A tweak to federal law is poised to greatly expand choice and speed up availability of accounts allowing people with disabilities to save money without risking their government benefits.
Tucked inside a tax bill approved by lawmakers in December 2015 is a provision that will permit individuals with disabilities to open new accounts established under the Achieving a Better Life Experience, or ABLE, Act in any state, regardless of where they reside.
The change means that people with disabilities across the country will be able to open ABLE accounts when the first state programs are up and running which could happen as soon as February or March, advocates say.
With the new accounts, people with disabilities will for the first time be able to accrue up to $100,000 in savings without losing access to Social Security and other government benefits. Medicaid coverage will remain intact no matter how much money is saved in an individual’s ABLE account.
Despite federal passage of the ABLE Act in 2014, states had to approve their own legislation and develop mechanisms to regulate and administer the new accounts before letting consumers take advantage. So far, 35 states have approved such legislation, advocates say, but some are farther along than others in implementing programs.
“Some of the smaller states don’t have the capacity to create an ABLE program so this will allow more people with disabilities to access ABLE accounts and access ABLE accounts faster,” said Sara Hart Weir, president of the National Down Syndrome Society.
Without the recent legislative change, individuals with disabilities would have been limited by the timetable and specific offerings in their state. Now, families will be able to shop around to find the state program that best suits their needs and the availability of many options should promote competition among states to make their programs attractive, according to Chris Rodriguez of the National Disability Institute.
It’s likely that each state ABLE program will only work with one or a handful of financial institutions and fees may vary, so enabling families to access programs across state lines will dramatically increase their options, Rodriguez said.
Some states are already working to encourage residents to utilize in-state accounts by offering tax incentives, he said.
“It’s a pretty exciting development,” Rodriguez said of the federal provision allowing consumers to access accounts originating in any state. “I know it’s shaking things up. Some of the states are looking to quicken their development and others are sitting back and looking at whether they need to build a program.”
Ohio, Florida, Virginia and Nebraska are widely expected to be among the first to make ABLE programs available. Accounts are likely to be created and administered through dedicated state websites, advocates say.
To be eligible for an ABLE account, an individual must have a disability that originated before the age of 26.
Funds in the accounts can be used to pay for education, health care, transportation, housing and other expenses. Interest earned on savings in the accounts will be tax-free.