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Issue Alert - 11-10-06

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Date:

Oct 17, 2011

Program Area:

Food Assistance Program (FAP)

Issue Summary:

The Department of Human Services (DHS) has added a complex Asset Test to the FAP program.

Persons Affected:

New applicants and current recipients with even modest assets.

For More Information:

Center for Civil Justice 320 S. Washington, 2nd Floor Saginaw, MI 48607 (989) 755-3120, (800)724-7441 Fax: (989) 755-3558 E-mail: info@ccj-mi.org Or Michigan Poverty Law Program 611 Church Street, Suite 4A Ann Arbor, MI 48104-3000 (734) 998-6100 (734) 998-9125 Fax


Background

On October 1st, the Department of Human Services implemented an asset test for the food assistance program (FAP).  Michigan had eliminated the former food assistance asset test in 2000 when federal policy allowed states to implement “categorical eligibility” to reduce administrative burden and to increase program access to families experiencing hunger or food insecurity by applying a “means test” only to income.  Eliminating the asset test helped Michigan and other states reduce their error rates and increase the number of households participating in FAP. 

 

Since 2000, the national food assistance payment error rate declined by 56% while the number of states eliminating asset tests grew to 35 and program participation increased from $15B for 17 million people in 2000 to $50B for 34 million people in 2009. 

 

Food assistance benefits are entirely federally funded while the costs of administering the program are shared approximately equally between the federal government and the state. 

 

DHS has been making announcements about a imposing a new FAP asset test for months – ever since some negative publicity about food assistance recipients earlier this year.  However, the policy was not available in advance. DHS announced that the asset test policy would apply to new applicants beginning October 1st and be applied in a gradual roll-out to current recipients as they came up for review.  However, that is not what happened for approximately 5,000 recipients.  CCJ is investigating and analyzing the procedures used to terminate these households to determine if federal requirements were met.

What's Happening?

As of October 1st, a new asset test will be applied to most households when DHS determines FAP eligibility.  DHS posted an updated assets policy, BEM 400, on October 1st, which includes the new FAP asset test provisions.  The asset test is complicated and it increased the length of BEM 400 by 8 pages. BEM 400 is available online at http://www.mfia.state.mi.us/olmweb/ex/bem/400.pdf.  DHS also revised its policy on Categorical Eligibility for FAP, contained in BEM 213, available online at http://www.mfia.state.mi.us/olmweb/ex/bem/213.pdf

 

Beginning in mid-September DHS started sending verification checklist letters to some food assistance recipients advising that their food assistance might be cut off and requiring them to provide documentation for a variety of assets within 10 days.  Many of the assets listed are “exempt” under the test (summarized below).  DHS also carried out widespread information searches and data matches with agencies such as the Secretary of State for vehicle information, the IRS and Social Security for income information, and Department of Treasury to determine – without verification – if current recipients’ assets exceeded asset test limits.  DHS also used information current recipients had entered into their applications for other assistance programs like State Emergency Relief (SER), Medical Assistance (MA), Child Development and Care (CDC), and Cash Assistance Programs (FIP, SSI, and SDA), some of which is clearly outdated, to make termination decisions without requesting current verification.  As a result, DHS sent approximately 5,000 notices of case closure to current recipients who were not scheduled for review, citing BEM 400 policy that was not publicly available at the time the recipients received the notice.

 

Michigan retains FULL Categorical Eligibility (eligibility without an income or asset test) only for households in which ALL members receive FIP, SDA, or SSI.  BEM 213. 

 

Under the new “Cat El” policy, some households have PARTIAL Categorical Eligibility – that is, they are exempt from the gross and net income tests contained in the federal food assistance law, but must meet the new asset test in BEM 400.   Most households that have gross income under 200% of the federal poverty level do not have to meet the gross or net income tests set forth in federal law.   However, they will have to meet the asset test in BEM 400.

 

Households that have a Senior/Disabled/Veteran member but cannot qualify for Categorical Eligibility because their gross income is over 200% of the federal poverty level must meet both the net income test and the asset test in BEM 400. (See the DHS Bridges Policy Glossary at http://www.mfia.state.mi.us/olmweb/ex/bpg/glossary.pdf for a definition of Senior/Disabled/Veteran or S/D/V households, which generally are households with a member age 60 or older or eligible for SSI, Social Security, or Veteran’s benefits based on disability).

 

Groups cannot have Categorical Eligibility if any member of the group is disqualified due to intentional program violation or a drug-related felony, or the head of household has been disqualified due to work-related penalties.  BEM 400 and BEM 213.  These groups must meet not only the new asset test but also the federal gross and net income limits.

 

The FAP asset group includes all FAP eligible members, all disqualified members (BEM 550) and alien sponsors (BEM 226).

The Asset Test summarized:

Asset Limit:  $5,000 

Countable assets (Must be available meaning that someone in the FAP group has the legal right to use or dispose of it.  DHS will assume that an asset is available unless evidence shows that it is not.): 

• Liquid assets:  money/currency, un-cashed checks or drafts, savings or checking account balances, certificate of deposits, money market accounts, money held by others, stocks and bonds, and lump sums/accumulated benefits.  (See exclusions below for some kinds of accounts.)

• Any winnings from the lottery or gaming unless the winnings are received as installments and considered unearned income for as long as the payments continue. 

• Vehicles:  Cumulative fair market value of all vehicles (licensed or unlicensed) owned by anyone in the FAP group after a $15,000 exclusion with other exclusions listed below.  This includes cars, trucks, motorcycles, motorbikes, off-road vehicles, trailers, campers, motor homes, boats, and ATV’s.  DHS will apply the fair market value of all licensed and unlicensed vehicles.  Vehicle cumulative values that exceed the $15,000 exclusion will be applied to the $5,000 asset limit.  Note:  Sources for fair market value – Kelly Blue Book and NADA generate different values for the same vehicle.  Note:  The equity value of unlicensed vehicles on Native American reservations is applied unless they meet one of the exclusions.

 

Vehicle exclusions:

◊  Vehicles used to transport a physically disabled person in the FAP group (Note:  does not have to be used solely for this purpose)

◊  Vehicles used as a primary residence

◊  Vehicles used for self-employment or income-producing purposes such as taxis, fishing boats, or vehicles used for deliveries.  (Note: does not count if used only for going to and from work)

◊  Vehicles required by terms of employment such as traveling salesperson or migrant farmworker

◊  Licensed vehicles used for carrying heating fuel (e.g. wood) or water for home use when it is the primary source of water or fuel for the household

◊  Vehicles with an equity value of $1,500 or less

◊  Leased vehicles unless the option to buy is chosen at the end of the lease

• Real property/land that is not part of primary residence/homestead (see exclusions below)

Excluded Assets include: 

• Primary residence/homestead

• Assets owned by victims of domestic violence that are unavailable due to domestic violence and accessing them could put the client in danger.  There is no time limit for the length of this exemption for FAP benefits.  These assets do not have to be jointly owned.

• Pensions, annuities, IRA’s, Keogh’s, retirement accounts, 401K and 457 accounts

• Personal property such as jewelry

• All burial plots and burial and/or funeral arrangements

• Life insurance including those with cash value

• Tuition and education savings accounts

• Native American Tribal payments

• Disaster payments

• Federal and State income tax returns and earned income tax credits

• Energy assistance payments or allowances

• Assets which are not accessible such as trusts, security deposits on rental property or utilities

• Farm equipment used for employment

• Installment contracts for sale of land or building if the contract/agreement is producing income consistent with its fair market value

• Real property:

◊ Only if the FAP group is making a good faith effort to sell it: no reasonable offer has been made, the property is continuously up for sale, and an actual attempt has been made to sell it at a price not higher than the fair market value.

◊ Rental and vacation properties, but not limited to time share properties, owned by the applicant if they are renting it to produce income.

◊ Commercial property owned by the resident unless used for household income.

 

• Anything excluded by federal statute

 

What Should Advocates Do?

1.    Educate clients and community organizations about the new FAP asset test policy

2.    Be aware that data collected by DHS through agency searches and data matches and from data supplied for other benefits may not be accurate, up to date or coded correctly in Bridges and that Bridges may be generating termination reports that are in error.  In cases where there appears to be an error, clients should request a hearing and seek legal help.

3.    Be aware that the sources for establishing fair market value of vehicles – Kelly Blue Book and NADA -- produce different values for the same vehicle information. 

4.    Provide information to CCJ about families that are being harmed by the FAP asset test.  Please call CCJ at the number at the top of this form, to find out how to communicate information to CCJ.

Help clients request and present information at administrative hearings when appropriate.

What Should Clients Do?

1.   Contact CCJ’s Helpline at 1-800-481-4989 for help understanding the asset test and advocacy with DHS if there appear to be errors in application of the asset test policy. 

2.   Seek legal advice if you are told your food assistance benefits are going to be terminated due to the asset test. 

3.   Read your notices carefully.  If your FAP is ending, you have the right to request a hearing.  If DHS receives your hearing request within the deadline given in your notice, you will continue to receive FAP at your current level (but if you lose, will owe DHS any assistance you were not entitled to).  Seek legal help if you request a hearing.

Finding Help

Most legal aid and legal services offices handle these types of cases, and they do not charge a fee. You can locate various sources of legal and related services, including the free legal aid office that serves your county, at MichiganLegalAid.org. You can also look in the yellow pages under "attorneys" or call the toll-free lawyer referral number, (800) 968-0738.