Chair of the College Savings Plans Network & Director of Washington’s Guaranteed Education Tuition (GET) Program.
December 18, 2014<
The US Senate has passed the ABLE (Achieving a Better Life Experience) Act of 2014 after this same legislation recently advanced through the US House of Representatives ( see Wall Street Journal article). Now the legislation goes to the President for his approval and is expected to be signed into law before the end of 2014. If written into law, the changes become effective for investors in 2015.
ABLE is proposed federal legislation that would allow families and individuals to save through a Federal tax-advantaged account for future qualified expenses associated with the care of a person with a disability. Qualified expenses are those related to the individual’s disability, including health, education, housing, transportation, training, assistive technology, and personal support.
The legislation is modeled after the 529 tuition program legislation and provides similar federal income tax advantages – contributions grow tax deferred and are tax exempt when used for “qualified disability expenses.” ABLE savings programs would need to be “established and maintained” by a state. For states that wish to offer such programs, the most effective and efficient way to do so may be to build on the infrastructure of the current 529 college savings program, or partner with another state’s program.
The legislation also provides a significant enhancement for 529 college savings plan investors. Most notably, account owners will now be permitted to change their investment direction up to two times per year. Under the current structure, the IRS allows only one change per calendar year. This provision is important for families who are investing in education through 529 plans and want to have more flexibility and control over their accounts.
This legislation is a huge accomplishment and has been in the works since 2011. The actions that took place today go a long way in our efforts to help American families prepare and support the future success of their children. I want to personally thank bill sponsors Rep. Ander Crenshaw (R-FL) and Senator Bob Casey (D-PA), and the 380 co-sponsors in the House and 75 co-sponsors in the Senate for their leadership.
I also want to be sure and recognize the CSPN Executive Board and Williams & Jensen, our government affairs partner, who helped with this legislation and advocated on its behalf. This is a true collaboration amongst many caring partners to see to it that all American children have the opportunity to reach their full potential. When the bill is signed into law by the President we will be sure to follow up with a formal announcement.