Step 1: What is ABLE?
History and Brief Definition of ABLE
In December 2014, Congress passed the Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act, which added Section 529A to the federal tax code. The ABLE Act allows qualified individuals with disabilities to save money in a tax-exempt account that may be used for qualified disability expenses (QDE) while keeping their eligibility for federally-funded, means-tested public benefits.
The ABLE Act, considered by many to be one of the most significant pieces of legislation for the disability community since the Americans with Disabilities Act (ADA), had overwhelming bipartisan support in both the Senate and the House and was the result of a decade-long cross-disability grassroots effort. The effort originated with a group of parents of children with disabilities who recognized the unfairness of not being able to save funds in their child’s name for fear of losing essential benefits that allowed their child to live independently in the community.
Topics at a Glance
How much can you save in an account?
The total annual contributions into an ABLE account by all contributors combined, including family, friends and the ABLE account owner, for any given tax year is $16,000 in 2022 (more for working individuals). The amount may be adjusted periodically to account for inflation. The total limit over time is subject to the individual state and their limit for education-related 529 savings accounts. Many states have set this limit at more than $500,000 per plan.
What is the impact on benefits: SSI, SSDI, Medicaid or other public benefits?
An ABLE account allows eligible individuals to accumulate more than $2,000 in assets without losing federally-funded, means-tested benefits. This includes Supplemental Security Income (SSI) and Medicaid. Funds in an ABLE account are not taken into consideration when determining eligibility for these types of programs.
ABLE account holders who receive SSI benefits will continue to receive their SSI payment until their ABLE account, combined with non-ABLE resources, exceeds $100,000 by an amount which is over the SSI resource limit. Once this happens, SSI will be suspended until the account balance over $100,000 along with non-ABLE resources no longer exceeds the resource limit. Although SSI benefits may be suspended, Medicaid benefits remain intact. Since the annual contribution limit to an ABLE account is $16,000 (more if you are working), it will take quite some time for ABLE account owners to accumulate enough savings to approach $100,000.
How many accounts can a person have?
The law prohibits any person from having more than one ABLE account at any given time.
Who can contribute to the account?
Anyone can contribute into an ABLE account including friends, family and the account holder.
Does a person need to wait for his state to launch a program?
No. While the original law passed in 2014 stated that an individual had to open an account in their home state, this was eliminated by Congress in 2015. Now, eligible individuals are free to enroll in any state program, provided that the program is accepting out of state residents.
How many ABLE programs are open?
The first ABLE program was launched in June 2016. Since that time, over 40 states have launched ABLE programs, many of which are enrolling individuals nationwide. Our State Comparison Tool can help you decide which state ABLE program is right for you.
- Deposits into an ABLE account are not allowed to exceed $15,000 in any given tax year. ABLE account owners who are working may be able to contribute more.
- You are allowed to open an ABLE account outside your state of residency.
- Over 40 states have launched ABLE programs.