The ABLE (Achieving a Better Life Experience) Act

The ABLE Act amends Section 529 of the Internal Revenue Service Code (IRC) of 1986 to create tax-free savings accounts for individuals with disabilities. The ABLE Act was enacted into Federal Legislation in December of 2015. It was adopted into law by Louisiana in July of 2015; however, as of June 23, 2016 (the end of the Fiscal Special Session for 2016), the Louisiana Legislature has not appropriated the minimal resources needed to fund the ABLE Act. Thus, it remains unavailable for thousands of Louisiana citizens living with disabilities.
 
The ABLE Act aims to ease financial strains faced by individuals with disabilities by making tax-free savings accounts available to cover qualified expenses such as education, housing and transportation. In addition to easing financial strain, the bill aims at encouraging independence and self-sufficiency in individuals with disabilities. By allowing individuals to open an ABLE Act account, individuals will be able to deposit, keep track of and spend money earned at a job or given to them by family and friends. Imagine the freedom and independence this will allow for individuals who do not always have the ability to do what they want, when they want, due to limitations created by their disability.

 
The ABLE Act supplements, but does not replace, benefits provided through private insurances, the Medicaid program, the supplemental security income (SSI) program, the beneficiary’s employment and other sources. This means that individuals with disabilities who currently receive Medicaid and SSI benefits due to their disability will be able to utilize the ABLE Act account to save and build up a larger sum of money than the $2,000 maximum currently allowed by SSI. With the passage of the ABLE Act, individuals with disabilities who receive SSI and Medicaid can set up an ABLE Act account and put up to $14,000 (the annual allowable gift tax exclusion) per year and a max of $100,000 before their SSI benefits will be affected. The actual maximum allowed in an ABLE Act account is determined by each individual state, based on the maximum that state allows for 529 plans. In Louisiana, for example, the maximum allowed to be held in an ABLE Act account is $313,000 (as of 2016). As the legislation stands now, only an individual who was designated by a physician (per the regulations for SSI and Medicaid) as disabled by the age of twenty-six (26) can utilize an ABLE Act account. Also, each individual with disabilities can only have one (1) ABLE Act account. Three bills proposing amendments to the ABLE Act legislation are currently before Congress (1. Changing the age of disability from 26 to 46; 2. Changing the maximum per year amount from $14,000 to roughly $26,000; and 3. Allowing an individual with disabilities to roll over funds from a 529 plan into a 529(A) plan). There are other very precise rules, so it is important to work with an individual well versed in implementing and utilizing an ABLE Act account.
 
An ABLE Act account may fund a variety of essential expenses for individuals including medical and dental care, education, community based support, employment training, assistive technology, housing and transportation. The ABLE Act provides individuals with disabilities the same types of flexible savings tools that all other Americans have through college savings accounts, health savings accounts and individual retirement accounts. The legislation also contains a Medicaid pay-back provision when the beneficiary passes away. It eliminates barriers to work and saving by preventing dollars saved through ABLE Act accounts from counting against an individual’s eligibility for any federal benefits program.
 
Funding is required to create an administering agency to watch over the program and make sure it is not being abused or misused. From my research, I have learned that the Louisiana Legislature intends for the ABLE Act to be administered by the Louisiana Office of Student Financial Assistance (LOFSA). I believe this is because the ABLE Act is under the umbrella of IRC 529, which is the federal legislation allowing individuals to set up accounts to save money and receive tax benefits for higher education expenses. The Louisiana 529 program, referred to as START, is administered by LOFSA. LOFSA also administers Louisiana’s TOPS program. It makes sense that this agency will be designated to administer the ABLE Act program, since they are already well versed with the rules and regulations of IRC 529. Given that the ABLE Act or 529(A) has very specific rules/regulations regarding what ABLE Act account funds can be used for, it will be necessary for LOFSA to train and devote full time staff to monitoring and regulating ABLE Act accounts. Thus the need for funding to be segregated by the Louisiana Legislature for the administration of the ABLE Act Program. However, because LOFSA is already familiar with administering the 529 plan for Louisiana, administering the ABLE Act/529 (A) plan should require only a minimal amount of additional funding and resources.
 
Unfortunately, because the ABLE Act program was not funded by the close of the Special Legislative Session, it will not receive funding until (at the earliest) the next Fiscal Legislative Session in 2017. Sadly, this means no ABLE Act accounts can be created or used and all individuals with disabilities receiving SSI and Medicaid benefits will have to wait to utilize freeing and independence creating benefits made possible by the ABLE Act Legislation.