by Betty T. Yee
For decades, people with disabilities and their families faced a conundrum: If they saved enough for the necessary care and supports, they risked becoming ineligible for some of the means-tested programs they need to maintain their independence.
In 2014, the federal Stephen Beck Jr. Achieving a Better Life Experience (ABLE) Act passed with overwhelming bipartisan support, giving states the authority to launch tax-advantaged savings and investment programs for people with disabilities. It is widely regarded as the most significant legislation affecting the disability community since the Americans with Disabilities Act of 1990.
In 2015, California Governor Jerry Brown signed the California ABLE Act into law, establishing the state’s 529A Qualified ABLE Program – CalABLE – and the California ABLE Act Board on which Controller Yee serves. This opened up life-improving opportunities for people with disabilities and their families.
ABLE accounts allow individuals with disabilities to save and invest money without losing eligibility for certain means-tested public benefits programs, like Medicaid and Social Security Income. Earnings in an ABLE account are not subject to federal or California state income tax as long as they are used for qualified disability expenses.
An eligible individual under CalABLE is someone who developed a disability before the age of 26. The individual must have been living with the disability for at least one year; or they must expect the disability to last for at least a year.
Savings in a CalABLE account can be used for many different disability-related expenses, such as education, employment support, housing, transportation, assistive technology, and healthcare. A CalABLE account lets a participant save emergency funds that help to enhance independence.
A CalABLE account can function like a checking or savings account. Individuals who plan to use their money short-term, such as for basic living expenses, may elect to enroll in CalABLE’s FDIC-Insured Portfolio for this purpose.
A CalABLE account also can be set up as a long-term investment account, where a participant will have the ability to invest money in a range of options that suits one’s particular risk appetite while helping to achieve financial goals.
Nationwide, 43 states and the District of Columbia have launched ABLE programs. Approximately $642 million has been saved in more than 82,000 ABLE accounts.
Among states that report their accounts and assets, California’s CalABLE program – which just officially opened its doors as a standalone program in December 2018 – ranks fourth in assets under management, totaling $60.3 million as of the third quarter of 2021; and fifth in total accounts at 6,473.
Recognizing the age-at-onset-of-disability requirement contained in the ABLE Act limits the reach of the program, Senators Bob Casey (D-PA) and Jerry Moran (R-KS), and Representatives Tony Cardenas (D-CA), Judy Chu (D-CA), and Cathy Morris Rodgers (R-WA) have introduced the ABLE Age Adjustment Act. This legislation would allow people who acquired their disability before the age of 46 to open an ABLE account. It is estimated this expansion would provide program access to more than six million more adults with disabilities, including one million military veterans.
California State Controller Betty T. Yee
300 Capitol Mall, Suite 1850
Sacramento, California 95814
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