What’s Next for Georgia’s ABLE Act?
On May 3, 2016, Governor Nathan Deal signed into law the Achieving a Better Life Experience (ABLE) Act, making financial security for people with disabilities a reality in the State of Georgia.
The law became effective on July 1, 2016, and will create the Georgia ABLE Program Corporation. The task of the corporation will decide whether to create a separate Georgia ABLE program, join with one or more other states in a consortium of ABLE programs or encourage Georgians to join ABLE programs created in other states. ABLE accounts are opening in various states and Georgia will start to examine and study other state programs to decide which would be the best to serve its constituents.
The task force will evaluate the accounts that are becoming readily available in states such as Ohio, and later on Nevada, Florida, Virginia and more. Some states will allow for outside residents to participate in their program (such as Ohio) and others will limit the use of ABLE accounts to their residents only.
As the process gets underway for Georgia to bring ABLE accounts to its residents with disabilities, here are some frequently asked questions on the ABLE accounts and what it means for people with disabilities:
What is the ABLE Act and an ABLE account?
The ABLE Act amends the Internal Revenue Code to allow for tax advantaged savings like the 529 higher education savings accounts allowing people with serious disabilities to save for qualified disability expenses without violating the $2,000 asset limits that apply to eligibility for Medicaid, SSI (Supplemental Security Income) and other benefits programs. Thirty-six states have created the legal authority for ABLE account programs.
Who is eligible to open an ABLE account?
People who have a serious disability and receive SSI or who meet similar criteria (certified by a physician) are eligible, if the disability had an onset prior to age 26.
What are “qualified disability expenses?”
Qualified disability expenses include education, employment, training and supports, housing, transportation, health and wellness, personal support services, financial management and administrative
services, legal fees, funeral and burial expenses.
Why do people with disabilities need an ABLE account?
In order to work and live as independently as possible in the community, an individual needs a savings account with more than $2,000 in order to pay if the car breaks down, to secure job coaching, provide for personal assistance, provide for a security deposit for an apartment, secure adaptive transportation, etc. ABLE accounts are another tool for people with disabilities. It allows them to save more without violating the asset limits imposed by federal and state benefit programs. People can use that savings in qualified ways to support the goal of living as independently as possible. People may use the ABLE account for long-term savings or more like a checking account. The goal is that the program be available to any qualified person with low costs for startup and maintenance of the accounts. Some individuals may also still want to have a special needs trust or participate in a community pooled trust.
What are the tax advantages and limitations of an ABLE account?
An individual can only have one ABLE account. Contributions to the account can come from the individual’s earnings or benefits, from family or friends, etc. However, contributions from all sources combined are limited to $14,000 per year (the federal annual gift tax limit). Contributions are not tax deductible for federal tax purposes. As passed, the Georgia law does not provide for a tax deduction for state tax purposes. Appreciation in the value of the account and qualified withdrawals from an ABLE account are tax exempt. Withdrawals that are not for qualified disability expenses are prohibited, are taxed to the beneficiary and carry a 10% penalty.
How much can a person save in an ABLE account?
A person may save up to $235,000 maximum in an ABLE account in Georgia (the same as the limit on the Georgia 529 higher education accounts). However, when an account reaches $100,000, a person’s SSI check is temporarily suspended until the account goes below $100,000. Medicaid eligibility is not so limited.
What happens to the account when the beneficiary dies?
After the payment of all outstanding qualified expenses, funeral and legal fees, the State Medicaid has a claim for all the money paid by Medicaid on behalf of the beneficiary since the date of the creation of the account. If there are any funds remaining after the state’s claim, the rest goes according to the beneficiary’s will.
How is an ABLE account held and invested?
ABLE accounts are held by the State in a separate account on behalf of the beneficiaries. The State Treasurer and the ABLE Program Corporation manage the accounts and have the power to decide whether to create a Georgia ABLE Program, to contract with one or more other states to have a program, to enter into a consortium of states for a program, or to refer Georgians to other state programs. As with the 529 higher education savings accounts, ABLE programs are expected to contract with private financial institutions to guide the investment of the funds.
Who pays for the administration of ABLE accounts?
Federal and state law allow the State to pass the cost of maintaining the accounts on to the account holders. State law provides that it is intended that these costs be kept as low as possible.
Who serves on the new Georgia ABLE Corporation?
The corporation is governed by a board of directors consisting of Frank W. Berry, commissioner, Department of Behavioral Health and Developmental Disabilities; Clyde L. Reese III, Esq, commissioner, Department of Community Health; Greg Griffin, state auditor; Teresa MacCartney, chief financial officer, director of the Office of Planning and Budget; Lynnette T. Riley, state revenue commissioner; Steve McCoy, state treasurer; and three directors who shall be appointed by and serve at the pleasure of the Governor, who shall include at least two persons who are persons with a disability, a family member of a person with a disability or a disability advocacy professional. The board shall elect a chairperson from its membership. The state treasurer shall act as administrative officer of the board. A majority of the board shall constitute a quorum, and the acts of the majority shall be the acts of the board.
