Helping protect your paycheck: A cautionary tale
529 ABLE, or simply 529A, are state-sponsored savings accounts authorized in 2014 by the Achieving a Better Life Experience Act (ABLE Act). They are modeled loosely on 529 college savings accounts.
The purpose of 529 ABLE is to ease the financial strain faced by people with disabilities by creating tax-free savings accounts, which can ease the burden of certain expenses such as housing, transportation, and education.
529 ABLE does not replace benefits provided through private insurance, Medicaid, or supplemental security income, and other other benefit sources.
Seven Important 529 ABLE Facts
Who Is Eligible?
Eligibility is restricted to individuals with the onset of significant disabilities prior to reaching 26 years of age. If you meet this criteria and already receive benefits under SSI and/or SSDI, you are automatically eligible to establish an ABLE account.
If you are not a recipient of SSI and/or SSDI, but meet the age of onset disability requirement, you could still be eligible to open an ABLE account if you meet Social Security’s definition and criteria regarding significant functional limitations and receive a letter of certification from a licensed physician.
How much money can be put in an 529 ABLE account?
The total annual contributions by all participating individuals, including family and friends, for a single tax year, are $14,000. Individual states dictate the lifetime contributions limit.
However, for individuals with disabilities who are recipients of SSI, the ABLE Act sets some further limitations. The first $100,000 in ABLE accounts would be exempted from the SSI $2,000 individual resource limit. If and when an ABLE account exceeds $100,000, the beneficiary’s SSI cash benefit would be suspended until such time as the account falls back below $100,000.
It is important to note that while the beneficiary’s eligibility for the SSI cash benefit is suspended, this has no effect on their ability to receive or be eligible to receive medical assistance through Medicaid.
Which expenses are allowed by ABLE accounts?
A “qualified disability expense” may include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services, and other expenses which help improve health, independence, and/or quality of life.
Can I have more than one ABLE account?
The ABLE Act limits the opportunity to one ABLE account per eligible individual.
What if my state has not established a 529 ABLE program before opening an account?
While the original law passed in 2014 did stipulate that an individual had to open an account in their state of residency, this provision was eliminated by Congress in 2015. This means that regardless of where you might live and whether or not your state has decided to establish an ABLE program, you are free to enroll in any state’s program.
Will states offer options to invest the savings contributed to an ABLE account?
Like 529 college savings plans, states are likely to offer qualified individuals and families multiple options to establish ABLE accounts with varied investment strategies.
How is an ABLE account different than a special needs or pooled trust?
An ABLE Account will provide more choice and control for the beneficiary and family. Cost of establishing an account will likely be considerably less than either a Special Needs Trust (SNT) or Pooled Income Trust. With an ABLE account, account owners will have the ability to control their funds and, if circumstances change, still have other options available to them. More information, webinars, slides, and transcripts are available: ABLE Accounts, Trusts, Financial and Benefits Planning.
What happens to funds in an ABLE account when the beneficiary dies?
The federal law authorizes state Medicaid agencies to become a creditor and seek reimbursement for the Medicaid services a beneficiary has received since he opened the ABLE account. All outstanding qualified disability expenses will be given priority over the Medicaid claims. The remainder of assets in an ABLE account will go to the beneficiary’s estate.
529 ABLE—An Additional Option
529 ABLE provides an additional option for those looking for financial relief, which is definitely a positive for those looking for Achieving A Better Life Experience.
Advocates continue to work to enhance these accounts. For instance, many seek to increase the age of available recipients to those who became disabled after they reached the age of 26 years old.
If you would like to see benefits expanded, help get the ABLE Act passed in your state. Click here to see the status of ABLE in the states.
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