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: 9/3/15 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
ProgramIncome taxation: savings plans: Qualified ABLE
Program.
SOURCE: Author
DIGEST: This bill partially conforms state law to the recently
enacted Stephen Beck, Jr., Achieving a Better Life Experience
Act of 2014 (ABLE Act).
Senate Floor Amendments of 9/3/15 delete this bill's personal
income tax provisions and remove new Welfare and Institutions
Code sections 4875, 4876, 4879, 4881, and 4883, which will
remain in SB 324 (Pavley), a complementary measure. The
amendments also make AB 449's enactment contingent upon the
enactment of SB 324.
ANALYSIS:
Existing law:
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Page 2
1)Does not automatically conform to changes to federal tax law,
except for specific retirement provisions.
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 the Personal Income 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)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
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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
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.
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3)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.
4)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.
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.
5)Allows the Treasurer, or the investment manager by contract
with the Board, to invest or reinvest funds in whole or in
part.
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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
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.
6)Requires the Board to market the program to residents, to the
extent funds are available.
7)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.
8)States that its provisions shall be liberally construed to
effectuate its intent, and only become effective only if SB
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324 (Pavley) is also enacted.
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
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
Currently, SB 324 (Pavley) contains provisions nearly identical
to this bill, but will be amended to delete the provisions
currently in this version of AB 449, so should these two
complementary measures be enacted, California will have a
comprehensive statute conforming to the ABLE Act. 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.
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SUPPORT: (Verified9/4/15)
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
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: (Verified9/4/15)
None received
ARGUMENTS IN SUPPORT: According to the author, "In California
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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 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
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Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
9/4/15 18:26:55
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