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An ABLE account, also known as a 529 ABLE or 529A account, is a state-run savings program for eligible people with disabilities in the United States. Rules governing ABLE accounts are codified in
Stephen E. Beck, Jr., vice chairman of the National Down Syndrome Society and the Down Syndrome Association of Northern Virginia Board of Directors, proposed a plan to help his daughter, who has Down syndrome, save money. Beck's plan became the basis for the Achieving a Better Life Experience (ABLE) Act.
The ABLE Act received broad support in Congress, with 85% of Congress signing on as cosponsors. On December 19, 2014, the ABLE Act was signed into law by President Obama.
In June 2016, Ohio, Tennessee, and Nebraska were the first three states to launch ABLE programs.
The
Internal Revenue Code
The Internal Revenue Code of 1986 (IRC), is the domestic portion of federal statutory tax law in the United States. It is codified in statute as Title 26 of the United States Code. The IRC is organized topically into subtitles and sections, co ...
section 529A, which was enacted by the Achieving a Better Life Experience (ABLE) Act in 2014. With limitations, funds in an ABLE account are exempt from the Supplemental Security Income
Supplemental Security Income (SSI) is a means-tested program that provides cash payments to disabled children, disabled adults, and individuals aged 65 or older who are citizens or nationals of the United States. SSI was created by the Social S ...
(SSI) and Medicaid
Medicaid is a government program in the United States that provides health insurance for adults and children with limited income and resources. The program is partially funded and primarily managed by U.S. state, state governments, which also h ...
asset limit, and earnings are exempt from federal income tax.
History
Stephen E. Beck, Jr., vice chairman of the National Down Syndrome Society and the Down Syndrome Association of Northern Virginia Board of Directors, proposed a plan to help his daughter, who has Down syndrome, save money. Beck's plan became the basis for the Achieving a Better Life Experience (ABLE) Act.
The ABLE Act received broad support in Congress, with 85% of Congress signing on as cosponsors. On December 19, 2014, the ABLE Act was signed into law by President Obama.
In June 2016, Ohio, Tennessee, and Nebraska were the first three states to launch ABLE programs.
The Tax Cuts and Jobs Act of 2017
The Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, , is a congressional revenue act of the United States originally introduced in Congress as the Tax Cuts and Jobs ...
included language from the ABLE Financial Planning Act and the ABLE to Work Act. The ABLE Financial Planning Act allows rollovers from 529 plan
A 529 plan, also called a Qualified Tuition Program, is a tax-advantaged investment vehicle in the United States designed to encourage saving for the future higher education expenses of a designated beneficiary. In 2017, K–12 public, private ...
s to ABLE accounts. The ABLE to Work Act allows working beneficiaries who don't contribute to 401(k)
In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodic employee contributions come directly out of their ...
or similar plans to make additional contributions to ABLE accounts.
As of August 2018, 39 states and the District of Columbia run ABLE programs, some of which are open to individuals nationwide.
Characteristics
ABLE programs are similar to tax-advantaged 529 plans for college savings. In addition, a 529 plan can be rolled over into an ABLE account for a qualified beneficiary. An ABLE account can be opened by a disabled individual who became disabled before 26 years of age. In 2026, the accounts will be available to disabled individuals who became disabled before age 46. An ABLE account can receive after-tax cash contributions from any person, including its owner. Contributions in a year are limited to the federal gift tax exclusion for that year — $19,000 in 2025. If the beneficiary works and does not contribute to a401(a)
In the United States, a 401(a) plan is a tax-deferred retirement savings plan defined by subsection 401(a) of the Internal Revenue Code. The 401(a) plan is established by an employer, and allows for contributions by the employer or both employer an ...
, 401(k), 403(b)
In the United States, a 403(b) plan is a U.S. tax-advantaged retirement savings plan available for public education organizations, some non-profit employers (only Internal Revenue Code 501(c)(3) organizations), cooperative hospital service organiz ...
, or 457 plan
The 457 plan is a type of nonqualified, tax advantaged deferred-compensation retirement plan that is available for governmental and certain nongovernmental employers in the United States. The employer provides the plan and the employee defers co ...
, the beneficiary can contribute an additional amount above that limit. The additional amount is equal to the lesser of the beneficiary's annual compensation or the federal poverty level
The poverty threshold, poverty limit, poverty line, or breadline is the minimum level of income deemed adequate in a particular country. The poverty line is usually calculated by estimating the total cost of one year's worth of necessities for ...
for an individual — $12,060 in 2018.
Up to $100,000 in an ABLE account is exempt from the Supplemental Security Income (SSI) asset limit.{{cite magazine , last=Ebeling , first=Ashlea , title=Fidelity Launches 529-ABLE Accounts, Tax-Free Savings For Disability Expenses , date=2017-05-17 , magazine=Forbes , url=https://www.forbes.com/sites/ashleaebeling/2017/05/10/fidelity-launches-529-able-accounts-tax-free-savings-for-disability-expenses , access-date=2017-11-16 If an ABLE account larger than $100,000 stops eligibility for SSI, the owner remains eligible for Medicaid. An ABLE account can be used instead of, or together with, a supplemental needs trust, to maintain a beneficiary's eligibility for SSI.
Earnings from an ABLE account are exempt from federal income tax, and money spent from the account must be used for qualified expenses, such as education, housing, transportation, and job training. Some states make contributions to an ABLE account deductible from state income tax.
Qualified Disability Expenses
Qualified Disability Expenses (QDEs) are costs related to the disability and are intended to maintain or improve the quality of life for individuals with disabilities. These expenses cover a broad range of disability-related needs and can be crucial for those with special requirements. QDEs can be drawn from an ABLE account tax-free. These may include costs associated with: # Education # Housing # Transportation # Employment training and support # Assistive technology and related services # Personal support services # Health, prevention, and wellness # Financial management and administrative services # Legal fees # Oversight and monitoring # Funeral and burial expenses # Other expenses approved by the Secretary of the Treasury under regulations.References