Legislators recently passed the federal Achieving a Better Life Experience Act (ABLE), which would allow individuals with disabilities or their families to open savings accounts, with no tax on the earnings, to pay for certain qualified expenses.
The federal law states that individuals can build up a financial cushion without fear that their eligibility for Social Security and Medicaid benefits will be jeopardized.
We are hoping that, in the near future, this federal opportunity will become a reality for Connecticut families and individuals with disabilities.
Currently, to qualify for many public benefits, people with disabilities can only have $2,000 in assets– making it very difficult to save for retirement, education or even general living expenses.
With ABLE, they can now put money aside for expenses that Medicaid and Supplemental Security Income don’t cover.
Expenses covered under ABLE:
- 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
- any other expenses approved under regulations
Important facts (Federal Statute):
- ABLE accounts are available to individuals who have become disabled before age 26 and (1) receives Social Security Disability Insurance (SSDI) or SSI; or (2) files a disability certification under rules that the IRS will write.
- Up to $14,000 per year can be saved, and the lifetime contribution cannot exceed the state-based limits for 529 accounts.
- Only one account can be opened per individual, and anyone can contribute to it with cash only, tax free, including the person with the disability.
- An ABLE account will only affect SSI if it exceeds $100,000. If the ABLE account exceeds $100,000, the monthly SSI benefit will be suspended until the account balance falls below $100,000. Eligibility for Medicaid will not be affected.
- When the person with the disability dies, Medicaid inherits the ABLE account funds first, then the heirs.
- Assets in an ABLE account can be rolled over without penalty into another ABLE account for either the beneficiary or any of the beneficiary’s qualifying family members.
- ABLE accounts will not replace other planning tools such as special needs trusts; they serve as an additional tool to address financial challenges of individuals with disabilities. Which tools work best will depend on individual needs and circumstances, and each individual or family should consult with a special needs planning attorney to determine how an ABLE account might fit into a comprehensive special needs plan.
What’s the outlook for Connecticut?
Although federal law applies uniformly to all states, individual states may regulate ABLE accounts differently. At this point in time, there is no language in the Connecticut bill to indicate that ABLE account balances will be excluded from being counted as assets for Medicaid. This must be remedied as it defeats the whole purpose and intent of the federal legislation.
We anticipate the federal program will be rolled out later this year. Connecticut legislators need to pass the bill, hopefully with some modifications, so that we’ll have a better idea as to when Connecticut residents can open these accounts, later this year or early 2016.
ABLE is much more than a savings account. It’s about self-sufficiency, helping people live independently, work, and go to college. It’s about allowing people with disabilities to save money to achieve the best life possible, just like anyone else.