NC ABLE Program Starts January 26

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

Beginning Thursday, January 26, people with disabilities and their families can save and invest without losing means-tested benefits. ABLE accounts are affordable, tax-advantaged accounts that allow eligible individuals with physical or cognitive disabilities that occurred before the age of 26 to save up to $14,000 per year without interfering with certain means-tested federal and state benefits programs, including Medicaid and Supplemental Security Income (SSI). Accounts can be opened by the person with a disability as well as parents or guardians on behalf of qualifying individuals with disabilities.

Funds in an ABLE account can be used to pay for “qualified disability expenses” (QDEs), including rent and housing, transportation, educational needs, employment training and supports, assistive technology, health care and therapies, and other approved expenses.

North Carolina has joined the National ABLE Alliance, a group of 14 states that united to offer high-quality ABLE accounts at a reasonable cost. NC ABLE accounts are open to eligible individuals across the country for a fee of $45 per year. They carry no enrollment fees or minimum startup balances, and you can manage funds through an online portal.

Staring March 31, NC ABLE will also offer a program debit card and checking option that gives people a quick and easy way to pay for QDEs from their ABLE account’s funds.

Below is more information from the Autism Society of North Carolina about ABLE and NC’s program.

For all of the details, go directly to the website of the NC Office of the State Treasurer’s ABLE information page.

To sign up, go to NC.SaveWithABLE.com starting Thursday, January 26. (The page will not be active until then.) Accounts are opened online only at this time.

 

What You Should Know About ABLE Accounts

One account per individual with a disability

Parents can open on behalf of minor children. Guardians can open on behalf of eligible individuals for whom they have guardianship.

At this time, existing 529 college savings plans cannot be rolled over into ABLE accounts.

Please be aware, if an individual with an ABLE account passes away, the state or federal government may require money in an ABLE account be used to repay the government for services provided by Medicaid.

There is a flat fee of $45 per year. One-fourth of the $45 is taken out of the account each quarter over the year.

For investment account options, additional fees will apply (as with other types of investment accounts). Please see NC.SaveWithABLE.com or a financial planner for information about how investment fees are calculated.

ABLE accounts are NOT a replacement for special-needs trusts. Trusts may have other advantages for an individual or family. An individual can have a trust and an ABLE account. If you have an existing trust or need to invest or save more than $14,000 per year, please see a financial planner to discuss your options.

Be aware: Money goes into the account after tax. The distribution of funds is tax-free for qualifying expenses.

 

Eligibility

The law says those eligible have a “medically determinable physical or mental impairment” that occurred before the age of 26. This includes intellectual and/or developmental disabilities, autism, brain injuries before age 26, and other conditions.

The onset must be before the age of 26, but not necessarily the diagnosis. IDD conditions are generally present at birth or in early childhood even if diagnosed later.

Individuals can self-certify that they qualify to open an account. Keep in mind that if the IRS audits for use of an ABLE account, individuals must provide proof of their “medically determinable physical or mental impairment” before age 26. This typically means evidence of a diagnosis by a health-care professional, including mental/cognitive care professionals.

 

Signing Up

Only online signup will be available this week. Paper signup will be available at a later time.

Signup for investment accounts will start January 26.

Signup for debit cards and “checking” type accounts will be an option after March 31. If you plan to move money in and out of the account to pay for weekly or monthly expenses, a debit or checking option may be best. There are no additional fees for debit and checking options. Debit cards will be able to withdraw funds through Allpoints ATMs as well. See NC.SaveWithABLE.com for more info.

Customer-service staff can assist with online signup.

Paper statements can be requested; the default for accounts is electronic delivery of account statements.

 

Contributions and Income

Contributions can be one-time, recurring, or from payroll deposit.

Investment account options are typically for long-term needs and large one-time expenses and debit/checking for ongoing or recurring expenses. Debit cards/checking can be used to pay for one-time or recurring expenses. You will determine what works best for you.

Funds can be moved based on the current needs of the individual. Funds can be pulled from investment or debit/checking accounts for QDEs, though the process may be different.

ABLE accounts cannot be used to “hide” income. Gifts, earned income from work, and Social Security payments to the individual are considered income. An ABLE account can help a person save up to $14,000 per year (up to $100,000) with tax advantages while setting those ABLE funds aside when benefits programs take into account what the person has in savings.

Money earned by or given to the person is still considered income. Families who want to gift to the person with an ABLE account should direct those funds to the ABLE account. NC ABLE will issue “coupons” and instructions on how to do so.

There are other programs that people with disabilities can use if they are earning income. Medicaid allows someone to “buy into” their Medicaid benefits if they work and earn too much income. See NC DMA for more information.

 

Certifying Qualified Disability Expenses (QDEs)

It is up to the account-holder and/or their guardian to track their QDEs.

The NC ABLE program will not require individuals to certify their QDEs. This means you will not have to submit proof of expenses on a monthly or yearly basis.

HOWEVER, the IRS is likely to audit some percentage of ABLE account-holders as part of assuring that the program is being used appropriately. ABLE account-holders and/or their guardians should keep records of expenses in case of an IRS audit.

Accounts are tax-free as long as they are used for QDEs. If not, the IRS may recoup taxes from account-holders.

QDEs are determined by federal regulations and may be subject to change over time. The list maintained by the IRS for their auditing purposes is available on the NC ABLE website.

 

Who “Owns” the Account?

Under 18: the parent or guardian owns the account.

Over 18: the individual account-holder (person with the disability) owns the account.

Over 18, but under some form of guardianship: the account is still owned by the individual with the disability, but the account is controlled by the legal guardian or person with power of attorney.

There are options to monitor the accounts without having access. Please see NC.SaveWithABLE.com for more info.

 

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.

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