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State Launches Tax-Free Savings Program to Help Disabled People

NJ ABLE gives people with disabilities as way to ‘save for vital day-to-day expenses,’ without imperiling Medicaid coverage, similar programs

disabled man wheelchair
Credit: Creative Commons

Disabled people in New Jersey will have a new financial tool to help them save money to pay for childcare, transportation, assistive technology, and other necessary expenses, thanks to a program state officials plan to announce today.

The New Jersey Department of Human Services will launch a tax-free savings program that will allow qualified individuals to collect funds to cover costs related to their disability, without preventing them from qualifying for Medicaid and other state and federal social-service programs with strict income limits, according to information provided to NJ Spotlight in advance. The program — called NJ ABLE, for Achieving a Better Life Experience — is based on a federal initiative now underway in three-dozen states.

Many disabled individuals and their families depend on a wide variety of public benefits — including Medicaid, food stamps or SNAP, and Social Security — most of which involve an income ceiling. These programs also require participants to report savings and other assets worth more than $2,000, according to the ABLE National Resource Center. That can make it hard to amass the capital needed to pay for services not covered by insurance or government programs.

Carole Johnson, DHS
Carole Johnson, commissioner of the Department of Human Services

“This is an exciting new program for New Jersey that gives individuals with disabilities and their families the opportunity to improve their financial security,” DHS Commissioner Carole Johnson said. “They deserve the peace of mind that comes with being able to save for vital day-to-day expenses. Individuals with disabilities can do anything — and NJ ABLE is now another tool to help them live full and independent lives.”

Making New Jersey ABLE

The national ABLE initiative was created in 2014 under former President Barack Obama and the following year New Jersey passed legislation — championed by Sen. President Steve Sweeney (D-Gloucester), Assemblywoman Pamela Lampitt (D-Camden), and others — to create its own program. Former Gov. Chris Christie signed it into law in January 2016, and the program was supposed to take effect in 10 months, but was not fully established until now.

Nationwide, the District of Columbia and 36 states — including Pennsylvania and New York — already have ABLE Account programs, according to recent reports. Other states, including Texas and California, are in the process of establishing similar efforts.

In New Jersey, some 22,000 disabled residents receive services through the DHS, and the state has been working in recent years to help more of these individuals remain independent. In addition, the state is now in the midst of a massive shift in how it reimburses providers who work with disabled clients, a process designed to give individuals and families more power in determining care.

Increasing independence

Disabled individuals, their families and advocate organizations welcomed the addition of the ABLE Account, which they said will also help increase independence. "People with disabilities and their families are delighted to learn that ABLE accounts are now a viable option in New Jersey,” said Mercedes Witowsky, chair of the New Jersey Family Support Planning Council, one of several supporters who praised the program in a draft press release prepared by the DHS.

“People with disabilities are often among the poorest citizens in our state,” added Dan Keating, executive director of the Alliance for the Betterment of Citizens with Disabilities. “NJ ABLE will allow them to save for their future without jeopardizing their benefits.”

According to the National Resource Center, ABLE Accounts are open to individuals with significant disabilities that developed before they were 26 (although they can sign up at any age.) Family, friends, and others can contribute up to $15,000 each — the maximum tax-free gift under federal law — into the fund, and the balance does not count toward the individual’s total income for federal or state tax purposes; interest that compounds is also tax-free.

Suzanne Buchanan, executive director of Autism New Jersey, said the organization gets daily calls from parents who are struggling “financially and emotionally” to meet their children’s needs, and ABLE Accounts provide them a new financial option to improve economic stability and peace of mind.

“These accounts will allow individuals to work more, to save more, and to plan more,” added Thomas Baffuto, executive director of The Arc of New Jersey, which provides services and supports for individuals with disabilities.

According to the DHS, the NJ ABLE accounts can be used to pay for expenses incurred as a result of living with a disability. These include, but aren’t limited to, education, health and wellness, housing, transportation, legal fees, financial management, job training and support, assistive technology, and personal support services.

Some states set limits on the totals that can be collected in these accounts, usually more than $300,000, and establish a minimum threshold for tax-free status. The state Department of Treasury will work with the DHS to establish the parameters of the New Jersey program, which may be administered and operated by a third party.

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