January 07, 2015

Achieving a Better Life Experience (ABLE) Act - Signed into Law!

Washington DC Update - What's Happening in the Policy Arena for CYSHCNOn December 19, President Obama signed the Achieving a Better Life Experience (ABLE) Act, which allows the creation of tax-favored savings accounts for people with disabilities without jeopardizing their eligibility for Medicaid or Supplemental Security Income (SSI). Some features of ABLE Act accounts: 

Those eligible for an ABLE account are children who meet the SSI program's disability standard for children, or an adult who meets the SSI program's disability standard for adults, provided that the adult's disability occurred before he or she reached age 26.

  • Accounts could be created - beginning in 2015 - by any contributor, such as a family member, a friend, or the disabled person, but each beneficiary could have only one account, which must be established in the state in which he or she resides (or in a state that provides ABLE account services for his home state).

  • Qualified disability expenses on which the account's funds could be spent would be any expenses made for the benefit of the disabled beneficiary related to education; housing; transportation; employment training and support; assistive technology and personal support services; health, prevention, and wellness; financial management and administrative services; legal fees; expenses for oversight and monitoring; funeral and burial expenses; and any other expenses approved by the Secretary of the Treasury under regulations.

  • Assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the qualified beneficiary's eligibility for most federal means-tested benefits. For SSI, only the first $100,000 in each ABLE account would be disregarded.

  • An ABLE account may not receive annual contributions exceeding the annual gift-tax exemption (which is $14,000 in 2015). Additionally, a state must provide adequate safeguards to ensure aggregate contributions to an ABLE account do not exceed the state-based limits for 529 (education) accounts. Earnings on an ABLE account and distributions from the account for qualified disability expenses would not count as taxable income of the contributor or the eligible beneficiary. Contributions to an ABLE account would have to be made in cash from the contributor's after-tax income.

See these Questions and Answers from Autism Speaks. For more details, see this publication from the Joint Committee on Taxation.