The Best Thing Since the ADA?
The ABLE Act is commonly referred to as just a 529 plan for disability expenses. So why does Susan Tachau say it may be the best thing since the ADA?
Last December, President Obama signed into law the Achieving a Better Life Experience (ABLE) Act, legislation culminating the longtime advocacy efforts of the National Down Syndrome Society and other disability organizations. The ABLE Act was sought as a way for individuals and families to save money for disability-related expenses, much the same way that families save for college. Incorporated into the Internal Revenue’s 529 plan for education, the Act allows tax-advantaged savings up to a state's 529 plan limit. To the lay person, however, this may look a tad underwhelming; the feds have simply allowed another helpful savings option for those who have something to save.
Susan Tachau disagrees, "No, this is big.”
Tachau is executive director of the Pennsylvania Assistive Technology Foundation and mother of an adult son with cerebral palsy. “For someone on SSI and Medicaid, this means for the first time there's a ladder a person can climb out of poverty. I actually think it's the most exciting legislation since the ADA."
The ABLE Act’s potential, she explains, rests with how it builds off the 529 model in a critical way. In addition to tax-advantaged savings, the Act allows individuals on SSI, Medicaid, and other public benefits to retain those benefits while saving beyond the $2,000 asset limit set by the Social Security Administration. ABLE account holders may save as much as $100,000 while retaining SSI payments. Beyond $100,000, ABLE account holders will retain their Medicaid and SSI eligibility, but SSI payments are suspended.
Tachau's excitement, however, has less to do with the height of the ABLE savings ceiling than with what ABLE accounts may purchase. Expenses eligible for funding through ABLE accounts are broad and include home modifications, tuition, transportation and assistive technology. “For a lot of people these amount to life-changing opportunities--the capacity to live in the community, pursue education, and get to a job." Adapted vehicles are a particular need that she stresses. After all, most states have funding resources available to consumers for adaptations: Vocational Rehabilitation, Home and Community Based Waivers, and even Make-a-Wish will pay for the adaptations but not the van itself. "The problem is getting that chassis. But now with an ABLE account if you are on SSI and you save a little bit, you're going to be able to buy an adaptive vehicle [especially if you work with your state's Alternative Financing Program]. It's going to be a safe way to save without a lot of paperwork. And that's the beauty of it."
Indeed, until the ABLE Act, the only broadly-available option for saving assets beyond $2,000 has been Special Needs Trusts. “But those require a lawyer. Plus there are fees.” It’s why most people with disabilities don't have Trusts, she observes. In addition, and unlike most Special Needs Trusts, ABLE accounts provide an opportunity for consumer control. ABLE accounts may be established by someone on behalf of a beneficiary, but also directly by a beneficiary. "I have a Special Needs Trust for my son, but he doesn't have anything to do with it,” Tachau reflects. “His ABLE account, however, will be his to manage. And he’s excited to get started.”
An ABLE account may collect funds from the account holder as well as gifts from others, up to $14,000 each year. Tachau imagines this flexibility will allow saving in a variety of ways. “There's finally a way to gift someone on SSI money, even annually! And there’s also no limit on the number of contributors to a single ABLE account. So at PATF, we even see potential for crowd-sourced funding through social media [i.e. Indiegogo]. That's the sort of opportunity that people with disabilities haven't been able to take advantage of [because of the $2,000 asset limit]. Now ABLE could open that door."
Dampening ABLE's potential for broad reach, Tachau acknowledges, are two downsides. The first is the age limitation on eligibility. To open an ABLE account, an individual must have experienced onset of their disability before age 26. ("That was a big concession.") The second is the disability criteria for eligibility. ABLE account beneficiaries must meet the same disability standard as required for SSI and SSDI (although they do not have to be recipients of these programs to qualify). Still, Tachau notes, there are an estimated 5.8 million people in the United States eligible to open an ABLE account.
"And that's a lot of impact."
Next Steps Toward ABLE Act Implementation:
ABLE implementation on the state level will be guided by federal regulations (yet to be released) as well as passage of each state’s own enabling legislation. Some of these bills will be better than others. If your program is engaged with influencing your state's ABLE Act legislation here are Susan's tips for what to work toward:
Incorporate language that allows applicants to be referred for consumer counseling with a disability services agency. ABLE account holders should know what is an eligible and non-eligible expense and also be sure they're not saving for goods and services that public resources may provide them (such as adaptations to a vehicle or a vehicle conversion).
Require no or low fees for opening and retaining an ABLE account. Some states are charging fees only if ABLE account funds are used for non-eligible expenses.
Be sure to adopt the federal (Internal Revenue Code Section 529A) language for what qualifies as an ABLE Act expense (“It’s good!”):
“[...] any expenses related to the eligible individual's blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary, including the following expenses: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary under regulations [….]"
- Allow disbursements to be made flexibly throughout the year, and avoid mimicking the 529 education strategy that may allow disbursements with each college semester only (“People need to be able to purchase what they are saving for as soon as they’ve reached their goal!”)
Review the status of ABLE Act legislation by state