Disabled Americans recently scored a victory when Congress approved an expansion of state-based accounts that allow them work and lower your expenses without risking the lack of public advantages like Medicaid.
The change means an estimated six million more people, including about a million military veterans, will eventually qualify for the tax-favored accounts, advocates for disabled people say. The accounts, often called ABLE accounts, are named after the 2014 law that created them, the Achieving a Higher Life Experience Act.
Forty-six states and Washington, D.C., offer ABLE accounts, which first became available in 2016 and are loosely modeled on 529 college savings accounts. But saving in ABLE accounts has been somewhat slow to catch on, partly because they’ve been limited to individuals who became disabled before the age of 26.
Now, the ABLE Age Adjustment Act, included within the omnibus spending bill passed in December, has raised the brink for the onset of a qualifying disability to age 46. Which means people might be eligible if their disability occurred after their mid-20s, in a automobile accident, say, or from a neurological disease they developed, like multiple sclerosis. It may help people coping with the lingering effects of Covid-19, said Thomas Foley, executive director of the National Disability Institute.
The accounts let individuals with disabilities save and invest for current expenses and future needs, including housing, education, transportation and legal costs, without the funds disqualifying them from need-based federal help like Medicaid and Supplemental Security Income. Typically, a disabled person can’t have greater than $2,000 in savings or other assets to qualify for those programs. But money in an ABLE account doesn’t count toward that total.
“It’s a protected place to lower your expenses,” Mr. Foley said.
The age expansion was crucial for the ABLE program overall, supporters say. A 2019 report from the National Association of State Treasurers warned that participation was too low to keep up reasonably priced fees for ABLE accounts and sustain the programs over the long run. The association’s charitable arm, the NAST Foundation, has began several initiatives to advertise awareness of the accounts.
The brand new rule, nonetheless, won’t take effect until January 2026. That somewhat damps the news of expanded access, said Mary Morris, chief executive of Virginia529, the agency that oversees Virginia’s ABLEnow program. People could also be dissatisfied, she said, to learn concerning the accounts only to listen to that they need to wait several years to participate.
“It’s a little bit of a letdown,” she said.
Still, tens of millions of individuals may already be eligible and might be helped with expanded outreach, advocates say. Under current rules, an estimated eight million people qualify for ABLE, but only a small fraction of them have accounts. (About 14 million may qualify under the expansion.)
“We’d like to succeed in out to those that have been excluded,” said Stacy Garrity, state treasurer for Pennsylvania and chair of the ABLE Savings Plans Network.
At the top of 2022, there have been an estimated 134,000 ABLE accounts with greater than $1.18 billion in assets, in line with ISS Market Intelligence, a financial research and analytics firm.
Listed below are some questions and answers about ABLE accounts:
How much can I contribute to an ABLE account?
Anyone — relations, friends and even employers — can contribute to the accounts, as much as a maximum for 2023 of $17,000. If a disabled person with an ABLE account works, that person can contribute extra from his or her own earnings, as much as $13,590 in most states, for an annual total of $30,590.
There are caps on total balances. Generally, accounts can grow to $100,000 without affecting Supplemental Security Income. But balances might be much higher without affecting eligibility for other advantages, like Medicaid or federal housing assistance.
There isn’t any federal tax deduction for contributing to an ABLE account, but earnings and withdrawals for eligible expenses are tax-free. Some states may offer state tax breaks for contributions.
Do I even have to open an ABLE account in my home state?
I’ll qualify for an ABLE account under the brand new rules. What can I do to organize for 2026?
Disabled people and their families can educate themselves and their supporters concerning the accounts and the way they’re used, Mr. Foley said. While relations for now can’t lower your expenses within the disabled person’s name without jeopardizing government advantages, they may save on their very own with the intention of contributing the cash starting in 2026, he said.