Legislation sponsored by Assembly Democrats Pamela Lampitt, Majority Leader Louis Greenwald, Valerie Vainieri Huttle and Daniel Benson to create tax-free savings accounts for individuals with disabilities was approved by an Assembly panel on Thursday.
The bill (A-3956) would establish a program within the New Jersey Division of Developmental Disabilities known as ABLE - Achieving a Better Life Experience - in accordance with the federal "Achieving a Better Life Experience Act of 2014," which was signed into law by President Obama in December 2014.
"The goal of this law is to ease the financial strains faced by individuals with disabilities by making tax-free savings accounts available to cover many day-to-day expenses," said Lampitt (D-Camden/Burlington). "This is an important tool to help provide financial security throughout their lives."
"This new law will allow people with disabilities to open specialized accounts where they can save up to $100,000 without risking eligibility for Social Security and other government programs," said Greenwald (D-Camden/Burlington). "Even more importantly, individuals can keep their Medicaid coverage no matter how much money they accrue in an ABLE account."
To be eligible, individuals must have a condition that occurred before age 26 and each person may only open one ABLE account. As set forth in the federal law, qualifying disability expenses would include expenses made for the benefit of an individual with a disability, including:
· education expenses;
· housing and transportation expenses;
· employment training and support expenses;
· health, prevention, and wellness expenses;
· assistive technology and personal support service expenses;
· miscellaneous expenses such as expenses for financial management and administrative services, legal fees, oversight and monitoring, and funeral and burial; and
· other expenses which are approved by the Secretary of the federal Department of Health and Human Services.
"An ABLE account can go a long way in helping individuals fund a variety of essential expenses, such as medical and dental care, education, employment training, assistive technology, housing, and transportation," said Vainieri Huttle (D-Bergen). "For those who may not be able to work full-time or at all, this savings tool is crucial to improving their quality of life."
"The ABLE Act provides individuals with disabilities the same types of flexible savings tools that many people have through college savings accounts, health savings accounts, and individual retirement accounts," said Benson (D-Mercer/Middlesex). "This was a laudable move on the part of the federal government and one New Jersey is proud to join."
The ABLE program would be operated as a trust through the use of accounts for designated beneficiaries. Opening an account would require: completing an application in the prescribed form; making the minimum initial contribution required by the division; and demonstrating that the designated beneficiary is a New Jersey resident.
Money paid into or out of an ABLE account for the purposes of financing the cost of qualified disability expenses would be exempt from state income taxation, certain federal taxes, and all claims of creditors of the contributor or the designated beneficiary.
The funds would not jeopardize a beneficiary's eligibility for any other state or federal assistance and would be disregarded for the purposes of determining eligibility to receive any assistance or benefit authorized by state law.
Anyone may contribute to the account. Contributions to accounts may be made only in cash. Contributors may withdraw all or part of the balance from an account on sixty days notice or a shorter period, as may be authorized by the division pursuant to regulations. A contributor who makes a withdrawal must provide written notice to the trustee and to the designated beneficiary.
Additionally, a request for a qualified withdrawal may be made by an agent of the designated beneficiary who has power of attorney or by the designated beneficiary's legal guardian.
Any state or local government agency or political subdivision would be permitted, by contract or collective bargaining agreement, to agree with any employee to remit contributions to an ABLE account through payroll deductions.
A designated beneficiary may, directly or indirectly, direct the investment of any contributions to the program, or any earnings thereon, no more than two times in any calendar year.
The bill was approved by the Assembly Human Services Committee chaired by Vainieri Huttle.