Disabled Americans won a victory recently when Congress passed an expansion of state-based accounts that allowed them to work and save money without risking losing public services like Medicaid.
The change means an estimated six million more people, including about a million military veterans, will eventually qualify for the tax breaks, disability advocates say. The accounts, known as ABLE accounts, are named after the 2014 law that created them, the Achieving a Better Life Experience Act.
Forty-six states and Washington, DC offer ABLE accounts, which first became available in 2016 and are loosely modeled after 529 college savings accounts. But savings in ABLE accounts have been a bit slow to take off, in part because they’ve been limited to people who became disabled before age 26.
Now, the ABLE Age Adjustment Act, included in the omnibus spending bill passed in December, has raised the threshold for beginning a qualifying disability to age 46. That means people may be eligible if their disability occurred after their mid-20s, in a car accident, for example, or a neurological disease they developed, such as multiple sclerosis. It may also help people dealing with the lingering effects of Covid-19, said Thomas Foley, executive director of the National Disability Institute.
The bills allow people with disabilities to save and invest for current expenses and future needs, including housing, education, transportation and legal expenses, without the funds disqualifying them from need-based federal aid such as Medicaid and Supplemental Security Income. Generally, a person with a disability cannot have more than $2,000 in savings or other assets to qualify for those programs. But money in an ABLE account does not count towards that total.
“It’s a safe place to save money,” said Mr. Foley.
The age expansion was critical to the ABLE program overall, supporters say. A 2019 report from the National Association of State Treasurers warned that participation was too low to maintain affordable fees for ABLE accounts and support the programs over the long term. The association’s charitable arm, the NAST Foundation, has taken several initiatives to promote awareness of the bills.
However, the new rule will not take effect until January 2026. That tempers the news about expanded access somewhat, says Mary Morris, CEO of Virginia529, the agency that oversees Virginia’s ABLEnow program. People may be disappointed, she said, to hear about the accounts, only to be told they have to wait several years to participate.
“It’s a bit of a disappointment,” she said.
Still, millions of people may already be eligible and could be helped with extensive outreach, advocates say. Under current rules, an estimated eight million people are eligible for ABLE, but only a small fraction of them have an account. (About 14 million could be eligible for the expansion.)
“We need to reach out to those who are excluded,” said Stacy Garrity, state treasurer for Pennsylvania and president of the ABLE Savings Plans Network.
According to ISS Market Intelligence, a financial research and analysis firm, by the end of 2022 there were an estimated 134,000 ABLE accounts with more than $1.18 billion in assets.
Here are some questions and answers about ABLE accounts:
How much can I contribute to an ABLE account?
Anyone — family members, friends, and even employers — can contribute to the bills, up to a 2023 maximum of $17,000. If a disabled person works with an ABLE account, that person can make additional contributions from his or her own income, up to $13,590 in most states, for an annual total of $30,590.
There are limits on total balances. In general, accounts can grow to $100,000 without impacting additional security revenue. But the balances can be much higher without affecting eligibility for other benefits, such as Medicaid or federal housing assistance.
There is no federal tax deduction for contributions to an ABLE account, but earnings and withdrawals for eligible expenses are tax-free. Some states offer state tax breaks for contributions.
Do I have to open an ABLE account in my home country?
No. Many programs accept participants from out of state. To compare programs, you can visit websites including the ABLE National Resource Center and ABLE Today.
I may be eligible for an ABLE account under the new rules. What can I do to prepare for 2026?
Disabled people and their families can educate themselves and their supporters about the bills and how they are used, said Mr. Foley. While family members can’t save money in the disabled person’s name for now without jeopardizing government benefits, they could save themselves with the intention of contributing the money starting in 2026, he said.
