Pooled trusts (also known as “(d)(4)(C) trusts”) are created under 42 U.S.C.§ 1396p(d)(4)(C) from the funds of the disabled beneficiary and are managed by a nonprofit fiduciary as trustee. The funds placed into the trust are deemed to be “unavailable” for purposes of means-tested public benefit programs like SSI and Medicaid, and transfers to a pooled trust may be exempt from benefit program transfer penalties.
At the death of the disabled beneficiary, federal law provides that the residue from a pooled trust may be retained in trust for other disabled persons. In 2005 Pennsylvania enacted a misguided law [62 P.S. § 1414(b)(3)(iii)] that required that a portion of the residue be available for payback to the state. Pooled trusts took the state to court over this and other restrictions in the law and won.
The federal courts specifically struck down the section of the Pennsylvania law that required that pooled trusts turn over at least 50% of the balance remaining in an account of a deceased account holder. In January, the United States Supreme Court refused to hear Pennsylvania’s final appeal in the case (Lewis v. Alexander).
In April, the Pennsylvania Department of Public Welfare began notifying administrators of pooled trusts that they may be due refunds from the state. A letter dated April 8, 2013 signed by Jason W. Manne, Deputy Chief Counsel, states in part:
If you are administering a trust that was designed to comply with the state law or was amended at the direction of the Department’s legal department to include specific language in order to receive approval for the trust from the Department, particularly with respect to the requirement of remitting 50% of residuary funds to the Department at the death of an account holder, your rights under federal law, and those of your beneficiaries, may have been violated and you may have certain remedies available.
As part of the resolution of the Lewis litigation, the Department has agreed to establish a procedure for pooled trusts to request a refund of amounts paid to the Department since 2005 when the law was enacted. To request a refund, send a refund request to: Carole Procope, Director, Third Party Liability Division, Department of Public Welfare, P.O. Box 8486, Harrisburg, PA 17105. The request should be submitted within forty-five (45) days of receiving this letter and should include the name, social security number and date of birth of each deceased account holder for whom a refund is sought and the amount of the refund you seek.
Mr. Manne’s letter goes on to specify additional documentation that the Department requests be submitted with claims for refunds. It states that the Department will review each request and issue a formal determination. Appeals may be taken from the Department’s determinations.
Beneficiaries of pooled trusts can contact the administrator of their trust for further information. Further information should also be available from the court appointed counsel for the class of individuals and trustees certified in the Lewis case. The court appointed two lawyers, Stephen Feldman and Karen Guss, as counsel for the class. Mr. Feldman’s contact information is as follows:
Stephen A. Feldman
820 Homestead Road
Jenkintown, PA 19046
Fax: (215) 887-1060
Further Information about Special Needs Trusts and Lewis v. Alexander: