ABLE Accounts and Social Security Benefits Working Together

Questions answered include what are the differences among ABLE, SSI, and SNTs, how does one report an ABLE account to the SSA, and can you directly deposit your SSI check into your ABLE account
Mother and son outside

ABLE Today recently hosted a webinar on ABLE accounts and Social Security benefits. If you missed the webinar and would like to watch the recording, you can find it online here. Webinar participants posed questions during the event to bring clarity to the connection between ABLE and Social Security and the details of the two programs. We've answered a handful of those questions below. MEFA is the state sponsor of the Massachusetts ABLE program, Attainable. You do not need to be a Massachusetts residents to enroll in the Attainable program.

What are the differences among ABLE accounts, Supplemental Security Income (SSI), and special needs trusts?      

ABLE accounts are tax-advantaged investment accounts that allow individuals to save money without affecting their Supplemental Security Income (SSI) (up to accounts of $100,000) or other federal benefits. SSI is a monthly payment for any adult or child with a disability or blindness who also meets certain financial requirements. A special needs trust (SNT) is a trust that preserves the beneficiary's eligibility for needs-based government benefits such as Medicaid and SSI. Because the beneficiary does not own the assets in the trust, he or she can remain eligible for benefit programs that have an asset limit. SNTs and ABLE accounts have very different uses and rules and are frequently beneficial to use in concert.  

How does one report an ABLE account to the Social Security Administration?      

The IRS may request information about the use of funds in an ABLE account, so payees should maintain adequate records for determining and supporting the designated beneficiary's qualified disability expenses for each taxable year. ABLE programs use Form 1099-QA, Distributions from ABLE Accounts, and Form 5498-QA, ABLE Account Contribution Information, to report relevant account information annually to designated beneficiaries and the IRS. Additionally, the SSA receives monthly reports from every ABLE provider showing the name of each ABLE owner and the account balance so that they can verify that the balance does not exceed $100,000.

Can you directly deposit your Social Security Income (SSI) check into your ABLE account?

Yes. SSI can be deposited directly into your ABLE account. However, SSI has a rule that it can only be deposited to a single place, unlike your paycheck which can be split up and deposited into multiple accounts. So if you want only part of your SSI income to go to your ABLE account, you will need to deposit it to a different account. At that point, you can set up a direct deposit into your ABLE account for whatever amount you decide on.

What tax advantages do those with Social Security Disability Insurance (SSDI) have when contributing their payment into an ABLE account?          

There are a few tax advantages:

ABLE Financial Planning Act: Provided that the beneficiary is the same individual on both accounts (or one beneficiary is a family member of the other), it is allowable to transfer funds from a 529 college savings plan into an ABLE account without incurring any tax or penalty.

Saver's Credit: ABLE account owners who meet certain criteria can receive a Saver's Credit on their federal taxes for contributions into an ABLE account. Individuals are eligible if they are age 18 or older, not a full-time student, and not claimed as a dependent on another person's tax return.

Qualified Disability Expenses (QDEs): As long as withdrawals are spent on QDEs, ABLE account growth from investments is federal and MA state income tax-free.

When should a parent apply for Social Security benefits for their disabled child?

A parent of a disabled child can apply at any time. Eligibility will be determined by the SSA's guidelines which include the combined income of the child and parents. To learn more about SSI please refer to the SSA webpage here.

To learn more about Attainable, the Massachusetts ABLE program, sign up for our periodic emails that provide updates and news on the program. You can also find blog posts dedicated to the topic of Attainable on our website here.

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