ENABLE Act Permanently Expands ABLE Account Benefits: More Savings and Flexibility for People with Disabilities

The ENABLE Act (Ensuring Nationwide Access to a Better Life Experience Act) is making some key changes to how ABLE accounts work, and it's mostly good news for people with disabilities and their families. Here’s the breakdown:

Boosting ABLE Contributions

This bill permanently removes the previous 2026 expiration date on increased contribution limits to ABLE accounts. What does that mean in practice? Before, there was a limit on how much extra someone could contribute to their ABLE account above the standard annual gift tax exclusion ($18,000 in 2024). The ENABLE Act makes that higher contribution limit permanent. This is a big deal for folks who can afford to save more and want to build up that safety net.

Specifically, this change amends Section 529A(b)(2)(B)(ii) of the Internal Revenue Code. It also ties ABLE contributions to retirement savings calculations (Section 25B(d)(1) of the Internal Revenue Code), which could mean some extra tax benefits.

Real-World Example: Imagine a young professional with a disability who's working and earning a decent income. They can now consistently put more money into their ABLE account each year without worrying about the limit disappearing. This helps them build a stronger financial foundation for future needs.

529 to ABLE Rollovers: Now a Permanent Feature

Previously, you could roll over money from a 529 college savings plan to an ABLE account without penalty, but that was also set to expire. The ENABLE Act makes this rollover option permanent (applying to distributions after the law is enacted). This offers crucial flexibility for families.

Real-World Example: Let's say a family started a 529 plan for their child, who is later diagnosed with a disability. They can now seamlessly transfer those funds to an ABLE account, ensuring the money is used to support their child's needs without tax penalties.

###The Bigger Picture and Potential Snags

By making these changes permanent, the ENABLE Act provides long-term financial planning certainty for individuals with disabilities and their families. It acknowledges that disability-related expenses are often ongoing and require a sustained financial commitment.

Real-World Example: A parent of a child with a disability can now plan for their child's long-term care with greater confidence, knowing they can consistently contribute to an ABLE account and potentially utilize 529 funds without facing penalties or expiring provisions.

One minor thing to keep in mind: While ABLE accounts are designed for qualified disability expenses, there's always a small chance of misuse. However, existing rules are in place to prevent this, and the benefits of increased savings flexibility likely outweigh this risk.