Treasury Release Notice of Proposed Rule Making Regarding ABLE

June 22, 2015

On Friday June 19th, the Internal Revenue Service (IRS) released the highly anticipated Notice of Proposed Rulemaking (NPRM) for the Achieving a Better Life Experience (ABLE) Act. The NPRM outlines the proposed rules and regulations by which states will establish and manage ABLE programs. These proposed rules and regulations are open for public comment until September 19th. In addition, a public hearing will be held on October 14th, in Washington, D.C., to allow relevant stakeholders and the public to comment further.

The ABLE Act allows states to establish ABLE accounts for eligible individuals with disabilities with “marked and functional limitations.” States have to enact ABLE authorizing legislation or contract with another state who has established an ABLE program.

The proposed regulations do require a recertification process confirming that the designated beneficiary continues to satisfy eligibility requirements either by being a recipient of Social Security benefits or by a letter that documents the significant functional limitation(s). Additionally, the proposed rules do allow a beneficiary to continue to maintain his or her ABLE account in one state even after the designated beneficiary moves to another state. Guidance in the proposed regulations allows for broad, flexible interpretation of what qualifies as a disability-related expense covered by ABLE account funds. Qualified expenses do include basic living expenses and other expenses that seek to improve health, independence and quality of life. Further, disability-related expenses need not be for the sole use of the beneficiary.

Reactions to the new rules have been mixed, with generally positive comments from the disability community and significant concerns voiced by the 529 College Savings Plan administrators regarding the degree of responsibility assigned to the States for oversight of recertification of eligibility and the review of qualified disability expenses.