The Achieving a Better Life Experience Act (ABLE) was finally signed into law by the President on December 19, 2014. Tax-free savings accounts can now 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.
ü Allows savings accounts to be set up for individuals with disabilities
ü Recipients do not have to count funds as income
ü 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.
ü Can be opened up by an individual with a disability or by someone else on their behalf
ü Up to $14,000 may be deposited yearly
ü 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.
ü Onset of disability must have occurred prior to turning 26 years of age
ü 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:
ü Employment training and support
ü Assistive technology and personal support services
ü Health, prevention and wellness
ü Financial management and administrative services
ü Legal fees
ü 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 so that individuals and families can begin saving for a better life!