This week, the United States Senate, in an act of bipartisan cooperation, passed the Achieving a Better Life Experience (ABLE) Act of 2014. Although the ABLE Act was nearly six years in the making, it is a major victory for disabled individuals and their families. Many of the services that disabled individuals rely upon for health care, housing assistance and monthly income have strict resource restrictions. For example, individuals receiving Supplemental Security Income (SSI) cannot report more than $2,000.00 in resources – like cash, savings and other assets. Local assistance programs also have similar resource and asset restrictions. The ABLE Act will allow disabled individuals and their families the opportunity to create and contribute to a tax-exempt savings account for costs related to disability related expenses. Most importantly, the ABLE accounts will not affect an individual’s eligibility for programs like SSI and other publically funded benefits. Therefore, the ABLE Act has the potential to assist disabled individuals, already struggling financially and, in many cases living in poverty, to become more self-sufficient without the fear of losing the benefits they are receiving.
Here are the highlights of the ABLE Act that you should be aware of:
What is an ABLE Account?
ABLE accounts are tax-advantaged savings accounts for disabled individuals and their families. Income placed into the accounts will not be taxed. Most importantly, anyone can make contributions to the account (with certain limitations), including the disabled individual, their family members or friends. (2)
Who is eligible for an ABLE account?
Disabled individuals who became disabled prior to turning 26 years old are eligible for an ABLE account. What does this mean? If you are over the age of 26, you may still be able to open an ABLE account, but you will need to demonstrate that your disability began before you reached the age of 26. If a disabled individual meets the age criteria and is receiving SSDI or SSI benefits, the disabled individual is automatically eligible to open an ABLE Account.
How much you be allowed to place into an ABLE account?
Initially, the annual amount that can be contributed to an ABLE account is $14,000.00. This includes contributions made by the disabled individual as well as family and friends. This amount will be adjusted each year for inflation. It is important to note that disabled individuals receiving SSI benefits will be subject to additional restrictions. That is, the first $100,000 contributed to the ABLE account will be exempted from the individual $2,000 resource limit that we discussed earlier. If the amount of the ABLE account exceeds $100,000, the disabled individual’s SSI benefits would be suspended, but not terminated. While the disabled individual would not receive their SSI check when the ABLE account exceeds $100,000 – he/she would not lose their eligibility for SSI benefits.
What expenses will be allowed by the ABLE Act?
A “qualified disability expense” has been described as an expense made for the benefit of the disabled individual for: education, transportation, housing, health care expenses, education and employment training, assistive technology and personal support services. We anticipate that the Treasury Department will issue future regulations that further define what will be accepted as a qualified disability expense.
When and how will I be able to open an ABLE account?
Although this is a federal program, each state will be responsible for initiating and operating ABLE accounts. Because final regulations will need to be completed along with a period for public review and comment, the ABLE accounts will not be available immediately. As each state will oversee the creation of the ABLE accounts, plan options for disabled individuals may differ from state to state. It is anticipated that states will be able to start accepting applications for ABLE accounts beginning in 2015.
If you have questions about the ABLE Act or about the Social Security disability process, please contact us for a free case evaluation.