Oregon Treasurer Ted Wheeler has set the stage for new tax-free savings accounts for people with disabilities, directing a citizen panel to hire an investment advisor, set rules for the program, and get these accounts ready to go by 2017.
The accounts will fall under the jurisdiction of the Oregon 529 Savings Board, which currently oversees similar accounts for college savings. In addition to the shelter from taxes, disabled people and their families will be able to utilize these accounts without losing their eligibility for government assistance for their condition, as they would with a normal bank account if they saved more than $2,000.
“It’s a significant game changer for families who have kids with disabilities,” Wheeler told The Lund Report in an interview Tuesday. “This gives them a sense of confidence that the needs of their child are cared for for the long run.”
Treasury spokesman James Sinks said the money can be invested, grown and distributed tax free as long as the dollars are used to pay for eligible expenses, such as education, housing, transportation and health prevention and wellness.
The Legislature directed Wheeler to issue these accounts in July with the passage of the ABLE Act -- Senate Bill 777, a popular bipartisan measure championed by Sen. Sara Gelser, D-Corvallis and Rep. Cedric Hayden, R-Cottage Grove, both of whom have children with disabilities.
The bill was passed in the first session after a new federal tax law enacted in 2014 allows states to create these accounts, making Oregon among the first to move ahead.
It’s unclear how many families will sign up for these accounts once they become available, but in the existing college savings program, accounts have been created in the Oregon 529 Savings Network on behalf of 156,810 separate beneficiaries to help pay for higher education and job training costs as of Sept. 30. Those combined accounts totaled more than $2.2 billion, according to the treasurer’s office.
“Part of the work is to ascertain demand and doing outreach to families and providers [investment brokers],” Wheeler said. “This is new across the country so no one has a good sense of demand.”
But excitement for the accounts is so great for some people, such as Ross Ryan, a disability rights activist who would qualify for an account, that he’s impatient to wait till 2017 before using earnings from his supported employment to save up for a car or pay a deposit on a better apartment. “I guess I’ll have to behave,” he said, and wait for the slow mechanics of government to work.
Sinks said a year was a standard timeline to get such a program off the ground: “There are many steps that need to occur to launch a program like this and ensure it is properly constructed, such as writing rules, soliciting and hiring investment and program managers, negotiating contracts, etc.,” he wrote in a follow-up email.
Gelser echoed his remarks: “I anticipated that [it] would likely be 2017, or mid-2016 at the earliest before Oregonians could start saving,” she told The Lund Report. “By the time the rules are written, the RFP gets sent out and awarded and everything gets started we knew it would take 12 to 18 months to get it done. We will be among the first states to have the accounts available.”
Once the program goes live in 2017, people will be able to sign up on the Oregon 529 savings website or through storefront investment brokers.
Account holders will be able to place up to $14,000 a year in these accounts, for a total of $100,000 without losing disability payments. Even if they exceed the cap, they will not lose their Medicaid benefits.
One significant difference between the disability savings plans and the college savings plans is that account holders can continue to draw money from the accounts to meet their needs throughout their lives rather than just during their college years.
Chris can be reached at [email protected].
