STABLE ACCOUNTS

What is a STABLE Account?

A STABLE Account is an investment account available to eligible individuals with disabilities. STABLE Accounts are made possible by the federal Achieving a Better Life Experience (“ABLE”) Act. STABLE Accounts allow individuals with disabilities to save and invest money without losing eligibility for certain public benefits programs, like Medicaid or SSI. Earnings in your STABLE Account are not subject to federal income tax, so long as you spend them on “Qualified Disability Expenses.”

STABLE Accounts have some similar features to normal bank accounts, but they are not checking or savings accounts. STABLE Accounts are investment accounts, similar to 529 college savings accounts or 401(k) retirement accounts. When you deposit money into your STABLE Account, your money will be invested in different options that you choose. While you can still withdraw and spend your money whenever you need it, a STABLE Account also allows you to grow your money and to save long-term for disability expenses. 

STABLE NH is New Hampshire's ABLE plan.  The New Hampshire Governor’s Commission on Disability and the Treasurer’s Office have partnered with STABLE Accounts and the Ohio Treasurer’s Office to offer this program to Granite Staters with disabilities. Although STABLE Accounts are available nationwide, STABLE NH is only available to New Hampshire residents. Through STABLE NH, Granite State residents are able to open STABLE Accounts at discounted rates.

Federal ABLE Legislation

The Achieving a Better Life Experience ("ABLE") Act was passed in December of 2014. It is the federal legislation that allows families and individuals with disabilities the opportunity to create tax-advantaged accounts that can be used to help maintain health, independence, and quality of life. To read the legislation, visit this link.  

How To Open a STABLE Account

Account set up and enrollment is all online. No bank trips necessary.

When you open your account, you will be asked to create your own username and password for our online account portal. You will put in your basic information, such as your name, address, birth date, etc. (If you are a parent or other representative opening an account for someone else, you will need to put in your information and the account holder's information.) You will also be asked a few questions regarding your disability, in order to confirm your eligibility to open an account.  

Once you have input your information, you will make your initial contribution and choose your Investment Options.  

Account Cost

Setting up your account online is free (and easy!).  You will need to make an initial contribution of at least $50 in order to set up your account.  

Currently, Granite Staters pay $3.50 per month ($42 annually) to maintain their accounts.  There is also a small asset-based fee of between 0.19% and 0.33%, depending on the investment options chosen.  

There could also be other costs (e.g., a return check fee) depending upon your particular account activity.  

IRS Regulations

The Internal Revenue Service (IRS) has provided proposed regulations for STABLE Accounts. These proposed regulations offer guidance to states, beneficiaries, and other interested parties. To read the proposed regulations, visit this link.

Click here to learn more about ABLE Act Accounts in New Hampshire

ABLE National Resource Center Response to Coronavirus

The ABLE National Resource Center (ABLE NRC), managed by National Disability Institute (NDI), has been closely monitoring the situation surrounding the novel coronavirus, or COVID-19, pandemic. The coronavirus is unprecedented and we are working to identify ways to address the challenges of this moment in our country’s history and how it intersects with the important work we do on behalf of the disability community that we serve. As such, we are actively working to develop materials for people with disabilities and others with chronic health conditions to help them maintain their financial stability and security during the COVID-19 outbreak.

We would like to share this excellent article by disability advocate, Andrew Pulrang, that recently ran in Forbes Magazine: 5 Things to Know About Coronavirus and People with Disabilities. We hope you find it helpful.

In addition, the CDC has released coronavirus.gov, a new website to share CDC updates on COVID-19. The website provides ways in which the community can take measures to reduce the spread of COVID-19 in different settings.

Please stay tuned for more information that will be coming out from us.

Be well and be safe.

Miranda Kennedy, M.P.P.
Director, ABLE NRC

ABLE National Resource Center <anrc@ablenrc.org>

ABLE ACCOUNT TOP THREE QUESTIONS: MARCH 2020

1. Can I be taxed on third-party contributions to my 529 ABLE account?

Generally, contributions to the ABLE account are treated as non-taxable gifts to the account owner and the third party contribution limit to a 529 ABLE account is the same as the gift tax limit under the IRS tax code. However, if a third-party contributor makes other gifts to the ABLE account owner in addition to the ABLE contribution and the total aggregate amount of all gifts exceeds $15,000, the contribution limit this year, it could give rise to a gift tax liability.

An ABLE program must return excess contributions, including any interest earned on the extra contributions. The last funds received must be returned to the contributor(s) on or before the due date, including extensions, for the federal income tax return of the ABLE account owner, for the tax year in which the excess contribution or excess aggregate contribution was made. Visit the 2020 IRS 1099 Instructions for more information.

2. If funds in my 529 College Savings Plan are rolled over to a 529 ABLE account, are there any adverse tax consequences?

It depends. The IRS allows one tax-free rollover of a 529 account per beneficiary in a 12-month period. If you violate the 12-month rule, you must treat the transaction as a non-qualified distribution and pay federal income tax and a 10% penalty on the earnings portion.

If you have not rolled over a 529 account in the 12-month period, a 529 to 529 ABLE account rollover within the same state is generally not subject to adverse state tax consequences. However, if you roll over a 529 state college savings plan to an ABLE account in another State, the earnings portion of the rollover may be subject to state income tax. Also, the rollover may be subject to taxation to recapture a state tax deduction if the account owner previously deducted it.

Finally, the Internal Revenue Service Notices 2001-81, 2001-52 and IRB 617 state that the distributing 529 plan must provide a breakdown of the earnings portion of the rollover amount to the recipient 529 ABLE plan. Until the recipient 529 ABLE plan receives appropriate documentation showing the earnings portion, the entire rollover amount is treatable as earnings. As a promising practice, it is helpful to include a statement from the 529 account that shows the breakdown of the contributions/principal and the earnings to verify this rollover to the 529 ABLE program. For more information, please visit Guidance on Recontributions, Rollovers and Qualified Higher Education Expenses under Section 529. 

Please consult your tax practitioner for further advice and information.

3. Can I make a 529 ABLE program transfer to another 529 ABLE program for someone who is a non-family member?

Yes, you can make the transfer. However, there may be tax consequences. A transfer of funds that do not meet the IRS rules for program to program transfers constitutes a non-qualified withdrawal subject to federal income tax on the earnings portion and an additional 10% tax. It may negatively affect the account owner’s eligibility for federal or state benefits. Further, a transfer to a person who is not a member of the family may subject the designated beneficiary to other taxes such as federal gift taxes and “generation-skipping transfer” taxes.

https://www.ablenrc.org/march-april-2020-achievable-newsletter/#ssa-news-flash

SSA News Flash

On March 13, 2020, the Social Security Administration (SSA) clarified that food is considered a “qualified disability expense” from an ABLE account.

“For ABLE purposes, food is considered a qualified disability expense (basic living expense).”

Although the policy above permits the deposit of monthly SSA payments into the ABLE account, the ABLE National Resource Center, as a promising practice, recommends that beneficiaries use their monthly benefit payments, and in particular their SSI, to pay for some or all of their housing and food costs before depositing any excess into the ABLE account. This is recommended for two reasons:

• Benefit payments deposited may not be immediately available due to “hold times” which differ from ABLE program to ABLE program;

• When monthly benefit payments are directly deposited into the ABLE account, this money is counted towards the annual contribution limit, thereby decreasing the amount available for additional contributions, even though the ABLE balance may be zero since the funds were used to cover regular monthly expenses.

https://www.ablenrc.org/march-april-2020-achievable-newsletter/#ssa-news-flash