While programs such as Medicaid and SSI (Supplemental Security Income) enable millions of people with disabilities to live independently, such programs have traditionally prevented recipients from establishing savings accounts. Any amount over $2,000 in excess cash could mean the end of SSI or Medicaid benefits.
When the Achieving Better Life Experience (ABLE) Act was passed in 2014, people with disabilities could, for the first time, build savings without jeopardizing other benefits. Account holders can contribute up to $15,000 per year to an ABLE account, pay no taxes on the money, lose no benefits and, best of all, use the money whenever needed for purposes identified as related to disability. There is no penalty for withdrawing money from an ABLE account to be spent on housing, food, medical expenses, transportation, technology, or any other need associated with the account holder's disability.
A growing number of states (39 of 50 at this writing, with California scheduled to launch as the 40th state on December 11) have established ABLE account programs. Many states allow qualified residents from anywhere in the United States to participate. Ohio and Virginia, for example, invite participants from any state, while Florida's program is open to residents of that state only. If your own state has not yet established an ABLE account program, in other words, and you meet the qualification guidelines, you can establish an account in any state that welcomes outside participation.
ABLE Account Eligibility
Anyone who was born with a disability or acquired a disability before the age of 26 is eligible to establish an ABLE account. Your ABLE account will not impact your SSI, SSDI, Medicaid, or other benefits. While it is not necessary to be receiving such benefits as SSI or SSDI to establish an ABLE account, being a recipient of such benefits provides automatic qualification for enrollment. If your onset of disability occurred before age 26 and you are not already receiving SSI, SSDI, or Medicaid, a physician's letter certifying disability will suffice for proof of eligibility. While enrollment in the ABLE program can be done for a beneficiary of any age, disability onset must have occurred prior to age 26.
Contributions to an ABLE account can be made by anyone, but total annual contributions may not exceed $15,000. Parents of a person with a disability, for example, can open an account for their child and invite friends and family to contribute to the account on birthdays or graduations. Qualified individuals of any age can open an ABLE account for themselves and be the sole contributors. If an account reaches $100,000 and the beneficiary is receiving Medicaid, Medicaid will not be interrupted. However, at the $100,000 point, SSA benefits will be suspended (not discontinued) until the account falls below that $100,000 threshold again. At any time, spending the savings in an ABLE account for purposes that do not qualify as disability-related expenses can be taxed and/or incur a penalty. The range of qualifying expenses, however, is so generous that incurring such penalties would be somewhat difficult to do.
Employment and ABLE Accounts
As tax-advantaged savings accounts, ABLE accounts are not just for people who are in school or have not yet found employment. Some ABLE account holders use the accounts to save for graduate school, specific technology, a home, or a modified vehicle. Some, however, are people who are employed, usually self-employed, and are using the ABLE account savings option as a kind of retirement account.
If you are blind or low vision and do not have a 401K, you can establish an ABLE account for retirement savings. If you find at some point that you need the funds in that account, for a new braille display or emergency medical expenses, for instance, you can access the money without penalty. Another advantage for ABLE account holders who are employed is the option to contribute an additional $12,000 annually (over the already allowed $15,000) as a work contribution.
Online Accessibility
To keep maintenance costs low, most business conducted with ABLE accounts is done online. Each state with an ABLE program has its own online presence.
I visited two of these sites, Virginia and Ohio, and found both to be relatively easy to navigate using JAWS 2018. You will need to supply your name, address, date of birth, and Social Security number. If you plan to make contributions from a bank account, you will need the account number and the bank's routing number. (The routing number is a nine-digit number that appears on checks associated with the account. Alternatively, a simple phone call to your bank can get you the routing number.) You will be asked to check wither or not you have a disability that occurred before age 26, and whether or not you are receiving Social Security benefits. If you are receiving benefits, that fact serves as your certification of eligibility. You will be asked a series of questions to indicate your disability and, if you did not check that you are receiving benefits, you will need to supply the name and address of a physician to certify your disability. It's a pretty straightforward process, and completely accessible. Approval takes only a day or two.
Your initial contribution needs to be at least $50. You can set up automatic contributions (to have a certain dollar amount taken from your bank account each month) or simply make one-time contributions when you choose. Anyone can contribute to an ABLE account for a single beneficiary.
ABLE accounts are investment accounts. You are given options for the level of risk you wish to take with investing your money. Bank Safe, while earning the smallest amount of return, is the only level that is FDIC insured. Otherwise, conservative, moderate, and aggressive levels are identified for investing. You can assign specific percentages of your money for each type of investing or assign all of it to one level. You can rebalance (reassign your investment levels) up to twice a year.
When looking at rebalancing options and/or transaction history, I did run into an accessibility roadblock. Each time, however, I called the toll-free customer service number and was given appropriate information to navigate successfully.
Further Information
An ABLE account is a tax-advantaged savings option for any person with a qualifying disability. As of this writing, more than 25,000 Americans with disabilities, many of them employed, have established ABLE accounts, totaling $120 million in assets. If it turns out that you need money from the account for qualifying expenses, you can withdraw without paying taxes or penalties. You can contribute up to $15,000 annually, an additional $12,000 if employed, and you can choose to invest your money with or without risk. You can enroll in your own state or any one of several other states that invite enrollees nationwide.
For additional information, the ABLE National Resource Center, managed by the National Disability Institute, provides a list of states offering ABLE programs and a comparison tool for selecting a plan. Visit the ABLE National Resource Center online or call 202-683-6094.
This article is made possible in part by generous funding from the James H. and Alice Teubert Charitable Trust, Huntington, West Virginia.
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