Minnesota on Tuesday will announce the launch of new savings accounts that could lift hundreds of people with disabilities out of poverty by allowing them to accumulate savings without jeopardizing their public health insurance coverage and other government benefits.
Nearly a decade in the making, the new accounts are considered a breakthrough for many of the roughly 600,000 Minnesotans with disabilities, who often are forced to impoverish themselves to qualify for public services. For the first time, people with disabilities and their families can set aside up to $14,000 a year for certain expenses without getting cut off from Social Security, Medicaid and other government programs.
Minnesota is among the first states in the nation to offer the accounts, known as ABLE accounts, which are considered among the broadest new benefits for the disability community in a quarter-century.Modeled after 529 college savings accounts, ABLE accounts allow money to grow tax-free to pay for a broad array of items — from housing to assistive technology — that can help people with disabilities live more independently in the community. Individuals can keep their Medical Assistance regardless of their account balance.
“This is really a great opportunity to help many people to avoid or grow out of poverty,” said Claire Wilson, assistant commissioner of community supports at the Minnesota Department of Human Services, which is overseeing implementation of the new accounts. “It’s not a silver bullet, but it is a significant step forward.”
State and federal rules have long trapped many individuals with disabilities in poverty, particularly if they need the broader array of services covered by public health insurance. Since 1983, for instance, most of those trying to qualify for Minnesota’s version of Medicaid, known as Medical Assistance, must spend down their income to 80 percent of the poverty level and hold no more than $3,000 in assets. And Supplemental Security Income, a federal benefit also known as SSI, has an asset cap of just $2,000.
‘You must be poor’
By almost any measure, the presence of a disability exacts a high toll on a person’s economic well-being. About 19 percent of Minnesotans with disabilities, or 110,300 people, live below the federal poverty line. That’s more than twice the poverty rate of people without disabilities. And nearly half of working-age Minnesotans with disabilities report no earnings.
The rules of government aid programs are partly to blame for these stark disparities. Even when people with disabilities accumulate a few thousand dollars in cash savings or other assets, they often must spend it immediately to avoid running afoul of asset caps and risk losing government aid.
“It’s part and parcel of how we view people with disabilities,” said Mary Fenske, a disability rights advocate from Maple Grove who has an adult son with a disability. “There is an assumption that if you have a disability then you must be poor, and you should just be happy with what you have.”
Leslie Sieleni of White Bear Lake has a 16-year-old son, Sean, with Down syndrome who aspires to attend college and pursue an acting career. Yet two years ago, she had to ask Sean’s grandmother to stop donating money to her son’s future because he had $2,000 in savings and risked losing public benefits.
“It’s disheartening that he can’t save, even a little bit, for the next stage of his life,” Sieleni said. “But we had nowhere to put those funds without putting his services at risk.”
Since former President Barack Obama signed the ABLE Act into law in 2014, 16 states have opened the special accounts to the public.
“This is huge,” said Sen. John Hoffman, DFL-Champlin, author of 2015 legislation that authorized the accounts in Minnesota. “It’s an easy way for families to put money aside without affecting their benefits.”
Besides helping to preserve eligibility for public programs, the new ABLE accounts offer tax benefits that resemble those of a college savings plan or an IRA. Interest and investment profits are not taxed as long as the money is used to cover qualified disability-related expenses. Parents of eligible minors may open accounts for their children.
Steven Allen, 34, of Apple Valley said he expects to enroll quickly. (Accounts are available online.)
Allen, who has a cognitive disability caused by fetal exposure to alcohol, said he began worrying about being cut off from public programs a year ago when he landed a job as a full-time courtesy clerk at a grocery store.
Allen counts on Supplemental Security Income to help pay his monthly rent and relies on Medical Assistance to pay for therapies that are not covered by private medical insurance.
“The day will come when everyone will just drop me because I’m making too much money from my job,” Allen said. “These [accounts] should finally offer some protection so I can keep working without getting penalized.”
Chris Serres • 612-673-4308