The March/April issue of our AchievABLE Newsletter contains stories on the following:
- ABLE National Resource Center Response to Coronavirus
- SSA News Flash
- Podcast Featuring ABLE NRC Director
- Ambassador Highlight: Jenny Casselman
- Ambassador Highlight: Andrew Komarow
- Frequently Asked Questions Resource
- Top Three Questions: March 2020
- January, February and March Webinar Archives
- State ABLE Program News
ABLE National Resource Center Response to Coronavirus
The ABLE National Resource Center (ABLE NRC), managed by National Disability Institute (NDI), has been closely monitoring the situation surrounding the novel coronavirus, or COVID-19, pandemic. The coronavirus is unprecedented and we are working to identify ways to address the challenges of this moment in our country’s history and how it intersects with the important work we do on behalf of the disability community that we serve. As such, we are actively working to develop materials for people with disabilities and others with chronic health conditions to help them maintain their financial stability and security during the COVID-19 outbreak.
We would like to share this excellent article by disability advocate, Andrew Pulrang, that recently ran in Forbes Magazine: 5 Things to Know About Coronavirus and People with Disabilities. We hope you find it helpful.
In addition, the CDC has released coronavirus.gov, a new website to share CDC updates on COVID-19. The website provides ways in which the community can take measures to reduce the spread of COVID-19 in different settings.
Please stay tuned for more information that will be coming out from us.
Be well and be safe.
Miranda Kennedy, M.P.P.
Director, ABLE NRC
SSA News Flash
On March 13, 2020, the Social Security Administration (SSA) clarified that food is considered a “qualified disability expense” from an ABLE account.
“For ABLE purposes, food is considered a qualified disability expense (basic living expense).”
Although the policy above permits the deposit of monthly SSA payments into the ABLE account, the ABLE National Resource Center, as a promising practice, recommends that beneficiaries use their monthly benefit payments, and in particular their SSI, to pay for some or all of their housing and food costs before depositing any excess into the ABLE account. This is recommended for two reasons:
- Benefit payments deposited may not be immediately available due to “hold times” which differ from ABLE program to ABLE program;
- When monthly benefit payments are directly deposited into the ABLE account, this money is counted towards the annual contribution limit, thereby decreasing the amount available for additional contributions, even though the ABLE balance may be zero since the funds were used to cover regular monthly expenses.
Podcast Featuring ABLE NRC Director
Miranda Kennedy, Director of the ABLE National Resource Center, is a guest on the newest episode of the LOMAH Special Needs Podcast!
During the podcast, Miranda addresses ABLE account myths, discusses what needs to be done before opening an ABLE account, stresses how ABLE accounts can and can not be used and highlights how an ABLE account can offer freedom unlike any other financial planning tool.
Ambassador Highlight: Jenny Casselman
Jennifer (Jenny) Casselman’s daughter, Kenley, is a fourth-grader who just turned 11 years old. She loves her dog Baxter, rock-climbing, baking, painting rocks, playing board games with her parents and friends, and hamming it up in front of a crowd. Kenley’s mom Jenny, is fun too, but she also has more practical concerns when it comes to her daughter. This is why Jenny opened an ABLE account for Kenley, with the Nevada ABLE program two years ago. This allows Kenley, who has Down syndrome, to save and prepare for her future while supporting her independence.
Jenny and her husband, Kenley’s dad, Gary, opened an ABLE account a few years ago to save for Kenley’s future. They chose the ABLE account because it will give her financial agency, (a sense of personal empowerment over her money) as an adult. She can choose to use the funds in the ABLE account to support herself and enhance her life without jeopardizing her means-tested benefits.
As both a loving mom and someone whose entire career has been in the world of finance, Jenny says it best, “The reality is, yes, Kenley’s extra chromosome has some genuine medical and cognitive ramifications. But, those ramifications don’t limit her ability to live a full and engaging life. We focus on her abilities and how we are going to support her best-self as she continues to gain independence. With hopes, dreams and many unknowns (because life always has just that), we are planning for her future and balancing it with the demands of today.”
Jenny continues, “Let’s face it, navigating social benefits is a herculean task, and we want to make sure we set Kenley up for success by not jeopardizing important social safety nets for her future. The ABLE account accomplishes just that for us. It is an asset in her name, and because we want Kenley to be as independent as possible, we need to plan through that lens. But the reality is, how do you carve out additional funds when you have to balance all the other demands of today? We have to save for dental work, which is extensive between the backward teeth, the teeth that don’t exist and the needed orthodontics. We also have a kid that tells the nurse how to take her blood pressure because we spend so much time at medical appointments. That means lots of copays, with very high deductibles since Kenley does not have SSI or Medicaid Benefits. So, it can be a conundrum – how do you carve out money for a monthly ABLE account contribution with everything needed for today? For us, we set up a manageable automatic deduction and ABLE deposit, monthly. When she receives gifts of $5 or $10 for Valentine’s Day or Easter from her Grandparents, we take that money and contribute to her ABLE account. Between the investment options of an ABLE account and the future value of our contributions today, it takes a bit of weight off our shoulders, knowing that we are putting the forth effort to help her be stronger tomorrow. That is why an ABLE account is our bright star.”
When Jenny has introduced ABLE accounts to other families who have children with disabilities, they always ask her, “Why haven’t I heard about this before?” with the second question being. “How do I set this up?”
We’re working on that first question, by sharing Jenny and Kenley’s story with others to get the word out about the availability of ABLE accounts. As for the second question…
Drilling it down to the essential items needed to open an ABLE account – which again, Jenny swears is the “easiest financial instrument you will ever open” – Jenny tells people:
- Be sure to check out the ABLE National Resource Center to compare all your options. Use their resources as a starting place to help decide where to open the ABLE account.
- Gather personally identifiable information about the ABLE owner. This means you need the full legal name, instead of a cool nickname.
- Have the formal disability diagnosis available to demonstrate ABLE eligibility, as some ABLE programs will require that level of detail.
- You need a current bank account number and the bank routing number to make a deposit through the mail or electronically from your bank account. You can also set your account up for recurring contributions, or you can change your allocations for future contributions at any time.
- Read the state ABLE program’s disclosure agreement fully for the program that you have chosen before you sign up for it.
- Everything happens online, so if you don’t have the internet at home through a personal computer, head on out to your local library.
- Make it happen and open the account!
Ambassador Highlight: Andrew Komarow
Andrew Komarow is 30-years old, a husband, a father of a two-and-a-half-year-old daughter, a dog owner and a financial planner whose firm focuses on helping individuals across the Autism Spectrum and others with disabilities to become financially independent. As an ASD/Special Needs Advocate, and ABLE account owner himself, Andrew incorporates researching and recommending ABLE accounts into his work with families who are planning for their financial future.
“I was an Ambassador for ABLE accounts before becoming an official one with ABLE National Resource Center in 2020”, says Andrew. He shares that he has seen situations in his work that he still can’t believe where parents and families are planning on disinheriting a child with a disability to safeguard their means-tested benefits. In both his advocacy with Autism Speaks and in his financially planning work, Andrew advises those families about the benefits of ABLE.
As a working professional, Andrew’s wife, Jessica, daughter, Emma and dog, Bentley, depend on him to take care of the family’s finances. Andrew incorporated his ABLE account into his financial plan. Not being on means-tested benefits, Andrew sees others like himself – working individuals with disabilities who have families to support and who also are not on means-tested benefits – who are still ABLE-eligible and have qualified disability expenses. He knows that many of these individuals are not taking advantage of the opportunity that an ABLE account offers. They, too, could benefit from opening an ABLE account and utilizing the tax advantages associated with it just like he is.
“My one piece of advice when someone is eligible for an ABLE account is to tell them to ‘Just do It.’ Just get started. I see so many people who are hesitating in opening an ABLE account because they think they need to know all the ins and outs. If you or your family member are eligible for an ABLE account, you can and will benefit from opening an ABLE account.”
It is especially noteworthy that Andrew is such a strong advocate for ABLE accounts since he lives in Connecticut, one of the few states that has not yet established an ABLE program. As a result, Andrew opened his ABLE account with the Massachusetts Attainable Savings Plan, one of the many state ABLE programs available to out-of-state residents. He has been active in lobbying for Connecticut to open their ABLE program.
When asked, “Why are you so passionate about ABLE?” Andrew responds, “I’d hate to have someone not open an ABLE account because they didn’t know about it, didn’t understand it or they compared ALL the programs and ALL the fees and got lost. It’s important not to get lost in all of that. ABLE NRC has tools to help you navigate all of that (e.g., The Getting Started “Roadmap to Enrollment” Tool). If you know opening an ABLE account makes sense and that it will make you better off than you were before, the answer is going to be YES with any of the ABLE programs. Just get started. Changes could always be made in the future.”
Check out additional tips that Andrew shared from his unique perspective as both a financial planner, ABLE account owner and as a co-presenter on ABLE NRC’s February 2020 “ABLE, The IRS and Tax Advantages.” Andrew presented alongside Don Dill with the IRS, Laurie Schaller with National Disability Institute, Joie Hill with SSA, and Miranda Kennedy with ABLE National Resource Center. Visit ABLE NRC webinars for more information.
Frequently Asked Questions Resource
Because of the volume of emails we receive, we offer several ways for you to find information about ABLE and ABLE accounts. The new Frequently Asked Questions section on the ABLE NRC website covers the following topic areas:
Top Three Questions: March 2020
1. Can I be taxed on third-party contributions to my 529 ABLE account?
Generally, contributions to the ABLE account are treated as non-taxable gifts to the account owner and the third party contribution limit to a 529 ABLE account is the same as the gift tax limit under the IRS tax code. However, if a third-party contributor makes other gifts to the ABLE account owner in addition to the ABLE contribution and the total aggregate amount of all gifts exceeds $15,000, the contribution limit this year, it could give rise to a gift tax liability.
An ABLE program must return excess contributions, including any interest earned on the extra contributions. The last funds received must be returned to the contributor(s) on or before the due date, including extensions, for the federal income tax return of the ABLE account owner, for the tax year in which the excess contribution or excess aggregate contribution was made. Visit the 2020 IRS 1099 Instructions for more information.
2. If funds in my 529 College Savings Plan are rolled over to a 529 ABLE account, are there any adverse tax consequences?
It depends. The IRS allows one tax-free rollover of a 529 account per beneficiary in a 12-month period. If you violate the 12-month rule, you must treat the transaction as a non-qualified distribution and pay federal income tax and a 10% penalty on the earnings portion.
If you have not rolled over a 529 account in the 12-month period, a 529 to 529 ABLE account rollover within the same state is generally not subject to adverse state tax consequences. However, if you roll over a 529 state college savings plan to an ABLE account in another State, the earnings portion of the rollover may be subject to state income tax. Also, the rollover may be subject to taxation to recapture a state tax deduction if the account owner previously deducted it.
Finally, the Internal Revenue Service Notices 2001-81, 2001-52 and IRB 617 state that the distributing 529 plan must provide a breakdown of the earnings portion of the rollover amount to the recipient 529 ABLE plan. Until the recipient 529 ABLE plan receives appropriate documentation showing the earnings portion, the entire rollover amount is treatable as earnings. As a promising practice, it is helpful to include a statement from the 529 account that shows the breakdown of the contributions/principal and the earnings to verify this rollover to the 529 ABLE program. For more information, please visit Guidance on Recontributions, Rollovers and Qualified Higher Education Expenses under Section 529.
Please consult your tax practitioner for further advice and information.
3. Can I make a 529 ABLE program transfer to another 529 ABLE program for someone who is a non-family member?
Yes, you can make the transfer. However, there may be tax consequences. A transfer of funds that do not meet the IRS rules for program to program transfers constitutes a non-qualified withdrawal subject to federal income tax on the earnings portion and an additional 10% tax. It may negatively affect the account owner’s eligibility for federal or state benefits. Further, a transfer to a person who is not a member of the family may subject the designated beneficiary to other taxes such as federal gift taxes and “generation-skipping transfer” taxes.
January, February and March Webinar Archives
VIEW THE ARCHIVE – January – A New Year, A New You! Strategies for Increasing Your Financial Fitness with an ABLE Account.
VIEW THE ARCHIVE – February – ABLE, the IRS and Tax Advantages.
VIEW THE ARCHIVE – March – CalABLE Spotlight.
State ABLE Program News
- As of the 4th quarter in 2019, there are 56,632 ABLE accounts, with investments totaling $354.8 million.
- In February, California State Treasurer Fiona Ma announced that a new CalABLE Visa® Prepaid Card is available to people with disabilities who hold CalABLE accounts. Account holders can use the debit card everywhere Visa debit cards are accepted.
- Visit the CalABLE AchievABLE Corner for financial education resources.