Able Accounts 3.0
The ABLE Act of 2014 is one of the most important disability reform laws since the ADA. Expanding ABLE Accounts would give people with disabilities greater financial security and more opportunities to work. These tax-advantaged accounts allow individuals with disabilities to save for disability-related expenses without losing eligibility for critical public benefits like Medicaid and Supplemental Security Income (SSI). This report shows that Congress and the states must do more to ensure ABLE Accounts truly help people with disabilities save, invest, and build better lives.
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Empowering People with Disabilities to Save, Invest and Achieve a Better Life
The ABLE Act of 2014 is the most significant disability reform legislation since the Americans with Disabilities Act of 1990.
The landmark, bipartisan Stephen Beck Jr. Achieving a Better Life Experience (ABLE) Act of 2014 recently celebrated its 10-year anniversary. Hailed as the most significant disability reform legislation since the passage of the Americans with Disabilities Act (ADA) of 1990, the ABLE Act allowed states to establish and maintain tax-advantaged ABLE plans where contributions and investment earnings can be used to pay for the designated qualified disability expenses (QDEs) for the person with a disability.
The ABLE Act continues to give individuals with disabilities the opportunity to save for disability-related expenses in a tax-advantaged account without losing eligibility for certain public benefits programs, like Medicaid and Supplemental Security Income (SSI). Medicaid and SSI have income and asset limitations, which often prevent people with disabilities from saving money for the future or taking jobs that earn more than the limitations allow. Funded with after-tax dollars, similar to a Roth IRA, ABLE accounts grow tax-free, and withdrawals can be made at any time for a broad range of qualified disability expenses. Some states also offer state income tax deductions for contributions to ABLE Accounts specific in-state plans.
According to the National Association of State Treasurers (NAST), to date, the disability community has saved $2.46 billion in assets under management (AUM) across 204,000 ABLE accounts since the first program launched in June 2016. Currently, there are over 8 million individuals with disabilities eligible to open an ABLE account, and that figure will grow to 14 million people (including 1 million veterans) when the ABLE Age Adjustment Act goes into effect in January of 2026.
What's Next? ABLE 3.0 Framework
There are many more things that Congress and the states can do to continue to open up ABLE Accounts as tools for independence and financial security.
- Eliminate the Medicaid clawback in the original Stephen Beck Jr., ABLE Act of 2014. A Medicaid clawback currently can occur when an ABLE account holder passes away, the remaining funds in the account may be used to reimburse the account holder's state for Medicaid expenses paid after the ABLE account was established.
- Increase competition in the ABLE marketplace to expand the number of entities that can offer ABLE plans by allowing financial institutions, authorized private institutions and advisor-sold plans to be offered.
- Allow State Vocational Rehabilitation (VR) Directors to utilize ABLE accounts as a mechanism to provide financial support to eligible consumers for training, transportation, education and other work-related expenses.
- Increase the SSI threshold in the original ABLE Act to provide greater financial flexibility for people with disabilities.