The passage of the Achieving a Better Life Experience Act (ABLE) by Congress, and signed by President Obama, promises to make the most significant positive difference in the lives of people with disabilities since the Americans with Disabilities Act (ADA) was passed 25 years ago. The ABLE Act will give individuals with disabilities (with an age of onset prior to 26 years old) an opportunity to establish a tax-exempt savings account for the use of qualified expenses that he/she can control.
Why is this groundbreaking? Let’s look at the facts:
- Currently, the unemployment rate for people with disabilities stands at 10.8% as compared to 5.3% for people without disabilities.
- The labor participation rate for people with disabilities stands at 19.7% as compared to 68.7% for people without disabilities.
- Over 28 percent of adults with a disability aged 21-64 live in poverty – more than twice the rate of people without disabilities.
- Many government benefits such as Social Security Income (SSI) and Medical Assistance (Medicaid) have strict asset limits. SSI, for example, has an asset limit of $2,000. For many, this means a lifetime of remaining below the poverty line in order to receive the help they need.
With the ABLE Act…
- Individuals have an opportunity to establish an account with deposits of up to $14,000 per year without jeopardizing his/her eligibility for government benefits.
- Savings of up to $100,000 in total are allowed without losing eligibility for SSI or waiver benefits. Note: If an account exceeds $100,000 the beneficiary will maintain Medicaid benefits.
- ABLE accounts are tax-exempt and excluded from the gift tax. This means that the beneficiary as well as family and friends can deposit up to $14,000 total per year tax-free.
- Savings can be used on a wide range of qualified expenses such as: assistive technology (AT); education; housing; transportation; employment training and support; health, prevention, and wellness; financial management; administrative services; and funeral and burial expenses. This means that an account beneficiary can save for an adapted vehicle, the purchase of a home, home modifications, or other AT devices. For some, this very well might mean the difference between remaining in poverty and moving out of it.
- The beneficiary is provided with greater autonomy and control over their own money as compared to a Special Needs Trust or Pooled Income Trust.
Achieving a Better Life Experience (ABLE) Act – Understanding the ABLE Act
What’s next? There are several bills circulating in the Pennsylvania General Assembly. It is expected that the House and the Senate will come to a consensus and one bill will be passed by both chambers before the end of 2015. It’s also expected that Governor Wolf will sign PA’s ABLE legislation so that people with disabilities and their families can begin to establish ABLE accounts!
We’ve adapted a great infographic originally created by the American Association of People with Disabilities (AAPD) and Allsup to show in visual terms what the ABLE Act is all about.
Text alternative for web accessibility provided below infographic.
Achieving a Better Life Experience (ABLE) Act – Understanding the ABLE Act
The ABLE Act, signed into law on December 19, 2014, gives individuals with disabilities the opportunity to establish tax-deferred savings accounts to maintain their independence, pursue their dreams and contribute to their communities. ABLE Plans fall under Section 529 of the Internal Revenue Code.
Protects current disability and healthcare benefits
SSI/MEDICAID Eligibility: In general, ABLE Plan funds would not affect eligibility for Supplemental Security Income (SSI), Medical Assistance (Medicaid) and other federal means-tested benefits. Currently, individuals with more than $2,000 in assets are not eligible for SSI.
TAX FREE: Withdrawals for qualified expenses are not considered income for tax purposes; and will, as a general rule, be exempt as a resource for any means-tested government benefit.
Qualified expenses under the ABLE Act include:
- Education
- Housing
- Transportation
- Employment Training & Support
- Assistive Technology
- Health, Prevention, & Wellness
- Financial Management
- Administrative Services
- Funeral & Burial Expenses
Who can have an ABLE Plan?
You are eligible for an ABLE Plan if you acquired a blindness or a disability prior to the age of 26. Proof of a disability includes:
- Receiving Social Security Disability Insurance (SSDI) or
- Receiving SSI or
- Receiving a disability certification under rules that the IRS will write.
Who might benefit the most?
The ABLE Act makes it possible for a person to save more than the $2,000 SSI asset limit. Save earned income, gifts, or inherited money for education, a vehicle, the purchase of a home, or as a reserve for repairs for assistive technology without jeopardizing existing benefits.
Setting up an ABLE Plan
Each state is responsible for establishing and operating an ABLE program or contracting with another state’s program.
Pennsylvania’s ABLE program will be available pending legislation.
Statistics and Numbers
13.5% – Pennsylvanians who reported having a disability in 2012, according to the American Community Survey.
$100,000 – Total amount that can be saved in an ABLE account while maintaining eligibility for SSI and waiver services. Beneficiary will retain Medicaid.
$14,000 – Total possible annual contributions, including those from family and friends, into an ABLE account without losing eligibility for government benefits. Gift tax exclusion applies.
This infographic was adapted by the Pennsylvania Assistive Technology Foundation (PATF), a non-profit organization that provides education and financing opportunities to people with disabilities and older Pennsylvanians to acquire the assistive technology they want to live independently. Visit us at patf.us.
Many thanks for this dynamic design, borrowed in part from:
- AAPD – For more information on the American Association of People with Disabilities, visit AAPD.com.
- Allsup – For more information on Social Security Disability Insurance, visit Expert.Allsup.com.