NATIONAL UNIVERSITY OF IRELAND CENTRE FOR DISABILITY LAW & POLICY QUARTERLY POLICY BRIEFING NO. 3, 2010. AVOIDING THE POVERTY TRAP AND ACHIEVEING ECONOMIC EMPOWERMENT FOR PERSONS WITH DISABILITIES: AN ANALYSIS OF THE UNITED STATES LEGISLATIVE INITIATIVE ‘ACHIEVING A BETTER LIFE EXPERIENCE’ (“ABLE”) BILL OF 2009. Principal Author: Hanh Le, Summer Clinical Intern at the CDLP, College of William & Mary, School of Law. www.nuigalway.ie/cdlp What Are Policy Briefings?
The Centre for Disability Law and Policy hosts and sponsors a large amount
of comparative law and policy research focused on disability. Much of this
research is directly relevant to current policy challenges in Ireland.
The Centre is committed to providing succinct Policy Briefings on a quarterly
basis which summarize some of its relevant research and tie it directly to
these policy challenges.
This is the third in that series (Autumn 2010). It goes to the very foundation
of the right to independent living. Independent living can best be achieved
when State support is partnered with economic self sufficiency. This is why
economic and social policies that (1) encourage asset building among
persons with disabilities and (2) which do not allow economic success in
building those assets to militate unjustly against welfare and other
entitlements are so important.
The author, Hanh Le – a Summer Intern at the CDLP from William & Mary
Law School (Virginia) – has done a superb job in detailing how the United
States is dealing with these issues. Of especial importance is the draft ABLE
Act which is due to be enacted the US Congress in late 2010. In a sense the
ABLE legislation – and other measures like it – help deliver on the promise of
a ‘developmental welfare’ State. And in a sense this Briefing helps inform
debate here about how we can achieve the goals of the ‘developmental
welfare state’ for our citizens with disabilities.
We hope you find this Briefing useful. Please visit our website for further
information on research underway and please log on to our Disability Law
Blog (on our website) for up-to-date news of relevant to policy debates in
Ireland.
We welcome comments, questions, suggestions and feedback. Please direct
your comments to info.cdlp@nuigalway.ie Professor Gerard Quinn, Director, CDLP. Gerard.quinn@nuigalway.ie
Acknowledgements.
My sincerest gratitude to Gerard Quinn, Rachel Stevens, and Eilionoir Flynn
at the Centre for Disability Law and Policy, NUI Galway, for their guidance,
inputs, and comments on previous drafts. Special thanks to Michael Morris,
Executive Director of the National Disability Institute in Washington DC and
CEO for the Burton Blatt Institute (Syracuse University) for expert guidance
on US legislation and policy. I would also like to thank Frank Conaty at the
Accountancy & Finance Department, NUI Galway, Pauline O'Dwyer at
EmployAbility Service in Galway Ireland for expert guidance on Irish law and
policy.
Hanh Le, 1L,
College of William & Mary Law School, Summer Clinical Intern, CDLP, 2010.
Page 2 Table of Contents I. Asset Ownership and Economic Empowerment .................................................................... 1 A. Benefits of Asset Ownership ...................................................................................................................1 B. Government Initiatives to Support Asset-­Building Opportunities ............................................2 II. Asset Building in the Context of Individuals with Low-­Income or Disabilities.......... 3 A. Ineffectiveness of Tax Code Incentives ...............................................................................................3 B. Means-­Based Eligibility for Public Assistance Programs and Its Deterrence for Saving ...4 United States – Asset Limits and Substantial Gainful Activity Test ...........................................................4 Ireland – Means Test......................................................................................................................................................5 Means-­‐Based Eligibility and Its Side-­‐Effects........................................................................................................6 C. Recent U.S. Initiatives Advancing Asset Development & Economic Self-­Sufficiency............7 SSI Savers Act of 2010 (H.R.4937) ...........................................................................................................................7 Savings for Working Families Act (H.R. 2277/S.985)......................................................................................8 III. Asset-­Building Tools In-­Line with Ireland’s Welfare State ............................................. 8 A. Overview of ABLE Act of 2009 ............................................................................................................. 10 B. Background and Legislative Status ................................................................................................... 10 C. ABLE Accounts – Proposed Structure................................................................................................ 11 1. Ownership and Control .........................................................................................................................................11 2. Eligibility .....................................................................................................................................................................12 3. Qualifying Expenses................................................................................................................................................13 4. Contributions, Distributions, and Rollovers ................................................................................................14 5. Tax Advantages.........................................................................................................................................................16 6. Liquidation .................................................................................................................................................................17 D. Considerations and Drawbacks.......................................................................................................... 17 IV. Rationale for Asset-­Building Initiatives and ABLE Account ..........................................18 A. Rights-­Based Arguments....................................................................................................................... 18 1. Autonomy to control financial affairs .............................................................................................................18 2. Right to work, participate in economic activities, and become self-­‐reliant ...................................19 3. Right to economic mobility and realization life opportunities............................................................20 B. Economic and Efficiency-­Based Arguments ................................................................................... 21 1. Increase in employment and productivity ...................................................................................................21 2. Cost savings from reduced use of government-­‐provided services ....................................................22 C. Rationale for Structures Similar to ABLE Accounts...................................................................... 23 1. Flexible withdrawals to incentivize savings without fear of restricted future use.....................23 2. Structure facilitates contributions on behalf of the designated beneficiary..................................23 Appendices...........................................................................................................................................24 Appendix A. Organizations Supporting the ABLE Act ...................................................................... 24 Appendix B. Blindness & Disability under Title XVI of the Social Security Act ....................... 25 Appendix C. Qualifying Relationships under §152(d)(2) of the Internal Revenue Code ..... 30 Page 3 I. Asset Ownership and Economic Empowerment A. Benefits of Asset Ownership Economic self-­‐sufficiency is arguably the foundation of financial independence. At the core of this economic empowerment is an individual’s ability to not only develop, but also to control his incomes and assets. Economic well-­‐being does not depend merely on income, spending, or consumption, but also on savings, investments, and accumulation of assets. As such, preserving and accumulating financial resources can expand one’s life choices and have direct impact on his quality of life.1 Benefits of asset ownership are well documented in research. Whether in the form of savings, financial investments, homeownership, higher education, or business capital, asset ownership can be the foundation of both economic and social mobility. Savings enable individuals to bridge short-­‐term cash flow gaps and provide a crucial buffer against life emergencies, such as job losses, income reductions, illness, or disability.2 As such, savings and other financial assets are often viewed as a source of financial security and economic independence. In addition, financial resources also promote developments of human capital, as people use their savings to invest in higher education or additional job training. Research indicates that asset ownership not only has positive behavioral effects and can change how individuals think about and plan for their futures, but can also increase personal efficacy, social influence and political participation. It has been documented that individuals who possess meaningful assets are more likely to engage in the political process or exert greater influence in social networks, most likely in order to protect their financial security.3 1
Michael Morris, Economic Empowerment for People with Disabilities in Building a Better Economic Future, A Progress Report for Individuals with Disabilities and Their Families in America, National Disability Institute, 2008. 2
Alejandra Lopez-­‐Fernandini, Unrestricted Savings: Their Role in Household Economic Security and the Case for Policy Action, New America Foundation, February 15, 2010. 3
J. Michael Collins, An Assessment of Policies to Promote Financial Savings and Asset Building in the U.S., PolicyLab Consulting Group, LLC, June 14, 2005. Page 1 But perhaps most importantly, asset ownership can also help low–income individuals “chart a path out of poverty.”4 Many economists argue that asset accumulation can be a poverty-­‐alleviation strategy and create opportunities for low-­‐income families to improve their economic and social status. B. Government Initiatives to Support Asset-­‐Building Opportunities Recognizing the benefits of asset ownership, governments around the world have utilized tax systems and direct spending programs to subsidize or otherwise encourage individuals to acquire, accumulate, and preserve long-­‐term assets.5 The United States government offers numerous incentives to encourage asset building, including government-­‐matched savings plans, tax credits for first-­‐time homebuyers, or subsidies and grants for higher education tuition. Arguably, asset accumulation is an integral element of the realization of the “American Dream.” With that in mind, it is not surprising that albeit the country’s $1.4 trillion budget deficit, the highest since World War II, President Obama’s 2011 Fiscal Year Budget still allocates approx. $701 billion in resources to promote asset building, with about $152 billion in direct spending and about $549 billion in tax subsidies.6 Ireland embraced asset building in 2001 with a matched-­‐savings scheme, called the Special Savings Incentive Account (“SSIA”), offered to all Irish residents. The initiative was launched in May 2001 and closed for new accounts in April 2002. The scheme allowed savers to deposit a maximum of €254 per month to a savings account, and the government would match 25% of the amount saved, as long as the account was held for five years. All incomes earned on the account were subject to a 23% tax rate at withdrawal. The program faced a number of criticisms, mostly on grounds of high fiscal costs to the government and inequity, as it provided obvious benefits to middle-­‐class individuals who had more disposable income to take advantage of the government match.7 Although the SSIA scheme is no longer offered in Ireland, the State continues to provide other asset-­‐building incentives through its tax codes.8 4
The Assets Report 2010, An Assessment of President Obama’s 2011 Budget and the Changing Policy Landscape for Asset-­‐Building Opportunities, New America Foundation, March 22, 2010. 5
Asset Building and the Escape from Poverty: A New Welfare Policy Debate, Organisation for Economic Co-­‐
Operation and Development, November 17, 2003. 6
The Assets Report 2010, An Assessment of President Obama’s 2011 Budget and the Changing Policy Landscape for Asset-­‐Building Opportunities, New America Foundation, March 22, 2010. 7
Asset Building and the Escape from Poverty: A New Welfare Policy Debate, Organisation for Economic Co-­‐
Operation and Development, November 17, 2003. 8
th
Irish Taxation Law and Practice, Irish Taxation Series 2009, 7 Edition. Page 2 For example, Irish residents can take advantage of tax credits for fees paid for third-­‐level education, if the fees are related to an approved course. There are also tax reliefs designed to encourage individuals to set up their own businesses (Seed Capital Investment allowance) or save for retirement (relief for Pension Contributions). II. Asset Building in the Context of Individuals with Low-­‐Income or Disabilities Although it is commonly accepted that asset building can alleviate poverty and help individuals improve their economic and social status, low-­‐income individuals, including those with disabilities, face significant challenges when trying to accumulate savings and other financial assets. Naturally, with low and stagnant wages, they have limited, if any, discretionary funds to save for future use. But more importantly, for those that do have funds to set aside, existing public policy and social structures neither encourage nor facilitate saving and asset building. First, asset-­‐building incentives offered through tax codes simply do not reach many low-­‐income families. To add another layer to the problem, the need-­‐basis eligibility for public assistance programs, which provide crucial support and services for many low-­‐income individuals, effectively deters any incentives to saving and asset building. As such, existing social structures create what is often referred to as a “poverty trap,” making it extremely difficult, and in some cases nearly impossible, for low-­‐income individuals to gain any level of financial independence and find an escape from poverty. A. Ineffectiveness of Tax Code Incentives Asset-­‐building incentives offered through tax codes often do not reach the indigent segment of the population, and thus, are ineffective means of motivating those individuals to save and accumulate assets. With their incomes below the minimum threshold, many poor persons are exempt from taxes altogether and cannot take advantage of tax subsidies. Those that do have a tax liability are still subject to a lower tax rate, and thus have a lower per dollar value of tax reduction, as compared to higher-­‐
income taxpayers. As it can be expected, middle-­‐ and upper-­‐income individuals are best positioned to take advantage of tax subsidies benefits. A study conducted in the United States estimated that 90% of tax benefits for Page 3 savings, retirements and homeownership were captured by households with incomes over $50,000.9 Although no comparable study was done in Ireland, it would seem that the dynamics still hold: individuals with larger tax liabilities accrue larger tax benefits from asset-­‐building incentives, whereas individuals with lower or no tax liabilities accrue smaller or no benefits at all. B. Means-­‐Based Eligibility for Public Assistance Programs and Its Deterrence for Saving Another significant hurdle for low-­‐income individuals as they strive for financial independence is the means-­‐based eligibility test for public benefit programs. The test effectively deters any incentives to save and indirectly prevents them from realizing the benefits of asset ownership. For many working-­‐age adults the dependence on public assistance programs for income, food, and medical assistance “requires staying poor to stay eligible,”10 creating a “poverty trap” with almost no opportunities to break out. United States – Asset Limits and Substantial Gainful Activity Test To qualify for most public assistance programs in the United States individuals must be both “income and asset poor.” Although the actual limit for countable assets may vary across programs, the calculation of countable assets generally include cash, bank deposits, retirement savings, pension funds, and assets held in tax-­‐advantaged savings accounts, such as Education Savings Accounts or Medical Savings Accounts.11 Currently, to qualify for cash assistance to low-­‐income elderly, blind or disabled persons, also known as Supplemental Security Income (“SSI”), individuals must have less than $2,000 of countable assets.12 In addition, in order to remain eligible an individual cannot engage in any Substantial Gainful Activity (“SGA”), earning more than a certain monthly amount. In 2010, the SGA amount for a blind and non-­‐blind person was $1,640 and $1,000, respectively.13 9
Ray Boshara, Reid Cramer, and Leslie Parrish, Financing Strategies for Learning and Asset Development, New America Foundation, Asset Building Program, October 2003. 10
Michael Morris, Economic Empowerment for People with Disabilities in Building a Better Economic Future, A Progress Report for Individuals with Disabilities and Their Families in America, National Disability Institute, 2008. 11
What is the ABLE Act and What Can It Do for You? Real Economic Impact, A Vision of the National Disability Institute. For a definition of Education Savings Account and Medical Savings Account, please refer to note 27 & 28. 12
Social Security Online, The Official Website of the U.S. Social Security Administration, Understanding Supplemental Security Income, SSI Eligibility Requirements, 2010 Edition, http://www.socialsecurity.gov/ssi/text-­‐
eligibility-­‐ussi.htm 13
Social Security Online, The Official Website of the U.S. Social Security Administration, Substantial Gainful Activity: Automatic Increases, http://www.ssa.gov/OACT/COLA/sga.html Page 4 Ireland – Means Test Ireland also has means-­‐based eligibility for social assistance payments, whereby in order to receive public benefits an individual’s income and other means must be below a pre-­‐specified level. For most means-­‐tested social assistance payments, an individual’s social welfare payments are reduced on a sliding scale according to his or her means. Generally, “means” include cash income, property personally used, and other capital, including property not personally used, as well as savings and investments.14 Persons with disabilities in Ireland may receive two types of means-­‐tested disability payments: Disability Allowance and Blind Pension. The calculation of “means” for these social assistance disability payments excludes most of other social welfare payments a disabled individual may receive, as well as weekly incomes of less than €120, if the incomes are earned from rehabilitative or therapeutic work.15 However, if an individual’s weekly income from rehabilitative work is between €120 and €350, 50% of those earnings will be taken into account in the means test. All earnings over €350 will also be assessed as income and an individual’s entitlement to Disability Allowance and Blind Pension will be reduced in line with the appropriate reduced rates. In general, an individual loses entitlements to social assistance disability payments when his or her weekly income level exceeds €420. In addition to the means test, individuals receiving social assistance disability payments face other restrictions when seeking employment. First, they need to obtain permission from the Department of Social Protection prior to accepting any employment. Also, although there are no official restrictions on the number of hours disabled persons can work, the Department of Social Protection either recommends a maximum of twenty hours a week as a guideline, or operates this limit in practice.16 In some cases, this twenty-­‐hour limit operates as a barrier for taking on a job with meaningful responsibilities, even though a person’s disability does not prevent him or her from fulfilling the requirements of the job. 14
CitizensInformation.ie, http://www.citizensinformation.ie/categories/social-­‐welfare/irish-­‐social-­‐welfare-­‐
system/means-­‐test-­‐for-­‐social-­‐welfare-­‐payments/means-­‐test 15
CitizensInformation.ie, http://www.citizensinformation.ie/categories/social-­‐welfare/social-­‐welfare-­‐
payments/social-­‐welfare-­‐payments-­‐and-­‐work/disability-­‐payments-­‐and-­‐work 16
CitizensInformation.ie, http://www.citizensinformation.ie/categories/social-­‐welfare/social-­‐welfare-­‐
payments/social-­‐welfare-­‐payments-­‐and-­‐work/disability-­‐payments-­‐and-­‐work Page 5 Means-­‐Based Eligibility and Its Side-­‐Effects Asset limit tests pose numerous problems and side-­‐effects. Perhaps it is no surprise that the test was summarized by proponents of its abolishment as “confusing, inefficient, counterproductive, and inequitable”17. The asset test is confusing mostly because it is relatively complex. With no clearly published guidelines, an individual often has no way of knowing whether he or she qualifies for the benefits prior to submitting the application. This ambiguity also makes it more difficult, and in some cases almost impossible, for individuals to manage their incomes and assets, while still maintaining eligibility for public assistance programs. The asset test is also inefficient and counterproductive because it effectively discourages individuals from seeking or taking meaningful work, even though their disability does not prevent them from doing so. According to the National Disability Survey, 11.4% of unemployed working-­‐age adults were not interested in starting employment due to a fear of losing some current income or government-­‐provided supports, such as medical cards.18 This is the second most common reason after 14.2% of unemployed adults reported they could not find employment due to lack of suitable jobs. Asset limit tests also deter individuals from saving for life emergencies and the future generally. They also discourage family members and friends from providing financial support to individuals with disabilities. Because both financial savings and monetary or asset-­‐based support may count as “means,” an individual may chose to not save due to a fear that he or she could accumulate assets beyond the allowable limit and fail the means test. This fear creates deterrence to saving, even when an individual has sufficient discretionary funds to set aside. Families and friends may be reluctant to help due to concerns that any monetary-­‐based support could disqualify a disabled individual from receiving government programs.19 As a result, individuals with disabilities are often forced to spend their financial assets, whether small inheritances or wages, in order to remain eligible for government benefits. They 17
Resource Guide: Lifting Asset Limits in Public Benefit Programs, 2009-­‐2010 Assets & Opportunity Scorecard, The Corporation for Enterprise Development (“CFED”). 18
National Disability Survey, Central Statistics Office in Ireland, 2006. 19
Letter from Advancing Employment Connecting People (APSE) to Congressional Leaders in support of the ABLE Act of 2009, dated November 23, 2009. Page 6 are forced to do so, even though it makes much more economic sense for them to save and preserve those assets for a rainy day.20 Lastly, asset limits are obviously inequitable. They only affect the society’s most vulnerable members, who already have limited economic means. The test and its limitations create multiple barriers, making it much more difficult for many low-­‐income individuals to escape poverty and build a better future for themselves and their families. Clearly, asset limits present a substantial financial disincentive to saving and asset building for individuals with low-­‐incomes, including those with disabilities. By effectively limiting their incentives and abilities to save and accumulate assets, means tests indirectly prevent them from reaching a level of financial independence and creating a more secure and financially stable future. Even more troublesome, this structure creates a poverty trap that not only leaves persons with low-­‐income and/or disabilities more dependent on government services, but also forces them to remain dependent on those services to meet their daily needs. C. Recent U.S. Initiatives Advancing Asset Development & Economic Self-­‐Sufficiency Recognizing the disincentives posed by asset limits, the U.S. government has taken a number of steps in addressing this problem. The most notable initiatives specifically targeting low-­‐income and disabled persons are the SSI Savers Act of 2010 (H.R. 4937), which advocates increasing the asset limit used in public assistance programs, and the Savings for Working Families Act (H.R. 2277/S.985), which proposes additional funding to finance matched-­‐savings plans for working families. SSI Savers Act of 2010 (H.R.4937) The SSI Savers Act of 2010 (the “SSI Act”) proposes to raise the current asset limit to $5,000 for individuals and $7,500 for married couples. For those under the age of 65, the SSI Act also proposes to exclude certain savings from the calculations of countable assets, such as Education Savings Accounts, Individual Development Accounts, and certain amounts in retirement savings accounts.21 The legislation is a direct effort to address the punitive nature of asset limits in public assistance programs, and to 20
What is the ABLE Act and What Can It Do for You? Real Economic Impact, A Vision of the National Disability Institute. 21
Asset Limit Reform in the Supplemental Security Income (SSI) Program: Remove the Penalty for Saving, The Corporation for Enterprise Development. Page 7 encourage low-­‐income adults with or without disability to pursue meaningful work, build savings, and secure a more financially-­‐stable future and a better quality of life. Savings for Working Families Act (H.R. 2277/S.985) The Savings for Working Families Act (the “SWF Act”) proposes to expand federal funding for Individual Development Accounts (“IDAs”) and provide investments to increase financial literacy services for low-­‐
income individuals with or without disability. IDAs are government-­‐assisted savings account, in which for every dollar saved by an individual, the U.S. government matches up to 200%.22 IDAs can be opened by any persons between 18 and 60 years of age, who are citizens or legal residents of the U.S. with federal adjusted gross income not exceeding $20,000 (single), $30,000 (head of household), or $40,000 (married). IDAs are designed to encourage asset building, and the most common uses for IDA savings are: purchase of a house, tuition for post-­‐secondary education, and starting or expanding a small business. In addition, all IDA account holders must complete a financial education course prior to making a withdrawal from the account. This is to ensure that low-­‐income individuals receive appropriate financial training that empowers them to exercise prudent control of their financial assets. The SWF Act proposes funding for an additional 2.7 million IDA accounts over a ten-­‐year period and provides $120 million to nonprofit organizations to provide financial education.23 The legislation is an effort to provide working low-­‐income persons with financial products, tailored to their needs that will enable them to save, build wealth, and enter the financial mainstream. III. Asset-­‐Building Tools In-­‐Line with Ireland’s Welfare State In its 2005 report, the National Economic & Social Council (“NESC”) argued that Ireland’s social structures should address social risks, needs, and inequalities more adequately, while also connecting more fully with the economy. In this “welfare state,” well-­‐designed social policies can foster employability and productivity, increase individuals’ participation in the labor market, and “contribute 22
Individual Development Accounts, The Corporation and Enterprise Development, http://cfed.org/assets/pdfs/IDA_Fact_Sheet_2009_12_12.pdf 23
Michael Morris and Johnette Hartnett, What Can the White House Do to Have Real Economic Impact for Americans with Disabilities? Appendix B, Prepared by Burton Blatt Institute at Syracuse University and National Disability Institute, June 15, 2009. Page 8 directly to reinventing the economy” 24. However, the NESC also pointed out that a mere dedication of additional resources may not be sufficient. Instead, the revision of social policies and implementation of new standards of care for the society’s most dependent and vulnerable members may require certain “institutional innovations.” The introduction of creative financial products, such as asset building tools is a great example of such “institutional innovation.” Empowering the most vulnerable members of the society with creative financial products that can address their social and economic disadvantage, while providing support as they build a more financially-­‐stable future, is not only the right thing to do from a social perspective, but can also contribute to Ireland’s economy as these individuals improve their participation in the economy. As the NESC pointed out, “the boundaries between what have, traditionally, been thought of as separable economic and social policy domains have become increasingly blurred.”25 Public assistance programs, although indispensable to millions of persons, are nevertheless insufficient. Persons with disabilities do not get access to all services they need through public assistance programs, but also lack the financial resources to pay for those services themselves. According to the National Disability Survey, 42% of individuals with disabilities, who require specialized features in and around their homes cannot afford to install those features. 26 Moreover, lack of funding is the most common reason why persons with disabilities cannot keep their homes adequately heated, and one of the most common reasons why they cannot access help with everyday activities. Given these statistics, providing persons with disabilities with financial products, creatively designed to encourage savings and incentivize family members and friends to help out financially, can be an effective way of bridging the gap for the much-­‐needed services not provided by government programs. Furthermore, with a sufficient balance, these savings tools will enable persons with disabilities to take advantage of benefits of asset ownership and live more productive and financially-­‐independent lives. Given the benefits of asset ownership and the punitive nature of means tests, it is productive and 24
“The Developmental Welfare State,” National Economic and Social Council, May 2005, http://www.nesc.ie/dynamic/docs/NESC%20DWS_RZ%20Text+Cover.pdf 25
“The Developmental Welfare State,” National Economic and Social Council, May 2005, http://www.nesc.ie/dynamic/docs/NESC%20DWS_RZ%20Text+Cover.pdf 26
National Disability Survey, Central Statistics Office in Ireland, 2006. Page 9 economically-­‐beneficial for Ireland to introduce financial products that could enable persons with disabilities to escape poverty and build a path towards financial independence. The ABLE account recently introduced in the United States may be an effective and efficient tool to achieve these social and economic goals and merits a detailed analysis and considerations. A. Overview of ABLE Act of 2009 The “Achieving a Better Life Experience Act of 2009,” also known as the ABLE Act of 2009 (the “ABLE Act”), is designed to encourage savings among individuals with disabilities and allow them to achieve and maintain a level of financial independence. The legislation proposes the creation of a savings instrument with significant tax advantages, often called the ABLE account. Modeled after similar savings instruments such as Education Savings Accounts27 or Health Savings Accounts28, ABLE accounts allow individuals to accrue their savings tax-­‐free. Incomes earned on amounts contributed to the account are tax-­‐exempt; withdrawals are also tax-­‐exempt, as long as the funds are used to pay for qualified disability-­‐related expenses. It is believed that these tax-­‐advantaged savings tools will encourage and facilitate savings among individuals with disabilities, and allow them to build financial resources to achieve and maintain independence and good quality of life. Most importantly, assets in ABLE accounts will supplement, but not replace benefits provided by other sources and thus, having an ABLE account does not affect an individual’s eligibility for other government programs, such as Medicaid or Supplemental Security Income. B. Background and Legislative Status The ABLE Act is a bipartisan and bicameral initiative. The legislation was introduced by Rep. Ander Crenshaw (R-­‐FL) in the House of Representatives (H.R. 1205) and by Sen. Robert Casey (D-­‐PA) in the Senate (S.493) on February 26, 2009. The legislation now has almost 200 co-­‐sponsors, with 178 co-­‐
27
Coverdell Education Savings Accounts (“ESAs”) allow individuals to make annual contributions of up to $2,000 to pay for their child’s future education expenses. Assets in ESAs grow tax-­‐free; distributions are also tax-­‐free if they are used for qualified education expenses at qualified institutions, which include primary and secondary schools, as well as colleges and universities. All contributions to ESAs must be made before the child turns 18. See Internal Revenue Code 26 U.S.C. § 530 for further details. 28
Health Savings Accounts (“HSAs”) allow individuals to make tax-­‐free contributions to pay for their medical expenses; withdrawals are also tax-­‐free if they are used to pay for qualified medical expenses, which typically cover most forms of medical care, disability, dental care, vision care, and long-­‐term care. Page 10 sponsors for the House Bill29 and 19 co-­‐sponsors for the Senate Bill30. In addition, over 20 non-­‐profit organizations and advocacy groups are in support of the legislation (please refer to appendix A for a list of all organizations).31 After its introduction in the House and the Senate, the ABLE Act was referred to congressional subcommittees for further review. The Senate bill was referred to the Finance Subcommittee; the House bill was referred to the Subcommittee on Ways and Means and Subcommittee on Energy and Commerce. As of August 2010, there were no subcommittee hearings scheduled for the ABLE Act.32 Although the Speaker of the House may set a time period, during which the subcommittee must review the legislation, this is typically done only when the bill is referred to additional committees following the report of the primary committee.33 As such, no time limit was set for review of the ABLE Act. It is not unusual for bills to not receive any committee consideration; in fact, committees can reject bills by simply not acting on them. However, some organizations believe the ABLE Act may be passed as a part of a larger tax bill at the end of 2010.34 Individuals in support of the ABLE Act are also encouraged to voice their opinions to their congressmen and senators in an effort to move the legislation up in the committees’ agendas. C. ABLE Accounts – Proposed Structure 1. Ownership and Control ABLE accounts can be established for the purpose of saving for disability-­‐related expenses by or on behalf of individuals with disabilities. Any blind or disabled person meeting the definition of blindness and disability under the current Social Security Act can be a designated beneficiary of an ABLE account. The legal capacity of the designated beneficiary, however, determines the legal structure of the account: whether it is a custodial or a trust account. 29
Govtrack.us, A Civil Project to Track Congress, http://www.govtrack.us/congress/bill.xpd?bill=h111-­‐1205 Govtrack.us, A Civil Project to Track Congress, http://www.govtrack.us/congress/bill.xpd?bill=s111-­‐493 31
The National Fragile X Foundation, ABLE Act of 2009: Discussion Guide, www.fragilex.org 32
Govtrack.us, A Civil Project to Track Congress, http://www.govtrack.us/congress/bill.xpd?bill=h111-­‐1205, http://www.govtrack.us/congress/bill.xpd?bill=s111-­‐493 33
How Our Laws are Made, The Library of Congress, http://thomas.loc.gov/home/lawsmade.bysec/introtocomm.html 34
The National Disability Institute, http://www.realeconomicimpact.org 30
Page 11 If the disabled person is deemed capable of making legal decisions, the ABLE account can be a trust account. In that case, a trustee, which can be a bank, a parent or guardian of the designated beneficiary, or a third party that can demonstrate he or she will administer the trust consistent with the requirement of the Act, must be appointed.35 The designated beneficiary of trust ABLE accounts retains the right to make his own decisions in terms of contribution and withdrawals of funds If the disabled person is deemed legally incapacitated and cannot make legal decisions, the ABLE account must be structured as a custodial account. In that case, a custodian must be appointed to render the decisions on distributions and usage of the funds. The designated beneficiary has no legal right to make decisions on contributions and withdrawals of the account. 36 Custodial ABLE accounts will most likely be held at national banks and the process of opening such accounts should be similar to opening ordinary savings accounts. The legislation in its current version does not outline the process of determining a person’s legal capacity; mostly likely because legal capacity is a state law issue and handled at a state level. The legislation also does not outline the process of opening and maintaining an ABLE account. It is expected, however, that the process will be similar to those of other tax-­‐advantaged savings accounts, such as an Education Saving Account.37 2. Eligibility Age – There is no age requirement for the designated beneficiaries, and an ABLE account can be opened for individuals with disabilities of all ages. However, after the beneficiary reaches the age of 65, no additional contributions are allowed to the account. Disability – The ABLE Act relies on the current definition of disability as applied by the Social Security Administration: disability is defined as an inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairments, which (i) can be expected to result in 35
ABLE Act of 2009, H.R. 1205/S.493, p. 4 The ABLE Account Act of 2009. Status Report to the NDI Board of Directors, dated March 17, 2010. 37
“ABLE Act FAQs,” Real Economic Impact, A Vision of the National Disability Institute, http://www.realeconomicimpact.org/data/files/other%20documents/able_accounts_faq's%20final.doc 36
Page 12 death or (ii) has lasted or can be expected to last for a continuous period of more than 12 months.38 As such, individuals eligible to open an ABLE account are those eligible to receive supplemental security income benefits under title XVI of the Social Security Act.39 In addition, individuals that do not receive these federal benefits because they failed the countable asset test and the SGA test utilized by the Social Security Administration are also eligible to open an account. The ABLE Act disregards these two tests and focuses on the type and level of the beneficiary’s disabilities, rather than his or her assets. Number of accounts – Each eligible individual can only have one ABLE account. 3. Qualifying Expenses40 The list of qualifying disability-­‐related expenses is exhaustive and broad, covering the majority of everyday life expenses. Withdrawals used to pay for the following expenses for the benefit of the designated beneficiary are not subject to federal taxation: Education -­‐
Tuition from pre-­‐school through post-­‐secondary education -­‐
Books, supplies, and other educational materials (e.g., tutors, special education services) Housing -­‐
Rent or mortgage payments -­‐
Home improvements and modifications, maintenance and repairs -­‐
Real property taxes and utility charges Transportation -­‐
Use of mass transit -­‐
Purchase or modification of vehicles -­‐
Moving expenses Employment Support -­‐
Expenses related to obtaining and maintaining employment (e.g., job-­‐related training, assistive technology, personal assistance supports) 38
Disability Evaluation under Social Security, Social Security Online, http://www.ssa.gov/disability/professionals/bluebook/general-­‐info.htm. Please refer to Exhibit B for a full definition of blindness and disability under the Social Security Act. 39
ABLE Act of 2009, H.R. 1205/S.493, p. 8 40
ABLE Act of 2009, H.R. 1205/S.493, p. 5 Page 13 Health, Prevention, and Wellness -­‐
Premiums for health insurance and other medical plans (e.g., vision and dental) -­‐
Habilitation and rehabilitation services -­‐
Durable medical equipment, respite care, therapy -­‐
Long-­‐term services and support, nutritional management Life Necessities -­‐
Expenses for clothing -­‐
Expenses for religious, cultural or recreational activities, community-­‐based supports -­‐
Supplies and equipment for personal care -­‐
Communication services and devices, adaptive equipment, assistive technology -­‐
Financial management and administrative services -­‐
Expenses for oversight, monitoring, or advocacy, personal assistance supports -­‐
Funeral and burial expenses Assistive Technology & Personal Support Services -­‐
Expenses for assistive technology and personal support with respect to all listed qualifying expenses 4. Contributions, Distributions, and Rollovers Contributions The legislation does not place limitations on who can contribute to an ABLE account. Beneficiaries that contribute to their own account can claim tax deductions for contributions. Contributions made on behalf of a designated beneficiary are considered completed gift, eligible for the gift tax exclusion41. There are, however, restrictions on the total amount of contributions, as well as when the contributions are allowed. ABLE account contributions are subject to a $500,000 lifetime cap, to be adjusted for inflation each calendar year.42 No contributions are allowed when the designated beneficiary reaches the age of 65.43 All assets held in the account, however, will continue to grow tax-­‐free. All contributions to ABLE accounts are made on an after-­‐tax basis. 41
In general, according to U.S tax codes a donor must pay gift taxes on any completed gifts. However, if the donor makes gifts that are below the annual exclusion amount to one person within a single year, he is exempt from gift taxes. The annual exclusion amount for 2010 was $13,000 per donee. 42
ABLE Act of 2009, H.R. 1205/S.493, p. 14 43
ABLE Act of 2009, H.R. 1205/S.493, p. 3-­‐4 Page 14 Distributions Funds from ABLE accounts can be withdrawn throughout a designated beneficiary’s lifetime. Generally, distributions are exempt from income taxes, as long as they satisfy certain criteria. The following categories of distributions are exempt from federal taxation:44 -­‐
Distributions made to cover payments of qualified disability-­‐related expenses -­‐
Distributions of funds that were contributed to the account within the previous 60 days -­‐
Distributions made to the estate of the designated beneficiary after his or her death Distributions that do not meet the above criteria or are otherwise not for the benefit of the designated beneficiary are subject to regular income taxes plus a penalty of 10%.45 Rollover to Another ABLE Account or Trust Account46 Assets in one ABLE account may be rolled over to another ABLE account or trust account if the two accounts are for the benefit of (i) the same beneficiary, or (ii) his or her spouse, or (iii) other qualified individuals bearing a relationship to the designated beneficiary, as specified under the Internal Revenue Code.47 The assets can also be rolled over into an ABLE account for the benefit of another individual with disability, as long as the individual meets the disability requirements. In both cases, if the rollover amount is deposited into the new account within 60 days of withdrawal, the balance is not subject to federal taxes. Rollover From Other Tax-­‐Advantaged Accounts48 Other tax-­‐advantaged accounts, such as Health Savings Accounts, Education Savings Accounts, and certain Individual Retirement Accounts (“IRAs”) may make rollover distributions to ABLE accounts without incurring penalties or being subject to taxes, as long as the contributions to ABLE accounts are made within 60 days of withdrawals. 44
ABLE Act of 2009, H.R. 1205/S.493, p. 11 ABLE Act of 2009, H.R. 1205/S.493, p. 10 46
ABLE Act of 2009, H.R. 1205/S.493, p. 11 47
Please see appendix C for a full list of qualified relationships. 48
ABLE Act of 2009, H.R. 1205/S.493, p. 18 45
Page 15 For Education Savings Account and Health Savings Accounts, the ABLE account must be for the benefit of the same beneficiary. For IRAs, the ABLE accounts can be for the benefit of the child or grandchild of the original account holder. Change in Designated Beneficiary49 The designated beneficiary of an ABLE account may also be changed without incurring taxes, as long as the new beneficiary meets the eligibility criteria of an individual with disabilities as of the date of the change. 5. Tax Advantages No Federal Taxation on Income Earned and Distributions50 Assets in ABLE accounts are accumulated, grown and distributed free from federal taxes if the criteria for distributions are met, as discussed above. It is unclear whether the funds will be subject to state level taxes, although similar types of tax-­‐advantaged accounts, such as college savings and IRAs, have been exempted from state taxation. Tax Deductions on Contributions Beneficiaries that contribute to their own account can claim an annual tax deduction for contributions of up to $2,000.51 The actual amount of deductions allowed will depend on the individual’s income level, and begins to phase out for individuals, heads of households and joint return filers making annual income of more than $30,000, $45,000 and $60,000, respectively. Individuals, heads of households and joint return filers with annual income above $35,000, $52,500, and $70,000, respectively, are not allowed to take any tax deductions on their contributions.52 All above-­‐mentioned amounts will be adjusted for inflation each calendar year. Family members, friends and other third parties can also contribute to the beneficiary’s ABLE account. Such contributions are considered completed gifts, eligible for the gift tax exclusion.53 49
ABLE Act of 2009, H.R. 1205/S.493, p. 12 “ABLE Act FAQs,” Real Economic Impact, A Vision of the National Disability Institute, http://www.realeconomicimpact.org/data/files/other%20documents/able_accounts_faq's%20final.doc 51
ABLE Act of 2009, H.R. 1205/S.493, p. 21 52
ABLE Act of 2009, H.R. 1205/S.493, p. 22 53
ABLE Act of 2009, H.R. 1205/S.493, p. 8 50
Page 16 6. Liquidation Upon the death of the beneficiary or when the beneficiary no longer has a disability, remaining assets in the account will be first distributed to a state Medicaid plan that provided medical assistance to the designated beneficiary. The Medicaid plan is allowed to recover up to the total amount of medical assistance provided to the beneficiary after the establishment of the ABLE account.54 After the Medicaid payback, any remaining assets in the ABLE account will be distributed pursuant to the beneficiary’s estate. Portions of such amounts may be subject to taxes. However, if the remaining balance is rolled over to another ABLE account or tax-­‐advantaged savings account and meets the rollover requirements as previously discussed, the rollover is exempt from federal taxes. D. Considerations and Drawbacks There are a few drawbacks that may raise some criticism against the ABLE Act and the account structure itself. First, the account merely facilitates saving among individuals and families, who already have sufficient discretionary funds to set aside and thus arguably, only benefits those who are already better positioned. The legislation will have the most beneficial impact for disabled persons, who already have financial resources to contribute, or have families and friends that are already inclined to help out and make contributions on their behalf. As such, on a marginal basis, the structure does not encourage or incentivize additional contributions. There are no monetary incentives for third parties to contribute to the account, as they do not benefit from incomes grown on the account balance. Their contributions are merely gifts for tax purposes. Second, unlike similar legislations proposed in other countries, such as the United Kingdom, the ABLE Act does not propose a capital commitment from the federal government. A capital commitment or other forms of “capital matching” from the government would naturally benefit individuals who have no financial assets and thus, help to address the criticism. However, in addressing the potential drawbacks of the ABLE Act it is perhaps helpful to re-­‐emphasize the purpose and rationale for the legislation. Most importantly, the ABLE Act is an attempt to address economic problems and social disadvantages posed by means tests eligibility for social welfare assistance. By allowing persons with disabilities to save and build financial assets without affecting their 54
ABLE Act of 2009, H.R. 1205/S.493, p. 5 Page 17 eligibility for government support programs, the account gives them the tools to build a path towards self-­‐reliance, financial independence, and a more secure and stable future. Further, the rationale for the legislation is not to incentivize additional contributions, but only that it is economically efficient for the system as a whole to remove bars posed by existing social structures that deter contributions from families, friends, and other third parties. As such, the account empowers third parties who previously, despite their willingness and desire, could not provide financial assistance to their family and friends due to various structures in the system, such as tax codes or means-­‐based eligibility for public support programs. In fact, the account structure is designed to facilitate those contributions: there are no restrictions on who can contribute to the account, third parties can rollover balances from other tax-­‐advantaged accounts without penalty or taxes, and most importantly, financial assets in the account are not taken into account in the means test for social assistance payments. IV. Rationale for Asset-­‐Building Initiatives and ABLE Account A. Rights-­‐Based Arguments 1. Autonomy to control financial affairs “(...) States Parties shall take all appropriate and effective measures to ensure the equal right of persons with disabilities to own or inherit property, to control their own financial affairs and to have equal access to bank loans, mortgages and other forms of financial credit, and shall ensure that persons with disabilities are not arbitrarily deprived of their property.” Article 12, Section 5 United Nations Convention on Rights and Dignity of Persons with Disabilities The society views adults as independent and autonomous individuals with the right to self-­‐
determination and the freedom to make their own decisions, as long as those choices do not pose harm to third parties. This autonomy and free will extends to nearly all aspects of everyday life, including the management of one’s financial assets and other investments. However, for individuals with low-­‐income or those with disabilities various social structures have adverse effects on their autonomy in managing and controlling their financial affairs. Yet, the right of Page 18 persons with disabilities to own and accumulate assets, and control their financial affairs was recognized by the UN Convention on Rights and Dignity of Persons with Disabilities. Financial independence and the resulting economic empowerment will allow persons with disabilities to have more stable, secure, and productive lives, allowing them to become more engaged in societal activities. Like all other citizens, persons with disabilities have the right to achieve their full potentials and reach a level of self-­‐reliance and financial independence. The State, then, should take steps to ensure that public policy and social structures are aligned as to give the society’s most vulnerable members the appropriate tools to help them realize those potentials. 2. Right to work, participate in economic activities, and become self-­‐reliant Aside from creating substantial barrier in a disabled person’s path toward accumulating financial assets and controlling his or her own financial affairs, existing social structures also prevent disabled individuals from taking on meaningful employment. Although there are no official restrictions, the Department of Social Protection recommends a twenty-­‐hour work week limit as guidance or in some situations operates this limit in practice. Individuals with disabilities may be at risk of losing their social assistance disability payments should they exceed this allowable limit. Individuals with disabilities already face numerous obstacles when seeking or taking on employment. First, there are a limited number of suitable jobs that can accommodate to their disabilities. In many cases, in order to sustain a job, persons with disabilities need a supportive work environment that can provide them with appropriate trainings, development plans, and reasonable accommodations to their unique needs. Without those services, disabled persons are at a considerable disadvantage or may be unable to take on the job altogether. There are also a number of qualitative factors, such as embarrassment or discomfort at disclosing one’s disability at work, intolerant or unaccepting colleagues and superiors, or even potential stigma, perhaps from friends, employers, or the society, that a disabled person is dependent on another’s help and cannot hold down a meaningful job. Maintaining a job also requires certain lifestyle changes and a disabled person is simply not capable of achieving those without proper help or appropriate financial resources. With all obstacles persons with disabilities already face when seeking or maintaining a job, on a human rights-­‐based level, it is simply unjust and inequitable for the State to impose other barriers making it even more difficult for persons with disabilities to take on a job. The primary considerations for the Page 19 State should be to provide appropriate accommodations and support for society’s most vulnerable members and encourage all citizens, regardless of their background or medical limitations, to participate in the labor market. By deterring disabled individuals from engaging in economic activities, both through means-­‐based eligibility for public assistance programs and “suggested” work hour limit, the State limits life choices of disabled persons and deprives them of opportunities to reach their full social and economic potentials. If a person’s disability does not prevent him or her from maintaining a job, a person should not only be encouraged to participate in the labor market, but should also be empowered to reap full benefits of their labor and skills, without a fear of losing additional government-­‐provided support. The introduction of asset building tools, such as the ABLE accounts, should achieve this purpose. 3. Right to economic mobility and realization life opportunities Financial savings and asset accumulation are a foundation of both economic and social mobility. Savings and investments help bridge short-­‐term cash flow gaps and provide a buffer against life emergencies. They are also a source of financial security, empowering individuals to make long-­‐term plans and investments in their futures. Asset accumulation is often argued as a poverty-­‐alleviation strategy, which can help individuals with low income, including those with disabilities, build a path out of poverty and towards financial independence. When social structures take away a person’s ability to save and accumulate financial assets, there are numerous harmful economic and social effects. With limited financial means and no savings, a person with disabilities is forced to continuously live on the verge of poverty and be dependent on government-­‐
provided support. As a result of this “poverty trap,” they have limited life choices, and maintain a subpar standard of life, often without adequate support and services, and with severe consequences on their everyday livelihood. Further, this inability to save confines them to short-­‐term planning, leaving them vulnerable to unexpected events and other life emergencies. It is hard to accept that existing social structures could effectively subject the most vulnerable members of the society to such an economic and social disadvantage. It seems to be completely contrary to what one hopes social policies and social inclusion are designed to do. As the NESC argued, the State should develop policies and structures that enable the widest possible number in the population to earn their livelihoods in a “decent and humane way” and “ensure universal regard in Irish life for the dignity of Page 20 human person and protection from discrimination.”55 Taking away the ability to save from individuals who arguably need it the most fails this premise in every aspect, and the State should address this issue immediately. B. Economic and Efficiency-­‐Based Arguments 1. Increase in employment and productivity As previously discussed, existing social structure create barriers that have the effect of deterring individuals with disabilities from working or participating in other economic activities. As a result, these working-­‐age adults are left out of the labor market, even though they are willing and able to maintain meaningful employment. Instead, they are forced to remain dependent on government support and help from family and friends. It would seem that reaching self-­‐reliance is nearly impossible for them. Yet, if their disability does not prevent these individuals from working, it is both counterproductive and inefficient when the society creates social barriers that effectively deter them from working. Such an inefficient deployment of capital resources could have a negative impact on Ireland’s economy. Human capital is arguably the most valuable asset for a country’s economic development. Technological advances in the 20th century, however, have led to and created many jobs requiring higher levels of knowledge and skills. With the strength of demand for labor and growth of the global economy, many employers today rely on workforce abroad, whether through outsourcing some of its functions to a foreign country or hiring immigrant workers in its main country of operations. Given these economic trends, it is even more crucial for Ireland to develop social and economic policies that treat all of its citizens as its greatest assets and adopt an institutional framework that enables the widest possible number of the population to engage in economic activities. This will not only allow Ireland to realize full value of its resources, but also to improve its economic performance. Increasing the employment rate will in part require focusing on the obstacles faced by the most vulnerable citizens in the working-­‐age population. Ireland’s social policies need to ensure that these citizens receive the support they need in finding and maintaining a meaningful and satisfying job. If successful, these changes will increase individuals’ participation in the labor market, help Ireland foster 55
“The Developmental Welfare State,” National Economic and Social Council, May 2005, http://www.nesc.ie/dynamic/docs/NESC%20DWS_RZ%20Text+Cover.pdf Page 21 its economic assets and “reinvent the economy.”56 Human capital is one of the economy’s greatest assets, and both economic and social policies should be framed to treat people as such. With appropriate economic policies, Ireland’s social structures can foster both employability and productivity among its human capital and improve the country’s economic growth. 2. Cost savings from reduced use of government-­‐provided services Introduction of asset building accounts, such as ABLE accounts, may also result in some cost savings for the State. It is expected that some individuals with disabilities will chose to pay for certain disability-­‐
related services with their own funds, even though they are still eligible for government programs and other welfare assistance payments. With a lower expected usage, the State can revise its budget and in the long-­‐run allocate fewer resources in the area of disability-­‐related services. According to the National Disability Survey, the most common reasons why many persons with disabilities cannot access help are related to the administration of these services. 57 In many cases, people remain on waiting lists for an extended period of time. Sometimes, discouraged by the complicated and burdensome application process, they do not even apply. More often than not, they simply do not know who to contact or where to go. In some cases, disabled persons do not access the services because they do not like the service provided by the government or the service is not available in his or her area. The ability to pay for some of these much-­‐needed services with private funds, whether through their own financial savings or assistance from family and friends, will give persons with disabilities the flexibility in lifestyle and the power to make more meaningful life choices. They will be able to choose the services they want, the way they want it. Personalization and avoiding long waiting lists or burdensome application processes are strong reasons for opting out of government-­‐provided services, despite one’s eligibility for them. The State can then adjust its budget appropriately to reflect this reduced use, and in the long-­‐run, capture cost savings from this shift to privately-­‐paid for disability-­‐
related services. 56
“The Developmental Welfare State,” National Economic and Social Council, May 2005, http://www.nesc.ie/dynamic/docs/NESC%20DWS_RZ%20Text+Cover.pdf 57
National Disability Survey, Central Statistics Office in Ireland, 2006. Page 22 Additionally, the ABLE account, as proposed in the United States, has a Medicaid pay-­‐back features, which allows the state to recover up to the total amount of medical assistance provided to the designated beneficiary after the establishment of the ABLE account. This feature naturally has direct cost savings implications, and will contribute to additional savings to the State. C. Rationale for Structures Similar to ABLE Accounts 1. Flexible withdrawals to incentivize savings without fear of restricted future use ABLE accounts are set up to be flexible in almost all aspects. Naturally, the most likely concern individuals may have before deciding whether they should open an account and contribute their savings is whether there are restrictions in withdrawals of those funds or how they can be spent. Anticipating these concerns, the ABLE account is designed to be extremely flexible, both in timing of the withdrawals and the use of withdrawn funds. Funds from the account can be withdrawn at anytime to support both ongoing and long-­‐term expenses. The list of qualifying expenses is broad enough as to cover almost all disability-­‐related expenses, encouraging individuals to contribute and save for their future without fears of restricted use. Funds from the account can also be rolled over to other accounts, if certain conditions are met, thereby alleviating any concerns of contributing too much and not being able to spend the entire balance in the account. 2. Structure facilitates contributions on behalf of the designated beneficiary Certain mechanics of the account are also designed to facilitate contributions from others, partially addressing the problem of persons with disabilities not having assets or incomes to contribute to the account in the first place. There is some criticisms that the account does not encourage and incentivize contributions from third parties. It does, however, facilitate contributions from those family members and third parties who are already inclined to help out, by removing previous concerns that their monetary help may jeopardize a disabled person’s eligibility for social assistance payments. The account also allows for rollovers from other tax-­‐advantaged savings accounts without penalties or taxes, and further facilitating such rollovers. Although Ireland does not offer many tax-­‐advantaged savings accounts, it can be possible to encourage rollovers from individual pension or retirement accounts. Page 23 Appendices Appendix A. Organizations Supporting the ABLE Act58 APSE The Arc of the United States Association of University Centers on Disabilities (AUCD) Autism Society of America Autism Speaks Center for Outcome Analysis Center for Self-­‐Determination Consortium for Citizens with Disabilities Asset Development Task Force Collaboration to Promote Self-­‐Determination Down Syndrome Association of Northern Virginia Easter Seals National Association of Councils on Developmental Disabilities National Association of State Directors of Developmental Disabilities Services (NASDDDS) National Fragile X Foundation National Disability Institute National Down Syndrome Congress National Down Syndrome Society TASH TecAccess United Cerebral Palsy World Institute on Disability Source: The National Disability Institute. http://www.realeconomicimpact.org/Public-­‐Policy/ABLE-­‐Act.aspx Page 24 Appendix B. Blindness & Disability under Title XVI of the Social Security Act TITLE XVI—Supplemental Security Income for the aged, blind, and disabled Sec. 1614. [42 U.S.C. 1382c] (a)(1) For purposes of this title, the term “aged, blind, or disabled individual” means an individual who— (A) is 65 years of age or older, is blind (as determined under paragraph (2)), or is disabled (as determined under paragraph (3)), and (B) (i) is a resident of the United States, and is either (I) a citizen or (II) an alien lawfully admitted for permanent residence or otherwise permanently residing in the United States under color of law (including any alien who is lawfully present in the United States as a result of the application of the provisions of section 212(d)(5) of the Immigration and Nationality Act[36]), or (ii) is a child who is a citizen of the United States, and who is living with a parent of the child who is a member of the Armed Forces of the United States assigned to permanent duty ashore outside the United States. (2) An individual shall be considered to be blind for purposes of this title if he has central visual acuity of 20/200 or less in the better eye with the use of a correcting lens. An eye which is accompanied by a limitation in the fields of vision such that the widest diameter of the visual field subtends an angle no greater than 20 degrees shall be considered for purposes of the first sentence of this subsection as having a central visual acuity of 20/200 or less. An individual shall also be considered to be blind for purposes of this title if he is blind as defined under a State plan approved under title X or XVI as in effect for October 1972 and received aid under such plan (on the basis of blindness) for December 1973, so long as he is continuously blind as so defined. (3)(A) Except as provided in subparagraph (C), an individual shall be considered to be disabled for purposes of this title if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. (B) For purposes of subparagraph (A), an individual shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which he lives, or whether a specific job vacancy exists for him, or whether he would be hired if he applied for work. For purposes of the preceding sentence (with respect to any individual), “work which exists in the national economy” means work which exists in significant numbers either in the region where such individual lives or in several regions of the country. (C)(i) An individual under the age of 18 shall be considered disabled for the purposes of this title if that individual has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. Page 25 (ii) Notwithstanding clause (i), no individual under the age of 18 who engages in substantial gainful activity (determined in accordance with regulations prescribed pursuant to subparagraph (E)) may be considered to be disabled. (D) For purposes of this paragraph, a physical or mental impairment is an impairment that results from anatomical, physiological, or psychological abnormalities which are demonstrable by medically acceptable clinical and laboratory diagnostic techniques. (E) The Commissioner of Social Security shall by regulations prescribe the criteria for determining when services performed or earnings derived from services demonstrate an individual's ability to engage in substantial gainful activity. In determining whether an individual is able to engage in substantial gainful activity by reason of his earnings, where his disability is sufficiently severe to result in a functional limitation requiring assistance in order for him to work, there shall be excluded from such earnings an amount equal to the cost (to such individual) of any attendant care services, medical devices, equipment, prostheses, and similar items and services (not including routine drugs or routine medical services unless such drugs or services are necessary for the control of the disabling condition) which are necessary (as determined by the Commissioner of Social Security in regulations) for that purpose, whether or not such assistance is also needed to enable him to carry out his normal daily functions; except that the amounts to be excluded shall be subject to such reasonable limits as the Commissioner of Social Security may prescribe. Notwithstanding the provisions of subparagraph (B), an individual whose services or earnings meet such criteria shall be found not to be disabled. The Commissioner of Social Security shall make determinations under this title with respect to substantial gainful activity, without regard to the legality of the activity. (F) Notwithstanding the provisions of subparagraphs (A) through (D), an individual shall also be considered to be disabled for purposes of this title if he is permanently and totally disabled as defined under a State plan approved under title XIV or XVI as in effect for October 1972 and received aid under such plan (on the basis of disability) for December 1973 (and for at least one month prior to July 1973), so long as he is continuously disabled as so defined. (G) In determining whether an individual's physical or mental impairment or impairments are of a sufficient medical severity that such impairment or impairments could be the basis of eligibility under this section, the Commissioner of Social Security shall consider the combined effect of all of the individual's impairments without regard to whether any such impairment, if considered separately, would be of such severity. If the Commissioner of Social Security does find a medically severe combination of impairments, the combined impact of the impairments shall be considered throughout the disability determination process. (H)(i) In making determinations with respect to disability under this title, the provisions of sections 221(h), 221(k), and 223(d)(5) shall apply in the same manner as they apply to determinations of disability under title II. (ii)(I) Not less frequently than once every 3 years, the Commissioner shall review in accordance with paragraph (4) the continued eligibility for benefits under this title of each individual who has not attained 18 years of age and is eligible for such benefits by Page 26 reason of an impairment (or combination of impairments) which is likely to improve (or, at the option of the Commissioner, which is unlikely to improve). (II) A representative payee of a recipient whose case is reviewed under this clause shall present, at the time of review, evidence demonstrating that the recipient is, and has been, receiving treatment, to the extent considered medically necessary and available, of the condition which was the basis for providing benefits under this title. (III) If the representative payee refuses to comply without good cause with the requirements of subclause (II), the Commissioner of Social Security shall, if the Commissioner determines it is in the best interest of the individual, promptly suspend payment of benefits to the representative payee, and provide for payment of benefits to an alternative representative payee of the individual or, of the interest of the individual under this title would be served thereby, to the individual. (IV) Subclause (II) shall not apply to the representative payee of any individual with respect to whom the Commissioner determines such application would be inappropriate or unnecessary. In making such determination, the Commissioner shall take into consideration the nature of the individual's impairment (or combination of impairments). Section 1631(c) shall not apply to a finding by the Commissioner that the requirements of subclause (II) should not apply to an individual's representative payee. (iii) If an individual is eligible for benefits under this title by reason of disability for the month preceding the month in which the individual attains the age of 18 years, the Commissioner shall redetermine such eligibility— (I) by applying the criteria used in determining initial eligibility for individuals who are age 18 or older; and (II) either during the 1-­‐year period beginning on the individual's 18th birthday or, in lieu of a continuing disability review, whenever the Commissioner determines that an individual's case is subject to a redetermination under this clause. With respect to any redetermination under this clause, paragraph (4) shall not apply. (iv)(I) Except as provided in subclause (VI), not later than 12 months after the birth of an individual, the Commissioner shall review in accordance with paragraph (4) the continuing eligibility for benefits under this title by reason of disability of such individual whose low birth weight is a contributing factor material to the Commissioner's determination that the individual is disabled. (II) A review under subclause (I) shall be considered a substitute for a review otherwise required under any other provision of the subparagraph during that 12-­‐month period. Page 27 (III) A representative payee of a recipient whose case is reviewed under this clause shall present, at the time of review, evidence demonstrating that the recipient is, and has been, receiving treatment, to the extent considered medically necessary and available, of the condition which was the basis for providing benefits under this title. (IV) If the representative payee refuses to comply without good cause with the requirements of subclause (III), the Commissioner of Social Security shall, if the Commissioner determines it is in the best interest of the individual, promptly suspend payment of benefits to the representative payee, and provide for payment of benefits to an alternative representative payee of the individual or, if the interest of the individual under this title would be served thereby, to the individual. (V) Subclause (III) shall not apply to the representative payee of any individual with respect to whom the Commissioner determines such application would be inappropriate or unnecessary. In making such determination, the Commissioner shall take into consideration the nature of the individual's impairment (or combination of impairments). Section 1631(c) shall not apply to a finding by the Commissioner that the requirements of subclause (III) should not apply to an individual's representative payee. (VI) Subclause (I) shall not apply in the case of an individual described in that subclause who, at the time of the individual's initial disability determination, the Commissioner determines has an impairment that is not expected to improve within 12 months after the birth of that individual, and who the Commissioner schedules for a continuing disability review at a date that is after the individual attains 1 year of age. (I) In making any determination under this title with respect to the disability of an individual who has not attained the age of 18 years and to whom section 221(h) does not apply, the Commissioner of Social Security shall make reasonable efforts to ensure that a qualified pediatrician or other individual who specializes in a field of medicine appropriate to the disability of the individual (as determined by the Commissioner of Social Security) evaluates the case of such individual. (J) Notwithstanding subparagraph (A), an individual shall not be considered to be disabled for purposes of this title if alcoholism or drug addiction would (but for this subparagraph) be a contributing factor material to the Commissioner's determination that the individual is disabled. (4) A recipient of benefits based on disability under this title may be determined not to be entitled to such benefits on the basis of a finding that the physical or mental impairment on the basis of which such benefits are provided has ceased, does not exist, or is not disabling only if such finding is supported by— (A) in the case of an individual who is age 18 or older— (i) substantial evidence which demonstrates that— Page 28 (I) there has been any medical improvement in the individual's impairment or combination of impairments (other than medical improvement which is not related to the individual's ability to work), and (II) the individual is now able to engage in substantial gainful activity; or (ii) substantial evidence (except in the case of an individual eligible to receive benefits under section 1619) which— (I) consists of new medical evidence and a new assessment of the individual's residual functional capacity, and demonstrates that— (aa) although the individual has not improved medically, he or she is nonetheless a beneficiary of advances in medical or vocational therapy or technology (related to the individual's ability to work), and (bb) the individual is now able to engage in substantial gainful activity, or (II) demonstrates that— (aa) although the individual has not improved medically, he or she has undergone vocational therapy (related to the individual's ability to work), and (bb) the individual is now able to engage in substantial gainful activity; or (iii) substantial evidence which demonstrates that, as determined on the basis of new or improved diagnostic techniques or evaluations, the individual's impairment or combination of impairments is not as disabling as it was considered to be at the time of the most recent prior decision that he or she was under a disability or continued to be under a disability, and that therefore the individual is able to engage in substantial gainful activity; or (B) In the case of an individual who is under the age of 18— (i) substantial evidence which demonstrates that there has been medical improvement in the individual's impairment or combination of impairments, and that such impairment or combination of impairments no longer results in marked and severe functional limitations; or (ii) substantial evidence which demonstrates that, as determined on the basis of new or improved diagnostic techniques or evaluations, the individual's impairment or combination of impairments, is not as disabling as it was considered to be at the time of the most recent prior decision that the individual was under a disability or continued to be under a disability, and such impairment or combination of impairments does not result in marked and severe functional limitations; or (C) in the case of any individual, substantial evidence (which may be evidence on the record at the time any prior determination of the entitlement to benefits based on disability was made, or newly obtained evidence which relates to that determination) which demonstrates that a prior determination was in error. Page 29 Appendix C. Qualifying Relationships under §152(d)(2) of the Internal Revenue Code An individual bears a relationship to the taxpayer described in this paragraph if the individual is any of the following with respect to the taxpayer: (A) A child or a descendant of a child. (B) A brother, sister, stepbrother, or stepsister. (C) The father or mother, or an ancestor of either. (D) A stepfather or stepmother. (E) A son or daughter of a brother or sister of the taxpayer. (F) A brother or sister of the father or mother of the taxpayer. (G) A son-­‐in-­‐law, daughter-­‐in-­‐law, father-­‐in-­‐law, mother-­‐in-­‐law, brother-­‐in-­‐law, or sister-­‐in-­‐law. (H) An individual (other than an individual who at any time during the taxable year was the spouse, determined without regard to section 7703, of the taxpayer) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household. Page 30