ABLE accounts are authorized by section 529A of the Internal Revenue Code which became law in late 2014. They allow a “designated beneficiary” with a disability to save money in an account for future Qualified Disability Expenses. The first ABLE accounts became active in 2016 and there are now active accounts in more than 35 states.
Key Elements of ABLE Accounts
- Disability requirement – getting SSI or Social Security disability payments based on disability that began before age 26; or there is a certification made that certain disability/blindness criteria is met and occurred before age 26.
- Contributions – any “person” can contribute, including designated beneficiary, a family member or friend, or a trust.
- Contribution limits – up to $15,000 per year in 2019, plus up to an additional $12,140 in 2019 if money comes from earnings of designated beneficiary.
- Can start ABLE account in any state with a national account (even if no active account in designated beneficiary’s state of residence).
- Range of investment options – State ABLE programs generally allow conservative, moderate, and more aggressive options.
- Ease of start-up – State programs generally allow for online start-up, designed to complete registration in less than 30 minutes. Accounts can typically be set up by the designated beneficiary or an authorized family member, but some may choose to pay an attorney or other professional for assistance.
- Modest fees to start and use account – These will vary from state-to-state. Person can use ABLE National Resource Center, www.ablenrc.org, to compare costs in different states.
- Distributions allowed for Qualified Disability Expenses – see below.
Wide Range of Qualified Disability Expenses (QDEs) Permitted, Including:
- Education, housing, and transportation
- Employment training and support
- Assistive technology and related services
- Health, prevention and wellness
- Financial management and administrative services, legal fees
- Expenses for ABLE account oversight and monitoring
- Funeral and burial
- Basic living expenses (These appear in SSI policy and proposed IRS regulations, but not in ABLE Act.)
Key SSI and Medicaid Policies
- Contributions of individual to ABLE account still count as income for SSI, Medicaid, and IRS.
- Contributions from all others not counted by SSI or IRS as income of designated beneficiary.
- Earnings from ABLE account are excluded and not counted by SSI or IRS.
- Up to $100,000 of account balance excluded and not counted by SSI.
- When countable resources exceed $2,000, as the result of ABLE account exceeding $100,000, SSI payments are “indefinitely suspended” but Medicaid continues. SSI payments can resume, without a new application, if ABLE balances are again below $100,000 even if that occurs several years later.
So long as distributions are for QDEs, distribution is not considered income by SSI or Medicaid. This includes distributions for housing costs, including rent, mortgage, taxes, or utilities.