1. North Carolina ABLE Act and NC ABLE Accounts

2. The Achieving a Better Life Experience Act On December 19, 2014, the “Stephen Beck, Jr., ABLE Act” was signed into federal law by President Obama, creating a new Section 529A of the Internal Revenue Code. On August 11, 2015, Governor Pat McCrory signed the NC ABLE Act into law, allowing NC to offer this program to eligible citizens. The law outlines the requirements for the ABLE Program, the ABLE Board of Trustees and administration of the ABLE Program. The ABLE Act allows people with disabilities to save in a tax-deferred account for qualified disability expenses, similar to the 529 tax-deferred accounts used by families to save for their children’s college educations. These accounts can provide an avenue for savings for many for whom it has not been feasible to save before - laying the foundations of economic independence and financial security.

3. Key Stepping Stones to Getting Here Dec 19, 2014 – Stephen Beck, Jr., ABLE Act is signed into federal law by President Obama. June 22, 2015 - IRS issues proposed regulations for implementation (“Guidance Under Section 529A: Qualified ABLE Programs”),invites public comments and schedules a public hearing for Oct. 2015. NCDST submits public comments in Sept. 2015. August 11, 2015 – North Carolina ABLE Act is signed into law by Governor McCrory. Dec. 2015 - IRS issues its response to the comments it received on proposed regulations - which fall in line with NC comments and suggestions provided. Dec. 14, 2015 - SSA provides notification for state ABLE programs about the general types of information it anticipates requiring in monthly reports from state programs. December 2015 – Congress eliminates the “home state provision” of the federal ABLE Act in the text of the Tax Extenders Bill. This meaningful change allows citizens from any state to participate in the NC ABLE program. Since the fall of 2015, NCDST has begun coordinating implementation and outreach related to the NC ABLE Program, with leaders of the disability community at the state and national level, the National ABLE Resource Center, DHHS staff members, and others.

4. The ABLE Program Board of Trustees The NC ABLE Act specifies there is to be an ABLE Program Trust to be administered by the ABLE Program Board of Trustees (G.S. 147-86.51 and G.S. 147-86.52). The Board of Trustees is to “provide oversight of the general administration and proper operation of the ABLE Program and to determine the appropriate investment strategy for the ABLE Program Trust.” The ABLE Program Board of Trustees consists of the following six members: 1.The State Treasurer, ex officio, or the State Treasurer’s designee, as chair, 2.The Commissioner of Banks, ex officio, or designee, 3.The NC DHHS Secretary, ex officio, or designee, 4.A person appointed by the Governor having “experience in investment and finance,” 5.A person appointed by the President Pro Tempore of the Senate having “experience in advocacy for the disabled,” and 6.A person appointed by the Speaker of the House of Representatives that is an immediate family member or guardian of an eligible individual.

5. How does the NC ABLE Act help people? The NC ABLE Act allows eligible people with disabilities to save money in an account for qualified disability expenses, similar to the tax-deferred accounts used by families to save for their children’s college educations. Individuals with disabilities, in many cases, rely on federal benefits such as Supplemental Security Income (SSI) and Medicaid to cover expenses related to healthcare, disability services, and other expenses related to day-to-day living. These benefits programs are “means-tested.” In order to be eligible for these federal benefits, income and assets must stay below specified limits. For most of these programs the “countable resources” limit (including money saved) is currently approx. $2,000. This significantly constrains these individuals’ ability to save for any unforeseen emergencies or for planned, larger expenses — even if the savings are earmarked to meet needs associated with living with a disability. Under the NC ABLE Act, up to and including $100,000 saved in an ABLE account will not be counted toward a disabled person’s eligibility for most federal means tested programs. Any funds placed into this account, and earnings thereon, can be used to defray eligible disability-related expenses, such as additional medical costs not covered by Medicaid.

6. Who is eligible to open an ABLE account? Any “eligible individual” may be the beneficiary of only one ABLE account. An “eligible individual” is a person who: 1) has a medically determinable physically or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continue period of not less than 12 months, or is blind (within the meaning of the Social Security Act), AND 2) The onset of the disability or blindness must have occurred before the individual reached age 26. There is no “home state provision” or “residency requirement.” As the law currently stands, any individual may open an ABLE account in any state, regardless of where the individual lives and even if their “home state” does not administer an ABLE program of its own. In this way, the NC ABLE program can be made available to any eligible individual across the country. Parents of eligible children and guardians of eligible persons may open an account on behalf of their children or eligible person. In this way they act as “signatories” of an ABLE account owner and administer the ABLE account for the benefit of the account owner.

7. What are the current rules about contributions to an ABLE account? The principal advantage of the ABLE account is that it offers an opportunity for individuals with disabilities to accumulate savings for disability-related expenses, without jeopardizing eligibility for federal benefits, like Medicaid services. Savings in ABLE accounts are not considered “countable resources” for SSI and Medicaid eligibility. Beneficiaries of means-tested programs must continue to meet income requirements, however. The individual who “owns” the ABLE account is called the “designated beneficiary.” ABLE account owners may save up to and including $100,000 in their ABLE account and continue to maintain eligibility for SSI and most federal mean’s tested programs. NOTE: SSI recipients must continue to meet eligibility requirements related to annual and/or monthly “income,” however. ABLE account owners may save more than $100,000 in their ABLE account and continue to maintain eligibility for Medicaid. NOTE: Medicaid recipients must continue to meet eligibility requirements related to annual and/or monthly “income,” however. ABLE accounts are set up under the special Internal Revenue Service code 529A. For this reason, ABLE accounts are also sometimes referred to as 529A accounts.

8. What are the current rules about contributions to an ABLE account? Total annual contributions to an ABLE account may not exceed the IRS annual gift-tax exclusion, which is currently $14,000 per year. Any person, such as a family member, friend, or the designated beneficiary of the ABLE account, may contribute to an ABLE account. ABLE account balances accumulate on a tax-deferred basis. There are limits (which vary by state) with regard to the total amount of savings a person may hold in their NC ABLE account, based on the state’s limits set for 529 college savings accounts. In North Carolina, that limit is $450,000.

9. What are the rules about distributions from an ABLE account? Distributions from ABLE accounts for qualified disability expenses (QDEs) are not considered “income” for a “means-tested” federal benefits program that limits eligibility based on income. In other words, qualified distributions are not considered “income” for those individuals receiving SSI or Medicaid. Distributions from ABLE accounts for qualified disability expenses (QDEs) related to housing expenses have special rules, as they relate to continued eligibility for SSI. Qualified disability expenses (QDEs) are any expenses related to the eligible individual’s blindness or disability, and which are made for the benefit of the eligible individual. Rollovers are permitted. However, rollovers are only permitted from one ABLE account to another. Rollovers are not subject to the $14,000 per year limit.

10. What are the rules about distributions from an ABLE account? What are “Qualified Disability Expenses” (QDEs)? QDEs are any expenses related to the eligible individual’s blindness or disability. The ABLE Act specifies that qualified expenses include the following: Education Housing expenses (NOTE: *There are special rules about qualified distributions from an ABLE accounts that are used to meet housing needs.) Transportation Employment Employment training and support Assistive technology and personal support services Legal fees Funeral and burial expenses Other expenses, which are approved by the Secretary under regulations

11. Fund Management – includes vendors for record-keeping, communication, performance review NC ABLE Program Program Participant What is the NC ABLE Program Structure? NC ABLE Staff Board of Trustees - Fiduciary Oversight

12. The NC ABLE Program How the NC ABLE Program may be made available to all those eligible Consortium of many states

13. What’s the timeline? NCDST is currently coordinating the implementation, administration, communication, and outreach of this important new program, with a goal to have NC ABLE accounts offered in the 4 th Quarter of 2016. The NC ABLE Program Board of Trustees has met and is moving forward to implement the NC ABLE Program. The NC ABLE Program Board of Trustees will help ensure strong oversight and administration for the ABLE program. The accounts are intended to be easy to open and available to citizens from any state. NCDST will contract with a vendor or vendors for record-keeping, communications and fund management. Individuals who want to open an account should be able to do so in a similar way that parents today open college savings accounts for their children.

14. Where can I get more information? More information is available on the Department of State Treasurer website at www.nctreasurer.com or by email at ncABLE@nctreasurer.com. www.nctreasurer.com As the program is developed all new information will be added to this website. You may also call or email: Mary Buonfiglio, Deputy Director, Retirement Services Division 919-814-4176 mary.buonfiglio@nctreasurer.com Catherine Jarboe, Communications Officer 919-814-3827 catherine.jarboe@nctreasurer.com