Individuals with certain disabilities can enroll in Colorado ABLE (Coloradans Achieving a Better Life Experience) – a savings and investment program – without losing Medicaid and SSI benefits. Eligibility to enroll in Colorado ABLE is based on meeting one of the following conditions:
- Entitlement to Supplemental Security Income (SSI) benefits based on blindness or disability
- Entitlement to Social Security Disability Insurance (SSDI) benefits based on blindness or disability
- Self-certification of a similarly severe disability, if not entitled to SSI or SSDI, demonstrated by the following:
- Blindness as defined by the Social Security Act (SSA); or
- A medically determinable physical or mental impairment with marked and severe function limitation that has lasted, or is expected to last, at least 12 continuous months or result in death; and
- Have a written disability-related diagnosis signed by a physician
- For all conditions above, the qualifying disability must have started prior to age 26.
A variety of savings and investment options are available through this plan. Earnings on investments are federally tax-deferred and tax-free, if used for qualified disability expenses.
Qualified expenses are defined as any that are incurred as a result of living with a disability and intended to improve the quality of life of the Individual. These include, but are not limited to the following:
- Education
- Health and wellness
- Housing
- Transportation
- Legal fees
- Financial management
- Employment training and support
- Assistive technology
- Personal support services
- Oversight and monitoring
- Funeral and burial expenses
Using the ABLE account exclusively for qualified expenses can help compound earnings. If savings are used for non-qualified expenses the earnings portion of the withdrawal is treated as income, taxed at the Individual’s current tax rate, and is subject to a 10% federal tax penalty and applicable state taxes.
Participants in the Colorado ABLE Plan can choose from six investment offerings – from aggressive, potentially high return options to conservative programs designed to preserve capital – based on financial goals and comfort with risk. Each investment incurs reasonable, periodic, management and maintenance fees, some of which can be waived with electronic delivery of statements and communications or by maintaining minimum balances. There is a checking account option as well, including access to ATMs.
Contributions are limited to $16,000 per year with a maximum account balance limit of $400,000. Account owners who earn income may be eligible to contribute more than the typical annual limit unless they are already contributing to certain other types of saving plans. The account owner or other authorized individual on the account retains control but family and friends can make contributions to the account. Social Security and SSI monthly benefit payments can be direct deposited into ABLE accounts if desired and other recurring contributions or withdrawals can be scheduled.
It’s not necessary to provide proof, at the time of withdrawal, that the expense is a qualifying one. However, Colorado ABLE is required to annually report total amount of withdrawals to the IRS, and itemized withdrawals to the Social Security Administration. So detailed records of expenses should be kept should either entity request verification that expenditures qualify.
Colorado ABLE accounts do not replace government programs, nor do they affect eligibility for federal, needs-based programs including Medicaid. The ABLE program can have an impact on Supplemental Security Income (SSI) benefits, however. Balances of $100,000 or less are excluded from the SSI resource limit. Amounts greater than $100,000 are counted against the limit, along with assets held in non-ABLE accounts. When resources exceed the SSI limit, SSI benefits are suspended while the balance stays above the threshold. Medicaid eligibility is not affected, regardless of the account balance.
It’s easy to set up a Colorado ABLE account, with as little as $25. Accounts are accessible via PC, tablet, mobile devices, debit card, check, by phone or mail. Visit www.coloradoable.org or call 888-609-3468 to enroll and to obtain information about investment objectives, risks, charges, expenses, Plan Disclosure Documents (which should be read in their entirety) and other information about this unique savings and investment tool, created especially for those living with disabilities.
The information in this blog is for informational purposes and is not a substitute for advice from a financial professional. Complete details about the Colorado ABLE account are available at www.coloradoable.org.
