ABLE Accounts Are Coming!

ABLE Accounts Are Coming!

Is It Really What You’ve Been Waiting For?

Many individuals and families who live withspecial needs are eagerly anticipating theavailability of ABLE accounts. What is an ABLEaccount? Is it something you’ll want? Or need?Are you even eligible to have one?

“It’s been a long wait,” says Chris Collier1, CLU, ChSNC, who is aSpecial Care Planner and has earned the Chartered Special NeedsConsultant designation.2 He’s with the Innova Financial Group3 inCincinnati, Ohio, a general agency of Massachusetts Mutual LifeInsurance Company (MassMutual). “The ABLE Act was introduced inboth 2009 and 2011, but neither bill was enacted. In February, 2013,the third bill [the Stephen Beck Jr. Achieving a Better Life Experience(ABLE) Act] was introduced. It wasn’t until the end of 2014 that theact was passed by the House of Representatives and the Senate, thansigned into law by President Obama.”

What kind of account is it?

It’s an account that allows persons with special needs and theirfamilies to:

• save money (with a maximum annual contribution level and overallmaximum account balance),

• choose from a variety of investment options,

• accumulate tax-free earnings,

• have money to pay certain expenses not covered by other sources,

• and have some protection against jeopardizing eligibility forgovernment benefits because of exceeding the personal assetslimitation.

The wait continues

The act added Section 529A of the Internal Revenue Code4.Although the bill is now law, regulations to fill in the details of thelaw have yet to be finalized. They have been published, and the IRSwill accept comments regarding them until mid-September andhold a public hearing in October. The regulations are expected to befinalized following that hearing. Meanwhile, ABLE programs must be established by each state. About 50% have already done so5. Remaining states are being encouragedto do so by the U.S. Department of Treasury. “We’re looking forward to the completion of this process,” saysCollier. “We hope we can begin working with current and potentialclients by year end to help them determine whether or not an ABLEaccount is appropriate for their needs.”

“Potential loss of SSI benefits and the Medicaid payback featureare important aspects to consider,” explains Collier. “You’ll want tocarefully monitor your account so you don’t jeopardize your SSIbenefits. Or you may want to have a special needs trust instead. With a trust – unless it’s a pooled trust – you can name a familymember or a charity, for example, to receive the money left whenthe trust beneficiary dies.” Other factors will also influence yourdecision to have a trust instead of, or in addition to, an ABLEaccount. Talk to your team of personal legal and tax advisors andfinancial professionals who are trained to serve the special needscommunity to review your overall financial strategy, your family’sfinancial needs and goals and the options available to you.

Covered expenses

The account will be a personal source of funds to pay certainexpenses not covered by public and private sources such as SSI,Medicaid, and medical insurance policies. The types of expensesthat can be paid include transportation, housing, education, medicaland dental care, personal assistance, employment, financialmanagement and legal services, and more as specified by the IRS.

Opening an account

ABLE accounts will be available through financial managementprofessionals and possibly other sources, such as banks. The IRScode will specify what information will be required to open an

account and what documentation is needed to prove your disability.No account may be opened until the regulations have been finalized,and only one ABLE account may be opened for any individual whomeets eligibility requirements.“Unlike ordinary bank savings accounts that earn interest, ABLEaccounts will offer a variety of investment options,” says Collier, “soyou can choose an investment strategy with growth and risk levelsthat are right for you.” You may change your choices twice annually.A financial professional, such as a special care planner, can helpyou determine your potential expenses and your risk tolerance tohelp you meet savings goals and maintain government benefits.“Individuals and families will contribute their own money to theaccount, but being able to save like this has never been an optionfor those who depend on SSI and Medicaid to help them manage expenses,” says Collier. “Money a person earns from employment can be contributed to the account, as well as gifts of money from family members up to contribution limits. Additionally, the tax exempt earnings feature will let them save without the tax burden.”

Who’s eligible?

“Not all persons with special needs willbe eligible for an ABLE account,” explainsCollier. The IRS code defines the level ofdisability a person must have, and the disabilitymust have begun before the personwas 26 years old. Anyone who meets theseeligibility rules who is currently receivingSupplemental Security Income (SSI) or SocialSecurity Disability Insurance (SSDI) benefitswill automatically be eligible. Otherwise,individuals must qualify as disabled asdefined by the SSI program. The IRS codewill specify how individuals prove disabilityand what medical documentation will berequired.

Limits on savings

The law will limit contributions to $14,000per year (2015 limit) (an amount equal tothe IRS gift tax exclusion). This amount issubject to adjustment annually for inflation.The maximum amount that may accumulatein an account will be set by state law and isexpected to be about $300,000, based onwhat many states have already decided.Contribution maximums may vary by state.

ABLE and government benefits

Individuals who receive SSI and Medicaidbenefits can save up to $100,000 in anABLE account without jeopardizing benefits.However, if the balance exceeds $100,000,he or she will lose SSI monthly benefits.Medicaid benefits will continue regardlessof the balance, but when the individual dies,states can access account funds to recoverMedicaid benefits they’ve paid out.Theaccount balance will not affect other needsbasedbenefits a person might receive, suchas food stamps or housing assistance.

Making withdrawals

Withdrawals should not exceed the expensesyou wish to pay. Otherwise, the proposed IRScode states excess funds will be counted aspersonal assets and, if the amount is $2,000 ormore, may jeopardize SSI and Medicaid benefits.Additionally, the excess amount will besubject to income tax and will be assessed a10% penalty fee. The regulations will includeother withdrawal regulations. Consult a taxattorney or other financial professional, suchas a special care planner, to learn more.

Should you havean ABLE account?

“Just because you can put funds into thistype of account doesn’t mean you should,”says Collier. “You can’t be sure until you lookat your overall financial picture, which issomething your personal legal and tax advisors,a special care planner, or other financialprofessional with experience in special needscan help you do. Are you saving appropriatelyfor other family members? Are you coveredby life insurance, disability income insuranceand property insurance? It’s important todetermine whether or not you need thesethings before contributing funds to an ABLEaccount.”

The information provided is not written orintended as specific tax or legal advice.MassMutual, its employees and representativesare not authorized to give tax or legal advice.Individuals are encouraged to seek advicefrom their own tax or legal counsel.Individuals involved in the estate planningprocess should work with an estate planningteam, including their own personal legal or

tax counsel.

2 The Special Care Planner, a title used by MassMutual financial professionals, who have received advancedtraining and information in estate and tax planning concepts, special needs trusts, government programs,and the emotional dynamics of working with people with disabilities and other special needs and their

families. The certificate program was offered by The American College in Bryn Mawr, PA, exclusively forMassMutual financial professionals. Additionally, a designation of Chartered Special Needs Consultant(ChSNC), which evolved from the certificate program, is now offered through the American College for

financial professionals. MassMutual financial professionals who have completed the certificate program,or received the ChSNC designation can use the Special Care Planner title.

4 You can read the Internal Revenue Service’s proposed regulation in its entirety at

5 You can find a current list of states that are working on or have signed the bill into law here:

* The Special Care Planner, a title used by MassMutual financialprofessionals, who have received advanced training and information inestate and tax planning concepts, special needs trusts, governmentprograms, and the emotional dynamics of working with people withdisabilities and other special needs and their families. The certificateprogram was offered by The American College in Bryn Mawr, PA,exclusively for MassMutual financial professionals. Additionally, a

designation of Chartered Special Needs Consultant (ChSNC), whichevolved from the certificate program, is now offered through theAmerican College for financial professionals. MassMutual financialprofessionals who have completed the certificate program, or receivedthe ChSNC designation can use the Special Care Planner title.

A Special Care Planner through MassMutual’s SpecialCareSMprogramcan assist parents in drafting Letters of Intent and can help make a

difference in the quality of life for an individual with special needs, theircaregiver and other family members. Through SpecialCare you willlearn valuable financial strategies, identify financial strategy solutions,access vital information, and meet certified specialists who will workwith you and your professional advisors – your banker, accountant orfinancial planner, lawyer, social workers and health care providers – toreview your financial picture and offer options to fit the needs of each

situation. For more details, visit MassMutual’s website at call 1-(800)-272-2216.

About MassMutual

Founded in 1851, MassMutual is a leading mutual " life insurance company that is run for the benefit of itsmembers and participating policyholders. The company has a longhistory of " financial strength and strong performance, and althoughdividends are not guaranteed, MassMutual has paid dividends toeligible participating policyholders consistently since the 1860s. With

" whole life insurance as itsfoundation, MassMutual provides products to help meet the financialneeds of clients, such as " life insurance," disability income insurance, " long term care insurance, " retirement/401(k) plan services, and" annuities. In addition, the company’s strong andgrowing network of financial professionals helps clients make goodfinancial decisions for the long-term. MassMutual Financial Group is amarketing name for Massachusetts Mutual Life Insurance Company(MassMutual) and its affiliated companies and sales representatives.MassMutual is headquartered in Springfield, Massachusetts and itsmajor affiliates include: Babson Capital Management LLC; Baring AssetManagement Limited; Cornerstone Real Estate Advisers LLC; The FirstMercantile Trust Company; MassMutual International LLC; MMLInvestors Services, LLC, Member " FINRA and" SIPC; OppenheimerFunds, Inc.; and TheMassMutual Trust Company, FSB.

The information provided is not written or intended as specific tax orlegal advice. MassMutual, its employees and representatives are notauthorized to give tax or legal advice. Individuals are encouraged toseek advice from their own tax or legal counsel. Individuals involved inthe estate planning process should work with an estate planning team,including their own personal legal or tax counsel.

Massachusetts Mutual Life Insurance Company, Springfield, MA.

MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives.

Reprinted with the expressed consent and approval of Exceptional Parent, a monthly magazine for families and professionals dealing with individuals with disabilities and special health care needs.

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MassMutual has carried the Exceptional Parent (EP) Symbol of Excellence since receiving it in 2004 in recognition of its commitment and service to people

with disabilities and other special needs and their families.