Significant Changes in ABLE Law

Significant Changes in ABLE Law

April 1, 2018

Removal of Medicaid Recovery

The Florida legislature took the first step during the 2019 legislative session to amend Florida ABLE statutes and permanently remove Medicaid recovery claims from ABLE United accounts.

This change ensures that those with ABLE accounts are treated in the same manner as those without ABLE accounts when it comes to Medicaid recovery. Florida law clarifies that any remaining funds in an ABLE account must first be distributed for qualified disability expenses then transferred to the estate of the designated beneficiary. Learn more.

Tax Cuts and Jobs Act 2017

When the Tax Cuts and Jobs Act was signed into law on December 22, 2017, it created three provisions that impact ABLE United account holders – in a positive way.

First, rollovers from 529 college savings plan accounts into ABLE accounts are now permitted under federal law. The state of Florida is in the process of amending state rules to allow such rollovers. These types of rollovers must be from the designated beneficiary or a member of the family of the designated beneficiary and will count towards the annual maximum contribution amount.

Second, beneficiaries who work and earn income will now be able to make contributions into their ABLE accounts in excess of the annual maximum contribution limit. It is important to note that there are limitations that the beneficiary should be aware of before making these types of contributions:

  1. The amount the beneficiary could contribute above the annual maximum contribution limit is the lessor of: (i) the beneficiary’s compensation for the taxable year; or (ii) an amount equal to the Federal Poverty Level for a one person household as determined for the preceding calendar year of the tax year in which contributions are made. The limit for 2023 is $13,590.
  2. The additional contribution would not be allowed if the beneficiary or his/her employer contribute to the beneficiary’s defined contribution plan, to an annuity described in section 403(b) of the IRS Code, or a deferred compensation plan as described in section 457(b) of the IRS Code.
  3. The beneficiary, or the person administrating the account on behalf of a beneficiary, is responsible for ensuring compliance with the ABLE contribution limits.

Third, individuals who are able to take advantage of contributing earned income to their ABLE account may be able to take advantage of the Federal Tax Savers Credit.

When an individual makes a contribution to their account, they will have the option to select if the contribution should be considered an ABLE to Work contribution.