The Achieving a Better Life Experience Act (ABLE Act)

Individuals with disabilities face enormous and unimaginable financial struggles, yet do not enjoy the same financial planning tools as other Americans who are planning for college and retirement.

The ABLE Act (H.R. 647/S. 313), introduced in the 113th Congress by Congressman Crenshaw and Senator Bob Casey (D-PA), 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 U.S. House of Representatives approved Congressman Crenshaw’s legislation on December 3, 2014 by a vote of 404-17 and sent the measure to the United States Senate for consideration. The bill’s provisions were included in Tax Extenders legislation, which passed the Senate by a vote of 76 - 16 on December 16, 2014. President Barack Obama signed the legislation into law on December 19, 2014.

With ABLE in place, individuals with disabilities would no longer have to stand by and watch others use Internal Revenue Service-sanctioned tools to lay the groundwork for a brighter future. The ABLE Act would open the door to a brighter future for millions of Americans.

National Organizations Push for ABLE Passage

Urge House, Senate Leadership to Bring ABLE to a Vote

On behalf of 19 national organizations, the Collaboration to Promote Self-Determination (CPSD), has urged top House and Senate leadership to bring the ABLE Act to a vote in both chambers before the end of the 113th Congress.

Those organizations who have signed a November 20, 2014  CPSD letter to Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell, House Speaker John Boehner, House Minority Leader Nancy Pelosi, House Majority Leader Keving McCarthy, and House Minority Whip Steny Hoyer are:

* Association of University Centers on Disabilities

* Autistic Self-Advocacy Network

* Autism Society

* Autism Speaks

* EveryLife Foundation for Rare Diseases

* Jewish Federations of North America

* Lutheran Services in America Disability Network

* Muscular Dystrophy Association

* National Association of State Directors On Developmental Disabilities Services

* National Down Syndrome Congress

* National Down Syndrome Society

* National Federation of the Blind

* National Fragile X Foundation

* Sibling Leadership Network

* National Organization of Nurses with Disabilites

* Parent Project Muscular Dystrophy

* Physician Parent Caregivers


What People Are Saying

What is the current thinking about the legislation?

  • Congressman Crenshaw on the positive impact the ABLE Act:

"No longer would individuals with disabilities have to stand aside and watch others use IRS-sanctioned tools to lay the groundwork for a brighter future. They would be able to as well, and that's an accomplishment we can all be proud of."

  • Senator Robert Casey, Jr. (D-PA) on how the bill will help Pennsylvanians and all Americans:

"Pennsylvanians with disabilities face incredible challenges every day. They shouldn't be penalized simply for trying to save for their future. Congress should use current programs to ensure America's most vulnerable have the same opportunities that are provided to all citizens."

  • Peter V. Berns, CEO of The Arc, on the improvements to the quality of life that would result from the ABLE Act:

"The ABLE Act is about giving people with intellectual and developmental disabilities the opportunity to achieve their dreams. Families are looking for ways to finance things like an apartment, or a ride to work, or additional educational opportunities after high school that don't jeopardize other necessary services provided by fedreal programs. This bill creates a tool for families that could lead to a more independent and fulfilling life."

  • Bob Wright, co-founder of Autism Speaks, on how the legislation will provide economic peace of mind to those impacted by disabilities:

"This is important, common-sense legislation tha twill provide an incredible financial boost to families affected by autism and other disabilities who are struggling to pay for critical services. If we allow families to save tax-free for college, it is only fair that they be permitted to save to meet the needs of all their children." 

  • Jeffrey Leach on how the ABLE Act will help his young daughter Sydney, who was born with Down Syndrome:

“The ABLE Act will allow Sydney to earn a salary and put part of that money into an ABLE savings account. It will also allow her family to give her monetary gifts that may be used for future expenses. This account will have a tremendous effect on Sydney’s future and we are so appreciative of Representative Crenshaw and all of the members of Congress who have signed on as co-sponsors of this bill.”

Frequently Asked Questions About the ABLE Act

 What is the purpose of this legislation?

American families currently enjoy tax incentives to save for significant future expenses such as college, retirement, and other life events. People with severe disabilities face significant challenges of their own, but they do not have an equivalent savings instrument to save for their future.

The ABLE Act aims to provide families of a severely disabled child with some peace of mind by allowing them to save for their child’s long-term disability expenses in the same way that families of able bodied children can currently save for college through popular 529 investment plans.

The ABLE Act empowers disabled individuals and their families to save their own money in a 529A (or ABLE) account for the purpose of maintaining health and independence with a goal of allowing those individuals to transition away from government assistance and benefits.

What is a 529 Education Savings Account?

A 529 Education Savings Plan is a tax- savings vehicle operated by a state or educational institution designed to help families set aside funds for future college costs.  Note: A 529 Education Savings Plan is a tax-free savings account already in existence.  The ABLE Act allows states to create a new type of 529 Education Savings Plan called the 529-ABLE Account.

What is a 529-ABLE Account?

A 529-ABLE account or 529A, allows for an account within Section 529 of the Internal Revenue Code of 1986, and is a tax-free savings vehicle operated by a state for disability-related expenses that will supplement, but not supplant, benefits provided through private insurances, the Medicaid program, the supplemental security income program, the beneficiary’s employment, and other sources.

Contributions are in after-tax dollars but earnings would grow tax-free just like with 529 college savings accounts (Roth style).  Withdrawals must be for qualified expenses, or else the earnings portion would be subject to regular income tax and a 10% penalty (state penalties could also apply).

529A accounts would be administered on a voluntary basis by the States in a similar manner as 529 college savings accounts.  Families would have a choice of investment options.  As with 529 college savings accounts, the range of investment options available for ABLE accounts would be determined by the States.

Eligibility for an ABLE account cannot be used to qualify for supplemental security income (SSI) or Medicaid.  


What are the age requirements for individual beneficiaries?

Individual must have been diagnosed with a qualified disability prior to age 26 to qualify for an ABLE account.

Are 529-ABLE accounts available to any individual with a disability?  How is the term disability defined?

 How to Qualify for an ABLE Account:

Any individual who has been diagnosed with a disability before the age of 26 years old, and who is receiving, deemed to be, or treated as receiving supplemental security income benefits or disability benefits under Title II of the Social Security Act.


Any individual who has been diagnosed with a disability before the age of 26 years old, who has a medically determined 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 month or is blind, and provides a copy of their diagnosis signed by a physician.


Are there any limits to the amount of funds that can be contributed to an ABLE Account during a certain period of time?

Annual contribution limit: Total contributions cannot exceed the gift tax exclusion in a single year, this is currently set at $14,000 each year.

Lifetime Contribution Limits: Aggregate contributions to an ABLE account would be subject to an overall limit matching the State limit for Section 529 educational accounts.

Are there any restrictions on the number of 529-ABLE accounts that can be used for one individual beneficiary?

Qualified beneficiaries can have only ONE ABLE account.

Do beneficiaries of 529-ABLE accounts pay any interest or taxes (federal or state) on assets accumulated within the account?

There is no federal taxation on funds held in a 529-ABLE account.  Assets can be accumulated, invested, grown and distributed from federal taxes.  Contributions to the accounts are made on an after-tax basis, but assets in the account grow tax and are protected from tax as long as they are used to pay qualified expenses.  Individual states will ultimately determine how the funds are treated for state taxation purposes. 

Are there any tax benefits for those who contribute to a 529-ABLE account?

No federal tax benefits are provided under traditional 529 Education Savings Plans or 529-ABLE account; however, individual states may provide tax benefits. 

Can I open multiple ABLE accounts in different states like current 529 Educational Accounts?

No. Qualified individuals or their families must open ABLE account in the state in which the beneficiary resides. If the state declines to offer 529 ABLE accounts, the state may opt into a memorandum of understanding with other states to provide ABLE accounts.


What are the qualified expenses that the funds accumulated in a 529-ABLE account can be used for?

Qualified disability expenses are any expenses made for the designated beneficiary related to their disability, including:  education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses  for oversight and monitoring, funeral and burial expenses.

Are there any penalties for using funds accumulated through 529-ABLE account for non-qualified expenses?

Such distributions will be subject to a 10% penalty on the earnings portion of the non-allowable expense. In addition, all earnings would be subject to ordinary income tax.


Can an individual with a disability work and maintain a 529-ABLE account? 

Yes, as long as the individual meets the definition of disability irrespective of whether s/he is engaged in substantial gainful activity. 

Can an individual with a disability contribute to these accounts from wages earned? 

Yes, after required taxes are paid, earnings may be contributed to the account, just as any other contribution.  For administrative purposes any contributions made by someone other than the account owner are treated as if the contribution was from the account owner.

Do assets accumulated in 529-ABLE account count toward asset/income means-testing for determining eligibility into Federal benefits programs?

Assets up to $100,000 held in 529-ABLE account are specifically excluded from the income and assets tests used to determine eligibility.  This includes the current SSI eligibility requirements that prohibit beneficiaries from having over $2000 in assets at any one time.

Do assets accumulated in 529-ABLE Accounts count toward asset/income means-testing for determining eligibility in State benefits programs?

The ABLE Act does not prohibit states from treating the accounts differently for programs funded FULLY with state funds. 


Who controls the funds in an ABLE Account?

529 ABLE accounts are established in the beneficiary’s name, contributions into an ABLE account could be made by any person. 529 ABLE accounts may be withdrawal for qualified expenses from the beneficiary or a family member or individual  on the account.

What is the administrative process for opening and maintaining an ABLE Account?

Each state will have its own process for establishing 529-ABLE accounts.  The process should be identical to the process used to establish a 529 Education Savings Plan.  Each state will need to reform their current process to take into account the eligibility provisions to establish a 529-ABLE Account.

What are the administrative fees for opening and maintaining an ABLE Account?

Fees will vary by the state.


If a 529-ABLE beneficiary is receiving SSI benefits, how will assets in the beneficiary’s 529-ABLE affect his/her benefits?

If the beneficiary is receiving Supplemental Security Income (SSI) benefits, when the assets in the account total $100,000, any monthly SSI benefits will be placed in suspension. If the assets in the ABLE account drop back below $100,000, the SSI benefit suspension ceases and any SSI benefit resumes. The beneficiary will not have to reapply for SSI benefits once the account drops back below the $100,000 threshold.

Can the beneficiary of a 529-ABLE account lose his/her Medicaid benefits?

No. ABLE account beneficiaries do not lose Medicaid eligibility based on assets in their ABLE account or suspension of SSI benefits.

What is the Medicaid Payback Provision?

In the event the qualified beneficiary dies (or ceases to be an individual with a disability) with remaining assets in an ABLE account are first distributed to any State Medicaid plan that provided medical assistance to the designated beneficiary. The amount of any such Medicaid payback is calculated based on amounts paid by Medicaid after the creation of the ABLE Account.


Can pre-existing savings accounts already established for an individual with a disability be rolled over into a 529-ABLE Account?

No, beneficiaries cannot roll over funds from a 529 Educational Account into a 529 ABLE Account.

Upon moving to another state or the death of a beneficiary, can 529-ABLE accounts be rolled over?

Amounts in an ABLE account could be rolled over to another account for the same beneficiary- if he or she moves to another state. There wouldn’t be tax liability for this rollover contribution. In addition, 529-ABLE accounts can be rolled over to an eligible sibling of the beneficiary without a taxable event if the new beneficiary is also a qualified individual.