ABLE Account Resource Directory
ABLE Accounts: Ten Things You Need to Know
- Protecting Social Security Eligibility
- ABLE to Work, Save, and Have Control of Your Own Money
- Representative Payees Managing Income and Social Security Benefits
- Grandparents Gifting to an ABLE
- 529 Fund Rollovers
- Saver's Credit
- Assessing Your ABLE Account Investment Choices
1. ABLE Accounts: Ten Things You Need to Know
Source: ABLE National Resource Center
1. What is an ABLE account?
ABLE Accounts, which are tax-advantaged savings accounts for individuals with disabilities and their families, will be created as a result of the passage of the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 or better known as the ABLE Act. The beneficiary of the account is the account owner, and income earned by the accounts will not be taxed provided the funds are used for qualified expenses. Contributions to the account made by any person (the account beneficiary, family and friends) will be made using post-taxed dollars and will not be tax deductible, although some states may allow for state income tax deductions for contribution made to an ABLE account.
2. Why the need for ABLE accounts?
Millions of individuals with disabilities and their families depend on a wide variety of public benefits for income, health care and food and housing assistance. Eligibility for these public benefits (SSI, SNAP, Medicaid) require meeting a means or resource test that limits eligibility to individuals to report more than $2,000 in cash savings, retirement funds and other items of significant value. To remain eligible for these public benefits, an individual must remain poor. For the first time in public policy, the ABLE Act recognizes the extra and significant costs of living with a disability. These include costs, related to raising a child with significant disabilities or a working age adult with disabilities, for accessible housing and transportation, personal assistance services, assistive technology and health care not covered by insurance, Medicaid or Medicare. For the first time, eligible individuals and their families will be allowed to establish ABLE savings accounts that will not affect their eligibility for SSI, Medicaid and other public benefits. The legislation explains further that an ABLE account will, with private savings, "secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary's employment and other sources."
3. Am I eligible for an ABLE account?
The ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age. If you meet this age criteria and are also receiving benefits already under SSI and/or SSDI, you are automatically eligible to establish an ABLE account. If you are not a recipient of 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 significant functional limitations and receive a letter of certification from a licensed physician. You need not be under the age of 26 to be eligible for an ABLE account. You could be over the age of 26, but must have had an age of onset before the individual’s 26 birthday.
4. Are there limits to how much money can be put in an ABLE account?
The total annual contributions by all participating individuals, including family and friends, for a single tax year is $15,000. The amount may be adjusted periodically to account for inflation. Under current tax law, $15,000 is the maximum amount that individuals can make as a gift to someone else and not report the gift to the IRS (gift tax exclusion). The total limit over time that could be made to an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts. Many states have set this limit at more than $300,000 per plan. However, for individuals with disabilities who are recipients of SSI, the ABLE Act sets some further limitations. The first $100,000 in ABLE accounts would be exempted from the SSI $2,000 individual resource limit. If and when an ABLE account exceeds $100,000, the beneficiary’s SSI cash benefit would be suspended until such time as the account falls back below $100,000. It is important to note that while the beneficiary’s eligibility for the SSI cash benefit is suspended, this has no effect on their ability to receive or be eligible to receive medical assistance through Medicaid. Additionally, upon the death of the beneficiary the state in which the beneficiary lived may file a claim to all or a portion of the funds in the account equal to the amount in which the state spent on the beneficiary through their state Medicaid program. This is commonly known as the “Medicaid Pay-Back” provision and the claim could recoup Medicaid related expenses from the time the account was open.
5. Which expenses are allowed by ABLE accounts?
A "qualified disability expense" means any expense related to the designated beneficiary as a result of living a life with disabilities. These may include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses, which help improve health, independence, and/or quality of life.
6. Can I have more than one ABLE account?
No. The ABLE Act limits the opportunity to one ABLE account per eligible individual.
7. Do I have to wait for my state to establish a program before opening an account?
No. While the original law passed in 2014 did stipulate that an individual had to open an account in their state of residency, Congress eliminated this provision 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 that the program is accepting out of state residents. To determine which state ABLE programs are accepting out of state programs, please refer to the individual state pages- http://www.ablenrc.org/state-review. Examples of state ABLE programs accepting enrollment nationwide include: Ohio, Nebraska, and Tennessee. An example of a state ABLE program only accepting in-state residents would include the Florida ABLE United program.
8. Will states offer options to invest the savings contributed to an ABLE account?
Like state 529 college savings plans, states are likely to offer qualified individuals and families multiple options to establish ABLE accounts with varied investment strategies. Each individual and family will need to project possible future needs and costs over time, and to assess their risk tolerance for possible future investment strategies to grow their savings. Account contributors or designated beneficiaries are limited, by the ABLE Act, to change the way their money is invested in the account up to two times per year.
9. How is an ABLE account different than a special needs or pooled trust?
An ABLE Account will provide more choice and control for the beneficiary and family. Cost of establishing an account will likely be considerably less than either a Special Needs Trust (SNT) or Pooled Income Trust. With an ABLE account, account owners will have the ability to control their funds and, if circumstances change, still have other options available to them. Determining which option is the most appropriate will depend upon individual circumstances. For many families, the ABLE account will be a significant and viable option in addition to, rather than instead of, a Trust program.
10. How Will I know Which State ABLE Program is Right for Me?
As of January 2018 there are over 20 ABLE programs nationwide inviting eligible individuals to open an ABLE account regardless of their state of residence. When comparing State ABLE programs you may want to consider the following questions in order to find a program that best meets your needs:
Opening an Account
- What proof will the ABLE program require for you to document in order to open an account or show that your disbursements are qualified expenses?
- Is there a minimum contribution to open an ABLE account?
- Is there a fee to open an account and, if so, how much is that fee? Maintaining the Account and Fees o Is there a required minimum contribution to your account? If so, what is the amount?
- Are the fees front end loaded or are they reduced if you leave your funds invested for several years?
- Are there restrictions on how often you can withdraw funds from your account? Investment Opportunities
- What are the investment options the state ABLE program offers? o Are the options likely to meet your needs for limiting risk with the growth of your contributed dollars to the ABLE account?
- Does the program offer any unique or value added program elements to help you save, contribute to your account, grow the account, and manage your invested dollars?
- Does the state program offer any unique or value added program elements (such as a match or rewards program, financial literacy info or program for beneficiaries) to help you save, contribute to your account, grow the account, and manage your invested dollars? If so, what is it?
Unique to Your State
- Does your state have a program and, if so, do they offer a state income tax for contributions to their account?
- Is there a “debit card/purchasing card” available with the program? Are there added costs to this?
2. Protecting Social Security Eligibility
Adults with disabilities become eligible for social security at age 18. Social Security (SSI) provides adults with disabilities a monthly benefit payment and health insurance if they meet a low income and asset threshold. To maintain eligibility for SSI benefits, an individual cannot have more than $2000 of resources in his or her name. This includes cash, bank accounts, stocks, and U.S. Savings bonds. To read a summary of SSI policies regarding the ABLE account, see below.
Prior to the child's turning age 18, and before applying for SSI, make certain that the child meets this requirement. One strategy could involve transferring money to an ABLE account as this can help reduce savings beneath the $2,000 threshold and avoid the spend-down process.
Case Study 1: When an SSI recipient receives an inheritance.
During the settlement of an estate, the personal representative (PR) (may also be known as the executor) of the estate discovered one of the beneficiaries was receiving government benefits. While this person could definitely use the funds to pay for furnishings in her home and some much needed dental work, if she received the inheritance directly, it would disqualify her from the important benefits she was receiving, as it would bring her above the $2,000 asset limit she is allowed. The personal representative was required to distribute $33,000 to this beneficiary prior to the projected closing of the estate in February of the following year.
The Options Considered:
In discussing the current situation with the beneficiary and the PR, we discussed options for the purpose of educating the parties involved of establishing a 1st party supplemental needs trust (also known as a d4A or Payback trust) where the beneficiary could transfer the entire inheritance to the trust and continue to receive her benefits.
We also discussed the option of distributing a portion of the inheritance this year and then again next year using an ABLE account. If the PR distributed $18,000 this year, the beneficiary would be able to buy new furnishings that she needed with about $2,000, get the needed dental work for another $2,000, and deposit $15,000 (2020 limit) into an ABLE account, assuming she had made no prior deposits into the ABLE in this year. The PR would then need to make the final distribution of about $15,000 to the beneficiary by the February of the following year. If the PR does this, the beneficiary could then keep $1,000 in her savings account (still under the $2,000 limit) and add an additional $15,000 to her ABLE account. The beneficiary would then able to use these funds for qualified disability expenses as needed without losing her SSI income and other benefits.
The Benefits of Using an ABLE Account:
Because of the amount of the inheritance, she did not need to go through the expense of hiring an attorney to establish a 1st party supplemental needs trust, find a trustee, file taxes, and then have to ask someone for money when she needed it. She was already living independently and managing her own expenses fairly efficiently. The ABLE account allowed her to continue to receive her benefits and use the funds in the account as she needed them.
Case Study 2: SSI Impacted by an ABLE account
Source: ABLE National Resource Center
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.
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.)
3. ABLE to Work, Save and Have Control of Your Own Money
Individuals earning their own money may be able to contribute their earnings, within limits, above the $15,000 limit.
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 2020 is $12,760. This means it is possible to contribute up to $27,760 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.
Case Study 1: When working, contribute more than the $15,000/year
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 2020, Sheila can contribute an additional $12,060 of HER OWN MONEY into her ABLE account.
4. Representative Payees Managing Income and Social Security Benefits
The 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 - Managing a Representative Payee Account
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 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.
5. 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.
Case Study: Generous Grandparents
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:
- 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.
- They are allowed up to the $15,000 contribution limit (2019) to fund the ABLE account.
- 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.
6. ABLE & 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.
7. Saver's Credit
Saver's Credit- The Saver's Credit is 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|
50% of your
AGI less than
AGI less than
AGI less than
20% of your
10% of your
0% of your
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.
8. Assessing Your ABLE Account Investment Choices
As part of an advisory group implementing the ABLE account in Massachusetts, we learned that many people opening ABLE accounts stopped the application process when they were asked to determine the investment choices for their contributions. This behavior raised a concern that individuals enrolling in the ABLE program might not have the prior experience or knowledge of financial matters to make the best selection for their situation.
If you began investing in 2015 when the ABLE was first being offered, unless you withdrew funds for expenses, you most probably never saw your account balances decline in 2016 and 2017. During this period, both the stock and the bond markets experienced positive returns.
Last year offered a different picture; in 2018 volatility returned to both the stock and bond markets and the returns on your investment, depending on when you put funds in, may have taken a hit. For investors with little experience, it may be a shock to observe 90 cents where they had invested a dollar a short time earlier. Regardless of how much money is in the account, it is critical to invest the funds in the ABLE account to meet the goals of the account owner.
Key Considerations for Your Investment Choices
- Your asset allocation, or balance between stocks, bonds and money markets, should be based upon your personal ability to withstand a decline in your balance and your tolerance of market volatility .
- Your asset allocation should align with the timing of your goals.
If a portion of the funds in the ABLE are being used for transactions, owners should consider investing these monies with very low risk assets. Depending on how the account is being used, the funds should be invested to provide a mix between funding for transactions and growth for the future. This should be a thoughtful and informed evaluation; federal law allows account owners to change investments in their ABLE account twice per year. Be sure you are comfortable that the money is invested to meet both your short-term needs and your long-term goals.
Case Study: Paul's ABLE Account Investment Choices
Paul and all other elements of this example are fictitious and all investment results are hypothetical.
Paul is an ABLE account owner. He works and contributed about $5,000 of his earnings to his ABLE account over the course of 2018. Paul was saving money in his ABLE to buy furniture for his apartment, and come September, his parents decided to contribute $10,000 to Paul’s ABLE account. Paul had chosen the a growth portfolio for his ABLE, investing 70% in stocks and 25% in bonds and 5% in money market securities. At the end of the year, the markets had taken a fall and the $15,000 contributed to the account in 2018 was worth only $12,000 ( return is hypothetical). While Paul and his parents believe his account will recover the $3,000 loss over time, he has to rethink and/or postpone the furniture purchase he hoped to make this spring. Since Paul had a near-term use for the funds he invested in his ABLE account, he needed to choose investments that may have offered a lower return but had little to no risk to this principal. He could have chosen the Growth portfolio for a portion of the contributions and kept the remainder in another, more conservative fund or money market.
Fidelity Investment’ s Attainable Portfolios (ABLE) is shown above for illustrative purposes only. Like Paul, many individuals who have opened ABLE accounts may not be overly experienced with investments and should review and reassess their investment choices.