The recently concluded, largely do-nothing 113thCongress managed to pass two bills with great significance for special needs families. The first, the Achieving a Better Life Experience (ABLE) Act, helps people with disabilities save for health-care costs, housing, lifelong education, and other needs. Under prior law, a child diagnosed with a disability could not have assets worth more than $2,000 or earn more than $680 per month without forfeiting eligibility for needs-based government programs like Medicaid and Supplemental Social Security (SSI).
The ABLE Act will allow a tax-free savings account up to $100,000 to pay for disability-related expenses. There are some significant limitations: eligibility is limited to those 26 years of age and younger; there’s a $14,000 per year cap on contributions, and each person can have only one account. The program will be managed by the individual states, along the same lines as the college savings 529 plans.
The second piece of legislation was passed as part of the National Defense Authorization Act of 2015, and it allows military retirees to name special needs trusts as beneficiaries of their Survivor Benefit Plans (SBP). This means that military families are now able to direct SBPs to their children with special needs without compromising the children’s eligibility for government disability and medical benefits, as long as the child meets the established criteria for disability (incapable of self-support as a result of a physical or mental disability, provided such disability occurred prior to the age of 22). This legislation has been up for Congressional consideration since 2009 as the Disabled Military Child Protection Act without ever getting out of committee.
Military retirees have long been able to defer a portion of their retirement pay so that when they pass away a surviving spouse or dependent child can receive up to 55 percent of their retirement payments. Retirees could only name individuals as the beneficiaries, and were not allowed to name trusts as beneficiaries. This rule forced retirees to choose between leaving the survivors benefit to a disabled child or keeping the child eligible for the means-tested benefits like SSI and Medicaid. Specifically, SSI payments are reduced by a dollar for every dollar of unearned income in excess of $20. If SSI is reduced entirely, the individual’s Medicaid eligibility may also be jeopardized. The retiree was often forced to determine whether the benefit of the additional income exceeded the loss of other valuable benefits.
