A New Savings Account for People With Disabilities

Who can have an ABLE account? Eligibility will be limited to people who became severely disabled before turning 26 years of age. An older disabled person can have such an account, provided the person’s disability arose prior to age 26. A person can prove his/her disability by receipt of Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) or by providing a disability certification, under rules that the federal government will issue.

Are there any dollar limits for such accounts? The total annual contributions from all individuals to an eligible individual’s ABLE account are limited to the gift tax exclusion amount (currently $14,000.00). The aggregate of all contributions to any one account is the maximum amount allowed by the state for Section 529 accounts (currently $310,000.00 in Oregon). An eligible individual can only have one such account.

Are there tax advantages to having such an account? Income earned by the accounts would not be taxed, provided account withdrawals are used for qualified expenses. Contributions to the account are not tax deductible.

How can the account be used? ABLE account funds can be withdrawn to pay any expenses related to the person’s disability, including housing, transportation, education, employment training, assistive technology and personal support services, health, prevention and wellness, financial management, legal fees, funeral and burial services.

Will an ABLE account affect eligibility for Medicaid? No, having an ABLE account would not jeopardize an individual’s eligibility for means-tested benefit programs such as SSI or Medicaid. This is one of the significant advantages of ABLE accounts. Under current law, individuals with more than $2,000.00 in resources are not eligible for SSI. However, the first $100,000.00 in an ABLE account would not be counted towards the $2,000.00 resource limit.

How soon can such an account be established? Ah, there’s the rub. Two things need to happen before an ABLE program can be established here in Oregon. The U.S. Department of the Treasury has to generate the rules (think fine print) by which this legislation is implemented, and that could take as long as six months. Second, the State of Oregon will need to “opt in” to the ABLE program and allow for such accounts in the state.

Watch out for federal and state action in regard to implementation of this new law.