The Achieving a Better Life Experience Act of 2014 (ABLE)

This post was written by UCP intern Katie Tung in collaboration with UCP’s Director of Advocacy, Jennifer McCue. 

There has been a lot of activity around the Achieving a Better Life Experience Act (ABLE) of 2014. To help you understand the legislation and it’s impact we’ve created a quick summary sheet. As always, if you have additional questions please reach out and let us know.

What it is:

The Achieving a Better Life Experience Act of 2014 (ABLE) allows individuals and families with disabilities to save money in a separate tax-free account that does not negatively affect their eligibility to qualify for federal support programs, most specifically Medicaid and Social Security Benefits. These savings supplement the individual’s current benefit plans and do not disqualify their eligibility to receive federal benefits, unless the benefits are related to housing expenses or the individual has ABLE accounts exceeding $100,000. Medicaid services can be retained regardless of how much is in the accounts.

The purpose of ABLE accounts is to relieve the financial stress caused by the cost of disability-related services. In additional to federal benefits, the assets in ABLE accounts can be used to cover any expense related to the disability of the individual.  These expenses would include but are not limited to: education, transportation, housing, assistive technology, health services and prevention costs. If the individual were to die with assets still in the account, legislation requires the remaining funds to be paid to the state to reimburse for Medicaid benefits.

These accounts would be known as 529-ABLE accounts or 529A. Assets must be added in after-tax dollars but can be withdraw tax-free, similar to 529 college savings accounts. Donors can add up to $14,000 per year, with maximum total contributions totaling at $100,000.

Ohio and Tennessee are the first to have opened ABLE accounts to the public and Nebraska will be opening their program on June 30th. Florida will be enrolling their plan on July 1st. Since individual states are in charge of regulating their ABLE programs, enrollment fees and investment options may vary slightly.

Proposed Improvements:

The ABLE Age Adjustment Act was introduced in March 2016 to raise the eligibility age to create an ABLE account from 26 to 46 years old. The current legislation requires the individual to have developed their disability before the age of 26. By raising the onset age, ABLE could better accommodate individuals who acquire disabilities later in life, such as disabled veterans, spinal cord injuries, heart failure, or other later-developing disabilities.

The ABLE to Work Act would allow individuals with a disability who are employed to personally contribute to their ABLE account. In addition to the $14,000 that can be contributed by parents or guardians, the beneficiary would be able to contribute funds up to the federal poverty level, currently $11,770 per year. Individuals would still qualify for Savers Tax Credit, a tax credit for individuals of low-to-moderate income saving for retirement.

The ABLE Financial Planning Act moves to allow families to rollover savings from their child with a disability’s 529 college saving account to an ABLE account and vice versa. This would allow families to draw previous college savings and put it in their child’s ABLE account without suffering from any taxes. It would also allow families to later draw from ABLE accounts to put into their child’s college savings account.

 

Outline of ABLE Act – http://crenshaw.house.gov/index.cfm/able-act

Ohio’s ABLE program (STABLE) – http://www.stableaccount.com/

Tennessee’s ABLE program – http://www.abletn.gov/

Definitions and qualifications for Savers Credit – https://turbotax.intuit.com/tax-tools/tax-tips/Taxes-101/What-Is-The-Savers-Credit-/INF15617.html

ABLE Age Adjustment bill – https://www.govtrack.us/congress/bills/114/hr4813

ABLE Financial Planning bill – https://www.govtrack.us/congress/bills/114/hr4794

ABLE to Work bill – https://www.govtrack.us/congress/bills/114/hr4795

Advocate Explains Basics of the ABLE Act

Guest blogger Melissa theSeed is a mother, wife, advocate & blogger with two children with medical needs. She advocates for social and civil justice for people with disabilities through her blog and online communities. She is co-founder of a NY-based nonprofit called “Forward RISE” that is committed to bettering communities and improving disability awareness through education and social experiences.

You can contact her via email at info@forwardrise.org or call Forward RISE at 631-291-9328. Check out her blog at theseed9811.blogspot.com or her website at Forwardrise.org. And, she is on Facebook. Feel free to contact her with any comments or questions.

ABLE ActThe Achieving a Better Life Experience Act (ABLE) was finally signed into law by the President on December 19, 2014. It is now up to each State to implement the new law which would allow for tax-free savings accounts to be built for a population that has historically been forced to live in poverty. Up until now, in order to be eligible for SSI and Medicaid, a person could not have more than $2,000 in cash and property ($3,000 for couples) or make more than $700 monthly (!) in order to be eligible for Medicaid or SSI.

This means they can’t save money for things that Medicaid and SSI don’t cover like education, housing, a job coach or transportation. While the rest of society is encouraged to save for emergencies, unforeseen expenses and rainy days, people with disabilities – who have naturally higher expenses and higher medical needs – were forced to scrape pennies and do without due to archaic laws and discriminatory notions held by society in general.

What Is the ABLE Act?

 

Once enacted by the States, this bi-partisan piece of legislation will give people with disabilities and their families freedoms and security never before experienced. It amends the IRS code of 1986 to allow savings accounts to be set up for individuals with disabilities much like the college tuition accounts known as “529 accounts” that have been around since 1996. The Treasury Department is currently writing all of the regulations. There will then be a period of time where public comments on the proposed rules will be allowed. Before the end of 2015, every State is expected to establish and operate an ABLE program.

  • Allows savings accounts to be set up for individuals with disabilities
  • Recipients do not have to count funds as income
  • Recipients do not have to pay taxes on funds if they are used for disability-related expenses

How does it work?

In a nutshell, once enacted by a State, an ABLE savings account can be opened up by an individual with a disability or by someone else on their behalf. Up to $14,000 may be deposited yearly untaxed, with that amount to be increased as inflation rises. If an account surpasses $100,000, the owner of the account will no longer be eligible for SSI but would not be in danger of losing Medicaid. When a person dies, Medicaid will be reimbursed first from the account before it is dispersed to the person’s estate.

  • Can be opened up by an individual with a disability or by someone else on their behalf
  • Up to $14,000 may be deposited yearly
  • Up to $100,000 can be accrued without affecting SSI

Who is eligible?

Individuals with a disability wanting to establish an ABLE account must have acquired their disability before turning 26. If an individual is over the age of 26 but their disability onset was prior to turning 26, they will be still be able to establish an ABLE account. Individuals who meet this requirement and receive SSI or SSDI are automatically eligible to establish an account. Individuals who do not receive these services may still be eligible if they meet SSI criteria regarding who is eligible. The Treasury Department will further explain standards of proof in the regulations they are currently completing.

  • Onset of disability must have occurred prior to turning 26 years of age
  • Must meet SSI eligibility criteria

What can the funds be used for?

While the details are still being finalized, it is anticipated that the funds will be allowed to cover any disability-related expenses, including:

  • Education
  • Housing
  • Transportation
  • Employment training and support
  • Assistive technology and personal support services
  • Health, prevention and wellness
  • Financial management and administrative services
  • Legal fees
  • Funeral and burial expenses

This is a great step forward in the right direction for this community. Let’s hope the regulations are completed sooner rather than later and that the States take quick action in adopting them so that individuals and families can begin saving for a better life! Equality for All, ALWAYS!

Congress Passes ABLE Act

Washington Wire

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The U.S. Senate passed the Achieving a Better Life Experience (ABLE) Act of 2014 by a vote of 76 to 16 late Tuesday evening, agreeing with the House of Representatives that the bill should become law. President Obama is expected to sign the bill soon.

The ABLE (Achieving a Better Life Experience) Act allows individuals with developmental disabilities and their families to save money tax free for their disability service needs, and allows these assets to be exclude for purposes of eligibility to receive needed government supports including Medicaid, Supplemental Security Income (SSI), and Social Security Disability Insurance (SSDI). ABLE addresses barriers to independent living because individuals’ access to certain essential government funded programs can be lost once they establish a minimal level of income and savings.

Beginning in 2015, children or adults who acquire a disability before age 26 will be able to annually save up to the amount of the IRS gift tax exclusion, currently $14,000, and up to $100,000 total while remaining eligible for public programs such as Medicaid and SSI.  The ABLE Act will allow for similar certain individuals with disabilities and their families to maintain savings accounts similar to 529 saving plans for education.

Once the President signs the ABLE Act, the federal government will issue guidance on exactly how to set up and fund ABLE savings plans.