ABLE Account Disability Discrimination

“Achieving Better Life Experience”.. the letters behind ABLE in ABLE Accounts. A great idea, a neat financial tool… but why does it penalize disabled people with the most financial need?

What are ABLE Accounts?

ABLE accounts were created as financial investment accounts for people with qualifying lifetime disabilities (the disability occurred before age 26 though that is moving up to age 46 in 2026. They work like a ROTH IRA … money is taxed before it goes in, but earnings in the account are tax free. Technically, it is a variation on the college savings account (a 529A plan instead of a 529 plan).

Funds can be used for almost anything that will make a disabled person’s life better (including food and rent) – formally “Qualified Disability Expenses (QDE)”:

expenses that help maintain or improve the health, independence, or quality of life of the account owner…

Currently, $19,000 can be added to the account each year and the maximum that the account can hold in $500,000.

So far, so good.

BUT.

The Penalty Box

While there aren’t restrictions on ABLE Accounts directly, they interact with other government disability programs to penalize some disabled people…. One could argue, disabled people with more support needs.

$250,0000 Medicaid Cap Penalty

The first level of penalty is that a disabled person who uses Medicaid (health insurance) is only allowed to have $250,000 in their ABLE account as any more will trigger Medicaid’s brutal asset limits ($2,000 total assets for an individual or $3,000 for a couple… there are additional variations by state… FUTURE ARTICLE!).

So, if you have a qualifying disability AND need health insurance (because of your disability)… you can save $250,000 LESS.

BUT, it gets worse.

$400,000 SSI Penalty

Supplemental Security Income (SSI) is a US Social Security for elderly and qualifying disabled people with limited income and resources. This is NOT a generous program – $967 per month for individuals and $1450 per couple. It has very similar income and resource restrictions as Medicaid…and as you start earning any money, the benefit gets cut quickly.

Only $100,000 of ABLE Account assets are sheltered from this limit.

So, basically, if you have a qualifying disability AND can’t work because of your disability you are only allowed to have $100,000 maximum in your ABLE account.

Even more fun for parents who are saving for their child… they have to plan early as to whether their child may be able to work when they are adults to determine their ABLE account savings strategy.

By our own government definitions, disabled people with the most need are least able to use ABLE accounts.

Fixing this

I will say, this one is conceptually easy… and may not even be a terribly hard sell.

Simply exempt ALL ABLE Account assets for counting against eligibility for state or federal services … or, more eloquently, having them legally considered “Third Party Assets” that don’t count as individually owned assets for determining eligibility for services (and would help with the estate planning problem LINK).