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ABLE Accounts: A New Financial Tool for Individuals with Disabilities

By: Olivia Macdonald, MPH, CPH

On December 19th, President Obama signed into law the Achieving a Better Life Experience (ABLE) Act. This now allows for people with disabilities to create savings accounts which would not affect their eligibility for Supplemental Security Income (SSI) or Medicaid.
These new ABLE accounts are expected to work similarly to existing 529 college savings plans. The individual with the disability, along with their family and friends, can contribute up to $14,000 a year to the account. While these contributions would be exempt from the gift tax, they would not be exempt from federal income tax. If more than $100,000 is in the account, SSI benefits will be suspended, but Medicaid eligibility will still be retained. Upon the death of the individual with the disability, the state will be able to recover funds from the account for some Medicaid expenses they have incurred for that individual. Only one account is allowed per person and the maximum funds allowed will be subject to each state’s decision. Funds from the account will be allowed to be spent on things such as healthcare, housing, transportation, and education.
To be eligible for an ABLE account, the individual must have a significant disability whose onset occurred before the age of 26. If they are also already receiving SSI and/or SSDI benefits, they will be automatically eligible to create an ABLE account. If they are not receiving SSI and/or SSDI, but the age of onset disability criteria is met, they could still create an account if they also meet SSI’s criteria for significant functional limitations.
The next step in the law’s progress will be for the Treasury Department to publish a set of final rules to guide state policymakers in establishing an ABLE account program for their particular state. These will inform each state’s guidelines regarding “a) the information required to be presented to open an ABLE account; b) the documentation needed to meet the requirements of ABLE account eligibility for a person with a disability; and c) the definition details of “qualified disability expenses” and the documentation that will be needed for tax reporting” (NDI, 2014). However, it is not required for a state to create an ABLE program, and some states may choose to contract with other states’ programs to offer ABLE accounts to its eligible residents.
ABLE accounts are expected to be available before the end of 2015.

You can learn more details about the new legislation, as well as steps you can take to prepare to open an ABLE account, by viewing the websites and video below:
“Congress Passes ABLE Act: Major Victory for Persons with Disabilities and Their Families”
http://realeconomicimpact.org/News.aspx?id=460

“Are Tax-Free ABLE Accounts The Right Financial Solution For People With Disabilities?”
http://www.forbes.com/sites/beltway/2014/12/04/are-tax-free-able-accounts-the-right-financial-solution-for-people-with-disabilities/

“ABLE Account Planning: Six Next Steps for 2015” by the National Disability Institute
https://www.youtube.com/watch?v=44d58G5GunA

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