Since I last wrote, there has been news in the affordable housing world that applies to LIHTC calculations: a Cost of Living Adjustment (COLA), and a new passbook rate more in line with the current economy.
The 1.7% Cost of Living Adjustment (COLA) increase to benefits paid to recipients takes effect in January 2015. Those amounts should be anticipated for applicants/tenants currently receiving SSA when conducting certifications effective from that date.
Also, HUD announced through Notice H2014-15 that a new Passbook Rate of 0.06% will be effective for imputing asset income for applicants/tenants having their total cash value of assets exceeding $5,000 as of February 1, 2015. The current rate, as published in HUD Handbook 4350.3 REV-1, is 2% and has been so for many years. This also has implications for LIHTC going forward into the new year, so again please be mindful for certifications that you conduct with regard to this effective date.
Along these same lines, I recently received an inquiry through NCHM’s eHotline on counting assets and/or income that I’d like to share with you. I believe our monthly HMU provides a good forum for teachable moments and reminders about issues of importance that you may find yourself confronting at your LIHTC properties. Here is the question and my answer:
Q: In a Tax Credit only property, a prospective resident has an annuity from which she is receiving regular and periodic payments. She also has access to the balance. Is this also counted as an asset?
A: This is an excellent question that really delves into the finer points of HUD’s guidance in the 4350.3. Specifically, the section in the Handbook on Annuities, Par. 5-7G2, p.5-33 takes the approach that they are counted as assets until regular annuity payments are being received when “generally,…the holder can no longer convert it to a lump sum of cash.” At that point, it goes on to say that it “will be treated as regular income, and no calculations from assets will be made.” So in other words, it would at that point convert from being counted as an asset to being considered a source of income. It does not address, however, when the holder still has access to the balance and is making regular withdrawals or receiving periodic payments.
HUD’s general take on assets related to supplementing retirement income, though, as evidenced by additional language added to Par. 5-7G4b and d with Change 4 and already supported by language in Par. 5-6P, p. 5-19, is that you are not to count any remaining amounts in the account as an asset after benefits are being received through periodic payments. So, my take on it is that even though annuities are not specifically identified in these sections, the intent is not to have any type of retirement investment ever counted as both an asset and as a source of income. Therefore, regardless of whether the balance may be withdrawn, if regular payments are being received then I say it’s a source of income and should not be counted as an asset.
The questioner went on to explain to me in a follow up message that the applicant had been denied because a third-party file reviewer had, in my opinion, incorrectly made them count it as both an asset and a source of income which put the applicant slightly over the income limit. I see this as an object lesson in staying current on all things related to assets, income and their calculations; keeping on top of your training, especially when you know there have been changes; and utilizing your resources, including NCHM’s eHotline which is a benefit available to all who currently hold certifications. In doing so, we can ensure that these calculations are indeed done correctly and that the properly qualified applicants are admitted to our LIHTC properties. Otherwise, we are exposing ourselves to the potential for noncompliance, not to mention denying eligible tenants.