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FDIC Consumer News - Fall 2017

More Savings Options, Greater Financial Independence for People with Disabilities

As previously reported in FDIC Consumer News, the federal Achieving a Better Life Experience Act of 2014 (the ABLE Act) allows many individuals with disabilities to put money in savings accounts that can grow tax-free. The funds saved can be used for "qualified disability expenses," which may include education, "assistive technology" (such as mobility scooters and computer screen readers), housing, transportation and other types of "supports and services." Based on September 2017 guidance from the U.S. Department of Health and Human Services, money in these accounts also will not affect eligibility for means-tested federal benefit programs such as Medicaid.

Individual state governments voluntarily establish these accounts under programs managed by each state or a private company serving on its behalf. We can now report that more than half the states plus the District of Columbia have set up ABLE programs, most of which are open to enrollment by eligible residents of any state. Under the law, an individual can open an ABLE account in his or her state of residence (if it offers the program) or through another state's program that allows eligible residents of any state to enroll.

"These accounts can be life-changing because they allow individuals with disabilities to save money, perhaps for the first time, without jeopardizing their federal benefits," said Laura Lawrence, an FDIC senior community affairs specialist.

These accounts allow individuals with disabilities to save money without jeopardizing their federal benefits.

Each ABLE program offers a range of investment options, usually including an FDIC-insured account. The programs also offer different withdrawal options, tax benefits and fee structures.

"When comparing ABLE savings programs, pay close attention to the fees for opening and maintaining the account, tax benefits that vary among programs based on each state's income tax deductions or credits, and any features that may make it easier for you to use the account the way you plan to use it," explained Nancy Tillmon, an FDIC consumer affairs specialist.

To qualify for an ABLE account, the account owner can be any age, but the disability must have started before age 26. Like "529 plan" college savings accounts, ABLE accounts provide favorable tax treatment when the funds are used for eligible expenses. The ABLE account is owned by the person with a disability, but someone else can manage or contribute to the account on his or her behalf. As of 2017, up to $14,000 a year can be contributed to an ABLE account.

Funds in an ABLE account deposited at an FDIC-insured institution are covered by the FDIC for up to $250,000, with the account owner (the beneficiary) being the insurable depositor. "Bank deposits in ABLE accounts are insured as single-ownership funds, subject to aggregation with any other single-ownership funds the account owner, in this case the ABLE account beneficiary, may have at the same financial institution," explained Martin Becker, chief of the FDIC's Deposit Insurance Section.

Links to state ABLE programs and their online enrollment portals, as well as more information about these programs, can be found on several websites, including the nonprofit National Disability Institute's ABLE National Resource Center. For more help or guidance on the deposit insurance for ABLE accounts or any other accounts you have at an insured bank, you can speak with an expert by calling 1-877-ASK-FDIC (1-877-275-3342).