Legislation creating tax-free savings accounts for people with disabilities was approved by the House on Wednesday.
Modeled after 529 college savings accounts, the Achieving a Better Life Experience Act had broad bipartisan support in the House, as well as the Senate, which will consider it next week as part of a broader tax-extension package.
The ABLE Act would allow accounts for people with disabilities to save up to $14,000 annually, and to accrue $100,000 without jeopardizing eligibility for Social Security and other government programs. Eligibility is limited to people whose conditions occurred before age 26.
With federal enactment likely, “I would expect every state to come under pressure to enact an ABLE program,” said Derek Dorn, partner in law firm Davis & Harman, whose clients include plan sponsors and service providers. “Even for financial services firms that are not interested in servicing ABLE accounts, there's a strong possibility that a state's implementation of an ABLE program could impact the RFP process for the state's 529 plans,” such as requiring a vendor to provide both services, Mr. Dorn said.