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