FAQs / Things to Know About ABLE
FAQs / Things to Know About ABLE
What does the ABLE Act do?
The law allows certain people with disabilities to have special savings accounts (ABLE accounts) for disability-related expenses without losing eligibility under Supplemental Security Income (SSI), Medicaid and certain other public benefits.
Who is eligible for an ABLE account?
An individual is eligible if they became disabled or blind before the age of 26, and either is currently entitled to Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), or gets a disability certification under rules the U.S. Treasury will write.
The U.S. Treasury proposes that a person with signature authority, like an agent having power of attorney, or a parent or legal guardian, may aid eligible individuals who may not be able to open an ABLE account themselves.
Can an eligible individual have more than one ABLE account?
No. Eligible individuals can only have one ABLE account, but anyone can contribute to their account.
Can anyone contribute to my ABLE account?
Who is a designated beneficiary?
A designated beneficiary is defined as an eligible individual who establishes (opens) an ABLE account and is the account owner. A designated beneficiary, or the parent, guardian, custodian or fiduciary of the beneficiary, can enter into a participation agreement to open a Texas ABLE℠ account.
How can an ABLE account be used?
An ABLE account must be used for "qualified disability expenses" that relate to the designated beneficiary's blindness or disability and are for the benefit of that beneficiary in maintaining or improving his or her health, independence or quality of life. Internal Revenue Code, Section 529(e)(5), lists the following as qualified disability expenses:
- employment training and support;
- assistive technology and personal support services;
- prevention and wellness;
- financial management and administrative services;
- legal fees;
- expenses for oversight and monitoring;
- funeral and burial expenses; and
- any other expenses that may be identified from time to time in future guidance published in the Internal Revenue Bulletin.
Expense payments from an ABLE account are referred to as "distributions" in the federal ABLE Act and legislation.
A distribution for housing expenses from an ABLE account would be considered a resource when determining eligibility for Supplemental Security Income (SSI) and could affect the designated beneficiary's Medicaid benefits.
How much money can be deposited in an ABLE account?
There is an annual limit on the total amount that can be paid into an ABLE account. Annual deposits (contributions) to an ABLE account cannot exceed the individual gift tax exclusion in effect for the calendar year in which the contribution is made ($14,000 in 2017).
An ABLE account is considered a 529A account by the IRS. The maximum contribution limit for a designated beneficiary’s Texas ABLE account is $370,000.
The first $100,000 in an ABLE account would not be considered a resource when determining eligibility for Supplemental Security Income (SSI). SSI benefits are temporarily suspended if the account exceeds $100,000, however the beneficiary will continue to receive Medicaid benefits.
What is the ABLE tax advantage?
Distributions from an ABLE account, including any earnings, are not taxed if used for qualified disability expenses. If a distribution is not used for a qualified disability expense, that amount could be subject to income tax and imposed a 10 percent penalty.
Distributions not used for qualified disability expenses could also affect other benefits. For federal income tax purposes, the ABLE owner should keep careful records when funds are withdrawn.
What happens when the designated beneficiary of an ABLE account dies?
Upon death of the beneficiary, available funds remaining in an ABLE account could be subject to a state reimbursement claim (referred to as "Transfer to State") for medical expenses that were paid by Medicaid for the designated beneficiary during the period that their ABLE account was open.
How was the ABLE program created?
The president signed the ABLE Act (H.R. 5771) into federal law in December 2014. The ABLE Act requires each state to pass laws to create an ABLE program. Texas passed legislation (Senate Bill 1664) establishing the Texas ABLE℠ Program during the 84th Legislative Session. Governor Greg Abbott signed the legislation into law on June 19, 2015.
Who is responsible for administering the Texas ABLE℠ Program?
The law tasks the Texas Comptroller's Office with administering the state's ABLE program through the Texas Prepaid Higher Education Tuition Board.
Where can I open an ABLE account?
While the ABLE Act originally stipulated that an eligible individual had to open an ABLE account in their state of residency, Congress eliminated this provision in December 2015. Eligible individuals can open an account in any state with an active ABLE program that accepts out-of-state residents. No decision has been made yet regarding whether the Texas ABLE℠ Program will accept out-of-state residents.
When can I open a Texas ABLE account?
The Texas ABLE℠ Program is not yet open for enrollment. Learn more about implementation efforts here.
- Where can I find more information on the federal ABLE Act and the Texas ABLE Program?