IRS Public Hearing on the ABLE Act
Internal Revenue Service
“Public Hearing on the ABLE Act”
Wednesday, October 14, 2015
Key Topics & Takeaways
- Portability: Christopher Rodriguez from the National Disability Institute supported the language to change residency while maintaining the ABLE account in the state of origin.
- Disability Determination and Recertification: Several of the speakers expressed their desire for self-certification as requirements are “excessive and burdensome.” Sara Wolff from the National Down Syndrome Society suggested a recertification waiver for conditions that will not improve with time, such as Down syndrome, that would require recertification every five years rather than annually.
- Qualified Disability Expenses: Several of the speakers applauded the broad definition of qualified disability expenses, as almost all expenses qualify under the definition.
Speakers
- Janine Cook, Deputy Associate Chief Counsel, Office of Chief Counsel (Tax Exempt and Government Entities), Internal Revenue Service
- Taina Edlund, Senior Technician Reviewer, Office of Chief Counsel (Tax Exempt and Government Entities), Internal Revenue Service
- Theresa M. Melchiorre, Attorney, Office of Chief Counsel (Passthroughs and Special Industries), Internal Revenue Service
- Catherine Veihmeyer Hughes, Attorney-Advisor, Office of Tax Legislative Counsel, Office of Tax Policy, Department of Treasury
- Sara Hart Weir, National Down Syndrome Society
- Charles Hammerman, Disability Opportunity Fund
- Sara Wolff, National Down Syndrome Society
- Sandra Madden, Ascensus College Savings
- Stephanie Hoffer, The Ohio State University Moritz College of Law
- Mary Morris, College Savings Foundation
- Jennifer Brown, The Investor Card, LLC
- Marty Ford, The Arc of the United States
- Kathleen McGrath, College Savings Plans Network
- Stuart Spielman, Autism Speaks
- Scott Gates, Kansas State Treasurer’s Office
- Christopher Rodriguez, National Disability Institute
Public Testimony and Discussion
Sara Hart Weir, National Down Syndrome Society
Sara Hart Weir stated that the Achieving a Better Life Experience (ABLE) National Resource Center (ANRC) was launched a day earlier on October 13 and serves to educate those with disabilities, families, state governments, the financial services industry and planners. She highlighted the need to expand the scope of signature authority for designated beneficiaries to include a parent or legal guardian as a single designee, as well as allowing self-certification for ABLE account ownership. Weir stressed the need for a consistent eligibility form to be used among all the states to reduce confusion, and asked for an exception to annual certification requirements for conditions, such as Down syndrome, that will not go away or improve.
A panel of Internal Revenue Service (IRS) and Treasury counsels asked Weir for examples of expenses that should not qualify as disability expenses. Weir stated the need to keep the list of qualified disability expenses broad to decrease the burden on states, and that with the exclusion of vacations and certain extracurricular activities, all other expenses should qualify.
The counsels asked Weir how to reconcile the legislative requirement to have a signed copy of a physician’s note when certifying or re-certifying. Weir explained that while a doctor’s note is important for certification, conditions such as Down syndrome do not change and placing an eligibility or annual requirement for certification is “unnecessary.”
Charles Hammerman, Disability Opportunity Fund
Charles Hammerman explained that Community Development Financial Institutions (CDFIs) are financial institutions that offer credit, capital and services that meet the needs of communities underserved by traditional financial institutions. He spoke on the Disability CDFI Coalition made of CDFIs, financial institutions, disability advocacy organizations and service providers, as well as those with disabilities, that addresses challenges faced by those with disabilities and their families.
The counsels noted that several of the comment letters received on the ABLE Act suggest not limiting the types of institutions used for such accounts to CDFIs, to which Hammerman agreed, stating that CDFIs are an “extra tool,” and are not exclusive for ABLE accounts.
Sandra Madden, Ascensus College Savings
Sandra Madden stated that the certification of eligibility requirement needs to allow self-certification, as the requirement currently creates risk to personal medical information when stored with a third party service provider, as well as delaying the enrollment process. She noted the need for safeguards for the use of distributions, as regular 529 plans do not have such a distribution requirement, adding that current eligibility requirements are “burdensome and excessive.” Madden continued that the collection of social security numbers (SSNs) and tax identification numbers (TINs) is not necessary because 529 plans do not collect them, and that the requirement of providing either the SSN or TIN is a disincentive for contributors.
When asked about her recommendation for self-certification, Madden explained that the participant will provide the certification rather than the physician, moving the burden from the record keeper, and added that if the certification form was “more of a check-the-box” type of document, “it would be more workable.”
Stephanie Hoffer, The Ohio State University Moritz College of Law
Stephanie Hoffer noted her concern over tax ramifications of contributions and distributions made within the same year, and that money deposited into the ABLE account and later withdrawn should not count against the contribution limit or be treated as an aggregate contribution. She noted that while the ABLE accounts cover disability expenses, savings should be encouraged, as it is a combination of an education, retirement and medical expenses account. Hoffer concluded that flush language does not increase tax expenditures and is not likely to increase the burden on other programs.
When asked if there is any legislative history that addresses flush language, Hoffer stated that there is none that she knows of that supports or strikes the interpretation of the language.
Mary Morris, College Savings Foundation
Mary Morris stressed that self-certification works and that requiring states to report is “not feasible… especially personal medical information.” She continued that when setting up an ABLE account, “the more flexibility, the better,” and stated the need for flexibility for contracting states when the state does not have its own ABLE Act program.
The counsels asked if contracting states offering more than one program for participants to choose from is an unfair advantage over those states with their own programs. Morris explained that while it may be a slight advantage, states that cannot open their own program are already at a disadvantage, and that there will be “unfairness for years” until each state opens its own program.
Jennifer Brown, The Investor Card, LLC
Jennifer Brown explained that technology can help navigate ABLE accounts and spoke about a type of card her company can offer participants for expenses, adding that there should not be restrictions on debit cards. She continued that owners should be the card holders but that accounts can have two cards should the owner permit a legal guardian or parent to have possession of one.
Marty Ford, The Arc of the United States
Marty Ford stressed concern that there is no formal process for signature authority like with a guardianship, and that beneficiaries may not approve of the authorized signatory. She noted her support for the broad definition of qualified disability expenses and stressed the need for a federal process using federal forms when dealing with disability eligibility certification so that the burden does not fall on states. Ford continued that the signature authority should be able to designate a successor beneficiary upon the participant’s death prior to Medicaid claim payments.
When asked for more details about naming a successor beneficiary upon death, Ford explained that account rollovers for siblings should be allowed if they are qualified individuals, and that the ABLE account should not be subject to Medicaid repayment until the second beneficiary passes.
Kathleen McGrath, College Savings Plans Network
Kathleen McGrath stated that there are more regulations in the ABLE Act than 529 plans, creating an administrative burden. She noted that few states have appropriated funds to generate ABLE programs so they will have to be self-supporting like 529 plans, which are supported by fees. McGrath stated that she is an advocate for a streamlined eligibility process but that there will be barriers to opening accounts if participants are required to provide eligibility documents. She noted her concern over obtaining SSNs and TINs as “people are protective” of this information, adding that there must be another way to obtain such information other than having the participant provide them. McGrath suggested the use of sub-accounts, as it will help families with conflicts over signature authority, such as divorced parents who could have their own account.
Stuart Spielman, Autism Speaks
Stuart Spielman noted his concern that proposed rules do not allow transfers from a qualified tuition account to an ABLE account on a tax-free basis. He explained that the statute does not seem to require a physician’s note for eligibility be filed with the state or other entity, but that having a note in possession would meet the requirements of the statute. Spielman applauded the definition of expenses, as many expenses may not be obvious, but are needed, to include swimming lessons for autistic children, as they are likely to roam and could put themselves in a dangerous situation.
Scott Gates, Kansas State Treasurer’s Office
Scott Gates noted his concern about how states will fund the cost of administering ABLE programs and the issue of certifying eligibility status when accounts are open. He continued that self-certification is not sufficient because “no one will be looking at compliance” and that states should not be involved in the certification of withdrawals process, as they may have a different determination than Treasury. Gates recommended that participants on Social Security have a bank account outside of the ABLE system for outside expenses so the ABLE account is purely an investment account and contributions are not counted against the $14,000 investment limit.
Christopher Rodriguez, National Disability Institute
Christopher Rodriguez expressed his “strong support” of the broad definition of qualified disability expenses, including the allowance for basic living expenses, and supported the language to change residency while maintaining the ABLE account in the state of origin. He noted the importance of the beneficiary being the owner of the account as it increases their independence. Rodriguez questioned whether states with ABLE programs can contract with multiple states to offer a wide array of program options, while also allowing states without programs to contract with states offering the accounts. He concluded that there is a need for uniformity of paperwork, suggesting the IRS or Treasury create forms so they are standardized across the program, limiting the amount of administrative burden on states.
Sara Wolff, National Down Syndrome Society
Sara Wolff stressed that the scope of individual eligibility for signature authority should include the single designation of a parent or guardian, but explained she should also be able to designate someone that is not a legal guardian (for example, a sibling). She noted that the IRS should have a standard certification form signed by a doctor so that beneficiaries do not have to send personal medical information to an ABLE administration and there is no confusion among states regarding who qualifies for an account. Wolff concluded that recertification for conditions that will not improve, such as Down syndrome, should not have to be completed on an annual basis and suggested a recertification waiver signed by a physician requiring recertification every five years.
For more information on this hearing, please click here.
Internal Revenue Service
“Public Hearing on the ABLE Act”
Wednesday, October 14, 2015
Key Topics & Takeaways
- Portability: Christopher Rodriguez from the National Disability Institute supported the language to change residency while maintaining the ABLE account in the state of origin.
- Disability Determination and Recertification: Several of the speakers expressed their desire for self-certification as requirements are “excessive and burdensome.” Sara Wolff from the National Down Syndrome Society suggested a recertification waiver for conditions that will not improve with time, such as Down syndrome, that would require recertification every five years rather than annually.
- Qualified Disability Expenses: Several of the speakers applauded the broad definition of qualified disability expenses, as almost all expenses qualify under the definition.
Speakers
- Janine Cook, Deputy Associate Chief Counsel, Office of Chief Counsel (Tax Exempt and Government Entities), Internal Revenue Service
- Taina Edlund, Senior Technician Reviewer, Office of Chief Counsel (Tax Exempt and Government Entities), Internal Revenue Service
- Theresa M. Melchiorre, Attorney, Office of Chief Counsel (Passthroughs and Special Industries), Internal Revenue Service
- Catherine Veihmeyer Hughes, Attorney-Advisor, Office of Tax Legislative Counsel, Office of Tax Policy, Department of Treasury
- Sara Hart Weir, National Down Syndrome Society
- Charles Hammerman, Disability Opportunity Fund
- Sara Wolff, National Down Syndrome Society
- Sandra Madden, Ascensus College Savings
- Stephanie Hoffer, The Ohio State University Moritz College of Law
- Mary Morris, College Savings Foundation
- Jennifer Brown, The Investor Card, LLC
- Marty Ford, The Arc of the United States
- Kathleen McGrath, College Savings Plans Network
- Stuart Spielman, Autism Speaks
- Scott Gates, Kansas State Treasurer’s Office
- Christopher Rodriguez, National Disability Institute
Public Testimony and Discussion
Sara Hart Weir, National Down Syndrome Society
Sara Hart Weir stated that the Achieving a Better Life Experience (ABLE) National Resource Center (ANRC) was launched a day earlier on October 13 and serves to educate those with disabilities, families, state governments, the financial services industry and planners. She highlighted the need to expand the scope of signature authority for designated beneficiaries to include a parent or legal guardian as a single designee, as well as allowing self-certification for ABLE account ownership. Weir stressed the need for a consistent eligibility form to be used among all the states to reduce confusion, and asked for an exception to annual certification requirements for conditions, such as Down syndrome, that will not go away or improve.
A panel of Internal Revenue Service (IRS) and Treasury counsels asked Weir for examples of expenses that should not qualify as disability expenses. Weir stated the need to keep the list of qualified disability expenses broad to decrease the burden on states, and that with the exclusion of vacations and certain extracurricular activities, all other expenses should qualify.
The counsels asked Weir how to reconcile the legislative requirement to have a signed copy of a physician’s note when certifying or re-certifying. Weir explained that while a doctor’s note is important for certification, conditions such as Down syndrome do not change and placing an eligibility or annual requirement for certification is “unnecessary.”
Charles Hammerman, Disability Opportunity Fund
Charles Hammerman explained that Community Development Financial Institutions (CDFIs) are financial institutions that offer credit, capital and services that meet the needs of communities underserved by traditional financial institutions. He spoke on the Disability CDFI Coalition made of CDFIs, financial institutions, disability advocacy organizations and service providers, as well as those with disabilities, that addresses challenges faced by those with disabilities and their families.
The counsels noted that several of the comment letters received on the ABLE Act suggest not limiting the types of institutions used for such accounts to CDFIs, to which Hammerman agreed, stating that CDFIs are an “extra tool,” and are not exclusive for ABLE accounts.
Sandra Madden, Ascensus College Savings
Sandra Madden stated that the certification of eligibility requirement needs to allow self-certification, as the requirement currently creates risk to personal medical information when stored with a third party service provider, as well as delaying the enrollment process. She noted the need for safeguards for the use of distributions, as regular 529 plans do not have such a distribution requirement, adding that current eligibility requirements are “burdensome and excessive.” Madden continued that the collection of social security numbers (SSNs) and tax identification numbers (TINs) is not necessary because 529 plans do not collect them, and that the requirement of providing either the SSN or TIN is a disincentive for contributors.
When asked about her recommendation for self-certification, Madden explained that the participant will provide the certification rather than the physician, moving the burden from the record keeper, and added that if the certification form was “more of a check-the-box” type of document, “it would be more workable.”
Stephanie Hoffer, The Ohio State University Moritz College of Law
Stephanie Hoffer noted her concern over tax ramifications of contributions and distributions made within the same year, and that money deposited into the ABLE account and later withdrawn should not count against the contribution limit or be treated as an aggregate contribution. She noted that while the ABLE accounts cover disability expenses, savings should be encouraged, as it is a combination of an education, retirement and medical expenses account. Hoffer concluded that flush language does not increase tax expenditures and is not likely to increase the burden on other programs.
When asked if there is any legislative history that addresses flush language, Hoffer stated that there is none that she knows of that supports or strikes the interpretation of the language.
Mary Morris, College Savings Foundation
Mary Morris stressed that self-certification works and that requiring states to report is “not feasible… especially personal medical information.” She continued that when setting up an ABLE account, “the more flexibility, the better,” and stated the need for flexibility for contracting states when the state does not have its own ABLE Act program.
The counsels asked if contracting states offering more than one program for participants to choose from is an unfair advantage over those states with their own programs. Morris explained that while it may be a slight advantage, states that cannot open their own program are already at a disadvantage, and that there will be “unfairness for years” until each state opens its own program.
Jennifer Brown, The Investor Card, LLC
Jennifer Brown explained that technology can help navigate ABLE accounts and spoke about a type of card her company can offer participants for expenses, adding that there should not be restrictions on debit cards. She continued that owners should be the card holders but that accounts can have two cards should the owner permit a legal guardian or parent to have possession of one.
Marty Ford, The Arc of the United States
Marty Ford stressed concern that there is no formal process for signature authority like with a guardianship, and that beneficiaries may not approve of the authorized signatory. She noted her support for the broad definition of qualified disability expenses and stressed the need for a federal process using federal forms when dealing with disability eligibility certification so that the burden does not fall on states. Ford continued that the signature authority should be able to designate a successor beneficiary upon the participant’s death prior to Medicaid claim payments.
When asked for more details about naming a successor beneficiary upon death, Ford explained that account rollovers for siblings should be allowed if they are qualified individuals, and that the ABLE account should not be subject to Medicaid repayment until the second beneficiary passes.
Kathleen McGrath, College Savings Plans Network
Kathleen McGrath stated that there are more regulations in the ABLE Act than 529 plans, creating an administrative burden. She noted that few states have appropriated funds to generate ABLE programs so they will have to be self-supporting like 529 plans, which are supported by fees. McGrath stated that she is an advocate for a streamlined eligibility process but that there will be barriers to opening accounts if participants are required to provide eligibility documents. She noted her concern over obtaining SSNs and TINs as “people are protective” of this information, adding that there must be another way to obtain such information other than having the participant provide them. McGrath suggested the use of sub-accounts, as it will help families with conflicts over signature authority, such as divorced parents who could have their own account.
Stuart Spielman, Autism Speaks
Stuart Spielman noted his concern that proposed rules do not allow transfers from a qualified tuition account to an ABLE account on a tax-free basis. He explained that the statute does not seem to require a physician’s note for eligibility be filed with the state or other entity, but that having a note in possession would meet the requirements of the statute. Spielman applauded the definition of expenses, as many expenses may not be obvious, but are needed, to include swimming lessons for autistic children, as they are likely to roam and could put themselves in a dangerous situation.
Scott Gates, Kansas State Treasurer’s Office
Scott Gates noted his concern about how states will fund the cost of administering ABLE programs and the issue of certifying eligibility status when accounts are open. He continued that self-certification is not sufficient because “no one will be looking at compliance” and that states should not be involved in the certification of withdrawals process, as they may have a different determination than Treasury. Gates recommended that participants on Social Security have a bank account outside of the ABLE system for outside expenses so the ABLE account is purely an investment account and contributions are not counted against the $14,000 investment limit.
Christopher Rodriguez, National Disability Institute
Christopher Rodriguez expressed his “strong support” of the broad definition of qualified disability expenses, including the allowance for basic living expenses, and supported the language to change residency while maintaining the ABLE account in the state of origin. He noted the importance of the beneficiary being the owner of the account as it increases their independence. Rodriguez questioned whether states with ABLE programs can contract with multiple states to offer a wide array of program options, while also allowing states without programs to contract with states offering the accounts. He concluded that there is a need for uniformity of paperwork, suggesting the IRS or Treasury create forms so they are standardized across the program, limiting the amount of administrative burden on states.
Sara Wolff, National Down Syndrome Society
Sara Wolff stressed that the scope of individual eligibility for signature authority should include the single designation of a parent or guardian, but explained she should also be able to designate someone that is not a legal guardian (for example, a sibling). She noted that the IRS should have a standard certification form signed by a doctor so that beneficiaries do not have to send personal medical information to an ABLE administration and there is no confusion among states regarding who qualifies for an account. Wolff concluded that recertification for conditions that will not improve, such as Down syndrome, should not have to be completed on an annual basis and suggested a recertification waiver signed by a physician requiring recertification every five years.
For more information on this hearing, please click here.