earned income accumulated. The lump sum payment is added to all other countable monthly income considered in determining the amount of the AFDC payment including non-excluded child support payments received by Child Support Enforcement Division. The AFDC grant is not included. If the total equals or exceeds the payment standard for the assistance unit size on Appendix C-1, Schedule IX, the case is determined ineligible. The case remains ineligible for the number of months derived by dividing the total amount of monthly countable income plus the lump sum payment by the need standard for the assistance unit size.
  • (6) The lump sum payment is considered whether depleted or not and members of the assistance unit receiving assistance or applying for assistance are not eligible for AFDC until the period of ineligibility has expired. The period of ineligibility begins with the month the lump sum payment is received. Any income remaining is treated as "other income" received in the first month following the period of ineligibility. Since the month of receipt is the first month of ineligibility, an overpayment will occur if AFDC benefits were received the same month. An overpayment referral must be completed and submitted to the FSSD Overpayment Section.
  • (7) For stepparent cases where the lump sum is received by a stepparent not included in the AFDC unit, the stepparent's countable income including the lump sum is computed in accordance with the stepparent's liability policy. If the contribution from the stepparent to the assistance unit is equal to or exceeds the AFDC payment standard, the assistance unit is ineligible for that month. Any portion of the lump sum income retained subsequent to the month of receipt represents a resource to the stepparent. The resource is considered in determining AFDC eligibility only to the extent of the amount actually contributed to the unit.
  • (8) A lump sum received by an individual excluded from the assistance unit for reasons identified in OAC 340:10-3-57(f)(1)(A)-(D) is considered available in determining the period of ineligibility. However, the excluded individual's need is not considered in establishing the assistance unit size.
  • (9) In all cases where a lump sum payment has been received or is expected to be received, the applicant or recipient must be promptly advised (as circumstances dictate) of the lump sum rule including budgetary requirements, effect on other benefits, counseling, options of voluntary application withdrawal or termination and availability of free legal advice. In all cases where the Department learns from a third party that a lump sum payment has been received or is expected to be received, the applicant or recipient must be promptly advised (not to exceed five calendar days) of the lump sum rule including the requirements set forth in the previous sentence.
  • (10) Within five calendar days of the date that the worker learns of a lump sum payment which would cause ineligibility or as soon as there is sufficient information to compute the period of ineligibility, OAC 340:10, Appendix KK, Lump Sum Termination/Denial Notice, is completed and mailed or given to the individual. An oral explanation of the notice must be given to the applicant or recipient with information and assistance with an application for other benefits, if appropriate.
  • (11) A computer generated notice of closure is sent to the assistance unit upon input of the case closure or denial.
  • (12) The period of ineligibility may be recalculated and shortened when one or more of the circumstances in subparagraphs (A) through (C) of this paragraph exist. A decision by the worker to recalculate and shorten the period of ineligibility requires a detailed explanation and necessary verification in the case record.
    • (A) An event occurs which, had the assistance unit been receiving AFDC, would change the need requirement and the amount if payment. This would include revision of the AFDC Need Standard.
    • (B) The income becomes unavailable due to circumstances beyond the applicant's or recipient's control. Examples of such circumstances include:
      • (i) theft;
      • (ii) natural disasters;
      • (iii) a member of the assistance unit takes the money and leaves the household;
      • (iv) payment of overdue utility bills to avoid cut-off of essential utility services existing at the time the lump sum money is received;
      • (v) payment of overdue rent or late mortgage payment to avoid eviction or foreclosure existing at the time the lump sum money is received.
    • (C) The AFDC unit has incurred or incurs or becomes responsible for and pays for medical or funeral expenses for an immediate family member.
  • (13) Recurring lump sum income received from any source for a period covering more than one month, that is received in a lump sum recurrently (such as annual rentals from surface or minerals, Windfall Profits tax refund, etc.) is prorated over a period of time it is intended to cover, beginning with the month of receipt of a lump sum payment. On applications and active cases, it is considered as available for the period of time it is intended to cover even though it is depleted in less than that time. If the lump sum closes a case and the client later reapplies for AFDC, the prorated amount is considered as income for the period of time it was intended to cover even if it has been depleted. If a recurring lump sum payment is received by a non-recipient and prior to the month of application, any part remaining is considered as a resource.
  • (14) Net income from oil and gas production (gross minus production taxes withheld), received in varying amounts on a regular or irregular basis for the past six months, will be averaged and considered as income for the next six months. In instances where an applicant or a recipient receives new income from oil and gas production and verification for the past six months is not available, the worker accepts the available verification and averages over the period of time intended to cover. Net income may be verified by seeing the individual's production check stub, or by contacting the oil and gas company.
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