The Senate and House have passed President Joe Biden’s $1.9 trillion stimulus package, a major step in the bill’s journey into law. The Senate voted on March 6 to approve the massive COVID-19 relief plan, which includes $1,400 stimulus checks for many Americans, $350 billion in aid to state and local governments and an extension of federal unemployment benefits. The House voted on March 10 to approve the Senate legislation, and President Joe Biden is expected to sign it into law on March 12.
Many Americans with disabilities are eligible for a stimulus payment and many have worried about how the stimulus payment will impact their eligibility for public needs-based benefits. Fortunately, stimulus payments of this kind aren’t being treated as income by federal programs (or state or local programs that are financed with federal funds) and are disregarded as resources for 12 months (26 U.S. Code § 6409). This means that clients with disabilities can accept these payments without putting Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) and other benefits at risk.
ABLE Accounts
Special savings accounts for people with disabilities are getting renewed attention, as a way to set aside all or part of federal stimulus payments. Achieving a Better Life Experience Act (ABLE) accounts were first introduced in 2016 as a way to give disabled individuals greater financial security and more independence. Disabled individuals can save money in the tax-favored accounts without risking the loss of need-based government benefits, like health insurance or supplemental income. Here’s why the accounts are attractive. Many individuals with disabilities struggle financially and rely on federal aid. But in general, a disabled individual can’t have more than $2,000 in savings or other assets to qualify for Medicaid health coverage or SSI, which helps low-income disabled people.
As mentioned above, stimulus payments aren’t treated as income, and there are no restrictions on how the money can be spent. But if the recipient doesn’t spend the cash within 12 months, it counts against asset limits and could jeopardize benefits. This is why ABLE accounts have seen an increase in popularity. If the money is deposited in an ABLE account, it doesn’t count toward the $2,000 cap. It can be saved or invested and spent later on a variety of disability-related needs that arise, like housing, transportation, education and training. Disabled individuals working toward independence can save for a down payment for an apartment or a wheelchair-accessible car. Or the funds can be used to save for specialized therapy or legal fees.
Eligibility Requirements
However, there are certain factors to be aware of. Currently, to be eligible for an ABLE account, your client must have been disabled by age 26. If your client wasn’t disabled by the age of 26 they’re not eligible for an ABLE account. Additionally, the maximum contribution for 2021 is $15,000. Disabled individuals who work can also save an additional amount from their earnings, usually, about $12,000 (the amount varies by state), for a total of $27,000. Many Americans will need to use their stimulus payment for urgent expenses. But ABLE-eligible clients may want to consider saving all or a portion of their payment in a tax-advantaged ABLE account. If funds aren’t needed immediately, the stimulus is an opportunity to build an emergency fund, invest for the future and have money available when they need it most.