Missouri families of loved ones with disabilities will soon have the opportunity to support them through a new tax-advantaged savings account based on the federal Achieving a Better Life Experience (ABLE) Act of 2014.
The ABLE Act allows eligible individuals with disabilities to save money in a federally tax-exempt account while still allowing them to be eligible for federal public benefits.
Former state Sen. Eric Schmitt guided the 2015 legislation to enact the ABLE law in Missouri, making the state a leader in this effort.
"The idea is to allow people to have a chance to achieve a better life experience by making everyday services and functions a little bit easier," Schmitt said. "Plus, we're empowering people to take ownership of their financials."
The account mirrors the activity of the 529 MOST college savings account, in the sense the contributions are tax-deductible.
Schmitt, in his most recent role as the state treasurer, is ready to celebrate with the disability community with the new program set to launch Monday.
Any person who has been diagnosed with a disability prior to 26 years old is eligible to enroll. A single person can contribute up to $8,016 in a year, and a married couple can contribute up to $14,000.
Schmitt described the ABLE program as one of the most significant reforms for people in the disabilities community since the the American Disabilities Act of 1990 was enacted.
"There are real and significant tax advantages for putting your money into an ABLE account," Schmitt said. "Any of the interest that is accumulated on the funds in the account are not taxed, and in addition account holders can claim the money as an asset."
Currently, there is a $2,000 limit imposed on people with disabilities who have money in a traditional savings account and receive state or federal assistance. With an ABLE account, they can save up to $325,000.
Schmitt explained the first $100,000 is shielded from asset limits, but any amount above $100,000 will be considered personal assets and will affect a person's eligibility for supplemental security income. Those limits do not apply to Medicaid benefits.
Any funds withdrawn into an ABLE account will not be taxed if they are used for qualified expenses such as education, assistive technologies, medical costs, transportation housing and person support services. Purchases that would not qualify may include restaurant outings or other miscellaneous expenses.
Schmitt noted organizations like Paraquad, Missouri Developmental Disabilities Council (MODDC) and the National Down Syndrome Society support the program.
"We are excited for the opportunity for Missourians to be able to preserve their income and to provide a peace of mind for families in the long term," Rebecca Bax, public policy coordinator at MODDC, said.