Thursday, December 18, 2014

Congress Passes Bill Allowing Disabled Persons to Save Up To $14,000 Per Year in Nontaxable Accounts

While this legislation creates another incentive for people to defraud the system by claiming to have disabilities they don't, persons with a disability and their families greatly need this kind of vehicle to keep the federal government from plundering their much needed care dollars.  Frankly, I wish every American could make use of such accounts to cover all of their healthcare needs.  But this is a great start to opening up a window of liberty in a much needed area. 

In summary:   
  • The accounts will be funded with post-tax dollars but the earnings in the account and disbursements will not be taxed; similar to a ROTH IRA
  • Accounts can accrue up to $100,000.  I'd like to see no limit or at least $1 million.
  • Up to $14,000 may be deposited per year
  • Disabled means "marked and severe functional limitations" and one must be diagnosed by the age of 26
  • Up to 54 million disabled persons and their families may benefit

This is from Hope Yen writing for the Associated Press, published at Twin
Congress gave final approval Tuesday to the most sweeping legislation to help the disabled in a quarter century, allowing Americans with disabilities to open tax-free bank accounts to pay for needs such as education, housing and health care.
The move paves the way for creation of the accounts beginning next year for as many as 54 million disabled people and their families.
"This is a monumental, landmark bill," said Sara Hart Weir, interim president of the National Down Syndrome Society. "This bill will change the way that families can save for all their children and adults with Down syndrome and will ease the unnecessary burdens that are placed on families — all while allowing people with Down syndrome to work and save for the future."
The ... Senate passed the measure on a 76-16 vote after it was attached to a bill extending dozens of tax breaks for individuals and businesses until the end of the year. Earlier this month, the ... House overwhelmingly approved the measure, having garnered 85 percent of Congress as co-sponsors.
The bill, called the Achieving a Better Life Experience Act, now goes to President Barack Obama for his signature.
Modeled after tax-free college savings accounts, the ABLE bill would amend the federal tax code to allow states to establish the program.
To qualify, a person would have to be diagnosed by age 26 with a disability that results in "marked and severe functional limitations"; those who are already receiving Social Security disability benefits would also qualify. Families would be able to set up tax-free accounts at financial institutions, depositing up to $14,000 annually to pay for long-term needs such as education, transportation and health care.
The contributions would be in after-tax dollars but earnings would grow tax-free.
The ABLE accounts would be able to accrue up to $100,000 in savings without the person losing eligibility for government aid such as Social Security; currently, the asset limit is $2,000. Medicaid coverage would continue no matter how much money is deposited in the accounts. ...
The measure was sponsored by Sens. Bob Casey, D-Pa., and Richard Burr, R-N.C. ...