Why Do Disabled People Need an Able Account?

Introduction

The US financial system gives disabled people an unexpected opportunity. But the implementation of this opportunity depends on the personal qualities of each disabled person!

Main Item

People with disabilities need 28% more money than non-disabled people to meet the same needs. (1) However, many disability support programs are terminated if the disabled person has an income above a certain level. (2) As a result, people with disabilities find themselves in a difficult situation. On the one hand, they need more money than non-disabled people. On the other hand, laws do not allow people with disabilities to receive assistance if their income and savings exceed $2,000 per month.

This can be called legalized poverty for people with disabilities. However, 10 years ago the situation changed. In 2014, the US Congress passed H.R.647 – ABLE Act of 2014.(3) This law creates an opportunity for people with disabilities to have large savings and incomes, but not to lose social support. Special ABLE accounts help with this.

Here’s what the ABLE National Resource Center website says about ABLE accounts:

“Saving in an ABLE account allows people with disabilities to keep benefits if they need them. Up to $100,000 of ABLE funds is not a countable resource for Supplemental Security Income (SSI). Any amount of funds in an ABLE account up to the state plan limit does not affect someone’s current or future eligibility for programs like FAFSA (Free Application for Federal Student Aid), HUD (Housing and Urban Development), SNAP (Supplemental Nutrition Assistance Program), Medicaid, Medicare, SSDI (Social Security Disability Insurance) or VRS (Vocational Rehabilitation Services).  Funds invested in an ABLE account grow tax-free and can be used for a broad range of expenses including food, housing, transportation, education, employment, medical expenses and more”. (1)

Despite such usefulness, ABLE accounts have not gained wide popularity among disabled people. The original version of the law granted the right to use accounts to Americans whose disability occurred before the age of 26. This is about 8 million people. However, only 134,000 people opened ABLE accounts. They accumulated about $1.18 billion in these accounts.

According to the official version, this happened due to the low awareness of disabled people about the ABLE account. The number of open accounts was so small that it jeopardized the continuation of this program. Therefore, in order to increase the number of open accounts, the government increased the number of disabled people who can open an ABLE account. From 2026, disabled people whose disability began at age 46 will be able to do this. This decision increases the number of potential account consumers by another 6 million people. In total, 14 million disabled people in the United States can open an ABLE account. (4)

All of these people will have their own experience with ABLE account. After all, each state has its own program for opening ABLE account. In some states, residents of other states can open accounts. In some states, only local residents can open such bank accounts. For example, there is a Residency Requirement in Arizona, Florida, Georgia, Kentucky, Louisiana, Missouri, New Hampshire, New Mexico, New York, Oklahoma, Oregon, South Carolina, Texas, Utah, Vermont, Washington, West Virginia, Wyoming.(5)

It is not only the Residency Requirement that varies. The “Account Balance Limits for Active ABLE Programs” vary from state to state. This value ranges from $300,000 in Oregon to almost $500,000 in Louisiana, Michigan, Virginia, Washington D.C. and Pennsylvania. The “Total Asset Fees for Active State ABLE Programs” also vary. The lowest value for this indicator is in Louisiana (0.13%-0.14%). The highest value is in Massachusetts (0.57%-0.94%). But in most states, the “Total Asset Fees for Active State ABLE Programs” are 0.34%-0.38%. There are also differences in the financial institutions that open accounts in each state, etc. All of this information is contained in “A 50-State Review of ABLE Act 529A Accounts” created by Eastern Michigan University. (6)

However, there are some common features for ABLE accounts on a national scale. Federal taxes and ABLE accounts have become the subject of a special section on the IRS website entitled “ABLE accounts – Tax benefit for people with disabilities.”(7) In particular, it states:

“The Tax Cuts and Jobs Act of 2017

Increases the amount of contributions allowed to an ABLE account and adds special rules for the increased contribution limit. Allows an ABLE account’s designated beneficiary to claim the saver’s credit for contributions to the account. Allows rollovers in limited amounts from a 529 qualified tuition program account of the designated beneficiary to the ABLE account of the designated beneficiary or his or her family member.

More about the increased contribution limit

In addition to the annual limit of $15,000 (the gift tax exclusion amount for 2018), a designated beneficiary who works may also contribute his or her compensation up to the poverty line amount for a one-person household. A designated beneficiary can’t contribute this additional amount if his or her employer made a contribution for him or her to a:

401(a) defined contribution plan or 403(a) annuity contract

403(b) annuity contract

457(b) eligible deferred compensation plan”

There are also general rules governing the interaction of ABLE account and Social Security disability benefits for all Americans. Information about this is available on the Social Security Administration website. (8) In particular, there are answers to some current questions. Here is one such example:

“How do ABLE accounts affect my Social Security disability benefits?

If you receive SSDI, are working, and deposit part or all of your earnings into an ABLE Account, Social Security still considers this deposited money as “countable earnings” and applies Work Incentives to determine if you’re engaging in substantial gainful activity (SGA). However, deposits made into an ABLE account by others, such as your family members, friends, and employers are not considered countable income for determining SGA.

However, if you receive SSI benefits, the ABLE Act sets further limitations. The first $100,000 in your ABLE account would be exempted from the SSI $2,000 individual resource limit. When your ABLE account exceeds $100,000, your SSI benefit payments would be suspended until the account balance falls below $100,000. It is important to note that while your eligibility for a benefit payment is suspended, this has no effect on your ability to receive or be eligible to receive medical assistance through Medicaid1.”

As we can see, ABLE accounts have differences at the state level, but similarities at the federal level. To open this bank account, you do not need to contact the bank. To do this, you need to contact a participating state plan. In each state, this is a special agency, the name of which can be found here. (5) Officials will provide you with qualified assistance in opening an account in an authorized financial institution.

However, in the future, you and your loved ones will have to act independently to fill the account with money. After all, the main point of opening an account is to stimulate disabled people to accumulate wealth to solve their own problems. And this involves getting a job, doing business and other economic activity. All this allows disabled people to live the life of non-disabled people. And therefore, completely get rid of the consequences of health problems. This bank account has great hidden significance for disabled people. ABLE account is an opportunity to fight back against fate!

Check List

1) https://www.ablenrc.org/what-is-able/what-are-able-acounts/

2) https://www.disabled-world.com/disability/social-security/usa/keeping-ssdi.php

3) https://www.congress.gov/bill/113th-congress/house-bill/647

4) https://www.nytimes.com/2023/01/20/your-money/able-disability-savings-accounts.html

5) https://www.savingforcollege.com/529-able-accounts

6) https://www.emich.edu/cob/documents/a_50_state_review_of_able_act_ccounts.pdf

7) https://www.irs.gov/government-entities/federal-state-local-governments/able-accounts-tax-benefit-for-people-with-disabilities

8) https://choosework.ssa.gov/blog/2023-08-22-able-accounts-what-you-should-know.html

Author Credentials:

Pavel Kuljuk’s articles and poems are published in Australia, North America, and Europe. In recent years, he has been constantly collaborating with Australian Rural & Regional News (Australia), Red Hook Daily Catch and OpEd News (USA), and Disabled World (Canada). Kuliuk’s individual publications are in Forbes (Kazakhstan), Rural 21 (Germany), London Loves Business (UK), Karrep (India), RealClearDefense (RCD), Change Links, Daily Caller (USA), and many others. Explore Pavels’ complete biography for comprehensive insights into his background, expertise, and accomplishments.

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Cite This Page (APA): Pavel Kuljuk. (2024, September 30). Why Do Disabled People Need an Able Account?. Disabled World. Retrieved October 1, 2024 from www.disabled-world.com/disability/social-security/usa/able-account.php

Permalink: <a href=”https://www.disabled-world.com/disability/social-security/usa/able-account.php”>Why Do Disabled People Need an Able Account?</a>: This article discusses the ABLE Act of 2014, which allows people with disabilities to save money in special ABLE accounts without losing their eligibility for essential government benefits.

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