In June 2016, Ohio became the nation’s first state to offer a new class of savings accounts, designed to help people with disabilities and their loved ones save and invest money, under the Achieving a Better Life Experience (ABLE) Act. Since then, 2,315 people have signed up for accounts, the Piqua Daily Call reports. More than 1,000 of these account holders are not residents of Ohio; the State’s program is open to applicants nationwide.
New Savings Vehicle For People With Disabilities
All too often, people with disabilities are trapped in poverty. The nation’s current social services framework makes saving money nearly impossible, since the government programs on which most individuals with special needs rely are only available to people with extremely limited assets. In effect, many people with disabilities are forced to keep their personal savings below an arbitrary limit – usually $2,000 – or risk losing access to government assistance for their basic needs.
The problem is so bad, says Doug Jackson, deputy director of Ohio’s STABLE office, that, until now, “people with disabilities have never talked about investments.” ABLE accounts have been suggested as a potential solution – and initial signs are promising.
Ohio’s version of ABLE – dubbed STABLE – allows people with disabilities to save their money in tax-advantaged investment accounts without losing their eligibility for means-tested benefits programs, like Medicaid and SSI. Earnings aren’t subjected to federal income tax as long as purchases are restricted to qualified disability expenses, a wide range of goods and services that can include housing, education, health care and transportation.
Vermont Joins States Offering ABLE Accounts
Ohio’s success has inspired other states to get into the act. On February 22, 2017, Vermont’s Treasurer Beth Pearce announced the kickoff of an ABLE account program to serve the Green Mountain State’s residents, VTDigger reports.
Vermonters with disabilities or their guardians will be able to contribute up to $14,000 per year without being subjected to taxes. Hoping to reduce the State’s administrative costs, Vermont has teamed up with Ohio’s STABLE system, which offers tax-advantaged savings accounts to people with disabilities regardless of their state of residence. Vermont Governor Phil Scott called the decision to piggyback on Ohio’s framework a “pragmatic” one. Vermont is the second smallest state in the Union, with a population around 626,500 people. “It makes sense for us to try to work with another state to try to administer the program more efficiently,” Scott said, adding that he hoped to “get the maximum benefit for individuals.”
People with disabilities in Vermont say the new accounts could have a transformative effect for the State’s disability community. ABLE accounts “will allow us to pay our own way and be seen as contributing, responsible members of society,” said Max Barrows, the outreach director for Green Mountain Self-Advocates. “An ABLE account is important to me because it allows me to get ahead and be more independent because I save to pay for disability-related expenses,” Barrows, who identifies himself as being on the autism spectrum, told an audience.
National ABLE Alliance Rolls Out Savings Programs
Elsewhere, 13 states have banded together to form the National Able Alliance, a partnership intended to lower costs for applicants, while offering strong investment options:
- New Jersey
- North Carolina
- Rhode Island
Working with investment giants like Vanguard, BlackRock and Charles Schwab, the Alliance’s members have begun rolling out their state-based ABLE programs in phases. While most programs will accept applicants nationwide, signing up with your own home state’s ABLE system usually offers tax benefits that aren’t available to out-of-state account holders.
STABLE accounts also offer family members a safe way of contributing to their loved one’s long-term goals. Placed directly into a person’s individual savings account, inheritances and gifts – though welcome – can threaten a person’s continued eligibility for government benefits. A STABLE account, however, isn’t limited to contributions from the account’s holder. In fact, contributions to a STABLE account are tax-deductible up to a $2,000 annual limit.