Savings Plan For The Disabled
As originally appearing in The Boston Globe

James T. Brett is president and chief executive of The New England Council

As the nation struggles with economic recovery from the recession, government leaders at all levels are making difficult choices to fix budget shortfalls. For those who rely on publicly-funded programs for crucial health and other human services, there is a pressing need to find ways to compensate for any future benefit cuts. The most vulnerable populations, such as people with disabilities, need to plan now for future needs.

Bipartisan legislation pending in Congress, known as the Achieving a Better Life Experience (ABLE) Act, would establish tax-exempt accounts for individuals with a disability to pay certain expenses for education, housing, transportation, employment support, medical care, and certain life necessities. Creation of such accounts, similar to a 529 tax-advantaged plan for higher education, would provide an incentive for and encourage long-range planning. It’s never too soon to plan ahead.

Indeed, projections for the insolvency of Social Security and Medicare already accelerated last year. And paying for these programs is only part of the challenge facing the federal government as unemployment remains high and revenues decline. States, too, are struggling with budget shortfalls.

As a result, many people with disabilities and their families are feeling the impact of the recession. Since 2008, 25 states and the District of Columbia have made cuts to medical, rehabilitative, home care and other services for the elderly and people with disabilities, according to the Center on Budget and Policy Priorities.

There are also about 2 million to 2.4 million elderly or people with disabilities who are on waiting lists and in need of some type of long-term services and supports, noted the National Council on Disability in recent months.

And the need for services is not going to go away when the economy recovers and — perhaps — funding is restored. People are living longer and that includes people with disabilities. Currently there are some 54 million Americans — or 18.7 percent of the population — that have some form of disability, according to the most recent data from the census. Of those, 35 million have a severe disability.

Poverty is more prevalent among people with disabilities, which also underscores the need for publicly-funded support programs. The poverty rate for people with severe disabilities is 27 percent and 12 percent for those with non-severe disabilities. Compare that with 9 percent for people without a disability.

If government funding does not support all of the services needed, then individuals and families will need to find ways to supplement. A qualified disability savings account could be set up in a way that would not exclude the individual from receiving government services, but rather encourage them to save, so that funds could be used to supplement benefits.

The account could be created like other special savings accounts which have been established through the federal tax code, to provide savings vehicles for vacations, college education and emergency spending. Contributions to the qualified disability savings account would not be tax deductible to the contributor. Nor could the account be used as a tax shelter.

But distributions to the beneficiary, and all account interest earnings, would accumulate on a tax-free basis for the benefit of the individual with disabilities. These distributions could be used to pay a third-party service provider for a number of services. For example, funds could be used to supplement transportation, the hiring of an aide to offer one-on-one support, or for eye or dental care that may not be covered by Medicare or Medicaid.

In a time when government agencies are trying to do more with less, it’s hard to predict what level of support will be available in the future. Now more than ever, it is important to encourage families to save what they can.

Parents want the best future for their children. And families of people with disabilities are no different. But to ensure that their children continue to experience the highest quality of life, throughout adulthood, they may need to rely more on public programs. At the same time, they may want to help ensure that the funds are there when their child needs services down the road. Creating an opportunity where parents can save to benefit their child in the future will help them achieve this important goal.

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