What is an ABLE Account? And Do I Need One?
By Janet Shouse
About the Author
Janet Shouse is a parent of a young adult with autism, and she is passionate about inclusion, employment of people with disabilities, medical issues related to developmental disabilities, supports and services, public policy, legislative initiatives, advocacy, and the intersection of faith and disability. She wears many hats at the Vanderbilt Kennedy Center, including one as a disability employment specialist for TennesseeWorks.
Our hope is that this weekly blog will offer information you want to know, so if you have a question you want answered about employment for people with disabilities or other mysteries of the world of work, please email me at email@example.com.
As a person with a disability or a family member of a person with a disability, have you ever wished for a way to save for disability-related expenses that is simple, affordable, AND allows you or your loved one to remain eligible for critical government programs such as TennCare and Supplemental Security Income (SSI)?
If you ever had that wish, your wish became a reality on June 13, 2016, with the official opening of ABLE TN, a program of the Tennessee Department of Treasury.
ABLE stands for Achieving a Better Life Experience.
For decades, people with disabilities have struggled to “get ahead.” Many people with disabilities rely on programs such as TennCare or SSI for health care, community support services, and income for basic necessities such as food and shelter. People who use TennCare or SSI benefits have traditionally been unable to build a “nest egg” for the future or even for unexpected emergencies because these programs prevent them from having more than $2,000 in their bank accounts. The ABLE Act has changed that.
ABLE TN is a savings program to help “qualified” individuals with physical and/or mental disabilities put aside money in a tax-free account, like a 529 college savings plan, to pay for “qualified” expenses without losing eligibility for critical government benefits.
To qualify for an ABLE TN account, a person must have a disability that occurred on or before his/her 26th birthday and meet one of the following criteria:
- Be eligible for/or receiving SSI
- Be eligible for/or receiving Social Security Disability Income (SSDI)
- Have a disability diagnosis by a qualified physician and the person with the disability or a legal representative has signed the ABLE TN certification statement included in the enrollment process.
“Qualified expenses” include items that fall under any of these categories: education, housing, transportation, employment, training and support, assistive technology, personal support services, health, prevention and wellness, financial management, administrative services, legal fees, expenses for oversight and monitoring, and funeral and burial expenses. Individuals will have to keep track of how the money is spent, and if it is determined the money was used inappropriately, the interest income is subject to income tax and a 10% penalty.
To determine if you are eligible for ABLE TN and to enroll in the program, visit able.treasury.tn.gov.
It takes $25.00 to open an account. There are minimal fees associated with the program, but they will average about 0.35% per year of the total funds in the account. ABLE TN accounts do not have application fees, rollover/transfer fees, monthly account maintenance fees, or paper statement fees.
Account holders will be able to put up to $14,000 a year in these accounts, and the deposits can be made by check, electronic funds transfer or automatic investment plans. While only the person with the disability can “own” the account, others may make contributions to it, such as grandparents, siblings or friends. Once the balance of an account reaches $100,000, SSI benefits may be suspended, but the individual will not be dis-enrolled. Once the balance drops below that amount, SSI will be reinstated. TennCare benefits will never be suspended. A maximum of $350,000 is allowed in the account.
ABLE TN will be administered by the Tennessee Treasury Department, the same entity that administers other programs such as TN Stars College Savings 529 program, RetireReadyTN and others. It is important for individuals and families to understand that ABLE accounts are not just savings accounts – they are investment accounts. This means that account holders will be able to choose from 14 different investment options with varying degrees of risk, including a standard savings account with virtually no risk at all, but little potential to earn interest. Account holders will have access to advisers to help them make decisions about their account and how the money is invested.
As with many laws that benefit people with disabilities, ABLE TN is a result of advocacy efforts of families and individuals with disabilities at the national and state levels. It took seven years of work to get the ABLE Act passed at the federal level. It was signed into law in December 2014. At that point, it was up to individual states to pass their own legislation. Tennessee didn’t waste any time. Thanks to a collaborative effort between advocacy organizations, Sen. Becky Massey of Knoxville, Rep. Steve McManus of Parkers Crossroads, and Rep. Kevin Brooks of Cleveland, and the Tennessee Department of Treasury, the Tennessee General Assembly passed the legislation in April 2015.
You may wonder if an individual with a disability should have a special needs trust, an ABLE account, or both. The decision is up to the individual and his/her family. An ABLE account has the advantage of being easy to open, requires only a $25 up-front investment, does not require an attorney, and keeps control with the account holder. However, it can only house “cash,” and the funds can only be used for “qualified” disability-related expenses. A special needs trust can include property, stocks, bonds and other assets in addition to cash. It can be used for anything that benefits the individual. However, a trust requires an attorney to establish it, often costs more to maintain, and requires the oversight of a trustee.
I would encourage you and your loved ones to sit down with a qualified adviser, such as a financial planner or an attorney that specializes in trusts for people with disabilities, and determine which options are best for you.
One question that I’ve heard with regards to ABLE accounts involves Vocational Rehabilitation Services. Some VR services depend upon the individual meeting economic need guidelines, while other services may be provided without regard to economic need. Since ABLE accounts are not considered income, these accounts cannot be considered in resource testing for VR services.
One final point, ABLE TN is a national program and offers enrollment to qualified individuals with disabilities both in Tennessee and throughout the country. So people in other states can enroll in ABLE TN, too. So, feel free to share this information with friends in other states.
If you have any questions, please contact me at firstname.lastname@example.org.