ABLE today Guide for Employees & Employers:
Maximizing ABLE Accounts in the Workplace
ABLE accounts are great tools for working individuals with disabilities! In 2017, the Stephen Beck Jr., Achieving a Better Life (ABLE) Act was expanded to allow adults who are working and not already contributing to a workplace retirement plan to save additional money each year in an ABLE account.
For Employees with Disabilities
If you have a disability, here are some key things to keep in mind when it comes to ABLE accounts.
Being employed has no affect on your eligibility for an ABLE account. You can have gainful employment and still meet the eligibility requirements for ABLE, whether you are on benefits like Medicaid or SSI, or not. Many people with ABLE accounts work! You can learn more about eligibility for ABLE accounts here.
Working ABLE account owners can bypass regular ABLE contribution limits by contributing additional money to their ABLE account.
Federal law limits how much money can be contributed to an ABLE account each year. For 2024, the standard ABLE contribution limit is $18,000. But federal law gives a special benefit to employed ABLE account owners. This is all thanks to a 2017 law called “ABLE to Work.” Here are the details:
Who is eligible to take advantage of ABLE to Work?
You are eligible to make the additional ABLE to Work contributions if:
(1) You have earned income during the calendar year (and yes, self-employment income counts!); and
(2) No contribution was made for or by you to certain workplace retirement plans during the calendar year. (Citation 1)
How much more are eligible employees able to contribute?
The amount of additional contributions you can make (above the standard $18,000) is personal to you. It depends on how much money you earned during the year and what state you live in. The amount of allowable contributions also typically increases each calendar year.
In 2024, if you are a resident of the 48 contiguous states, you can contribute an additional amount that is equal to your total compensation for the year - but only up to a maximum of $14,580. Remember: this is in addition to the regular $18,000 limit. That means a potential maximum annual contribution of $32,580.
In 2024, if you are a resident of Alaska, you can contribute an additional amount that is equal to your total compensation for the year - but only up to a maximum of $18,210. (Citation 2) Remember: this is in addition to the regular $18,000 limit. That means a potential maximum annual contribution of $36,210.
In 2024, if you are a resident of Hawaii, the increase in your annual contribution limit is equal to the amount of your compensation for the year - but only up to a maximum of $16,770. (Citation 2) Remember: this is in addition to the regular $18,000 limit. That means a potential maximum annual contribution of $34,770.
Do I have to show proof of my earned income to my ABLE program?
Generally, no. Your ABLE program may ask you to sign a document or complete an online form certifying that you work and are eligible to make additional contributions under the ABLE to Work law. But ultimately, you are responsible for determining: (1) whether you are eligible to make additional contributions, and (2) how much additional money you are allowed to contribute each year. Your ABLE program will not know how much compensation you earned during each year. It is up to you to track your additional work contributions and ensure that you correctly calculate and comply with your increased limits.
Do “ABLE to Work” contributions have to come directly out of my paycheck?
No. You can use any money to make your “ABLE to Work” contribution. The contribution represents your income, but it doesn’t have to literally come from your income. However – the law does specify that an “ABLE to Work” contribution can only be made by the ABLE account owner (payroll direct deposit done through an employer is OK, too). That means that a family member cannot be the one contributing the additional “ABLE to Work” amounts. Those third-party contributions are always limited to $18,000 (combined) a year.
You can direct deposit a portion of your paycheck to your ABLE account. Nearly all ABLE programs allow you to set up contributions via a direct deposit from your paycheck. You can find your state’s ABLE program payroll deduction form or instructions on how to take advantage of this incredible ABLE feature here.
ABLE contributions are always after-tax. Even if you contribute a portion of your paycheck into an ABLE account, you will still pay taxes on that income. You may, however, be eligible for a state tax deduction or credit. To find out more about your state’s ABLE program’s tax incentives, please visit: https://www.abletoday.org/able-programs.
“Countable income” deposited by the ABLE account owner is still “countable income” for benefits purposes. If you personally contribute your own countable income into your ABLE account, that money is still treated as countable income for purposes of benefits programs, like SSI. This is true even if you direct deposit the income straight into ABLE. You cannot avoid income counting rules by direct-depositing your own wages or other types of income (e.g., VA benefits, pensions, etc.) into your ABLE account. Put another way – ABLE accounts are an asset shield, but not always an income shield. However: ABLE contributions made by third parties (like family or friends) are never countable income for benefits purposes. Additionally, any interest or investment earnings you make on the balance of your ABLE account is also never countable income for benefits purposes.
Contributions you make to your own ABLE account may reduce your federal income taxes. Contributions made directly by the ABLE account owner may be eligible for the federal Saver’s Credit. The Saver’s Credit is a federal tax credit of up to $1,000. For more information, visit this IRS website.
Talk to your employer about whether they can offer matching (or flat) contributions to your ABLE account. Over the past several years, businesses have begun offering ABLE contributions as an employee benefit. Talk to your employer or HR representative about this option! Remember, though: employer contributions to your ABLE account will be considered additional taxable income, and will be reported on your W-2. They will also likely count as income for purposes of determining your eligibility for means-tested benefits programs, like SSI and Medicaid. It’s best to speak with a certified benefits counselor or tax professional to determine how an employer ABLE contribution will impact you.
For Employers
Employees with disabilities are a substantial and critical piece of the U.S. workforce. Throughout the country, businesses are prioritizing diversity, equity, inclusion, and accessibility (DEIA) in the workplace. And that means attracting, retaining, and supporting employees with disabilities. Educating employees about ABLE accounts and offering ABLE account benefits is an excellent way to promote disability inclusion and recruit new talent – not only to employees with disabilities, but also to those employees who are caring for a loved one with a disability.
ABLE today and ABLE programs partner with large and small employers, disability organizations, and other key stakeholders by providing:
Free ABLE account training and education,
Expertise on how employers can leverage ABLE as a workplace inclusion tool; and
Guidance for HR/DEIA professionals to promote ABLE accounts.
Here are a few key things for employers to consider:
Offer employees the ability to direct deposit a portion of their paycheck into an ABLE account. The vast majority of ABLE programs accept payroll direct deposit. As the employer, your role in this process is simple and free: encourage your employees to take advantage of the payroll deduction option with ABLE accounts. Employees can direct deposit money into their own ABLE account, or the ABLE account of a loved one. The employee’s ABLE program can provide instructions and information on where to direct the employee’s deposits. For more information, visit https://www.abletoday.org/able-program-direct-deposit.
Contribute directly to an employee’s ABLE account. Employers can also contribute to ABLE accounts, whether the account is for the employee or the employee’s family member. Across the country, businesses have been increasingly setting up ABLE contribution programs. These can be matching programs or simply a direct employee benefit. Some things to keep in mind:
According to the IRS, employer contributions to an ABLE account (whether the account is for the employee or the employee’s family member) are treated as a taxable fringe benefit to the employee.
Employers can deduct ABLE contributions as wages or compensation.
Per IRS instructions, employer contributions should be reported in box 1, box 3 (if applicable), and box 5 of the employee’s W-2. This is true regardless of whether the employer contribution goes to the employee or the employee’s family member. It’s also true regardless of what your business structure is.
Many employees with disabilities who access benefits, like Medicaid and/or SSI, aren’t able to participate in traditional workplace retirement programs, like a 401k, 403b, or pension, since doing so could make them ineligible for critical public benefits. Some businesses have started offering ABLE contributions in lieu of a traditional retirement program, in order to solve this inequity. If you are considering using ABLE accounts in this way, be sure to speak with a retirement benefits specialist. For businesses that already have an existing retirement plan, there may be special rules to consider.
Partner with ABLE today to host an ABLE presentation with your employer or Employee Resource Group (ERG). ABLE today is available to give free ABLE presentations to employees. Don’t think you have any employees with disabilities? Remember - disabilities can often be “invisible.” And even if an employee doesn’t have a disability, their parent, child, or other family member might. You can find more information about our ABLE today employer trainings here.
Our ABLE today team would welcome the opportunity to connect with you to discuss the numerous ways an employee or employer could maximize ABLE accounts in your workplace.
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CITATIONS
(1) Per 26 USC 529A(b)(7)(A), this includes:
A “defined contribution plan (within the meaning of section 414(i)) with respect to which the requirements of sections 401(a) or 403(a) are met)”;
A 403(b) annuity contract; and
A 457(b) deferred compensation plan.
(2) Curious what counts as “compensation”? See 26 USC 219(f)(1).