Bill Would Create Savings Accounts for Delawareans with Disabilities

DOVER – Delawareans with disabilities would be able to save money for schooling, housing, transportation and other expenses under legislation introduced Thursday.

Sponsored by Rep. Melanie George Smith, House Bill 60 is based on a federal law Congress passed late last year to create tax-free savings accounts for individuals with disabilities. Public benefits such as food stamps and Medicaid limit eligibility to individuals with disabilities to no more than $2,000 in cash savings or retirement funds. This severely limits the ability of people with disabilities and their families to set aside funds for use later in life.

The federal ABLE (Achieving a Better Life Experience) Act allows individuals with disabilities to create tax-advantaged savings accounts, similar to federal 529 college-savings accounts. Income earned by the accounts would not be taxed. The ABLE accounts could be used to cover expenses such as education, housing, and transportation. However, each state has to pass its own enabling legislation to create its own version of this program.

Rep. Smith said that the limits set by Medicaid create difficulties for people with disabilities, forcing them and their families to make a choice: save money and forgo needed benefits or forego long term financial planning in order to receive assistance.

“The way the law was written, a person with disabilities couldn’t save for his or her future,” said Rep. Smith, D-Bear. “All Delawareans deserve the ability to save and plan for their futures. It’s a basic tenet of independence and self-reliance. By implementing our own ABLE Act, we will provide these residents with the security they need throughout their lives.”

Under the federal law, the total annual contributions by all participating individuals, including family and friends, is $14,000. The amount would be adjusted annually for inflation. The maximum allowed to be set aside would be subject to each state and its limit for college savings 529 accounts. The Delaware College Investment Plan has a maximum contribution of $350,000.

Rick and Amy Kosmalski of Bear have spent years lobbying Congress about the need for such a program. Their 8-year-old daughter Kayla has Down syndrome and was unable to have the same kind of savings fund that her 2-year-old brother has.

“This bill will give Kayla more financial independence,” Mr. Kosmalski said. “She will be allowed to save for her future just like any other kid her age. She could use money from her ABLE account for college and other things that will improve her quality of life. It will also help her with employment as her income will not be limited to current Medicaid asset restrictions. The ABLE Act helps people with disabilities save their own money for a better tomorrow.”

Last month, Vice President Joe Biden hosted the Kosmalskis in Washington, D.C. to celebrate passage of the federal law. During the event, Vice President Biden applauded the new law and the Kosmalskis for their unwavering dedication to make a positive change.

“The reason I’m here is to reinforce that it makes not only economic sense but it’s a moral imperative for what you all have done here today,” Vice President Biden said at the event. “It’s simply the right thing to do, but it’s also overwhelmingly in the economic interest of the country to do what you are doing. And that is just giving folks an even chance to meet their potential and an even chance to be able to have an opportunity to be in a position when extraordinary needs are required to be met, that there is some ability to save to be able to meet those needs.”

Under HB 60, Delaware’s ABLE account would be overseen by a seven-member board, with the Office of State Treasurer providing assistance. The board would be charged with taking actions necessary to run the program in compliance with federal law and regulations, including contracting with financial service providers and other consultants to implement the plan.

HB 60 has 25 co-sponsors and has been assigned to the House Health & Human Development Committee.