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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          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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