Date: December 17, 2014
Senate Passes H.R. 5771, which includes the
Achieving a Better Life Experience Act of 2014 (ABLE Act)
On December 16, 2014, the Senate passed H.R. 5771, without amendment, by a vote of 76-16. H.R. 5771, the Tax Increase Prevention Act of 2014 passed the House by a recorded vote of 378-46 on December 3, 2014 and would extend certain expiring tax provisions. Incorporated within H.R. 5771 is the ABLE Act, a bill that passed the House on December 3, 2014. See Legislative Bulletin 113-29. H.R. 5771 now goes to the President for his signature.
The ABLE Act would create a new type of tax-advantaged account that would have limited effect on an individual’s eligibility for the Supplemental Security Income (SSI) program and other Federal means-tested programs. It also includes several provisions intended to help offset the expected increase in Federal expenditures due to these accounts, and one of these provisions affects the Old Age, Survivors, and Disability Insurance (OASDI) programs.
The ABLE Act includes the following provisions of interest to Social Security:
- Would allow a person to establish for the benefit of an eligible individual (as defined below) a tax-advantaged, “ABLE account,” similar to a Section 529 qualified tuition program. ABLE accounts would be established and maintained by the State.
- Eligible individuals would be limited to one ABLE account. Contributions to such an account would not be deductible from the contributor’s income for Federal tax purposes. Generally, an ABLE account must provide that it may not receive aggregate contributions during a taxable year in excess of the annual gift tax exclusion (in 2014, $14,000). Within certain limits, distributions for “qualifying disability expenses” from the account would not be subject to Federal taxes.
- For purposes of the ABLE Act, an eligible individual would be someone who is blind or disabled, according to the Social Security definitions, by a condition or conditions that began before age 26. If the person was not receiving Disability Insurance or SSI benefits, then he or she would qualify by filing with Treasury each year a self-certification that he or she meets this definition of disability, supported by a statement from his or her physician. The bill provides that no inference may be drawn from an ABLE self-certification for purposes of establishing eligibility to Social Security benefits.
- The State would set the maximum balance for ABLE accounts. In any case, the first $100,000 in balance would not count toward SSI eligibility (as a resource). Furthermore, if the balance exceeds $100,000 and the amount in excess causes an SSI beneficiary to exceed the SSI resource limit, then the beneficiary’s SSI benefits would be suspended without time limit, but not terminated. Additionally, the beneficiary would retain eligibility for Medical Assistance while in suspension.
- Contributions to and qualifying distributions from an ABLE account—with the exception of distributions for housing—would not affect SSI eligibility or payment amount. Qualifying distributions are defined broadly and include such expenses as education, housing, transportation, employment support, assistive technology, and health and wellness expenses. The Treasury would further define these expenses. State ABLE account administrators would be required to send SSA electronic statements of relevant distributions on a monthly basis in a manner specified by the Commissioner.
- ABLE accounts would be transferable to another family member, if that person is also an eligible individual. Additionally, upon the eligible individual’s death, the balance in his or her ABLE account, net of certain expenses, would be used to repay the State for his or her total Medical Assistance expenses.
- Would change the age at which workers compensation offset ends for DI beneficiaries from age 65 to full retirement age. This provision would apply to any individual who attains age 65 on or after the one year anniversary of enactment of this bill.
Unless specified otherwise, all provisions would be effective for the taxable year beginning after December 31, 2014. Treasury would be required to promulgate regulations and guidance implementing various provisions within six months of enactment.