Senators Eric Schmitt (R-MO) and Bob Casey (D-PA) recently introduced legislation (S 4539) to extend expiring Tax Cuts and Jobs Act (TCJA, PL 115-97) enhancements to ABLE programs, which allow people with disabilities to save money in tax-advantaged accounts without losing eligibility for federal aid programs.
Background.
The initial ABLE Act, also backed by Casey, was signed into law in 2014. That law, under Code Sec. 529A, allows states to establish Achieving a Better Life Experience (ABLE) programs for people with disabilities — including tax-advantaged savings accounts to help those individuals and their families meet qualified disability expenses. All but four states have ABLE programs, according to the ABLE National Resource Center.
The intention of the ABLE Act is to allow those with disabilities and their families to save money while still qualifying for federally funded benefits like Medicaid and Supplemental Security Income. Currently, those who develop a disability or blindness before age 26 are eligible.
ABLE accounts are generally free from taxation, subject to certain limitations — though contributions are nondeductible. Under the initial ABLE Act, contributions to an account could be made by any person, but aggregate annual contributions were limited to the annual gift tax exclusion under Code Sec. 2503(b).
In addition, earnings on ABLE accounts accumulate tax-free. And distributions from ABLE account to beneficiaries for qualified disability expenses are also tax-free.
TCJA enhancements.
The 2017 TCJA increased the ABLE account contribution limit for tax years 2018 to 2025. It allowed employed ABLE-account beneficiaries to make additional contributions beyond the gift tax exclusion up to the lesser of the federal one-person poverty line or their compensation.
The TCJA also allowed beneficiaries to take a retirement savings contributions credit for ABLE account contributions. And it allowed rollovers from a beneficiary’s Code Sec. 529 qualified tuition program account to an ABLE account.
Bipartisan legislation.
Schmitt and Casey’s bill, the Ensuring Nationwide Access to a Better Life Experience (ENABLE) Act (S 4541), would make those three TCJA enhancements permanent.
In addition to Schmitt and Casey, at least 10 lawmakers on both sides of the aisle are supporting the legislation, according to a press release. Supporters include a top Senate taxwriter, Finance Committee Chair Ron Wyden (D-OR).
Casey said the bill will “prevent some key ABLE provisions from expiring and ensure that as many people with disabilities as possible across the country can continue to benefit from opening ABLE accounts.”
In addition to driving the enactment of the initial 2014 ABLE Act, Casey has continually pushed for enhancements. His bipartisan ABLE Age Adjustment Act passed as part of the Consolidated Appropriations Act of 2023, moving the time by which an individual must have developed a disability to qualify for an ABLE account from age 26 to 46. That change is set to take effect beginning in the 2026 tax year. Casey said the age adjustment will allow one million veterans to save money without losing federal disability benefits.
Schmitt, who has a son with disabilities, led the implementation of the ABLE program in his home state of Missouri. He called the bill a “fantastic bipartisan opportunity to protect access to federal programs for those with disabilities while safeguarding their ability to invest and save.”
Disability advocacy groups, the National Association of State Treasurers, and others have also lined up to support the ENABLE Act. Autism Speaks president and CEO Keith Wargo said that extending the TCJA provisions “will not only enhance financial opportunities for the autism community, but also empower autistic individuals to achieve greater financial independence and security.” Wargo testified at a House Small Business Committee subcommittee hearing this January about the importance of creating pathways to employment for those with autism.
For more on ABLE accounts, see Checkpoint’s Federal Tax Coordinator ¶ A-4740 et seq.
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