INFORMATION ABOUT TAX-FREE SAVING ACCOUNTS FOR DISABLED INDIVIDUALS
The Stephen Beck, Jr., Achieving a Better Life Experience Act (ABLE) became law on December 19, 2014. The law aims to ease financial strains faced by individuals with disabilities by making tax-free saving accounts available to cover qualified disability expenses.
IMPORTANT FACTS TO KNOW ABOUT THE ABLE ACT
- The designated beneficiary of an ABLE account is the eligible individual who owns the ABLE account. He or she must be:
- eligible for Supplemental Security Income (SSI) based on disability or blindness that began before age 26;
- entitled to disability insurance benefits (DIB), childhood disability benefits (CDB), or disabled widow’s or widower’s benefits (DWB) based on disability or blindness that began before age 26; or
- someone who has certified, or whose parent or guardian has certified that he or she met the criteria for a disability certification before age 26.
- An eligible individual may have only one ABLE account.
- A contribution is the deposit of funds into an ABLE account. Any person may contribute to an ABLE account for an eligible beneficiary. Typically, contributions for an ABLE account may not exceed the annual gift tax exemption ($15,000 in 2021). However, if the beneficiary is working, and they or their employer is not contributing to a retirement plan, they may contribute an additional amount equal to the lesser of their annual gross salary or the individual Federal Poverty Level ($12,880 for 2021).
- A distribution is the withdrawal from an ABLE account. Distributions are only to or for the benefit of the designated beneficiary.
- A person with signature authority can establish and control an ABLE account for a designated beneficiary who is a minor child or is otherwise incapable of managing the account.
- Qualified disability expenses (QDE) are expenses made for the benefit of the designated beneficiary and related to his or her disability, including, but not limited to:
- Employment training and support;
- Assistive technology and related services;
- Prevention and wellness;
- Financial management and administrative services;
- Legal fees;
- Expenses for ABLE account oversight and monitoring;
- Funeral and burial; and,
- Basic living expenses.
- Earnings on an ABLE account and distributions from the account for qualified medical expenses do not count as taxable income.
- A rollover is:
- the distribution of all or some of the funds from one ABLE account to the ABLE account of a member of the original designated beneficiary’s family;or
- A limited amount from a qualified tuition plan (also called a 529 plan) to the SSI applicant, recipient, or deemor’s ABLE account.
TREATMENT OF ABLE UNDER FEDERAL MEANS-TESTED PROGRAMS
We disregard the first $100,000. Only assets above $100,000 count as a resource. If an ABLE balance exceeds $100,000 by an amount that causes you to exceed the SSI resource limit — whether alone or with other resources, we suspend the SSI payment until the countable resources are below the allowable limit.
A beneficiary’s Medicaid continues when an SSI recipient’s ABLE account exceeds $100,000 by an amount that causes the recipient to exceed the SSI resource limit–whether alone or with other resources. The recipient retains eligibility for Medical Assistance (Medicaid) without a time limit as long as he or she remains otherwise eligible.
Medicaid Payback Provision
Assets remaining in an ABLE account upon the death of a beneficiary must be used to reimburse the state for Medicaid payments it made on behalf of the beneficiary.