General Assembly Approves ABLE Accounts for NC Families

This article was contributed by Jennifer Mahan, Director of Advocacy and Public Policy at ASNC.

On Monday, Aug. 3, The General Assembly approved legislation authorizing ABLE accounts in North Carolina; Gov. Pat McCrory is expected to sign the bill into law. The Achieving a Better Life Experience (ABLE) Act, a federal law signed in December 2014, will give many individuals with disabilities, including those on the autism spectrum, and their families the opportunity to save for the future and fund essential expenses such as medical and dental care, education, community-based supports, employment training, assistive technology, housing, and transportation. The law allows eligible individuals with disabilities to create “ABLE accounts” that resemble the qualified tuition programs, often called “529 accounts,” that have been established under that section of the tax code since 1996.

By saving for and funding critical daily expenses, these ABLE accounts will give North Carolinians with disabilities increased choice, independence, and opportunities to participate more fully within their communities. Without these accounts, people with disabilities have very limited ways to save, and any savings may prevent them from accessing other needed programs and services.

Key Characteristics of ABLE Accounts

  • An eligible individual may have one ABLE account, which must be established in the state in which he resides (or in a state that provides ABLE account services for his home state).
  • Any person, such as a family member, friend, or the person with a disability, may contribute to an ABLE account for an eligible beneficiary.
  • An ABLE account may not receive annual contributions exceeding the annual gift-tax exemption ($14,000 in 2015). A state must also ensure that aggregate contributions to an ABLE account do not exceed the state-based limits for 529 accounts.
  • An eligible individual is a person (1) who is entitled to benefits on the basis of disability or blindness under the Supplemental Security Income (SSI) program or under the Social Security disability, retirement, and survivors program OR (2) who submits certification that meets the criteria for a disability certification (to be further defined in regulations). An eligible individual’s disability must have occurred before the age 26.
  • Qualified disability expenses are any expenses made for the benefit of the designated beneficiary and related to his/her disability, including: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary of the Treasury.
  • Tax treatment: Earnings on an ABLE account and distributions from the account for qualified disability expenses do not count as taxable income of the contributor or the eligible beneficiary for purposes of federal tax returns. Contributions to an ABLE account must be made in cash from the contributors’ after-tax income.
  • Rollovers: Assets in an ABLE account may be rolled over without penalty into another ABLE account for either the designated beneficiary (such as when moving to another state) or any beneficiary’s qualifying family members.

 Federal Treatment of ABLE Account under Means-Tested Programs

  • Means-Tested Programs: Assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the designated beneficiary’s eligibility for most federal means-tested benefits.
  • Supplemental Security Income (SSI): For SSI, only the first $100,000 in an ABLE account will be disregarded. Assets above $100,000 will count as resources under SSI. If the designated beneficiary’s ABLE account balance exceeds $100,000, the individual’s SSI benefits will not be terminated, but instead suspended until the individual’s resources fall below $100,000. It is intended that distributions expended for housing will receive the same treatment as all housing costs paid by outside sources.
  • Medicaid Eligibility: A beneficiary will not lose eligibility for Medicaid based on the assets held in an ABLE account, even during the time that SSI benefits are suspended (as described above for an account over $100,000).
  • Medicaid Payback Provision: Subject to certain limits and upon a state’s filing of a claim for payment, any assets remaining in an ABLE account upon the death of the qualified beneficiary must be used to reimburse the state for Medicaid payments it made on behalf of the beneficiary. The amount of Medicaid payback is calculated based on amounts paid by the beneficiary as premiums to a Medicaid buy-in program.

How Soon will ABLE Accounts be Available?

  • Federal Regulations: The Secretary of the Treasury issued draft regulations on June 22 that are up for public comment until September 21. A public hearing will follow on October 14. Final rules will be issued after that.
  • State decisions: Each state must decide whether to offer a qualified ABLE program to its residents. States offering ABLE accounts must then decide whether to have the state itself run the program, to select another entity to run it, or to contract with another state to allow residents to use that state’s program.
  • North Carolina: The House and Senate have both put funding to administer the ABLE program in their budgets. The NC legislation states that accounts would be available once the NC Office of the Treasurer has the program up and running and federal regulations are set for ABLE accounts. While no specific time is set, we hope that accounts would be available in 2017.

The Autism Society of North Carolina has supported the development of ABLE accounts, which will be another tool that families and individuals can use to create opportunities to enhance their lives. We will provide information to the public about how to access them as it becomes available. Please check our blog, website, and social media outlets for updated information and other helpful resources.

If you have questions about this or other public policy issues, please contact Jennifer Mahan, Director of Advocacy and Public Policy at ASNC, at jmahan@autismsociety-nc.org or 919-865-5068. ASNC believes in the importance of public policy advocacy to enhance the lives of people on the autism spectrum and their families. Please see our website for more information on public policy issues and how you can get involved.

We thank The Arc of NC for support in writing this article. ASNC has been proud to partner with The Arc of NC in support of efforts to increase asset building, promote independent living, and create more access to services and supports. You can read more about The Arc of NC’s public policy efforts on their website, www.arcnc.org.

 

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5 Responses

  1. Will people who started a 529 plan for their children at birth be able to transfer the funds into this fund?

  2. Thank to all who did this. I have a daughter who is deaf and has cerebral palsy. I am having to pay $755 a month for her to attend a program that she loves. Her social security check went and her medicaid counselor told me that her benefits were being cut. She said that for her to attend the program I would have to pay the “deductible” which was the amount I stated. Hence I cannot buy the things she needs. I also cannot charge her room and board as I was told to do. God bless you all.

  3. […] NC Office of the Treasurer will oversee the new ABLE Act 529 savings accounts. The budget includes $215,000 in recurring funds and $250,000 in nonrecurring funds for 2015-16, […]

  4. […] State Treasurer is required to report to the General Assembly by December 1 on the status of the Achieving a Better Life Experience (ABLE) Trust program that would allow people with disabilities and their families to open 529 savings […]

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