Many of America’s disabled people are often forced into a cyclical and financial trap. Supplemental Security Income (SSI ) recipients are forced to save under a low income limit that is up to (but usually less than) $2,000 in order to maintain access to disability benefits and other entitlements. These entitlements include programs such as Medicaid health insurance to treat their disabilities
If a benefit recipient fails to obey income limits, the Social Security Administration can label that person no longer disabled or needing income, depending on the situation. This possibility threatens many people with disabilities into maintaining a low income, keeping them in poverty and dependent on government entitlements.
In response, U.S. lawmakers proposed the ABLE Act of 2014, which is finally being implemented by the first set of states, with either statewide or national programs.
Proponents of the ABLE Act stated that this cycle can be addressed through allowing tax-free savings accounts that do not disqualify the recipient from federal need-based programs. This would apply for up to $100,000 in savings. These savings can be from the disabled account holder and be combined with gifts from family and friends.
The ABLE program also allows for investing up to that level while maintaining access to federal need-based programs. In theory, ABLE programs should allow Americans on disability benefits to save for their future living, educational, and even retirement costs.
However, in reality there are different issues that make ABLE much more capable of mainly being a tax giveaway. The program fails to address how disabled people are still forced to have a low monthly, independently-earned income. The program also does not increase earnings from monthly disability checks. ABLE accounts would primarily benefit families of disabled people who already have money to support disabled relatives.
There are two major types of disability entitlements from the Social Security Administration. There is SSDI (Social Security Disability Insurance) and SSI (Supplemental Security Income). SSI recipients could not save without this program beyond a low amount of money. SSDI recipients have already been allowed to save an unlimited amount from their benefits.
An example of how cumbersome the system remains with ABLE accounts
Here is an example of how a disabled person can lose everything despite responsibly setting up an ABLE account:
Some disabled people have to go to work. These people may collect the legal maximum of income for any SSI recipient from working and from benefits. Those people legally must keep income below $2,000 a month in order to continue qualifying for essential health coverage to address their disabilities. They are legally allowed to have the maximum income for any SSI money in any given month from independent income.
Yet they face these challenges to maintain a low income for health insurance and affordable rent. For many recipients, the maximum hourly wages they can make is approximately $10 an hour per month. They are only allowed to maintain low income status for survival because a debilitating disability prevents them from obtaining skills needed for a high wage position that makes government benefits unnecessary. Those disabilities can make a standard salary much more difficult or even impossible to obtain.
Why ABLE Doesn’t Adequately Address Their Needs
A SSI recipient would face harsh penalties and could be cut off from benefits quickly. This would result from failing to constantly track items such as work hours, monthly income, and when to contribute. If the recipient’s bank account goes over the low limit determined for the person’s account by the Social Security Administration on even a temporary basis, he or she could lose all entitlements.
The poorest disabled Americans are usually the ones who apply for Supplemental Security Income. Also, the ABLE program would benefit a specific subset of SSI recipients. Only SSI recipients who had proof of disability before age 26 could possibly be able to use ABLE to become less burdened by poverty.
ABLE does not address the low level of funds available in Supplemental Security Income checks. ABLE also does not address severe income from work limits per month to continue qualifying for SSI, Medicaid, food stamps, federal housing vouchers, and other programs. ABLE primarily benefits the few SSI recipients with backgrounds affluent enough to fit most American lives.
Meanwhile, many more comfortable middle and upper class American families could gain financially much more from using ABLE accounts as a tax break. They can do this while encouraging their disabled relatives to use limited government funds collecting SSI. This can be despite their ability to pay for their relative’s living costs.
People who have the right backgrounds can also collect up to $300,000 in ABLE accounts from themselves, friends, or relatives without paying federal taxes on the income.
Author’s Note: Background information for this piece was gathered from interviews with a paralegal disability advocate (Michael Stretton, Eligible for Direct Payments, Non-Attorney Representative) and a financial adviser for the disabled (Chris Cooper, conservator for disabled adults and special needs trustee).