ABLE (529A) plans -- what's a good one and who has it

Wikipedia has a succinct description of the 529A (ABLE) plan:

ABLE programs are similar to tax-advantaged 529 plans for college savings.[8] In addition, a 529 plan can be rolled over into an ABLE account for a qualified beneficiary.

An ABLE account can be opened by a disabled individual who became disabled before 26 years of age.[8] An ABLE account can receive after-tax cash contributions from any person, including its owner.[1] Contributions in a year are limited to the federal gift tax exclusion [9] for that year — $15,000 in 2018.[10] If the beneficiary works and does not contribute to a 401(a), 401(k), 403(b), or 457 plan, the beneficiary can contribute an additional amount above that limit. The additional amount is equal to the lesser of the beneficiary's annual compensation or the federal poverty level for an individual — $12,060 in 2018.

ABLE plans were based on 529 plans, but the comparison misleads. The value of a 529 plan is that after-tax donations can grow and be disbursed without taxation. That's also true of a 529A, but it's not the point. People with ABLE accounts don't pay income tax anyway.

The entire value of an ABLE account is that it bypasses the savings limits of Social Security Income. SSI savings limits are extremely low -- about $2000. SSI recipients can't save more than that. The cap was last updated in 1989, it's been minimally changed since 1974. It's insanely low. There are limits on income too; and gifts are part of income.

ABLE accounts bypass that crazy low limit. In an ABLE account savings can grow to $100,000; 50x higher than the SSI limit.  Money can come gifts or from the account owners's contributions. The catch is those savings can only spent on qualifying expenses. Rent is the big one. Things that are related to independence -- like a smartphone, maybe gym expenses (health), legal fees, disability expenses. Training and education, health costs, transportation.

ABLE accounts launched in 2016-2017. I don't think they've been super successful. The rules are fuzzy and people on SSI learn mistakes are punished severely. There's also not enough money in play to excite the banks.

Our #1 has an ABLE account through Minnesota - currently managed by MinnesotABLE. They aren't a great solution. The web site is mediocre at best and key topics are undocumented, It's easy to add money, hard to remove it. In particular there isn't a useful debit card.

MN doesn't do anything special for residents so I went looking for better plans using the ABLE National Resource Center State Compare app. I want:

• A debit or credit card tied to the account. I want self-documenting transactions. If #1 is buying a new iPhone I want that on the transaction record.
• Low fees
• Small management fees
• A quality web site

It's very hard to find information on ABLE plans. This is one of the best discussions of the general options and why expenses are high or hard to discover (from 2018):

... 529 plans, especially ABLE accounts can only be administered by a state. When does a state see money and not figure out a way to skim off the top. The dirty little secret is that a significant portion of program management fees goes to the state. For example, Maryland and Oregon take 0.30% in administrative fees themselves in their 529 ABLE plans. 

The best I have seen so far is LA ABLE for Louisiana state residents only. No annual fee, no program management fee and 0.07%-0.15% for six Vanguard funds, including the four LifeStrategy Funds. There is a state alliance of GA, KY, MO, NH, OH, SC, and VT that offers funds with asset based fees of 0.31%-0.34% for those state's residents (0.57%-0.60% non-residents). 

For non-residents the National ABLE Alliance of AK, CO, DC, IL, IA, IN, KS, MN, MT, NC, NV, PA and RI. Offers funds with asset based fees of 0.34%-0.38%. Their program management management fee is 32% and I'm sure the states gets a significant chunk of that. The underlying expense ratios are 0.02%-0.06% (based on fixed portfolios using Vanguard, Schwab and iShares funds/ETFs). They have a $15 ($11.25 e-delivery)/qtr account fee. 

The best plan for non-residents based on cost might be Tennessee's ABLE TN, offering Vanguard and DFA funds with asset based fees mostly in the range of 0.35%-037% (Wellington at 0.35%) with no account fees. As always the devil is in the details. E.g. the plan does not offer a debit card.

I'll update this post with what I find, for tonight I'll review:

Ohio

• STABLE card: loadable prepaid debit card
• Vanguard
• $42/year maintenance fee

Massachusetts

• Has debit card
• Fidelity Attainable Savings Plan
• No annual fees

Oregon

• web site information unimpressive, doesn't explain how the prepaid card works
• has annual fee, does at least describe management fees on mutual funds (most sites don't do this)

Pending: Tennessee, Lousiana,Virginia

See also

• ABLE Plans and special needs trusts 7/2018
• ABLE plans 2016

529A (Able tax-free savings accounts) slowly state-by-state rollout starts 2016.

Able accounts are coming, slowly starting next year. On my quick review the fund looks like a good way to pay for housing.

The Arc has a useful fact sheet, but it predates authorization and treasury rules are only up for public hearing in October 2015. I think some of this is now incorrect:

• At $100,000 SSI benefits are suspended and restarts if falls under 100K, but medicaid benefits continue. When individual dies balance goes to medicaid.
• residents of one state can open accounts in another state, so you don’t need to wait for your state to create an account. (But NYT article below suggests we have to wait? Confusing)
• beneficiaries can rollover from an ABLE to a 529 if no longer disabled including another family member’s ABLE or 529 (Doesn’t say whether one can go the other direction, from a 529 to an ABLE). Rollovers can also go to a special needs trust. (q: So if the 100K limit nears can one rollover to the trust? What about other direction? 
• The fund can be used to pay housing (this is the big one), transportation (bicycle?), health related (gym?), disability care expenses (legal fees, oversight, etc).

The http://www.ablenrc.org domain is supposed to go live in September 2015 with more information. There is a $14K limit to fund per year.

The NYT has a more current review of 529A accounts, emphases mine. It’s unclear whether the 100K limit will be a balance limit or a lifetime contribution limit and whether that will vary by state. If it’s a lifetime contribution limit that’s not so good. It’s also unclear what happens if someone changes residences.

Tax-Free Savings Accounts for Disabled Are Expected in 2016 - NYTimes.com

… each must approve its own legislation to set up a plan. As of Aug. 13, 40 states and the District of Columbia either had passed laws or had proposals pending, but 10 states had no bill pending, according to an online registry maintained by the Arc, an advocacy group for people with intellectual and developmental disabilities.

The Treasury, meanwhile, has proposed rules to govern the accounts, and will hold a public hearing on them in October.

As with 529 college savings plans, 529A accounts allow contributed funds to grow tax-free, and to be withdrawn tax-free for eligible expenses. Anyone — including family and friends of a disabled person, as well as the disabled person — can contribute to the accounts, but there is no federal tax deduction for the contribution.

An important feature of the accounts is that they allow people with special needs to save for their care and education without disqualifying them from receiving government benefits….

… Typically, families must set up a special-needs trust to set aside funds for a disabled child without putting benefits at risk — a step that can involve costly legal fees to establish and maintain the trust. Funds in the Able accounts, however, won’t count toward that limit, so they may provide a simpler, lower-cost alternative for many families.

The accounts, however, have some limitations. To qualify, you must have been disabled before age 26. The funds have an annual contribution limit equal to the annual gift tax exclusion — currently $14,000. The account can grow to $100,000 without jeopardizing federal benefits (although some states may set much higher overall total contribution limits), but balances over that amount may prompt a suspension.

…  families may want use a combination of a 529A and a special-needs trust, depending on their financial situation, said Christopher Krell, a financial adviser and principal with Cassaday & Company. With special-needs trusts, there is no contribution limit and they can be structured to avoid Medicaid repayment. “The 529A accounts are great,” Mr. Krell said, “but they’re not going to get rid of special needs trusts.”

■ Can an individual have more than one 529A account?

No. Unlike 529 college savings accounts, you can have just one 529A account, and it must be established in the state where you live (or through the program your state contracts with).

■ How can I find out when 529A accounts will be offered in my state?

You can check with the agency that administers your state’s 529 college savings plan for updates. In early September, look for an online 529A resource center at www.ablenrc.org.

The state-by-state rules sound like a mess; I wonder if that was a GOP congress outcome. If the plans end up restricting an individual ability to move between states I wonder if there will be a constitutional challenge.

My gut sense is that we’re going to get a lot less than what we’d hoped for, but maybe things will improve over time. The special needs trusts remain very important. The real impact could be on paying for housing — that’s increasingly important given the seeming collapse of programs designed to provide housing for disabled adults.

Changing landscape of adult special needs: Housing in the Twin Cities

As our eldest heads towards his last year of High School we’ve been focusing on the housing and employment landscapes. Focus is hard, because both housing and employment options are changing quickly.

I’ve been thinking through the bigger picture of what’s going on, which has something to do with demographic squeeze (aging boomers), slow economic growth (aka “secular stagnation”), the large role prisons play in American special needs housing [1], ethnicity and special needs services, Baumol’s Cost Disease, reaction to scandals like ’The Boys in the Bunkhouse’, the Minnesota Meto case, Staten Island’s horrific Willowbrook State School [2] and to the history of sheltered workshops for the blind. All summing to well intentioned but fuzzy thinking that recapitulates the idealistic failure of deinstitutionalization - including mixing cost reduction with reform.

Ok, I really do need to write that post — which is to include a survey of what’s happening in Europe and Canada. Someday - but not today. Today is an edited contribution from an anonymous contributor on the current state of special needs housing in Minnesota taken from a recent meeting in the Twin Cities (emphases mine). This complements notes from a similar Nov 2013 meeting.

[meeting was]… run by Sean Burke, a lawyer with MN Disability Law Center, who is on a housing law fellowship there (paid with money donated to the law center to fund his work in this area—3 cheers to someone)

 

…. Sean says state and counties are still establishing guidelines and rules for how the housing rules will work.  Next couple of years will be important in rule development.  Laws are changing, but could cause unintended problems, and lose some of the group home advantages--eg safety.  He believes can be good opportunities however, for better living without problems that did exist in poorly run group homes, which could resemble mini institutions.

 

Compares it to the IEP process, where it has taken 30 years for schools to come to terms with what the Disabilities Act requires them to do.  Says we need to approach this as we do IEP--with an idea of what we want to ask for.  If we wait for them to propose what they are willing to do, it will be smaller and less.

 

NB: I was thinking that I was really going to miss the yearly IEP process when the kids graduate from high school; but now happily we get to do it for the rest of our lives!

 

… 1980s—reaction to Willowbrook etc—Feds authorized money for HCBS (home and community based services): Federal tool/mandate to take institutional money and use it for community services (although these not defined).  Suspect Texas used this money to send young adults to work in Iowa turkey farm.  MN used this money in 1980s to establish 4 person group home model, run by private businesses.  This has lasted until last 5 years or so.  

 

State of MN said in 2009 no more group homes to be established [Pawlenty/GOP administration].  Seems like combination of Fed response to lawsuits, re institutionalization,  and MN response to expense of group homes.  This sudden change has everyone trying to figure out what can be done and what money there is for it.  

 

MN is developing an “Olmstead Plan” for this purpose— taking its name from the Supreme Court decision Olmstead vs Zimring in 1999, where the state of Georgia was told it needed to find community based services for cognitively disabled people who wanted them....

 

Also, as of this year “community setting” is now finally defined by feds—10 features. There is a particular focus on privacy and choice as defining a community setting. There is real concern that the well regarded Fraser apartment building with only disabled residents will not meet the “community setting” criteria.

 

Three parent and family scenarios were presented, all with cognitively disabled children in 20s.

 

D lives in duplex shared with his parents.  1/3 time staff care, paid for with CDCS waiver, rest of time including overnight is parent care.  They are not sure this will be final solution, but now feel that can take a few tries to find what works, don't need perfect plan at start.  Their CDCS waiver pays less than a DD waiver, but lets them have more flexibility about how they can use the money--most used for PCAs, some used for technology in his apt, some for a personal trainer, some for transportation, etc.  His home has a space for sensory things, a space for quiet things, a good chair..

 

They did not like the day programs they visited … so plan his days themselves with use of Highland Friendship club activities and personal trainer, trips with PCA etc.

 

They used the "Person Centered Planning" process to develop this plan, a formal process that the waiver can pay for (ARC can do this--called Lifetime Assistance Planning).  They found a team of people to be involved with D —trainer, neighbor who checks in, family friend to be maintenance guy.  These roles are specified in the plan.  They feel these people will remain involved if parents die.

 

… They had to negotiate all of the above arrangement with the state, who will do “assessments” of the needs of the people getting wavered services.  The state has to agree with the family housing plan.  The family found that the state risk assessment gave the the evidence they needed to get the monitoring technology in D’s home paid for by the waiver, however.

 

D gets SSI (about $750/mo) and “MN supplement mental aid shelter needy” or MSA Shelter Needy ($200/mo) plus food stamps $51/mo...

 

M lives at home.  He gets about $760/mo Soc Security disability, he does not work.

 

B lives in a home owned by his father with 2 other cognitively disabled young men…  did a lot of work with state and county to establish this house, an example of an IHO (independent housing option—a term used by the counties, basically means anything that is not a group home).  B has a DD waiver (started with a CDCS waiver, hard work to convert it to a DD waiver a few years ago).

 

B goes to center based DTH (day training and habilitation) at Merrick, where he gets vocational training, and B and housemates have staff in the home from a licensed service provider approved by the waiver board.  One of B’s housemates has a job at Davannis through Merrick.  Also get money from SSI and RSDI  (retirement and survivors disability insurance?), plus MSA shelter needy $200/mo, and $16 food stamps/mo.  Plus he earns about $200/mo.  

 

The IHO setup was complex. It required working with an existing group home, learning to structure an IHO, and writing an RFP

 

When talked to county about how much money available, was told “you won’t get as much money with an IHO as in a group home".  After extensive pressure found B was eligible for $155/day for a group home, they managed to get 80% of that for the IHO.

 

All say the evaluation process is in flux, and the parental fees are in flux.

 

Parents worry about loneliness in a parent shared duplex, about segregation in an IHO.  Also has been a problem that with live in staff, there can be confusion about whose house it is—the staff’s or the person with disabilities’, can use rotating staff for overnights to prevent this problem. Some parents wish for a cooperative housing example—like in the 60s—separate bedrooms with a common living area and shared meals, and mix of disabled and non disabled residents. That does not exist now. 

 

I asked Sean whether the state is trying to avoid what happened with mentally ill in the 70s—he thinks that state will pay what needed to get the community services, MN is just a good state that way.

 

Sean says that there are other HCBS services and money that can be used for housing if your child does not get a waiver. Also that in this time of change, keep talking to everyone you know. 

[1] And long term care of mentally ill too.

Special needs in Minnesota - notes from an ARC and family sponsored meeting

I joined a meeting tonight hosted by Arc Minnesota [1] which was both an opportunity to learn from the work of the local Bender family and a chance to chat with a few local politicians (all of whom I voted for of course).

Unfortunately I was delayed and missed part of the meeting, but I'll share some of the issues that came up. There's much more on these topics in a post from last year - Transition and employment - notes from a Minnesota presentation.

•  I heard some good things about the Legacy Endeavors, I think they'd be categorized as a "supported Employment Service Provider" though I'm fuzzy on the divisions.
• Arc is pushing for a 5% increase in reimbursement for aides and other caregivers in the special needs system. They've gone a long time with no salary increases.
• The ACA is reducing or eliminating the "parental fees" associated with buying into medical assistance (TEFRA) (!)
• Minnesota's Olmstead plan, which came out of a court settlement following the meto case, is starting to turn into laws. There's a focus on licensing and quality improvement for provider organizations and moving towards individual annual budgets and "increased flexibility" [2]. A long promised self-directed support option for personal are attendants might become real.
• There's some legislative pressure to limit use of family members as paid Personal Care Attendants due to vague fears of fraud and abuse. This practice is most common amongst 'communities of color' . The common pattern in special needs services is to put in place so many 'fraud and abuse' safeguards that programs become almost useless.
• The Federal move to limit use of group homes realized most of its money savings from reducing 24 hour surveillance costs.
• Minnesota schools are have accelerated inclusion programs in late High School. Personally we haven't noticed any changes - certainly not any improvements. (For example.)
• States vary in how they deal with maintenance of disability benefits when income rises above poverty level. Minnesota is particularly harsh -- ensuring special needs persons with disabilities will be just barely out of federal poverty. There didn't seem to be a lot of energy for changing this.

[1] I believe The Arc used to be A.R.C, and the R stood for what you might expect. Now it's an "Arc" as in the curvy thing. Incidentally, The Arc has a legislative blog. I had no idea - I've added it to the MSP special needs search engine.

[2] "Flexibility" can be a euphemism for "free to do whatever you want and here's a ticket out of town". We'll see.

Alternative housing for special needs adults - the MEDCottage

This was setup for elderly parents, but there are obvious implications for special needs adults (emphases mine)...

In the Backyard, Grandma's New Apartment - NYTimes.com:

.... a MEDCottage — a prefabricated 12-by-24-foot bedroom-bathroom-kitchenette unit that can be set up as a free-standing structure in their backyard. It’s more than a miniature house — it’s decked out with high-tech monitoring and safety features that rival those of many nursing homes....

... The Australians, who began building simple backyard homes for the elderly in the ’70s, call them granny flats. In the United States, these self-contained units have earned another nickname: granny pods...

... the Pages will become the first family in the country to take delivery of a high-tech MEDCottage. The cottage is laid out as an open-plan apartment with a kitchen area (equipped with a microwave, small refrigerator and washer-dryer combo), a bed area and a bathroom large enough in which to maneuver a wheelchair. The utilities and plumbing connect to the primary residence....

... The cameras sweep an area 12 inches above the floor, so normally all they transmit are images of feet and ankles...

... Currently about half of the states allow these accessory dwellings for a family member, according to Mr. Dupin. (Several additional states, including New York, are considering legislation explicitly permitting granny pods.)...

... The cottage costs about $85,000 new; Mr. Dupin’s distributors will buy it back for about $38,000 after 24 months of use...

... For caregivers in the tristate area who like the idea of aging in place, there’s another prefab alternative: P.A.L.S., short for Practical Assisted Living Structures.

... Attaching a portable pod didn’t cost much more than retrofitting his home, and the unit could be set up faster and with less mess. So last year he contacted Henry Racki, P.A.L.S. creator and a Connecticut home builder who also is a certified aging-in-place specialist... 

... Though each P.A.L.S. unit is customized to the client’s needs, the standard 20-by-14-foot bedroom and bathroom unit starts at about $67,000. Homeowners can also lease a unit. A five-year lease runs about $1,700 per month, after which you own the unit.
The pod comes with phone and TV cable lines built into the wall (no wires to trip on), a closet with levers that lower the clothes to wheelchair level, motion detectors that automatically turn the knee-high night-light system on, showers with grab bars and various types of no-step entries, wheelchair-accessible sinks and comfort-height toilets.

So far, Mr. Racki has set up 10 of these mini-homes in Connecticut, Massachusetts and New York. Zoning in Connecticut doesn’t usually allow for full kitchens, Mr. Racki said, but they can be included. He helps clients get all the permits and zoning approvals needed.
None of the P.A.L.S. purchasers so far have requested high-tech medical monitoring. But a system similar to the MEDCottage’s can be added for $16,000...

I didn't realize there was so much innovation in this area. Astonishing that similar devices have been use in Australia since the 1970s. There will be enormous pressure to find a way to care for demented elderly over the next 30 years; systems like this will be made legal in every state.

In my own case, when I'm demented I expect my daughter to build one on the side of a very steep cliff (which is what I personally would want).

For my son however, something like this may be needed for a longer term, presumably as a form of rental unit.