Welcome to the Down Syndrome Association of Snohomish County’s new blog! In the
coming months we’ll be sharing family stories, tips and information, event updates, and
more. This month, I want to talk about a piece of legislation that is near and dear to my
heart: the Achieving a Better Life Experience (ABLE) Act.
President Obama signed the ABLE Act into law in December 2014. The legislation creates a new category of tax-advantaged accounts that allows people with disabilities and their families to save money without jeopardizing their Social Security or Medicaid benefits. The legislation began eight years ago with a group of parents of children with disabilities, including my friend Steve Beck, who wanted to save money for their children’s future. I got involved in the effort in 2010, and traveled to Washington, DC each year to meet with legislators and advocate for the bill. Unfortunately, Steve passed away just before the Act became law, but the law now bears his name: the Stephen J. Beck, Jr. Achieving a Better Life Experience Act.
Although the ABLE Act is now federal law, there is still much work to be done. Each state must develop its own ABLE program, which requires passing legislation at the state level. Here in Washington, Representative Christine Kilduff introduced an ABLE bill early in the 2015 legislative session, calling for the state treasurer to form an ABLE workgroup to create our state’s program and report back to the legislature. My daughter Emma and I testified at multiple hearings, and were thrilled to be present as Governor Jay Inslee signed the bill into law.
I have since been named to the workgroup developing Washington’s ABLE program, and we begin our work on August 5. Once we report back, the final program will have to pass through the legislature one final time. I’m honored to represent all of our families in this process, and look forward to the day when all of our families can open ABLE Accounts and save for their child’s future.
1. 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.
2. 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 other sources."
3. 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 26.
4. Are there limits to how much money can be put in an ABLE account?
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
5. 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
6. 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 account.
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.
7. Can I have more than one ABLE account?
No. The ABLE Act limits the opportunity to one ABLE account per eligible individual.
8. 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 year.
9. How many eligible individuals and families might benefit from establishing an ABLE
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
10. 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.
Amy Patterson, Director, Down Syndrome Association of Snohomish County