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ABLE Act Accounts

What is an ABLE Account?
The Achieving a Better Life Experience Act (ABLE Act) is a law that allows qualified
individuals with disabilities to open tax-advantaged savings accounts. ABLE accounts were
modeled after the tuition accounts allowed under the Internal Revenue Service (IRS) Code
Section 529 except that they are for individuals with a disability that manifested itself before
the age of 26. Take note that the account does not need to be set up before age 26,
only that the disability began before that age.
The funds accrue income tax free for federal taxes, and some states may allow for
income tax deductions for contributions made to the account. Account funds can be
used for a range of qualified expenses related to the disability of the individual.
Most states allow deposits from out of state residents so even if your state does not have the
program you may still be able to sign up for another state’s account. For the most current
information and states that offer an ABLE Account, please visit
ABLE accounts are limited to those individuals who became/become disabled prior to age
26. It is important to note that the age consideration is NOT how old the individual is at the time
of the establishment of the ABLE account, but rather it is the age when the disability
presented itself.
The person for whom the account is set up for (aka the ABLE account owner) is
automatically eligible if they meet the age requirement and are also receiving Supplemental
Security Income (SSI) and/or Social Security Disability Insurance (SSDI). If the individual is not
already receiving government benefits, they may still be eligible if they meet the age
requirement, meet Social Security’s definition of disability, and provide a letter certifying their
disability from a licensed physician, a doctor of medicine (M.D.) or doctor of osteopathic
medicine (D.O.).
Who Can Establish and Fund the Account?
An ABLE account can be established by the eligible individual with a disability or by a
beneficiary’s parent, legal guardian or agent acting pursuant to a power of attorney. The
funds can come from either the account beneficiary or any third person (including family,
friends, Special Needs Trust, or Pooled Trust.
Under current law, the eligible individual with the disability is permitted to have only one ABLE
Are There Contribution Limits?
A total of $15,000.00 from all sources combined can be contributed annually
If the ABLE account owner is employed and does not participate in their employer’s defined
contribution plan (such as a 401(k) plan, profit-sharing plan, 403(b) plan, or 457(b) plan), they
may make an additional annual contribution up to the lesser of:
1. The ABLE account owner’s compensation from their employer for the tax year
2. The United States (U.S.) poverty line amount in 2020 of $14,380 in Hawaii, $15,600 in
Alaska, or $12,490 in all other U.S. states
The maximum accumulation amount in the ABLE account is subject to the individual state’s
limit, based on the state’s cap for the traditional 529 Plans. The amount can range from
$235,000 to $529,000 for 2020.
For ABLE account owner’s receiving Supplemental Security Income (SSI), if the account
combined with their other resources exceeds$100,000 there will be a suspension of their SSI until
all their resources no longer exceed the $100,000 limit. However, there is no effect on benefits
under the Medicaid program, even if a beneficiary’s SSI is suspended because the account
exceeds the $100,000 limit.
What Happens to The Funds Upon Termination or Death?
Upon the death of the beneficiary or termination of the account, there is a payback
required for benefits received under the Medicaid program, regardless of whether the funds
were deposited by the beneficiary or came from a third party.
What Types of Expenses Can Be Paid?
The ABLE Act lists certain “qualified disability expenses” that can be paid and while the list is not
exclusive, all expenses must be related to the disability of the account owner. The expenses
can include education, housing, transportation, health, prevention and wellness, financial
management, administrative services, legal fees, personal support services, employment
training, etc. To the extent that expenses are paid that are found to be “non-qualified” they
will be subject to federal income tax and a 10% penalty.
How to Open an ABLE Account
Most states will provide online applications for ABLE accounts. An ABLE account can
be opened in any state, regardless of where the qualified ABLE account
owner lives, as long as the state’s ABLE program allows for out-of-state
residents. For the most current information and states that offer an ABLE account, please
SpecialCare is a program created by MassMutual that provides access to information, specialists and
financial solutions to people with special needs and their families. For more information about
Massachusetts Mutual Life Insurance Company (MassMutual) and its SpecialCare program, please visit
The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries,
employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged
to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should
work with an estate planning team, including their own personal legal or tax counsel.
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01111-0001. All rights reserved.
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