Helping Workers with Disabilities Save for Retirement

ABLE accounts are an important financial tool that help employees save and employers recruit.

By Andrea Feirstein

Helping clients strategize for retirement can be a challenge for advisors. But when a client (or their family member) has a disability, the challenges compound. How do you, as an advisor, approach planning for individuals with disabilities?

Understand the breadth of their financial constraints.

Many individuals with disabilities rely on critical benefits programs such as Medicaid, Supplemental Security Income (“SSI”) or Supplemental Nutrition Assistance Program (“SNAP”) for their care and expenses. But to receive such benefits, the individual cannot accumulate more than $2,000 in savings, effectively prohibiting them from participating in workplace savings and retirement programs. Does it make sense to forego these government benefits in exchange for retirement savings? The answer is likely “no” — especially for clients who depend on Medicaid for costly healthcare needs.

These savings constraints also make income a double-edged sword. Would your client like to take that higher-paying job, or encourage a family member to take that job? Think twice, because the individual with disabilities may not be able to save the extra money they’re earning.

This also poses a dilemma for advising clients who are business owners. Do they offer a 401(k)? Are they joining a state-run retirement program? Be sure to advise them that these traditional tools may not work for their employees with disabilities, because saving money in a 401(k) or an IRA will cause their employees’ government benefits to lapse.

Learn about this game-changing financial tool.

But what can be done? Is there a means by which workers with disabilities can save for their future without jeopardizing Medicaid, SSI, SNAP, or other benefits?

Thankfully, yes! Meet the ABLE account. ABLE accounts are a relatively new financial tool that became available in 2016, following passage of the federal ABLE Act in late 2014. ABLE Plans are state-run investment programs, often offered by the same agency that provides a state’s 529 College Savings Program. The accounts offer tax-advantaged savings and investment options for people with disabilities: Earnings are tax-free so long as the money is spent on Qualified Disability Expenses (a broadly defined term that includes even basic living expenses like food and housing). Money held in an ABLE account does not affect an individual’s eligibility for government benefits programs the way a typical savings or retirement account would.

To eligible for an ABLE account, among other criteria, a person’s disability must have begun before age 26. There is currently legislation in Congress that would raise this limit to age 46.

Originally, ABLE account contributions were limited to $15,000 a year, but in 2017 Congress increased contribution limits for employed account holders who do not already participate in a workplace retirement plan. The ABLE to Work Act allows workers with disabilities to contribute additional amounts – up to between $12,000 and $16,000 more a year, depending on income level and state of residence. The ABLE to Work Act is specifically designed to promote savings by employees who would be precluded from using other retirement vehicles that might be offered by their employers.

Recognize how ABLE accounts can ease the burden for families.

The ABLE to Work Act provides a critical financial planning tool to an advisor’s clients (and their family members) with special needs. For people with disabilities, it eliminates the disincentive to seek employment or a higher-paying job.

In addition, ABLE accounts can help ease the financial planning burden for families of people with disabilities. When a client’s child has a disability, saving for the future can be a double struggle: The client must plan for their ownretirement and for the life-long financial security of their adult child. ABLE to Work can relieve part of that burden, enabling an adult child to save for the future with his or her own earnings, and move toward financial independence.

Before ABLE accounts existed, the planning vehicle of choice for people with disabilities was a special needs trust. Trusts may still be an option for individuals whose families have assets to transfer to them, because ABLE accounts have contribution limits. However, ABLE accounts can, in many cases, replace the need for a trust, saving families time and money.

For others, trusts and ABLE accounts work hand-in-hand. The trust can be a place to invest excess assets and large gifts, while the ABLE account gives individuals a place to save their own money, including earnings from a job — which they cannot deposit into a traditional third-party special needs trust. When the individual eventually stops working, the funds they have saved in the ABLE account remain theirs. They can even continue contributing up to $15,000 annually to the ABLE account, they just won’t be able to take advantage of the higher ABLE to Work contribution limits once employment ends.

Educate business owners about the ABLE to Work Act.

The ABLE to Work Act can also be especially important for clients who are employers or business owners. With ABLE to Work, your client’s business can now offer ABLE account benefits in lieu of traditional retirement savings programs. Businesses can facilitate employee payroll deposits directly into an ABLE account and, depending on State tax treatment or other considerations, also could make contributions into an employee’s ABLE account. Small businesses that have adopted this approach have seen great success.

“Offering disability-inclusive benefits is also an excellent way to attract a loyal employee base in today’s shrinking labor market.”

Offering disability-inclusive benefits is also an excellent way to attract a loyal employee base in today’s shrinking labor market. Research shows that employees with disabilities have higher job satisfaction and productivity, and lower rates of turnover and absenteeism. As we have noted previously, companies that focus on disability inclusion have better growth prospects and perform better on key financial metrics.

Explore ABLE offerings in the states where clients reside.

Since ABLE accounts are still relatively new, more outreach is needed to educate individuals and business owners. ABLE Plans themselves are doing much of this outreach work, and it’s catching on. As an example, Voya has begun promoting the use of ABLE accounts at work, and with luck, other financial firms will follow. Advisors should explore the ABLE Plans offered by the states in which your clients reside as 17 states today offer a tax benefit for investments in a particular Plan. Additionally, commissioned brokers should research options for Plans that include advisor compensation. Although most ABLE Plans are direct sold, advisors may still be able to offer services to ABLE clients under other compensation models.

Additional Reading: A Boon for Clients With Disabled Children, Even Adult Ones 

We see ABLE accounts becoming a more popular financial tool for individuals, families, and businesses in the coming years. The accounts offer promising savings opportunities for employees and exciting benefits and recruitment opportunities for employers. Whether you advise families, individuals with disabilities, or business owners – make sure that ABLE accounts and the ABLE to Work initiative are part of your planning discussions.

Andrea Feirstein is the founder and CEO of AKF Consulting, a leading SEC- and MSRB-registered municipal advisor to public administrators of 529, ABLE and state-run retirement programs. We work with state governments and public entities nationwide to structure programs that help people save for education, disability-related expenses and retirement. Andrea invites you to contact her ( if this article piqued your interest in learning more about ABLE Plans and the opportunities they present for you and your clients.



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