The ABLE Act

In December of 2014, the Achieving Better Life Experiences (ABLE) Act was signed into law. The ABLE Act allows those who become disabled before the age of 26 to open ABLE accounts (529A accounts) dedicated to disability-related costs. An ABLE account can grow without having its earnings subject to tax. Furthermore, an ABLE account can accumulate up to $100,000 without that money affecting an account holder’s eligibility for Supplemental Security Income (SSI) or benefit level.

Each state is responsible for establishing its own protocols for ABLE accounts. So far, 27 states have developed ABLE account programs, and 10 more have legislation in the works.

The IRS and Treasury Department are working to iron out some of the issues and answer questions about ABLE accounts. They recently released a Notice of Proposed Rulemaking in which they outlined a number of issues to be considered when developing ABLE account regulations. They include:

-Who can establish an ABLE account?

-How will disability be determined and/or re-certified?

-How will someone’s state of residency be decided when establishing an ABLE account?

-What happens if the account holder or benefit recipient moves?

-How will qualifying expenses for tax-free distributions from accounts be determined?

Feedback on the Notice of Proposed Rulemaking is being accepted until September 21, 2015.