Friday, May 08, 2015
"When you choose an action,
you choose the consequences of that action”
-
Cordelia
Vorkosigan
Now
that the post legislative tidal wave of vigorous celebration and
self-congratulations has diminished to a social media driven drumbeat of rah-rah’s
as each state assumes its responsibility in the design and implementation of
its own 529A plan; a.k.a., The ABLE Act, some historical perspective is in
order.
The
original concept of the plan began in quiet obscurity in the Congressional
offices of Representative Ander Crenshaw of the 4th District of South
Florida. After listening to the concerns of several constituents, all parents
of children with unique lifetime care needs, he and his able staff began the
process by researching the issues surrounding this unique population. His Chief
of Staff, John Ariale, and top Legislative Assistant, Dustin Krasny, reached
out to the many available resources of the federal bureaucracy in the pursuit
of accurate information about the current approach to providing benefits and
opportunity to those in the disability community. In the spirit of full
disclosure, this author became one of those resources.
My
contribution to the cause can be summed up by the following:
Financial Liberation for those with Special
Needs:
Current Problems:
• Benefit
rules and laws are state specific and ever changing;
• It
is expensive to establish traditional trusts to maintain eligibility;
• The
rules are complicated for those that work and receive benefits;
• It
can be difficult for others to contribute to the care of a person with unique
needs;
• The current system offers little chance for a
beneficiary to achieve true independence if asset development is limited and/or
complex;
• The ever present likelihood of running afoul
of current income and asset deeming rules create financial hardship and require
expensive legal solutions for those least able to afford them;
• The rules to operate special needs trusts are
complex and the costs to manage them, including taxes, are often excessive;
and,
• There are no incentives for traditional
advisors to assist this population and far too few experienced ones to address
the need.
After
spending time in multiple meetings, plus numerous emails, explaining the
details of these items, I returned to regular life and the episode faded in
memory.
Then,
in April 2008, it all came rushing back as I read the initial draft of the
‘‘Financial Security Accounts for Individuals with Disabilities Act”, the first
iteration of what is now the ABLE Act. I had been invited by Mr. Ariele to
attend a meeting at their Congressional office to discuss the recently
introduced bill. I immediately fired off an email accepting the offer and to
congratulate them with what I called an “evolutionary” bill. The issues
discussed in that meeting dealt primarily with the prioritizing of the main
components of the bill as they prepared to begin brokering for support to take
the bill to the next level. They did push forward and by the end of that
session had garnered the support of 85 cosponsors; however, the bill languished
and died in committee.
On
July 22, 2009, Congressman Crenshaw reintroduced HR 1205; now the Achieving a Better
Life Experience Act. My comparison of this new version revealed a number of
changes, but most were on the margins and it still held promise as a real game
changer. The promising new aspect was that several companion bills in the
Senate (S 2743 and S 2741) had been sponsored by Senators Casey, Hatch and
Dodd, with Brownback and Kennedy also looking to become involved. With this
much new high power support it seemed that there might be light at the end of a
hopefully short tunnel and that this deal would be done in quick fashion.
Always
the optimist, I discussed these positive activities with an associate who had
40 years of governmental experience and he quickly, and correctly, poured water
on my fire of enthusiasm. His words of wisdom went something like “the bigger
the guns, the heavier the opposition”. Although I had learned to trust his
judgment I was somewhat skeptical about this outlook. About six months later I
was forced to lay my optimism aside as it became evident that there were large
competing forces attempting to mold this bill to fit their particular
objectives and each had their own flag bearer firmly entrenched in the
legislative action.
So
what accounts for the five year delay in finally having a bill brought to the
House and Senate, where it received almost unanimous approval, and then the in
short order, to the White House for the President’s signature? In each of those
years the bill had over 300 cosponsors from both sides of the aisle, and in the
later years, lots of daily press from the different advocacy groups around the
country.
During
the next legislative sessions most of the activity surrounding the bill dealt
specifically with political ideologies and protecting well-funded business
interests. I was fortunate to have access to a bimonthly side-by-side breakdown
of all of the active bills, including an updated analysis and working group
consensus report. The delay, in fact, was not due to any overt objection to the
bill itself, rather to its impact on certain organizations in general.
Some
groups, like the national and state bar associations, were concerned that ABLE
might be detrimental to certain specialized members who derived their income
for work they performed in the special needs area. The question was asked
whether these accounts would preclude the use of special needs trusts or would
structured annuities become a thing of the past in the personal injury world.
Banks and trust companies could envision billions of dollars being managed
outside of their control. And, national nonprofit advocacy groups envisioned a
gold mine if they could somehow become the primary gatekeeper for this
potential financial bonanza.
As
time went on all of these issues were apparently dealt with using reason,
political efforts and certain changes in the bill itself. Yet by the end of
2013, now with over 300 cosponsors, ABLE still languished in committee.
The
ultimate answer to what changed during the 2014 legislative session is probably
very complex - but I have a much simpler and unprovable explanation to offer,
and a suggestion of what is to come.
The
Social Security Administration, along with CMS, ceased its efforts to defeat
the bill in favor of probable managerial usurpation once the states had
ratified their individual plans. Why fight against a rising tide of national
support in which virtually every legislator was taking public credit for this
bill, when you could bide your time and quietly assume the authority over how
the bill is actually enforced and managed. In the end, after all, much of this
was done to allow individuals receiving means tested welfare benefits to have a
mechanism with which to accumulate more than the current $2000 asset limit. And
now we have that mechanism; but I think we also have the Golden Rule - they
that have the gold, rule. And “they” are headquartered in Baltimore, Maryland.
To
be clear, I am not bashing the Social Security Administration or CMS with these
comments. I have known and worked with many fine and caring members of both
organizations; however, there were two unique aspects to their reticence about
the entire bill. First, Mr. Crenshaw was inspired with the decision to place
this bill in the Internal Revenue Code rather than under the Health and Human Services
Act. This one move obviously removed the ball from SSA/CMS’s court and
relegated them to becoming observers in the game. Secondly, SSA/CMS has been
going through a major internal reorganization due to an incredible, and
seemingly ever increasing, workload. To better understand the volume of their
annual output you can review the highlights from the 2014 statistics HERE
. Although they traditionally take a lot of heat from just about every quarter
it’s important to remember that they didn’t write the complex regulations or create
the large and ever-increasing caseloads. In my 30 years of dealing with many
offices on behalf of beneficiaries, and with few exceptions, I have found most
caseworkers to be responsive to the needs of those they serve.
While
I remain a proponent of the ABLE Act, my attempt at critical thinking has
forced me to address a number of problematic issues based on observation,
experience and reasoning. In addressing the following concerns I am in no way
holding myself out as a “thought leader” for the disability community or the
professionals who provide services in that community. But I have put in enough
time in the trenches to justify airing my concerns.
What
we currently know is:
·
The
wording of the legislation as signed by the president in December 2015 along
with the initial rules, restrictions and the monetary guidelines;
·
That
the Treasury Department will develop and finalize the regulations within IRC Section
529;
·
That
each state is required to develop a plan based on those regulations plus
identify a specific plan provider, or cede that role to another state if they
so wish;
·
Submit
their completed plan back to the Treasury Department for final approval; and,
·
Interestingly,
the news that there would be “Discontinued Coverage of Vacuum Erection Systems
(VES) Prosthetic Devices in Accordance with the Achieving a Better Life
Experience Act of 2014.
So,
on the threshold of a new era of how disability benefits, both welfare and
entitlement, will be managed in a manner that might actually allow a
beneficiary the opportunity to work and save toward the goal of
self-sufficiency, and the first rule change deals with erectile dysfunction?
Well, why not – after all bureaucratic dysfunction is one of the targets of
this law.
Assuming
all goes well, when those steps are completed we will, in theory, have the
ability to open and fund actual ABLE accounts, “managed” by a named agency for
each state. The key issues then will be:
·
How
will the qualified disability determination be made and by whom?
·
If
a determination denial occurs, how are appeals to be handled?
·
How
will ongoing eligibility be monitored and by whom?
·
Who
will monitor post eligibility issues which might affect a beneficiary’s
account?
·
If
an existing account is disqualified and an overpayment situation occurs, will
the account be allowed to make that repayment?
·
If
an existing account is disqualified, how is the date of disqualification
determined for Medicaid reimbursement purposes?
·
If
a beneficiary has an existing guardianship, either of the person or the estate,
how can they also be the named owner of an account as the current rules
specify?
·
How
will the investment regulations be modified to address the requirements of an ABLE
account from a college savings account which will have very different distribution
timing and longevity?
·
Will
there be specific regulations dealing with possible interactions between an ABLE
account and a special needs trust?
·
Will
the Social Security Administration/CMS establish a single, specialized office with
well-trained cadre to deal with these and other complex issues as this program
gains momentum?
This
list is far from all-encompassing; however, it does speak to some of the
unanswered questions on the minds of those of us that provide services to the
potential beneficiaries of this new law.
Finally,
a few observations concerning how best to utilize an ABLE account during its development
and evolution process:
1.
No
funding, other than from the beneficiaries earned or unearned income, should
occur until the last month of the year. This will allow a working individual to
contribute excess funds or an SSI beneficiary to more efficiently manage their
$2000 asset limit restriction. If by December there is still some unused funding
allowance, then a third party can easily make up the difference.
2.
Communicate,
communicate, and communicate with other family members about the importance of
coordinating any contribution into the account.
3.
Regardless
of your state’s ultimate lifetime funding limit, do not contribute more than
the stated $100,000 limit. This amount came about after eight hard years of
political compromise. Any hope for future enhancements to this or other plans
with the goal of helping our citizens with unique needs to better achieve a
higher level of self-sufficiency will go right out the window if we begin to
read about accounts with two or three times that amount being established.
Plus, with the Medicaid payback provision, any advisor that suggested that
level of funding should be subject to whatever remedy is available.
4.
Keep
excellent records.
The
success or failure of this program the will be based on many factors. The key
to a good beginning will be, I believe, based on the agency or organization chosen
in your state to be the ABLE provider. In my state of Texas I already know who
that should be; The ARC of Texas Master Pooled Trust and I am expending what
limited political capital I do have in carrying their banner. I want this
program to work because I can see the great potential for many of those
individuals that my firm works with on a daily basis. I say the ARC because
they already have all of the necessary components required by legislation, plus
they have years of experience in dealing with those who will be providing plan oversight
and management. This next year or two with ABLE will have its highs and lows
and I will feel much more comfortable with a steady, component hand at the helm
of the Texas plan.
Yes,
the bill was almost unanimous in its passing, and the President was swift in
its ratification- and now the states are in a race to create and pass their
legislation. All that means is the managers have met and exchanged lineups at the
plate and the umpires are heading to their positions in the field - but the
game doesn’t start until the players come out onto the field of play. The hope
is that it will be a rewarding and entertaining game and that the box score
will be a just reward for the years of hard work that went into its
preparation. But, little has been heard from the 800 pound gorilla in the room,
yet – so stay alert and be ready to play hard.
Postscript: I was just preparing to publish this post
when I received notification that the Texas Legislature had completed and
passed its version of the ABLE plan. After a quick review it appears to express
all of these significant elements of the federal bill along with the initial
Treasury Department regulations. It names the Texas Comptroller’s office as the
states lead agency and mandates the creation of an independent advisory board
to work through the details. The stated goal is to have a working program
available by 2016.
