ABLE Act / Social Security Update
As you read last week, we attended the annual Stetson SNT conference and listened to the 2015 update from Ken Brown and Eric Skidmore from the Social Security Administration. The implementation of the ABLE Act was a big topic for discussion.
For those not familiar, ABLE, Achieving a Better Life Experience, is basically a section 529 Educational Savings account with a few twists. First, only individuals who were disabled prior to age 26 can use them and the funds can be used for things other than education. Examples of allowable expenditures are: education, housing, transportation, employment training, assistive technology, health, prevention and wellness, financial management, legal fees, expenses for oversight and monitoring of the ABLE account, and funeral and burial arrangements.
ABLE accounts seem a lot like a Special Needs Trust, which is true, but there are a few exceptions. We could write entire articles on the similarities and differences of SNT’s and ABLE accounts, and probably will. I wanted to focus on one particular nugget that came out of the recent conversation with Social Security.
Generally speaking, if an SNT pays for food or shelter for a beneficiary receiving SSI (Supplemental Security Income) there will be a reduction in the individual’s SSI check. It was unclear whether a payment for shelter expenses out of an ABLE account would result in an SSI reduction for the ABLE account owner. A payment for food has not been an issue since food is not a permissible expenditure from an ABLE account. It was thought, at least by me, that shelter payments would result in an SSI reduction.
Social Security has hinted that they do not intend to consider shelter payments from an ABLE account as in-kind support and therefore not impact SSI. As Donald Trump might say, this is HUGE! This could be the ideal way to supplement an SSI recipient’s shelter expenses. Parents, or others, can place funds into the ABLE account (with no impact on SSI resulting from the funding) then the ABLE funds could pay for shelter with NO REDUCTION IN SSI benefits. Then just repeat the process every month or as needed. It could be an endless (at least up to several hundred thousand dollars worth) flow through of help. Previously there was no way to make such payments without the 1/3 reduction (or in some instances where the SSI recipient only received a few hundred dollars per month, a complete loss of SSI).
Prior to this discussion with Social Security, I couldn’t envision using ABLE accounts very often, if at all. The benefits of the ABLE account (tax-free growth, potentially low costs) were (and I still believe are) outweighed by the disadvantages (must be under age 26 when disability occurred to use, $100,000 limit for SSI recipients, mandatory Medicaid payback on death, annual contribution limits and lifetime limit on contributions). However the ability to pay for housing from ABLE with no SSI reduction can make the ABLE account a necessity for every SSI recipient who became disabled prior to age 26.