New ABLE Report Highlights Good News for Disabled

An additional 6 million Americans, including 1 million veterans, will be eligible for ABLE accounts.

By Jerilyn Klein

Financial advisors should take the time now to familiarize themselves and their clients with two big developments highlighted in a market report on ABLE accounts that was recently published by AKF Consulting Group.

First, an estimated 6 million more Americans, including 1 million injured veterans, will become eligible for ABLE accounts thanks to new legislation that expands eligibility to individuals whose qualified disability began prior to age 46, up from 26. Although this change won’t go into effect until January 1, 2026, it’s important for families to be aware of it now, says Andrea Feirstein, the founder and a managing director of AKF Consulting Group.

The second development permits a greater array of people to serve as ABLE account managers for individuals with disabilities who are unable to establish and manage their own account. Initially, only a parent, guardian or power of attorney could assume this role. Siblings, grandparents and others may now step in.

ABLE accounts, first launched in 2016 and known as 529(a) accounts, are tax-advantaged savings accounts that allow individuals with disabilities to accumulate more than $2,000 in savings without losing SSI (supplemental security income), Medicaid and other benefits. Maximum account balances vary by state and generally range from about $400,000 to over $550,000.

Annual contributions to an ABLE account, tied to the federal annual gift tax exclusion, are limited to $17,000 in 2023. Under the ABLE to Work Act, ABLE account workers who don’t participate in employer-sponsored plans may be able to contribute more than the annual limit.

Spread the word

An estimated 14.2 million Americans will be eligible for ABLE accounts once the expanded age of onset kicks in. The provision comes from the ABLE Age Adjustment Act, which was included in the Consolidations Appropriations Act (Secure Act 2.0) signed into law in December 2022. State programs, advocates and stakeholders lobbied for years to increase the age of eligibility, notes AKF Consulting Group’s new “ABLE America” report.

Trusted advisors should spread the word generally since some disabilities could appear in ‘early adulthood’ — in my mind, late twenties to late thirties — but may have been hidden earlier,” Feirstein tells Rethinking65.

Mental illnesses and degenerative or terminal diseases can present at this time, such as schizophrenia, multiple sclerosis and late-stage cancers, notes AKF’s report. Individuals who experienced traumatic brain or physical injury between ages 26 and 46 (including veterans) will also be eligible for ABLE accounts. The Social Security Administration’s List of Compassionate Allowances Conditions includes more adult-onset conditions that qualify for ABLE accounts.

“Of course, for an advisor, it will always be easier to broach the topic [of ABLE accounts] if they have reason to believe a disability already exists,” says Feirstein. In other cases, “they will have to walk a fine line.” The topic can also come up or be broached by advisors in general discussions about financial planning enhancements and changes resulting from Secure 2.0, she says.

Juliana Crist, a senior consultant with AKF Consulting Group, also encourages advisors to spread the word to clients about expanding eligibility of ABLE accounts. Disabilities can take years to surface and “even if their family member doesn’t have a disability, they are very likely to know someone else who does,” says Crist.

It can now take a village

Client discussions should also cover the expanded, hierarchical list of eligible account managers established under IRS final regulations. As noted in the AKF report, the following people in this order may serve as eligible account managers: (1) a power of attorney, (2) a conservator or legal guardian, (3) a spouse, (4) a parent, (5) a sibling, (6) a grandparent, or (7) a representative payee (an individual or an organization) appointed by the Social Security Administration.

“The expanded categories give individuals and families much more flexibility, especially where a parent or guardian may not be present,” notes the AKF report. However, not all states implement this hierarchy or implement it equally, it points out.

For instance, Pennsylvania requires individuals to prove they are the account owner’s sibling by submitting a birth certificate that shows a common parent. North Carolina requires an affidavit. Virginia and a few other states require representatives to submit additional documentation with their applications. Maryland will begin implementing the full hierarchy starting in June, says Crist.

Many states also require applicants to submit power-of-attorney forms in some or all hierarchy situations. Instead of requiring documents, some other states allow account managers to self-attest to their position on the hierarchy, according to the AKF report.

The easiest way to find out which categories a plan accepts to look at the state plan’s website or plan-disclosure statement, says Crist. She also points to ABLE Today, which she says is a good resource that researches and collects information on all plan websites.

Additional suggestions

AKF’s latest ABLE market report suggests a number of technology improvements for administrators of state-run ABLE programs. This includes offering mobile apps (only one program currently does), adding live-chat sessions and offering Social Security direct-deposit (only a few plans currently do).

The report also suggests several legislative changes, including making permanent the ABLE to Work and ABLE-to-529 rollover provisions. Both provisions are scheduled to sunset as of Jan. 1., 2026. Additional legislative suggestions that AKF Consulting Group includes in its report are exempting 529 rollovers from annual contribution limits (as noted earlier, currently $17,000 per year) and adding the ability to make one-time lump sum contributions to ABLE accounts.

Another suggestion AKF supports in its latest “ABLE America” report is removing the one-account rule.

The ability to have multiple ABLE accounts for one person could also be a game changer for industry growth and account holder stability. It would also solve administrative problems that arise when an account owner has multiple (and even competing) would-be account managers. For instance, with multiple accounts, parents who may be separated could each oversee a distinct ABLE account for their child,” says the report. “This multiple-account structure works in the 529 industry and could potentially work well for ABLE, too.”

Currently, 46 States and the District of Columbia offer 15 distinct ABLE Plans, according to the AKF market report. Most states offer a single plan directly to the public. As of December 31, 2022, ABLE-plan assets exceeded $1.25 billion and ABLE accounts numbered more than 137,000.

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