Quick links

AlabamaABLE

Not rated

Our rating

AL resident benefits

On May 17, 2021 Alabama terminated its involvement with the Enable program and launched its own ABLE program called the Alabama ABLE Savings Plan. The plan is administered by the Alabama State Treasurer and will be the Official ABLE Plan of Alabama. The plan is established pursuant to the Alabama ABLE Act, §16-33C-1 through 25, Code of Alabama, as amended. The plan is designed to be a "qualified ABLE program" under Code Section 529A, which status permits a beneficiary of an ABLE Account established under the plan to make tax-free withdrawals to pay for qualified disability expenses under certain circumstances.

OVERVIEW

Program type

ABLE Savings plan

Investment manager

Sellwood Consulting, LLC and Callan LLC

Inception

2021

State agency

Alabama State Treasurer and Alabama Savings Plan Board

Program manager

Sumday Administration, LLC

Manager contract term

MORE INFORMATION

Eligibility

State residency requirements:

Who can be a participant/owner in the program?

To participate in the Alabama ABLE Savings Plan, the beneficiary must be a U.S. resident and an "Eligible Individual" under Section 529A.

Program restrictions:

An individual is an Eligible Individual for a taxable year if, during that year, either the individual (1) is entitled to benefits based on blindness or disability under Title II (Social Security Disability Insurance) or Title XVI (Supplemental Security Income) of the Social Security Act, or (2) has a qualifying significant functional limitation disability certified by a physician. In all cases, the blindness or disability must have occurred before the date on which the individual attained age 26.

Did you know?

The plan can be used to pay for qualified disability expenses.
This can include education, job training and support, healthcare and financial management.
Savings in an ABLE account will not impact eligibility to receive government benefits.
The first $100,000 is exempt from the Supplemental Security Income limit, and beneficiaries will continue to receive Medicaid regardless of account size.
Residents are not limited to investing in their own state's ABLE plan.
Another state may offer a plan with better suited investment options, lower fees or preferred features.
Visit this plan's website to learn more.

Contributions

Maximum contributions:

The annual contribution limit is currently $17,000 from all sources. If the beneficiary works, the beneficiary can also contribute part, or all, of their income to their ABLE account. This additional contribution is limited to the poverty-line amount for a one-person household. For 2023, this amount is $14,580. The designated beneficiary is not, however, eligible to make this additional contribution if their employer contributes to a workplace retirement plan on their behalf.

Additional contributions to an ABLE account are not permitted if, taking into account the proposed contribution, the ABLE account's balance is or would be greater than or equal to the lifetime account limit, currently $475,000.

Minimum contributions:

The minimum initial contribution amount is $25 per ABLE Account. The minimum subsequent contribution amount is $5 per ABLE Account.

Does the program offer an e-gifting platform for receiving gift contributions?

Yes. Account owner has option to set up a gifting page once an account is established. They can share this page with friends and family and anyone can contribute by debit card, ach or paper check.

Investment Options

Target-Risk Options:

Select among 3 portfolio options: ABLE Conservative Investment Option, ABLE Moderate Investment Option, and ABLE Aggressive Investment Option.

Bank Money Market Investment / Checking Option:

The Cash Option deposits 100% of its funds into an FDIC-insured account with The Bank of New York Mellon.

Fees & Expenses

Enrollment or application fee:

None

Account maintenance fee:

The annual account maintenance fee is $35 (assessed $8.75 quarterly).

Program management fees:

0.30%

Expenses of the underlying investments:

Ranges from 0.039% to 0.04, depending on the selected investment option; none for the Cash Option

Total asset-based expense ratio:

0.30% - 0.34%, depending on the selected investment option

Fees or restrictions on the number of disbursements

There is a $2.50 fee on each paper check disbursement, as well as a $15 fee on outgoing wires and the re-issue of disbursement checks.

Taxes and other Benefits

Program match on contributions:

There is no federal income tax on qualified withdrawals. For federal gift and estate tax purposes, contributions from third parties are generally considered completed gifts to the beneficiary. Contributions to an ABLE Account may also be eligible for the Saver's Credit under Section 25B(d)(1) of the IRS Code. Contributions are subject to the annual federal gift tax exclusion. There are no Alabama state income taxes due on investment earnings on qualified withdrawals.

State tax deduction or credit for contributions:

Contributions to an Alabama 529 plan of up to $5,000 per year by an individual, and up to $10,000 per year by married taxpayers filing jointly who each make their own contributions, are deductible in computing Alabama taxable income.

State tax treatment of qualified distributions:

State tax treatment of rollovers:

No portion of a rollover or a plan-to-plan transfer is includable in the gross income of the beneficiary for purposes of federal and Alabama state income taxes or is subject to the additional 10% federal tax.

Medicaid eligibility

The CMS guidance can be found at Implications of the ABLE Act for State Medicaid Programs on the CMS website. Please consult with your state's Medicaid office with any additional questions.

Medicaid recapture provisions

Under Section 529A, following the death of the beneficiary, any state may file a claim against the ABLE account itself for the amount of the total medical assistance paid for the beneficiary under the state's Medicaid plan after the establishment of the account (or any ABLE account from which amounts were rolled to the ABLE account). The amount paid in satisfaction of such a claim is not a taxable distribution from the ABLE account. Further, the amount is to be paid to the claiming state only after the payment of all outstanding payments due for the qualified disability expenses, which include burial and funeral expenses, of the beneficiary and is to be reduced by the amount of all premiums paid by or on behalf of the beneficiary to a Medicaid Buy-In program under that state's Medicaid plan.

Is there a debit card/ purchasing card available, and if so, at what cost?

The ABLE Visa Prepaid Card will be issued by Sunrise Bank in accordance with the terms of a Cardholder Agreement. The ABLE Visa PrepaidCard program will be managed by True Link Financial.

Statutory protection of an account from creditors:

Distributions & Terminations

To whom are distributions made payable:

Only the beneficiary, or, if one has been named, the authorized legal representative, may direct withdrawals from an ABLE account.

Account Changes

Policy regarding participant/owner changes:

A change in the beneficiary of an ABLE Account is not treated as a distribution and is not subject to federal gift or Goods and Services Tax (GST) if the new beneficiary is an eligible individual and a sibling of the current beneficiary. However, if the new beneficiary is not a sibling of the current beneficiary, the change is treated as a non-qualified withdrawal by the current beneficiary and may have federal gift tax or GST tax consequences.