Ever since the Achieving a Better Life Experience (ABLE) Act was signed into federal law on December 19, 2014, individual states have been jumping to get on board with the ABLE Act. 39 states have either introduced or enacted a state version of the ABLE program. We may now add to that list our own state of Ohio. On Wednesday April 15, 2015, Ohio legislators introduced HB 155 and SB 147, the Disability Expense Savings Account bill, also known as the Ohio ABLE Act.
Why is there such an interest in ABLE accounts?
Here are some of the highlights:
- An ABLE Act account may be set up for the benefit of a person with a disability who became disabled prior to age 26. Cash contributions may be made with the beneficiary’s funds or other persons’ funds. Annual aggregate contributions from all sources are limited to $14,000.
- Earnings in the ABLE Act account remain tax-free as long as distributions are made for “qualified disability expenses,” a term used in the federal ABLE Act that needs to be further defined. Distributions for other purposes are taxed on the earnings, plus include a 10% penalty.
- An ABLE Act account beneficiary who also receives Supplemental Security Income (SSI) will continue to be eligible for SSI until the ABLE Act account balance exceeds $100,000. SSI benefits are suspended if the balance exceeds this limit, but will be restored once the amount falls below $100,000.
- An ABLE Act account beneficiary who also receives Medicaid will continue to be eligible for Medicaid as long as the account balance does not exceed the limit established by the Ohio ABLE Act. The maximum amount is based on Ohio’s contribution limits applicable to section 529 plans which are savings accounts for higher education. The 2015 limit is $414,000.
- Upon death of the ABLE Act account beneficiary, any funds remaining in the account are subject to payback to the state for the amount Medicaid paid for the beneficiary.
Stay tuned for further updates.
- Posted by Attorney Elena Lidrbauch