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Federal bill proposes tax-sheltered savings account for disabled

For disabled, low-income individuals without an extensive work history, Supplemental Security Income benefits might be a lifesaving program. 

Unlike its sibling program of Social Security disability insurance, eligibility for SSI payments is not determined by work history. Although applicants might need to prove their disability by demonstrating a certain level of functional impairment under both SSDI and SSI, only the former requires work credits. For SSI, payments are determined primarily by disability status and financial need. 

The current income ceiling set by the SSI program is close to the poverty line. Yet many disabled individuals hover near that financial threshold set by the SSI program. For example, perhaps they are able to make some income, in spite of their disability. Yet in extreme cases, such SSI beneficiaries might have to turn down a promotion -- and higher pay -- to avoid financial disqualification.

This dilemma might explain one of the rationales behind new legislation proposed by federal lawmakers. The bill is called the Achieving a Better Life Experience Act, and could benefit all disabled individuals, regardless of the type of disability benefits they might be receiving.

Under the proposal, Section 529 of the Internal Revenue Code would be amended to allow disabled individuals to set aside money for an enumerated list of long-term expenses. The money in these proposed 529 accounts would be tax sheltered. More importantly, an individual’s balance in his or her 529A account would not be a basis of disqualification from need-based disability programs. However, the bill is still in the proposal stage. Individuals who have questions about maximizing their eligibility for disability benefits under SSI or other programs should consult with a disability benefits attorney.

Source: The Washington Post, "How the proposed ABLE Act will help parents of children with disabilities," Mari-Jane Williams, March 6, 2014

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