Image credits: The ABLE National Resource Center
Able Accounts, named for the 2014 federal legislation called the Stephen Beck Jr. “Achieving a Better Life Experience” Act, are a tax advantaged savings account program specifically designed for disabled adults receiving some measure of public support, such as SSI and Medicaid. To continue to receive SSI, young adults must not have over $2,000 in assets. This includes traditional savings programs such as US Savings Bonds or college funds. If these funds are in the disabled adult’s name, they become ineligible for SSI.
The new ABLE accounts allow family members and others to deposit post-tax dollars into a savings account for the use of the named account holder without jeopardising government benefits.
The ABLE account is designed to supplement, rather than supplant, government benefits. At this time, the maximum monthly amount a single beneficiary can receive from SSI is $733 per month. 50% of this amount, or $366, can be spent on housing. It is difficult in America to find safe housing at this price, and independent safe housing that takes into account special needs is out of reach.
The ABLE National Resource Center describes ABLE accounts as being used for qualified disability expenses: “A ‘qualified disability expense’ means any expense related to the designated beneficiary as a result of living a life with disabilities. These 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.”
Having an option to help provide a disabled young adult with safe housing, including the possibility for independent housing without putting SSI at risk, is huge.
Taxes and the ABLE accounts: Funds are deposited in ABLE accounts post federal tax, and income earned by the accounts in not taxable. Withdrawals are tax-free (federal tax) as long as the withdrawal meets the criteria of a disability related expense. If money is withdrawn and is not for a disability related expense, the tax rate is the beneficiary’s rate plus a 10% penalty. State tax authorities can tax withdrawals. The maximum amount that can be added to an ABLE account is $14,000 per year, and the total in the account cannot go over $100,000 without jeopardising SSI.
Each state has been authorized to set up ABLE accounts, but an addendum to the bill means ABLE accounts can be set up for an individual outside of his or her state of residence. Families can find the best account for their family member. Only one ABLE account is allowed per individual.
Criteria for eligibility include having a permanent disability before age 26. Of particular concern is the large population of young adults with autism and intellectual disability who are aging out of the school system. They remain socially isolated, unemployed, and without independent housing. The ABLE accounts will give families an added safety net as family members and caregivers get older.
At this time, ABLE accounts are open for all in Ohio, Tennessee, and Nebraska. Florida has opened ABLE accounts only for Florida residents.