Achieving a Better Life Experience (the ABLE Act) Puts Participants in Control of Financial Future

June 14, 2022|Achieving More Inc.|Uncategorized

Achieving a Better Life Experience (ABLE) is a tax-advantage savings tool for qualified individuals with disabilities and their families and friends.

ABLE account funds can be used for many qualified disability expenses like education, job training, assistive technology, healthcare, housing, and transportation.

A key component of the program is that individuals and their families will be allowed to establish ABLE savings accounts without changing their eligibility for Social Security Income (SSI), Medicaid, and other public benefits. The account builds assets through savings and investments to assist people in reaching their financial goals and shaping an economic future.

“Medicaid has a resource cap. Participants in Medicaid are forced to have no more than $2,000 worth of assets at any given time,” says Christopher J. Rodriguez, director of public policy at the National Disability Institute. “Many people with disabilities have healthcare needs that are only addressed through the Medicaid program and they can’t get the types of supports and services they need through employer-based insurance programs or insurance programs you can purchase on the open market. It really chains them to a life of poverty.”

Modeled after 529 college savings plans, the program allows up to $15,000 a year to be used for a variety of disability-related costs (such as medical devices, transportation, or changes to your home), including living expenses. Money in these accounts won’t count against the $2,000 Medicaid asset limit.

“Now with the ABLE program, people with disabilities—for the first time—are allowed to save money without the fear of losing these vital supports and services that help them be independent,” adds Rodriguez.

The ABLE program has various options and it is important for the person to find a program that best matches his or her needs. The ABLE National Resource Center offers visitors a tool to compare up to three ABLE programs at a time. Once you make a decision, you can enroll through the state’s online program. Enrollment and maintaining an account is done online, not through brick-and-mortar establishments. There are call centers available to assist through the enrollment process.

Factors to Consider when Choosing an ABLE Program

In any financial endeavor, the participant should educate themselves on the options, carefully weigh their choices, and be sure to ask questions before making a decision. Some questions to consider before choosing an ABLE program are:

Is there a minimum contribution?

Does program offer enrollment to out-of-state resident?

What types of fees are associated?

What types of investment options are being offered?

Does it offer an FDIC-insured option?

Does it offer a debit card?
Are there additional tax benefits?

Changes to ABLE in 2018

ABLE entered 2018 excited and eager to launch more programs nationwide. The new year also marked changes that launched on January 1st or are in the process of being implemented throughout the year.

Significant changes that are expected in 2018 include:

Annual Contribution Limit: Periodically adjusted for inflation, for the 2018 tax year, the annual contribution is $15,000 (previously $14,000).

Saver’s Tax Credit: ABLE account owners who contribute to their ABLE account, as opposed to only contributions made by outside contributors such as family and friends, might be eligible to take advantage of the Retirement Savings Contributions Tax Credit (also known as the Saver’s Credit). Additional requirements must be met to qualify for this non-refundable credit.

ABLE Financial Planning Act: If the beneficiary is the same on both accounts (or a family member of the 529 College Savings account beneficiary), it is permitted to transfer funds in a 529 college savings account to an ABLE account without incurring tax or penalty.

The funds rolled over from the 529 college savings account to an ABLE account are subject to the annual contribution limit and capped at $15,000 for any given tax year (provided that no other contributions into the account have been made during that tax year).

“Clearly, people are starting to save more because they are allowed to save more. It gives them a better financial future and a better financial peace of mind,”

ABLE to Work Act: ABLE account owners who are employed may be eligible to contribute above the $15,000 annual contribution limit (possibly up to an additional $12,060 depending on the gross income of the account owner). The contributions above the $15,000 annual contribution limit would be limited to contributions made specifically by the account owner into his or her ABLE account.

The ABLE National Resource Center monitors these changes to ensure that they are executed in a way that provides maximum benefit to individuals with disabilities and their families. Visit ANRC for further information and updates related to these changes.

The History of ABLE

The federal Stephen Beck Jr., Achieving a Better Life Experience Act of 2014, authorized states to create ABLE programs. In 2016, Pennsylvania Achieving a Better Life Experience (PA ABLE) Act was passed and the Pennsylvania Treasury Department worked with public and private stakeholders and families to develop the PA ABLE Savings Program.

The Achieving a Better Life Experience Act of 2013 (S. 313/H.R.647) was introduced in the 113th Congress by a bipartisan set of Congressional Champions. In December 2014, the Act passed in the US House of Representatives. A few weeks later, the U.S. Senate voted to pass the ABLE Act as a part of the Tax Extenders package. On Friday, December 19, 2014, President Barack Obama signed the Tax Extenders package, turning the ABLE Act into law.

Before the ABLE Act passed in 2014, even a modest savings of $2,000 rendered millions who relied on federal assistance for medical bills and living costs ineligible for disability benefits through Medicaid or Supplemental Security Income.

2016 was the first year ABLE accounts were available to qualified beneficiaries.

A Deeper Look at ABLE in Pennsylvania

Federal and state law authorized the creation of PA ABLE accounts which gives individuals with qualified disabilities and their families and friends, a tax-advantage way to save for disability-related expenses while maintaining government benefits.

PA ABLE offers seven investment options. Six are asset-allocation options with varying blends of stocks, bonds, and cash with the combinations ranging from conservative to aggressive. The seventh is an FDIC-insured interest-bearing checking account with a debit card provided through Fifth Third Bank.

Details of the PA ABLE Program

Minimum initial deposit – $25

Annual account maintenance fee – $60 taken from accounts quarterly ($15 per quarter). However, if you select electronic delivery (e-delivery) of quarterly statements and account activity confirmations, the annual account maintenance fee will be reduced to $45 ($11.25 per quarter). Additionally, there are investment and banking fees.

Other fees – For the six asset-allocation options there are asset-based fees that are deducted from your returns. These fees range from 0.34% to 0.38% depending on the option. For the checking account option provided through Fifth Third Bank, there is a monthly service fee of $2.00, which is waived if, on the Fifth Third Bank website, you select e-delivery of your account statements or have an average monthly balance of at least $250. Other banking charges may apply, such as a fee for using out-of-network ATMs.

ABLE’s Growing Numbers

Nationally, Rodriguez estimates there are about 20,000 open accounts with an average of $4,000 in each account.

“Clearly, people are starting to save more because they are allowed to save more. It gives them a better financial future and a better financial peace of mind,” he says.

Currently in Pennsylvania, more than 1,200 people have enrolled in the program, which started in April 2017, with assets under management of over $6.5 million dollars.