Last December, the Achieving a Better Life Experience Act of 2014 (ABLE Act) was signed into law by President Obama.
Prior to the enactment of the ABLE Act, if an individual with a disability had assets in excess of $2,000 or earned more than $700 per month, he or she risked having to forfeit eligibility for government programs like Medicaid and Supplemental Security Income (SSI).
The ABLE Act allows a contributor – whether the individual with the disability, a family member, or friend – to establish a tax-deferred private savings account to fund disability-related expenses to supplement government benefits and private insurance, although only individuals who became disabled before reaching age 26 are eligible for the accounts.
ABLE accounts are built on the same foundation as the 529 college savings plans. The accounts are administered by the states, annual contributions are capped at $14,000 per person, and withdrawals must be for qualified disability expenses.
In other ways, the accounts are more restricted. The ABLE Act limits the opportunity to one account per eligible individual. Further, if an ABLE account exceeds $100,000, SSI benefits would be suspended, but not terminated.
Before the accounts can become available, however, states must put regulations in place. House Bill 155 has passed the Ohio House and is before the Ohio Senate, where approval appears likely. The bill’s status can be tracked here.