Hunt & Associates P.C.

Ready to Launch? Oregon’s ABLE Accounts to Open for Business in December 2016

MoneyOur past blogs have told you about a recently enacted federal law, the Achieving a Better Life Experience Act of 2014 (the “ABLE Act”), which allows persons with disabilities to establish accounts that can be used to pay expenses related to their disabilities.[1]  Up to $14,000.00 can be contributed to an ABLE account each year.  Account earnings grow tax deferred and, provided the funds are used by the account owner to pay for “qualified disability expenses”, are tax free. Such expenses would include education, health, housing, transportation, employment training and financial management services.

The ABLE Act left it to the individual states to enact legislation to implement the Act.  At this writing four states (Ohio, Tennessee, Florida and Nebraska) have established ABLE accounts and are open for enrollment.  Of the participating states, Ohio, Nebraska and Tennessee allow out of state residents to enroll in their programs.

Oregon is getting closer to launching its own ABLE account program.  The Oregon 529 Savings Board recently announced that the “Oregon ABLE Savings Plan” will open for enrollment this December.  The Plan will be managed by BNY Mellon and will allow participants a choice of investment strategies. Contributions to such accounts will be limited to $14,000.00 annually with total contributions to an account limited to $310,000.00.

In addition to the tax free growth features allowed under the federal legislation, the Oregon Plan will provide tax benefits to ABLE accounts with beneficiaries under the age of 21. Contributions to those accounts will be deductible for Oregon income tax purposes up to annual limits that are indexed annually for inflation.  For 2016, the maximum deduction will be $2,130.00 for single filers and $4,620.00 for taxpayers filing jointly.

Congress is currently considering new legislation which would expand the scope of the ABLE Act.  The proposed ABLE to Work Act would allow people with disabilities who are employed to deposit their earnings into their ABLE accounts, subject to a maximum deposit equal to the federal poverty level (currently $11,770.00).  Additional proposed legislation would expand eligibility for ABLE accounts to people whose disabilities have an onset prior to age 46 as opposed to the current law which limits eligibility to those whose disabilities were manifested prior to age 26.

Like funds held in a special needs trust, funds held in an ABLE account are not considered “countable assets” for purposes of Medicaid eligibility.  Generally, Medicaid recipients are limited to having assets of not more than $2,000.00 in order to maintain their eligibility.  The ABLE Act, however, allows account holders to maintain account balances as high as $100,000.00 without compromising their ability to collect means tested government benefits. This feature makes ABLE accounts an attractive complement to special needs trust and offers disabled individuals a tax favored planning opportunity worthy of careful consideration.

© 9/15/2016 Charles A. Ford of Hunt & Associates, P.C.  All rights reserved.

[1] For additional in depth information, please see our previous blog posts: ABLE Accounts: A New Savings Account for People with Disabilities dated Jan 15, 2015; “Almost ABLE: An Update on Savings Accounts for People with Disabilities dated July 16, 2015; and, ABLE Accounts Can Be a Game Changer for People with Disabilitiesdated August 4, 2016.


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