New 529 ABLE accounts may offer even more benefits for people with disabilities

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For people with special needs, achieving financial independence often seems like an unrealistic goal. In fact, according to a report from the U.S. Senate's Committee on Health, Education, Labor and Pensions, over 28 percent of adults with disabilities currently live in poverty. High costs of medical care and equipment are partially to blame, combined with the fact that these individuals have no incentive to save. Prior to the signing of the ABLE Act, a person living with a disability who earned more than $700 per month, or had savings or other assets totaling more than $2,000, would have to forfeit their eligibility for government programs like Medicaid.

The ABLE Act changed this by giving Americans with disabilities the opportunity to save up to $14,000 per year in a tax-deferred account similar to a 529 college savings plan as a supplement to their government benefits. While no states have announced a specific launch date, the first 529 ABLE plans are expected to become available in the spring or summer of 2017. Colorado, Florida, Michigan, Nebraska, Ohio, Tennessee, Texas, Utah and Virginia have created webpages that provide status updates.

RELATED: The ABLE Act and what it means for your 529 plan

And as families wait for the arrival of the first ABLE accounts, federal lawmakers are continuously working to expand their capabilities. For example, the signing of the PATH Act last year removed residency requirements, giving individuals the option to use any state's 529 ABLE plan. What's more, three bills were recently introduced that would offer additional flexibility for those who use the plans. Here is a summary of what each would offer if enacted:

ABLE Financial Planning Act

The Act will permit rollovers from 529 college savings accounts into a 529 ABLE accounts, and vice versa. Any rollovers would count toward the annual contribution limit, which is $14,000 in 2016. This is ideal for families who may have started saving in a traditional 529 plan before the beneficiary was diagnosed with a disability.

Able to Work Act

Under current law, contributions to an ABLE account cannot exceed the federal gift tax exclusion limit of $14,000. The Able to Work Act allows individuals and families to contribute an additional $11,700 (the Federal Poverty Level) as long as the beneficiary works and earns income. The Act will also allow beneficiaries to qualify for the existing Saver's Credit for their contributions.

ABLE Age Adjustment Act

Currently, in order to qualify for an ABLE Account, individuals must have been diagnosed with a severe disability before they turned 26. The ABLE Age Adjustment Act raises the age limit to 46, which would allow people who fall victim to debilitating diseases later in life, such as Lou Gehrig's disease, to take advantage of the program.

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