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People with disabilities can now set some financial goals thanks to this game-changer

How ABLE accounts are changing the lives of the disabled

There's one form of discrimination that the 1990 Americans with Disabilities Act didn't fix: economic.

Until recently, people who were eligible for federal assistance programs such as Medicaid and SSI still faced an uneven playing ground. Using these programs meant you could not have assets over $2,000, a paltry amount when you consider life's various costs.

In order to stay under the cap, people routinely spent money monthly on non-essentials, such as extra clothes or DVDs. One family purchased 100 pairs of socks for their son to avoid having too much money. The one thing they couldn't do with that money was park it in a savings or investment account to save for their future.

The asset cap was put into place in 1964, says Chip Gerhardt, a registered lobbyist in Ohio and one of the advocates who worked on federal and state legislation for ABLE accounts. "The [limit] never went up," he said.

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Financial life for people with disabilities has been truly dire, says Miranda Kennedy, director of the ABLE National Resource Center.

An estimated 31.5% of people age 21 to 64 with a cognitive disability in the U.S. were living below the poverty line in 2017, according to Cornell University. People with a disability are more than three times likely to have extreme difficulty paying their bills, Kennedy says.

The problem of poverty in the disability community has long been almost universally recognized, and legislators as well as disability advocates began scouting solutions in recent years.

Looking for an answer

Initial proposals considered Social Security or Medicaid as possible solutions, but those programs were too unwieldy to alter directly.

Ultimately, the idea of amending the 529 college savings program was floated, and momentum began building in 2010 or 2011. "It was a good vehicle," Gerhardt said. "Simple to understand, and most people had one."

After years of bipartisan, bicameral legislative effort, the Achieving a Better Life Experience (ABLE) Act was signed into law in 2014 by President Obama. The tax-advantaged accounts would give disabled people a way to save more, under the same tax code that created 529 college savings plans.

Financial life for people with disabilities was really dire.
Miranda Kennedy
director of the ABLE National Resource Center

People can save up to $100,000 in an ABLE account with annual contributions up to $15,000, without jeopardizing federal assistance programs. Unlike 529 college savings plans, a person can have only one ABLE account in their name. The accountholder must be younger than 26 when diagnosed with a disability. Investment growth is tax-free, as are withdrawals for qualified expenses.

"ABLE is the first thing in many years that starts to chip away at that archaic system," says JJ Hanley, director of the Illinois state program.

"It's a substantial change, so forward-thinking," Hanley said. "An individual can now build self-reliance while receiving needed support."

Not a slam dunk

It took another two years for the accounts to roll out.

"We were very excited with the program Congress created," said Illinois State Treasurer Michael W. Frerichs. Unfortunately, setting it up wasn't easy. Financial services firms were reluctant to work with Illinois, and they had trouble getting bidders.

It was a matter of numbers: The state had more than 600,000 college savings 529 accounts with some $12 billion in assets. The highest estimate for ABLE accounts was far, far smaller: Perhaps 30,000 to 35,000 families in the state would use them.

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Also, Frerichs says, potential partners felt the accounts would have more in common with checking accounts. A parent might set up a college 529 plan for a newborn. "You'd have 18 years before using it," he said. "With an ABLE account, you might put money in today and then need something next month, for a wheelchair or medical expense."

Other states, like Kansas, were having the same problem. By forming an alliance — initially, the request for proposals included 10 states — they were able to make the program more attractive to financial services firms. The initial request for proposals included 10 states, making it larger than the state of California, which helped negotiate favorable rates.

Illinois now has about 1,200 accounts funded, with over $7.5 million saved. The alliance in total has more than 10,000 accounts, with about $67 million in assets.

As of November, ABLE account owners on the Ascensus platform have contributed $51.9 million in savings and withdrawn $16.7 million to pay for qualified expenses. Ascensus is the program administrator for 20 state ABLE programs and Washington, D.C.

Changes for wage-earners

In 2017, the ABLE to Work Act passed, allowing accountholders who earn a salary to contribute above the $15,000 limit.

"The ABLE is game-changer for anyone [with a disability]," said Edward Mitchell, 33.

Edward Mitchell
Source: U.S. Senate

Mitchell's life changed forever when he was hit by a truck at age 16. While biking to work, a hit-and-run driver caused a spinal cord injury. About 17,700 people sustain a spinal cord injury each year in the U.S.

An independent living specialist in Jackson, Tennessee, Mitchell keeps his hours to part-time and works at reduced salaries to maintain benefits and needed nursing support. He is also a fan relations coordinator for a minor league baseball team. He still hopes to work full-time.

Family and friends can now contribute to his account for technology and medical expenses. Mitchell is saving for a wheelchair-accessible van. "I wish they'd been around when I first had my accident," he said.

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