New Improvements to ABLE Accounts

Many people who receive federal benefits for disability have a challenge with being able to save due to asset restrictions. While you may want to put away some funds for a possible health emergency, the rules for programs like Social Security Disability (SSD) say you can’t go above a certain limit for income or holding assets in savings. These rules can really thwart financial planning for people with chronic conditions like rheumatoid arthritis.

ABLE accounts were created to help and are a method for building savings that are exempt from SSD asset restrictions. Recently, Congress passed some improvements that will be going into effect to expand the usefulness and availability of ABLE accounts.

What are ABLE accounts?

The ABLE account was established in a law passed in 2014 to allow people with disabilities acquired before age 26 to save in a special tax-free account without concerns about disrupting their federal benefits. Family members and loved ones can also contribute to such an account in support of the eligible person.

Accounts can be held by an eligible person (and managed with the help of a parent or guardian) who is entitled to benefits based on a disability or with the support of a qualifying diagnosis from a physician. Juvenile idiopathic rheumatoid arthritis can be a qualifying diagnosis if the onset of the illness was before age 26.

While the ABLE account was created by federal law, 46 states and DC all have programs. However, you don’t have to be a resident of a specific state, and residents in the states without account programs can still open an account in another state. You can choose any state or qualifying bank to open an ABLE account.

Limits and qualified expenses

ABLE accounts are tax-free, but there are some limitations. Different banks may operate them slightly differently, but overall, the rules are that a maximum of $17,000 per year may be contributed. If the account holder is working, an additional amount may be contributed (generally $13,500), but this amount may vary by state. The first $100,000 in the account is sheltered from the Social Security Insurance resource limit (which is usually $2,000 in savings). An overall account limit is set, usually around $500,000, but this may also vary by state. Additionally, an individual can only have one open ABLE account.

Funds from an ABLE account can be withdrawn at any time, but taxes must be paid unless it is a qualified disability expense. However, this definition is very broad to help assist the individual with expenses for education, food, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management, administrative services, and other costs that support health, independence, or quality of life. It is important that records are kept about how the money is used and show that withdrawals go toward qualified expenses.

Depending on the state or financial institution, different fees and return rates are available. The National Resource Center on the ABLE Act provides more details and information, including viewing options by state for the accounts.

Exciting changes coming for more people with RA!

Included in the omnibus budget passed by Congress in late 2022 was the “ABLE Age Adjustment Act,” which changed the eligibility age to 46 years old starting in 2026. Anyone diagnosed with a qualifying disability before age 46 will be eligible to open an ABLE account. This can be a game changer for adult-onset rheumatoid arthritis (or other conditions resulting in disability) and offer an opportunity for creating more savings and financial security.

Additionally, the maximum amount of savings has increased over the years. This has allowed people to save more in their accounts to counter inflation and other growing expenses.

ABLE accounts can be a great option for saving for a rainy day and a way for family members to help financially if they would like to do so. Now that more people will have the opportunity to start accounts as the age cap is raised, it is another financial tool that is available to help more people with chronic illness and disability.