BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1553| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1553 Author: Irwin (D) Amended: 8/10/16 in Senate Vote: 27 - Urgency SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/15/16 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 79-0, 5/5/16 (Consent) - See last page for vote SUBJECT: Savings plans: qualified ABLE program SOURCE: State Treasurer John Chiang DIGEST: This bill modifies the definition of "eligible individual" for purposes of the ABLE (Achieving a Better Life Experience) program, and provides that a section of the Public Contract Code prohibiting certain contracts does not apply to a contract between the ABLE Board and an ABLE Act program consultant. Senate Floor Amendments of 8/10/16 substitute the term "program consultant for the qualified ABLE program" for "account servicer" for purposes of the Public Contract Code exemption, and insert an urgency clause. AB 1553 Page 2 ANALYSIS: Existing law: 1)Conforms to the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014, which allows tax-free savings accounts for eligible individuals who became blind or disabled before reaching age 26, and directs states to establish one ABLE account for each eligible individual who is a resident of the state. 2)Creates the ABLE trust with specified powers, as well as an ABLE board with specified membership within the State Treasurer's Office to administer the program (SB 324, Pavley, Chapter 796, and AB 449, Irwin, Chapter 774, Statutes of 2015). 3)Defines as an "eligible individual" for purposes of the ABLE program an individual both entitled to benefits based on blindness and disability under the Social Security Act, with onset before 26 years of age, and who has a disability certificate filed pursuant to ABLE Act requirements. 4)Allows the ABLE Act Trust to enter into contracts necessary for the administration of the ABLE program trust, and engage personnel, including consultants, actuaries, managers, counsel, and auditors, as necessary for the purpose of rendering professional, managerial, and technical assistance and advice. 5)Prohibits, generally, a consultant from bidding on or being awarded a follow-on contract based on the product of a consulting services contract. This bill: AB 1553 Page 3 1) Modifies the eligibility definition to allow an individual whose onset of blindness or disability occurred before age 26, who is either entitled to benefits based on blindness or disability under Title II or XVI of the federal Social Security Act, or has filed a disability certification, as defined in the federal ABLE Act, pursuant to the requirements set forth in the federal ABLE Act. 2)Provides that the general prohibition against awarding a contract to the same consultant who recommended the contract as part of its consulting services does not apply to a contract between the ABLE trust and a program consultant for the qualified ABLE program. This bill requires public disclosure of any contract for which the prohibition would have applied. 3)Makes a technical change. 4)Provides that its provisions take effect immediately to allow ABLE accounts to be accessed at the earliest possible time. Background The ABLE Act directed states to establish one ABLE account for each beneficiary who is a resident of the state, and additionally required the Internal Revenue Service (IRS) to issue regulations to implement the program to guide states as they enact legislation creating ABLE accounts. IRS has since issued proposed regulations, updated them, and issued Publication 907: Tax Highlights for Persons with Disabilities, which details ABLE accounts. Comments on the proposed regulations raised concerns regarding costs on states to manage medical records and manage records necessary to verify disability certifications. As a result, the IRS updated guidance to also allow an individual to also qualify as a beneficiary based on a certification, signed under penalty of perjury, that the individual has a condition that meets all of the required elements, and a diagnosis signed by a physician AB 1553 Page 4 regarding the relevant impairment or impairments. AB 1553 conforms state law to reflect this change in guidance. Existing law, as added by AB 449 (Irwin, 2015), allows the ABLE Act Trust to enter into contracts necessary for the administration of the ABLE program trust, and engage personnel, including consultants, actuaries, managers, counsel, and auditors, as necessary for the purpose of rendering professional, managerial, and technical assistance and advice. AB 1553 disconnects the current prohibition against "follow-on" contracts, which would prohibit a consultant hired to help set up the program from providing consulting services to the program on an ongoing basis. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No SUPPORT: (Verified8/1/16) State Treasurer John Chiang Financial Services Institute State Council on Developmental Disabilities The Arc and United Cerebral Palsy OPPOSITION: (Verified8/1/16) None received ARGUMENTS IN SUPPORT: According to the author, "The California ABLE Act as signed into law by Governor Brown in late 2015 will provide people with disabilities a critical service by allowing them to save money for the future without jeopardizing their disability benefits. The State Treasurer and ABLE Act Board have requested the authority to enter into a multistate, long-term contract with an account service provider in order to successfully implement the ABLE Act in a cost-effective manner. Current statute does not give them this authority. AB 1553 is AB 1553 Page 5 cleanup language that will allow the successful and effective implementation of AB 449 (Irwin 2015) and SB 324 (Pavley 2015)." ASSEMBLY FLOOR: 79-0, 5/5/16 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, 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, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon NO VOTE RECORDED: Beth Gaines Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119 8/12/16 13:21:56 **** END ****