An Act To Establish a Tax-free Savings Program for Individuals with Disabilities
Sec. 1. 5 MRSA §156 is enacted to read:
§ 156. ABLE ME Savings Program
(1) May engage the services of consultants on a contract basis for rendering professional and technical assistance and advice;
(2) May seek rulings and other guidance from the secretary and the federal Internal Revenue Service relating to the program;
(3) Shall develop marketing plans and promotional material to advertise and promote the program;
(4) Shall, by February 15th annually, evaluate the program and provide a report to the Governor and the Legislature;
(5) Shall notify the secretary when an account has been opened for a designated beneficiary and submit other reports concerning the program required by the secretary;
(6) May enter into agreements with other states either to allow residents of the State to participate in a plan operated by another state or to allow residents of other states to participate in the ABLE ME Savings Program;
(7) Shall, through rulemaking:
(a) Make changes to the program required for the participants in the program to obtain the federal income tax benefits or treatment provided by the Code, Section 529A;
(b) Establish, impose and collect administrative fees and service charges in connection with any agreement, contract or transaction relating to the program;
(c) Establish the methods by which the funds held in accounts are dispersed; and
(d) Establish the method by which funds are allocated to pay for administrative costs of the program.
Rules adopted pursuant to this subparagraph are routine technical rules pursuant to chapter 375, subchapter 2-A;
(8) Shall select, if acting as the depository or program manager, one or more investment instruments for the program; and
(9) Shall act as a depository or program manager or shall select one or more financial organizations to act as depositories or program managers.
(1) The treasurer may solicit proposals from financial organizations to act as depositories or program managers. A financial organization that submits a proposal shall describe the investment instruments that will be held in accounts.
(2) The treasurer shall make the selection of a financial organization on the basis of a proposal under subparagraph (1) that demonstrates the combination of the following factors most favorable to both potential program participants and this State:
(a) The financial stability and integrity of the financial organization;
(b) The safety of the investment instruments being offered;
(c) The ability of the financial organization to satisfy record-keeping and reporting requirements;
(d) The financial organization's plan for promoting the program and the investment the organization is willing to make to promote the program;
(e) The fees, if any, proposed to be charged to the account owners;
(f) The minimum initial deposit and minimum contributions that the financial organization will require;
(g) The ability of the financial organization to accept electronic withdrawals, including payroll deduction plans; and
(h) Other benefits to the State or its residents included in the proposal, including fees payable to the State to cover expenses of operation of the program.
The treasurer may select more than one financial organization to act as a depository or program manager.
(3) The treasurer may enter into a contract with a financial organization selected pursuant to subparagraph (2) to be a depository or program manager. A management contract must include, at a minimum, terms requiring the financial organization acting as a depository or program manager to, as relevant:
(a) Take any action required to keep the program in compliance with requirements of this section and any action not contrary to its management contract to maintain the program as a qualified ABLE program as defined in the Code, Section 529A;
(b) Keep adequate records of each account, keep each account segregated from each other account and provide the treasurer with the information necessary to prepare the statements required by subsection 4, paragraph E;
(c) Compile information contained in statements required to be prepared under subsection 4, paragraph E and provide the compilations to the treasurer;
(d) Provide the treasurer with such information as is necessary to determine compliance with subsection 4, paragraph E;
(e) Provide the treasurer with access to its books and records to the extent needed to determine compliance with the management contract, this subsection and the Code, Section 529A;
(f) Hold all accounts for the benefit of the account owner or owners;
(g) Be audited at least annually by a firm of certified public accountants selected by the financial organization and provide the results of the audit to the treasurer;
(h) Provide the treasurer with copies of all regulatory filings and reports made by the financial organization during the term of the management contract or while the financial organization is holding any accounts, other than confidential filings or reports that will not become part of the program. The financial organization shall make available for review by the treasurer the results of any periodic examination of that financial organization by any state or federal banking, insurance or securities commission, except to the extent that such report or reports may not be disclosed under law; and
(i) Ensure that any description of the program, whether in writing or through the use of any media, is consistent with the marketing plans developed by the treasurer pursuant to paragraph A, subparagraph (3).
(4) As part of a management contract made pursuant to subparagraph (3), the treasurer may:
(a) Require that an audit be conducted of the operations and financial position of the depository or program manager at any time if the treasurer has any reason to be concerned about the financial position, the record-keeping practices or the status of accounts of that depository or program manager; and
(b) Terminate or not renew a management contract. If the treasurer terminates or does not renew a management contract, the treasurer shall take custody of accounts held by that depository or program manager and shall seek to promptly transfer the accounts to another depository or program manager and into investment instruments as similar to the original instruments as possible.
(5) Every contract, application or other similar document that may be used in connection with opening an account must clearly indicate that the account is not insured by the State and that the principal deposited and the investment return are not guaranteed by the State.
(1) The name, address and social security number of the account owner;
(2) The name, address and social security number of the designated beneficiary, if the account owner is the designated beneficiary's conservator or guardian; and
(3) Certification relating to the prohibition against excess contributions as specified in paragraph B.
(1) A contribution to an ABLE ME savings account may be made only in cash.
(2) The treasurer, depository or program manager promptly shall reject or withdraw from the ABLE ME savings account and return to the contributor:
(a) Contributions that are in excess of the limits established as specified in this paragraph; or
(b) All contributions if:
(i) The value of the account is equal to or greater than the account maximum established by the treasurer, which must be equal to the account maximum for postsecondary education savings accounts under the Maine College Savings Program established in Title 20-A, chapter 417-E; or
(ii) The designated beneficiary is not an eligible individual in the calendar year in which the contribution is made.
(1) An account owner may:
(a) Make qualified withdrawals from the account;
(b) Change the designated beneficiary of an account to an individual who is a member of the family of the prior designated beneficiary in accordance with procedures established by the treasurer; and
(c) Transfer all or a portion of an account to another ABLE ME savings account, the designated beneficiary of which is a member of the family of the prior designated beneficiary.
(2) An account owner may not use an interest in an account as security for a loan. A pledge of an interest in an account in violation of this subparagraph has no legal force or effect.
(3) Money withdrawn from an account by an account owner that is a nonqualified withdrawal is subject to a penalty as established in the Code, Section 529A.
(1) Provide a statement to an account owner at least 4 times each year within 30 days after the end of the 3-month period to which a statement relates. The statement must set out for the preceding 3-month period:
(a) Each individual contribution made to the account;
(b) The total contributions made to the account;
(c) The value of the account at the end of that period;
(d) Distributions made from the account; and
(e) Any other information that the treasurer requires to be reported to the account owner.
Statements and information relating to accounts must be prepared and filed to the extent required by this section and any other state or federal law;
(2) If there is a distribution from an account to an eligible individual or for the benefit of an eligible individual during a calendar year, report the distribution to the federal Internal Revenue Service and each account owner, the designated beneficiary or the distributee, to the extent required by state or federal law; and
(3) Provide separate accounting for each designated beneficiary.
(1) The treasurer may establish a nonrefundable application fee.
(2) The treasurer may charge a depository or program manager an administrative fee as established by rule pursuant to subsection 3, paragraph A, subparagraph (7).
(3) The depository or program manager may charge the account owner an annual fee for the maintenance of an ABLE ME savings account only if the fee has been set pursuant to the management contract entered into between the treasurer and the depository or program manager.
All fees collected by the treasurer pursuant to subparagraphs (1) and (2) must be deposited in the ABLE ME Savings Expense Fund established in subsection 8 and used for the administrative expenses of the program.
All expenses incurred by the treasurer in developing and administering the ABLE ME Savings Program are payable from the expense fund.
summary
Under the federal Achieving a Better Life Experience Act of 2014, also known as the "ABLE Act," individuals with disabilities and the families of those individuals may establish federal tax exempt savings accounts and use the funds from those accounts to pay for the care of the individual with a disability, similar to so-called 529 accounts that allow tax-deferred savings for college expenses.
This bill establishes the ABLE ME Savings Program, based on the federal Act, to allow individuals with disabilities who are residents of Maine or their families to establish savings accounts to be used for qualified disability expenses. Contributions made to the accounts are tax-deferred; withdrawals for qualified disability expenses, as well as the earnings of the account, are tax exempt. The program is administered by the Treasurer of State in compliance with the federal Act. The Treasurer of State is authorized to contract with financial organizations to serve as depositories or managers of the program.
The program is open to an individual who is blind or disabled and whose blindness or disability occurred before the date on which the individual attained 26 years of age and to an individual who filed a disability certification to the satisfaction of the Secretary of the Treasury of the United States. Qualified disability expenses are defined in federal law and include expenses on behalf of a qualified individual for education, housing, transportation, employment training and support, assistive technology and personal support services and legal fees.
The Treasurer of State is required to establish, impose and collect fees for the administration of the program. These fees may be imposed on a depository or program manager contracted with by the treasurer and, pursuant to the contract between the treasurer and the depository or program manager, on the account holders for the maintenance of the accounts. The fees collected by the treasurer must be used for the administrative expenses of the treasurer.