INFORMATION ABOUT TAX-FREE SAVING ACCOUNTS FOR DISABLED INDIVIDUALS
The Stephen Beck, Jr., Achieving a Better Life Experience Act (ABLE) became law on December 19, 2014. The law aims to ease financial strains faced by individuals with disabilities by making tax-free saving accounts available to cover qualified disability expenses.
IMPORTANT FACTS TO KNOW ABOUT THE ABLE ACT
The designated beneficiary of an ABLE account is the eligible individual who owns the ABLE account. They must be:
Note:We do not determine ABLE eligibility.
TREATMENT OF ABLE UNDER FEDERAL MEANS-TESTED PROGRAMS
We disregard the first $100,000. Only assets above $100,000 count as a resource. If an ABLE balance exceeds $100,000 by an amount that causes you to exceed the SSI resource limit -- whether alone or with other resources, we suspend the SSI payment until the countable resources are below the allowable limit.
A beneficiary's Medicaid continues when an SSI recipient's ABLE account exceeds $100,000 by an amount that causes the recipient to exceed the SSI resource limit--whether alone or with other resources. The recipient retains eligibility for Medical Assistance (Medicaid) without a time limit as long as he or she remains otherwise eligible. If ABLE resources above $100,000 cause an individual to exceed the resource limit, then Medicaid continues uninterrupted. If non ABLE resources over $100,000 cause an individual to exceed the resource limit, Medicaid is suspended.
A portion or all of the balance remaining in the ABLE account of a deceased designated beneficiary must be distributed to a State that files a claim against the designated beneficiary or the ABLE account itself with respect to benefits provided to the designated beneficiary under that State's Medicaid plan. The payment of such claim (if any) will be made only after providing for the payment from the designated beneficiary's ABLE account of the designated beneficiary's funeral and burial expenses and all outstanding payments due for their other qualified disability expenses, and will be limited to the amount of the total medical assistance paid for the designated beneficiary after the establishment of the ABLE account over the amount of any premiums paid, whether from the ABLE account or otherwise by or on behalf of the designated beneficiary, to a Medicaid Buy-In program. After the expiration of the applicable statute of limitations for filing Medicaid claims against the designated beneficiary's estate, a qualified ABLE program may distribute the balance of the ABLE account to the successor designated beneficiary or, if none, to the deceased designated beneficiary's estate. Some States have taken steps to limit payback. See state plan disclosure documents for specific details.
Frequently Asked Questions:
1. What is an ABLE account?
An Achieving a Better Life Experience (ABLE) account is a tax-advantaged savings account to which contributions can be made to meet the qualified disability expenses of the owner, or designated beneficiary. ABLE accounts receive favorable treatment and are excluded from resources in whole or in part, for purposes of certain means-tested Federal programs.
2. What is the federal law that made ABLE accounts possible?
The Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act became law on December 19, 2014. The law aims to increase financial independence and improve quality of life while easing financial hardship faced by many individuals with disabilities and their families.
3. Who is eligible to own an ABLE account?
In order to be eligible to own an ABLE account, a person must be:
Note: We do not determine ABLE eligibility.
4. Do you have to provide proof of disability when opening an ABLE account?
Most ABLE programs simply require individuals to certify that they have a disability and are eligible to open an account. You do not, generally, have to send in medical records or diagnoses in order to open an ABLE account. The person must make the proof available for the IRS or the ABLE program if requested to satisfy the disability certification requirement. Account owners must recertify their eligibility annually.
5. Who is the owner and beneficiary of an ABLE account?
The person with the disability is the owner and the beneficiary of the ABLE account. Therefore, you may see “owner” and “designated beneficiary” used interchangeably when you get information about ABLE accounts.
6. Do ABLE account balances count toward the SSI statutory resource limit?
Up to and including $100,000 in the person’s ABLE account is excluded from being treated as a countable resource for SSI benefits calculations.
7. What happens if an SSI recipient has more than $100,000 in an ABLE account?
Up to and including $100,000 in an ABLE account is disregarded. Only assets above $100,000 count as a resource for SSI purposes. If the ABLE account balance exceeds $100,000 by an amount that causes the SSI recipient to exceed the $2,000 resource limit, either alone or with other resources, SSI benefits will be suspended without a time limit (assuming that the individual otherwise remains eligible for SSI). SSI benefits are reinstated for all months in which the ABLE account balance no longer causes the individual to exceed the resource limit and the individual is otherwise eligible for SSI.
8. Will Medicaid be suspended if the ABLE account exceeds $100,000?
No. Medicaid eligibility continues even if the ABLE account exceeds $100,000 by an amount that causes the recipient to exceed the SSI resource limit, whether alone or with other resources, as long as the individual remains otherwise eligible for SSI.
9. Who may contribute to an ABLE account?
Any person may contribute to, or deposit funds into, an ABLE account. (The Internal Revenue Code defines a person as including an individual, trust, estate, partnership, association, company, or corporation.)
10. Can Social Security or SSI benefits be deposited into an ABLE account?
Yes. Beneficiaries who receive Social Security or SSI benefits can deposit their benefits into their ABLE accounts. If the beneficiary has a representative payee (payee), the payee must ensure that the ABLE account adheres to all requirements of the Representative Payee Program. For more information for payees who use ABLE accounts to manage benefits, please visit our website: Social Security - Representative Payee Program - Payee and ABLE Accounts (ssa.gov).
11. Can a Representative Payee deposit SSA funds into an ABLE account?
For information on representative payees’ use of ABLE accounts to manage funds, please visit Use of ABLE Accounts by Representative Payees.
12. How much may be contributed annually to an ABLE account?
Total contributions from all sources are limited to the annual gift tax exclusion, unless the account owner is employed (see below). In 2022, the gift tax exclusion limit is $16,000. In 2023, the gift tax exclusion is $17,000.
13. Can more money be contributed to the ABLE account of a working account owner?
Yes. ABLE account owners who are employed, and for whom certain retirement plan contributions have not been made for the taxable year, may contribute additional funds to their ABLE accounts beyond the annual gift tax exclusion limit ($16,000 in 2022; $17,000 in 2023). The additional annual contributions may not exceed the federal poverty level for a one-person household (in the designated beneficiary’s state of residence) for the previous calendar year or the designated beneficiary's compensation for the current taxable year, whichever is less.
14. What is a distribution from an ABLE account?
A distribution is any payment from an ABLE account. Distributions (other than returns of contributions) may be made only to, or for the benefit of, the designated beneficiary. Distributions for Qualified Disability Expenses are not counted as taxable income.
15. What are Qualified Disability Expenses (QDE)?
Qualified Disability Expenses (QDE) are expenses that relate to the disability or blindness of the designated beneficiary and that are for the benefit of the designated beneficiary in improving health, independence, or quality of life. Such expenses include, but are not limited to, expenses related to the designated beneficiary’s: education; housing; transportation; employment training and support; assistive technology; healthcare, prevention and wellness; financial management and administrative services; legal fees; account oversight and monitoring; funeral and burial expenses; and basic living expenses.
16. Do distributions from ABLE accounts impact SSI benefits?
A distribution for a housing expense or for an expense that is not a QDE is counted as a resource, if the designated beneficiary retains the distribution into the month following the month of receipt. If the designated beneficiary spends the distribution within the month of receipt, there is no effect on SSI eligibility.
17. Who can open an ABLE account?
The ABLE account may be established by a person selected by the eligible individual; or If an eligible individual (whether a minor or adult) is unable to establish their own ABLE account, an ABLE account may be established on behalf of the eligible individual by: the eligible individual’s agent under a power of attorney or, if none, by a conservator or legal guardian; spouse, parent, sibling, grandparent of the eligible individual; or a representative payee appointed for the eligible individual by the Social Security Administration (SSA), in that order. An account opened by a representative payee appointed by SSA must meet all of the SSA account rules and requirements.
18. How do you open an ABLE account?
You can open an ABLE account by going directly to an ABLE program’s website or by calling their customer service. Some state programs may offer paper enrollment. You can view a list of all state ABLE programs and websites at www.abletoday.org/able-programs.
19. Who administers ABLE programs?
States administer ABLE programs. You can view a listing of all state ABLE programs at www.abletoday.org/able-programs.
20. Does the ABLE account have to be opened in the home state of the eligible individual?
No. Eligible persons or their authorized legal representatives may open an account in their own State’s plan or in a State plan that is available to out-of-State residents. Some State plans are available only to residents of that State. It is important to look at one’s home State plan first in case there are tax benefits for owning an ABLE account with that plan.
21. How many ABLE accounts may an account owner have?
Only one ABLE account can be owned no matter what plan you enroll in.
22. Are ABLE accounts transferrable?
ABLE accounts are transferrable to siblings who are also eligible individuals. See state plan disclosure documents for specific details.
23. What are the tax benefits of owning an ABLE account?
Earnings on an ABLE account and distributions from the account for QDEs are not counted as taxable income.
OTHER USEFUL LINKS
SSA Program Operations Manual System (POMS): https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740
Use of ABLE Accounts by Representative Payees Social Security - Representative Payee Program - Payee and ABLE Accounts (ssa.gov)
Representative Payee FAQs Social Security Administration - Representative Payee Program (ssa.gov)
Federal Register: Guidance Under Section 529A: Qualified ABLE Programs https://www.federalregister.gov/documents/2020/11/19/2020-22144/guidance-under-section-529a-qualified-able-programs
Centers for Medicare & Medicaid Services ABLE Medicaid Director Letter: https://www.medicaid.gov/federal-policy-guidance/downloads/smd17002.pdf
National Association of State Treasurers – ABLE:
ABLE National Resource Center:
THIS INFORMATION IS GENERAL.
FOR MORE INFORMATION, CALL 1–800–772–1213 (TTY 1–800–325–0778),
VISIT OUR WEBSITE (www.ssa.gov) ON THE INTERNET,
OR CONTACT YOUR LOCAL SOCIAL SECURITY OFFICE.