Southeast ADA CenterShow me the Money Webinar Series:Part 3: Understanding ABLE Accounts: Advancing Self-Sufficiency for Individuals with Disabilities and Their FamiliesMarch 22, 2018
Introduction:
Pam Williamson
I am Pam Williamson, assistant director of the Southeast ADA Center, based in Atlanta, Georgia. The Southeast ADA Center is a project of the Burton Blatt Institute at Syracuse university. We are funded by the national institute on disability, independent living and rehabilitation research. Also known as NIDCLRR. This is a center within the center of community living, Department of Health and Human Services. We are one of ten centers in the ADA National Network. Their purpose is to provide informal technical guidance, training and information on all aspects of the Americans with Disabilities Act.
The Burton Blatt Institute at Syracuse, university, is a leader in of efforts to advance the civic, economic and social participation of people with disabilities in a global society. For today's webinar, Understanding ABLE Accounts: Advancing Self-Sufficiency for Individuals with Disabilities and Their Families, we are pleased to welcome today's host, Michael Morris; and our presenters, LaKesha Page, Joanna Swanson, and Samara Heavrin.
Let me begin by introducing our host, Michael Morris. He is the founder and executive director of the national disability institute and member of the executive leadership team at the Burton Blatt Institute at Syracuse, university.
He served as formal legal counsel to the Senate committee on key architect for the ABLE act. He is a subject matter expert on financial inclusion and poverty reduction, concerning people with disabilities and provides this service to the FIDC, the Internal Revenue Service, the national council on disability and multiple state ABLE programs.
He was the first Kennedy foundation public policy fellow and also worked in the office of Senator Lowell Weicker. It is my privilege positive introduce you over to Michael Morris. I turn the webinar over to you.
Michael Morris
Thank you, Pam. It is a pleasure to be here and joining people from throughout the southeastern states and as well around the country. What I want to do is set a context for our excellent panelists who will follow me on this webinar. The ABLE act was passed into law after about eight years of deliberation by Congress and signed by President Obama in December of 2014. ABLE stands for achieving better life experience act. And before we hear from three panelists who will tell you about programs in three of our eight southeastern states, I want to share with you some basic information so that we kind of level the playing field about what you should know about the ABLE act. First, what is an ABLE account? An ABLE account is a tax advantaged savings account that helps individuals with disabilities and their families save for the purposes of purchasing disability-related expenses. How do funds in an ABLE account affect my benefits? Well, funds in an ABLE account will be not taken into consideration when determining an individual's eligibility for means-tested public benefits, including SSI, Supplemental Security Income, Medicaid, food and housing assistance. For many people who have been on SSI or other means-tested public benefits there always has been a barrier to savings. For the people who are eligible to open an ABLE account, what you have for the first time is an opportunity to have rainy day funds, short-term or really save for a long-term needs. You will learn more about that as I go on to tell you about key things to know about an ABLE account.
Why the need? Millions of individuals with disabilities and their families depend on a wide variety of public benefits for income, healthcare, food and housing assistance. Eligibility for these public benefits require meeting a means or resource test that often limits eligibility to individuals who can have no more than $2,000 in cash savings, retirement funds or other items of significant value.What this means, for many of you probably listening in is to be eligible for federal public benefits often as well means an individual must remain poor and can't put money aside to any great extent in savings.
So let's talk about who is eligible to be an ABLE account beneficiary? So there are two ways to become eligible. These tests of eligibility are the same whether you join an ABLE account, an ABLE program in a southeastern state or join one anywhere around the country. There is an age requirement. You must be disabled before the will age of 26. Then there is a second part to the definition of eligibility. You must have severity of disability determined to meet the disability requirements for SSI or SSDI, Social Security disability income under title 16 or Title II of the Social Security Act and are receiving those benefits.
So you are automatically eligible under scenario 1, age of disability, age of on set of disability before 26 and you are a current recipient and beneficiary of Social Security benefits. You could be 45, 41, but if your age of disability is determined by on set of disability, if it happened before age 26 you could be 50 years old and you could still open an ABLE account.
However, if you are not on Social Security benefits, but you still had a significant disability before the age of 26, there is a second way to become eligible. That is to submit a disability certification which comes from documentation of a licensed physician, signed by that physician, confirming that your needs or your functional disability criteria is equal to the severity of disability test in Title XVI or Title II of the Social Security Act. That is eligibility for SSI or SSDI with one important exception. That exception is, you do not have to prove you are unable to work. So very significant difference.So these are the two ways, always age of on set before age 26 and then either on SSI or SSDI, or if not you have a physician's letter certifying your significance of disability.
So next slide. Do I have to enroll in my state of residence? Well, in fact, no. The law was changed a year after it was passed in 2015 and that amendment allowed that regardless of where you might live and whether or not your state has decided to establish an ABLE program, you are free to enroll in any state's program that is accepting out-of-state residents.
Most of the states, there are 33 states now with ABLE programs. Most of the states do allow and accept out-of-state residents who meet the eligibility criteria. However, there are some states that do not. An example in the southeast is the state of Florida. You will hear about other states with that exception as well.
Next slide, please. Are there limits on account contributions? Yes, there are. And in 2018 anyone contributing to a person's ABLE account, that could be the individual with a disability, that could be family members, friends, even an employer. The total amount that can be contributed in one year is $15,000. That is expected to be adjusted annually to account for inflation.
The total amount limit over time, so not just annually but over the length of time you might use an ABLE account is typically for most states about $300,000. Some states have a little bit less. Some states have more. And often they have tied that total dollar limit that can be in your account to what they had established in their education-related 529 savings plans or accounts.
Okay? Next slide. So what might the funds in an ABLE account be used for? Here is what is very exciting. The distributions from an ABLE account which the money comes out tax free. So you put money in. It grows depending on your choice of investments that the state ABLE program offers. Those monies when you distribute them, when you take them out for qualified disability expenses, do not count as income. You pay no income tax.
Qualified disability expenses are for the benefit of the designated beneficiary in maintaining or improving his or her health, independence or quality of life. So what we know now is unlike college savings plans, if you have heard of them or use them, which are only exclusively for covering tuition costs to go to college, and housing costs while you are in college, the expenses here for qualified disability expenses are very much broader. Expenses do not need to prove medical necessity. And others could benefit from monies you spend coming out of your ABLE account. For example, use of means of transportation or purchase of a house as two examples.
Next slide will give you the list of what other expenses qualify. It includes education, housing, transportation, employment training and assistance, purchase of assistive technology or personal support services, health, prevention and wellness; financial management and administrative services, legal fees, expenses for oversight and monitoring; basic living expenses, funeral and burial expenses and any other expenses approved by the secretary of the Treasury under regulations consistent with the purpose of the program to increase health and wellness, productivity, and independence.
Distributions from an ABLE account that are not qualified don't meet this criteria, will be subject to a tax and may affect eligibility for federal means-tested benefits as well.
Now that you understand a little bit more about ABLE accounts and benefits of ABLE accounts, where are your choices? Since 2014, the end of the year, December 14 of 2014, 33 states now have opened ABLE programs. With the exception of New York, Missouri, Georgia, Alabama, Florida and Kentucky, all the currently launch states are taking people from outside their state. So they are enrolling nationwide.
Enrollment and maintenance of the account is most frequently done entirely online. I would recommend to you that you may want to look at a website that is called ABLE national resource center. The ABLE National Resource Center -- next slide, please, is a collaborative whose supporters share the goal of accelerating the design and availability of ABLE accounts for the benefit of individuals with disabilities and their families.
This particular website, NRC.org allows you to look at a map. You can touch a state on the map and find out the current status in terms of an ABLE program. It also has a tool on that website which allows you to compare at the same time three state ABLE programs to look at do they only accept enrollment from people in their state? Is there a minimum contribution to establish the ABLE program? Are there special benefits of that state ABLE program? So a variety of questions are answered and it allows you to compare three states at a time.
So I do hope as you want to learn more about ABLE national resource center that you have the opportunity to visit this website and really learn a lot more about the opportunities and benefits of ABLE programs.
Now that we have some background and context for the ABLE programs across the country, we want to zero in and have invited guest speakers from three programs in the southeast. I believe if we go to the next slide what we are going to hear first from is LaKesha Page, who is the director of the program for ABLE in the state of Tennessee. ABLE has been operating in Tennessee since December of 2017 and I think that may not be the right date but I'll leave it to LaKesha to correct me. LaKesha has been with the Department of Treasury since 2001. She holds a bachelor degree in political science with emphasis in public administration from Fisk University. She is also a graduate of the state of Tennessee government management institute.LaKesha, let me turn it over to share with people to understand more. What is the state of Tennessee offering folks around the country?
LaKesha Page:
Awesome, Michael. Thank you so much for the introduction. And I'm so glad to be part of the webinar. I guess we'll get started with our next slide. So ABLE Tennessee, our ABLE Tennessee actually launched in June of 2016. We were the second ABLE plan to launch. We were two weeks behind ABLE in Ohio. But essentially it is a savings program take is administered here in the state of Tennessee Treasury Department under the leadership of our treasurer David little lard junior. Our program is designed to help individuals with physical and or intellectual disabilities to set aside money to pay for qualified disability expenses.
We were the second plan in the nation to appear and of course we opened our doors to anyone nationwide. In fact, we were excited to see a proliferation of growth in our plan for a lot of individuals nationwide.
Has Michael mentioned there are 33 plans that are offered throughout the nation today and we just recently, in February of 2018 we restricted enrollment in ABLE Tennessee to Tennessee residents. Everyone who was in ABLE Tennessee prior to that date got grandfathered in. They still can receive direct benefits from our program. This enables us to focus on Tennesseans and their needs knowing there are many other offerings nationwide. We wanted to fill that void until other states opened their plan. That is one development recently with our ABLE Tennessee plan.
Well, in terms of contributions, Michael kind of touched on this. Of course, the annual maximum limit was increased for 2018 to 15,000. If you were in our ABLE Tennessee plan it was 2,014,000 in 2017 it was 14,000. This is the first time we experienced an increase for 2018 and I know participants have been excited about that change. That is a federal increase, not anything specific to our program.
The second bullet point here is a federal limit in terms of affecting benefits, in terms of the $100,000 threshold. Move down to the next bullet point, the $350,000 balance limitation, that is specific to our program. As Michael alluded to, we like other states align that total contribution limit with our contribution limit in our 529 college savings program. They are at the same threshold.
When individuals contribute to their ABLE Tennessee program, it can be done via check or electronic funds transfer meaning you can direct money directly from your bank savings or checking account. We do accept qualified 529 plan rollovers and I'll get to this later about the new tax law that was passed in December of 2017. We do accept rollovers from a 529 college savings program into an ABLE program.
We have in the state of Tennessee an individualized education account program offered I our Department of Education. We do allow contributions from that individualized education account program into an ABLE Tennessee account.
We do allow ABLE program to program transfers. If there is money held in another state ABLE program and an individual wants to roll over or transfer those amounts to ABLE Tennessee we accept those as a method of contribution. One caveat about rollovers, they are not capped at the annual $15,000 annual maximum limit. You are able to roll over the entire account balance. That is one caveat for rollovers that you can transfer your entire account balance.
The other two methods to contribute would be an automatic investment plan or recurring contributions to the account from your bank savings or connecting account. Where if you wanted to contribute $100 a month, $50 a amount, whatever amount you want to contribute you can set that to occur monthly or any other way that works well for you.
Finally we do have a way for individuals to invite families and friends to gift their online gifting portal which is basically a way for them to have a special code and go online and enter transactions to gift into the account.
With our plan, we offer I think we are among the states to offer the widest range of investment options. I'll tell you the impetus for that is we aligned the investment offering with our college savings plan offering. That was one way to keep the cost low. But we have kind of three categories. We have six growth options which are growth or primarily equity options invested in a stock portfolio and designed to seek maximum returns for investors with higher risk tolerance. With those options they come with some volatility. Of course, we have that category for individuals to invest.
We also have three balanced investment options. Of course, these are blended with stocks and bonds. It is just kind of modest appreciation and with moderate risk. Where the risk tolerance is not as high, we have to balance options to choose from. We also offer five conservative options. Fixed income and one insured option within that category. Any individual can invest in one or a myriad of the options or combination of the options offered by our plan.
So in choosing it, you can also seek financial advice from a financial professional if you like or from family and friends in terms of a combination of the investment options. We do have a wide range of investment options to hopefully meet everyone's needs, those who really want to have an allocation that is sophisticated or those who want to be in one or two funds.
Well, Michael actually alluded to this as well. In terms of the categories, these are just kind of denoting the categories. We align with the law in Tennessee for the categories in which ABLE funds can be disbursed, education, health, transportation, assistive technology, financial management, legal fees, a myriad of categories. Of course, because an individual with a disability may differ, the individual can determine whether or not, kind of make a determination whether or not their withdrawals or the monies within the fund are used for qualified disability expenses unique to their own situation.