Shared from M&L Special Needs Planning, LLC, www.specialneedsplanning.net.
The ABLE account is an excellent tool for individuals with disabilities to save for the future while living full, rewarding, financially secure lives. As a special needs planning company, we have written quite frequently on the ABLE account and the ways in which we feel it is a beneficial addition to the special needs planning toolkit.
In the event that you haven’t yet familiarized yourself with the Achieving a Better Life Experience (ABLE) account, here is a quick rundown: the ABLE account allows individuals with disabilities to open special savings accounts for disability-related expenses. The account is modeled off of the already existing 529 college savings accounts, and ensures that all funds in this account can grow tax free as long as the funds are used for qualifying, disability-related expenses (as approved under regulations). For a more detailed description of the ABLE account, follow this link or check out or ABLE account blog archive.
Are ABLE Accounts Sustainable?
President Obama signed the ABLE Act into federal law in 2014. At that time, states were given the option to design their own ABLE act legislation. As a result, the rollout date for this type of account (and the specific program legislation) varied from state to state. Over the last four years, many states have released their ABLE program details and opened up registration. To date (August 2018), 37 states offer ABLE programs, with many of these programs being available nationwide.
Despite this widespread availability, registration for these accounts hasn’t lived up to its potential. Information released by the National Association of State Treasurers (NAST) shows that a rapid infusion of account holders are needed to ensure the sustainability of this program – and that this infusion is unlikely to happen.
“NDI estimates that 8 million individuals with disabilities are eligible to open ABLE accounts under the current age of onset of birth through 25. With 17,000 accounts open nationwide, three years after the passage of the ABLE Act, the ABLE adoption rate stands at 0.22%.” According to NAST, “…approximately 390,000 funded ABLE accounts (4.9% adoption rate) will be needed by June 2021, in order to achieve bare bones sustainability of ABLE. Based on 529 program history and anticipated continued slow growth of ABLE, we believe a 4.9% adoption rate is unlikely.”
Disability advocates that have sounded this warning have a potential solution for this problem – the passage of the ABLE Age Adjustment Act.
The ABLE Adjustment Act
The ABLE Age Adjustment Act of 2017, H.R. 1874/S. 817 would increase the age of onset of disability from up to the age of 26 to up to the age of 46, adding millions of new potential ABLE account holders into the pool of eligible individuals. According to a letter published by the Consortium for Citizens with Disabilities (CCD),
“The limitation on eligibility based on age of onset of disability did not exist in the original legislation, but was inserted at the end of the ABLE Act’s nearly ten-year legislative history to reduce the bill’s score and get it over the finish line. Opposition to the revised bill by many disability groups concluded when Congressional Members promised to restore the broader eligibility criteria as soon as possible. This concession resulted in the exclusion of otherwise-eligible individuals with disabilities from realizing the benefits associated with the ABLE Act based solely on the age at which they became disabled. Moreover, many of those individuals who are now prevented from participating in ABLE programs, due to the age of onset of their disability, devoted years of advocacy to pass the law.”
The CDC goes on to assert that the passage of this law is an essential step towards saving the ABLE program. The organization asserts that without the infusion of account holders that this legislation would bring, the ABLE program is unsustainable.
NAST agrees, claiming the growth necessary to sustain the program is not possible without the additional potential 8 million users that the new legislation would bring. They also identify other key changes that will be necessary for long term sustainability, such as multiple accounts for same beneficiary, elimination of the provision that the beneficiary and account holder must be the same person, and allowance of lump sum deposits, among others.
Would you Like More Information?
For more information on the ABLE Act and account, please take a moment to browse our blog archive. As always, feel free to contact us with any questions you may have. If you would like to read the letter from the CCD, please follow this link. The full report, as released by NAST, can be accessed here.
If you would like to support the ABLE Adjustment act, many disability advocacy organizations have ways to do so on their websites. The United Spinal Association has a customizable email template available here.