New HUD Income Exclusion – ABLE Accounts

On May 6, 2019, HUD published Notice H-2019-06 and Notice PIH 2019-09, Treatment of ABLE Accounts in HUD-Assisted Programs.

Background

The Achieving Better Life Experience (ABLE) Act was signed into law on December 19, 2014. The ABLE Act 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 26^th birthday and who meets the statutory eligibility requirements.

Per the mandate of the ABLE Act, for the purpose of determining eligibility and continued occupancy, HUD will disregard amounts in the designated beneficiary’s ABLE account.

Applicability

This income exclusion applies to the following programs:

1. Housing Choice Voucher (including all special voucher types);
2. Public Housing;
3. Project-Based Section 8;
   1. New construction
   1. State Agency financed
   1. Substantial rehabilitation
   1. Section 202/8
   1. Rural Housing Services Section 515/8
   1. Loan Management Set-Aside (LMSA)
   1. Property Disposition Set-Aside
   1. Rental Assistance Demonstration Project Based Rental Assistance (RAD/PBRA)
4. Section 202/162 Project Assistance Contract (PAC);
5. Section 202 Project Rental Assistance Contract (PRAC);
6. Section 202 Senior Preservation Rental Assistance Contracts (SPRAC)
7. Section 811 PRAC;
8. Section 811 Project Rental Assistance (PRA);
9. Section 236 (including RAP); and
10. Section 221(d)(3)/(d)(5) Below Market Interest Rate (BMIR)

Since the Low-Income Housing Tax Credit Program (LIHTC) is required to follow the rules of the Section 8 program relative to the definition of income, this new exclusion also applies to LIHTC projects.

The entire value of the individual’s ABLE account will be excluded from the household’s assets. This means actual or imputed interest on the ABLE account will not be counted as income. Distributions from ABLE accounts are also not counted as income.

Contributions Made by the Designated Beneficiary

If the beneficiary has a portion of his/her wages directly deposited into his/her ABLE account, then all wage income received, regardless of which account the money is paid to, is included as income. Pre-tax employer contributions to an ABLE account (that are not deducted from wages) are excluded. If the designated beneficiary subsequently deposits any amount previously included as income into his/her ABLE account, that deposited amount must not be included in the household’s asset calculation or counted as income again when the beneficiary receives a distribution from the account. I.e., the distributions from the account should not be counted as income until the full amount deposited by the beneficiary has been withdrawn.

Contributions Made by Others into the ABLE Account

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. E.g., if a relative provides a recurring gift of $100 per month directly to the beneficiary, the recurring gift is considered income. If a relative deposits the $100 per month directly into the ABLE account, then it will not be counted as income.

Verification

In accordance with program requirements, PHAs and owners should verify the amount held in the ABLE account. PHAs and owners should develop a policy and procedure for verifying ABLE accounts that obtain the following information:

• The name of the designated beneficiary; and
• The State ABLE program administering the account to verify that the account qualifies as an ABLE account.

Owners participating in the programs noted above should obtain a copy of the Notice and ensure a full understanding of this new income exclusion.