Debunking ABLE Myths

Myth: An individual has to be receiving Social Security benefits to qualify for an ABLE account.

Fact: The ABLE Act limits eligibility to individuals with disabilities with an age of onset of disability before turning 26. If you meet this requirement and have also been found eligible to receive benefits through Supplemental Security Income (SSI) and/or Social Security Disability Insurance (SSDI) programs, you are automatically eligible to establish an ABLE account. If you don’t receive SSI and/or SSDI but still meet the age of onset disability requirement, you could still be eligible to open an ABLE account if you meet Social Security’s definition and criteria regarding functional limitations and receive a letter of disability certification from a licensed physician (licensed physician, a doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, and for some purposes, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor), indicating that the disability onset occurred prior to age 26. Please find a sample disability certification here.

Myth: An individual must be under the age of 26 in order to have an ABLE account.

Fact: An individual doesn’t need to be younger than 26 to establish an ABLE account. An individual of any age could open an ABLE account, as long as the onset of disability was before the individual’s 26th birthday.

Myth: The only person who can deposit money into the ABLE account is the eligible person who has a disability.

Fact: The individual with a disability or any “person” 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 “person” as defined by the IRS 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 $18,000. The amount may be adjusted periodically for inflation. In addition, ABLE account owners who work under the ABLE to Work Act may contribute up to an additional $14,580 (2024) or their gross income for that taxable year, whatever is less, into their ABLE account. Residents of Alaska can contribute $18,210 and residents of Hawaii can contribute $16,770. They may do this if they have not contributed to a 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: 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 I have a Special Needs Trust or participate in a Pooled Income Trust, there is no need or benefit for me to set 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: If my state does not have an ABLE program, there is no opportunity for me to participate in the program.

Fact: While the original law passed in 2014 did stipulate that an individual had to open an account in their state of residency, this provision was eliminated by Congress in 2015. This means that regardless of where you might live, and whether or not your state has decided to establish an ABLE program, you are free to enroll in any state’s program provided the program is accepting out-of-state residents.

To determine which state ABLE programs are accepting out-of-state residents, please refer to the individual state pages.

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. Some states have passed state laws that would prohibit this Medicaid payback provision. When enrolling, we encourage you to ask about these laws. Any remaining funds are payable to the Estate or to a successor designated beneficiary if one was appointed before the death of the original account owner

Myth: An individual has to visit or contact a bank in order to set up an ABLE account.

Fact: Most ABLE accounts are opened and managed online. This can help to reduce ABLE costs and fees. However, many ABLE plans also offer the option to open an account with a paper application that may be mailed or faxed. At least one state offers an option to use a brick and mortar bank to open an ABLE account, make deposits and conduct business. Use the ABLE National Resource Center’s Comparison Tool to compare ABLE Plan features.