Pennsylvanians now have a tax-free way to save for the future expenses of loved ones with disabilities or special needs, while preserving the government benefits upon which they rely.
The Pennsylvania Achieving a Better Life Experience (ABLE) Savings Program officially opened for business yesterday, one year after it was unanimously passed by the General Assembly and signed into law by Governor Wolf. Read on to learn how this program, modeled after the federal legislation that authorized states to create their own ABLE plans, allows individuals with disabilities and their families to save for qualified disability-related expenses.
Benefits of a PA ABLE account
The PA ABLE program, which allows families to open and contribute to savings accounts for loved ones who become disabled before age 26, is administered by the Pennsylvania Treasury. Modeled after 529 college savings accounts, the PA ABLE program provides the following tax and federal benefit eligibility advantages:
- Contribute up to $14,000 each year.
- Savings grow tax-free.
- Withdrawals are exempt from federal and state income tax when used for qualified expenses.
- Accounts are exempt from inheritance tax.
- Funds in an ABLE account are not counted in eligibility determinations for Supplemental Security Income benefits (savings up to $100,000), Medical Assistance and other means-tested federal programs.
Save Without Jeopardizing Benefits
Previously, additional or supplemental savings would jeopardize or nullify eligibility for much-needed government benefits. This roadblock was a chief complaint of families wanting to help financially support a child with disabilities, and the ABLE savings program was developed at the federal level in response to these concerns.
Pennsylvania’s ABLE program opens a door to financial independence and security previously closed to individuals with disabilities or special needs. It also provides peace of mind for families who can now set aside funds to pay for current and future services including housing, transportation and education.
Other states are in the process of launching their own ABLE programs, some of which accept outside residents. The ABLE National Resource Center tracks the progress of ABLE legislation and programs across the country, and provides a state ABLE program comparison tool.
Contributed by Lauren R. McNeely, CRPC®, AIF®, Wealth Advisor for RKL Wealth Management. Lauren is responsible for managing client relationships in the area of qualified retirement plans. She also specializes in retirement planning, educating plan participants and helping them make informed decisions to strengthen their financial well-being in retirement.