Peace of Mind for Parents of Children With Disabilities

Nearly 1 in 5 Americans has a disability. Many are children who have long, productive lives ahead of them. Under current law, these young people cannot save more than $2,000 in assets without losing health care and other federal benefits.
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Each year, Dan and Jenn are able to save for Carina's college education by putting away money tax-free in a 529 education savings account. But the tax code restricts them from saving tax-free for Carina's younger brother Sean, who was born with Down Syndrome. Dan and Jenn work hard every day to provide everything they possibly can for their children but they were distressed when they realized saving for Sean's long-term health care, housing and educational needs was nearly impossible under current law. They found it ironic that the child in their family that might need the most financial assistance during his lifetime was the one they could not save for.

Dan and Jenn thought that was wrong and so do we. That's why we have introduced legislation to help Dan and Jenn, and millions of other parents with disabled children, access the same financial tools that children without a disability have.

Families currently can save for their children's education through tax-advantaged 529 education savings accounts. Our Achieving a Better Life Experience (ABLE) Act would expand the use of 529 accounts to help cover disability related expenses, enabling parents of children with disabilities as well as older individuals with disabilities to put aside money to help cover anticipated long-term costs.

Here's how it works. The ABLE Act creates a new type of 529 savings plan that would allow individuals with disabilities and their families to save money to be used for education, medical and dental care, job training, housing, transportation and other expenses. Contributions to the account would grow tax-free and withdrawals for disability expenses would also be tax-free.

Our starting point is simple: Individuals with disabilities and their parents who care for them should have access to the same kinds of savings tools as the broader population.

The federal government encourages Americans to save for their retirements through 401(k) plans and for education through education savings accounts or 529 plans. These tax-deferred saving plans are now such a fundamental part of how families prepare for the future we barely think of them as public policy. But of course they are. Our legislation applies this successful model to help people with disabilities and their families save for costs they will likely encounter down the road.

In the past two decades, people with disabilities have made significant progress. The Americans with Disabilities Act (ADA), signed into law by President Bush more than 20 years ago, opened new doors and solidified a change in attitude in this country. Barriers to employment have been knocked over. Buildings are more accessible. Equal opportunity in our schools is no longer a dream for children with disabilities.

However, adults with disabilities continue to confront significant economic challenges, facing unemployment and poverty rates far higher than the overall population. In 2010, the poverty rate for people with a disability was more than double that of those with no disability and workers with a disability experienced an unemployment rate more than 5 percentage points higher than those without one.

Parents of children with disabilities also face significant financial challenges. The average cost of raising a child with a significant medical disability is more than $1 million over the course of the child's lifetime.

The tax-free saving accounts authorized by the ABLE Act would help families plan for and meet future needs. Creating an ABLE account is as easy as opening an account at your local bank. Because it builds on the 529 college savings program people already know about and use, it would be simple to get started. ABLE accounts could be managed online. And anyone would be able to contribute.

The money saved in the ABLE account would supplement rather than replace benefits from core government programs, such as Medicaid. These additional funds would support individuals as they encounter a range of expenses related to their disability -- expenses such as tutoring, home and vehicle modification, and job training.

Nearly one in five Americans has a disability. Many are children who have long, productive lives ahead of them. Under current law, these young people cannot save more than $2,000 in assets without losing health care and other federal benefits. The ABLE Act would change that, ensuring that a person with a disability or his parents would be able to save for the future without jeopardizing the benefits they count on.

With a small change to the 529 savings program, we can make a big improvement in the lives of millions of Americans living with a disability.

And Dan and Jenn, and millions of parents like them, will finally be able to save for the futures of all of their children.

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