ABLE Accounts and Amendments
In my previous column, I introduced the exciting new program for people with disabilities, called the ABLE Act (Achieving a Better Life Experience Act). The final bill, signed into law in 2014, deviated substantially from the original proposal and that needs to be addressed. On the plus side, amendments were proposed early in 2016, but Congress has failed to act on them.
The amendments can be found by clicking on this link.
PLEASE CALL YOUR REPRESENTATIVES AND SENATORS in Congress, and at the state level as well, to encourage the passage of these amendments. Information on how to contact federal lawmakers is available on the Civil Rights website (through the Capitol switchboard) or directly through these sites for Senators and House Legislators.
What You Need to Know About ABLE Accounts
The ABLE Act allows parents, yourself, or anyone to put up to $14,000, each year, into a TAX-EXEMPT account. ABLE accounts DO NOT count as assets for means-tested social services like SSI and Medicaid up to $100,000; the total amount allowed in the accounts is $500,000, but any amount over $100,000 does impact means-tested programs.
Parents open savings plans called 529 accounts to put money aside for their children’s education. These accounts can be rolled over into ABLE accounts. The sensible thing in getting ABLE accounts started would have been to piggyback on the existing offices doing the 529 plans, but no.
The 14 points are in a somewhat capricious order, and don’t help provide an overall sense of what the plans are, what the costs are, or how states came to any of these decisions. Based on the variations in the data, I would say that they just picked numbers out of thin air.
Here is a recap of some of the important parts of the plans — taken from those points — in an order I think is important. I am only going to compare plans in the three states open to anyone — state residents and non-residents alike — and cover Florida in a different column. The three open states open are Nebraska, Ohio, and Tennessee (referred as NE, OH, TN below).
Is a state income tax deduction or tax credit available for ABLE deposits?
NE: Yes, up to $10,000/$5,000 for married couple filing separately (Nebraska residents only)
OH: Yes, up to $2,000
OH: $2.50/month Ohio residents, $5.00 out-of-state ( $30.00 in-state/$60.00 out-of-state annually)
With only three plans available to people nationwide at present, but 40+ anticipated, careful evaluation of future plans will be required. While I understand that some people are comfortable trusting a hedge fund or mutual fund or whatever to maintain their account, I am not. This means I would have to hire an accountant or financial adviser to monitor my plan’s management. More money for questionable returns and risk.
Fee by investment option?
NE: Yes. Fees vary by option, from 0.50% to 0.56%
OH: Yes. Fees for Ohio residents by option (0.19% to 0.34%), for non-residents by 0.45% to 0.60%
TN: Yes. Most investment options carry fees of 0.35%, but overall range is from 0% to 0.62% (state residents and non-residents)
Note: Fees charged are based on the amount in the ABLE account. Obviously, it costs something to administer any account, and ABLE accounts require fees MAINLY IF THEY ARE INVESTMENT (aka, risk) accounts. Simply being able to use a local credit union checking or savings account would be a nice, reasonable option for people uninterested or incapable of participating in casino Wall Street — with no fees! Fees will be based on cost + profit for the plans, so that reduces your return on investment. Under the ABLE Act implementation, we have to pay annual fees, plus fees on the accounts, and RISKIER plans could actually lose principle that most disabled people can ill afford.
What’s more, all this otherwise unnecessary infrastructure has delayed the implementation of the ABLE accounts for two years since it was signed into law.
Debit card available?
OH: Yes, and a portal to track transactions
The access of a debit card to make necessary purchases seems pretty essential to me. It would allow easy online or local purchasing without delays.
OH: Yes. But the fee is not applied to withdrawals that meet “Qualified Disability” expenses
Rollover available to another ABLE account with or without fees?
NE: Yes, with prorating of annual maintenance fee
OH: Yes, no fee
TN: Yes, no fee
Number of plan options and amount of risk?
NE: 4 of varying risk; the Bank Savings option is FDIC-insured and no risk
OH: 5 of varying risk; the Bank Savings investment option only carries no risk
TN: 14 of varying risk — 6 growth, 3 balanced, and 5 conservative, including an FDIC-insured no risk account
With only three national plans and inadequate details, it’s difficult to decide. Tennessee has the most options. A simple FDIC-insured savings or checking account works for me; I can’t deal with all the investment issues. FDIC, please note, only covers up to $250,000; funds above that would not be insured. Since you can only have one account, many are likely to pick a plan with some risk, and that risk is hard to calculate.
I definitely like the debit card feature (Ohio). When more plans are available, I will do a +/- chart to get a full grasp of the weight to give any particular feature or cost.
Other factors include the agency or group responsible for managing the ABLE accounts and how trustworthy they are. Vanguard Group will manage Ohio’s plan. Multiple entities will manage accounts (remember there’s 14 types) in Tennessee, one of which is also Vanguard. I know little about the Nebraska Investment Council that will manage that state’s plans, so I will research it and others a bit more.
Management refers to the people responsible for the actual investing. Administrators provide oversight of the investors. The state Department of Treasury administers the Tennessee plans. Nebraska has a bank, and Ohio has a private corporation with experience in the 529 educational savings account system.
There are a few other factors to consider that I will cover in future discussions. You can see them for yourself at the ABLE Resource website given above. Most concern opening account minimum deposits, minimum contribution amounts, or the like.
Start saving money the traditional way, so that when the time comes, you will have the first $14,000 to drop in immediately. Maybe by December for plans not currently open for enrollment yet. If you have some money set aside, then you can drop another $14,000 in, right away, come January.
Once again, I ask that you please call your legislators and ask that they pass the proposed amendments for the reasons I gave in my previous column. Additionally, you could recommend they write new amendments, such as those I also proposed in that first column. To reiterate, examples include raising the age limit (now 46 years old) or better, eliminating the age limit. Allowing first-time larger lump-sum deposits, a critical need for older people with disabilities. Since it would be the disabled person’s own money, the IRS limit on non-taxable gifts would be irrelevant. This would greatly help older disabled people, who need savings sooner than younger ones, and have less time to build their funds.
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