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Frequently Asked Questions


Basics

The Texas ABLE® Program (“Texas ABLE” or the “Program”) was created by the Texas Legislature in 2015 and is administered by the Texas Prepaid Higher Education Tuition Board through the Texas Comptroller’s Office. Texas ABLE is authorized by the federal Stephen Beck Jr. ABLE Act of 2014, which is designed to help disabled persons and their families save for the Qualified Disability Expenses that allow them to live independently.

The Legislature of the State of Texas enacted the Texas ABLE Act (1) to encourage and assist individuals and families in saving funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life; and (2) to provide secure funding for qualified disability expenses on behalf of Designated Beneficiaries with disabilities. The Texas Prepaid Higher Education Tuition Board, with assistance from the Texas Comptroller of Public Accounts, administers the Texas ABLE Program.

The Program provides Eligible Individuals with the opportunity to save in a tax-advantaged investment account while preserving eligibility for certain other means-tested Federal programs. (An Eligible Individual who opens an account, or for whom an account is opened, is referred to as the “Designated Beneficiary” of the account.) Balances in the Texas ABLE Program Account (“Account”) are disregarded for purposes of determining the Designated Beneficiary’s eligibility to receive benefits under Medicaid. Balances of up to $100,000 will be disregarded for purposes of determining the Designated Beneficiary’s eligibility to receive benefits under the Supplemental Security Income (SSI) program.

Eligibility

A person is eligible (an “Eligible Individual”) to open a Texas ABLE Program Account if he or she meets the following four requirements:

  1. The person is a Texas resident.
  2. The person can establish that he or she has a disability through one of the following ways:
    • SSI or SSDI Eligibility – The Social Security Administration has determined that the person is eligible to receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI), and he or she is still eligible to receive SSI or SSDI when he or she opens the account.
    • OR Physician’s Diagnosis – A licensed physician has provided a written diagnosis that the person is either:
      a) blind (within the meaning of the Social Security Act),
      or (b) has a medically determinable physical or mental impairment that results in marked and severe limitations, and which can either be expected to result in death, or has lasted or is expected to last at least 12 months.
      (note: individuals do not have to provide us with a copy of the diagnosis during enrollment, but a copy of the diagnosis must be available upon request)
    • OR Compassionate Allowances Conditions – The person has a condition listed on the Social Security Administration’s list of Compassionate Allowances Conditions.
  3. The person’s disability was present before age 26.
  4. The person must have no other active ABLE account in their name except for during a rollover or program-to-program transfer process.

The Texas ABLE Program is an online program, which means you can enroll and manage your Texas ABLE Program Account online. In order to open an account, you must certify that you possess the appropriate documentation related to your eligibility. Also, if you establish an Account as an Authorized Legal Representative on behalf of a Designated Beneficiary, you must certify that you possess the appropriate documents during online enrollment. The program reserves the right to request documents supporting your eligibility (such as the Social Security Administration’s SSI or SSDI letter or a physician’s written diagnosis) or demonstrating your status as an Authorized Legal Representative for the Designated Beneficiary.

After enrolling in the Program, an Authorized Legal Representative may receive an email notification or letter requesting submission of supporting documentation to validate his or her legal authority to act on behalf of the Designated Beneficiary. Documentation must be received by the Program before an Authorized Legal Representative will be able to transact on the Account. The Authorized Legal Representative cannot have the power to acquire any beneficial interest in the Account or funds held therein and must administer the account solely for the benefit of the Designated Beneficiary in accordance with Section 529A of the IRC and the proposed, and any final, tax regulations. In other words, the Authorized Legal Representative must not have the authority to make gifts to themselves.  Documentation must be received by the Program within ninety days of enrollment in the Program or the Account may be suspended or closed and refunded.

The Program will accept the following types of documents, if submitted in good order, to demonstrate that an individual has legal authority to establish an Account acting as the Designated Beneficiary’s Authorized Legal Representative:

Parent: Designated Beneficiary’s Birth Certificate

Legal Guardian: a valid court order or other documentation establishing legal guardianship of person or estate

Other Fiduciary (for example, a trustee or an agent acting under a power of attorney (“POA”) for the Designated Beneficiary): a Power of Attorney instrument (such as our Limited Power of Attorney form) or a Trust Agreement

A Texas power of attorney must:

  • be in writing;
  • be signed by an adult beneficiary who has legal capacity;
  • designate one person to act as attorney in fact or agent (no co-agents but successors allowed);
  • grant the agent the authority to act in place of the Designated Beneficiary regardless of whether the term “Power of Attorney” is used;
  • grant the agent the authority or power to manage the banking and other financial institution transactions of the Designated Beneficiary or specifically, the Designated Beneficiary’s Texas ABLE Program Account;
  • if a durable power of attorney, it must also contain:
    • “This power of attorney is not affected by subsequent disability or incapacity of the principal” and
    • be notarized.

If you prefer, the Designated Beneficiary and Authorized Legal Representative may execute the Texas ABLE Limited Power of Attorney form which is acceptable to the Program as it addresses each of the above bullets.

NOTE: A power of attorney instrument executed in another state must comply with the laws of that state.

A Texas trust agreement must:

  • be in writing;
  • identify a trustor who intends to create a trust;
  • name the Designated Beneficiary as the only person intended to be the beneficiary;
  • appoint one person as trustee authorized to manage the trust property (no co-trustees but successor trustees allowed);
  • have the Designated Beneficiary’s Texas ABLE Program Account as the sole trust property;
  • not authorize or grant the trustee gifting authority or any beneficial interest in the Designated Beneficiary’s Texas ABLE Account and
  • be signed by trustee and trustor.
  • NOTE: A trust agreement executed in another state must comply with the laws of that state.

Failure to provide documents requested by the Program in a timely manner may lead to suspension or closure of the Account.

Qualified Disability Expenses

Funds in the Account can be used to pay bills or expenses. There are two categories of expenses:

  1. Qualified Disability Expenses, and
  2. Non-Qualified Disability Expenses.

Qualified Disability Expenses must be:

  1. Incurred while the Designated Beneficiary is an Eligible Individual,
  2. Related to the blindness or disability of the Designated Beneficiary, and
  3. For the benefit of the Designated Beneficiary in maintaining or improving his or her health, independence, or quality of life.

Non-Qualified Disability Expenses, on the other hand, do not meet all of these requirements. Withdrawals that are used for Non-Qualified Disability Expenses may negatively impact benefit eligibility and benefits for SSI, SSDI, and Medicaid. Non-Qualified Withdrawals will also be subject to income tax on any earnings and the Additional 10% Tax on any earnings unless an exception applies.

Qualified Disability Expenses are related to the blindness or disability of the designated beneficiary and are for the benefit of the designated beneficiary. They can include basic living expenses and are not limited to expenses for medically necessary items or which only benefit the Designated Beneficiary.

Such expenses include, but are not limited to, expenses related to:

  • Education
  • Housing
  • Transportation
  • Employment training and support
  • Assistive technology and related services
  • Personal support services
  • Health
  • Prevention and wellness
  • Financial management and administrative services
  • Legal fees
  • Expenses for oversight and monitoring
  • Funeral and burial costs
  • Other expenses that may be identified from time to time by the Internal Revenue Service

 

You should maintain good records on where you deposit and how you spend your Texas ABLE Program funds, including bank records, invoices and receipts. While we do not require documentation when you are requesting a withdrawal, you may be asked by state or federal agencies to verify your expenditures.

Any non-qualified funds you withdraw will be considered an asset for purposes of determining your eligibility for certain means-tested Federal programs, including Medicaid, SSI and SSDI. Any withdrawals for housing expenses that are not spent for qualified disability expenses for housing in the month the withdrawal is received will also be considered an asset for SSI purposes.

Withdrawals are not counted as income to the Designated Beneficiary but could be considered as an asset if not spent for Qualified Disability Expenses.

Also, the earnings portion of a Non-Qualified Withdrawal is subject to federal income taxation, and an additional 10% tax will be assessed except in certain limited circumstances. You should consult a qualified tax advisor regarding how federal tax laws may apply to your particular circumstances.

Opening an Account

An Eligible Individual who is at least 18 years old can open his or her own Account. If the Eligible Individual is under the age of 18, is not able to manage his or her Account, or prefers to have assistance managing the Account, an Authorized Legal Representative (ALR) may act on his or her behalf. The ALR must be a parent, legal guardian, or other fiduciary (for example, a trustee or an agent acting under a power of attorney (“POA”) for the Designated Beneficiary) authorized by law to act on behalf of the Eligible Individual. An ALR may be requested to provide copies of the legal documents to the Program for review to verify the ALR’s legal authority to establish an Account for a Designated Beneficiary.

Once an Eligible Individual opens an Account, or an ALR opens an Account on an Eligible Individual’s behalf, the Eligible Individual is referred to as the “Designated Beneficiary” of the Account.

There is no application fee for enrolling, and online enrollment is quick and easy at TexasABLE.org. There is a $50 minimum deposit to open an Account.

You should have the following information available before you begin the enrollment process:

  • The Designated Beneficiary’s contact information, Social Security or Taxpayer Identification Number, and date of birth. If the Designated Beneficiary is certifying eligibility with a written diagnosis from a physician, you will be asked for the physician’s name and address, the date of diagnosis, and the applicable diagnosis code.
  • If applicable, the Authorized Legal Representative’s contact information, Social Security or Taxpayer Identification Number, and date of birth. You may be asked by the Program to submit proof of your legal authority to establish an Account for the Designated Beneficiary.
  • Routing number and account number for your bank if you will be making the initial contribution via electronic transfer

The minimum initial contribution to open an Account is $50, and there is a minimum of $25 for subsequent contributions.

The Designated Beneficiary manages his or her own Account unless an Authorized Legal Representative is named on the Account. If an Authorized Legal Representative is named on the Account, the Authorized Legal Representative is the only person who may manage the Account, and any action that is required to be taken on the Account must be taken by the Authorized Legal Representative.

The Designated Beneficiary is the owner of the Account, regardless of whether there is a named Authorized Legal Representative. An Account may have only one owner.

With the exception of Rollovers and Program-to-Program Transfers, an eligible individual is allowed to have only one ABLE account open at any time.

You will be asked to submit additional documentation to verify your identity and if you are an Authorized Legal Representative, you may be asked to submit proof of your legal authority to establish an Account for the Designated Beneficiary. You will be unable to perform financial transactions unless all requested documents are submitted in good order in a timely manner. Failure to do so may result in suspension or closure of the Account.

Tax Advantages

Contributions to an Account are made with after-tax dollars and are not deductible for federal income tax purposes.

The two primary tax advantages of investing in an ABLE program are:

  1. First, any investment earnings on the money contributed to a qualified ABLE program will not be subject to federal income tax until they are distributed.
  2. Second, any investment earnings distributed as a Qualified Withdrawal will not be subject to federal income tax.

The State of Texas does not impose a state income tax on individuals.

The earnings portion of a Non-Qualified Withdrawal from an Account is subject to federal income taxation and an additional 10% tax except in certain limited circumstances. Also, if an excess contribution is not returned within the required time period, it will be subject to a 6% excise tax.

The Program will provide IRS Form 1099-QA each year, which will show the total amount of withdrawals from the Texas ABLE Program Account and identify the earnings and contribution portions of the withdrawals. The Program will also provide IRS Form 5498-QA, which will show the total annual contributions to the Account, the amount of any rollover contributions, the fair market value of the Account, and the basis for the Designated Beneficiary’s eligibility for the Program.

The Texas ABLE Program cannot provide tax advice. You may wish to seek tax advice from an independent tax advisor based on your own circumstances.

Savings and Investment Options

When you contribute money to your Texas ABLE Program Account, you will designate how your money will be invested among the Investment Options we provide. The Program offers four Investment Options from which to choose. You may allocate all of your contributions to one of the Investment Options, or you may choose to allocate your contributions among more than one Investment Option.

The Investment Options are:

  • Aggressive Allocation Option
  • Moderate Allocation Option
  • Moderately Conservative Allocation Option
  • Bank Savings Option

For more information about the Investment Options, please review the Investment Options section of the Texas ABLE Program Disclosure Statement and Participation Agreement (“Plan Disclosure Statement”).

The Texas ABLE Program cannot provide investment advice. The United States Securities and Exchange Commission provides general investment guidance and the Texas State Securities Board offers several publications on investing. You may benefit from visiting their websites and consulting with your own investment advisor to discuss your specific situation and choose the Investment Options that are appropriate for you.

Yes. You may log in to the online portal to access your Texas ABLE Program Account and change the Investment Options for the funds already in your Account up to two times per calendar year. In addition, you may change your Investment Options for future contributions to your Account at any time.

Only funds placed in the Bank Savings Account Option are insured under the guidelines of the Federal Deposit Insurance Company (FDIC). Accounts, contributions, and rates of return on investment are not guaranteed by the State of Texas or any other entity, and you could lose money on your investment in the Program. Please review the Risks of Investing in the Program section of the Program Disclosure Statement.

Account Contributions

Contributions can easily be made to an Account by electronic payment simply by providing your personal bank information and requesting a one-time contribution. You can also set up recurring contributions from your bank account on a monthly, quarterly, or annual basis.

Additionally, contributions can be made with a check made payable to the “Texas ABLE Program” and mailed to the Texas ABLE Program, PO Box 44035, Jacksonville, FL 32231. Your name and your Texas ABLE Program Account number should be included in the memo field of the check.

You can contribute through payroll deduction if your employer provides that option for the Program.

You also can contribute through a Rollover or Program-to-Program Transfer by completing the appropriate section of the Application and/or the applicable Account form.

Any person (including your friends and family), corporation, trust, or other legal entity may make a contribution to your Account.

There are certain limits on contributions and Account balances.

  • The Annual Contribution Limit is currently $15,000 per year per Designated Beneficiary (unless the expanded contribution for working individuals with disabilities under the Tax Cuts and Jobs Act applies) from all sources.
  • You may not make additional contributions to your Account if your Account balance, including any earnings, is greater than or equal to the Lifetime Account Limit, currently $370,000. Accounts that have reached the Lifetime Account Limit can continue to accrue earnings. Once your balance falls below the Lifetime Account Limit, contributions may resume.
  • If the Designated Beneficiary is an SSI recipient, SSI benefits may be suspended if the Account balance, including any earnings, exceeds $100,000. Benefits can be reinstated when the Account balance no longer causes the recipient to exceed the resource limit as long as he or she is otherwise eligible for SSI benefits. See “Impact on Government Benefits” below for more information on this and other considerations.

Our system is designed to reject contributions that will cause your Account to exceed the annual or lifetime limits.

If an attempted Excess Contribution is received by the Program, it will be placed in a non-interest-bearing account and refunded automatically to the contributor whenever possible. However, if we are unable to obtain the necessary information from the contributor, the refund will be made to the Designated Beneficiary.

If an Excess Contribution is inadvertently accepted by the Program and deposited to your Account, the Program will make a good-faith effort to return it, plus any earnings or minus any losses on the Excess Contribution, to the contributor in accordance with then-current IRS regulations.

An Excess Contribution inadvertently applied to an Account and not returned to the contributor on or before the due date (including extensions) of the Designated Beneficiary’s income tax return for the year in which the Excess Contributions were received will result in the imposition on the Designated Beneficiary of a 6% excise tax on the amount of Excess Contributions.

In accordance with federal and state law, the Program will provide advance written or electronic notification to the Designated Beneficiary of any returned excess contribution within a reasonable time (i.e., not less than thirty days) prior to the return.

Yes. Our system provides a gifting tool that allows you to create an eGift event. You may input the email addresses of your friends or family members, and we will send each of them an email with a unique link and instructions allowing them to make a gift to your Account as long as it does not exceed the allowable balances noted above.

Yes. Effective for distributions after December 22, 2017, and before January 1, 2026, amounts in a 529 account may be rolled over to an ABLE account of the 529 account’s designated beneficiary or a “member of the family” of the 529 account’s designated beneficiary. Such rollover amounts would count toward the Annual Contribution Limit. The amount that may be rolled over may not exceed the Annual Contribution Limit. For 2018, this amount is $15,000. To qualify as a rollover, it must be paid to a Texas ABLE Program Account within 60 days after the date of the withdrawal. In the case of a rollover to the designated beneficiary’s Texas ABLE Program Account, only one rollover is allowed within 12 months of a previous rollover to the Account for that designated beneficiary. Please see the offering document from your 529 account administrator for information regarding the tax consequences of Rollovers out of your 529 account.

Yes. You may transfer funds through rollover or program-to-program transfer. Rollovers are limited to once every 12 months for the same Designated Beneficiary and must be contributed to the ABLE program within 60 days of the date of distribution from the former ABLE program, otherwise the earnings in the account will be subject to federal tax. Please see the Program Disclosure Statement for more details on program-to-program Transfers or Rollovers. There is no fee to rollover funds into the Texas ABLE Program, but you should check with the program from which you are transferring the funds to determine if they will charge an outgoing rollover fee.

Account Withdrawals

You may log in to the online portal to pay bills by electronic transfer or by check or to move funds from your Account to your personal bank account and pay expenses from that account. Please keep in mind that payment of expenses other than qualified disability expenses is subject to certain tax and government benefit consequences.

We typically process electronic transfers in 3-5 business days. We typically issue and mail paper checks within 7-10 business days.

The Program also reserves the right to place a temporary hold on a withdrawal as follows:

  • Seven business days following receipt of a contribution by check if that contribution is needed to fund the withdrawal;
  • Five business days following receipt of a contribution made by electronic transfer if that contribution is needed to fund the withdrawal;
  • Ten business days following a change of address for either the Authorized Legal Representative or the Designated Beneficiary; and
  • Fifteen business days following a change of Authorized Legal Representative.

You are allowed two free electronic (ACH) withdrawals per month. Additional ACH transactions will be subject to a $1.00 processing fee per transaction.

Each check withdrawal will be assessed a $5.00 processing fee.

We do not require you to send us any documentation for withdrawals. You should maintain good records of how you are spending your ABLE funds in case you are asked by state or federal agencies such as the Internal Revenue Service or Social Security Administration to provide that information.

The Program does not conduct any approval process related to the purpose of your withdrawals. Whether a withdrawal complies with applicable laws and regulations and can be classified as a Qualified Withdrawal, Rollover, or a Program-to-Program Transfer is a matter between the Designated Beneficiary and state and federal agencies such as the Internal Revenue Service and the Social Security Administration. The Program assumes no responsibility for monitoring the Designated Beneficiary’s compliance with applicable rules.

Note: The Program will not withhold taxes or penalties due on a Non-Qualified Withdrawal or an excess contribution, if applicable. The taxpayer is responsible for reporting taxes and penalties due on the taxpayer’s federal tax return. The Program will file IRS Form 1099-QA to report withdrawals and IRS Form 5498-QA to report contributions annually.

Impact on Government Benefits

Funds in your Account are generally disregarded for purposes of determining eligibility to receive government assistance or benefits, with the following special limits and considerations:

  • SSA will exclude up to $100,000 of the balance of funds in an Account from the resources of the Designated Beneficiary.
  • SSA will consider as a countable resource of the Designated Beneficiary any amount by which an Account balance, including any earnings, exceeds $100,000.
  • SSA will count as a resource a withdrawal for a housing-related Qualified Disability Expense if the withdrawal is retained into the month following the month of receipt. If the withdrawal is spent within the month of receipt, it will not affect eligibility. Section SI 01130.740 of the SSA Program Operations Manual states that housing expenses for purposes of an ABLE account are the same as they are for in-kind support and maintenance purposes, except for food, and include: mortgage (including any property insurance required by the mortgage holder); real property taxes; rent; heating fuel; gas; electricity; water; sewer; or garbage removal.
  • SSA will include as a countable resource any withdrawal that is spent on a Non-Qualified Expense.
  • SSA will exclude from a Designated Beneficiary’s countable resources a withdrawal for a Qualified Disability Expense other than housing if it is retained beyond the month received. This exclusion applies only if:
    • The Designated Beneficiary maintains, makes contributions to, or receives withdrawals from the Account,
    • The withdrawal is unspent,
    • The withdrawal is identifiable, and
    • The individual still intends to use the withdrawal for non-housing-related Qualified Disability Expenses.

Contributions from the Authorized Legal Representative, family, friends, or another third party are not considered income to the Designated Beneficiary when determining eligibility for federal disability benefits.

Contributions to an Account from the income of the Designated Beneficiary are still considered countable income of the individual. The fact that a person uses his or her income to contribute to an Account does not mean that income is not countable for SSI purposes.

Other Considerations

Texas ABLE Program Account can be used in conjunction with, or as an alternative to, a Special Needs Trust.

First, all outstanding requests for withdrawals for Qualified Disability Expenses, including funeral and burial expenses, will be paid from the Account.

Next, any state that has provided Medicaid assistance to the Designated Beneficiary may be required to file a claim against the Designated Beneficiary’s estate or the Account for the amount of the total medical assistance paid for the Designated Beneficiary under the state’s Medicaid plan after the Account (or any ABLE account from which amounts were rolled over or transferred to the Account) was established.

Enrollment Fee – There is no fee for enrolling in the Program.

Monthly Account Maintenance Fee – The Monthly Account Maintenance Fee is $4 and includes two ACH withdrawal transactions per month.

Annual Print/Mail Fee – There is a $10 annual fee for paper delivery of Program correspondence and documents. This fee will be waived if you elect to receive Program correspondence and documents via email.

Returned Item Fee – There will be a charge of $20 for processing contributions that are returned unpaid.

Check Processing Fee – There is a $5 charge for each withdrawal by check.

ACH Processing Fee – There is a $1 charge for each withdrawal by ACH in excess of two (2) per month.

Annual Asset-Based Fees – There are annual asset-based fees charged by the Program Manager, the state and the Mutual Funds underlying each Investment Option. You can review the asset-based fees in the allocation worksheet..

Additional Fees – Fees for additional services such as overnight delivery of documents or re-issue of disbursement checks will vary depending on services provided.

If an Account has a zero balance for 90 days or more, it may be closed by the Program. The $4 per month account maintenance fee will continue to accrue until the Account is closed. If the Account owner wishes to reinstate a zero-balance Account that has been closed by the Program, the Designated Beneficiary or the Authorized Legal Representative must complete an online reinstatement process.

It is the responsibility of the Designated Beneficiary or their Authorized Legal Representative, if applicable, to notify the Program if the Designated Beneficiary is no longer an Eligible Individual. If the Designated Beneficiary ceases to be an Eligible Individual, beginning on the first day of the Designated Beneficiary’s first taxable year for which the Designated Beneficiary does not satisfy the definition of an Eligible Individual, additional contributions to the Texas ABLE Program Account will not be accepted by the Program, provided the Program has notice of such ineligibility. Any withdrawals for expenses made while the Designated Beneficiary is no longer eligible will not be considered Qualified Disability Expenses. Any earnings on withdrawals made subsequently will be subject to ordinary income taxes and an additional 10% tax. If the Designated Beneficiary subsequently re-qualifies as an Eligible Individual, contributions to the Account may again be accepted subject to the applicable Annual Contribution Limit and the Lifetime Account Limit, and expenses incurred that meet the definition of a Qualified Disability Expense will again be considered Qualified Disability Expenses.

The Program files IRS Form 1099-QA to report withdrawals and IRS Form 5498-QA to report contributions annually as noted above.

The Federal ABLE Act also requires the Program to report Account information on each Designated Beneficiary to the Social Security Administration (SSA) on a monthly basis. SSA will match the Social Security or Taxpayer Identification Number furnished by the Program against their records and incorporate the Account information into their records.

As of the date of the Program Disclosure Statement, no final guidance has been issued by HUD about the impact of having an ABLE account on eligibility for housing benefits.

For information about the Program or to enroll, see the other sections of our website at TexasABLE.org.

You should read the Program Disclosure Statement available on the website prior to enrolling.

You can also call the Program at 1-844-489-2253 (1-844-4TX-ABLE) or send an email to CustomerService@TexasABLE.org if you have any questions.




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