The IRS has published its proposed regulations for state ABLE plans. Unfortunately, the offered rules leave many questions unanswered.
The Achieving a Better Life Experience (ABLE) Act, was signed into law late last year. It allows people with disabilities, whose disabilities began prior to age 26, to set aside up to $14,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. The proposed regulations deal with numerous aspects of creating and maintaining ABLE accounts, as well as the gift and estate tax treatment of contributions into the accounts, and a host of other implementation issues.
The proposed regulations provide that the state ABLE programs can devise their own methods for verifying claims of disability from SSI or SSDI recipients. The comments on the regulations suggest that states have SSI and SSDI beneficiaries verify, under the penalty of perjury, that their conditions began prior to their attaining the age of 26. For people who are claiming to be disabled and who do not receive SSI or SSDI, the regulations define how to prove disability in order to qualify for an ABLE account. These requirements include a certification of disability signed by a treating physician and submission of additional medical evidence regarding the disabling condition. Certain conditions, specifically those listed in the Compassionate Allowances Conditions list maintained by the Social Security Administration, are deemed to meet the requirements of an impairment sufficient for a disability certification without a physician’s diagnosis, provided that the condition was present before the individual attained age 26.
An ABLE account owner who ceases to be “disabled” is allowed to retain his or her account, but no further contributions to the account can subsequently be made, and funds cannot be withdrawn unless the disability returns. Because people can lose their disability status at any point, the regulations require annual disability certifications, without providing any detail about how such certifications are accomplished.
There is also a requirement, according to the summary of the regulations, that “[a] qualified ABLE program must establish safeguards to distinguish between distributions used for the payment of qualified disability expenses and other distributions, and to permit the identification of the amounts distributed for housing expenses as that term is defined for purposes of the Supplemental Security Income program of the Social Security Administration.” Again, there is no guidance regarding how this monitoring is to take place.