The ABLE Act: Next Steps Webinar – December 7, 2015

ABLE Act Info
The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act became law on December 19, 2014. The ABLE Act creates a new option for some people with disabilities and their families to save for the future, while protecting eligibility for public benefits.

What is an ABLE Account?
ABLE accounts:
1. Are established in the new Section 529A Qualified ABLE Programs;
2. Are qualified savings accounts that receive preferred federal tax treatment;
3. Enable eligible individuals to save for disability related expenses;
4. Are NOT yet available, and there are still some unknowns.
Assets in and distributions for qualified disability expenses will be disregarded or given special treatment in determining eligibility for most federal means-tested benefits.

What are some important requirements of ABLE account?
1. Each eligible individual may have only one ABLE account.
2. “Designated beneficiary” is the account owner.
3. Total annual contributions may not exceed the federal gift tax limit, which is currently $14,000.
4. Multiple individuals may make contributions to the one ABLE account.
5. Aggregate contributions may not exceed the state limit for 529 savings accounts.

Who is eligible to be an ABLE account beneficiary?

To be eligible, individuals must meet two requirements:
1. Age requirement: must be disabled before age 26
2. Severity of disability:
• Have been determined to meet the disability requirements for Supplemental Security Income (SSI) or Social  Security disability benefits (Title XVI or Title II of the Social Security Act) OR;
• Submit a “disability certification”, including a physician’s diagnosis, that the individual meets criteria to be further established in regulations (essentially equal to Social Security level of disability).

What may funds from an ABLE account be used for?
Distributions from an ABLE account may be made for qualified disability expenses, related to the individual’s disability or blindness and made for his/her benefit, including:
1. Education;
2. Housing;
3. Transportation;
4. Employment training and support;
5. Assistive technology and personal support services;
6. Health, prevention, and wellness;
7. Financial management and administrative services;
8. Legal fees;
9. Expenses for oversight and monitoring;
10. Funeral and burial expenses;
11. Any other expenses approved by the Secretary of the Treasury under regulations consistent with the purpose of the program.

Expenditures for non-qualified expenditures will be penalized (tax and potential SSI penalties).

How do ABLE account assets impact eligibility for federal benefits?
ABLE assets will be disregarded or receive favorable treatment when determining eligibility for most federal means-tested benefits:
SSI: For SSI, only the first $100,000 in ABLE account assets will be disregarded.
• SSI payments will be suspended if the beneficiary’s account balance exceeds $100,000 but SSI benefits (eligibility) will not be terminated. Funds above $100,000 will be treated as resources.
• Housing expenses are intended to receive the same treatment as all housing costs paid by outside sources (SSI benefits subject to reduction of 1/3 federal SSI payment, as applicable).

Medicaid: ABLE assets are disregarded in determining Medicaid eligibility
• Medicaid benefits are NOT suspended if the ABLE account balance exceeds $100,000
• Medicaid Payback: Any assets remaining in the ABLE account when a beneficiary dies, subject to outstanding qualified disability expenses, will be used to reimburse a state for Medicaid payments made on behalf of the beneficiary after the creation of the ABLE account
• For purposes of this section, the state is considered a creditor of the ABLE account, not a beneficiary

What are the tax implications?
1. Contributions to an ABLE account are made with post-tax dollars.
2. Federal taxation: In general, ABLE programs are exempt from taxation.  Distributions from ABLE accounts for qualified disability expenses are exempt from taxation.  With certain exceptions, distributions not used for qualified disability expenses are taxable and subject to an additional 10% tax.
3. State taxation: State tax consequences will vary.  Some states provide significant tax incentives for contributions to 529 accounts and may provide similar incentives for contributions to ABLE accounts.

When will ABLE accounts be available?
Federal regulations need to be written.  The Treasury Department is required to issue regulations or guidance within six months of enactment of the ABLE Act.
1. Before ABLE accounts become available, States need to pass authorizing legislation.
2. Each state must decide whether (and how) to offer a qualified ABLE program to residents – some considering authorizing legislation now.
3. The timing of ABLE program availability will vary from state to state.

What states have passed legislation to date?
1. Some states are moving quickly to pass authorizing legislation.
2. Minimum state requirements could include:
• Authorization of 529A ABLE program;
• Consistent with federal law, including definitions;
• Designation of state agency;
• Exemption of state means-tested programs;
• Exemption of ABLE accounts from state taxes;
• Authority to contract with other state programs.

ABLE Related Bills that have passed (34): AL, AR, CA, CO, CT, DC, DE, FL, HI, IA, IL, KS, LA, MA, MI, MN, MO, MT, NE, NC, ND, NJ, NV, OH, OR, RI, SC, TN, TX, UT, VA, VT, WI, WV.

Active bills (9): AZ, IN, KY, MD, NH, NM, NY, PA, WA.