ABLE Accounts Are Up and Running
Written by Jacque Mingle
Some people with disabilities have a new option for saving that can preserve needs-based benefits. They’re called ABLE accounts, for Achieving a Better Life Experience.
Benefits have long been available for disabled adults, but there are asset limits. To qualify for Supplemental Security Income (SSI) and Medicaid (AHCCCS and ALTCS in Arizona), a disabled person generally can’t have more than $2,000. ABLE accounts, loosely based on 529 college-savings plans, allow money (up to $100,000) to be held in these special accounts, and the funds can grow tax free. More importantly, they will not endanger the beneficiary’s eligibility for means-tested government benefits as long as they are under the $100,000 threshold. Accounts can accumulate more, but benefits may be impacted.
The accounts can be used only by someone who has been deemed “disabled,” and the disability had to have occurred before his or her 26th birthday. “Disabled” means the person is eligible for SSI or Social Security Disability Insurance (SSDI) based on blindness or disability, or a qualified physician has provided a qualifying diagnosis.
The origin of the accounts came back in 2014, when Congress passed the basic structure, allowing each state to then take steps to get them going. The accounts are now up and running in Ohio, Nebraska, Tennessee, and Florida (for Florida residents only). Programs in Oregon and Virginia are expected by the end of 2016, and several states (including Alaska, Illinois, Iowa, Kansas, Minnesota, Missouri, Nevada, Pennsylvania, and Rhode Island ) plan to form an ABLE consortium, which aims to lower costs by increasing the number of participants.
In Arizona, initial legislation was passed during the last legislative session. That law gives the green light to begin the planning for the accounts here, which is expected to take several years. That doesn’t mean Arizonans are out of luck, however. A person can set up an account in another state; residency is not a requirement (except in Florida). And you can move your ABLE balance from one plan to another. So you could set up an account in Ohio, and move it to Arizona once our system is up and running.
A total of up to $14,000 per year can be deposited in an individual’s ABLE account, so these accounts won’t help much with a large inheritance or if you have many generous family members. The accounts can be opened by family members or other legal representatives and they can accept investment money from anyone. Funds have to be used for “qualified” expenses, which include housing, education and training, assistive technology, and personal support services.
Each state’s program will be somewhat different, and fees probably will vary. Ohio’s program, known as “STABLE Accounts,” have a normal bank account’s saving and withdrawal features, and also allow for long-term investments (similar to a 529 or 401(k)). The initial minimum contribution is $50, and set up is free. Ohio residents will pay a $2.50 per month fee, and others will pay $5 per month. Additional fees may apply, depending on investment choice.
One downside: states can recover money remaining after an account holder dies to pay for Medicaid benefits that were paid on the disabled person’s behalf, also known as a “payback” provision.