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Upton supports creation of tax-free savings accounts for Michiganders with disabilities

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WASHINGTON, DC, December 3, 2014 | Lynn Turner / Nick Culp (269-385-0039 / 202-225-3761) | comments

More than 2 million Michigan adults have some form of a disability and that number is projected to increase by the year 2030, reports the Michigan Department of Community Health. We want to help give those families the opportunity to save for their future and long-term expenses, said U.S. Representative Fred Upton, R-St. Joseph, a supporter of the original Americans with Disabilities Act (ADA).

Upton joined his House colleagues this evening in passing bipartisan legislation – H.R. 647, the Achieving a Better Life Experience (ABLE) Act of 2014 – to create tax-free savings accounts (ABLE accounts) for individuals with disabilities to cover qualified expenses such as education, housing, and transportation. Upton is a cosponsor of the ABLE Act, which passed the U.S. House of Representatives by a vote of 404 to 17 and now awaits action in the U.S. Senate.

“The ABLE Act empowers millions of Americans with disabilities, enabling them to save for their own future needs without jeopardizing the benefits and services they vitally depend upon,” said Upton. “Through access to tax-free savings accounts, we can help our most vulnerable maintain their health, independence, and quality of life.”

The creation of tax-free savings accounts for individuals with disabilities has been a top priority for disability rights advocates in Southwest Michigan.

"The ability to save money for housing or home modifications, assistive devices, accessible transportation, education & health care is critical for people with disabilities,” says Joel Cooper, President & CEO at Disability Network Southwest Michigan. “We hear from people with disabilities and family members who would like to put aside some money to pay for these necessities but cannot because they fear that this will jeopardize the health, housing, or community living supports they need to survive. We believe the ABLE Act will provide the security people need to negotiate the expenses that living with a significant disability brings.”

Under the ABLE Act, states would have the option to establish an ABLE program, under which eligible individuals with disabilities may establish an ABLE account. To be eligible, individuals must: 1) be severely disabled before turning age 26, based on a marked and severe functional limitation; or 2) receive benefits under the Supplemental Security Income (SSI) or Disability Insurance (DI) programs. 

ABLE accounts would be modeled after existing 529 investment plans – named after section 529 of the Internal Revenue Code – that are already used by families to save for college expenses. ABLE account balances and withdrawals would not jeopardize an individual’s eligibility for Medicaid and other benefit programs.

Other key features of the program include the following:

  • Contributions into an ABLE account can be made by any person;

  • Contributions are not tax deductible;

  • Income earned by the accounts is not taxed;

  • Account withdrawals, including portions attributable to investment earnings generated by the account, for qualified expenses are not taxable;

  • Qualified expenses are those related to the individual’s disability, including health, education, housing, transportation, training, assistive technology, and personal support;

  • Individuals are limited to one ABLE account, and total annual contributions by all individuals to any one account can be made up to the gift tax limit ($14,000 in 2014);

  • Aggregate contributions to an ABLE account are subject to an overall limit matching the State limit for Section 529 accounts;

  • Individuals with ABLE accounts can maintain eligibility for means-tested benefits. ABLE account balances and withdrawals are completely excluded for the purpose of Medicaid and other benefit programs. In SSI, the first $100,000 in account balances is excluded; and

  • In the event a beneficiary of an ABLE account dies (or no longer has a disability) and has remaining assets in the account, the assets are first distributed to any state Medicaid plan that provided medical assistance to the beneficiary.

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