Dateline: December 9, 2014

Promising the first significant legislative help for disable persons since the 1990 Americans with Disabilities Act, the Achieving a Better Life Experience Act of 2014 (the ABLE Act), has perhaps the best chance of any major bill to pass in Congress during what’s left of its lame duck session.

Now enjoying the support of Democrats and Republicans, the ABLE Act would allow more than 50 million Americans with disabilities to open tax-exempt bank accounts to help then pay for certain long-term expenses.

Similar to the government’s existing tax-free college savings account program – the qualified tuition program – the ABLE Act would allow as many as 54 million disabled Americans to open tax-free savings accounts to help pay for “qualified disability expenses,” including: education, including higher education, housing transportation, obtaining and maintaining employment, health and wellness, and other personal support expenses.

Under the law, ABLE accounts could grow up to $100,000 without being taxed and without the loss of eligibility for benefits from other federal government assistance programs and state Medicaid.

However, the payment of Supplemental Security Income (SSI) benefits could be temporarily suspended if funds deposited in a person’s ABLE account resulted in them having “excess resources” as defined by Social Security.

Annual contributions to ABLE Act accounts from family members and friends would be restricted to the current annual gift tax exemption of $14,000.

How the Act Defines ‘Disabled’

Ready for some government legal-speak? In order to qualify to open an ABLE Act tax-free savings account, an individual must have been diagnosed by a physician as having a physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to last for a continuous period of not less than 12 months or will result in death, or is blind as defined by Social Security. In addition, the disability or blindness must have occurred before the individual reached age 26.

ABLE Act Passes House Easily

Showing its bipartisan support, the ABLE Act passed in the House on December 3 by a 404 – 17 vote.

“This levels the playing field for people less fortunate than we are,” said Rep. Ander Crenshaw (R-Florida)., the bill’s main sponsor in the House. “And it demonstrates we can work together when it's something that affects so many people.”

What About the Cost

Any law allowing anything of value to be “tax-free” will almost certainly impact the federal budget in the areas of the deficit and revenue.

According to the non-partisan Congressional Budget Office (CBO), enactment of the ABLE Act would reduce the unified federal budget deficit by $33 million over the 2015-2024 period. The bill would reduce outlays by $294 million and reduce revenues by $261 million over those 10 years, the CBO estimates.

The CBO also estimated that enacting the ABLE Act would increase direct government spending by $5 billion in at least one of the four consecutive 10-year periods beginning in 2024.