Congress Proposes Tax-Deferred Savings Accounts, called "ABLE" accounts, for People with Special Needs

A bill that would create tax-deferred savings accounts for people with special needs has been introduced in the House and Senate. If passed, the new legislation would allow family members, friends, or a person with special needs to place up to $500,000 of funds into an “ABLE” (Achieving a Better Life Experience) account that functions much like an IRA or 529 College Savings Account, with the income generated by the account accumulating without taxation. An ABLE account must be designated as an ABLE account at the time it is created or organized.

Under the proposed legislation, the accounts will be initially available only to individuals who qualify for Supplemental Security Income (SSI) benefits. The accounts would be titled in the name of the SSI beneficiary, but funds up to $500,000 placed in such accounts will not qualify as available resources and will not prevent a beneficiary from continuing to receive SSI benefits and other means-tested federal programs, such as Medicaid, food stamps, and federal housing assistance. Furthermore, distributions from the accounts, so long as they are made for “qualified disability expenses” of the disabled beneficiary of the account, will not count as a part of their income for purposes of SSI. Qualified disability expenses are expenses (1) made for the benefit of an individual with a disability who is the designated beneficiary of the account and (2) approved under regulations.  These expenses include costs associated with education, housing, transportation, employment support, health, prevention and wellness, life necessities, assistive technology and personal support services.

Anyone will be able to transfer money into an ABLE account and rollovers from other accounts will be possible. Like an IRA, the funds in an ABLE account will accumulate tax-free interest during the beneficiary’s lifetime. Finally, should someone become disabled later in life, he would be allowed to roll over a previously existing IRA or 529 account into an ABLE account in order to qualify for benefits. Contributions cannot be made after the beneficiary turns 65.

Upon the death of a qualified beneficiary, Medicaid will recover from unused account funds that are not placed in an ABLE account or special needs trust of another beneficiary an amount equal to the total medical assistance paid.

Autism Speaks, an advocacy group for people living with autism, has a detailed summary of the ABLE act, along with information about how to contact your representative or senator to encourage their support of the bill. More information can be found here.

To read the text of the Senate bill, click s-493.
To read the text of the House bill, click hr-1205.