Q & A | Is an ABLE Account an Asset? Income? Why Doesn't the HUD Handbook Tell Us?

Question from a Blog Reader

"I have a resident at my LIHTC property with a savings account. His social worker insists that we should not count it. All they will provide is proof that it is an ABLE account, and a balance, but no interest information. The resident and his employer both put money into the account. Can you help me with how to explain that we need more information about the account and that we must count the asset? ABLE accounts are not mentioned in the HUD Handbook as excluded. Also, should the money his employer deposits be counted as income?"

Answer

Summary: ABLE accounts are not counted as assets and the employer contributions are not income.

The LIHTC (and almost all other affordable housing programs), use HUD rules when determining household income, and it is commendable that the questioner consulted the HUD Handbook. However, the HUD handbook 4350.3 that we usually reference for HUD direction was last revised before ABLE accounts existed. To help until a new Handbook is produced, HUD published Notice H-2019-06 to provide guidance on ABLE accounts. 

Background. The Achieving Better Life Experience (ABLE) Act was signed into law on December 19, 2014. Since the 4350.3 was last revised with Change-4 in 2013, it does not address ABLE accounts. ABLE allows States to establish and maintain a program under which contributions may be made to a tax-advantaged ABLE savings account to provide for the qualified disability expenses of the designated beneficiary of the account. The designated beneficiary must be a person with disabilities, whose disability began prior to his or her 26th birthday, and who meets the statutory eligibility requirements.

The ABLE Act, Section 103, mandates that an individual’s ABLE account (specifically, its account balance, contributions to the account, and distributions from the account) is excluded when determining the designated beneficiary’s eligibility and continued occupancy under certain federal income-based programs. Individuals have to be income-eligible to receive assistance under HUD programs. Per HUD regulation (24 CFR 5.609), annual income is defined as the anticipated total income from all sources received by every family member which are not specifically excluded in HUD regulation (24 CFR 5.609(c)). One of the exclusions (24 CFR 5.609(c)(17)) excludes from income all amounts that are specifically excluded by other federal law applicable to HUD programs. In Notice HUD-H-2019-06, HUD instructed that, given that the ABLE Act creates a federally mandated exclusion for ABLE accounts in determining a household’s income, HUD will also exclude amounts in the individual’s ABLE account based on HUD regulation 24 CFR 5.609(c)(17)). The entire value of the individual’s ABLE account will be excluded from the household’s assets. This means that interest on the ABLE account balance will not be counted as income, whether actual income or imputed asset income. HUD also clarified that distributions from the ABLE account are also not considered income. However, all wage income received is included as income, even the part that is deposited into the ABLE account.

HUD also has determined that If someone other than the designated beneficiary contributes directly to the ABLE account, that contribution will not be counted as income to the designated beneficiary. This could include the employer that the question asked about. Any person can contribute to someone's ABLE account. However, the IRS limits the total annual contributions that an ABLE account can receive from all sources for a given calendar year. 

 

The below scenarios are adapted from examples in the Notice. 

 

Example #1 | A beneficiary of an ABLE account has a portion of her wages directly deposited into her ABLE account. All wage income received, regardless of which account the money is paid to, is included as income. Employer contributions to an ABLE account are excluded. The designated beneficiary then deposits some of her wages into the ABLE account. That deposited amount is not included in the household’s asset calculation or counted as income again when she receives a distribution from the account.

 

Example #2 | If a relative provides a recurring gift of $100 per month directly to a resident, the recurring gift would be counted as income. However, if they also deposit $100 monthly directly into an ABLE account, then it will not be counted as income.

 

Read the full notice by clicking the picture below

    

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Check it out HERE! The above topic is just one of many to be discussed at this year's Compliance Summit Events. 

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