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A New Way to Save for Disability Expenses in MA


Last month, the Massachusetts Educational Financing Authority (MEFA for short) announced the launch of a 529 ABLE account. Many of you may be thinking “Aren’t 529 accounts used for college savings?” and you would be right! 529 accounts are mainly focused on providing parents a tax-efficient way to save for future college costs.

Parents, relatives, and other interested people can contribute to a 529 account using after-tax money) for the benefit of a child. That money is then allowed to grow tax-free and when you take the money out the earnings are not taxed as long as the money is used to pay for qualified education expenses, such as: tuition, room and board, mandatory fees, and required computer equipment and books.

529 accounts have long been a tool for financially-savvy parents to save for college costs. However, 529 accounts are named for the section of the IRS tax code that first established these accounts, and back in 2014, the Achieving a Better Life Experience Act added section 529A to this section of the tax code. This subsection allowed the states to create ABLE accounts that allow individuals with disabilities to save for eligible disability expenses while avoiding the $2,000 asset limit imposed to still be eligible for many federal benefit programs.

In order to create one of these accounts, the individual must have developed the disability before age 26 and they must have “marked and severe functional limitations”. If the individual is receiving Social Security Disability payments then they are automatically eligible, but if they are not receiving these payments, they will need to obtain a certification of disability from their doctor.

Anyone, including the account beneficiary, employers, families, and friends, may contribute to a 529 ABLE account and the maximum total yearly contribution is $14,000. Under Section 529, each state can set their own maximum total contribution limits for these accounts and this limit is usually around $350,000.

However, ABLE accounts have one additional restriction to note, which is that after $100,000 in contributions, the contributions to the account start to count as assets when calculating the individual’s Supplemental Security Income (SSI) payments. Normally SSI ceases after the individual has more than $2,000 in assets, so when the account balance rises above $102,000 the SSI payments will be suspended temporarily. However, these payments can be restored once the account balance falls back down below $102,000.

When these 529 ABLE contributions are used for any eligible disability expenses (education, housing, transportation, employment training, assistive technology, personal support services, healthcare, financial management, administrative, daily living, and other expenses to increase the beneficiary’s quality of life) the withdrawals are tax-free.

MEFA just began offering these accounts on May 10th as part of a partnership with Fidelity. However, eligible individuals can open these accounts from any state agency that offers them. So, if you are interested in 529 ABLE accounts, you should compare the costs and benefits offered by each of the participating states, as they may have lower fees or more investment options than your home state. More information about the accounts being offered by Massachusetts is available at MEFA's website. and the accounts can be opened online with Fidelity.