The ABLE Act: what it means for special needs financial security
You know how in recent years the political climate in Our Great Nation has become so polarized that it seems hardly anything can get done?
Well, hold on to your hats: in December 2014, Congress passed the Achieving a Better Life Experience Act by wide margins in both houses. President Obama then signed the ABLE Act of 2014 into law. That really happened! In the words of Dave Barry: I am not making this up.
It wouldn’t have happened without the relentless efforts of the bill’s sponsors, Rep. Ander Crenshaw (R-FL) and Sen. Bob Casey (D-PA), as well as groups like the Autism Society, the National Down Syndrome Society, The Arc, and many others. Those of us with special needs family members are indebted to these lawmakers and organizations for getting it done!
So, what are we celebrating? What will the ABLE Act do for our community?
It’ll allow many disabled individuals who receive government benefits (like SSI and Medicaid) to have a savings account for immediate and future needs. In general, anyone can contribute funds to the account, and the balance can go up to $100,000 without the risk of losing government benefits. (Currently, benefits can be cut off if assets exceed $2000, as discussed in this post about SSI.) With the new law, disabled individuals will have the chance to move out of poverty and even move ahead in their lives, since they’ll be able to pay for goods, education and training, or services that would otherwise be out of reach.
True confession: at first, because I was just skimming the headlines, I made some faulty assumptions about the ABLE Act. Acting on those assumptions would have led to trouble! But after reading things like this editorial and this summary, and watching this short video, I’ve got a better handle on how the new law is supposed to play out.
For those of you who have also only skimmed the headlines, here are some important things to know about the ABLE Act:
It won’t cover everybody. It will cover people who were diagnosed before the age of 26 with a disability that qualified them for receiving SSI. The individual may or may not be actually receiving SSI benefits, but s/he does have to meet SSI criteria for significant functional limitations (such as discussed in this post). The disabilities can involve intellectual, learning, or mental health challenges as well as medical issues.
Sadly, people who were older than 26 when they became ill or disabled will not be covered; their exclusion was a political compromise, made to hold down the costs. In any event, if your disabled family member is younger than 26 and you’ve been hesitating about getting an official diagnosis for him or her, here’s a new reason to do so.
You can’t just use any old bank account. Warning: don’t start chunking money into the individual’s current bank account! ABLE Act or no, if the balance shoots past $2000, that’ll still get him/her booted off SSI.
However, in the future, covered individuals may open an ABLE Account. It will be similar to the education-related 529 savings accounts. This ABLE Account is where you’ll want to chunk the money, with the following restrictions: 1) Total annual contributions to the account (from you, Uncle Harry, whoever), all put together, can’t exceed $14,000. 2) As stated earlier, if the balance ever goes over $100,000, say good-bye to SSI. Fortunately, the law allows the individual to remain on Medicaid.
There will probably be a variety of investment options (with different rates of risk and return) for money in the account. Income earned by the account will not be taxed. Contributions made to the account by anyone (the individual, a family member, friends) will not be tax deductible.
The account funds are to be used for “qualified disability expenses,” which haven’t been totally defined but include education, employment training, transportation, housing, assistive technology, and health care expenses. General living expenses – yes; luxury items – no.
When the individual passes away, funds in the ABLE Account will be used to reimburse the state for Medicaid expenses incurred during the person’s lifetime.
It isn’t ready yet. Don’t run to your financial institution tomorrow to ask for an ABLE Account – they won’t be able to offer you one.
Although the ABLE Act is now the law, there will be a lag before it can be implemented. The next step is for folks at the Treasury Department to develop regulations regarding the ABLE program. The regulations will be finalized after public comment. Then, each of the 50 states will have to figure out how or if they are going to operate the ABLE program. If a state chooses not to establish its own program, it can contract with another state that is setting up a program.
As you can imagine, all of this will take time. The earliest we can reasonably expect the program to be up and running is the end of 2015.
Special needs trusts will still be around. When my husband and I finally started setting up a special needs trust for our son, the ABLE bill was still pending in Congress. I asked our attorney,”If the bill passes, would we still need a special needs trust?” Of course, he said yes!
Here’s one reason why: if we were both to pass away suddenly, like in a car crash, our son’s inheritance might exceed $100,000. Even if that went into an ABLE Account, he’d lose his SSI benefits. By contrast, if the funds went into a special needs trust, our son could still receive SSI.
To sum up: the ABLE Act isn’t perfect, and ABLE Accounts aren’t available yet. Some details are still unknown. Even so, thanks to the new law, we can anticipate a significant improvement in the financial independence and well-being of roughly 6 million disabled Americans. That is a very good way to start 2015.
Note: the source of the image used in this post is The Lutheran Home Association.
Tags: ABLE Act, autism spectrum, diagnoses, learning disabilities, mental illnesses, residual functional capacity, savings account, Social Security Administration, special needs, special needs trust, SSI, supplemental security income
About janet565I've lived in the Inland Empire of Southern California since 1982. My profession involves maps and geography. I hope you find the blog useful, and wish you well....
The purpose of this blog
Climbing The Cinder Cone presents resources that may help young people who learn or think differently. The focus is on situations that "fall through the cracks," where it isn't clear what programs or treatments are appropriate.
The blog mostly addresses topics our family has dealt with (or should have known about). Anyone with experience in these areas is invited to chime in!
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