UPDATE: The ABLE Act is starting to get implemented. Virginia is the first state.
On Friday, the President signed into law the ABLE act of 2014. ABLE stands for Achieving a Better Life Experience. The bill amends the Internal Revenue code of 1986 to establish tax-free ABLE accounts for the longterm care of family members with disabilities. ABLE will now allow for tax-free savings accounts similar to the 529 college savings program. Most importantly, the ABLE act supplements other government assistance programs it does not replace them. Believe it or not, before this tax code change, individuals with disabilities were discouraged from saving money for the future because when their assets totaled more than $2,000, eligibility for Supplemental Security Income (SSI), Medicaid and other benefits was put at risk. Think about that. A capable disabled person could not buy or own a car or a house in their own name.
How does the ABLE Act work?
ABLE act of 2104 is similar in structure to the 529 tuition savings plan.
- In general, the ABLE program follows the rules of the 529 tuition savings plan.
- The maximum contributions to ABLE will be the same as the 529 maximums for each state.
- The ABLE program has not been set up on the state level, so specifics are not available yet.
The following describes who is eligible for ABLE
- Any individual who has been disabled for a year before age 26 with a medically determinable physical or mental impairment which causes noticeable and severe functional limitations that are expected to last 12 months or more.
- People who are blind.
- Any individual 1) receiving benefits under the supplemental security income program under title XVI or 2) is receiving disability benefits under title II of the Social Security Act or 3) files for a disability certificate from the IRS.
Here is a list of qualified disability expenses under ABLE
- Education – Expenses including tuition from pre-school through post secondary education. This includes books, supplies and educational materials. It also includes tutors and special education services.
- Housing – Expenses for a primary residence including rent, the purchase of a home, interest on a loan, mortgage payments, real estate property taxes, utility charges and home maintenance / repair costs.
- Transportation – Expenses for transportation including use of mass transit and the purchase or modification of vehicles.
- Employment Support – Expenses related to obtaining and maintaining employment including job training, assistive technology and personal assistance support.
- Health – Expenses related to health and wellness including premiums for health insurance, mental health care, medical care, vision and dental care. Rehabilitation, durable medical equipment, therapy, respite care, long-term services, nutritional management, communication services or devices, adaptive equipment and assistive technology.
- Miscellaneous – Expenses related to financial management, legal fees, funeral and burial expenses.
ABLE accounts can rollover like 529 accounts
- ABLE Account can be rolled over into another ABLE account with the same beneficiary or into an ABLE account of another family member with a qualifying disability.
- ABLE accounts can also be rolled over into a qualifying 529 plan for the beneficiary of the ABLE account or another family member disabled or not.
There are some limits
- SSI benefits would be suspended, but not terminated if an ABLE account exceeds $100,000. The SSI benefits would immediately restart if and when the ABLE account falls below $100,000. Medicaid benefits, however, would continue.
When will the ABLE Act accounts be available?
- ABLE accounts will become available late next year (2015). The IRS needs to define the qualifying expenses and regulations and the individual states will need time to set up the plans.
- Several states have already started moving on this. Massachusetts created a state ABLE program earlier this year.
Why is this the ABLE Act so important?
- 50,000 people with autism become adults every year.
- The National Disability Institute estimates that there are 58 million people with disabilities in the US.
Who Made the ABLE Act possible?
There are a lots and lots of people and organizations who fought to make this happen. Here are a few of the key players.
In 2006, a group of parents of children with disabilities went to Congress to ask for help. They wanted help changing an unfair tax code, one that penalized people with disabilities.
One of those parents was Steve Beck. Steve knew all to well the challenges that families with disabled kids face. He has two children, one with Down Syndrome. He knew that long after he was gone, his daughter would encounter a lifetime of extraordinary expenses, yet he was discouraged from saving money in her name due to the tax code. Steve’s tireless work for the last 8 years, set change in motion. Unfortunately, Steve would not live to see the tax code change. Steve died on December 8th, just 4 days after the bill, called The ABLE act of 2014, passed the House. Rest in peace Steve Beck, you have made this world a better place. Ander Crenshaw (R-FL), the original sponsor of the House bill had the act renamed in Beck’s honor.
Sara Wolff, who was born with Down Syndrome, is an outspoken advocate for change to the tax code. She traveled all over the country advocating for the legislation. She helped get 268,000 signatures on a petition demanding Congress to change the tax code. She also testified before the Senate Finance Committee. As you might imagine, Sara is driven. She currently holds down two jobs and serves on the board of the National Down Syndrome Society. Like other hardworking Americans, she has goals for the future, but the tax code was holding her back from saving the money she needs to meet her longterm goals. Sadly, she currently has to make arrangements with her employers to keep her monthly pay below $700 and she carefully watches her savings / assets closely so not to exceed $2,000. She will not need to do that anymore.
This story is not uncommon. Millions of Americans with disabilities are living with financial uncertainty. Due to the current tax code, Americans with disabilities are forced to rely on the government when their parents die because they were not allowed to save for the future like other Americans.
US Senator Bob Casey (D-PA) and US Congressman Ander Crenshaw (R-FL)
In 2009, Bob Casey (D-PA) introduced Senate Bill 493 to amend the Internal Revenue Code of 1986 for the establishment of ABLE accounts for the longterm care of family members with disabilities. The bipartisan ABLE Act of 2009 (Achieving a Better Life Experience Act of 2009) was never voted on and was not enacted. At the same time, Ander Crenshaw (R-FL) introduced the identical bill to the house with H.R. 1205. That bill died in committee too. To these two men, this was just a temporary roadblock.
In 2011, Bob Casey and Ander Crenshaw both re-introduced the identical bills (S. 1872 and H.R. 3423) to the 112th Congress and both died in committee. Still Casey and Crenshaw would not be deterred. They again re-introduced identical bills (S. 313 with 78 co-sponsors and H.R. 647 with 380 co-sponsors) to the 113th Congress in February of 2013.
In an era of fiercely divided government, our lawmakers got together to pass the House bill (H.R. 647) 404 to 17 and the (H.R. 5771) 76-16
Mr Casey (D-PA), who sponsored the Senate bill, strongly believes that people with disabilities have the ability to live a full life. Like anyone else, people who want to live a full life need to save for the future.
Autism Speaks, The National Down Syndrome Society and The Arc
Thanks to the resources and tireless efforts of people at organizations like Autism Speaks, The National Down Syndrome Society and Arc of Pennsylvania, the ABLE act of 2014 is now a reality.
Why did it take 8 years for this the ABLE Act to be passed?
- Who knows? The US government is dysfunctional and passing any law that actually reduces taxes has been nearly impossible, especially during the last 6 years.
- The Senate bill did not make it out of the Senate Committee on Finance on two occasions (2009 and 2001). Here are the members of the Senate Finance Committee.
- The House bill had a tough time getting out of the House Energy and Commerce – Health committee and the House Ways and Means committees (2009 and 2011)
- Once the bill finally passed the committees and was introduced for vote and passed with strong bipartisan support in both houses.
- I can tell you who did not vote for this law, so you can call them and ask them why they would vote against helping disabled people.
- 17 congressman and woman (12 Democrats and 5 Republicans) voted against it.
- Debbie Wasserman Schultz (D-FL and the Chair of the Democrat National Committee)
- Raul Grijalva (D-AZ)
- John Garamendi (D-CA)
- Grace Napolitano (D-CA)
- Xavier Becerra (D-CA)
- Paul Ruiz (D-CA)
- Mark Takano (D-CA)
- David Scott (D-GA)
- Jay Schakowsky (D-IL)
- Jim McDormott (D-WA)
- Mark Pocan (D-WI)
- Gwen Moore (D-WI)
- Walter Jones (R-NC)
- Justin Amash (R-MI)
- Tim Huelskamp (R-KS)
- John Bridenstine (R-OK)
- Mark Sanford (R-SC)
- 16 Senators (8 Democats and 8 Republicans) voted against it. The ABLE act was rolled into H.R. 5771: The Tax Increase Prevention Act of 2014. So the following Senators may have voted against ABLE for other reasons.
- Elizabeth Warren (D-MA)
- Sherrod Brown (D-OH)
- Michael Bennett (D-IL)
- Jeff Merkley (D-OR)
- Ron Wyden (D-OR)
- Sheldon Whitehouse (D-RI)
- Patrick Leahy (D-VT)
- Joe Manchin (D-WV)
- Jeff Flake (R-AZ)
- Michael Crapo (R-ID)
- James Risch (R-ID)
- Daniel Coats (R-IN)
- Rob Portman (R-OH)
- Thomas Coburn (R-OK)
- Pat Toomey (R-PA)
- Tim Scott (R-SC)
- 17 congressman and woman (12 Democrats and 5 Republicans) voted against it.
The Kidmunication Point
Never give up. A good idea and good people will always prevail.