BILL ANALYSIS Ó
AB 1553
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Date of Hearing: April 27, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
1553 (Irwin) - As Amended February 29, 2016
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| |Revenue and Taxation | |9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill authorizes the California Achieving a Better Life
Experience (ABLE) Act Board (Board) to enter into a multistate
contract with an account servicer to implement the ABLE program
trust. Specifically, this bill:
AB 1553
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1)Authorizes the ABLE Board to enter into a long-term multistate
contract with an account servicer.
2)Allows the account servicer to recoup costs from administering
ABLE accounts in the first years of administration.
3)Specifies that the provision of the Public Contract Code (PCC)
that prohibits the recipient of a consulting services contract
from bidding on a subsequent contract the recipient requires
or suggests does not apply.
FISCAL EFFECT:
Potential administrative savings to the ABLE Act Board.
COMMENTS:
1)Background. Upon full implementation, the California ABLE Act
will allow Californians with disabilities to access federally
recognized ABLE tax-free savings accounts to save for future
disability-related expenses. These accounts will generally
follow the same rules as 529 Qualified Tuition Programs,
administered in California as the Golden State Scholarshare
College Savings Trust (Scholarshare): individuals can make
nondeductible cash contributions to an ABLE account in the
name of a beneficiary, and earnings can grow tax-free. ABLE
account distributions are not included in the beneficiary's
income so long as they are used for qualified services for the
beneficiary and distributions do not exceed the cost of those
services.
AB 1553
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The Board has not yet met in a formal capacity and has no
dedicated staff. As a result, the Board has not entered into
any contracts for administration of the program or beneficiary
accounts. California and other states are in the process of
developing their ABLE programs, with most states aiming to
offer ABLE Accounts by 2017.
2)Potential for higher administrative costs. The ABLE Act is
different from the Scholarshare in some key ways. First,
unlike college savings accounts, the distributions from ABLE
accounts are meant to support immediate and ongoing expenses
for an individual with disabilities. As a result, ABLE
accounts may not see the same investment growth over time as a
Scholarshare account. Second, there is likely to be a much
smaller beneficiary pool for ABLE accounts than for
Scholarshare accounts, so relative administrative costs are
likely to be higher for this program than for Scholarshare.
3)Purpose. According to the sponsor, AB 1553 makes technical
improvements to California's ABLE Act statue by allowing the
state to enter into a multi-state consortium and a long-term
contract with a service provider in order to minimize
administrative costs. A multi-state consortium would mean a
larger pool of beneficiaries for ABLE accounts.
4)Is legislation necessary? The Assembly Revenue and Taxation
Committee analysis of AB 1553 suggests that legislation may
not be necessary to allow the State Controller's Office to
enter into a multistate agreement, as there is no general
prohibition on multistate contracts.
AB 1553
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Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081