Debunking ABLE Myths
For Service Providers…
Myths and misstatements of fact frequently circulate on the internet, in email and on websites and are repeated in endless loops. Here are some of the most common ABLE myths, along with facts, which you can share with other service providers or with your clients to debunk these myths.
Myth: An individual must be receiving Social Security disability benefits to qualify for an ABLE account.
Fact: The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age. If an individual meets this criterion and receives benefits through Supplemental Security Income (SSI) and/or Social Security Disability Insurance (SSDI) programs, they are automatically eligible to establish an ABLE account. If they do not receive these benefits, but still meet the age of onset of disability, they would still be eligible to open an ABLE account if they have a “disability certification” signed by a licensed physician confirming that they meet Social Security’s definition and medical criteria regarding significant functional limitations.
Myth: An individual must be under the age of 26 in order to have an ABLE account.
Fact: An individual does not need to be under the age of 26 to establish an ABLE account. An individual of any age may open an ABLE account, as long as the onset of disability was before the individual’s 26th birthday.
Myth: The only individual who can deposit money into the ABLE account is the individual with a disability (account owner).
Fact: The individual with a disability or any individual such as a third party such as a family member, friend or an employer, may contribute to an ABLE account on behalf of the beneficiary. The term “individual” also includes a trust (i.e., Special Needs Trust or Pooled Income Trust), estate, partnership, association, company or corporation. Funds may also be rolled over from a 529 college savings account into an ABLE account!
Myth: An unlimited amount of money can be deposited into an ABLE account.
Fact: The total annual contribution by all participating “contributors” for any given tax year is currently $15,000. The amount may be adjusted periodically for inflation. In addition, ABLE account owners who work may contribute up to an additional $12,140 (2019) or their gross income for that taxable year, whatever is less, into their ABLE account. They may do this if they have not contributed to an employer sponsored retirement plan that year. The total aggregate account limit, over time, is subject to state specific limits for education-related 529 savings accounts. Many states have set this limit at more than $500,000 per account.
Myth: Earnings or other income contributed by a beneficiary are not counted by means-tested benefit programs.
Fact: There are no changes in the way means-tested benefit programs count earned or unearned income deposited into an ABLE account. An ABLE account is not a way to exclude income such as earnings, child support, pensions, retirement benefits, veteran’s benefits, alimony, worker’s compensation. It is a way to increase assets/resources. Direct deposit does not avoid income counting rules.
Myth: Once my ABLE account exceeds $2,000 I lose my eligibility for SSI benefits and Medicaid.
Fact: The ABLE Act states that funds in an ABLE account will not affect eligibility for federally-funded, means-tested benefits such as SSI and Medicaid. When the ABLE account balance over $100,000 is combined with other resources and exceeds the SSI resource limit, SSI payments are suspended but Medicaid continues. Payments may be reinstated when resources fall below the SSI resource limit.
Myth: If an individual has a Special Needs Trust or participates in a Pooled Income Trust, there is no need or benefit to setting up an ABLE account.
Fact: While the tools used for financial planning can be different from one beneficiary to another, ABLE accounts offer various options, including checking account and debit card options, which may be more flexible and accessible than other types of trusts and savings accounts. An ABLE account may also provide more choice and control for the beneficiary and family. The cost of establishing an ABLE account is likely to be considerably less than either a Special Needs Trust or Pooled Income Trust. With an ABLE account, account owners have the ability to make choices and control their funds as circumstances change. For many families, the ABLE account is a significant and viable option in addition to, rather than instead of, a trust.
Myth: In all circumstances, the account must pay Medicaid the remaining balance upon the death of the beneficiary.
Fact: When an individual dies, funds remaining in the ABLE account, after the payment of outstanding Qualified Disability Expenses (which may include funeral and burial expenses), may be used to reimburse the state for Medicaid-related services. The amount of any Medicaid payback is calculated based on amounts paid by Medicaid after the creation of the ABLE account and excludes amounts paid by the beneficiary as premiums to a Medicaid buy-in program. Several states have passed state laws that would prohibit this Medicaid payback provision. When enrolling, we encourage you to ask about these laws. Remaining ABLE funds are payable to the designated heir under the estate.
Myth: An individual may only open an ABLE account in their state of residence and through a bank.
Fact: ABLE programs are developed and managed at the state level. If your state has not launched an ABLE program, you can open an account in most states because most allow out of state residents to open an account. You can use the comparison tool on the ABLE National Resource Center website to find the state program open to non-residents and one which is best suited to meet your needs.
Myth: An individual has to visit or contact a bank in order to set up an ABLE account.
Fact: Therefore, the managing state has the flexibility to determine the enrollment process. Thus far, in an effort to keep administrative costs low and to ensure an affordable program, enrollment (and maintenance of the account) is primarily done through the individual state ABLE program website/online portal. Some states may also offer the option to enroll via mail or fax.