ABLE Account Contributions and Social Security Income (SSI)

Posted by Haddad Nadworny on Sat, Aug 18, 2018 @ 08:00 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for Fall 2018/Spring 2019 season. Please click here to email Alex Nadworny or call 781-756-1804 . 

ABLEThe analysis and case study below are excerpted from a Case Summary series offered by the National Disability Institute's ABLE National Resource Center(ABLE NRC).  John Nadworny met Chris Rodriguez of the National Disability Institute at a meeting prior to the ABLE's passage and has worked with Chris and the ABLE NRC on a number of presentations and webinars educating the public about ABLE. We share below information from the case studies presented by ABLE NRC. The case serves to illustrate the impact of the ABLE Account on Social Security and Social Security Income (SSI) disability benefits. 

The ABLE Account offers an individual with a disability, which began before age 26, an opportunity to save funds in a dedicated account to meet " qualified disability expenses" that will allow them to improve health, independence and quality of life.  To view the benefits, limitations and rules related to the ABLE Account, see ABLE Accounts:10 Things You Need to Know

SSI is based on financial need and therefore impacted by any income received by the SSI beneficiary.  Note: SSDI is not a means-tested benefit and is not impacted by the ABLE account. In 2018, the maximum SSI federal benefit is $750/month with states supplementing this amount at their option. Unless income exclusions apply, any income received by the SSI recipient will effect the SSI monthly payment amount. The maximum countable resources a beneficiary is allowed is $2000. If resources go above $2000, the right to an SSI payment may be suspended.  If resources remain above $2000 for 12 months, the SSI is terminated.  

ABLE Account & SSI

A summary of SSI policies regarding ABLE: 

(Source: POMS SI 001130.740, https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740.  )

 Contributions of the designated beneficiary to the ABLE account, from his or her monthly income (i.e., income other than SSI), will still count as income for SSI (subject to any income exclusions) and may result in a reduction to the SSI payment. Contributions from all others are excluded and not counted as income of the beneficiary.

• Earnings from the ABLE account are excluded and not counted as income or against SSI resource limits.

• Up to $100,000 of the account balance is excluded by SSI and not counted toward the $2,000 SSI resource limit.

• When the value of an ABLE account exceeds $100,000 and the amount above $100,000, combined with other resources, results in countable resources above $2,000, SSI payments are indefinitely suspended.

 Unlike the general SSI rules related to excess resources, SSI eligibility is not terminated after 12 months of excess resources related to the ABLE account. SSI payments will be restored once the overall countable resources are reduced to $2,000 or less. Under SSI’s ABLE policy, two years or several years could elapse and the beneficiary can return to SSI payment status when countable resources are again below $2,000.

 • When the SSI payment is suspended due to excess ABLE account resources, Medicaid eligibility will continue.(Note of caution to readers that while the cited policy does allow Medicaid to continue despite an ABLE account balance of more than $100,000, since Medicaid eligibility will be tied to SSI status in 41 states, we believe countable resources (other than the ABLE account) must still be below the $2,000 SSI resource limit in those states. In the remaining nine section 209(b) states, that opted to determine Medicaid eligibility separately, the ABLE account should still be an exempt resource but the person will have to meet any state-specific resource test to keep Medicaid. POMS SI 01715.010.)

 A Case Study of SSI being Impacted by an ABLE account

Source: ABLE National Resource Center

ABLE-1

Mario has $101,500 in his ABLE account and $1,500 in his checking account. Since his countable resources are now $3,000 ($1,500 from ABLE account + $1,500 from checking account), his ABLE account has caused him to exceed the resource limit and his SSI payments are indefinitely suspended.

Mario continues putting money in his ABLE account for 24 more months and his indefinite suspension continues. Then, with the account balance standing at $107,000, he takes a $21,000 distribution to purchase a new car (a Qualified Disability Expense), dropping his account balance to $86,000 at a time when his checking account balance stands at $850. Since the ABLE account balance is below $100,000 it is once again exempt and his only countable resource is the $850 in his checking account. Mario’s SSI payments will be restored without the need for a new application. Mario had Medicaid eligibility continue when his SSI payments were suspended for 24 months based on excess resources caused by the ABLE account.

To read a more detailed case study and analysis, see ABLE National Resource Center. 

 The opinions voiced in this material are for general information only and are not intended to provide
specific advice or recommendations for any individual, nor intended to be a substitute for specific
individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified
tax or legal advisor.

Prior to investing in an ABLE account investors should consider whether the investor's or designated beneficiary's home state offers amy state tax or other benefits that are only available for investments in such states's ABLE program.  Withdrawals used for qualified disability expenses are federally tax free.  Tax treatment at the state level may vary.  Please consult with your tax advisor before investing. 

 

Tags: ABLE Account, disability supports, government supports, Social security income

ABLE to Work and Key Changes to the ABLE Account

Posted by Haddad Nadworny on Sat, Aug 04, 2018 @ 08:30 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP

We are committed to presenting complimentary educational workshops to  organizations and parent groups. We are currently booking presentations for Fall 2018/Spring 2019 season. Please click here to email Alex Nadworny or call 781-756-1804 . 

 

Changes to the ABLE Account for 2018

ABLEThere are significant changes/enhancements to the ABLE account for 2018.  We have summarized the changes based upon information from the National Disability Institute's excellent  ABLE National Resource Center.  To learn the basics about ABLE, check out our ABLE Accounts: Ten Things You Need to Know , adopted from the The ABLE National Resource Center.

Major changes for 2018 are:

  1. Increased annual contribution limit- now $15,000.
  2. ABLE to Work- additional allowable contributions by the beneficiary as a result of employment.
  3. Ability to Rollover funds from a 529 College Savings account to an ABLE -529A-account.
  4. Savers Credit - Access to the Retirement Savings Contribution Credit.

 1. Increased Annual Contribution Limit - The annual contribution limit is periodically adjusted by Congress for inflation. 

  • For the 2018 tax year, the annual limit is $15,000. 
  • Since an ABLE account may have many individuals depositing money into the account, it is important for the account holder to be sure the total of all contributions from all sources does not exceed $15,000. in one year. 

 

2. ABLE to Work- The ABLE to Work provision was passed by Congress as part of the Tax Cuts and Jobs Act of 2017.  It is currently set to expire on January 1, 2026.

  • This provision allows an ABLE account beneficiary who works and earns income to contribute funds above the $15,000 annual limit.
  • The additional contribution may be up to the lesser of: the account beneficiary's earned income or the federal poverty line, which for 2018 is $12,060. This means it is possible to contribute up to $27,060 to an ABLE account in one year. 
  • Two additional elements of the law to be aware of when considering eligibility for the additional contribution:
    • (1) the ABLE beneficiary may not be a participant in their employer-based retirement fund, including if an employer makes contributions to the fund on their behalf.
    • (2) the Beneficiary's employment earnings deposited in an ABLE account are still counted in terms of Substantial Gainful Activity (SGA) or earned income, and will be taken into consideration when  determining eligibility for certain public benefits. 

Example: Sheila, an ABLE owner has a job and makes $13,000. She does not participate in her employer's retirement plan. Although her parents have put $15,000 into her ABLE account in 2018, Sheila can contribute an additional $12,060 of HER OWN MONEY into her ABLE account.


3. 529 Fund Rollovers-  This provision allows funds in a 529 College Savings account to be rolled over into a 529A(ABLE) account. It is currently set to expire on January 1, 2026. 

  • The ABLE account beneficiary to receive the rollover funds must be either:
    • the beneficiary of the 529 College Savings Account or
    • A "family member" of the beneficiary of the 529 College Savings account
  • The rollover funds are subject to the annual contribution limit of $15,000 for any given tax year, given that no other contributions have been made into the account that year.

Example:  Max, a teenage child just received a diagnosis of autism. When he was born his parents started a college savings fund (529) for him but now it is not known whether he will go to college or not.  An ABLE account may be opened for Max, assuming he meets the criteria, and his parents may now roll over the 529 to an ABLE account without any penalties or taxes due on earnings.


4.  Saver's Credit- also known as the Retirement Savings Contributions Credit, was designed to provide an incentive for low and middle income individuals to save. It is currently set to expire on January 1, 2026. 

An ABLE owner contributing to their own account, and meeting the following eligibility requirements, may claim this credit toward taxes owed with the maximum value reducing the taxes owed to zero. The ABLE owner must be:

  • Age 18 or older
  • Not a full time student
  • Not claimed as a dependent on another person's return

Details about the Saver's Credit:

  • Maximum credit is $2000 for an individual and $4000 for a couple
  • Percent of your contribution allowed to take is reduced as your AGI ( Adjusted Gross Income) increases

 

This chart outlines the credit for each category of tax filer:

Source: the ABLE National Resource Center

2018 Saver's Credit      
Credit rate

Married-

filing jointly

Head of 

Household

All Other

Filers*

50% of your

contribution

AGI less than 

$38,000

AGI less than

$28,500

AGI less than

$19,000

20% of your 

contribution

$38,001-

$41,000

$28,501 -

$30,750

$19,001-

$20,500

10% of your

contribution

$41,001-

$63,000

$30,751-

$47,250

$20,501-

$31,500

0% of your

contribution

More than

$63,000

More than

$47,250

More than

$31,500

 

Example: You are an ABLE owner working and making $20,000. You have put $2000 into your ABLE account this year.  You can take a credit of 50% of your contribution,  equal to $1000 in this case, to reduce your tax liability. If possible, you can use this $1000 to contribute further to your savings. 

For further information, please contact us or visit the ABLE National Resource Center

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. [ add line space ] Prior to investing in an ABLE account investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's ABLE program. Withdrawals used for qualified disability expenses are federally tax free. Tax treatment at the state level may vary. Investing involves risk including loss of principal. No strategy assures success or protects against loss.

 

Tags: ABLE Account

Grandparents Gifts to an ABLE Account

Posted by Haddad Nadworny on Sat, Jun 10, 2017 @ 08:04 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP  We are committed to offering educational workshops to organizations and parent  groups.  Please call Alex or click here to attend a workshop or discuss a presentation  to your group.

Workshops Calendar

Case Studies Using the ABLE Account:

I.    Protecting Social Security Eligibility

II.   Save and Have Control of Your Own Money

III.  Representative Payees Managing Income and Social Security Benefits 

IV.  Grandparents Gifting to an ABLE 

The ABLE account provides grandparents with the opportunity to gift to their grandchild with a disability in the same manner as they contribute to their typical grandchild's 529 account. Many grandparents want to treat all of their grandchildren equally and using an ABLE account as a savings vehicle for gifting may help. 

A Case Study

The Situation:

Our client has a strong belief in higher education and set the goal of establishing educational accounts for all of their grandchildren soon after they are born. They have just celebrated the arrival of their third grandchild. However, this beautiful baby boy was born prematurely and with significant health issues which will likely cause developmental delays.  It is already known that his hearing has meaningful, and perhaps total, impairment. 

Options to Consider:

While the ABLE account is an option for these generous grandparents to consider, they must be mindful of some of the limitations of the ABLE account that do not apply to 529 accounts. The limitations they should take into consideration might include:

  1. An individual can only own one ABLE account. In this case, if the grandparents opened an ABLE account for their grandson, the parents or the other grandparents would NOT be able to open a separate ABLE account for him. 
  2. They are allowed up to the $15,000 contribution limit (2018) to fund the ABLE account.
  3. If the balance in the ABLE account exceeds $100,000, the individual's Supplemental Security Income (SSI) eligibility is impacted. 

Another option is to gift the funds directly to the parents and have them specifically earmarked for the benefit of the child. Should the grandparents have financial wealth, they may want to explore the option of creating a Supplemental Needs Trust and purchasing life insurance on their lives to fund it upon their death(s).  These are only a few common strategies we discuss with families.  There are various strategies and considerations the grandparents can explore with their team of advisors to determine the most appropriate option to gift to their grandchild with special needs.

 

Questions? Talk with us.

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

The experiences described here may not be representative of any future experience of our clients, nor considered a recommendation of the advisor's services or abilities or indicate a favorable client experience. Individual results will vary.

Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program.

 

 

Tags: ABLE Account

Using the ABLE Account: Case Study - For Representative Payees Managing Income & Social Security Benefits

Posted by Haddad Nadworny on Sat, May 20, 2017 @ 08:02 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP  We are committed to offering educational workshops to organizations and parent  groups.  Please call Alex or click here to attend a workshop or discuss a presentation  to your group.

Workshops Calendar

Case Studies Using the ABLE Account:

I.   Protecting Social Security Eligibility

II.  Save and Have Control of Your Own Money

III. Representative Payees Managing Income and Social Security Benefits 

ABLE.pngThe ABLE is a great tool to help keep a balance below $2,000 in a Representative Payee (or an Individual's) checking account. A representative payee helps beneficiaries who need assistance in managing their social security benefits.

A representative payee’s responsibilities include:

  • Using benefits to pay for the current and foreseeable needs of the beneficiaries;
  • Appropriately saving any remaining benefits;
  • Keeping good records of how benefits are spent.*
*Source: Social Security Administration

 

Case Study

 The Situation:

Our client called and was very distressed that she had lost her son’s SSI income due to having more than $2,000 in his representative payee account.

The Options We Considered:

In the past, our first go-to would have been to think creatively about items or services their adult child could both benefit from and pay for.  This would allow the parents to save their resources for their family’s goals. If the account continued to increase we would then suggest a “spend down” of the account to maintain eligibility for social security benefits.

In this case, we asked if there was anything he needed that she could spend the extra money on? She had already purchased a new computer for him as well as some new winter clothes. He really did not need much of anything else. She could put the additional money into his already established and funded first party supplemental needs trust. However, this was money he had inherited from his grandparents and she considered the SSI benefits “his money”.

So another option to be considered would be the ABLE Account, which would allow for contributions of excess funds above the $2000 threshold in the representative savings account.

 The Benefits of Using an ABLE Account:

The new ABLE account savings option allows contributions up to $15,000/year into the account, to be used for the beneficiary's short term needs or invested for longer term needs. As long as the account, housed in Massachusetts, remains under $100,000 her son’s benefits will not be impacted. When reviewing the investment options, we reminded her to carefully read all the materials should she choose the ABLE Account, and to choose the best investment for the beneficiary of the account: her child.

Learn the Basics. The ABLE Account:  Ten Things to Know

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

The experiences described here may not be representative of any future experience of our clients, nor considered a recommendation of the advisor's services or abilities or indicate a favorable client experience. Individual results will vary.

Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program.

 

Tags: ABLE Account

Finally ABLE to Save: A New Savings Tool for People with Disabilities

Posted by Patty Manko on Sat, Apr 29, 2017 @ 08:05 AM

 The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP  We are committed to offering educational workshops to organizations and parent  groups.  Please call Alex or click here to attend a workshop or discuss a presentation  to your group.

Workshops Calendar

ABLE.pngThe ABLE Account is available in several states currently and is due to be offered in Massachusetts next month.  Here are a few resources to help you learn about the ABLE account and whether it is right for you or your family member with a disability.

To learn about the basics of the ABLE account, click here to read ABLE Accounts: Ten Things You Need to Know. 


Click here for a chart, provided by the National Down Syndrome Society comparing elements of all of the currently operable ABLE programs in the U.S., along with their contact information.   

Stay tuned to our blog; over the next few weeks we will feature wealth accumulation planning strategies including: 

  • When the child turns 18, transferring money to an ABLE account can help avoid the spend-down process - reducing savings beneath the $2,000 threshold.
  • Gainfully employed persons with a disability may open an account to save their own money.
  • An ABLE account may be used to address the issue of staying below $2000 in a Representative Payee Account.
  • There are potential planning strategies around allowing distributions for housing related expenses. Currently, special needs trusts do not permit distributions for housing; only supplemental expenses. 

* We borrowed your great title!  The title Finally ABLE to Save: A New Savings Tool for People with Disabilities is from a presentation by  Heather Sachs, JD, Vice President of Advocacy & Public Policy, National Down Syndrome Society.  Thanks, Heather!

Tags: ABLE Account

New England States Discuss Offering the ABLE Account

Posted by Patty Manko on Wed, Jun 29, 2016 @ 07:00 AM

The Special Needs Financial Planning Team at Shepherd Financial Partners
Cynthia Haddad, CFP® | John Nadworny, CFP® | Alex Nadworny, CFP® 

John__VTstatehouse1.jpgAttendees included (partial list L to R): Teresea Hayes, Maine State Treasurer; Tom Graff, MEFA; John Nadworny, MA Down Syndrome Congress; Chris Rodriguez, National Disability Institute; Bill Dwyer, New Hampshire Sate Treasurer; Beth Pearce, Vermont State Treasurer.

Earlier this month, John Nadworny attended a meeting of State Treasurers and representatives from the 6 New England states, (MA, ME, VT, CN, RI, NH) to discuss the possibility of forming a consortium to offer the ABLE account to their constituents. This meeting was a first step toward crafting a platform for regional collaboration, as the New England states with smaller populations are concerned with achieving the critical mass necessary to effectively administer a program on their own. The consortium approach involves one state taking the lead and working together with the other states to develop a program that would provide meaningful benefits to the families in their state. 

Collaboration on the ABLE account is occurring in other areas in the country as well. On June 1st, Ohio became the first state to enact their “STABLE account” program. Ohio’s national program offers benefits to individuals with disabilities in Ohio and across the country. The program allows for out of state individuals to hold accounts in Ohio for slightly higher fees without risking their eligibility for federally-funded means tested benefits. For the first time, individuals living with a disability can save more than $2,000. while maintaining their current benefits such as social security, medicaid, and other publicly funded programs. Tennessee was quick to follow Ohio’s lead on June 14th putting their own national program (ABLE TN) into place. Tennessee’s program is nearly identical with slight differences coming in it’s fee structure. Currently ABLE TN and the STABLE Account are the only two states enrolling beneficiaries, however others are expected to follow soon. Nebraska and Florida are the closest to launching programs currently, with Nebraska offering like benefits to ABLE TN and the STABLE Account, and Florida offering an in state only program.

Important disclosures:

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
Prior to investing in a ABLE account investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's ABLE program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.Investors should consider the investment objectives, risks, charges and expenses associated with the ABLE account carefully before investing. The issuer's official statement contains this and other information about the investment. You can obtain an official statement from the state's ABLE program administrator. Read carefully before investing.

 

Tags: ABLE Account

In the News - Planning for Individuals with Disabilities

Posted by Patty Manko on Sat, May 14, 2016 @ 08:00 AM

 

The Special Needs Financial Planning Team at Shepherd Financial Partners
Cynthia Haddad, CFP® | John Nadworny, CFP® | Alex Nadworny, CFP® 

 
A New Home for the Arc of Massachusetts
 

The May 8 Boston Sunday Globe featured an interview with Arc of Massachusetts Executive Director Leo Sarkissian, about the Arc's new headquarters building. Leo stressed the need for a new building and how The Arc's advocacy helps individuals with disabilities across the state. In case you missed it, you can read the article in its entirety here.

An Update on the ABLE Account
 
Key take-aways: 
  • Once ABLE programs start becoming available, a tweak to federal law earlier this year will allow individuals with disabilities to open accounts through any state program no matter where they live. 
  • The first ABLE accounts are scheduled to become available this summer.
 Read more from Disability Scoop.
 
Special Advice for Special Needs Parents
 
We are quoted in the article, Special Advice for Special Needs Parents in Financial Advisor Magazine.  To read the article, click here.
 
Words Matter
 
The terms used to describe people with disabilities have changed over the years but is the search for respectful language permanently hampered by the very practice of placing labels on individuals?  
Read Dan Barry's  Giving a Name , and Dignity, to a Disability from the New York Times, May 7, 2016.
 
 
 
 

Tags: ABLE Account

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