In December, 2014, Congress passed the Stephen Beck, Jr., Achieving a Better Life Experience Act (“ABLE”). The federal law amends Section 529 of the Internal Revenue Code as a new Section 529A. Only people whose disability was established prior to age 26 can open an ABLE account. Anyone can contribute to an ABLE account, but the total of all contributions in any one year cannot exceed $14,000, the annual gift tax exclusion amount. The funds in the account can grow income tax deferred, similar to an IRA or 529 plan. Distributions for the benefit of the disabled beneficiary can be made, income tax free, for:
-employment training and support
-assistive technology and personal support services
-prevention and wellness
-financial management and administrative services
-expenses for oversight, monitoring, funeral and burial expenses
-and other expenses approved by the US Secretary of the Treasury
Up to $100,000 in the ABLE account is excludable for SSI purposes. The beneficiary may direct the investments of the ABLE account, limited to twice a year. States must elect to participate in the ABLE program. The ABLE account must be opened in the state where the beneficiary resides. There is a limit of one ABLE account per beneficiary. Medicaid, which is described as a creditor in the statute, gets paid back at the death of the beneficiary for any amounts paid by the state for the care of the beneficiary after the establishment of the account. Enabling legislation was introduced in the 2015 session of the New Mexico Legislature, H.B. 448, but was not considered. Thirty-four other states have passed enabling legislation as of November 9, 2015, according to The Arc of the United States.
In September, 2015, testimony was heard about the ABLE Act by the Legislative Committee on Disabilities of the New Mexico Legislature, and the members of that committee present voted to support passage of an ABLE Act for New Mexico. On November 17, 2015, the Legislative Health and Human Services Committee will consider a new draft of a bill titled “Accounts for Persons with Disabilities Act,” which is drafted to enable the federal ABLE Act program for New Mexico.
An ABLE account will be helpful to people with disabilities who qualify for having one because it will make cash available to persons who otherwise are restricted to having only $2,000 in available resources in order to maintain eligibility for Supplemental Security Income (“SSI”) or Medicaid. One striking exception in the ABLE accounts is that they can be spent for housing, with no adverse effect on their eligibility for other benefits. An individual with a special needs trust will experience a reduction in his or her SSI monthly check if the trust pays for certain housing expenses, the most common one being rent. However, rent paid from an ABLE account will not affect the SSI benefit.
This is one more benefit for folks with disabilities that the state of New Mexico can provide with little expense to the state budget.