A chieving a B etter L ife E xperience

1. Achieving aBetter Life Experience

2. Medicaid and SSI Means Tests • In order to live independently, individuals with disabilities must rely on the services that Medicaid and Supplemental Security Income (SSI) provide. • Yet in order to qualify for Medicaid/SSI in 2009, individuals with disabilities may not possess more than $2,000 of assets, earn monthly income of more than $674, or engage in “substantial gainful activity.” • The families of individuals with disabilities generally are not permitted to help their disabled family members financially or provide “in kind” support.

3. The Right to Save • Non-disabled Americans have many ways to save money, and the federal government encourages them to save with a variety of tax-advantaged savings accounts. • Individual Retirement Accounts: including traditional, Roth, and nondeductible IRAs • Education savings Accounts: Section 529 Qualified Tuition Plans, Coverdell Education Savings Accounts • Medical savings Accounts: Archer Medical Savings Accounts, Health Savings Accounts • Employer savings Accounts: 401(k) plans, SIMPLE 401(k) plans, Thrift plans, charitable 403(b) plans, governmental 457 plans

4. Saving by Individuals with Disabilities • As a result of the Medicaid/SSI means tests, • Individuals with disabilities are discouraged from participating in meaningful work because they cannot save their earnings. • Families are discouraged from providing financial support to family members with disabilities because such support may cause the individual with a disability to be disqualified from Medicaid/SSI. • Individuals with disabilities are encouraged to waste those assets they do acquire, such as small inheritances or unspent earnings from wages, in order to remain qualified for Medicaid/SSI. • Under current law, only those who do not need to rely on Medicaid/SSI or who can afford to hire an attorney to set up a special needs trust and pay the trust’s income taxes, are able to save.

5. ABLE Accounts • An ABLE Account is an account established by or on behalf of an individual with a disability for the purpose of saving for life’s necessities, many of which Medicaid does not cover. • The income earned on amounts contributed an ABLE Account is tax exempt, so ABLE Accounts grow tax free. • The assets held in the ABLE Account would not be counted for purposes of determining the individual’s eligibility to qualify for Medicaid/SSI. SSI payments would be suspended for periods that the total amounts held are over $100,000 in value. • The assets in an ABLE Account can only be used to pay for qualified expenses, such as education, housing, employment support, health, transportation, and other life necessities.

6. Case Study • The following slides show how individuals with disabilities would benefit from ABLE Accounts.

7. Aaron and Julia

8. What Would You Do with an ABLE Account? • Aaron and Julia both have down syndrome. Aaron is 37, and Julia is 35 years old. They are engaged. • Aaron and Julia live in Santa Rosa, CA, in an apartment building for individuals with special needs. • Aaron and Julia have worked in a variety of sheltered environments for individuals with special needs, including a local coffee shop, a recycling plant, and a workshop where they help assemble American flags. • Medicaid/SSI provide Aaron and Julia with in home care support assistants who help them get to work, go to the doctor, cook and clean, and attend educational and social activities. • How would Aaron and Julia use the money in an ABLE Account? • Go to the dentist. Medicaid covers one teeth cleaning a year, but dentists recommend getting two cleanings. Medicaid also doesn’t pay for dental crowns. • Join a health club. Medicaid doesn’t cover exercise or other preventative health programs. • Get a hearing aid. Medicaid doesn’t cover hearing aids for the partially hearing impaired. • Replace a pair of lost glasses. Medicaid’s vision benefits are very limited.

9. Natalie Beck

10. What Would You Do with an ABLE Account? • Natalie Beck is 11 years old and goes to Sangster Elementary School. • She lives in Burke Virginia with her older sister Mariae and her Mom And Dad. • Natalie is a member of her local pool’s swim team and Special Olympics, she rides horseback at NVTRP, she belongs to a Girl Scout Troop, takes gymnastics classes and has appeared in a number of school plays. • Natalie has made it very clear that she is going to go to George Mason University, marry her boyfriend Brice, and work at Dominion Electric Supply with her Dad • How would Natalie use the money in an ABLE Account? • She could use it to pay for the year round tutoring she receives to stay as close as possible to her peers at school. • She could use it to pay for her orthotics and therapies that her parents health insurance won’t cover. • She could use it to pay tuition to George Mason or any other post-secondary school option. • She could use it to help pay rent or the mortgage on her and Brice’s first home

11. Qualified Expenses • “Qualified disability expenses” are any expenses that are made for the benefit of the beneficiary of the ABLE Account, to the extent provided under Treasury Regulations. Such expenses will include: • Education—including tuition for preschool thru post-secondary education, books, supplies, and educational materials related to such education, tutors, and special education services. • Housing—expenses for the primary residence including rent, purchase of the primary residence, mortgage payments, home improvements and modifications, maintenance and repairs, real property taxes, and utility charges. • Employment Support—including expenses related to obtaining and maintaining employment, including job-related training, assistive technology, and personal assistance supports. • Health Prevention and Wellness—including premiums for health insurance, mental health, medical, vision, and dental expenses, habilitation and rehabilitation services, durable medical equipment, therapy, respite care, long term services and supports, and nutritional management. • Transportation—including the use of mass transit, the purchase or modification of vehicles, and moving expenses. • Miscellaneous—including communication services and devices, adaptive equipment, assistive technology, personal assistance supports, financial management and administrative services, expenses for oversight or monitoring, funeral and burial expenses.

12. Opening an ABLE Account • An ABLE Account is being created as subset of a 529 college savings account. The same basic rules used to open, fund, pay expenses and report will apply to ABLE accounts that apply to 529’s. • By making ABLE accounts subsets of 529’s we avoid having to create any new infrastructure needed to regulate or establish the accounts. • If the beneficiary of a 529 account has a disability that meets the requirements established in the bill the account becomes a 529 / ABLE account. • Eligibility is established by demonstrating that the beneficiary is currently receiving benefits under title II or XVI of SSA or supplies a doctors diagnosis and signed letter by the account owner that he/she meets the definition • The trustee of an ABLE Account, like a 529 will be the person that opens the account on behalf of the beneficiary.

13. Rollovers • Certain IRAs, Health Savings Accounts, and Education Savings Accounts may make rollover distributions to ABLE Accounts without incurring penalties. • The assets of one ABLE Account may be rolled over to another ABLE Account for the benefit of the same beneficiary (or his or her disabled family members) without tax. • The rollover amount must be deposited into the new ABLE Account 60 days after it is distributed. • The designated beneficiary of an ABLE Account may be changed without incurring tax, provided that the new beneficiary is a member of the old beneficiary’s family and meets the eligibility requirements.

14. Medicaid Payback • In the event the qualified beneficiary dies (or ceases to be an individual with a disability): • The assets in the ABLE Account are first distributed to any State Medicaid plan that provided medical assistance to the designated beneficiary. • The amount of any such Medicaid payback is calculated based on amounts paid by Medicaid after the creation of the ABLE Account. • After the Medicaid payback, any remaining assets in the ABLE Account would be distributed pursuant to the beneficiary’s estate and a portion of such amounts would be subject to tax.

15. Other Estate Planning Vehicles • ABLE Accounts are not intended to replace special needs trusts as an option for estate planning. ABLE Accounts provide an alternative or even complement to special needs trusts and could be utilized by a lower income demographic. • Like ABLE Accounts, the assets held in special needs trusts are not subject to the Medicaid/SSI means tests. • Unlike ABLE Accounts, special needs trusts are not subject to a contribution cap, so they can be unlimited in size. • Unlike ABLE Accounts, which are tax-exempt, special needs trusts are taxable trusts. • Special needs trusts pay tax at the highest marginal tax rate (e.g., 35%). They are also expensive to set up and to administer, and they are not easily portable to states outside the state of their creation. • Unlike ABLE Accounts, special needs trusts that are “third party” trusts, meaning the assets of the trust do not belong to the disabled beneficiary, and therefore are not subject to Medicaid payback provisions.

16. Organizations Supporting the ABLE Act • APSE • The Arc of the United States • Association of University Centers on Disabilities (AUCD) • Autism Society of America • Autism Speaks • Center for Outcome Analysis • Center for Self-Determination • Consortium for Citizens with Disabilities Asset Development Task Force • Collaboration to Promote Self-Determination • Down Syndrome Association of Northern Virginia • Easter Seals • National Association of Councils on Developmental Disabilities • National Association of State Directors of Developmental Disabilities Services (NASDDDS) • National Fragile X Foundation • National Disability InstituteNational Down Syndrome Congress • National Down Syndrome SocietyTASHTecAccessUnited Cerebral Palsy • World Institute on Disability

17. Last Congress and Current Status • Primary Sponsors: • House: Congressmen Crenshaw and Van Hollen: H.R. 3423 • Senator: Senator Casey and Burr: S. 1872 • Over 200 Co-sponsors in the House and 26 in the Senate • The bills were introduced on November 15th with 28 original co-sponsors