The Michigan Able Act was signed into law in October 2015, following passage in December 2014 of the federal Stephen Beck Jr. Achieving a Better Life Experience (ABLE) Act, which authorized states to establish tax-advantaged savings programs for individuals with disabilities. The goal is to encourage and assist individuals and families in saving funds that help individuals with disabilities to maintain health, independence and quality of life without jeopardizing benefits provided through private insurance, Supplemental Security Income, Medicaid, the beneficiary’s employment and other sources.
Individuals with disabilities and their families depend on a wide variety of public benefits for income, health care, food and housing assistance. Many of these benefits require meeting a means or resource test that limits the eligibility of individuals who report more than $2,000 in cash savings, retirement funds and other items of significant value. For the first time, the legislation that enabled creation of MI ABLE accounts recognizes the extra and significant costs of living with a disability. MI ABLE accounts provide eligible individuals the opportunity to save and fund a variety of qualified expenses without endangering eligibility for certain benefits that are critical to their health and well-being, such as Medicaid and Supplemental Security Income.
The MI ABLE program is administered by the Michigan Department of Treasury, and investment services are managed by TSA Consulting Group. In general, individuals are eligible if they became disabled or blind before the age of 26 and are entitled to either Social Security Disability Insurance or Supplemental Security Income. Currently, the annual contribution limit is capped at $15,000. On top of that limit, beneficiaries who are employed can contribute an amount equal to their current-year gross income, up to $12,060. The first $100,000 in a MI ABLE account is not considered when determining eligibility for Supplemental Security Income. If the account exceeds $100,000, the designated beneficiary could lose monthly SSI benefits.
In addition, a MI ABLE account is considered a 529 account by the IRS, and the maximum contribution limit for all Michigan 529 plans combined for a designated beneficiary is $500,000. MI ABLE accounts offer a prescreened list of brand-name low-cost investments from Vanguard and Dimensional funds. Also available are five predefined asset allocation models constructed from the prescreened list of investments, ranging in approach from conservative to aggressive. MI ABLE offers options that meet all needs and comfort levels and also offers a bank savings investment option that is insured by the Federal Deposit Insurance Corp. A MI ABLE account is a complement to a special needs trust, not a replacement. Benefits associated with a MI ABLE account include cost-effectiveness, broader spending power, easy account access, a Michigan tax deduction, & no federal tax on earnings.
Savings in a MI ABLE account grow tax-free, and distributions – including any earnings – are not taxed if used for qualified disability expenses. Furthermore, Michigan state income taxpayers can claim up to a $5,000 deduction for single filers and $10,000 for joint filers for MI ABLE contributions.
ENROLLMENT / CUSTOMER SERVICE: