5 Little Known Facts: The ABLE Account and Social Security

1. May Social Security benefits be deposited into an ABLE account? 
   
   
   • Social Security Income (SSI) is a means-tested program. SSI is intended to pay for living expenses for individuals with disabilities who would otherwise have a difficult time paying for food & shelter. It makes sense to segregate the SSI in an account used to pay for living expenses and not deposit into the ABLE account. One exception might be If the recipient is getting close to having $2000 in resources, they may choose to deposit some funds into their ABLE account.
   • Social Security Disability Income (SSDI) is an entitlement (not means-tested) program based upon the beneficiary’s earnings record. You may deposit SSDI into an ABLE account.
      
2. What happens when a child has a disability under age 18, receives SSI and opens an ABLE account, and then becomes gainfully employed after age 18?
   
   

• The Supplemental Security Income (SSI) program pays benefits to disabled adults and children who have limited income and resources. The Social Security Administration has a two-part definition and you must meet both parts to get benefits.
  
  
  1. If a person of any age is able to earn Substantial Gainful Activity (SGA), which is currently $1,220 gross per month, they will not be eligible to receive benefits from Social Security.
  2. The person must have a physical or mental condition expected to last 12 months or result in death that prevents them from earning SGA.
     
     
• While this person may lose their SSI benefit, they may continue to contribute to their ABLE account- in fact, the ABLE to Work Act allows them to potentially contribute more! They may contribute the $15,000 annual limit PLUS their adjusted gross income or $12,140- the current federal poverty level, whichever is less, meaning they may contribute up to $27,140 in 2019. There is one caveat:  they are not allowed to participate in ABLE to Work and also participate in a workplace retirement or 401K plan.

3. What is the status of child support and the ABLE account?
   
   
   • Child support is considered unearned income. Unearned income including pension, 401K, worker’s compensation payments, unemployment compensation, veteran’s benefits, rental income and child support payments can be deposited into an ABLE account. These income sources also follow the usual income counting rules for the public benefits program and cannot qualify you for additional benefits.

4. Can you use the ABLE account to pay for housing expenses and avoid in-kind supports?
   
   • You can draw money from an ABLE account for housing expenses without it being considered an illegal transfer of funds. This would allow a parent or other family member to deposit money into the ABLE account to help pay living expenses.  If the money is given to the account holder directly, it is considered an In-Kind Support and may impact SSI.
     
     
5. What is the status of Medicaid payback in Massachusetts and other states?

• The Medicaid payback provision varies from state to state.
• In Massachusetts, the state “may or have the potential” to claw back a portion of the proceeds an individual received from Medicaid from their ABLE account if they have one(minus any premiums they paid). In terms of ABLE, this claw back exists only during the period the ABLE account was in existence before their death. If they received Medicaid prior to the ABLE account-that portion is not included in the claw back- only the time period during the ABLE account applies. Before the claw back takes place, when an ABLE account owner passes away, the money in the ABLE account goes to the person’s estate. Prior to the claw back, the estate can pay funeral/burial expenses and any outstanding disability related expenses with the ABLE account however.  A person who receives Medicaid over a lifetime is likely to receive hundreds of thousands of dollars- with a smaller claw back potential.  Any potential claw back can be weighed with the benefits of ABLE overall.
• Medicaid payback may only be avoided with a third-party special needs trust. Upon the beneficiary’s death, the proceeds will go to the secondary beneficiaries.

Sources:

MEFA, Massachusetts Educational Financing Authority, Attainable Account

Fidelity Investments, Attainable Account

Social Security Administration, https://www.ssa.gov/benefits/ssi/

U.S. Dept. of Health and Human Services, https://aspe.hhs.gov/2019-poverty-guidelines