Are State ABLE Programs Sustainable? Disability Advocates Raise Concerns

In the past two years, nearly every state in the country has passed legislation enabling people with disabilities and their families to open new savings accounts, modeled after popular 529 college savings plans, to save for disability related expenses.

But early projections indicate that many of these state savings programs are losing money, in part due to fewer accounts being opened than initially expected.

Created by Congress via passage of the Achieving a Better Life Experience (ABLE) Act in 2014, ABLE accounts allow people to save up to $15,000 annually and up to $100,000 in total for certain disability related expenses, such as education, housing, transportation, and employment training. Contributions to these accounts are tax free and do not jeopardize the beneficiary’s eligibility for Medicaid, Supplemental Security Income, or other means-tested government benefit programs.

One major limitation, however, is that for an individual to be eligible, the disability must have had an onset prior to age 26. This means that many people with disabilities that form later in life, such as many chronic conditions and disabilities resulting from car crashes or other incidents, are ineligible. Veterans are disproportionately affected by this limitation.

According to a recent report from the National Association of State Treasurers (NAST), only 17,000 accounts opened nationwide between June 30, 2016, when the first state ABLE program launched, and December 31, 2017. Because an estimated 8 million people nationwide are eligible for ABLE accounts, the so-called adoption rate, or percentage of eligible people opening accounts, is just 0.22 percent. For comparison’s sake, this is less than half of the 0.53 percent adoption rate for 529 college savings plans over a similar time period.

NAST calculates that to achieve financial sustainability, 390,000 ABLE accounts will be needed by June 2021, the five-year anniversary of the first state program. To meet this goal, the adoption rate would have to soar to 4.9 percent, which NAST says is “unlikely.”

To increase the number of new ABLE accounts, and thus make state ABLE programs more financially sustainable, NAST strongly urges passage of the ABLE Age Adjustment Act. This bill, introduced in both chambers of Congress, would raise the onset age from 26 to 46, effectively increasing the number of eligible individuals for ABLE accounts from about 8 to 14 million.

In a June 22, 2018, letter to Congressional leadership signed by 159 disability advocacy groups, the Consortium for Constituents with Disabilities (CCD) urged immediate action on the bill.

“The limitation on eligibility based on age of onset of disability did not exist in the original legislation, but was inserted at the end of the ABLE Act’s nearly ten-year legislative history to reduce the bill’s score and get it over the finish line,” the CCD wrote. “The long-term sustainability, availability, and affordability of ABLE programs to individuals with disabilities are in doubt without this expansion of eligibility.”

As additional steps to increase the popularity of ABLE accounts, NAST also recommends that Congress eliminate the Medicaid payback provision for ABLE accounts, allow for multiple account holders for the same beneficiary, and increase or eliminate annual contribution limits, among other changes. 

Nationwide, 46 states now have active ABLE programs. Learn more about the options in your state for starting an ABLE account.