SENATE AMENDED
PRIOR PRINTER'S NOS. 1767, 1879, 2219
PRINTER'S NO. 3001
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1319
Session of
2015
INTRODUCED BY MARSHALL, O'NEILL, STEPHENS, D. MILLER, MURT,
BARRAR, COHEN, D. COSTA, CUTLER, DAVIS, DRISCOLL, GIBBONS,
GODSHALL, GROVE, A. HARRIS, HEFFLEY, KINSEY, KORTZ,
LONGIETTI, McNEILL, MULLERY, PETRARCA, ROSS, ROZZI, SABATINA,
SAMUELSON, SCHLOSSBERG, SCHWEYER, THOMAS, WHEATLEY,
YOUNGBLOOD, FREEMAN, DAVIDSON, BRADFORD, WATSON, WARD,
MICCARELLI, BARBIN, D. PARKER, MATZIE AND DEAN, JUNE 10, 2015
AS AMENDED ON THIRD CONSIDERATION, IN SENATE, MARCH 21, 2016
AN ACT
Providing for the establishment of a savings program by the
Treasury Department to encourage eligible individuals with
disabilities to save private funds from which the expenses
related to their disabilities may be paid to assist them in
maintaining health, independence and quality of life.
PROVIDING FOR THE TAXATION OR THE EXEMPTION FROM TAXATION OF
AMOUNTS AND EVENTS RELATING TO THE PENNSYLVANIA ABLE SAVINGS
PROGRAM.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Achieving a
Better Life Experience (ABLE) Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"ABLE account contract." An agreement between the program
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manager or the department and the account owner.
"Account." An individual savings account held in trust for a
designated beneficiary established within the department in
accordance with this act.
"Account owner." A person or legal entity permitted to be an
ABLE account owner under IRC ยง 529A and who enters into an ABLE
account contract under this act.
"Contracting state." A state that has not set up an eligible
ABLE savings account program and contracts with this
Commonwealth to manage accounts for the state's residents.
"Department." The Treasury Department of the Commonwealth.
"Designated beneficiary." An eligible individual at the time
the account is established or the eligible individual who
replaces a designated beneficiary, who is the beneficiary of the
account and whose qualified expenses may be paid from the
account.
"Disability certification." A certification which:
(1) meets the satisfaction of the Secretary of the
Treasury of the United States by an eligible individual or
the eligible individual's parent or guardian that certifies
that the eligible individual:
(i) has a medically determinable physical or mental
impairment that results in marked and severe functional
limitations and that can be expected to result in death
or that has lasted or can be expected to last for a
continuous period of not less than 12 months or is blind;
and
(ii) that the blindness or disability occurred
before the date on which the eligible individual attained
age 26; and
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(2) is accompanied by a copy of the diagnosis relating
to the eligible individual's relevant impairment that is
signed by a physician.
"Eligible individual." A person who:
(1) is entitled to Social Security benefits based on
blindness or disability under Title II of the Social Security
Act (49 Stat. 620, 42 U.S.C. ยง 401 et seq.) or Title XVI of
the Social Security Act (42 U.S.C. ยง 1381 et seq.) and whose
blindness or disability occurred before the date on which the
eligible individual attained age 26; or
(2) has filed a disability certification with the
Secretary of the Treasury of the United States for the
taxable year.
"Fund." The ABLE Savings Program Fund.
"IRC ยง 529A." Section 529A of the Internal Revenue Code of
1986 (Public Law 99-514, 26 U.S.C. ยง 529A) and any successor
legislation. The term includes any regulations or guidance
issued under section 529A of the Internal Revenue Code of 1986.
"Management contract." The contract executed by the
department and a person or legal entity to serve as investment
managers, program managers and trustees to the department on
behalf of the program.
"Nonqualified withdrawal." A withdrawal from an account
which is not:
(1) A qualified withdrawal.
(2) A rollover distribution.
"Qualified ABLE Program." An ABLE account program
established and maintained by the Commonwealth or an agency or
instrumentality of the Commonwealth.
"Qualified disability expense." An expense relating to an
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eligible individual's blindness or disability that is made for
the benefit of the eligible individual as designated
beneficiary. The term shall include but is not limited to each
qualified expense enumerated in IRC ยง 529A.
"Qualified withdrawal." A withdrawal from an account to pay
the qualified disability expenses of the designated beneficiary
of the account.
"Rollover distribution." A rollover distribution as defined
in IRC ยง 529A.
Section 3. ABLE savings program.
(a) Establishment.--The department may establish and
maintain a qualified ABLE program. The department may enter into
account agreements to provide accounts for the benefit of
designated beneficiaries. The qualified ABLE account program
must provide that:
(1) Family members and other persons may make
contributions for a taxable year for the benefit of a
designated beneficiary to an account that is established to
help the designated beneficiary to supplement, not supplant,
the costs of qualified disability expenses without losing
other sources of income.
(2) An account shall be only for a designated
beneficiary who is a resident of this Commonwealth or a
resident of a contracting state.
(b) (Reserved).
(c) Contributions.--Contributions to an account may be
accepted only in cash and if the contribution does not result in
aggregate contributions to an account from all contributors for
the taxable year exceeding any limit set forth in IRC ยง 529A.
(d) Development and administration.--Notwithstanding any
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other provision of law, the department shall develop and
administer the qualified ABLE program in accordance with IRC ยง
529A and this act and in a manner that allows account owners and
designated beneficiaries to obtain and maintain Federal income
tax benefits or treatment provided by the Internal Revenue Code
and exemptions under Federal securities laws.
(e) Consultants.--The department may engage the services of
consultants, including organizations with experience in services
for people with disabilities, on a contract basis for rendering
professional and technical assistance.
(f) Management contracts.--The department may enter into
management contracts with a legal entity. If the department
contracts with investment managers, program managers or trustees
in order to fulfill the objectives of this act, the investment
managers, program managers and trustees must work with the
department to create a program, to develop investment portfolios
and to supervise investments and the investment programs
selected.
(g) Fees.--The department may charge administrative and
other qualified ABLE program fees for services rendered under
this act.
(h) Other states.--The department may contract with other
states that do not have qualified ABLE account programs to
provide qualified ABLE account program services to residents of
the contracting states.
(i) Rules.--The department shall prescribe qualified ABLE
program rules that the department determines are necessary or
appropriate to carry out the purposes of this act, including
rules to:
(1) Enforce the account limitation per eligible
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individual limit as required in IRC ยง 529A.
(2) Provide for the information required to be presented
to open an account.
(3) Prevent fraud and abuse with respect to amounts
claimed as qualified disability expenses.
(4) Allow for transfers from one account to another
account.
(j) Fiduciary.--To the extent that Federal law requires an
eligible individual to be the account owner, the following may
enter into an ABLE account contract as fiduciary for an eligible
individual who is a minor or who lacks capacity to enter into an
ABLE account contract:
(1) A parent or guardian.
(2) A person or legal entity designated in writing by
the parent or guardian.
(3) A trustee of a trust for which the eligible
individual is a beneficiary.
(4) For an eligible individual who is receiving benefits
based on blindness or disability under Title II of the Social
Security Act (49 Stat. 620, 42 U.S.C. ยง 401 et seq.) or Title
XVI of the Social Security Act (42 U.S.C. ยง 1381 et seq.),
the representative payee for the benefits.
(5) Any other person or entity authorized by IRC ยง 529A
to be the person with signature authority over the account.
Section 4. Interdepartmental cooperation.
The head of a department, a board, a commission, an agency or
an instrumentality of the Commonwealth, unless otherwise
prohibited by law, must assist the department in providing
information about the program to potential eligible individuals
and the eligible individual's families.
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Section 5. ABLE Savings Program Fund.
The department may establish a special fund to be known as
the ABLE Savings Program Fund. The following shall apply:
(1) The fund shall consist of:
(i) All contributions made to accounts of eligible
individuals under an ABLE account contract and all
interest, earnings and additions to the accounts.
(ii) Any fees and charges levied on ABLE accounts to
cover expenses in administering the program.
(iii) Any other public or private money appropriated
or made available to the department for the fund from any
source and all interest, earning and additions to the
money.
(2) All money in the fund, including fees and charges
levied on an ABLE account to cover the expenses in
administering the program, contributions and increase in
value on the money for distribution to or on behalf of
eligible individuals, is appropriated to the department on a
continuing basis to carry out the provisions of this act.
(2.1) The department shall prepare, and through the
Governor, submit annually to the General Assembly a budget
covering the operating and administrative expenses of the
program. Upon approval by the General Assembly in an
appropriation bill, expenses incurred by the program and the
department shall be paid from the fees and charges or from
other funds available.
(3) The assets of the fund shall be preserved, invested
and expended solely under and for the purposes of carrying
out this act.
(4) The money in the fund shall be invested under
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policies established by the department to provide for an
appropriate balance of risk, liquidity and return
commensurate with the management of a prudent investor. The
department and the department's investment managers, program
managers and trustees may invest and reinvest the funds in
any lawful investments.
Section 6. ABLE accounts.
(a) ABLE account contract.--An ABLE account may be opened
through a contract entered into by an account owner and the
department. If the account owner is a fiduciary as enumerated
under section 3(j), the account owner shall continue to have
signatory authority over the account until the account owner
relinquishes the authority.
(b) Change of designated beneficiary.--An account owner may
change the designated beneficiary named in the ABLE account
contract to another eligible individual if permitted under IRC ยง
529A.
(c) Reports.--
(1) The department or the department's investment
managers, program managers and trustees must make monthly
reports to designated beneficiaries with respect to
contributions, distributions, the return of excess
contributions and any other matters involving the state of a
designated beneficiary's account.
(2) On or before September 1, 2017, and each September 1
thereafter, the department shall issue a report annually to
the Governor, the chairman and minority chairman of the
Finance Committee of the Senate, the chairman and minority
chairman of the Finance Committee of the House of
Representatives, account owners and designated beneficiaries.
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The report must include the following:
(i) The qualified ABLE account program's fiscal
transactions during the preceding fiscal year.
(ii) The market value of the program as of June 30
of the preceding fiscal year.
(iii) The asset allocations of the qualified ABLE
program expressed in percentages of stocks, fixed income
securities, cash or other financial assets.
(iv) The rate of return on the investment of the
qualified ABLE program assets during the preceding fiscal
year.
Section 7. Powers of the department.
In addition to any other powers granted under this act, the
department shall have the power to carry out this act,
including, but not limited to, the power to do any of the
following:
(1) Administer the program and the ABLE savings program
fund.
(2) Enter into contracts with individuals for the
creation of an ABLE savings account.
(3) Pay to an account owner, eligible individual or a
third party authorized by the account owner, upon receipt of
appropriate documentation if required by the department,
funds from the account to pay for the eligible individual's
qualified disability expenses.
(4) Contract for goods and services and engage and
employ personnel, including, but not limited to, the service
of private consultants, actuaries, managers, legal counsel
and auditors for rendering professional, managerial and
technical assistance and advice.
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(5) Solicit and accept gifts, grants, loans and other
aid from any person, corporation or other entity or from
Federal, State or local government and participate in any
Federal, State or local government program that results in
additional funds being available to pay for the qualified
disability expense of eligible individuals with ABLE savings
accounts.
(6) Charge and collect administrative fees and charges
in connection with any transaction, including continued
participation in the ABLE program.
(7) Close ABLE savings accounts and return any remaining
funds, minus any fees, to the account owner.
(8) Contract for insurance, letters of credit and
collateral agreements.
(9) Adjust the terms of contracts with account owners.
(10) Solicit answers from the appropriate Federal
agencies regarding the application of security or other
Federal laws to the program.
(11) Consider means by which contributions into an ABLE
savings account can be deducted from salary.
(12) Promulgate regulations.
(13) Take any other action necessary to carry out the
purpose of this act and incidental to the duties imposed on
the Secretary of the Treasury.
Section 8. Qualified disability expenses.
Qualified disability expenses shall include but are not
limited to the following:
(1) Education.
(2) Housing.
(3) Transportation.
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(4) Employment training and support.
(5) Assistive technology and personal support services.
(6) Health, prevention and wellness.
(7) Financial management and administrative services.
(8) Legal fees.
(9) Expenses for oversight and monitoring.
(10) Funeral and burial expenses.
(11) Other expenses approved by the Secretary of the
Treasury of the United States.
Section 9. Nonqualified withdrawals.
(a) Value received.--Upon a full or partial withdrawal of
funds from an ABLE account which are not used for qualified
disability expenses, the account owner or the account owner's
designee must receive the market value of the account for the
amount requested.
(b) Fees.--The department may impose fees and charges for
administrative costs on a nonqualified withdrawal or termination
and deduct the fee from the amount otherwise payable.
(c) Involuntary termination.--The department may close an
account and return remaining funds in the account as a
nonqualified withdrawal if necessary for compliance with Federal
law, or if the department, in the department's sole discretion,
finds that termination is in the best interest of the program or
the designated beneficiary.
(d) Taxation of nonqualified withdrawals.--In the event of a
nonqualified withdrawal, to the extent the amount withdrawn
includes earnings on the contributions, or contributions that
were eligible to be deducted from Pennsylvania income tax for
the tax year in which the contributions were made, the amount of
earnings and deductible contributions shall be subject to
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taxation as income under the laws of this Commonwealth.
Section 10. Electronic distribution statements.
The department must submit electronically to the Commissioner
of Social Security, in the manner specified by the Commissioner
of Social Security, statements on relevant distributions and
account balances from each account.
Section 11. Exemption from securities law.
The program and accounts shall be exempt from any statute
regulating securities.
Section 12. Treatment of ABLE accounts.
(a) Levy, execution and security for loans.--An ABLE account
shall not be subject to attachment, levy or execution by any
creditor of a contributor, account owner, or designated
beneficiary and shall not be used as security for a loan.
(b) Disability or health benefits.--Any amount contributed
to an account and any increase in the value of the account may
not be used in calculating personal assets of a designated
beneficiary or an account owner in order to determine
eligibility for disability, medical assistance or other health
benefits conferred by the Commonwealth.
(c) Student aid.--Any amount contributed under an ABLE
account contract and any increase in the value of the account
may not be used in calculating personal asset contributions for
determining eligibility and need for student loan programs,
student grant programs or other student aid programs
administered by an agency of the Commonwealth, except as
otherwise may be provided by Federal law.
Section 13. Commonwealth as creditor of accounts.
Subject to any outstanding payments due for qualified
disability expense and on the death of the designated
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beneficiary, each amount remaining in a designated beneficiary's
account not in excess of the amount equal to the total medical
assistance paid for the designated beneficiary after the
establishment of the account, net of any premiums paid from the
account or paid by or on behalf of the designated beneficiary to
a Medicaid buy-in program under the State Medicaid plan
established under Title XIX of the Social Security Act, shall be
distributed to the Commonwealth upon the filing of a claim for
payment by the Commonwealth. For the purpose of this section,
the Commonwealth shall be a creditor of an account and not a
beneficiary.
Section 14. Tax exemptions.
(a) Property of the program.--The property of the ABLE
savings program and the earnings from the program shall be
exempt from all taxation by the Commonwealth and the political
subdivisions of the Commonwealth.
(b) Contributions.--Contributions made to an account, any
increase in the value of the contribution, the retention, or
transfer during life or as a result of death of any legal
interest in an account and payment of qualified disability
expenses of eligible individuals from an account shall be exempt
from all taxation by the Commonwealth and political subdivisions
of the Commonwealth.
Section 15. Limitation.
An obligation or debt under this act shall not be deemed an
obligation or debt of the Commonwealth and the Commonwealth
shall not be liable to pay principal and interest on an
obligation or to offset a loss of principal and interest
earnings on investments made by the department under this act.
Section 16. Effective date.
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This act shall take effect immediately.
SECTION 1. SHORT TITLE.
THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE PENNSYLVANIA
ABLE SAVINGS PROGRAM TAX EXEMPTION ACT.
SECTION 2. DEFINITIONS.
THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ACT SHALL
HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
CONTEXT CLEARLY INDICATES OTHERWISE:
"ACCOUNT." AN ABLE SAVINGS ACCOUNT AS DEFINED IN SECTION 102
OF THE PENNSYLVANIA ABLE ACT.
"DESIGNATED BENEFICIARY." THE TERM SHALL HAVE THE SAME
MEANING AS PROVIDED IN SECTION 102 OF THE PENNSYLVANIA ABLE ACT.
"ELIGIBLE INDIVIDUAL." THE TERM SHALL HAVE THE SAME MEANING
AS PROVIDED IN SECTION 102 OF THE PENNSYLVANIA ABLE ACT.
"INTERNAL REVENUE CODE." THE INTERNAL REVENUE CODE OF 1986
(PUBLIC LAW 99-514, 26 U.S.C. ยง 1 ET SEQ.).
"PENNSYLVANIA ABLE ACT." THE ACT OF , 2015 2016
(P.L. , NO. ), KNOWN AS THE PENNSYLVANIA ABLE ACT.
"PENNSYLVANIA ABLE SAVINGS PROGRAM." THE PROGRAM ESTABLISHED
PURSUANT TO THE PENNSYLVANIA ABLE ACT.
"QUALIFIED DISABILITY EXPENSE." THE TERM SHALL HAVE THE SAME
MEANING AS PROVIDED IN SECTION 102 OF THE PENNSYLVANIA ABLE ACT.
"ROLLOVER DISTRIBUTION." THE TERM SHALL HAVE THE SAME
MEANING AS PROVIDED IN SECTION 102 OF THE PENNSYLVANIA ABLE ACT.
SECTION 3. CONTRIBUTIONS AND DISTRIBUTIONS.
(A) EXEMPTION.--SUBJECT TO SUBSECTION (B), THE FOLLOWING
SHALL BE EXEMPT FROM ALL TAXATION BY THE COMMONWEALTH AND ITS
POLITICAL SUBDIVISIONS:
(1) CONTRIBUTIONS MADE TO AN ACCOUNT.
(2) ANY INCREASE IN THE VALUE OF A CONTRIBUTION MADE TO
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AN ACCOUNT.
(3) (1) ANY UNDISTRIBUTED EARNINGS ON AN ACCOUNT.
(4) THE RETENTION OR TRANSFER DURING LIFE OR AS A RESULT
OF DEATH OF ANY LEGAL INTEREST IN AN ACCOUNT.
(5) (2) ANY ROLLOVER DISTRIBUTION THAT IS EXCLUDABLE
FROM TAX UNDER SECTION 529A(C) OF THE INTERNAL REVENUE CODE.
(6) PAYMENT OF QUALIFIED DISABILITY EXPENSES OF ELIGIBLE
INDIVIDUALS FROM AN ACCOUNT.
(7) (3) ANY AMOUNT DISTRIBUTED FROM AN ACCOUNT THAT IS
EXCLUDABLE FROM TAX UNDER SECTION 529A(C) OF THE INTERNAL
REVENUE CODE.
(B) DEDUCTION.--AN AMOUNT PAID AS A CONTRIBUTION INTO AN
ACCOUNT SHALL BE DEDUCTIBLE FROM TAXABLE INCOME ON THE ANNUAL
PERSONAL INCOME TAX RETURN. THE AMOUNT PAID AS A CONTRIBUTION TO
AN ACCOUNT ALLOWABLE AS A DEDUCTION UNDER THIS SECTION SHALL BE
SUBJECT TO AN ANNUAL LIMITATION NOT TO EXCEED THE THRESHOLD FOR
EXCLUSION FROM GIFTS AS PROVIDED IN SECTION 2503(B) OF THE
INTERNAL REVENUE CODE, PER DESIGNATED BENEFICIARY. THE DEDUCTION
SHALL NOT RESULT IN TAXABLE INCOME BEING LESS THAN ZERO.
(C) TAX.--AN AMOUNT THAT IS DISTRIBUTED FROM AN ACCOUNT AND
NOT DESCRIBED AS EXEMPT FROM TAXATION UNDER THIS SECTION SHALL
BE TAXABLE UNDER ARTICLE III OF THE ACT OF MARCH 4, 1971 (P.L.6,
NO.2), KNOWN AS THE TAX REFORM CODE OF 1971.
SECTION 4. CHANGE OF BENEFICIARY.
A change in designated beneficiaries under section 529A(c) of
(D) CHANGE OF BENEFICIARY.--A CHANGE IN DESIGNATED
BENEFICIARIES UNDER SECTION 529A(C) OF THE INTERNAL REVENUE CODE
SHALL NOT CONSTITUTE A TAXABLE EVENT UNDER THE PENNSYLVANIA ABLE
ACT.
SECTION 5 4. EFFECTIVE DATE.
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THIS ACT SHALL TAKE EFFECT IMMEDIATELY.
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