Saving For People With Disabilities May Soon Be Tax-Free
A bill that’s expected to be introduced in Congress Tuesday would give families a new way to save money for people with disabilities without jeopardizing government benefits.
The legislation known as the Achieving Better Life Experience Act, or ABLE Act, would create savings accounts that could be used to pay for education, health care, transportation, housing and other expenses for people with disabilities.
A bipartisan group of legislators plans to announce that they will introduce the bill in the U.S. House of Representatives and the Senate at a noon press conference Tuesday on Capitol Hill where they will be joined by representatives of the National Down Syndrome Society, Autism Speaks, The Arc and other groups.
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Under the legislation being proposed, up to $100,000 could be deposited into a so-called ABLE account without compromising access to government benefits from Social Security, Medicaid and other programs.
The accounts are modeled after the popular 529 college savings plans, which can be opened at any financial institution. Interest earned on funds within the accounts would be tax-free.
“Our tax code currently provides advantages to help Americans save for college and retirement, yet people with disabilities do not enjoy those same financial planning tools,” said Rep. Ander Crenshaw, R-Fla., who’s sponsoring the House bill. “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.”
Currently, there are few options for families to save money for those with disabilities who often cannot have more than $2,000 to their name without forfeiting many government benefits. One existing option is the special needs trust, which allows families to set money aside for the benefit of a person with a disability under the care of a trustee. But advocates say the proposed ABLE accounts would offer a much-needed alternative that’s more flexible and significantly easier to start.
“Oftentimes to create a special needs trust you have to have a lawyer. It’s a much more involved process whereas an ABLE account operates more like a bank account,” says Peter Bell, executive vice president at Autism Speaks.
Those backing the ABLE Act say they have high hopes for passage. Before even being introduced, the measure has secured support from at least 20 members of Congress spanning the ideological spectrum from Rep. Barney Frank, D-Mass., to Rep. Ron Paul, R-Texas. A broad array of disability advocacy groups are also on board.
Advocates say a previous incarnation of the bill introduced in 2009 fell apart as a result of timing alone.
“This is one of the only bills that has overwhelming bipartisan, bicameral support,” says Sara Weir, senior policy adviser for the National Down Syndrome Society. “We are very optimistic this year.”