Americans with disabilities recently scored a victory when Congress approved an expansion of state bills that allow them to work and save money without risking losing public benefits like Medicaid.
The change means an estimated six million more people, including about one million military veterans, will eventually qualify for tax-advantaged accounts, disability advocates say. The accounts, known as ABLE accounts, are named after the 2014 law that created them, the Achieving a Better Life Experience Act.
Forty-six states and Washington, DC, offer ABLE accounts, which were first available in 2016 and are loosely modeled on 529 college savings accounts. However, saving in ABLE accounts has been somewhat slow to catch on, in part because it was limited to people who became disabled before age 26.
Now, ABLE Age Adjustment Act, included in the omnibus spending bill passed in December, raised the qualifying disability threshold to age 46. This means that people can be eligible if their disability occurred after they reached their mid-20s, for example in a car accident or from a neurological condition that developed, such as multiple sclerosis. It can also help people who deal lingering effects Covid-19, said Thomas Foley, executive director of the National Disability Institute.
The accounts allow people with disabilities to save and invest for current expenses and future needs, including housing, education, transportation and legal expenses, without the funds disqualifying them from need-based federal assistance such as Medicaid and Supplemental Security Income. Generally, a disabled person cannot have more than $2,000 in savings or other assets to qualify for these programs. But money in an ABLE account doesn’t count toward that total.
“It’s a safe place to save money,” Mr Foley said.
The age expansion was crucial to the ABLE program overall, supporters say. AND report for 2019 of the National Treasurers Association warned that participation is too low to keep ABLE account fees affordable and sustain the programs long-term. Charitable component of the association, spol NAST Foundationhe has begun several initiatives promote account awareness.
But the new rule doesn’t go into effect until January 2026. That somewhat dampens news of expanded access, said Mary Morris, CEO of Virginia529, the agency that oversees Virginia’s ABLE Now program. People can be disappointed, she said, when they learn about the bills, only to hear they have to wait several years to participate.
“It’s a little disappointing,” she said.
Still, millions of people may already be eligible and could be helped with expanded outreach, advocates say. Under current rules, an estimated eight million people qualify for ABLE, but only a small fraction of them have accounts. (About 14 million may qualify under the expansion.)
“We need to reach out to those who have been excluded,” said Stacy Garrity, state treasurer for Pennsylvania and chair of the ABLE Savings Plans Network.
According to ISS Market Intelligence, a financial research and analytics firm, there were an estimated 134,000 ABLE accounts with more than $1.18 billion in assets at the end of 2022.
Here are some questions and answers about ABLE accounts:
How much can I contribute to an ABLE account?
Anyone can contribute to the accounts—family members, friends, and even employers, up to a maximum of $17,000 for 2023. If a disabled person with an ABLE account is working, that person can contribute extra from their own earnings, up to $13,590 in most states, for an annual total of $30,590.
There are caps on total balances. In general, accounts can grow up to $100,000 without affecting supplemental security income. However, balances can be much higher without affecting eligibility for other benefits such as Medicaid or federal housing assistance.
There is no federal tax deduction for contributions to an ABLE account, but earnings and withdrawals for eligible expenses are tax-free. Some states may offer state tax credits for contributions.
Do I have to open an ABLE account in my home state?
I can qualify for an ABLE account under the new rules. What can I do to prepare for 2026?
Affected people and their families can educate themselves and their supporters about the accounts and how they are used, Mr. Foley said. While family members cannot yet save money in the disabled person’s name without jeopardizing state benefits, they could save themselves with the intention of contributing money from 2026, he said.