On October 5, 2015, Oregon Senate Bill 777D became effective. In this bill, Oregon implemented the federal ABLE (Achieving a Better Life Experience) Act. This legislation gives families use of a tax-deferred savings plan, similar to the 529 college-savings plan, to save for individuals with disabilities. These plans would have the tax benefits of 529 college savings plans combined with the benefits of a special needs trust, in that the account would not count as a qualifying asset when determining qualification for needs based aid such as Social Security Income and Medicaid.
There are important differences between ABLE plans and special needs trusts of which families should be aware. First, ABLE plans can only be created for people who are disabled before the age of 26 and all funds are subject to payback after the recipient’s death. Second, the funds can only be used for qualifying expenses, and that list may be narrower than the qualifying expenses from a special needs trust, depending on how the trust is drafted. Third, contribution and asset caps apply to an ABLE account, whereas they do not apply to a special needs trust. However, the cost of creation and administration of an ABLE plan will likely be significantly lower than those of a special needs trust, making them a helpful planning tool for lower income families.
At this point, though the ABLE Act is now effective in Oregon, it is unclear exactly how the plans will be managed. The IRS issued proposed regulations in June of this year, which gives the state more guidance in establishing the plans. SB 777D requires the Oregon 529 Savings Board to establish rules and maintain the program in accordance with the requirements of the federal ABLE Act. Families who may benefit from these new accounts should keep an eye on the Oregon 529 Savings Board as they draft these rules.