We need to have an intentional conversation about the availability of bank accounts with features that suit the needs of the disabled.
According to the Department of Labor, XXX million adults have disabilities. Many still have employment. Most, if not all, receive some public benefit to assist with their needs.
In 2014, the Achieving a Better Life Experience Act (“ABLE”) established a new type of bank account for disabled persons. Until the account balance reaches $100,000, funds held in ABLE accounts cannot disqualify a person for needs-based asset tests. Disabled persons can own and control the funds in their account. Additionally, income generated from those balances is not subject to income tax. The IRS refers to ABLE accounts as 529a accounts.
The law establishes several other conditions on the accounts that govern the tax treatment and legal expectations surrounding the holdings. Some states have applied modifications to the rules.
However, ABLE accounts will not serve everyone. A person must open the account before age 26 and have been diagnosed with a long-term disability before that time. Even workers who meet the age rules could still find that they need a second account, as the Act caps contributions to $15,000 per year. Moreover, it limits how funds can be spent – typically for costs associated with necessary living expenses such as housing, food, and transportation.
Fundamentally, ABLE accounts act as a tax-protected form of a savings account. So, in spite of their user-specific functions, they do not replace the need for a transaction account.
One shortcoming is that unlike with a traditional savings account, account managers may charge a fee based on the account size. For example, in the District of Columbia, a manager may charge as much as 37 basis points for their services.
The bottom line is that many disabled people will still need to have another bank account. For some, the answer is a trust account managed by a third-party.
While not an absolute line in the sand, I think there is a sound basis to believe that we should adopt a “do-no-harm” approach to the question surrounding what is suitable and what is not. To me, that starts with a tough conversation about the presence of overdraft on the account. If we know that most people on disability must survive on fixed incomes of modest amounts, then we should be careful to not set them up with a service that could trigger a series of $35 mistakes. If we insist that overdraft is a choice – as many people do – then we should be certain that people who exercise an overdraft do so with full understanding of the costs and benefits of that service. If we have reason to believe that this kind of decision isn’t entirely within someone’s capabilities, then a “do-no-harm” tactic instructs us to redirect disabled persons away from a traditional checking account.
Luckily, such an option is readily available. Prepaid debit cards and checkless overdraft-free debit cards can be found in the market. Many companies participate in this space, so there is no need to worry about unfair pricing. Increasingly, the market for a maintenance fee on one of these accounts clears at zero dollars per month.
Surprisingly, the other factor that matters is how the accounts are accessed. It turns out that branch banks are not a fundamental need. Many disabled people find it difficult to visit a branch. For them, the ability to access funds at a nearby ATM, to deposit a check with their smartphone, and to see balances through some media matter most.
I recently met with a group of counselors who serve disabled adults. They said that their clients love using their smartphones to deposit their checks. Last month, I spoke with an advocate for the blind. He said that only a few ATMs are ready to serve blind individuals, but that new software for smartphones now make it possible for the blind to manage their account digitally. The software uses the acoustic capabilities of a device to transform print to audio. The software works globally across a device. It is not necessary for a bank app to be programmed especially for this ability.
WiseWage has several accounts that all suit the needs of disabled individuals, as none have overdrafts and all come with excellent apps.
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