Disabled Americans recently scored a victory when Congress approved an expansion of state-based accounts that let them work and save money without risking the loss of public benefits like Medicaid.
The change means an estimated six million more people, including about one million military veterans, will eventually qualify for the tax-favored accounts, advocates for disabled people 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, D.C., offer ABLE accounts, which first became available in 2016 and are loosely modeled on 529 college savings accounts. But saving in ABLE accounts has been somewhat slow to catch on, partly because they have been limited to people who became disabled before the age of 26.
Now, the ABLE Age Adjustment Act, included in the omnibus spending bill passed in December, has raised the threshold for the onset of a qualifying disability to age 46. That means people can be eligible if their disability occurred after their mid-20s, in a car accident, say, or from a neurological disease they developed, like 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 accounts let people with disabilities save and invest for current expenses and future needs, including housing, education, transportation and legal costs, without the funds disqualifying them from need-based federal help like Medicaid and Supplemental Security Income. In general, a disabled person can’t have more than $2,000 in savings or other assets to qualify for those programs. But money in an ABLE account doesn’t count toward that total.
“It’s a safe place to save money,” Mr. Foley said.
The age expansion was crucial for 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 sustain the programs over the long term. The association’s charitable arm, the NAST Foundation, has started several initiatives to promote awareness of the accounts.
The new rule, however, won’t take effect until January 2026. That somewhat damps the news of expanded access, said Mary Morris, chief executive of Virginia529, the agency that oversees Virginia’s ABLE Now program. People may be disappointed, she said, to learn about the accounts only to hear that they must wait several years to participate.
“It’s a bit of a letdown,” she said.
Still, millions of people may already be eligible and can be helped with expanded outreach, advocates say. Under current rules, an estimated eight million people qualify for ABLE, but just a small fraction of them have accounts. (About 14 million may qualify under the expansion.)
“We need to reach out to those who have been excluded,” said Stacy Garrity, state treasurer for Pennsylvania and chair of the ABLE Savings Plans Network.
At the end of 2022, there were an estimated 134,000 ABLE accounts with more than $1.18 billion in assets, according to ISS Market Intelligence, a financial research and analytics firm.
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 accounts, up to a maximum for 2023 of $17,000. If a disabled person with an ABLE account works, that person can contribute extra from his or her own earnings, up to $13,590 in most states, for an annual total of $30,590.
There are caps on total balances. Generally, accounts can grow to $100,000 without affecting Supplemental Security Income. But balances can be much higher without affecting eligibility for other benefits, like Medicaid or federal housing assistance.
There is no federal tax deduction for contributing to an ABLE account, but earnings and withdrawals for eligible expenses are tax-free. Some states may offer state tax breaks for contributions.
Do I have to open an ABLE account in my home state?
No. Many programs accept out-of-state participants. To compare programs, you can check websites including the ABLE National Resource Center and ABLE Today.
I may qualify 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 accounts and how they are used, Mr. Foley said. While family members for now can’t save money in the disabled person’s name without jeopardizing government benefits, they could save on their own with the intention of contributing the money beginning in 2026, he said.