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The IRS is easing up on ABLE Act Rules


The Achieving a Better Life Experience Act of 2014 (ABLE Act) allows a person with a disability and that person’s family to put money into a special tax-advantaged account that would not destroy eligibility in government benefit programs such as Supplemental Security Income (SSI) or Medicaid.

The ABLE Act won final congressional approval and was signed into law by President Obama in December of 2014.  The enactment of the ABLE Act culminated an eight-year campaign to gain approval for tax-free savings accounts to help individuals and families finance disability needs.  The Act calls for each state to independently pass their own ABLE bills to establish state programs for their residents.   California unanimously passed legislation that established an Achieving a Better Life Experience (Able) program was the 32nd state to enact the Act.

On November 20, 2015, the Internal Revenue Service stated that it was easing up on rules for the ABLE accounts, in a notice the agency said that Individuals opening ABLE accounts will not need to submit medical documentation, but will have to certify under penalty of perjury that they have a qualifying diagnosis.

The agency indicated that ABLE programs will not be required to request taxpayer identification numbers from contributors to ABLE accounts except in limited circumstances and program administrators will not have to categorize what the funds in the accounts is used for.

Despite federal passage of the ABLE Act last year, each state must establish regulations of their own in order to make the accounts available.  ABLE accounts are expected to start becoming available to consumers next year, but the exact timetable will vary by state.

With the new accounts, individuals with disabilities that originated before age 26 will be eligible for the new accounts.  The individuals will be able to accrue up to $100,000 without losing access to Social Security and other government benefits. Medicaid coverage will remain intact no matter how much money is saved in an individual’s ABLE account.

The ABLE Act is built on the model of the current 529 education savings plans that help families save for college.  Through the Act, families have a tax‐deferred savings vehicle to save for the care of people with disabilities.

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