08 Nov I have Medicaid. Will my 401(k) hurt my eligibility?

Q. I have contributed to my employer’s matching 401(k) in my biweekly paycheck. I have been receiving Medicaid for about six years. Would the asset include just my contribution or the joint balance with my employer’s contribution? If 401(k) contributions count as an asset for Medicaid, what should I do so I don’t lose Medicaid?
— Concerned

A. There are several different Medicaid programs, so right off, we recommend you speak to someone who can look at all the specifics of your situation.

We want to make sure you’re getting the advice that’s right for you.

But generally speaking, the Affordable Care Act’s expanded Medicaid program is based only on income, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

She said if you are receiving expanded Medicaid and are not required to take minimum distributions, your Medicaid should not be affected.

Other Medicaid programs consider both income and assets, she said.

“In New Jersey, all of the assets in a 401(k), including matching employer contributions, are countable assets for purposes of Medicaid eligibility in programs that count assets unless the 401(k) assets are in payout status, in which case the 401(k) will count as income instead of an asset,” Whitenack said.

“Payout status” means that the account holder is taking at least the required distribution on a monthly basis, she said.

“A company with a 401(k) plan previously had the discretion to limit the ability of an employed account holder to access the assets if the account holder was under a certain age,” she said. “However, on Jan. 1, 2020, a new federal rule went into effect that may make the assets in a 401(k) plan more accessible to the employee.”

You should consult with an elder law attorney to determine the interplay between Medicaid and your 401(k).

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This story was originally published on Nov. 8, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.