Congress Weighing Tax-Free Disability Savings Accounts
A long-stagnant bill that would establish a new way for people with disabilities to save money without jeopardizing their government benefits is starting to make its way through Congress.
The legislation known as the Achieving a Better Life Experience, or ABLE, Act would allow people with disabilities to create special accounts where they could save up to $100,000 without risking eligibility for benefits like Social Security. What’s more, under the plan, individuals would not lose Medicaid coverage no matter how much money is deposited in the proposed accounts.
A U.S. Senate hearing Wednesday marked the first step in Congress for the bill which has been under consideration since 2006.
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Under the proposal, individuals with disabilities would be able to create ABLE accounts at any financial institution. Modeled after the popular 529 college savings plans, funds deposited in ABLE accounts could be used to pay for education, health care, transportation, housing and other expenses. Interest earned on savings within the accounts would be tax-free.
In testimony before the Senate panel, Sara Wolff, 31, who has Down syndrome, said that passing the ABLE Act would change her life. Under current law, Wolff and many others with disabilities cannot have more than $2,000 at any given time without forfeiting government benefits. As a result, Wolff said she works two jobs but is careful not to earn more than $700 a month even though she’s capable of far more.
“Just because I have Down syndrome, that shouldn’t hold me back from achieving my full potential in life. I can work a full-time job, be a productive member of society and pay taxes — but because of these outdated laws placed on individuals with disabilities, people like me are held back in life,” said the Moscow, Pa. resident who has amassed more than 250,000 signatures on an online petition calling on Congress to pass the bill.
With widespread support from lawmakers in both political parties and the disability community, backers say they expect the ABLE Act to be fast-tracked and hope to have a bill on President Barack Obama’s desk by the end of September.
“This is really the most popular piece of legislation in Congress right now,” said Sara Weir, vice president of advocacy at the National Down Syndrome Society, who indicated the bill has 366 co-sponsors in the U.S. House of Representatives and 74 in the Senate.
Next up, the House Ways and Means Committee is expected to consider the ABLE Act before sending it for a vote in the full House and Senate.
Weir said advocates are already in talks with financial institutions who are eager to begin offering the new accounts should the ABLE Act become law.
“No other bill in Congress has this level of bipartisan, bicameral support,” said Sen. Bob Casey, D-Pa., the legislation’s lead sponsor. “We want all 535 members of Congress behind this important legislation, and we need to build on our momentum in order to get the bill passed when we return from the August recess.”