Advocating for an important tool for clients with disabilities

Disabilities impact people’s lives in many ways, from imposing physical challenges to taking emotional tolls. Having a disability in the U.S. is also costly. A family with a working-age person who has a disability needs an average of 28% more income to achieve the same standard of living as friends and neighbors in similar socioeconomic situations, according to research by the National Disability Institute and others.

As nearly 22 million working-age Americans are living with disabilities, it is important for financial professionals to understand this significant financial burden and the role ABLE accounts can have in mitigating the problem.

This month is the 10th anniversary of the passage of the Achieving a Better Life Experience Act of 2014, which allows individuals with disabilities and their families to save and invest in tax-free savings accounts without losing eligibility for federal support programs such as Medicaid and Supplemental Security Income. Under the legislation, states may create tax-advantaged 529A ABLE account programs eligible people with disabilities can use to pay qualified expenses. These accounts are like 529 educational savings accounts.

To qualify as a beneficiary of an ABLE account, an individual must:

» Have an ongoing disability with onset before their 26th birthday (in 2026, the age limitation for the onset of disability increases to 46).

» Be receiving SSI or meet the Social Security Administration’s functional limitations criteria with certification by a medical doctor.

The District of Columbia and 46 states administer ABLE programs, but access is not limited to those jurisdictions. Some programs welcome out-of-state enrollees. Despite their widespread availability, ABLE accounts are definitely an underused resource.

About 8 million Americans qualify for the accounts, yet fewer than 200,000 people are taking advantage of them. And although ABLE accounts contain over $1.25 billion in savings, the average balance is less than $10,000. A survey by the Financial Health Network found that 93% of disabled Americans have no knowledge of the program.

How do ABLE accounts work?

Anyone can contribute to an ABLE account — including the beneficiary, family, friends, employers and special needs trusts — up to an annual limit of $18,000 in 2024. Employed individuals with disabilities who do not participate in employer-sponsored retirement plans during the year may contribute an additional amount up to the federal poverty level for an individual or their total compensation, whichever is lower.

Investments in these accounts grow tax-free and can be withdrawn to pay a variety of qualified disability expenses, including transportation, employment training, education, housing, health care, assistive technology and services, basic living expenses, and more. As long as the account balance remains under $100,000, it does not affect the beneficiary’s eligibility for SSI. Account balances up to plan limits in the $235,000-to-$600,000 range do not affect eligibility for Social Security and Disability Insurance, Department of Housing and Urban Development housing assistance programs, the Supplemental Nutrition and Assistance Program, the Free Application for Federal Student Aid, or Medicare parts A, B, C or D.  

The Tax Cuts and Jobs Act

Tax reform legislation passed in 2017 expanded ABLE accounts and made them more flexible in several important ways. The legislation created the expanded contribution limit for working beneficiaries, permits beneficiaries to claim the federal “saver’s credit” on their income taxes, and allows penalty-free rollovers from 529 education savings plans into ABLE accounts. 

As has been widely reported, many provisions of the TCJA are set to expire at the end of next year, and these include the ABLE program measures. Sens. Bob Casey, D-Pa., and Eric Schmitt, R-Mo., introduced the Ensuring Nationwide Access to a Better Life Experience Act to make the TCJA’s ABLE account provisions permanent. At the time of writing, the ENABLE Act has passed the Senate unanimously, and a companion bill in the House introduced by Reps. Lloyd Smucker, R-Pa., and Don Beyer, D-Va., enjoys strong, bipartisan support. NAIFA’s advocacy team has encouraged members of Congress to support the legislation and expects that the expanded provisions of the ABLE Act will become permanent either this year or next. 

Americans with disabilities make up a significant and growing portion of the population who may face significant economic burdens. Financial professionals with a solid understanding of the ABLE Act can help some clients make important strides toward achieving and maintaining financial security. The pool of eligible ABLE account beneficiaries will expand significantly in 2026, when the age limitation for the onset of disability goes up to 46, making it even more likely the accounts will be relevant. Just as anyone whose clients have school-aged children should know about 529 plans, those working with disabled people and their families or their employers should understand the significance of ABLE plans.

Rick Cordaro, DIF, DIA, LUTCF, is disability insurance regional vice president with Principal Financial Group. He is a past president of the International DI Society and former trustee for NAIFA-Iowa. He may be contacted at [email protected].