ABLE Act Wins Congressional Approval

Achieving a Better Life Experience Act of 2014, or the ABLE Act, is federal legislation that aims to ease financial strains faced by individuals with disabilities by making tax-free savings accounts available to cover qualified expenses such as education, housing, and transportation.  The Act now heads to President Obama for signature.

The purpose of the act is to encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life;  and to provide secure funding for disability-related expenses of beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Supplemental Security Income (SSI), Medicaid, the beneficiary’s employment, and other sources.

Any contributor—such as a family member, a friend, or the disabled person—could establish an ABLE account for an eligible beneficiary. Qualified disability expenses would be any expenses made for the benefit of the disabled beneficiary related to education; housing; transportation; employment support; health, prevention, and wellness; miscellaneous expenses (such as financial management or legal fees); assistive technology and personal support services.

Earnings on an ABLE account and distributions from the account for qualified disability expenses would not count as taxable income of the
contributor or the eligible beneficiary. Contributions to an ABLE account would have to be made in cash from the contributor’s after-tax income.

Assets in an ABLE account and distributions from the account for qualified disability expenses would be disregarded when determining the qualified beneficiary’s eligibility for most federal means-tested benefits. For SSI, only the first $100,000 in each ABLE account would be disregarded.