ABLE Account on:
[Wikipedia]
[Google]
[Amazon]
An ABLE account, also known as a 529 ABLE or 529A account, is a state-run savings program for eligible people with disabilities in the United States. Rules governing ABLE accounts are codified in
Stephen E. Beck, Jr., vice chairman of the
Internal Revenue Code
The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large, and separately as Title 26 ...
section 529A, which was enacted by the Achieving a Better Life Experience (ABLE) Act in 2014. With limitations, funds in an ABLE account are exempt from the Supplemental Security Income
Supplemental Security Income (SSI) is a means-tested program that provides cash payments to disabled children, disabled adults, and individuals aged 65 or older who are citizens or nationals of the United States. SSI was created by the Social Se ...
(SSI) and Medicaid
Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and pers ...
asset limit, and earnings are exempt from federal income tax.
History
Stephen E. Beck, Jr., vice chairman of the National Down Syndrome Society
The National Down Syndrome Society (NDSS) is an American organization that offers support to people with Down syndrome, their families, friends, teachers, and coworkers, and educates the general public about Down syndrome. The mission of the NDS ...
and the Down Syndrome Association of Northern Virginia Board of Directors, proposed a plan to help his daughter, who has Down syndrome, save money. Beck's plan became the basis for the Achieving a Better Life Experience (ABLE) Act.
The ABLE Act received broad support in Congress, with 85% of Congress signing on as cosponsors. On December 19, 2014, the ABLE Act was signed into law by President Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party (United States), Democratic Party, Obama was the first Af ...
.
In June 2016, Ohio, Tennessee, and Nebraska were the first three states to launch ABLE programs.
The Tax Cuts and Jobs Act of 2017
The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, , is a congressional revenue act of the United States originally introduced in Congress as the Tax Cuts and Jobs A ...
included language from the ABLE Financial Planning Act and the ABLE to Work Act. The ABLE Financial Planning Act allows rollovers from 529 plan
5 (five) is a number, numeral and digit. It is the natural number, and cardinal number, following 4 and preceding 6, and is a prime number. It has attained significance throughout history in part because typical humans have five digits on eac ...
s to ABLE accounts. The ABLE to Work Act allows working beneficiaries who don't contribute to 401(k)
In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodical employee contributions come directly out of their ...
or similar plans to make additional contributions to ABLE accounts.
As of August 2018, 39 states and the District of Columbia run ABLE programs, some of which are open to individuals nationwide.
Characteristics
ABLE programs are similar to tax-advantaged 529 plans for college savings. In addition, a 529 plan can be rolled over into an ABLE account for a qualified beneficiary. An ABLE account can be opened by a disabled individual who became disabled before 26 years of age. An ABLE account can receive after-tax cash contributions from any person, including its owner. Contributions in a year are limited to the federal gift tax exclusion for that year — $16,000 in 2022. If the beneficiary works and does not contribute to a401(a)
In the United States, a 401(a) plan is a tax-deferred retirement savings plan defined by subsection 401(a) of the Internal Revenue Code. The 401(a) plan is established by an employer, and allows for contributions by the employer or both employer an ...
, 401(k), 403(b)
In the United States, a 403(b) plan is a U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only Internal Revenue Code 501(c)(3) organizations), cooperative hospital service organiza ...
, or 457 plan
The 457 plan is a type of nonqualified, tax advantaged deferred-compensation retirement plan that is available for governmental and certain nongovernmental employers in the United States. The employer provides the plan and the employee defers comp ...
, the beneficiary can contribute an additional amount above that limit. The additional amount is equal to the lesser of the beneficiary's annual compensation or the federal poverty level
The poverty threshold, poverty limit, poverty line or breadline is the minimum level of income deemed adequate in a particular country. The poverty line is usually calculated by estimating the total cost of one year's worth of necessities for t ...
for an individual — $12,060 in 2018.
Up to $100,000 in an ABLE account is exempt from the Supplemental Security Income (SSI) asset limit.{{cite magazine , last=Ebeling , first=Ashlea , title=Fidelity Launches 529-ABLE Accounts, Tax-Free Savings For Disability Expenses , date=2017-05-17 , magazine=Forbes , url=https://www.forbes.com/sites/ashleaebeling/2017/05/10/fidelity-launches-529-able-accounts-tax-free-savings-for-disability-expenses , access-date=2017-11-16 If an ABLE account larger than $100,000 stops eligibility for SSI, the owner remains eligible for Medicaid. An ABLE account can be used instead of, or together with, a supplemental needs trust
Supplemental needs trust is a US-specific term for a type of special needs trust (an internationally recognized term). Supplemental needs trusts are compliant with provisions of US state and federal law and are designed to provide benefits to, an ...
, to maintain a beneficiary's eligibility for SSI.
Earnings from an ABLE account are exempt from federal income tax, and money spent from the account must be used for qualified expenses, such as education, housing, transportation, and job training. Some states make contributions to an ABLE account deductible from state income tax.
References