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.

ABLE Accounts Coming in Early 2017

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

Individuals with developmental disabilities and their families have been eagerly anticipating the availability of ABLE savings accounts, which allow a person with a disability to save for critical expenses while still allowing eligibility for means-tested disability supports and health care. North Carolina has looked at the options and resources available to operate an ABLE account program and has determined that the best approach is to join a consortium of other states to keep costs lower and still provide good value and customer service for account-holders.

Under this consortium of states, ABLE accounts should start to become available in early 2017, according to information presented to advocates from the ABLE Board of Trustees and the NC Department of the State Treasurer. This statement presented at the last NC ABLE Board of Trustees meeting outlines the board’s decision to participate in the 11-state group. You can learn more about ABLE accounts and sign up for information at the NC Department of the State Treasurer.

With recent changes to federal law, you are no longer required to open an account in the state where the individual with the disability resides; you can open an account in any state that offers them! The Arc of the US is tracking ABLE implementation and which states are operating accounts; see the results here. Please note that some states may be offering accounts only to state residents, an individual can have only one account at a time, and fees may apply for accounts to be rolled over into new accounts should you want to move them to another state later.

 

Background

In August of 2015, legislation authorizing ABLE accounts passed the General Assembly and was signed into law by the governor. 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, 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 can be established in any state that offers ABLE accounts.
  • 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 2016). A state must also ensure that aggregate contributions to an ABLE account do not exceed the state-based limits for 529 accounts.
  • ABLE accounts are investment savings accounts and monthly fees are typically charged for account management. Compare fees and services across states before choosing where to open an ABLE account.
  • 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 under regulations.
  • 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. At this time, college savings 529 accounts cannot be rolled over into ABLE accounts.

 

Federal Treatment of ABLE Account under Means-Tested Programs, Including Supplemental Security Income and Medicaid

  • 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.

 

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 the ASNC 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.