New ABLE Act Lets Workers with Disabilities Divert Employer 401(k) Match to Savings Accounts

This bill, the ABLE Employment Flexibility Act, is a major win for financial flexibility, especially for working people with disabilities. It directly addresses the tightrope walk many face: earning enough to live on without saving too much and losing essential benefits like Medicaid or Supplemental Security Income (SSI). The core of the bill is simple: it allows eligible employees who have an ABLE account (Achieving a Better Life Experience) to elect that their employer’s contributions—like a 401(k) match—go directly into their ABLE account instead of the traditional retirement plan.

The Asset Test Hustle

For years, the biggest hurdle for working individuals with disabilities has been the asset limit, often set at a ridiculously low $2,000 for programs like SSI. ABLE accounts were created to allow these individuals to save up to $100,000 without jeopardizing those benefits. This new Act makes it much easier to fund those accounts. If you’re an eligible ABLE individual with a 401(k) at work, you can now tell your employer, “Hey, instead of putting that 3% match into my 401(k), put it into my ABLE savings.” This is huge because it lets people build a financial cushion for housing, transportation, or education without constantly worrying about crossing the asset line.

Making Employer Contributions Work Harder

Section 2 of the bill lays out the mechanics, ensuring that this new option doesn't mess up the employer’s retirement plan compliance. When an employer redirects money to an employee’s ABLE account based on the employee’s choice, the IRS will still treat that money as if it went into the retirement plan for anti-discrimination testing purposes. This means employers can offer this flexibility without running afoul of complex tax rules designed to ensure fairness across the workforce. The bill also clarifies that these employer contributions are treated as if the employee made them, which is key for tracking annual ABLE contribution limits.

Tax Clarity and the Paper Trail

Another critical provision requires the Treasury Secretary to confirm that when an employer contributes to an employee’s ABLE account, it counts as a reasonable, tax-deductible business expense, similar to salary or other benefits. This removes any ambiguity for businesses and encourages them to adopt the new system. Furthermore, the IRS is mandated to update its publications—within one year of the Act becoming law—to specifically inform employees who opt out of automatic retirement plan enrollment that they might have the option to contribute to an ABLE program instead. This ensures that the people who need this option the most actually hear about it.

Real-World Impact: Building the Safety Net

Consider a warehouse worker who qualifies for an ABLE account. Under the old rules, if their employer offered a 401(k) match, the worker might have avoided it completely, fearing the money would eventually push them over the asset limit for Medicaid. Now, they can confidently elect to have that employer match—say, $1,500 a year—go straight into their ABLE account. That money is now protected and can be used for qualified disability expenses, building a real financial safety net without the stress of losing essential health coverage. This bill is a straightforward, practical solution that uses the existing tax infrastructure to offer genuine financial empowerment to a community that often faces the highest barriers to saving.