How to Handle Balances Held Within and Distributions from ABLE Accounts

June 13, 2019

ABLE accounts are tax-advantaged savings accounts for individuals with disabilities and their families. They were created as a result of the passage of the Achieving a Better Life Experience Act of 2014, better known as the ABLE Act. The beneficiary of the account is the account owner, and income earned by the accounts is not taxed.

ABLE accounts are tax-advantaged savings accounts for individuals with disabilities and their families. They were created as a result of the passage of the Achieving a Better Life Experience Act of 2014, better known as the ABLE Act. The beneficiary of the account is the account owner, and income earned by the accounts is not taxed.

Millions of individuals with disabilities and their families depend on a wide variety of public benefits for income, health care, food, and housing assistance. Eligibility for these public benefits (SSI, SNAP, Medicaid) require meeting a means or resource test that limits eligibility to individuals who report more than $2,000 in cash savings, retirement funds, and other items of significant value. To remain eligible for these public benefits, an individual must have low income.

The ABLE Act recognizes the extra and significant costs of living with a disability. These include costs related to raising a child with significant disabilities or a working age adult with disabilities, for accessible housing and transportation, personal assistance services, assistive technology, and health care not covered by insurance, Medicaid, or Medicare.

With the passage of the ABLE Act, eligible individuals and their families are allowed to establish ABLE savings accounts that will largely not affect their eligibility for SSI, Medicaid, and other public benefits. The legislation explains further that an ABLE account will, with private savings, “secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary’s employment and other sources.” The designated beneficiary must be a person with disabilities, whose disability began prior to his or her 26th birthday and who meets the statutory eligibility requirements.

HUD recently published Notice H-2019-06 and Notice PIH 2019-09 on the treatment of ABLE accounts in HUD programs. In effect, for the purpose of determining eligibility and continued occupancy, HUD will disregard amounts in the designated beneficiary’s ABLE account.

Applicability

HUD’s notice regarding the treatment of ABLE accounts applies to the following programs:

  • Housing Choice Voucher Program, including all special voucher types;
  • Public Housing;
  • Project-based Section 8 — New Construction, State Agency Financed, Substantial Rehabilitation, Section 202/8, Rural Housing Services (RHS) Section 515/8, Loan Management Set-Aside (LMSA), Property Disposition Set-Aside (PDSA), Rental Assistance Demonstration Project Based Rental Assistance (RAD/PBRA);
  • Section 202/162 Project Assistance Contract;
  • Section 202 Project Rental Assistance Contract;
  • Section 202 Senior Preservation Rental Assistance Contracts (SPRAC);
  • Section 811 PRAC;
  • Section 811 Project Rental Assistance;
  • Section 236 (including RAP);
  • Section 221(d)(3)/(d)(5) Below Market Interest Rate (BMIR).

Treatment of ABLE Accounts in HUD Programs

Section 103 of the ABLE Act mandates that an individual’s ABLE account (specifically, its account balance, contributions to the account, and distributions from the account) is excluded when determining the designated beneficiary’s eligibility and continued occupancy under certain federal means-tested programs.

Income classification. According to the notice, the entire value of the individual’s ABLE account will be excluded from the household’s assets. This means actual or imputed interest on the ABLE account balance won’t be counted as income. Distributions from the ABLE account also aren’t considered income. However, all wage income received, regardless of which account the money is paid to, is included as income.

For example, if the applicant or resident has a portion of his wages directly deposited into his ABLE account, then all wage income received, regardless of which account the money is paid to, is included as income. However, pre-tax employer contributions to an ABLE account (that are not deducted from wages) are excluded.

If the designated beneficiary subsequently deposits any amount previously included as income into his ABLE account, that deposited amount must not be included in the household’s asset calculation or counted as income again when the beneficiary receives a distribution from the account.

Outsider contributions. For cases in which contributions are made by others directly into the resident or applicant’s ABLE account, that contribution is not be counted as income to the designated beneficiary. For example, if a relative provides a recurring gift of $100 per month directly to the beneficiary, the recurring gift would be counted as income. But if a relative deposits the $100 recurring monthly gift directly into the ABLE account, then it won’t be counted as income. It’s important to note that any person can contribute to an ABLE account. But the Internal Revenue Service (IRS) limits the total annual contributions that any ABLE account can receive from all sources for a given calendar year.

Rollovers. Rollovers from existing ABLE accounts to the designated beneficiary’s ABLE account are not counted as income to the designated beneficiary. 

Verification of ABLE Accounts

The notice states that PHAs and owners should verify the amount held in the ABLE account. And PHAs and owners should develop a policy and procedures for verifying ABLE accounts. That policy should obtain the following information: 

  • The name of the designated beneficiary; and
  • The state ABLE program administering the account to verify that the account qualifies as an ABLE account.

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