Lump Sum Payments and TAFDC & EAEDC

 

The following Q&A is adapted from a column that appeared in “DTA Transitions” a DTA internal publication.

It is not uncommon for those already receiving needs-based cash assistance such as TAFDC or EAEDC to receive a significant one-time cash payment (a “lump sum”) from various sources such as an insurance settlement, lottery winnings, Unemployment Compensation,  compensation for lost wages from Victim’s Compensation, and/or retroactive benefits from Social Security.

• The first $600 is disregarded in the month of receipt, and then any additional funds that are not exempted are used to calculate continued eligibility for assistance or a period of ineligibility.
• The rules are complex, but some examples of exemptions include payments that are reimbursements for a specified item, portions of the lump sum used to pay for back bills resulting from the costs of day-to-day living expenses incurred while awaiting the receipt of the lump sum income, judgments for back-pay of child support or alimony, and certain monies immediately placed into a trust for someone who is legally incompetent.
  • Regulations: TAFDC: 106 CMR 204.240, starting at p. 37, and EAEDC: 106 CMR 321.240, starting at page 31.

Q. My TAFDC client reported receiving a lump sum payment. He was in a car accident and his insurance company reimbursed him for his totaled vehicle. Is this reimbursement amount considered lump sum income?

A. No. Lump sum amounts that are received as reimbursement for a specified item cannot be included or considered as part of the countable lump sum.Instead, these reimbursements are considered noncountable assets. See 106 CMR 204.240(A)* for more information on what is considered lump sum income in the TAFDC Program. Also, see 106 CMR 321.240(A) (p. 31) for more information on what is considered lump sum income in the EAEDC Program.

Q. My TAFDC client who recently reported a lump sum payment for his damaged car also received a separate lump sum insurance payment of $2,100 that is intended to cover expenses incurred while he was absent from work. Since the $2,100 payment amount is not reimbursement for a specified item and is considered lump sum income, I need to perform a calculation to determine whether or not the client remains eligible for cash assistance. If the client is ineligible, I would need to determine the period of ineligibility. Before I completed the lump sum calculation, my client explained that he used a portion of the $2,100 to cover his rent arrearage. Is this portion of the payment considered an exclusion?

A. No. According to the regulations, rental payments are not considered a day-to-day living expense and therefore do not qualify as an acceptable lump sum exclusion. See 106 CMR 204.240(B)(p. 38) for a complete listing of acceptable lump sum exclusions in the TAFDC Program and 106 CMR 321.240(B) (see p. 32) for a complete listing of lump sum exclusions in the EAEDC Program.

Q. My EAEDC applicant had been in a car accident. Three months ago, she received an insurance check for almost $11,000. The payment was intended to cover expenses during the applicant’s absence and eventual lay-off from work. She explained that during her period of unemployment, she accrued a large amount of debt and that the $11,000 insurance payment was used to cover a portion of this debt. Can I count this applicant’s lump sum income after applying any acceptable exclusions?

A. No. While ongoing EAEDC and TAFDC clients who report lump sum income must have a lump sum calculation performed on their payment, lump sum payments are not considered income for APPLICANTS in the EAEDC or TAFDC Programs.

-From DTA Transitions, May 2010, forwarded by Mass Coalition for the Homeless.

* 106 CMR 204.240 (TAFDC)

(A) Definitions

(3) Lump sum income includes, but is not limited to, the following types of income:

(a) Accumulation of retroactive income such as Railroad Retirement, Federal Veterans' Benefits, Workers' Compensation that represents loss of income, retroactive Social Security payments, Unemployment Compensation, retroactive wages, and/or compensation for lost wages received under the Compensation to Victims of Violent Crimes Act.

(b) Other payments in the nature of a windfall, such as lottery winnings, inheritances, settlements and awards that are not totally or partially received as a reimbursement for a specified item(s) and used to pay for such item(s). Whatever portion of the lump sum income that is received as a reimbursement for a specified item(s) and used to pay for such item(s) shall be considered a noncountable asset. (See 106 CMR 204.140, p. 21.) [Emphasis added]

 

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