ABLE accounts can serve as valuable savings tool for caregivers, employees with disabilities and their employers

How can it be that employers and individuals with disabilities — especially those who are employed — still are not taking advantage of ABLE accounts? Earnings and withdrawals are tax free when used to pay for qualified disability-related expenses (including education, housing and transportation) and make it possible for people with disabilities to save and pay for the extra costs associated with living with a disability. The assets in an ABLE account can enhance the financial health, independence and quality of life of qualifying individuals with disabilities, all without jeopardizing eligibility for valuable government-sponsored means-tested benefits. Yet 10 years after the legislation creating ABLE accounts was signed into law — on Dec. 19. 2014 — only close to 163,000 active accounts¹ have been opened, a drop-in-the-bucket considering the estimated eight million Americans who are eligible.²

ABLE accounts’ origins and significance

Stephen Beck, Jr. created a plan to help his daughter, Natalie, who has Down syndrome, sitting at his living room table with some other parents to brainstorm a way that would allow their children to save for the future. This group of parents were understandably worried, because federal law only allows individuals like Stephen’s daughter to have $2,000 set aside for their long-term support to remain eligible for Supplemental Security Income (SSI) and Medicaid.

These federal regulations limit the resources that millions of individuals with disabilities and their families are permitted to build. The resulting legislation, called The Stephen Beck Jr., Achieving a Better Life Experience (ABLE) Act, created ABLE accounts — a savings vehicle intended to help offset the often-significant financial challenges that can accompany living with a disability.

Also, ABLE accounts allow working individuals with disabilities to contribute to them from their wages, in addition to an annual contribution limit. With this ability to contribute wages on top of the annual limit, ABLE accounts allow individuals with disabilities to gain competitive integrated employment and earn income while maintaining those valuable public government benefits that are income based. Employment is a key step in helping individuals with disabilities achieve maximum levels of independence. 

The passage of this new legislation also demonstrated that the collective voices of impacted individuals and disability service organizations finally were being heard by legislators on Capitol Hill.

ABLE accounts’ expansion

The original ABLE Act has been strengthened over the years with additional key pieces of legislation and regulatory rulings:

• The Tax Cuts and Jobs Act (2017) allows for the transfer of funds from a 529 College Savings account to an ABLE account.
• Several Social Security Administration regulations allow for the transfer of funds to and from a Special Needs Trust to an ABLE account.
• The ABLE to Work Act (2017) allows an employed ABLE beneficiary who does not participate in an employer pension plan to contribute up to an additional $15,060 annually — the 2025 federal poverty level — above the $19,000 limit (2025 gift tax exclusion), resulting in as much as $34,060 total.
• The ABLE Age Adjustment Act (2021) will increase the age of ABLE eligibility from disability onset “before age 26” to “before age 46,” effective Jan. 1, 2026. This change will expand the number of ABLE-eligible individuals by an estimated six million people, including one million veterans.

ABLE accounts’ basics

ABLE accounts are state-established savings options that receive preferred federal tax treatment, and many states may offer a state tax deduction, as well. Individuals who have a disability that meets the Social Security definition and that started prior to age 26 (age 46, effective Jan. 1, 2026) are eligible. These accounts enable eligible individuals to save for disability-related expenses without jeopardizing eligibility for public assistance benefits. In some states, ABLE accounts assets are generally subject to Medicaid payback upon the death of the account’s beneficiary. However, “[s]ome [s]tates have taken steps to eliminate payback. See state plan disclosure documents for specific details.”³

Why employers should consider ABLE accounts

When employers offer enrollment assistance for and access to state-run ABLE accounts as an employee benefit, it is a sign that an employer has made disability inclusion a priority and will build a more inclusive and supportive work culture that will help attract and retain talent and improve productivity.

Many employee benefits savings solutions may unintentionally exclude employees with disabilities and caregivers, who often opt out of valuable employer-sponsored benefits — including 401(k) and 403(b) plans — to maintain government benefit eligibility. Forgoing these benefits that many of their colleagues can take advantage of may have serious ramifications for employees with disabilities’ savings accumulation and tax benefits. Employers could reverse years of disadvantages faced by people with disabilities and caregivers in the workplace.

Listen to  what ABLE account beneficiaries have to say about how their ABLE accounts enhance their quality of life in a video created by National Down Syndrome Society (NDSS), in conjunction with Voya Cares. 

Listening to their stories brings back my original question: How can it be that employers and individuals with disabilities — especially those who are employed — still are not taking advantage of ABLE accounts? So, help us spread the word about the benefits of ABLE accounts to employers, employees with disabilities and caregivers.