As a grandparent of a special needs child I have firsthand knowledge of how much extra time, love and patience is required of the parents on a daily basis. I’m so very proud of my son and daughter-in-law at how well they manage their household day in and day out.
As a financial adviser, I am also keenly aware that having a child with
special needs can be a significant strain on a household budget.
At the end of 2014, President Obama signed into law the Achieving a
Better Life Experience Act (ABLE). One of the major goals of the ABLE
Act was to provide people with special needs an incentive to save.
You would think that families would be thrilled when their special needs
adult child got a job. Unfortunately, landing a job could create a
drawback. If the special needs person earned too much money they could
forfeit their eligibility for government programs.
In other words, to a certain degree it almost forced special needs
people to keep their income so low that they were practically living in
poverty. The ABLE Act is intended to alleviate this concern.
One of the provisions of the ABLE Act created 529A plans, modeled after
529 College Savings Plans, which I have written about before. A 529A
plan is intended to help families with special needs children save for
their future without giving up eligibility for public benefits.
As with traditional 529 plans, the 529A must be used for “qualified”
expenses. Since special needs last a lifetime, the qualified expenses
last over a person’s lifetime on purchases and expenses related to the
special needs, including education, employment training, housing and
A big difference between the traditional 529 and the 529A plan is that
with the traditional program the account owner, typically a parent or
grandparent, can withdraw the money at any time. Of course, they must
pay taxes on any gains plus a ten percent penalty. With the 529A plan,
the money is truly the special needs person’s money.
With most traditional 529 programs there’s a cumulative cap. It varies
from state to state, but it’s generally around $200,000. The new 529A
plans simply limit the annual contribution to $15,000 per year and only
the first $100,000 is exempt from Supplemental Security Income. Once the
account value exceeds $100,000, SSI benefits are no longer received.
With traditional 529 plans, families can purchase the program of
virtually any state. For example, if you like the fund manager of say,
Ohio, you can purchase it for your loved one. With the 529A plan, it
must be your state.
I recently called the two 529 programs available to Michigan residents
and I am sorry to say that neither offers a 529A program. Nor does one
appear to be in the works. I find this extremely disappointing.
This is a program that Michigan should offer. I’m certain there are a
number of grandparents who would like to financially contribute to the
long-term care needs. It might be helpful to write your elected
officials in Lansing and urge them to do something.
In the meantime, I tip my hat to all the moms, dads and grandparents
who, on a daily basis, do the very best they can with a smile under