The ABLE Act for Special Needs: Contents and Cautions
It can be difficult for parents to stay on top of disability laws - especially for families whose children need highly-involved support. Unfortunately, this is true even for landmark events that would make their and their children's lives easier in the long run.
But why should you, the employer, care about the recently passed Achieving a Better Life Experience (ABLE) Act?
The ABLE Act: Highlights for EmployersThe ABLE act is a federal law intended to help people with disabilities maintain their health, independence, and quality of life. As employers, stepping in to provide this information is both a valuable service and cost-effective strategy. As a service, employers are making sure that affected employees:
- Understand the impact of new laws on their children's lives
- Know how to maximally access benefits on behalf of their children
- Can leverage financial and other resources to provide their children the best life possible
The ABLE Act's Finer DetailsThe ABLE Act allows individuals to save up to $14,000 per year for disability-related expenses - that's outside of other need-based government benefits such as Supplemental Security Income (SSI) and Medicaid. This is an important milestone in the lives of people with disabilities who, prior to now, could not have more than $2,000 in assets without affecting their government benefits.
To qualify, a person must have been disabled prior to age 26. The person must be receiving Supplemental Security Income (SSI) or Social Security Disability Income (SSDI) benefits, or be able to certify a physical or mental impairment resulting in marked and severe functional limitations which are expected to last more than 12 months or result in death.
Individuals can use ABLE Account funds for education, housing, transportation, employment training, assistive technologies and support services, financial and administrative services, legal services, funeral and burial, and numerous other expenses.
Funds in an ABLE Account:
- cannot exceed $14,000 (or the current gift tax exclusion) from ALL sources per year
- are not tax-deductible
- must be set up in the state where the beneficiary resides
- grow tax free (for both the contributor and the beneficiary)
- can be distributed tax free for qualified goods and services
- can be deposited by anyone, even the person with a disability who is the beneficiary of the account
- cannot total more than the state limitation for section 529 plans (e.g., $350,000 in Massachusetts)
The ABLE Act's Darker SideWhile there is a definite benefit to establishing an ABLE Account, there are items in the fine print parent should know about as well.
- If contributions exceed $14,000 in one year, the WHOLE amount is a countable asset for government benefits determinations
- If funds are spent on non-qualified goods and services, the money spent is subject to income tax and a 10% penalty
- If the beneficiary of the A.B.L.E. account dies, any remaining money is subject to Medicaid estate recovery for any expenses incurred since the ABLE account was established
- If the account grows to more than $100,000, SSI benefits are suspended (not terminated) until the amount in the account drops below $100,000. (Note: There is no asset limitation for Medicaid eligibility)
- SSI will not disregard any A.B.L.E. Account funds that are used for housing costs; a person's SSI check will be affected
A Lot to Know, A Lot at StakeFortunately we still have time to spread the word, as ABLE Accounts likely will not be available until late 2015/early 2016. Regulations still need to be written, and states have to enact legislation that will allow banks to actually set up the accounts.
We've summarized the ABLE Act so you have the latest information to share with employees. But it doesn't stop there.
For parents whose children are newly impacted, it actually starts there: Does my child need an ABLE Account? Do we qualify for one? How do I set one up? How is this different from a special needs trust? Does my child need one of those instead? Will my financial planner know about this? Who else can I talk to?
...And on it goes. Make sure that employees have access to the right resources to empower them, foster their peace of mind, and en-ABLE them to achieve a better life experience for their children.