ABLE Accounts

In 2014, the Achieving a Better Life Experience (ABLE) Act was signed into law to enable and empower individuals with disabilities to save and invest without jeopardizing other benefits. The law began as a conversation between parents about inequalities their children with disabilities face. It became the first piece of legislation aimed at people with disabilities that passed through Congress since the Americans with Disabilities Act. Over the next eight years, advocates worked to garner support for the law. Life with a disability can increase living expenses by an estimated 28%, and many living with disabilities live in poverty. ABLE Accounts are tax-advantaged accounts that do not consider balances up to $100K as assets for eligibility-based benefits. Funds within the accounts can be used for qualified disability expenses, and most plans offer debit cards. However, awareness of ABLE Accounts is low. A survey by Deloitte Insights among people with disabilities showed that 73% of respondents did not know of the account, and most respondents come from low-income-earning households. The survey also found that over half of respondents believe banks are the go-to source for information on financial well-being. Yet, as our team researched this topic, we found the branch isn’t where individuals can go to learn more about ABLE. Bank associates from one custodian weren’t willing to help, in fact, one branch manager seemed exasperated when pressed for more information. States and banks have an opportunity and obligation to offer support to communities that need it most.

Individuals who benefit from social programs are subject to income restrictions to remain eligible. Prior to ABLE, Special Needs Trusts (SNTs) were the only option available to protect beneficiaries from losing their program benefits while receiving other financial support. SNTs are expensive and require an attorney to draft the trust documents; SNTs need constant management and oversight, which can be cumbersome without paying for expertise from a lawyer, accountant, portfolio manager, etc. ABLE accounts are easily accessible and can be opened online with a minimal or no deposit. Account holders can choose to use their account as a checking account for qualified disability expenses or as a savings account to earn interest, and they can choose to invest in tax-advantaged funds. Debit cards and checks enable account holders to use their funds for qualified expenses like assistive technology, employment training and support, basic living expenses, and more. Fees and charges can vary between plans and if investment options are selected. While the option is not meant to replace SNTs, it is a more affordable option and can be a complementary tool to an SNT.

When the ABLE Act was enacted, states gained the ability to create and offer plans to residents living with a disability. Forty-six states and the District of Columbia offer a plan, with Idaho, North Dakota, South Dakota, and Wisconsin opting to allow residents to establish their accounts in another state. PNC Bank and Fifth Third Bank are two institutions that act as custodians for state-sponsored ABLE plans. States and custodians should work together to provide eligible individuals with the information they could use to become more independent. Rhode Island passed a bill that requires school districts to provide ABLE account program information to parents and guardians of students with an individualized education plan, starting with the 2024-2025 school year. Including this information with other paperwork at the beginning of the school year is likely the most effective way to communicate the availability of ABLE accounts to eligible individuals. Contact information for custodians and the state will lead interested parties to reach out to the right places.   

Although a valuable tool, ABLE accounts aren’t free of criticism. As of 2024, only individuals who were disabled prior to the age of 26 (including at birth) and meet one of the two following qualifications are eligible for ABLE: receive SSI or possess signed documentation from a physician confirming a severe disability. Given that a life-altering event can cause disability at any age, it’s prohibitive to set an age limit so young. Therefore, in 2021, the Act was amended to increase the disability onset age to before age 46, effective in 2026. An estimated six million additional people will become eligible for this change, with 1.2 million being veterans. Limitations bar contributions to $18,000 per year, and balances of $100,000 or more will affect program benefits. Funds within the accounts are restricted to qualified disability expenses like education, housing, transportation, and basic living expenses such as food. Upon the death of the beneficiary, funds in an ABLE account will be used to pay back Medicaid and any other outstanding qualified disability expenses. For funds that remain after any outstanding debts are paid, a successor account owner may be named. The successor must be an ABLE-qualified individual and a sibling, stepsibling, or half-sibling of the account owner, whether by blood or adoption. As a promising practice, there is flexibility given to individuals nearing the end of life if they wish to roll over or do a program-to-program transfer of funds.

An estimated eight million individuals living with disabilities are currently eligible for an ABLE account, yet there are just under 200,000 accounts open, and accounts are one per person. States and custodians would benefit from bringing awareness to ABLE and extending resources in anticipation of the age limitations increasing in 2026.