You have probably heard of the Achieving a Better Life Experience (ABLE) Act, enacted in December 2014. In the past year alone, plenty of developments have taken place to ensure successful implementation of the Act in Ohio. In writing this article, I want to explain just how extraordinary the ABLE Act is to people with special needs and focus on the current developments in implementation.
ABLE accounts are financial accounts that can be established by or for a person with special needs. The person must have a disability as determined by the Social Security Administration or some equivalent disability determination. The disability must have occurred before the person reaches age 26.
The money in ABLE accounts does not count against the person’s eligibility for Supplemental Security Income (SSI), Medicaid, Supplemental Nutrition Assistance Program (SNAP or “food stamps,”) Section 8 housing, and other means tested public assistance programs. ABLE accounts can be used to pay for “qualified disability expenses” and the expenditures from the accounts will not impact benefit eligibility.
A person can have only one ABLE account. Annual contributions to an ABLE account are limited to $14,000 (in 2015). If the able account balance exceeds $100,000, the person’s SSI benefits are suspended until the account goes below $100,000. No other benefits are suspended. The maximum amount that can be held in and able account is approximately $414,000.
Any money left in an ABLE account at the death of the owner of the account must be used to pay back the state of Ohio in an amount equal to the value of any Medicaid benefits received by that person.
Ohio has been very proactive in implementing the ABLE Act. ABLE accounts are controlled by IRS regulations. Ohio has enacted laws to permit people to establish ABLE accounts. Ohio is one of only a handful states that are moving forward so quickly. The law authorizes the Treasurer of State to develop Ohio’s ABLE program. Treasurer of State, Josh Mandel, has made this a priority for his administration. Because of this, Ohio is one of the states leading the way on establishing ABLE accounts. The following are some of the most recent developments.
The IRS issued draft regulations in the summer of 2015. The comment period ended in September. The draft regulations were notable in that the IRS is taking a very favorable view of what counts as a “qualified disability expense”. The ABLE Act defines qualified disability expenses as those related to the account owner’s disability and are for maintaining or improving his or her health, independence, or quality of life. The IRS regulations conclude that “the term ‘qualified disability expenses’ should be broadly construed to permit the inclusion of basic living expenses.” An example given by the IRS as a legitimate qualified disability expense is a smart phone, if it is effective and safe communication or a navigation aid for a child with autism. This very liberal interpretation of what constitutes a qualified disability expense is a tremendous benefit for people with special needs. It will very likely mean less picky and erratic oversight by agencies administering public benefit programs. That will mean more flexibility in the use of ABLE accounts.
The ABLE Act lists examples of qualified disability expenses. These include expenses for education, housing, transportation, employment support, assistive technology, personal support services, financial management, legal fees, administrative expenses, and funeral and burial expenses. The Act specifically lists housing expenses. But, as everyone familiar with public assistance programs knows, when someone with a disability receives money or support for housing and shelter expenses there may be a reduction in their SSI benefits. There have been many questions about what will happen if housing expenses are made from an ABLE account. Recently, I attended a conference at which senior members of the Social Security Administration (SSA) stated that the Administration’s opinion that ABLE accounts are owned by the person with a disability, rendering them no different than any other monies owned by that person (except that they don’t count against benefit eligibility.) Therefore, housing expenditures made from ABLE accounts will not count as income to the owner of the ABLE account and there will not be a reduction in SSI benefits for these expenditures. While the SSA has not issued a formal policy on this, it is nonetheless a huge benefit for people with special needs. Many people with special needs have difficulty paying for housing expenditures on the small amount of money provided by SSI or allowed under the Medicaid Worker Buy-In Program. The ability to save money in an ABLE account for housing expenses is a tremendous benefit of the Act.
The ABLE Act provides that someone is considered to have a disability when that person is receiving benefits from the SSA as a person with a disability (SSI or SSDI, for example). The Act also provides that a disability determination equivalent to that made by the SSA will also meet the definition of disability. There has been much concern about how this alternative method of disability verification will work. Within the past two weeks the IRS has issued additional guidance for its proposed rules regarding this. The IRS guidance states that the account owner may self-report as meeting the disability definition under penalty of perjury and must provide additional certification if requested. The guidance states that the individual, the individual’s agent under a power of attorney, or the parent or legal guardian of the individual may sign a physician’s diagnosis form and provide that as evidence of meeting the disability criteria. This new guidance removes a significant obstacle from the effectiveness of the ABLE Act. There are a significant number of people receiving public assistance who have never received a disability determination from the SSA. While the ABLE Act anticipated that, there were no provisions for how someone would meet the SSA’s very complicated standard for being disabled. This additional guidance to the rules will significantly ease that process. The IRS believes that the penalty of perjury is sufficient to ensure that people will follow the law and that there is no need to implement a burdensome administrative process.
There is much discussion about what financial institutions will administer ABLE accounts. At this time, the Treasurer of State is reviewing proposals from various financial organizations familiar with ABLE accounts to be the administrator of those accounts. It seems very likely that people who wish to establish and benefit from ABLE accounts will have a designated financial institution to work with in establishing, administering and using ABLE accounts.
One final update worth mentioning is that the ABLE Act and the Ohio law implementing the Act require an ABLE Account Program Advisory Board be established by the Governor of Ohio. The board is responsible for reviewing and advising the Treasurer of State on implementation of the ABLE Act and making recommendations on improving the ABLE Program. I am pleased to have been appointed as a member of the board. At this time, the state is in the process of setting the first meeting of the ABLE Advisory Board.
The ABLE Act is a game changer for people with special needs who receive public assistance. It is always very difficult for those people to maintain any quality of life given the impoverished conditions one must maintain in order to receive public assistance. One of the most significant aspects of the ABLE Act is that it represents one of the rare moments when public policy recognizes that people with special needs deserve a better quality of life than they are able to achieve through public assistance programs alone. It is likely that the ABLE Act will go down in history as one of the best things ever accomplished for people with special needs.