DEPARTMENT OF HEALTH AND HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, MD 21244-1850 
 
 
 
                  SMD# 17-002 
 
                  RE: Implications of the  
                  ABLE Act for State   
                  Medicaid Programs 
 
 
September 7, 2017 
 
Dear State Medicaid Director: 
 
The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (the ABLE Act), enacted 
as Division B of Pub. L. No. 113-295, and as amended by the Protecting America from Tax 
Hikes Act of 2015 (Pub. L. No. 114-113), enables individuals with disabilities to save money in 
tax-advantaged accounts which they can later use for meeting their disability-related needs, with 
limited impact on their eligibility for certain means-tested benefits.1  The purpose of this letter is 
to provide guidance to states on the implications of the ABLE Act for state Medicaid programs. 
 
Background 
 
The ABLE Act amended the Internal Revenue Code of 1986 to create section 529A (Qualified 
ABLE Programs), permitting states to establish ABLE programs within which people with 
disabilities can open accounts that will generally be exempt from taxation.  The purpose of the 
ABLE Act is to permit people with disabilities to save money in and withdraw funds from their 
ABLE accounts to pay for disability-related expenses, in support of their efforts to maintain 
health, independence and quality of life.  The law states that ABLE accounts should 
supplement, but not supplant benefits available to ABLE account beneficiaries under 
Medicaid, the Supplemental Security Income program (SSI), and other programs. 2   
 
Section 103 of the ABLE Act (hereinafter referred to as section 103) provides that, for the 
purpose of determining an individuals eligibility to receive, or the amount of, any assistance 
provided by a needs-based federal program (such as Medicaid), amounts in, contributions to, and 
certain distributions from, ABLE accounts shall be disregarded.  This letter provides guidance to 
states on the treatment of funds in, contributions to, and distributions from an ABLE account, 
under section 103, for purposes of Medicaid eligibility.  We also address the treatment of funds 
in an ABLE account for purposes of the post-eligibility treatment of income, and the disposition 
of amounts remaining in a Medicaid beneficiarys ABLE account upon the death of the 
beneficiary.   
 
Eligibility to Participate in a Qualified ABLE Program 
                                                 
1 State agencies should apply the guidance set forth in this letter to the Childrens Health Insurance Program (CHIP) 
where applicable to determine the income of the family unit to which the applicant belongs. 
2 ABLE Act, section 101(2)  Page 2  State Medicaid Director 
 
 
Section 103 applies to individuals who have an ABLE account in a qualified ABLE program. 
Eligibility for an ABLE account is open to an individual of any age who has blindness or a 
disability, provided, however, that the individuals blindness or disability occurred before the age 
of 26.  An individual is permitted to have only one ABLE account.  The individual may open the 
account in the program of the state of which the individual is a resident, or in another states 
ABLE program. The determination of eligibility for an ABLE account is the responsibility of the 
ABLE program in which an individual seeks to establish the account.  
  
Under section 102(a) of the ABLE Act (codified at 26 U.S.C. 529A(e)), an individual is eligible 
for an ABLE account if the individual is receiving SSI or Social Security Disability Insurance 
(SSDI) benefits based on a disability or blindness that occurred before age 26.  Alternatively, an 
individual (or a parent or guardian acting on the individuals behalf) may establish eligibility by 
filing a disability certification (and obtaining a signed physicians diagnosis) with the qualified 
ABLE program indicating that the individual has a medically determinable impairment meeting 
certain criteria that occurred before age 26.  However, while sufficient to establish eligibility to 
participate in an ABLE program, section 102(a) of the ABLE Act provides that no inference 
may be drawn from a disability certification for purposes of establishing eligibility for Medicaid.   
 
Although the statute refers to qualified ABLE programs, the ABLE Act does not provide for 
formal federal certification of a state ABLE program as a qualified program.  Moreover, the 
Department of Treasury and Internal Revenue Service (IRS) have not proposed to establish a 
formal certification process in a proposed rule that is designed to implement the ABLE act.3  We 
have concluded that state Medicaid agencies should presume that an ABLE program established 
by a state is a qualified program in the absence of evidence to the contrary (CMS will issue 
additional guidance if a formal certification process for ABLE programs is established). 
 
Treatment of Funds in an ABLE Account 
 
Generally, an account containing funds that a Medicaid applicant or beneficiary can access is 
considered a resource in determining Medicaid eligibility if a resource test is applied, as is 
generally the case in determining eligibility for individuals excepted from application of 
Modified Adjusted Gross Income (MAGI)-based methodologies.  Section 103 requires that funds 
in an ABLE account, including earnings on the account (e.g., interest), be disregarded in 
determining eligibility for Medicaid and other federal need-based programs.4  We interpret 
section 103 to mean that state Medicaid agencies must disregard all funds in an ABLE account in 
determining the resource eligibility of Medicaid applicants and beneficiaries who are subject to a 
resource test.5  Additionally, although earnings generated by funds in an account generally will 
                                                 
3 Guidance Under Section 529A: Qualified ABLE Programs, 80 F.R. 35602 (June 22, 2015).  We note that a 
proposed rule does not have the force of law and is not legally effective.  Moreover, an agency may make changes 
from a proposed rule based on the timely public comments and other factors.  The Department of Treasury and IRS 
have not issued a final rule at this time. 
4 We interpret section 103 to apply to an individuals ABLE account, regardless of whether the individual opens his 
or her ABLE account in the state of which the individual is a resident or in another states ABLE program.  
5 Section 103(a)(1) and (2) state that, in the case of the supplemental security income program . . . , a distribution 
for housing expenses . . . shall not be so disregarded, and any amount . . . in [an] ABLE account shall be 
considered a resource to the designated beneficiary to the extent that such amount exceeds $100,000.  However, 
while SSI methodologies are typically applied for non-MAGI eligibility determinations, these limitations on the  Page 3  State Medicaid Director 
 
be countable income in determining eligibility for both MAGI and non-MAGI based eligibility 
groups, the disregard required under the ABLE Act applies notwithstanding any other provision 
of Federal law, which we interpret as including the general prohibition on application of 
disregards in determining income eligibility using MAGI-based methods under section 
1902(e)(14)(B) of the Social Security Act (the Act).  Accordingly, under section 103, earnings 
on the account should be excluded from income for both individuals subject to and those 
excepted from application of MAGI-based methodologies.6 
 
Contributions to ABLE Accounts 
 
Contributions by a Third Party    
 
For MAGI and SSI-based eligibility determinations, under section 103, third party contributions 
to an ABLE account are disregarded in determining Medicaid eligibility.  This is different than 
the treatment of such contributions in determining financial eligibility using SSI-based 
methodologies and, in narrow circumstances, different than the treatment of such contributions 
under MAGI-based methodologies.  
 
Under SSI-based methodologies, applied to most non-MAGI eligibility groups, money 
contributed by a third party to an account which an individual can access generally is considered 
countable income in the month in which the contribution is received and, if not spent, a resource 
in the month following.  Per section 103, however, third party contributions to an ABLE account 
are not counted either as income or included in total resources of the account beneficiary.   
 
For MAGI-based individuals, a third-party contribution to an account that is accessible to the 
individual would generally qualify as a gift which usually is not taxable to the gift recipient.  
Even in the rare circumstance in which a gift could be subject to a gift tax lien against the 
recipient (e.g., where the donor does not pay a tax due on gifts), section 103 directs that its 
disregards apply notwithstanding any other provision of Federal law, which means the third 
party contribution must be disregarded in a MAGI-based income determination.7  
                                                 
disregard of distributions from or funds in an ABLE account are expressly described as applying exclusively in the 
case of the [SSI] program. In fact, section 103(b)(2), entitled No Impact on Medicaid Eligibility, requires that 
SSI beneficiaries whose benefits are suspended on the basis of resources exceeding the $100,000 limit shall be 
considered to be receiving SSI for purposes of Medicaid eligibility.  Therefore, we interpret section 103 to require 
that states, in determining Medicaid eligibility of ABLE account beneficiaries, disregard distributions used for 
housing expenses (provided the expense is a qualified disability expense, as discussed below), and all funds in an 
ABLE account, regardless of the amount in the account. 
6 For SSI-based individuals, we also interpret the disregard to apply to the ABLE accounts of individuals whose 
income or resources are deemed available to a Medicaid applicant.  Under the SSI programs rules, which apply in 
most states to individuals who seek Medicaid on the basis of being 65 years old or older, or having blindness or a 
disability, the income and resources of a spouse or parent (a deemor) are generally disregarded in the applicants 
SSI eligibility determination where such income or resources would be disregarded if received or owned exclusively 
by the SSI applicant.  We consider this to be the most reasonable approach, as we believe it would be inconsistent 
with the ABLE Acts goals to count as available to a Medicaid applicant the ABLE account of the applicants 
deemor.  
7 Section 529A(b)(2)(B) of the Internal Revenue Code generally limits aggregate annual contributions to an 
individuals ABLE account to the annual gift tax exclusion, which means a third-partys accepted contribution to an 
ABLE account, when it is the third partys only gift during the taxable year, will not be taxable to either the donor or 
ABLE account beneficiary.    Page 4  State Medicaid Director 
 
 
Some ABLE account beneficiaries may also be a beneficiary of a special needs trust (SNT) or 
pooled trust, as described in section 1917(d)(4) of the Act.  Distributions from such trusts made 
on behalf of the trust beneficiary to the beneficiarys ABLE account should be treated the same 
as contributions  to ABLE accounts from any other third party.  Thus, while disbursements from 
an SNT or pooled trust can be considered in some circumstances income to the trust beneficiary,8 
disbursements from an SNT or pooled trust to the ABLE account of the trust beneficiary are not 
counted as income under section 103.  Therefore, states should disregard as income a distribution 
from an SNT or pooled trust that is deposited into the ABLE account of the SNT or pooled trust 
beneficiary.   
 
Contributions by the ABLE Account Beneficiary  
 
Designated beneficiaries of an ABLE account can contribute their own income or resources to 
their ABLE account.  If an ABLE account beneficiary transfers some of his or her own 
(otherwise countable) resources to his or her ABLE account, the effect would be a corresponding 
reduction in total countable resources.  By contrast, if a beneficiary of an ABLE account 
transfers some of his or her income in the month received to his or her ABLE account, the effect 
would not be a reduction in countable income.  This is because how an individual uses income 
generally does not change its designation as income at the point of its receipt, and there is 
nothing in the ABLE Act which supersedes this general rule.  Consistent with this interpretation, 
the Treasurys and IRSs NPRM does not propose that income contributed to an ABLE account 
by the designated beneficiary reduces the individuals taxable income.  Similarly, SSAs 
Program Operations Manual System (POMS) directs that income contributed to an ABLE 
account by the account beneficiary is counted as available income.9  Therefore, income 
contributed to an ABLE account by the applicant or beneficiary him- or herself is not 
disregarded from income, unless the state utilizes its authority under section 1902(r)(2) of the 
Act and 42 CFR 435.601(d) (regarding less restrictive methodologies), if available.10  
 
Contributions by Third Parties who Apply for Medicaid    
 
It is possible that a third party who has made a contribution to an ABLE account of someone else 
may apply for Medicaid and seek coverage of long-term services and supports (LTSS).  Section 
103 of the ABLE Act does not provide for any special treatment of contributions made to an 
ABLE account benefiting another person.  Thus, for example, a contribution from a grandfather 
to the ABLE account of his grandchild, whether from the grandfathers income or resources, 
would constitute a transfer of assets from the grandfather to his grandchilds account which may 
need to be evaluated under the requirements in section 1917(c)(1) of the Act (depending on when 
the transfer occurred), if the grandfather subsequently seeks Medicaid coverage of LTSS.  The 
                                                 
8 This determination is generally made under the rules of SI 01120.200 of the Social Security Administrations 
Program Operations Manual System (POMS) (Trusts, General  Including Trusts Established Prior to 1/1/00, 
Trusts Established with the Asset of Third Parties and Trusts Not Subject to Section 1613(e) of the Social Security 
Act, available at https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120200 )).   
9 See Achieving a Better Life Experience (ABLE) Accounts, Program Operations Manual Systems, SI 01130.740 
available at https://secure.ssa.gov/apps10/poms.nsf/lnx/0501130740  
10 Per section 1902(e)(14)(B) of the Act, states cannot disregard in MAGI-based eligibility determinations income as 
a less restrictive methodology under the authority of section 1902(r)(2) of the Act and 42 CFR 435.601(d).  Page 5  State Medicaid Director 
 
amount transferred by the grandfather to his grandchilds ABLE account would not be an exempt 
transfer by virtue of section 103 in the determination of the grandfathers eligibility for Medicaid 
coverage of LTSS.11   
 
Distributions from ABLE Accounts 
 
Like funds in and contributions to ABLE accounts, distributions from ABLE accounts are not 
included in the beneficiarys taxable income or counted as income in eligibility determinations 
for federal programs such as Medicaid as long as they are used for qualified disability 
expenses (QDEs).  Section 529A(e)(5) of the Internal Revenue Code broadly defines QDEs as 
any expenses related to the eligible individuals blindness or disability which may include, but 
are not limited to, expenses incurred for education, housing, transportation, employment training 
and support, and assistive technology.  The Treasurys and IRSs NPRM explains that QDEs can 
include ones not identified in the statute, and that the term should be broadly construed in order 
to implement the legislative purpose of the ABLE Act.12  As long as distributions from an 
ABLE account are used for QDEs of the designated beneficiary, they are not included as income 
for purposes of determining Medicaid eligibility for MAGI-based and non-MAGI eligibility 
categories. 
 
In some cases, however, ABLE account beneficiaries may receive distributions that exceed their 
QDEs in a taxable year or are paid toward expenses that do not qualify as QDEs.  Distributions 
from an ABLE account that are not for QDEs do not fall within the scope of the protection 
afforded by section 103, and may be countable as income under both MAGI-based and non-
MAGI financial methodologies.  The extent to which distributions exceeding total QDEs are 
countable as income for Medicaid eligibility purposes depends on whether the individual is being 
evaluated for eligibility under a MAGI-based or non-MAGI category. 
 
Treatment of Distributions Exceeding QDEs for Non-MAGI Determinations   
 
For individuals whose financial eligibility is determined using SSI-based methodologies, receipt 
of cash from a resource, whether the resource itself is counted or excluded, generally is not 
considered to be income, but rather the conversion of a resource from one form to another.  The 
protection afforded under section 103, however, does not require that distributions from an 
ABLE account be used within the month the distribution is made, or within any particular time 
frame.  Accordingly, a distribution from an ABLE account may be countable as a resource only 
if (1) it is retained beyond the month in which the distribution is made and (2) it is used for  
something other than a QDE in that or a subsequent month.  Thus, we interpret section 103 to 
mean that states should continue to disregard ABLE account distributions retained after the 
month of receipt unless used for a non-qualifying expense. 
 
For example, if an SSI-based individual receives an ABLE account distribution in August, but 
does not spend the distribution until December (and uses the distribution for a QDE in that 
month), the amount of the distribution is not counted in any month.  If the individual uses the 
                                                 
11 Section 1917(c) would not apply to a Medicaid applicants contribution of income or resources to his or her own 
ABLE account, as the individual retains the ability to use the funds for his or her own needs.   
12 80 F.R. at 35608.  Page 6  State Medicaid Director 
 
distribution in December for a non-QDE, the distribution would be counted as a resource in the 
month of December.   
 
Treatment of Distributions Exceeding QDEs for MAGI-Based Eligibility   
 
A portion of ABLE account distributions which exceed the QDEs incurred by the account 
beneficiary in a taxable year is taxable and therefore, per section 1902(e)(14)(A) of the Act and 
42 CFR 435.603(e), included in determining MAGI-based income eligibility.  The taxable 
portion will be determined based upon Department of Treasury and IRS rulemaking.  Based on 
the formula proposed and preamble discussion in Treasurys and IRSs NPRM, we expect that, 
in nearly all circumstances, the taxable portion of such distributions will be de minimus;13 
nonetheless, however small, the taxable portion is included in an individuals MAGI-based 
income.  Under 42 CFR 435.945(a), states may accept self-attestation of income for which no 
electronic data for verification purposes is available.  Because the amount of taxable income 
from ABLE account distributions exceeding QDEs is likely to be negligible, a state may want to 
consider exercising the option to take self-attestation.  If additional verification is necessary, 
documentation should only be required in accordance with 42 CFR 435.952.  Pursuant to 42 
CFR 435.945(j), a state must update its verification plan to reflect its procedure for verifying 
taxable income from ABLE account distributions. 
 
Post-Eligibility Treatment of Income 
 
Under regulations at 42 CFR 435.700 et. seq. and 435.832, the extent of medical assistance 
provided to certain individuals receiving LTSS in institutions or through home and community-
based services (HCBS) waivers under sections 1915(c) or (d) of the Act is reduced by the 
amount of the individual's available income.  Under these regulations, the Medicaid agency 
determines the beneficiarys total income.  After making certain deductions, the individual is 
required to apply the remaining income toward the cost of LTSS received.  The requirement that 
affected individuals apply most of their total available income to the cost of LTSS before federal 
financial participation for medical assistance is available is referred to as post-eligibility 
treatment of income (PETI).   
 
Under long-standing CMS policy, reflected in section 3701.2 of the State Medicaid Manual, all 
income is taken into account for purposes of PETI, including types or amounts of income that are 
not counted in making an initial eligibility determination.  Consistent with this policy, 
distributions from an ABLE account, including earnings, typically would be counted.  However, 
section 103 of the ABLE Act provides that its provisions apply notwithstanding any other 
provision of Federal law.  Accordingly, for purposes of PETI, states should disregard from an 
individuals total income any ABLE account distributions that are used for a QDE.  To the extent 
that a distribution is counted as income in determining the individuals eligibility for other 
Medicaid benefits, discussed above, the distribution also would be counted for purposes of PETI. 
 
Transfers of ABLE Account Funds to States and Estate Recovery 
 
 
                                                 
13 See 80 Fed. Reg. at 35607.  Page 7  State Medicaid Director 
 
Section 529A(f) requires that certain amounts remaining in an ABLE account upon the death of 
the account beneficiary, subject to any outstanding payments due for QDEs, shall be distributed 
to a state that provided medical assistance to the beneficiary after the establishment of the ABLE 
account upon the filing of a claim for payment by such state (section 529A claim).  The 
amount that may be so distributed is limited to the excess of the total medical assistance paid for 
the account beneficiary after the establishment of the ABLE account over the amount of 
premiums paid from the ABLE account or paid by or on behalf of the beneficiary to a Medicaid 
Buy-In program under the states Medicaid plan.14 
 
The Treasurys and IRSs NPRM does not propose mandating that states file section 529A 
claims.  However, even in the absence of a Treasury and IRS mandate regarding claims against 
ABLE accounts, pursuant to section 1917(b) of the Act, states are required to seek recovery 
against the estates of certain deceased Medicaid beneficiaries.15  Thus, consistent with section 
1917(b) of the Act, states are required to seek recovery of funds in an ABLE account that have 
become part of an estate subject to recovery under the statute.  If the estate of an ABLE account 
beneficiary is not subject to Medicaid estate recovery, states have discretion whether to file a 
section 529A claim against the ABLE account of a deceased individual who had been enrolled in 
a Medicaid Buy In program.  
 
CMS is committed to realizing the goals of the ABLE program and facilitating the programs 
implementation.  If you have questions about this guidance, please contact Gene Coffey at 410-
786-2234, or gene.coffey@cms.hhs.gov, or contact your SOTA team lead. 
 
Sincerely, 
 
     /s/ 
 
Brian Neale 
Director 
 
cc: 
National Association of Medicaid Directors 
National Academy for State Health Policy 
National Governors Association 
American Public Human Services Association 
Association of State Territorial Health Officials 
Council of State Governments 
National Conference of State Legislatures 
Academy Health 
                                                 
14 Neither the ABLE Act nor the Treasurys and IRSs NPRM define a Medicaid buy in program.  We are working 
with the Treasury and IRS to provide clarification to stakeholders on the scope of this language. 
15 The specific individuals whose estates state Medicaid agencies must seek recovery from are those who received 
Medicaid at the age of 55 or older, or who received coverage for certain LTSS and were subject to PETI rules.