D.C. – Dec. 17, 2014) – Last night, the U.S. Senate overwhelmingly passed the Achieving a
Better Life Experience (ABLE) Act of 2014 by a vote of 76 to 16. First
introduced in 2006, and subsequent sessions of Congress, the ABLE Act will
allow people with disabilities (with an age of onset up to 26 years old) and
their families the opportunity to create a tax-exempt savings account that can
be used for maintaining health, independence and quality of life.
“Today marks a new day in our country’s understanding
and support of people with disabilities and their families,” Michael Morris, National Disability Institute (NDI)
Executive Director, said. “A major victory for the disability community, ABLE,
for the very first time in our country’s policy on disability, recognizes that
there are added costs to living with a disability.” He continued. “For far too
long, federally imposed asset limits to remain eligible for critical public
benefits have served as a roadblock toward greater financial independence for
the millions of individuals living with a disability.”
NDI has long championed the ABLE Act as a critical strategy
to providing a pathway to a better economic future for all people with
disabilities. As the nation’s first nonprofit dedicated to improving the
financial health and future of all people with disabilities, the organization
has extensively documented and called attention to the daily reality and extra
expenses associated with living with a disability, and the challenges of
navigating the complex web of government rules to maintain public benefits
In recognition of this unprecedented legislation, NDI
has created a list of 10 items about ABLE accounts that individuals with
disabilities and their families should know:
Accounts: 10 Things You Must Know
What is an ABLE account?
ABLE Accounts, which are tax-advantaged savings accounts for
individuals with disabilities and their families, will be created as a result
of the passage of the ABLE Act of 2014. Income earned by the accounts would not
be taxed. Contributions to the account made by any person (the account
beneficiary, family and friends) would not be tax deductible.
Why the need for ABLE accounts?
Millions of individuals with disabilities and their families
depend on a wide variety of public benefits for income, health care and food
and housing assistance. Eligibility for these public benefits (SSI, SNAP,
Medicaid) require meeting a means or resource test that limits eligibility to
individuals to report more than $2,000 in cash savings, retirement funds and
other items of significant value. To remain eligible for these public benefits,
an individual must remain poor. For the first time in public policy, the ABLE
Act recognizes the extra and significant costs of living with a disability.
These include costs, related to raising a child with significant disabilities
or a working age adult with disabilities, for accessible housing and
transportation, personal assistance services, assistive technology and health
care not covered by insurance, Medicaid or Medicare.
For the first time, eligible individuals and families will
be allowed to establish ABLE savings accounts that will not affect their
eligibility for SSI, Medicaid and other public benefits. The legislation
explains further that an ABLE account will, with private savings, “secure
funding for disability-related expenses on behalf of designated beneficiaries
with disabilities that will supplement, but not supplant, benefits provided
through private insurance, Medicaid, SSI, the beneficiary’s employment and
Am I eligible for an ABLE account?
Passage of legislation is a result of a series of
compromises. The final version of the ABLE Act limits eligibility to
individuals with significant disabilities with an age of onset of disability
before turning 26 years of age. If you meet this criteria and are also
receiving benefits already under SSI and/or SSDI, you are automatically
eligible to establish an ABLE account. If you are not a recipient of SSI and/or
SSDI, but still meet the age of onset disability requirement, you would still
be eligible to open an ABLE account if you meet SSI criteria regarding
significant functional limitations. The regulations to be written in 2015 by
the Treasury Department will have to explain further the standard of proof and
required medical documentation. You need not be under the age of 26 to be
eligible for an ABLE account. You could be over the age of 26, but must have
the documentation of disability that indicates age of onset before the age of
Are there limits to how much money can be put in an ABLE
The total annual contributions by all participating
individuals, including family and friends, is $14,000. The amount will be
adjusted annually for inflation. Under current tax law, $14,000 is the maximum
amount that individuals can make as a gift to someone else and not pay taxes
(gift tax exclusion). The total limit over time that could be made to an ABLE
account will be subject to the individual state and their limit for
education-related 529 savings accounts. Many states have set this limit at more
than $300,000 per plan. However, for individuals with disabilities who are
recipients of SSI and Medicaid, the ABLE Act sets some further limitations. The
first $100,000 in ABLE accounts would be exempted from the SSI $2,000
individual resource limit. If and when an ABLE account exceeds $100,000, the
beneficiary would be suspended from eligibility for SSI benefits and no longer
receive that monthly income. However, the beneficiary would continue to be
eligible for Medicaid. States would be able to recoup some expenses through
Medicaid upon the death of the beneficiary.
Which expenses are allowed by ABLE accounts?
A “qualified disability expense” means any expense related
to the designated beneficiary as a result of living a life with disabilities.
These include education, housing, transportation, employment training and
support, assistive technology, personal support services, health care expenses,
financial management and administrative services and other expenses which will
be further described in regulations to be developed in 2015 by the Treasury
Where do I go to open an ABLE account?
Each state is responsible for establishing and operating an
ABLE program. If a state should choose not to establish its own program, the
state may choose to contract with another state to still offer its eligible
individuals with significant disabilities the opportunity to open an ABLE
After President Obama signs the ABLE Act, the Secretary of
the Department of Treasury will begin to develop regulations that will guide
the states in terms of 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.
No accounts can be established until the regulations are
finalized following a public comment period on proposed rules for program
implementation. States will begin to accept applications to establish ABLE
accounts before the end of 2015.
Can I have more than one ABLE account?
No. The ABLE Act limits the opportunity to one ABLE account
per eligible individual.
Will states offer options to invest the savings contributed
to an ABLE account?
Like state 529 college savings plans, states are likely to
offer qualified individuals and families multiple options to establish ABLE
accounts with varied investment strategies. Each individual and family will
need to project possible future needs and costs over time, and to assess their
risk tolerance for possible future investment strategies to grow their savings.
Account contributors or designated beneficiaries are limited, by the ABLE Act,
to change the way their money is invested in the account up to two times per
How many eligible individuals and families might benefit
from establishing an ABLE account?
There are 58 million individuals with disabilities in the
United States. To meet the definition of significant disability required by the
legislation to be eligible to establish an ABLE account, the conservative
number would be approximately 10 percent of the larger group, or 5.8 million
individuals and families. Further analysis is needed to understand more fully
the size of this market and more about their needs for new savings and
How is an ABLE account different than a
special needs or pooled trust?
An ABLE Account will provide more choice and control for the
beneficiary and family. Cost of establishing an account will be considerably
less than either a Special Needs Trust (SNT) or Pooled Income Trust. With an
ABLE account, account owners will have the ability to control their funds and,
if circumstances change, still have other options available to them. Determining which option is the most
appropriate will depend upon individual circumstances. For many families, the
ABLE account will be a significant and viable option in addition to, rather
than instead of, a Trust program.
About National Disability
National Disability Institute
(NDI) is a national nonprofit
organization dedicated to building a better economic future for people with
disabilities. The first national organization committed exclusively to
championing economic empowerment, financial education, asset development and
financial stability for all persons with disabilities, NDI affects change
through public education, policy development, training, technical assistance
and innovative initiatives. NDI and its Real Economic Impact (REI)
helped more than 2.3 million people with disabilities receive nearly $2.3
billion in tax refunds and credits. To learn more, visit www.realeconomicimpact.org
. Engage with NDI on Facebook: RealEconImpact
or follow NDI on Twitter: @RealEconImpact
# # #