Achieving a Better Life Experience (ABLE) Accounts and the Benefits Counselor
Description: This article explores how Achieving a Better Life Experience (ABLE) accounts allow individuals with disabilities to save funds for qualified expenses without jeopardizing their eligibility for means-tested federal benefits like SSI and Medicaid. It also serves as a comprehensive guide for benefits counselors, detailing contribution limits, eligible expenses, and strategies to help beneficiaries use these accounts to achieve greater financial independence.
Introduction
The Achieving a Better Life Experience (ABLE) Act of 20141 became a reality in 2016 as ABLE programs were started in several states. It creates a means to save funds for the Qualified Disability Expenses (QDEs) of a “designated beneficiary,” who meets a test for disability or blindness with an onset before age 26.2 As of November 2023, ABLE programs exist in 46 States and the District of Columbia, with 29 of those considered national programs accepting enrollees from all States.3
We describe below who is eligible for an ABLE account; who can contribute to the account and annual contribution limits; the policies for spending on QDEs; and how ABLE accounts can help persons moving toward self-supporting employment. We explain that Supplemental Security Income (SSI), Medicaid, and many other federally supported, means-tested programs will not, in most cases, count as income or resources contributions from others to an ABLE account, or distributions (withdrawals) from an ABLE account. And we describe how benefits counselors can advise an SSI or Social Security Disability Insurance (SSDI)4 beneficiary on using an ABLE account as they pursue financial independence through work and earnings.
Importance of ABLE Accounts
The ABLE account is a significant savings tool for a person with a disability, as assets can grow free of federal income taxes. It allows use of saved assets to pay for QDEs, with no federal tax owed on that part of a withdrawal that represents account earnings. The most profound benefit accrues to persons who seek or receive one or more means-tested federal benefits. This is especially true if the person receives or expects to receive SSI payments or is eligible for or expects to become eligible for Medicaid.
The SSI Program’s Historical Bar to Saving More than $2,000.
The SSI program will provide a monthly federal benefit rate (FBR) of $943 in 2024 plus an optional State Supplement to persons with disabilities with limited income and resources. A beneficiary must keep countable resources at or below $2,000. The SSI program will exclude and not count certain resources, such as home furnishings, a vehicle, and a residential home. Still in the past, a beneficiary could not save amounts exceeding $2,000 for a larger purchase, such as a car or a home.
An exception to the $2,000 limit is SSI’s Plan to Achieve Self Support (PASS), which allows a person, with Social Security Administration (SSA) approval, to save money in an excluded account to support a work goal. However, unlike ABLE savings that can be used at any time in the future for a broad range of items, PASS savings can only be used, within an approved time frame, for items that support a work goal. Only one PASS can be approved unless a later plan is for a new work goal.5 The bottom line is that PASS plans are time limited, and items purchased must be pre-approved. The ABLE account is not time limited and QDE purchases are not pre-approved. It is possible to use a PASS and ABLE together to move toward a work goal and independence.
SSI’s Penalty if a Family Member or Friend Helps with Housing Expenses
If a family member pays all or part of a beneficiary’s rent or mortgage, SSI treats the payment as unearned income, i.e., in-kind support, and reduces an SSI payment by as much as one third the FBR, a $314.33 reduction in 2024. A similar penalty can occur when a third party helps the beneficiary through contributions of or payments for food.6
Similar Penalties with Federally Supported Medicaid Programs
Two important federally supported programs are the Medicaid Spend Down and the Medicaid Buy-In for working persons with disabilities programs. States offering these options set their own income and resource limits. State resource limits vary widely, with a one-person household having a resource limit in the $5,000 to $10,000 range in many spend down or buy-in programs. These resource limits can create a barrier for persons who want to save for a major purchase or for unforeseen expenses.
ABLE Accounts to the Rescue!
An ABLE account offers a penalty-free option if family or friends want to help an SSI beneficiary with rent or mortgage payments, or provide money for future needs. In 2024, the annual limit on contributions to ABLE accounts will be $18,000:
Sherri’s Case. Sherri qualified for SSI in 2023 at age 24 and will receive $943 each month during 2024, with automatic Medicaid eligibility in her State. Her parents want to pay $700 per month for rent on a one-bedroom apartment near Sherri’s college, allowing her to move from her cramped two-room apartment. If the rent is paid directly to the landlord, this will be treated as in-kind income and Sherri’s SSI will be reduced by $314.33 to $628.67 per month.
A benefits counselor tells Sherri about ABLE accounts and her parents agree to help Sherri start one with a $1,700 deposit from their tax refund. They will then deposit $700 each month to the account. When Sherri uses her account to pay
$700 for her first month’s rent and a $700 security deposit, both amounts qualify as QDEs and SSI will not treat them as income. Her SSI remains at $943, and Medicaid continues. Her benefits counselor will meet with Sherri and her parents to explain the many ways an ABLE account can be used with no adverse consequences to SSI, Medicaid, or many other benefit programs.
The ABLE account will also allow friends and family to make gifts as contributions to the account. There is no concern about the SSI program counting the gift as income to the beneficiary or counting retained contributions toward SSI’s $2,000 resource limit, unless the total value of the ABLE account exceeds $100,000 (discussed below).
ABLE Account Basics
Established and Maintained by a State or State Agency
Many programs are operated by a State’s treasury department, but IRS rules do not mandate this. If a person’s State does not offer ABLE accounts, an account can be set up in any of the 29 States with a national program. Enrollment is typically available online and usually takes less than 30 minutes. Minimum initial deposits vary but are often less than $100. Fees associated with an account vary by State and tend to be quite reasonable. Nineteen States offer tax deductions, and three States offer tax credits for residents who contribute to an ABLE account in their State.7
Designated Beneficiary Must Meet Disability Criteria by Age 26 (or, Effective January 1, 2026, by Age 46)
Disability can be established in one of two ways:
By showing they are currently eligible for Social Security or SSI benefits, based on a disability or blindness that began before age 26; or
By certifying or having the person who opens the account for the beneficiary certify, under penalties of perjury, that the designated beneficiary has a medically determinable impairment “which results in marked and severe functional limitations” that has lasted or is expected to last for 12 consecutive months, or is likely to result in death, with the disability or blindness occurring before age 26.8
Persons in 1619(b) Medicaid status or the Extended Period of Medicare Coverage will meet disability criteria. A 1619(b) beneficiary meets the disability criteria as a person whose entitlement to SSI cash benefits has been “suspended solely due to excess [earnings].”9 A former SSDI beneficiary, who is in an Extended Period of Medicare Coverage (EPMC) following the suspension or termination of SSDI based on substantial gainful activity level earnings, will meet the disability criteria as a person “receiving benefits under title II … of the Social Security Act based on blindness or disability.”10
Who May Open an ABLE Account?
It may be opened by the designated beneficiary, as the account owner. Suppose the beneficiary cannot open an account. In that case, the ABLE regulations provide a list of others who may open it, in the following order of priority:
An eligible person’s agent, under a power of attorney
A conservator or legal guardian (States generally consider the parent of a minor child to be their legal guardian without a formal court appointment.)
A spouse
A parent
A sibling
A grandparent
A representative payee appointed by SSA.
The designated beneficiary has “signature authority” for the account or, if established by a person on the list above, that person will have signature authority.11
POMS GN 00603.041, The Use of ABLE Accounts by Representative Payees, was published by SSA in October 2023. It authorizes a payee to establish and manage an ABLE account and contribute to the account from Social Security or SSI benefits when “it is in the beneficiary’s best interests.” The policy provides: that a payee can only deposit funds into the beneficiary’s ABLE account if the payee has “signature authority” on the account; that payees must follow SSA’s payee rules when managing ABLE accounts; and that payees who take on responsibility for an ABLE account “are expected to understand IRS’s rules for using an ABLE account, including the tax implications of spending the ABLE funds on non-QDEs.”12 Some benefits counselors and other service providers have expressed concerns that following SSA’s payee rules while managing an ABLE account may sometimes compromise the beneficiary’s ability to receive the intended benefits of an ABLE account. Given these concerns and the added layer of responsibility in managing ABLE accounts, many payees may choose not to take on that responsibility. Remember that the many beneficiaries who do not have payees can freely deposit a portion of their monthly SSI or SSDI payment into their ABLE account with no SSA oversight.
Who May Contribute to the ABLE Account? Annual Contribution Limits and Account Asset Limits
Any “person” may contribute to an ABLE account, including the designated beneficiary.13 A person, as defined by IRS rules, includes a trust, estate, partnership, or corporation.14 We understand that a growing number of employers, including partnerships and corporations, are contributing to ABLE accounts of their employees. As noted above, the maximum combined contributions for a calendar year cannot exceed the current year's IRS gift tax exempt amount, $17,000 in 2023 and $18,000 in 2024.
Additional contributions by an employed designated beneficiary are allowed if the beneficiary worked and neither the employer nor the beneficiary contributed to any of these types of retirement plans: a defined contribution plan; an annuity contract under 403(b) of the Internal Revenue Code (IRC); or a deferred compensation plan under 457(b) of the IRC. If those conditions are met an additional contribution up to the Federal Poverty Level for one person for the previous year ($13,590 for 2023 based on 2022 poverty level) or their annual gross earnings, whichever is less, can be contributed.15
Bella’s ABLE Account. Her parents deposited the maximum $17,000 into her account in April 2023. During 2023 Bella worked part-time and was paid $650 gross twice per month ($15,600 for the year). She arranged to directly deposit $50 per paycheck into her ABLE account (i.e., $1,200 for the year). Even though her parents contributed $17,000 into her account, she can make this additional $1,200 deposit out of earnings as it is less than the $13,590 limit for additional deposits out of her 2023 earnings.
Some rollovers are allowed as contributions from a 529 college savings account or from another ABLE account. The designated beneficiary with a 529 college savings account may transfer all or part of that money to the beneficiary’s ABLE account. A designated beneficiary’s sibling, by blood or by adoption, can transfer all or a part of their 529 college savings account and/or all or part of their ABLE account as a contribution to the designated beneficiary’s ABLE account. These additional contributions (or rollovers) are subject to the cumulative annual limits for contributions.16
Each State sets its own limits for funds held in an ABLE account. Those limits range from $235,000 to $569,000.17 We discuss below the likely suspension of SSI payments, but not Medicaid, when ABLE account assets exceed $100,000.
How can Money in an ABLE Account be Used for “Qualified Disability Expenses”?
ABLE regulations refer to QDEs as expenses “for the benefit of the designated beneficiary in maintaining or improving his or her health, independence, or qualify of life” and provide examples of QDE categories, including those related to:
Education
Housing
Transportation
Employment training and support
Assistive technology and related services
Personal support services
Health, prevention, and wellness
Financial management, administrative services, legal fees
Basic living expenses18
Not all QDE categories are disability specific. For example, basic living expenses, college or training expenses, and rent/mortgage expenses often have no connection to the person’s disability. The regulations explain that QDEs “are not limited to items for which there is medical necessity, or which solely benefit an individual with a disability.”19
Consider other payment sources before using ABLE assets. Look to sources such as Medicaid, a Medicaid waiver, Medicare, private insurance, a special education program, or a state vocational rehabilitation program to pay for a needed item. Since the regulations state that medical necessity is not required for a QDE, using ABLE funds would be appropriate, for example, if Medicaid denies payment for adapted exercise equipment as not medically necessary. Remember that an optional Medicaid waiver will often fund specialized medical equipment or assistive technology that is not easily approved through traditional Medicaid.
Do the IRS or State ABLE programs maintain lists of items that can or cannot be funded as QDEs? The general answer is no. Although you may see QDE examples in IRS policies, the SSA POMS, or on ABLE program websites, no universal lists are available. The categories above are considered by the regulations to be representative but not inclusive of all the possible QDEs. In addition to expenses for items such as food, clothing, shelter, transportation, and medical treatment, most reasonable expenses related to leisure-time activity would fit into the “maintaining or improving health, independence, or qualify of life” language you find in the ABLE regulations.
An IRS opinion letter states that payments for a beneficiary’s SSI or SSDI overpayment would meet the QDE definition. The IRS has stated “[t]he repayment of SSI and SSDI overpayments would be QDEs because they fall under the category of “financial management” under [26 CFR] 1.529A–2(h)(1)."20
Are there items you should avoid funding out of ABLE funds? The account cannot be used for things that benefit only a person who is not the designated beneficiary. This means payments for gifts to friends or family do not qualify as QDEs. Otherwise, ABLE account owners and those assisting them should use good judgment and avoid expenses you think would raise big questions or be in a gray area. Two things that come up in this regard is money spent on gambling or alcohol. While you may argue that legal drinking or legal gambling are ways to pursue independence and quality of life, we would avoid these and any other expenses that would raise questions. Keep in mind that if the designated beneficiary can use ABLE monies to fund core expenses like housing, phone service, and transportation, it should free up leftover money from SSI, SSDI, or earnings to pay for the more questionable expenses.
Keep good records of money spent on QDEs. Both the IRS and the ABLE program may audit ABLE account contributions and spending. ABLE account owners and third parties who oversee an ABLE account should retain records of what they spend each year for QDEs. A good system would be one with a log of expenses, by month and year, with receipts or proof of payment for each expense. Some ABLE programs may offer account options, such as checking accounts or debit cards, that make setting up a record keeping system easier.
What Happens to ABLE Account Assets if Designated Beneficiary Dies?
“Medicaid Payback” provision. Upon the beneficiary’s death, the State Medicaid program in which the beneficiary lived may file a claim to all or a portion of remaining ABLE account funds. The account balance is first used to pay outstanding QDEs and funeral and burial costs. The State can then get back up to the amount Medicaid spent on the beneficiary’s care back to the date the ABLE account was opened.21
Nine States do not permit recovery of Medicaid costs through the payback option, with some of those states adding a phrase like “unless required by federal law.”22 Since federal or State Medicaid policies can change, it is a good idea to verify that information posted on the ABLE National Resource Center’s US Map continues to be accurate.
SSI Program Rules Related to ABLE Accounts
SSI Exclusion or Non-Exclusion of ABLE Account Contributions
If the designated beneficiary contributes to the account out of income they received that month, that income is counted under normal SSI rules. For example, if the beneficiary contributes a portion of their SSDI payment, SSI will still count all but a $20 general income exclusion. Suppose the beneficiary contributes a portion of monthly wages. In that case, the SSI program will still apply the earned income exclusions but will not provide any further exclusion for earnings contributed to the ABLE account.
Frieda’s case. She gets monthly SSI of $943. She starts working and earns $485 gross per month. The SSI program excludes the first $20 and $65 of her monthly earnings and an additional 50 percent of what remains ($485 – 85 = 400/2 = $200 countable earnings), with her SSI payment reduced by $200 to $743. Frieda deposits $150 of her current earnings into her ABLE account but that contribution will not allow her an additional SSI exclusion from income. The good news for Frieda is that SSI’s earned income exclusions created an extra cash flow that she used toward an ABLE contribution.
Suppose a family member or any third party (including a trust) contributes money to an ABLE account. In that case, the SSI program will not treat those deposits as income.23
SSI Exclusion of up to $100,000 of ABLE Account Value24
ABLE accounts for SSI beneficiaries typically carry balances less than $10,000, well below the $100,000 exclusion allowed to retain SSI payments. Why? ABLE accounts are most often established to allow SSI beneficiaries to achieve a better life experience now! Thus, they are used regularly to pay for rent and for things not easily purchased out of an SSI payment. In these situations, assets retained in the account will be for unforeseen expenses, such as the need to replace an appliance or pay for car repairs. Using the ABLE account to establish an emergency fund of $5,000 or more creates a level of security and independence not allowed by the SSI program in the past.
Ability to save and retain 1619(b) Medicaid. The 1619(b) work incentive allows beneficiaries who lose SSI payments, due to budgeted earnings, to retain Medicaid if 1619(b) criteria are met. Many 1619(b) beneficiaries will have earnings that allow them to save more than SSI’s $2,000 limit and now they can save that extra money in an ABLE account and retain 1619(b).
Albin’s case. He lost SSI due to earnings in 2013 and has retained Medicaid through 1619(b) despite $50,000 to $60,000 in annual earnings over the past 10 years.25 Since 1619(b) beneficiaries, as recipients of a non-cash SSI benefit, must retain no more than $2,000 in countable resources, Albin was unable to grow savings until he learned about ABLE accounts. Six years ago, he opened an ABLE account and now has $36,000 in the account with half of that money in investment-type accounts expected to grow over time. Since the $36,000 is well below the $100,000 ABLE account limit to retain SSI, it is not counted toward the $2,000 limit for 1619(b) eligibility and Medicaid continues. Albin’s benefits counselor explains to him that to retain 1619(b) he must keep his non-ABLE countable resources within SSI’s $2,000 limit.
Indefinite suspension of SSI payments when $2,000 resource limit exceeded based on ABLE assets exceeding $100,000, with continued Medicaid eligibility. Over time, a few SSI beneficiaries with ABLE accounts may go over the $100,000 threshold. This could be a result of generous family contributions, self-funding by a beneficiary, contributions from a trust, or a combination of these sources. When that happens the SSI program will exclude the first $100,000 of account assets, then count the amount over $100,000 (along with any other countable resources) toward the $2,000 limit.
If the “other resources” remain at or below $2,000 and it is the extra ABLE resources that take countable resources above $2,000, the right to an SSI payment is indefinitely suspended, but Medicaid will continue so long as total ABLE assets are below what is allowed by the State’s ABLE program (i.e., below the State’s unique asset limits for ABLE accounts).
In the future, SSI payments can be reinstated if countable resources, including the ABLE assets above $100,000 are now below $2,000. Even if this occurs after a suspension period of more than 12 months, no new SSI application is required.
By contrast, if non-ABLE countable resources are more than $2,000 for 12 consecutive months, SSI payments are terminated and a new SSI application will be needed if resources dip below $2,000.
Can 1619(b) Medicaid be retained when ABLE account assets exceed $100,000 and the excess ABLE resources create more than $2,000 in countable resources?
We believe the cautious approach is to assume 1619(b) will be suspended when: ABLE assets exceed $100,000; and countable resources, including ABLE assets exceeding
$100,000, are now more than $2,000. Knowing this, a benefits counselor can explain to the beneficiary that 1619(b) eligibility can be reestablished if countable resources, including countable ABLE resources, are once again $2,000 or less.
The Case of Nanette. She has been eligible for 1619(b) since she graduated from college in the late 1990s. Currently, she earns $73,000 per year and retains 1619(b) through an individualized threshold calculation based on very high annual costs paid by Medicaid. She lives alone in a small ranch house which she owns. She started an ABLE account in Ohio, when their program first opened in 2016 and, when she contributed $3,000 to her account with her tax refund in March 2023, her total assets in the ABLE account increased to $102,500. At the same time, her non-ABLE countable resources in her checking account were $1,180. When the SSI program did a 1619(b) recertification in June 2023, they determined she was no longer eligible for 1619(b) because her countable resources were now $3,680 ($1,180 in checking and $2,500 of ABLE assets that exceed the $100,000 exclusion).
Nanette reaches out to her former benefits counselor and explains her dilemma. After reviewing her ABLE resources on what qualifies as QDEs, the benefits counselor meets with Nanette and explains that since she is only in a 1619(b) suspended status (i.e., ineligible for 1619(b) for less than 12 consecutive months), her eligibility can be reestablished if enough ABLE assets are spent on QDEs to bring her account safely below $100,000. Nanette, who was diagnosed with cerebral palsy as a child, has started using a lightweight manual wheelchair and has increased difficulty getting in and out of her bathtub to take a shower, and faces other challenges as her mobility has gotten worse. She and the benefits counselor agree that a $5,500 investment in accessibility modifications to reconfigure the bathroom’s layout, replace her tub with a roll-in shower, and install a more accessible sink and vanity would meet the QDE criteria. And the expense will bring her ABLE account value down to $97,000, allowing her to retain 1619(b). Nanette plans to start looking into the purchase of a new vehicle, with ABLE account funds, that can be better equipped to store her wheelchair while she is driving. Also, at the benefit counselor’s urging, Nanette will have a better plan for monitoring ABLE account assets (including earnings on the account) and a priority list for spending on future QDEs.
SSI Exclusion of ABLE Account Distributions
Exclusion of distributions as income. The SSI program will not count ABLE account distributions as income, even if the distribution is for a non-qualified expense. The reasoning is that the distribution “is not income but is a conversion of a resource from one form to another.”26 Despite this policy, we recommend that ABLE accounts only be used for items and services that qualify as QDEs because distributions for non-QDEs will likely have federal tax consequences and may, in some cases, lead to an IRS audit of the beneficiary’s saving and spending activity. Distributions for non-QDEs may be counted as income for eligibility determinations made by one or more of the other federal benefit programs discussed below.
Ravi’s case. He withdraws $1,200 from his ABLE account on October 20th with plans to use the money buy a new stove ($450) and new refrigerator ($750).
Each would meet QDE criteria as basic living expenses. After buying the stove on October 25th, he decides to wait until November to buy the refrigerator. Since the purchase of the stove is a QDE, the SSI program will not count this as income to Ravi. Since the remaining $750 is unspent, identifiable, and he still intends to use it on the refrigerator, the SSI program will still exclude it from income, and it will continue to be an excluded resource going forward.27 Note: If Ravi had withdrawn the $750 in October to pay November’s rent, but still had not spent that money on rent as of November 1st, the SSI program would consider that QDE for housing costs a countable resource in November.28
On November 20th, Ravi has still not purchased the refrigerator. That same day, he gives the $750 to his brother to pay his December rent. The SSI program will not count any part of the $750 as income even though used for an unqualified expense pursuant to the policy referenced above. However, under IRS rules that part of the $750 that can be considered “earnings” (e.g., interest or dividends) on money initially deposited to the ABLE account will be taxable, with a 10 percent penalty added on to the taxable income from the distribution.29
If we assume the earnings portion of the $750 is $150, the $150 is now taxable income and the tax penalty is $15 (10 percent of $150). Although the tax and penalty consequences could be very modest in Ravi’s case, the stakes could be much higher if the beneficiary had significant annual wages and the unqualified distribution was thousands of dollars (what if Ravi took $15,000 from the ABLE account and bought his brother a car?). If the designated beneficiary makes a habit of using ABLE funds for non-QDE expenses, this could lead the IRS and the State’s ABLE program to audit the beneficiary’s use of the ABLE account which is always an outcome to be avoided.
Using a Special Needs Trust (SNT)30 to fund an ABLE account creates a way to pay for rent without an SSI penalty. If the beneficiary’s SNT paid directly for rent, SSI would treat this as in-kind income and the SSI payment could be reduced by up to one third of the FBR ($314.33 in 2024). However, as noted above, the SNT could contribute the same amount of money to the ABLE account. Thereafter, if the ABLE account distributes that money to pay for rent (a QDE), the SSI program will not count the distribution as income to the beneficiary and the SSI payment is not reduced.
Federal Policy Governing ABLE Accounts and State Medicaid Programs
The Centers for Medicare and Medicaid Services’ (CMS) Dear State Medicaid Director Letter, SMD # 17-002, Implications of the ABLE Act for State Medicaid Programs (Sept. 7, 2017) reinforces principles already covered in the SSI section, above, and applies those principles to State-run Medicaid programs. In determining initial and continuing eligibility, this policy provides that a State Medicaid Program must:
Exclude third party contributions to an ABLE account, including contributions made by a trust, and not count them as income or resources of the ABLE account’s designated beneficiary. Income of the designated beneficiary that is contributed to the ABLE account is still counted as that person’s income.
Exclude all funds in an ABLE account (not limited to the $100,000 excluded by the SSI program), including earnings on money contributed, and not count them as resources of the designated beneficiary.
Not count distributions from the ABLE account as income of the designated beneficiary so long as they are used for QDEs.
Application to Medicaid Buy-In Program
This policy is particularly important for persons who receive or will seek healthcare through the optional Medicaid Buy-In for working persons with disabilities program (known by different names in different States), an option available in 45 States. Although States have established their own income and resource limits for the program, they must follow the 2017 CMS policy related to ABLE accounts.
The Case of David. This former SSDI beneficiary lost cash benefits based on substantial gainful activity-level earnings. He currently earns $52,000 per year and gets health coverage through his State’s Medicaid Buy-In program. That program provides that countable resources cannot exceed $12,000. David opened an ABLE account in 2022 and currently has $9,000 in the account. His goal has been to keep his ABLE account assets below $10,000 on the mistaken belief that those assets count against the $12,000 resource limit for the Buy-In.
David attended a webinar delivered by a benefits counseling agency, during which both the Medicaid Buy-In program and the ABLE program were discussed. After hearing that ABLE assets are excluded and not counted against the Medicaid Buy-In’s resource limits, he meets with one of the agency’s benefits counselors. She explained the federal policy discussed above and provided David with links to the federal policy and his State’s policy, reinforcing that ABLE account assets do not count toward the Medicaid Buy-In resource limit. David is now more aggressively saving in his ABLE account with hopes of making a down payment on a home or condo in the future.
Impact of the ABLE Account on Other Federally Authorized Benefits
Medicare Savings Programs (MSPs)
MSPs provide for Medicaid agency payment of Medicare Part B premiums and, in some cases, copayments and deductibles if a financial needs test is met.31 Although resource limits for MSPs will be much higher than SSI’s $2,000 limit,32 States, in determining countable income and resources for MSP eligibility, must follow all SSI income and resource exclusion rules.33 Since ABLE account resources, up to $100,000, are exempt in the SSI program they will also be exempt in determining MSP eligibility. This means that a Medicare beneficiary can retain a very significant balance in his or her ABLE account and qualify for the Qualified Medicare Beneficiaries program, for example, which would pay for both Part B premiums and the 20 percent copayment on any device covered by Medicare as durable medical equipment.
State Vocational Rehabilitation (VR) Agency’s Financial Need Requirements
A State VR Agency can fund a range of services to allow an eligible person with a disability to achieve a vocational goal. Most of the more expensive services, like college or trade school tuition, or vehicle modifications will in nearly every State be subject to a financial needs test. Federal VR policy requires that an SSI or SSDI beneficiary is exempt from the VR agency’s financial need criteria.34 Since persons can retain SSI cash payment status notwithstanding ABLE account resources up to $100,000, financial eligibility for VR agency funding will continue for those individuals. SSDI beneficiaries with ABLE accounts will remain exempt from financial need criteria.
SSI’s Plan to Achieve Self Support (PASS)
The PASS allows for exclusion of both income and resources to be used to support an approved work goal.35 Since up to $100,000 in an ABLE account is an excluded resource for SSI purposes, there is no requirement that an individual exhaust the ABLE funds before using the PASS to purchase goods and services needed to support a work goal. If PASS savings are not enough to support the work goal in an individual case, an ABLE account distribution for one or more QDEs could be used to supplement those funds available in the PASS.
The Federal Supplemental Nutrition Assistance (SNAP) Program
The SNAP program, often still referred to as Food Stamps, is overseen by the U.S. Department of Agriculture (USDA). It provides means-tested assistance for food purchases and is administered by the States, often by the same agencies that administer public assistance programs. Based on 2017 USDA regulations, assets in ABLE accounts are excluded from resources and distributions are excluded from income when determining SNAP eligibility.36
Federal Subsidized Housing Programs
The federal Department of Housing and Urban Development (HUD) oversees many programs that provide means-tested federal subsidies for rental housing. Two examples are the Housing Choice Voucher Program (formerly the Section 8 certificate program), that provides vouchers for tenant use in the private housing market, and the Public Housing program that typically provides individual apartments in a housing complex.
Those and other HUD-sponsored programs offer reduced rents based on the applicant or applicant family’s countable income.
On April 26, 2019, HUD released a three-page policy, Treatment of ABLE Accounts in HUD-Assisted Programs. Under that policy, which applies to more than a dozen listed HUD programs, HUD will exclude and not count as part of the eligibility process: contributions to the ABLE account by third parties, amounts held in the ABLE account, and distributions from the account for Qualified Disability Expenses. HUD will continue to count as income all earnings of the designated beneficiary, even when that income is contributed to the ABLE account.
ABLE Accounts and Federal Financial Aid Applications
Students seeking federal financial aid are generally required to complete the Free Application for Federal Student Aid (FAFSA), with questions to be completed regarding their financial resources and their parents’ resources. While not required to do so, a college or university’s financial aid office may use information from the completed FAFSA form to determine any non-federal financial aid package to offer to a student.
The FAFSA form addresses ABLE accounts. Questions 38 and 39 ask about the student’s (and their spouse’s) net worth, while questions 86 and 87 ask about the parents’ net worth. Guidance for answering those questions appears in the Notes on page 9, stating that investments do not include ABLE accounts. Therefore, financial aid should be awarded without regard to balances in the student’s, the spouse’s, or the parent’s ABLE account. While a student might want to use their ABLE account to minimize student loan debt, this policy allows student flexibility in making that decision. The student, of course, will likely accept a federal educational “grant,” with no payback required, before depleting ABLE account assets.
Conclusion – The Benefits Counselor’s Role with ABLE Accounts
ABLE accounts are a wonderful tool to assist a person with a disability to lead a better life immediately and in the future. A person with a disability can set up their own account, with their own money or with monies from others, instead of relying on a parent, grandparent, or court to establish a Special Needs Trust for them. A person with a disability can manage the funds in their own ABLE account, making them less reliant on others for assistance and making it easier to access funds. ABLE savings plans are easy to set up with a State ABLE program and the financial institution that works with them. Finally, by using ABLE accounts to exclude monies that would normally be considered resources, a person with a disability can retain or establish eligibility for government programs that will help them become more self-sufficient and independent.
Benefits counselors should promote ABLE accounts to persons with disabilities, their families, and friends. Help the beneficiaries you serve to achieve a better life experience now! As always, please let us know of your successes or challenges as you seek to use the information in these articles in your day-to-day work.
Dated: December 7, 2023
Authors: James R. Sheldon, JD (Board Member), Disability Consultant and Edwin J. Lopez-Soto, JD (NABWIS member), Extension Faculty, Cornell’s Yan Tan Institute (YTI)
Footnotes:
1 26 USC 529A; ABLE Regulations, 26 CFR 1.529-0 – 1.529-8; Social Security Program Operations Manual System (POMS) SI 01130.740 (May 2023 update).
2 Effective January 1, 2026, the ABLE Adjustment Act of 2022 makes ABLE accounts available to those with an onset of disability before age 46.
3 See ABLE National Resource Center and its US Map showing states with ABLE accounts (click on a State for an overview of its ABLE program features).
4 SSDI is used in this article to refer to Social Security Disability Benefits on the worker’s earnings record, Childhood Disability Benefits, and Disabled Widow’s/Widower’s Benefits, often collectively referred to as Title II Disability Benefits.
6 Pursuant to Presumed Maximum Value Rule (PMV), POMS SI 00835.300, a reduction of one third of the FBR is presumed if the beneficiary receives in kind support for rent but not food. This presumption can be rebutted on a showing that the value of the in kind support is less than the PMV.
7 See ABLE National Resource Center and its US Map with State program details. States use a range of formulas in offering deductions or credits.
8 “Marked and severe limitations” means the disability standard for children under 18 claiming SSI based on disability, “but without regard to age or whether the individual engages in substantial gainful activity.” 26 CFR 1.529 A-2(e)(2).
10 Id. The EPMC meets this criterion as a disability-based benefit authorized in Title II of the Social Security Act. 42 USC 426(b); POMS HI 00820.025 A.4. It “provides [at least 93] months of extended Medicare eligibility to persons whose disability ceased due to [substantial gainful activity] and [who] continue to have a disabling impairment.” POMS DI 28055.001 B (emphasis added).
17 See the ABLE National Resource Center’s US Map of active ABLE programs (click on a State.
22 Be aware that State Medicaid agencies must, pursuant to section 1917(b) of the Social Security Act, seek recovery from the estate of certain individuals, including those who received Medicaid at age 55 or older. Implications of the ABLE Act for State Medicaid Programs, SMD #17-002 (Sept. 7, 2017), footnote 15.
25 See POMS SI 02302.000 et seq for 1619(b) policy and SI 02302.200 for State-by-State 1619(b) eligibility thresholds for current and past years. While only a few states have a general eligibility threshold of $50,000 or more, Albin may reside in one of those states or may have met an “individualized” eligibility threshold based on actual Medicaid expenses and/or impairment related work expenses. POMS SI 02302.050.
28 POM SI 00130.740 D.3 (applies to distributions for housing costs held into the next month).
30 See the ABLE National Resource Center’s ABLE Accounts Compared to Special Needs Trusts (May 2018) for a discussion of how ABLE accounts and SNTs differ and how they can be used together to serve the needs of a person with a disability.
31 See Medicare Savings Program section of Medicare.gov website, https://www.medicare.gov/your-medicare-costs/help-paying-costs/medicare-savings-program/medicare-savings-programs.html, summarizing three important MSPs: the Qualified Medicare Beneficiaries (QMB) program, the Specified Low-Income Beneficiaries (SLMB) program, and the Qualified Individuals (QI-1) program.
32 Federal policy requires that State MSP resource limits must be at least $9,090 in 2023. Several States have opted for even higher resource limits, and a few have opted to for no MSP resource limits. See Medicare Savings Programs section of Medicare.gov website.
33 See 42 USC 1396d(p)(1)(B) (requiring that income determinations in the QMB program, and by extension the other MSP programs, be made using SSI rules) and 1396d(p)(1)(C) (requiring that asset determinations, for states with an asset test, be made using SSI rules); see also POMS HI 00815.023 B (SSI earned income exclusions apply).
34 See 34 CFR 361.54(b)(3)(ii) (providing that individuals “determined eligible for Social Security benefits under Titles II [SSDI] and XVI [SSI] of the Social Security Act” must be exempt from the financial needs test.
35 See Social Security POMS SI 00870.001 et seq.
36 7 CFR 273.8(e)(2)(ii) and 273.9(c)(1) (second reference excludes from income a gain or benefit not directly payable to household, including certain vendor payments}. ABLE accounts specifically referenced in former but not latter citation.
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