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529 ABLE Accounts

The Achieving a Better Life Experience (ABLE) Act

529 ABLE Accounts

The ABLE Act, which was signed into law in December 2014, allows Americans who are living with disabilities to save money for college and other expenses in a tax-deferred account as a supplement to private insurance and public benefits.

529 ABLE (529A) accounts

Similar to a 529 college savings plan, 529 ABLE accounts are savings accounts administered by the states. Money can be withdrawn tax-free when the funds are used to pay for qualified disability expenses. The contribution for 2016 is $14,000 (the amount of the annual gift tax exclusion) and many states have total contribution limits that exceed $300,000.

However, if a person's 529 ABLE account balance exceeds $100,000 they will no longer be eligible for SSI benefits. Also, if the beneficiary dies, states will be able to recoup some of expenses through Medicaid.

The signing of the PATH Act in 2015 removed residency requirements from 529 ABLE accounts, giving individuals the option of using any state's plan. Yet some states may offer tax benefits for those who use their home state's plan.

Why 529 ABLE accounts are so important

Prior to the ABLE Act, if a person with a disability earned more than $700 per month or had savings or other assets in excess of $2,000 they risked having to forfeit eligibility for government programs like Medicaid. The only way families could get around this was to set up a special needs trust, which is often very costly to do. As a result, there has been little incentive to save, and many people with disabilities end up living below the poverty level.

Qualified disability expenses

Qualified disability expenses include education, job training and support, healthcare and financial management.

Eligibility

To qualify for a 529 ABLE account, individuals must have been diagnosed with a significant disability before they turned 26 years old, with a condition expected to last at least 12 consecutive months. The individual must also be receiving benefits under SSI and/or SSDI, or be able to obtain a disability certification from a doctor.

Parents who have saved money in a 529 college savings account may be able to roll the funds into a 529 ABLE account in the event the beneficiary is later diagnosed with a disability such as autism.

Investment options

States will provide families with multiple investment options to suit various savings goals and risk tolerance levels. Account owners will be able to make changes to their investments two times per year.

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States with active 529 ABLE accounts

Each state will establish their own regulations to make 529 ABLE accounts available. Here are states that currently or will soon offer ABLE programs:

State Plan Name Residency Requirement State Tax Deduction Total Asset-Based Expense Ratio Debit or Purchasing Card?
Alabama Enable Savings Plan Alabama NO NO 0.50%-0.56% YES
Alaska Alaska ABLE Plan NO NO 0.34%-0.38% NO
Florida ABLE United YES NO 0.035%-0.29% NO
Illinois Illinois ABLE NO NO 0.34%-0.38% Spring 2017
Iowa IAble Plan NO $3,239 0.34%-0.38% NO
Kansas Kansas ABLE Savings Plan NO NO 0.34%-0.38% Spring 2017
Kentucky STABLE Kentucky YES NO 0.19%-0.60% YES
Michigan MiABLE NO $5,000/$10,000 0.50%-0.78% YES
Minnesota Minnesota ABLE Plan NO NO 0.34%-0.38% Spring 2017
Nebraska Enable Savings Plan NO $10,000* 0.50%-0.56% YES
Nevada ABLE Nevada NO NO 0.34%-0.38% Spring 2017
North Carolina NC ABLE NO NO 0.34%-0.38% 03/31/2017
Ohio Stable Account NO $2,000 0.19%-0.60% YES
Oregon Oregon ABLE Savings Plan YES $2,310/$4,620** 0.30%-0.38% YES
Oregon ABLE for ALL Savings Plan NO $2,310/$4,620** 0.30%-0.38% YES
Pennsylvania PA ABLE NO NO 0.34%-0.38% YES
Rhode Island RI's ABLE NO NO 0.34%-0.38% Spring 2017
Tennessee ABLE TN NO NO 0.35%-0.62% NO
Vermont Vermont ABLE NO NO 0.19%-0.60%  
Virginia ABLEnow NO $2,000 0.37%-0.40% YES

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The ABLE Act and what it means for your 529 plan

 

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