ABLE accounts are a great new savings tool for individuals with disabilities, but not all people with disabilities are eligible to open these accounts. The rules for determining eligibility are for the most part uncomplicated, although one requirement is proving controversial.
Created by Congress via the passage of the Achieving a Better Life Experience (ABLE) Act in 2014 and modeled after popular 529 college savings accounts, ABLE accounts allow people with disabilities and their families to save up to $100,00.00 for disability related expenses without jeopardizing their eligibility for Medicaid, Supplemental Security Income (SSI), and other government benefits.
Under the ABLE Act, two categories of people are eligible to set up accounts. The first category is straightforward: If you are a recipient of SSI and Social Security Disability Insurance (SSDI), you are automatically eligible because you have already been determined to to be “disabled.”
The second category is for people ineligible for these programs, either because they have too much income or assets, in the case of SSI, or they lack a work history, in the case of SSDI. These individuals must obtain a certification, from a licensed physician, attesting that they meet the Social Security Act’s disability definition, which is as follows:
“The individual has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, or is blind . . .”
The actual legislation provides almost no further guidance concerning these disability certifications. However, in subsequent proposed regulations released in June 2015, the Internal Revenue Service (IRS) elaborated that certifications must state the person's diagnosis, detail the limitations on the person’s daily living activities, and certify that the disability began before the person turned 26. So, to be clear, ABLE account holders can be older than age 26, but they must have first experienced their disability before their 26th birthday.
This latter requirement — which also applies for SSI and SSDI beneficiaries who wish to open ABLE accounts — is perhaps the law’s most controversial element. For many disability advocates, reforming this provision has become a top legislative priority. Versions of the ABLE Age Adjustment Act, a bill to raise the age from 26 to 46, have been introduced in both the Senate and House each of the past two legislative sessions.
After the Senate Finance Committee passed two unrelated ABLE reform bills in October 2016, a coalition of 82 disability rights groups wrote a letter to senators opposing the bills’ passage if the ABLE Age Adjustment Act wasn’t included in the package. As a result, none of the three ABLE reform bills has yet passed.
The IRS regulations also provide further guidance on situations where a person’s eligibility changes, such as when the person’s disability no longer exists, or disappears but later resurfaces. These regulations have not been finalized and thus are not legally binding, although the IRS has stated that “[u]ntil the issuance of final regulations, taxpayers and qualified ABLE programs may rely on these proposed regulations.”