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Issue Alert - 12-1-01

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Date:

Jan 14, 2012

Program Area:

Food Assistance Program (FAP)

Issue Summary:

The Department of Human Services (DHS) has made changes to the FAP Asset Test.

Persons Affected:

Applicants and recipients (current and former) 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 1, 2011 the Department of Human Services implemented an asset test for the food assistance program (FAP).  Michigan had not had a FAP asset test for more than 10 years.  For complete background and full explanation of the asset test, see Issue Alert 11-10-06. 

 

Within weeks of implementation, it became clear that the vehicle part of the asset test was problematic and would result in households losing FAP eligibility primarily because they owned more than one car.  In much of the state, with no public transportation, families need more than one vehicle to manage obligations for work and/or work training, the children, and day-to-day family needs.  

 

By mid- to late October, Governor Snyder and DHS Director Corrigan announced that the asset test would be changed to exclude one vehicle beginning January 1st.  DHS policy with this change (and others discussed below) was published on January 4, 2012.   

 

Several weeks ago DHS reported that 6,820 families lost FAP in October and another 514 families lost FAP in November.  A DHS representative states that its computer system is not programmed to identify households who may now be eligible because of the new policy.  DHS says caseworkers will be tasked with case-by-case review followed by contact with families who had been terminated but who should qualify under the changes to urge them to reapply.  We don’t know how long it will take caseworkers to accomplish this task but, with caseloads ranging between 350 and 800, and a complicated test, we are concerned that this will not get done quickly. 

What's Happening?

DHS’s FAP asset test was modified effective 1/1/12.  The most significant change is the exclusion of one vehicle with the highest fair market value in each FAP household.  In addition, policy clarifies that vehicles with fair market values (not equity values) of $1,500 or less are excluded.  Finally, policy states that all other vehicle exclusions are applied before the one-vehicle-per-household exclusion. 

Another policy change refers to annuities.  In the initial policy (10/1/11) all annuities were excluded.  Under the modified policy, the specific exclusion is only for employer-sponsored annuities.  All other annuities (and trusts, as well) must be analyzed by the DHS Department of Family Program Policy to determine if exclusion is permissible.

Other changes are for purposes of clarification and include: 

·         A direction that the caseworker is to use the lowest checking/savings/money market account balance in the month to determine asset eligibility

·         Specific exclusion for an SSI dedicated account (for retroactive benefits awarded to a child)

·         Specific exclusion for Native American lands held jointly with a Tribe or requiring the approval of DOI’s Bureau of Indian Affairs for a sale

·         Specific exclusion of a non-liquid asset against which a lien has been placed as a result of taking out a business loan and the household is prohibited by the security or lien agreement with the creditor from selling asset(s), rendering the asset not accessible.  

BEM 400 covers the topic of assets for all programs covered by BEM and is available online at http://www.mfia.state.mi.us/olmweb/ex/bem/400.pdf.  The policy bulletin that discusses these changes, dated 1-1-12 and posted by DHS on 1-4-12 can be found at http://www.mfia.state.mi.us/olmweb/ex/BP-2012-001.pdf.

The Asset Test summarized:

Asset Limit:  $5,000 

Countable assets  -  Must be “available” meaning that anyone 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 specific 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.

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

 

• Vehicles:  Cars, trucks, motorcycles, motorbikes, off-road vehicles, trailers, campers, motor homes, boats, and ATV’s. 

 

Vehicle Asset Test

Ø  DHS will apply the cumulative fair market value* of all licensed and unlicensed vehicles owned by anyone in the FAP group after exclusions to the $5,000 Asset Limit. 

Ø  All vehicles must be analyzed under this test.

 

Ø  Step 1 - Specific exclusions are applied first:

◊  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 a fair market value of $1,500 or less (Note: a change from original policy that described an “equity” value.)

◊  Leased vehicles unless the option to buy is chosen at any time during or at the end of the lease

 

Ø Step 2 – After all specific exclusions are applied, one vehicle with the highest fair market value may be excluded.

 

Ø  Step 3 – $15,000 is subtracted from the cumulative fair market value of the remaining vehicles and any remaining balance is applied toward the $5,000 asset limit. 

 

*Note:  Online sources to determine fair market value – Kelly Blue Book (www.kbb.com) and NADA (www.nadaguides.com) generate different values for the same vehicle.  We have learned, anecdotally, that some FAP clients have been directed by caseworkers to go to local car dealers and obtain a written statement of value.  We are not sure why DHS would do this but believe it may be in response to a client challenging the online results.  We are not aware of any specific case where this rendered the FAP group ineligible. 

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, employer-sponsored 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 policies with cash value

• SSI dedicated accounts

• Tuition and education savings accounts

• Individual development accounts (IDA)

• 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, annuities, security deposits on rental property or utilities.  Trusts and annuities must be analyzed by DHS Department of Family Program Policy to determine if exclusion is allowed.

• 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

◊ Native American lands held jointly with a Tribe or requiring the approval of DOI’s Bureau of Indian Affairs for a sale

• A non-liquid asset that is not accessible because a lien has been placed as a result of a business loan and the FAP household is prohibited by the security or lien agreement with the creditor from selling assets(s).

• Anything excluded by federal statute

 

†Exclusion may be lost if payments are deposited with non-excluded assets in checking/savings account. 

What Should Advocates Do?

1.    Tell clients who were terminated from FAP due to the asset test to re-apply immediately.

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

3.    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.   If your FAP benefits were terminated because of the asset test, re-apply immediately.

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

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

4.   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.