Guidance Released on ABLE Accounts

In December, the Social Security Administration (SSA) released a new Program Operations Manual System (POMS) section governing the agency’s treatment of ABLE accounts for Supplemental Security Income (SSI) beneficiaries.  The guidance released has answered some, but not all, of the questions surrounding the administration of ABLE accounts.

In 2014, the Achieving a Better Life Experience (ABLE) Act became law, allowing some people with special needs or their families to establish tax-free savings accounts that would not disqualify them from receiving federal disability benefits.  The new POMS materials clarify several confusing parts of the ABLE legislation and provide a road map for practitioners dealing with ABLE accounts and SSI benefits, although as a result of the recent federal budget legislation the POMS now contains one error regarding the residency requirement for ABLE accounts.

As one example of clarification, the new POMS section specifically states that the designated beneficiary of an ABLE account is always considered to be the account owner, regardless of whether he has signature authority on the account.  Furthermore, contributions to an ABLE account from any source do not count as the account owner’s income, but if the owner funds his own ABLE account, the receipt of the funds used to establish the account is considered income.

The most important part of the POMS section deals with the SSA’s treatment of distributions from an ABLE account.  Distributions from an ABLE account for non-housing-related qualified disability expenses are not counted as income and are excluded from the beneficiary’s resource calculation even if they are retained for months following the distribution.  (The POMS includes lists of qualified disability expenses and housing-related qualified disability expenses.)  In the example used in the POMS, a beneficiary takes a $500 cash distribution from an ABLE account in June to pay for a medical bill due in September.  The beneficiary keeps the $500 in his bank account for two months until paying the medical bill.  According to the POMS section, this distribution is neither income nor a resource because it is being used to pay for a non-housing-related qualified disability expense.  (If the same cash distribution were made from a special needs trust, it would be considered unearned income in the month received and it would be counted as a resource in the following months.)  In a second example, if the same distribution was put into her checking account in May but used to pay rent on June 3, , it would be included as a beneficiary’s resource because it was part of her checking account balance as of the first of the month in June.

The new section also discusses what happens if an ABLE account is over-funded.  (ABLE accounts can only hold a total of $100,000.)  In this case, the funds in the account above $100,000 count towards an SSI beneficiary’s resource limit.  However, if the beneficiary’s non-ABLE resources are worth less than $2,000, and the additional money from the over-funded ABLE account brings the beneficiary over SSI’s $2,000 resource limit, then the beneficiary will fall into a special period of SSI suspension, during which the beneficiary will not receive an SSI cash benefit but won’t lose Medicaid benefits.  Normal SSI benefits will be reinstated as soon as the beneficiary’s excess ABLE funds are not causing her to exceed the $2,000 SSI resource limit.

The new POMS does contain one error that came about due to a change in the ABLE Act that was promulgated in the recent federal budget legislation.  The budget removed the requirement that an ABLE account must be established and maintained in the state where the beneficiary lives.  As amended, an ABLE account can now be set up in any state, regardless of the beneficiary’s state of residence.  The POMS section does not reflect the recent change and will need to be amended to comply with the new federal law.

To read the new POMS Section SI 01130.740, click here:  https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740

ASNP’s Letter to HUD regarding Special Needs Trusts and Section 8

The Academy of Special Needs Planners has signed on to a letter drafted by the National Academy of Elder Law Attorneys (NAELA) asking the U.S. Department of Housing and Urban Development (HUD) to stop treating most distributions from special needs trusts as income for purposes of qualifying for Section 8 or Section 811 housing assistance.

Some local public housing authorities have been treating distributions from special needs trusts as income attributable to public housing residents even if the payments are not being made to the residents.  The letter calls on HUD to issue clear guidance to local housing agencies exempting payments from special needs trusts as income as long as the payments are not being made directly to the beneficiary.

Doing so would further integration of people with disabilities into their communities and would mirror current SSI and Medicaid treatment of income from special needs trusts, the letter says.  In fact, the letter recommends that HUD follow POMS SI 01120.201I when crafting guidance governing these distributions.

The text of the letter is copied below.

 


 

January 6, 2016

The Honorable Julian Castro
Secretary
U.S. Department of Housing and Urban Development
451 7th Street, SW
Washington, DC 20410

Subject: Housing Programs and Special Needs Trusts

Dear Secretary Castro:

The undersigned organizations are writing out of concern that public housing authorities (PHAs)
and other rental assistance program administrators are interpreting national HUD policy to be
that all distributions from special needs trusts are income for HUD rental assistance programs.1
We believe that HUD rules, in light of special needs trust law and policy, require that
distributions from special needs trusts not be counted as income.

Federal policies and mandates seek to ensure that persons with disabilities live in the least
restrictive, most integrated setting possible. Counting distributions from special needs trusts as
income conflicts with that policy. Moreover, doing so contradicts HUD’s long-standing
regulation requiring exclusion of amounts specifically excluded by any other Federal program
that has the same exclusions as HUD.

HUD housing programs and Medicaid are means-tested; Medicaid, however, has both asset and
income tests, while HUD housing programs have only an income test. By excluding assets
placed in special needs trusts, Congress made Medicaid eligibility for persons with disabilities
more like the HUD housing programs in that assets would not be an impediment to eligibility. As
such, HUD should treat special needs trust distributions as Medicaid does, disregarding them
except to the extent they are distributed to the beneficiary.

Clear guidance from HUD is needed to prevent further actions inconsistent with community
integration and to reduce administrative uncertainty at the local determination level. Treating
special needs trust distributions in this way would benefit a particularly disadvantaged group of
people, while streamlining eligibility determinations for parallel programs.

Persons with Disabilities Want Be Part of their Communities

Individuals with disabilities face impoverishment due to the high cost of long-term services and
supports. Most hope to receive services and supports at home, and be active in their community.
Many fear institutionalization, which is often a real threat. This is so despite the landmark
Supreme Court case, Olmstead v. L.C., 527 U.S. 581 (1999) in which the Supreme Court held
that the congressional mandate in the Americans with Disabilities Act – that individuals with
disabilities not be swept into unwanted institutional settings – applied to how states managed
other joint federal-state programs, in that case Medicaid.

Moving away from institutional care has allowed more Medicaid beneficiaries with disabilities to
remain in their communities. Those who have special needs trusts and benefit from SSI and/or
Medicaid home and community-based services (HCBS) are also often beneficiaries of housingbased
assistance.

To promote integration, the Administration for Community Living (ACL) encourages states to
rely on HUD housing programs. Section 811 and the Section 8 Housing Choice voucher program
assist persons with disabilities in their quest to live successfully in the community with Medicaid
as a main payor for State-provided supports under their waiver authorities.2 In particular, the
joint initiatives of ACL and HUD rely heavily on the Section 8 Housing Choice voucher
programs to successfully support persons with disabilities.

Special Needs Trusts Are Consistent With the Goals of Community Integration

Congress authorized the use of special needs trusts in 1993 to ensure that individuals with
disabilities with disqualifying assets could receive assistance for their long-term services and
supports from means-tested programs like Medicaid, so long as certain conditions were met.3
As a practical matter, special needs trusts eliminate the Medicaid asset test for persons with a
disability under age 65 and allow them to qualify based on their income levels only. However,
these trusts are highly restrictive and incorrect administration of them will result in means-tested
benefit ineligibility.

HUD housing programs also follow an income-only approach to qualification. As such, HUD
should treat special needs trust distributions as the Medicaid program does, disregarding them
except to the extent they are distributed to the beneficiary.4 This would promote both better
housing and health outcomes for a particularly vulnerable population.

Adopt Social Security Administration Guidance as Part of 24 CFR § 5.609(c)(17)
HUD policy, set out in 24 CFR § 5.609(c)(17), requires exclusion of income excluded by other
public benefits programs:

“Amounts specifically excluded by any other Federal statute from consideration as income for purposes of determining eligibility or benefits under a category of assistance programs that includes assistance under any program to which the exclusions set forth in 24 CFR § 5.609(c) apply.”

For instance, Section 5.609 excludes reparation payments, as does Medicaid. 42 U.S.C. §
1396a(r)(1)(A). Special needs trust income is excluded by Federal statute, 42 U.S.C. §
1396p(d)(4)(A) and (C), should therefore be excluded from HUD’s income test on that basis.

The Social Security Administration has issued clear guidance as to what does and does not
constitute income when there are expenditures made out of a trust that are not considered a
resource for SSI or Medicaid purposes.5 This guidance provides predictability and best practices
for special needs trust beneficiaries who wish to live in the community with housing-based
assistance. Except for rules respecting shelter, which are uniquely HUD’s domain, HUD should
adopt this as a sub-category of income exclusion for purposes of § 5.609(c)(17).

Conclusion

Medicaid eligibility is increasingly, as a matter of federal and state policy, used as the linchpin
for community services for disabled individuals, including many who are developmentally
disabled. For many, this means using a special needs trust and relying on a trustee to purchase
items or services directly to pay for his or her supplemental needs, actions that would not create
income for the Medicaid recipient. HUD should issue new guidance following POMS SI
01120.201I to ensure that PHAs and other HUD rental assistance providers apply consistent rules
for SNT distributions across the country.

*********
Thank you for your consideration of this issue. Please contact David Goldfarb
(dgoldfarb@naela.org) if you have any questions. We are committed to working in collaboration
with HUD, the ACL, and other interested stakeholders to bring about this change.

 

Sincerely,
Academy of Special Needs Planners
Autism Speaks
Community Housing Network, Inc.
Justice in Aging
National Academy of Elder Law Attorneys
National Alliance on Mental Illness
NAMI New Jersey
National Plan Alliance
Special Needs Alliance
United Spinal Association

CC:
The Honorable Kathy Greenlee
Administrator
Administration for Community Living
One Massachusetts Avenue NW
Washington, DC 20001


 

1 These concerns, respecting eligibility determinations and rent calculations of certain PHAs and other HUD rental assistance providers, is in part based on a 2007 regional HUD advisory letter available at http://bit.ly/1Nh9d2n

2 See http://acl.gov/About_ACL/FederalInitiatives/Housing.aspx.

3 42 U.S.C. § 1396p(d)(4)(A) and (C)

4 The HUD advisory letter referenced above, ECF No. 10-4, failed to appreciate that HUD would normally disregard (except to the extent they generated or were presumed to generate income) the resources most often distributed from modest special needs trusts. The fact that it is being distributed from an SNT should hardly make a difference.

5 Program Operations Manual System (POMS) SI 01120.201I.