BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 449|
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THIRD READING
Bill No: AB 449
Author: Irwin (D), et al.
Amended: 8/17/15 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/24/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
ASSEMBLY FLOOR: 79-0, 6/2/15 - See last page for vote
SUBJECT: Income taxation: savings plans: Qualified ABLE
Program
SOURCE: Author
DIGEST: This bill conforms state law to the recently enacted
Stephen Beck, Jr., Achieving a Better Life Experience Act of
2014 (ABLE Act).
ANALYSIS:
Existing law:
1) Does not automatically conform to changes to federal tax
law, except for specific retirement provisions.
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2) Conforms to federal law as of a specified date, currently
January 1, 2009.
3) Conforms with modifications to educations savings accounts
authorized by Section 529 of the Internal Revenue Code
(529s), and directs the State Treasurer's Office to implement
California's 529 program, currently known as "ScholarShare."
4) Does not conform to the ABLE Act, which allows individuals
who became blind or disabled before reaching 26 years of age
to create tax-free savings accounts similar to 529s.
5) Applies income and asset tests for some programs benefitting
disabled individuals.
This bill:
1) Enacts the California Achieving a Better Life Experience
Act, which conforms state tax law to the ABLE Act, thereby
allowing the creation of ABLE accounts in California and
ensuring that ABLE account earnings and distributions for
qualified services are not included in the eligible
individual's income for state tax purposes.
2) Creates the California ABLE Act Board, consisting of the
following, or their designees:
a) The State Treasurer, as Chair,
b) The Director of Finance,
c) The State Controller,
d) The Director of Developmental Services,
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e) The Chairperson of the State Council on Developmental
Disabilities,
f) The Director of Rehabilitation, and
g) The Chair of the State Independent Living Council.
3) Directs the ABLE Act Board to administer the program,
annually prepare and adopt a written statement of investment
policy in a public hearing, maintain separate accounting for
each beneficiary, provide specified information to the
Franchise Tax Board (FTB), and grants it specified powers,
such as:
a) The power to sue and be sued, make and enter into
contracts to administer the program, and engage
consultants.
b) Enter into agreements with designated beneficiaries or
eligible individuals to establish and maintain ABLE
accounts.
c) Make provisions to pay administrative and operation
costs.
d) Carry out the duties of this bill, the ABLE Act, and
any federal regulations.
e) Carry out studies and projections to advise
beneficiaries regarding expenses and levels of financial
participation.
f) Promulgate, impose and collect administrative fees in
connection with transactions in the ABLE Act program trust
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and provide for reasonable service charges, including
cancellation penalties.
g) Set minimum and maximum investment levels.
h) Administer ABLE Act program trust funds.
i) Procure insurance against any loss and insurance
indemnifying any member of the board from personal loss,
or liability as a result of his, or her action, or
inaction as member of the Board.
j) Issue regulations to implement the program, including
emergency regulations.
4) Requires the Treasurer to appoint an executive director and
determine his or her duties, as well as fix the director's
salary.
a) States that the director serves at the pleasure of the
Board.
b) Allows the Board to authorize the director to enter
into contracts or conduct any business necessary on its
behalf.
5) Establishes the California ABLE Program Trust.
a) Requires the Board to segregate monies into a program
fund and an administrative fund, both of which are
continuously appropriated to the Board to implement the
Act.
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b) Caps administrative costs at 3% of the incoming funds
in each fiscal year for the first five fiscal years and 1%
for each fiscal year thereafter.
c) Directs initial costs be funded by a loan from the
General Fund sufficient to fund the first two fiscal
years' projected administrative costs.
d) Allows transfers from the program fund to the
administrative fund, to pay operating costs in association
with administering the ABLE program trust.
6) Allows the Treasurer, or the investment manager by contract
with the Board, to invest or reinvest funds in whole or in
part.
a) Requires any investment manager to place on file for
public inspection specified information, regarding
investments no later than 30 days of the close of each
month.
b) Requires all moneys paid by designated beneficiaries,
or eligible individuals in connection with accounts be
deposited into the program fund and be promptly invested
and accounted for separately.
c) Allows deposits and earned interest to be used for
qualified disability expenses.
d) Allows designated beneficiaries to direct the
investment of any contributions.
e) States that all assets of the trust are held in trust
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for the beneficiary and no property rights exist in favor
of the state.
f) Prohibits the state from transferring or using any
assets of the trust.
7) Allows persons to make contributions for a taxable yea, for
the benefit of eligible individuals to an ABLE account
established for the purpose of meeting that person's
qualified disability expenses.
a) Limits accounts to one per individual,
b) Allows accounts only for residents of the state,
c) Requires contributions to be in cash, and
d) Prohibits contributions and interest from being
pledged as loan collateral.
8) Requires the Board to:
a) Report to the appropriate individual of any
distribution to any individual with respect to an interest
in an ABLE account in a time and manner as required by
FTB.
b) Report specified information to each designated
beneficiary.
c) Provide a means for designated beneficiaries to
express concerns, or comments regarding the ABLE program
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trust as well as any other information.
d) Market the program to residents, to the extent funds
are available.
9) Defines several terms, including:
a) "Eligible individual" as an individual who is blind or
disabled, with onset before 26 years of age. The
individual must be entitled to Social Security Disability
Insurance benefits, or have a disability certificate on
file with the Internal Revenue Service (IRS).
b) "Qualified services" include education, housing,
transportation, employment training and support, assistive
technology and personal support services, health,
prevention, and wellness, financial management and
administrative services, legal fees, oversight and
monitoring, and funeral and burial services.
10)Provides that ABLE contributions and distributions below
$100,000 don't count when considering individual's
eligibility for any means-tested state or local program.
11)States that its provisions shall be liberally construed to
effectuate its intent.
Background
On December 19, 2014, President Obama signed the ABLE Act, which
allows individuals who became blind or disabled before reaching
age 26, to create tax-free savings accounts. ABLE accounts
generally follow the same rules as 529s: individuals can make
nondeductible cash contributions to an ABLE account in the name
of a specified beneficiary, and earnings can grow tax free.
ABLE account distributions are also not included in the
beneficiary's income, so long as they're used for qualified
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services for the beneficiary and distributions don't exceed the
cost of those services.
The ABLE Act directs states to establish one ABLE account for
each beneficiary who is a resident of the state. The ABLE Act
additionally directs the IRS to issue regulations by June 19,
2015, to implement the program to guide states as they enact
legislation creating ABLE accounts. AB 449 implements the ABLE
Act in California, and directs the State Treasurer to administer
ABLE accounts on behalf of qualified Californians.
Related Legislation
SB 324 (Pavley) is largely identical to this bill. The bill is
currently pending action on the Assembly Floor.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, AB 449 results
in a General Fund revenue loss of $100,000 in 2015-16, $400,000
in 2016-17, and $900,000 in 2017-18. FTB would incur minor
costs to implement its provisions of this bill, while the
Treasurer's Office would incur costs of approximately $330,000
annually.
SUPPORT: (Verified8/28/15)
State Treasurer John Chiang
Alliance for Supporting People with Intellectual and
Developmental Disabilities
Association of Regional Center Agencies
Autism Speaks
California Association for Health Services at Home
California Association of Public Authorities
California Disability Services Association
California Foundation for Independent Living Centers
California State Council on Developmental Disabilities
Cal-Tash
California Taxpayers Association
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Center for Autism and Related Disorders
Club 21 Learning and Resource Center
Disability Rights California
Down Syndrome Association of Central California
Down Syndrome Association of Los Angeles, Inc.
Down Syndrome Society of Orange County
National Down Syndrome Association
North Los Angeles County Regional Center
Reid's Gift, Inc.
Special Heroes (San Diego Down Syndrome)
State Independent Living Council
Strategies to Empower People
The Arc and United Cerebral Palsy
The Arc of Ventura County
The South Bay Down Syndrome Association
United Domestic Workers, AFSCME, Local 3930
OPPOSITION: (Verified8/28/15)
None received
ARGUMENTS IN SUPPORT: According to the author, "In
California many people with disabilities and their families
depend on a variety of public benefits for income, health care,
food and housing assistance provided by the state and federal
government. There are strict eligibility requirements for
public benefits, such as Supplemental Security Income/State
Supplementary Payment (SSI/SSP), CalFresh and Medi-Cal, which
often don't allow an individual to have more than $2,000 in
savings. To remain eligible for these public benefits, an
individual cannot save for the future. AB 449 will give
eligible Californians with disabilities access to federally
recognized 529A ABLE accounts. The California ABLE program will
be administered by the State Treasurer, who also administers 529
college savings accounts. Eligible individuals and families
will be allowed to establish ABLE savings accounts that will not
affect their eligibility for SSI, Medicaid and other public
benefits. However, pursuant to federal law once an ABLE account
reaches $100,000 SSI benefits are suspended until the balance
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goes below that amount. The ABLE Act recognizes the extra and
significant costs of living with a disability. These include
costs related to raising a child with significant disabilities
or a working age adult with disabilities, for accessible housing
and transportation, personal assistance services, assistive
technology and health care not covered by insurance, Medicaid or
Medicare. AB 449 will provide people with disabilities and
families raising a child with disabilities an opportunity to
save money without being penalized with loss of public social
services."
ASSEMBLY FLOOR: 79-0, 6/2/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Chávez
Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
8/31/15 8:54:49
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