Supporting Asset Development and Accumulation
This toolkit will help you understand and explain two key Supplemental Security Income (SSI) policies that allow youth to save money to support a range of goals related to future employment and independence. Our focus will be on two saving and asset accumulation options: SSI’s Plan to Achieve Self Support (PASS); and the Achieving a Better Life Experience (ABLE) Account.
Special SSI Income and Resource Exclusions to Support Employment and Independence
The SSI program has some lesser-known exclusions from income and/or resources that a transition-aged youth (ages 14 to 25) could use to meet needs related to employment and long-term independence. These include the following:
- The Plan to Achieve Self Support (PASS)
- Achieving a Better Life Experience (ABLE) Accounts
- Section 529 College Savings Accounts
- Individual Development Accounts (IDAs)
- Special Needs Trusts
We describe below, in some detail, the use of the PASS and ABLE account as ways to save and accumulate assets as permitted by special SSI income or resource exclusion rules. We also provide web-based resources for the PASS, ABLE account, and the other three special accounts mentioned.
SSI’s Plan to Achieve Self Support (PASS)
The PASS allows an individual to set aside income and/or resources that would otherwise count in determining SSI eligibility or payment amount in order to pay for items and services to support a vocational goal. If a PASS proposal is approved by the SSI program, the money set aside will not count as income and the resources that are accumulated will not count toward SSI’s $2,000 resource limit.
Example: Daniel, age 18, has a learning disability and a moderate hearing impairment. He gets $640 in Social Security Childhood Disability payments (on the Social Security record of a parent who is disabled) and an SSI payment of $151 per month. It is March and Daniel will graduate from high school in June. He will begin attending college in September studying to become an accountant. Daniel lives about 35 miles from the college and would like to obtain a used car to travel to and from the campus, since public transportation is not available where he lives.
Daniel’s PASS: His written PASS proposal lists his vocational goal as accountant. He will save $620 of his Social Security each month toward the purchase of a $10,000 used car and to pay for $2,000 per year car insurance while attending school. He will save $3,100 between April and August: to make a $2,000 down payment on the car (with a car loan to finance the remaining $8,000); to pay $1,000 for his first six months of car insurance; and the remaining $120 to provide the start of a maintenance and repair fund. During the remaining months of his 29-month PASS, Daniel’s $620 monthly deposits into the dedicated PASS account will be used: to pay for monthly car payments on a 24-month loan (about $350 to $375 per month); to pay for $2,000 per year in car insurance; and to pay for routine maintenance and repairs.
You can explain to a youth like Daniel and his family that a PASS can be used to pay for items, like a vehicle, which most State VR agencies will not be able to cover through their Individualized Plan of Employment.
Here is how Daniel’s SSI payment is calculated without and with an approved PASS:
Without a PASS:
|- 20||General income Exclusion|
|$771||Base SSI Rate|
|-$620||Countable unearned income|
|$151||Monthly SSI payment|
With an Approved PASS:
|-$20||General income exclusion|
|$771||Base SSI rate|
|-$0||Countable unearned income|
|$771||New monthly SSI payment|
After Daniel’s PASS is approved, his monthly SSI payment goes up by $620 – the exact amount of the Social Security that he has set aside in the dedicated PASS account. Daniel will still have the same $770 per month to meet expenses unrelated to the PASS.
Achieving a Better Life Experience (ABLE) Accounts
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 40 states.
ABLE Accounts: A Unique Opportunity for SSI Recipients to Have a Protected Asset Account
- The beneficiary can establish an account in his or her own state or, if their own state does not offer accounts, in any of 20 or more states that have a national ABLE account.
- Up to $15,000 can be contributed to the account in 2019, by the beneficiary, a family member, other third party, or trust. Up to an additional $12,140 can be contributed out of a beneficiary’s annual earnings.
- Contributions by others, including contributions by a trust, are not considered income to the beneficiary by SSI or Medicaid.
- Up to $100,000 in the account is considered by SSI to be an exempt resource.
- If account assets exceed $100,000 and put the beneficiary above SSI’s $2,000 resource limit, SSI is indefinitely suspended. If the account again falls below $100,000 SSI can be reinstated without a new application.
- If SSI is suspended because of excess ABLE account assets, Medicaid eligibility continues.
- If the account assets are distributed to pay for Qualified Disability Expenses (such as housing or transportation costs), distributions are not counted as income by SSI or Medicaid programs.
Example: Candida recently turned age 21 and has a rare bone disease that limits her mobility. She gets monthly SSI disability payments of $771 and automatic Medicaid as available with SSI in 41 states. Candida is completing her second year of college studies. She has been living at home but would like to move into a $800 per month apartment (including utilities) near the college, with plans to be a high school science teacher. She cannot afford this rent as an SSI beneficiary unless she takes out a student loan. Her grandmother has offered to pay Candida’s rent and a security deposit but Candida has learned that the SSI program would treat her rent payment as in-kind income and reduce her SSI payment by $257 per month.
Candida’s ABLE Account: Candida starts the account in 2019 with a $500 deposit from her savings. Then her grandmother deposits $12,000 into the ABLE account as a way to help Candida pay for her rent and a security deposit. Candida’s parents agree to put an additional $2,500 into the account when they receive their federal income tax refund. This would put total ABLE account deposits right at the 2019 limit of $15,000. Knowing that she could put up to an additional $12,140 into the account from her earnings, Candida is considering depositing additional money into the ABLE account from her summer job. (Note: If Candida works during the summer, she will be eligible for SSI’s Student Earned Income Exclusion (SEIE) as she is a full-time student under age 22. This means that all her gross income from the summer job will be excluded if under $1,870 each month, up to $7,550 for calendar year 2019, with her SSI payment remaining at $771 per month. For more information about the SEIE, see our Toolkit # 5, “Special Work Incentives for Youth – the Student Earned Income Exclusion.”)
At the time Candida moves into her apartment in September, she has $16,500 in her ABLE account including $1,500 from her summer employment.
- She makes distributions from the ABLE account in September to pay a security deposit of $1,500 and her first month’s rent of $750.
- Additional distributions from her ABLE account are made to pay $750 for rent in October, November, and December.
- As 2019 ends, $4,500 from ABLE account has been distributed to pay expenses related to Candida’s apartment and $12,000 remains in the account.
- Since Candida’s housing expenses are Qualified Disability Expenses, the SSI program will not count them as in-kind income and her SSI payment will remain at $771 per month. Since her ABLE account balances have been below $100,000, those balances are exempt resources for SSI purposes.
- The Medicaid program will not count the distributions as income and will not count ABLE account balances toward any Medicaid-specific resource limit (if Candida lives in a state where she must apply for Medicaid separately).
- Despite having up to $16,500 in her ABLE account during the year, since Candida continues to be an SSI beneficiary she continues to be exempt from the State VR agency’s economic needs test and will not be required to contribute to the cost of her tuition and other college expenses currently paid through the VR agency.
Candida’s VR counselor can share with Candida, her parents, and her grandmother how the ABLE account can be used to save money without affecting SSI eligibility.
Candida’s grandmother and her parents hope to contribute similar yearly amounts to her ABLE account while she remains in school and until she completes a Master’s program. This will allow Candida to keep using the account toward her rent payments and possibly toward other expenses not covered by the State VR program. This should also allow Candida to build up assets toward a future vehicle purchase or a down payment on a home purchase when she graduates and starts working.
The VR counselor can explain to Candida and her family members that distributions from the ABLE account to pay for her rent and other housing costs will not be counted by the SSI program as income and her full SSI payment will continue.
Other Strategies for Asset Accumulation to Support Transition-Aged Youth
Youth and their families may also want to consider the use of: a Section 529 College Savings Account, an Individual Development Account, and/or a Special Needs Trust. A discussion of these vehicles for saving, without any impact on SSI eligibility or payment amount, is beyond the scope of this toolkit. See the Web-Based Resources section of this toolkit for more information about them.