The ABLE Act: From Federal Regulations to your State Legislature

1. The ABLE Act: From Federal Regulations to your State Legislature John M. Ariale Attorney and Senior Government Relations Consultant Washington, D.C. 20005 jariale@bplegal.com

2. Legislative History • First introduced in 2007 – Called the Financial Security Accounts for Individuals with Disabilities Act • Re-introduced in each Congress • HR 647 – passed on 12/3/14 (404-17) • S 313 – passed on 12/16/14 (76-16) • Signed into law – 12/19/14

3. ABLE at a Glance • Not a silver bullet for families with disabled children, nor will it come close to assisting those families in saving for all the costs associated with raising a child with special needs. • The ABLE Act does give families another weapon for battling the challenges they face.

4. ABLE at a Glance • Disability was established before age 26, • Individuals living in a state that has authorized ABLE Act accounts can participate, • Only one ABLE Act account per individual, • Total annual contributions cannot exceed $14,000, • Upon the death of an ABLE Act participant, every dollar remaining in the account must be paid to the state Medicaid • If the ABLE Act account exceeds $100,000, the participant’s ability to receive Supplemental Security Income (SSI) will be temporarily suspended.

5. Comparing ABLE to SNT

6. Comparing ABLE to SNT

7. Comparing ABLE to SNT

8. Comparing ABLE to SNT

9. Comparing ABLE to SNT

10. Regulatory Updates

11. Key Regulation Developments • On March 10, 2015 the Internal Revenue Service (IRS) announced Notice 2015-18 to provide advance notification of a provision it expects to be included in the proposed regulations for section 529A of the Internal Revenue Code regarding ABLE Act accounts • On June 19, 2015, the IRS released the highly anticipated Notice of Proposed Rule Making (NPRM) for the Achieving a Better Life Experience (ABLE) Act • Public comment until September 21, 2015 • Public hearing October 14, 2015

12. Signature Authority • Regulation: • The designated beneficiary, who is the qualified individual with a disability, is also the account owner • If the designated beneficiary is not able to exercise signature authority, designated beneficiary’s agent, or a parent or legal guardian can be allowed signature authority over the account • Comments: • Good rule in general • Should add extension of rule to designee of parent

13. Establishing An ABLE Program • Regulation: • The proposed regulations states that “a program is established by a State, or its agency or instrumentality, if the program is initiated by State statute or regulation, or by an act of a State official or agency with the authority to act on behalf of the State.” • Comment: • ABLE Act only allows a state to establish its own ABLE program – it does not obligate a state to do so • Suggests that an ABLE program can be established by a state outside the usual vehicle of some enacted piece of legislation - highly unlikely

14. Criteria for Establishing Eligibility • Regulation: • Reaffirms Definition of Statute • 26th Birthday • Each state can verify as they determine • Comments: • Age limitation was added late in the legislative process by the W&M staff

15. Disability Determination • Regulation • standard of disability in the Social Security Act for children claiming benefits under the Supplemental Security Income for the Aged, Blind, and Disabled (SSI) program based on disability • Certification leaves the responsibility of determining eligibility to administrators • Comments • May establish an unreasonable obligation to program administrators unfamiliar with this type of determination • Standardize the documentation necessary for eligibility • Consistency in proof of eligibility would minimize confusion in the disability community

16. Recertification/Change in Status • Regulation • There may be circumstances in which the designated beneficiary changes his or her status • Permits account continuation if eligible when account opened • No contributions can be made • Comments • Uniform disability certification • Longer term waiver for unlikely change in disability • Those receiving SS benefits, should be exempt from recertification

17. Residency Requirements • Regulation • May be established only under the qualified ABLE program of the State in which that designated beneficiary is a resident • If State does not establish and maintain a qualified ABLE program, it may contract with another State • If move, may maintain ABLE account • Comment • Strongly support this proposed regulation • Intent was not to have residency requirement • Concern over Medicaid Payback regulations/confusion

18. Rollovers • Regulation • funds from a 529 college saving account will not be allowed to be rolled over to a 529A account (ABLE account) without applicable penalties and tax implications • Comment • IRS rationalizes this ecause such a distribution to the ABLE account would not constitute a qualified higher education expense • Contrary to ALL legislative intent • Will be fixed legislatively

19. Qualified Expenses • Regulation • List of permitted allowable expenses are not exhaustive and should additionally include basic living expenses • Disability related expenses should be construed broadly, may be attributed to the designated beneficiary’s health, independence and quality of life, should not be limited to items for which there is a medical necessity, and may include expenses which could benefit individuals in addition to benefiting the designated beneficiary • Comment • Strongly support interpretation • Beneficiary should be solely responsible for record keeping

20. Community Development Financial Institutions (CDFI’s) • Regulation • Qualified ABLE program or any of its contractors may contract with one or more Community Development Financial Institutions (CDFIs) • Comment • Rule suggesting CDFI’s may lead some policymakers to look no further than establishing CDFI’s as their ABLE account administrators • Should clarify that other entities could play similar role

21. State Implementation

22. Typical State Enactment As states consider legislative models, they have many different approaches to consider. However, the minimum requirements that all bills include are: • Authorization of 529A ABLE program • Consistent with federal law, including definitions • Designation of state agency • Exemption of state means-tested programs • Exemption of ABLE accounts from state taxes • Authority to contract with other state programs

23. Florida’s ABLE Act The Florida legislation includes several key components: • Governing Board • Consistent with key federal requirements • Purpose • Eligibility • Disability expenses

24. Florida’s ABLE Act - Timeframe • Effective July 1, 2015 • For 2015, contributions capped at $14,000 • Only the first $100,000 disregarded for SSI eligibility; continued eligibility for Medicaid and other means-tested programs • $3,386,000 allocated for start-up for 2015-16 fiscal year

25. Florida’s ABLE Act – Framework • Florida ABLE (not-for-profit direct support organization) to be established by the Florida Prepaid College Board • Oversight by Prepaid College Board • Will maintain a Florida ABLE website • Moneys and property held in trust by Florida ABLE

26. Florida’s ABLE Act – The Board • Chair of Florida Prepaid • An advocate for persons with disabilities appointed by the President of the Senate • An advocate for persons with disabilities appointed by the Speaker of the House • A person with expertise in accounting, risk management, or investment management appointed by the Prepaid Board (may be member) • A person with expertise in accounting, risk management, or investment management appointed by the Governor

27. Florida’s ABLE Act – Participation Agreements • Maximum annual contribution of $14,000 per year • Amendments to increase or decrease participation, change beneficiaries or other authorized purposes • Contracting • May contract with another state if Florida ABLE is not qualified • May contract with another state to provide their services if they do not have an ABLE program

28. Florida’s ABLE Act – Other Provisions • An estimated 4,000 of Florida’s 400,000 population may participate during 2015-16 • Formal operation as early as April 1, 2016, but no later than July 1, 2016 • Status report required to the Governor by November 1, 2015 • Rule making authority granted

29. Status of ABLE Act Implementation • 31 states have passed some version of ABLE enacting legislation in their state • 2 states have legislation awaiting signature (California and New York) by the governor

30. ABLE Considered - Not Enacted • 9 states and the District of Columbia have considered some version of an ABLE enactment bill; however, they have not yet passed the legislation: • Alaska • District of Columbia • Kentucky • Maine • Michigan • New Hampshire • New Jersey • New Mexico • Pennsylvania • South Carolina

31. ABLE Implementation - Acts Not Considered • The following eight (8) states did not consider any version of the ABLE Act during the current legislative session: • Arizona • Georgia • Idaho • Indiana • Mississippi • Oklahoma • South Dakota • Wyoming

32. Conclusion • Lasting legacy of the ABLE Act is awareness of the fact that due to antiquated laws in this country, people with disabilities are forced to live in deep poverty and there is no choice for too many of these individuals but to remain impoverished • We should continue to build upon the momentum and good work of the ABLE Act by removing restrictions that leave people with disabilities trapped in poverty

33. Questions/Comments/Discussion John Ariale 202-236-4835 jariale@bplegal.com