ABLE Accounts
The Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act of 2014 was passed to give individuals with disabilities the opportunity to save for disability-related expenses in a tax-advantaged account without losing eligibility for certain public benefits programs, like Medicaid and Supplemental Security Income (SSI). The ABLE Act allows states to establish and maintain tax-advantaged ABLE plans where contributions and investment earnings can be used to pay for the designated beneficiary’s qualified disability expenses.
Anyone may contribute to an ABLE account, also known as a 529A account. Investment gains grow on a tax-deferred basis, and withdrawals used for qualified disability expenses are tax-free.
Under the Tax Cuts and Jobs Act of 2017, certain ABLE account beneficiaries who work and earn income are allowed to contribute above the annual ABLE contribution limit, and designated beneficiaries are eligible for the Retirement Savings Contribution Credit (known as the Saver’s Credit). In addition, through January 1, 2026, qualified tuition programs allow a limited amount of funds to be rolled over to an ABLE account from the designated beneficiary’s own 529 savings plan, or from that of a family member, without being subject to income tax.
Both 529 plans and ABLE accounts are considered "municipal fund securities" and are regulated under rules of the Municipal Securities Rulemaking Board (MSRB).
How ABLE Accounts Work
In general, individuals (designated beneficiaries) are eligible for an ABLE account if they’re already receiving benefits under SSI and/or Social Security Disability Insurance (SSDI). If not, they may still be eligible if they meet the Social Security Administration definition and criteria regarding significant functional limitations and have a letter of certification from a licensed physician. Currently, under all circumstances, the onset of the disability must have begun prior to age 26. However, beginning in January 2026, the eligibility age for ABLE accounts will rise to 46.
A designated beneficiary is limited to only one ABLE account at a time; however, the money in an ABLE account can be used for disability expenses over the lifetime of the beneficiary. Like 529 savings plans, ABLE account owners can make changes to their investments two times per year.
The total amount of contributions in a single year may not exceed the Internal Revenue Service (IRS) annual gift tax exclusion amount. Contributions aren’t tax-deductible at the federal level, although some states may provide an income tax deduction for contributions made to an ABLE account.
The first $100,000 saved in an ABLE account is exempt from the $2,000 SSI individual resource limit (beneficiaries will still receive Medicaid if the account exceeds $100,000). Check with the state that administers your ABLE account for additional details related to this exemption and whether it applies to your situation.
State Administration
States establish, administer and regulate their ABLE plans. Most have joined collaborative structures in which groups of states combine their individual ABLE plans under the same program design and fee structure.
Almost all ABLE plans are direct-sold, where individuals open ABLE accounts directly through the plan.
The ABLE National Resource Center, managed by the National Disability Institute, maintains a map with details of each state’s ABLE program along with a tool to compare up to three ABLE plans at a time. Comparing the features of different ABLE plans is essential to making an informed investment decision.
Do Your Research
Consider the following when evaluating ABLE plans:
- Most ABLE plans are available to any person with a disability regardless of where the person resides. However, a few states limit participation to in-state residents.
- Some states offer tax benefits for ABLE plan contributions, although the benefits are typically limited to contributions to the state’s own plan.
- Almost all ABLE plans charge both asset-based fees and dollar-based fees, but the percentage and dollar amount of these fees differ across plans.
- Investment options vary across ABLE plans, but most offer multiple options based on risk tolerance and investment objective.
- Contribution minimums and maximum account balances vary across plans.
- Almost all ABLE plans offer either a debit or prepaid card, or both, making it easy to access funds for transactional expenses. This feature allows designated beneficiaries to use ABLE plans as a vehicle for both short-term spending and long-term planning.
