Fidelity launches savings plan for disabled children

Investing giant's entry into market could boost use of these new planning tools

May 10, 2017 @ 12:45 pm

By Liz Skinner

Nearly a year after tax-advantaged savings plans for disabled children were first made available, investing giant Fidelity Investments is jumping into the business to offer the specialized accounts to U.S. families.

The Boston-based firm on Wednesday said it is making an ABLE savings plan available through the state of Massachusetts. Named for the Achieving a Better Life Experience Act that created the plans in 2014, the accounts are available to individuals who were diagnosed with a significant disability before they turned 26.

Investment earnings in the ABLE accounts accrue tax free and can be used for qualified expenses for the disabled individual, including education, housing, transportation, training, assistive technologies, personal support and health services, as well as basic living expenses. Annual investments in the accounts are capped at $14,000 currently.

"We felt like offering these accounts was the right thing to do as part of our purpose to inspire better futures," said Keith Bernhardt, Fidelity's vice president of retirement and college products. "This plan can help families build a safe and secure financial future, with greater flexibility to address their needs."

The first ABLE plan was introduced July 1, 2016, and to date about 7,286 accounts have been created and $25 million invested, according to Strategic Insight's most recent figures.

(More: Advisers to start recommending ABLE plans to clients)

The accounts are an important planning tool for families with disabled children because it's a way to save for the individuals' care and support without fear of losing their government benefits. U.S. laws place a $2,000 total asset limit for a disabled individual in order to be eligible for means-tested government benefits, but these accounts generally don't count towards that total.

The addition of an institutional player such as Fidelity could help spark faster growth and use of the plans.

"Having a firm like Fidelity get into the market adds credibility to the ABLE program, especially at this critical junction," said Paul Curley, director of college savings research at Strategic Insight.

The firm's distribution network and impressive record of customer service and reliability will be a great benefit for the program, he said.

Fidelity provides 12,500 financial advisory firms with investment and technology products for investors.

(More: Careful planning needed for families with special needs children)

The specialized plans stand to receive an even bigger boost if legislation proposed on April 10 is cleared. It would make three changes to the rules that pertain to the accounts, which were created under the same Internal Revenue Service code designed for 529 college savings plans, which have attracted $289 billion in investments.

The proposed ABLE changes, introduced as three separate measures, would increase the age limit to 46 from 26, would allow families to rollover 529 college account balances into these 529A accounts, and would allow for additional money to be saved in an ABLE if the beneficiary earns income from work.

Massachusetts is the 21st state to introduce ABLE accounts, according to the ABLE National Resource Center, based in Washington, D.C.

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