HB 188-PERSON W/DISABILITY SAVINGS ACCOUNTS  3:33:15 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 188, "An Act relating to financial accounts for persons with disabilities; relating to financial institutions; relating to property exemptions; relating to securities; and providing for an effective date." 3:33:39 PM REPRESENTATIVE DAN SADDLER, speaking as the sponsor, read from the following sponsor statement [original punctuation provided]: HB 188 seeks to help Alaskans cope with the challenges of living with a disability by allowing individuals and families to set up tax-free savings accounts, called "ABLE accounts," to pay for education, housing, transportation or other disability-related expenses. The U.S. Congress passed the "Achieving a Better Life Experience (ABLE) Act" in 2014, authorizing states to create special savings accounts for disability-related expenses modeled after the successful "529 college savings programs," named after the relevant section of IRS code. ABLE accounts, also known as "529A" accounts, allow individuals with disabilities to improve their financial security by using private investments to supplement their benefits from insurance, employment, Supplemental Security Income (SSI), Medicaid, and other sources. Assets held in an ABLE account would not be counted under means tests required for Medicaid or SSI, although SSI cash benefits would be suspended if the ABLE balance exceeded $100,000. ABLE accounts could be spent for education, transportation, job training and support, assistive technology, health and wellness, legal and other qualified services. Contributions would be limited to $14,000 per year, and capped at $400,000. A person could have only one account. To be eligible for an ABLE account, a person must have become blind or disabled before the age of 26. The Governor's Council on Disabilities and Special Education estimates that about 13,770 Alaskans - 10 percent of those with a disability - might qualify for ABLE accounts. By empowering Alaskans with disabilities and their families to build their financial independence, HB 188 will help them meet more of their life challenges by relying on private resources, without eroding the value of public benefits to which they are entitled. ABLE accounts will be important tools for helping them live full, productive lives in their communities. REPRESENTATIVE SADDLER noted that the current version of the bill places administration of the [Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act of 2014], accounts with the Department of Commerce, Community & Economic Development (DCCED), but a forthcoming proposed committee substitute would place administration with the Department of Revenue (DOR). 3:37:49 PM CHAIR OLSON asked whether the $400,000 cap on ABLE accounts would only be contributions, or could include interest. REPRESENTATIVE SADDLER was unsure. REPRESENTATIVE LEDOUX expressed her understanding that the bill allows a disabled person with $400,000 in assets to continue to benefit from various state and federal entitlement programs. REPRESENTATIVE SADDLER said yes. REPRESENTATIVE HUGHES asked what mechanism is used to determine eligibility for account holders. REPRESENTATIVE SADDLER stated there is a federal certification to establish one's disability. In further response to Representative Hughes, he said an account can be held by someone who is older than 26 years of age. REPRESENTATIVE KITO asked how DOR would administer the program differently than would DCCED. 3:40:10 PM KIM SKIPPER, Staff to Representative Saddler, answered that DCCED has a conflict of interest because they audit and regulate the affected industry; however, DOR can manage ABLE accounts. In further response to Representative Kito, she said she was unsure whether DOR manages similar accounts, and deferred his question to DOR. REPRESENTATIVE SADDLER observed that the current Alaska 529 savings plan for college education is currently housed in the University of Alaska (UA). REPRESENTATIVE COLVER questioned whether there was a way for individuals to open 529 plans through brokerage houses instead of having the state administer accounts. REPRESENTATIVE SADDLER said yes. He advised that the 529(A) federal enabling legislation does allow individuals to set up private investment accounts with brokerage houses. REPRESENTATIVE TILTON requested a review of the monetary guidelines. REPRESENTATIVE SADDLER restated that the annual cap on contributions to one account is $14,000, and the lifetime maximum is $400,000. In further response to Representative Tilton, he said if the balance in the account exceeds a threshold of $100,000, SSI cash benefits to the account holder would be suspended. REPRESENTATIVE TILTON inquired as to the maker of the monetary guidelines. REPRESENTATIVE SADDLER said the $400,000 maximum was established by the state for 529 savings accounts, and the $100,000 threshold is a federal requirement. REPRESENTATIVE LEDOUX questioned why there is an age limit for eligible disabilities. REPRESENTATIVE SADDLER stated the age limit is based in the federal legislation, and suggested that in order to limit the number of potential beneficiaries, those who become disabled later in life are not eligible. REPRESENTATIVE LEDOUX directed attention to the bill on page 6, lines 24-26, which read: SEC. 06.65.150. Program account contributions. (a) A person may not make a contribution to open or add to a program account unless the person makes the contribution in cash. REPRESENTATIVE LEDOUX asked why securities are not acceptable. 3:47:08 PM MS. SKIPPER responded that this provision would be changed in the forthcoming committee substitute. REPRESENTATIVE LEDOUX asked how the meaning of "member of the family" is described in the federal authorizing statute. REPRESENTATIVE SADDLER said he would inquire and provide this information. REPRESENTATIVE COLVER expressed his reluctance to approve the appropriation indicated in the attached fiscal note which adds two employees to the Division of Banking and Securities, DCCED. REPRESENTATIVE SADDLER remarked: The intent of the legislation, the authorizing federal legislation, does not envision the state doing investment work, but contracting with an organization like Ameritrade or ... T. Rowe Price which is, who does the 529 for Alaska, and having them do the actual investment and so forth, and providing the quarterly or annual reports. There is some expense for the state required to make sure reports are done for the state to the [Internal Revenue Service, U.S. Department of the Treasury] and so forth. I hope there is a way to do that ... we're working on trying to reduce the costs. MS. SKIPPER added that the forthcoming committee substitute allows DOR to contract out with other services instead of hiring staff, resulting in a lower fiscal note. In addition, the state may partner with other states to lower costs. REPRESENTATIVE LEDOUX suggested imposing a charge on those who are setting up an account. MS. SKIPPER pointed out that the bill operates in a similar manner to the college savings accounts, and fees would be charged. In further response to Representative LeDoux, she said she was unsure whether the fees would cover all of the state's costs. REPRESENTATIVE HUGHES asked whether the state incurs an annual cost for the college savings accounts. MS. SKIPPER said yes. However, UA has reduced the cost by creating a large pool of account holders; in fact, the pool creates sufficient income to pay for staffing. REPRESENTATIVE HUGHES observed that if the legislature creates an enabling statute, that would encompass the state's obligation. MS. SKIPPER advised that the state does not have to authorize the accounts because disabled persons could establish accounts in other states; however, establishing enabling legislation benefits Alaska because residents could direct contributions to the accounts from their permanent fund dividends, and a provision in the forthcoming committee substitute allows Medicaid services to be repaid to the state after the death of an account holder. 3:54:04 PM CHAIR OLSON opened public testimony on HB 188. 3:56:38 PM MILLIE RYAN, Executive Director of REACH, Inc., said her organization serves those with intellectual and developmental disabilities who would benefit from HB 188. She is also the president of Key Coalition of Alaska, which strongly endorses the bill. Those with disabilities and their family members would like the opportunity to save a down payment for a house or for transportation, an opportunity that is taken for granted by others. In fact, those with disabilities often live with extraordinary expenses, and need services and support such as Medicaid waivers and disability income; currently, however, after saving more than $2,000, disability income and support are taken away. Ms. Ryan advised that REACH would encourage its beneficiaries to begin saving for their needs and to work for things that are important. 3:58:18 PM ROBERT FRICK said he lives in Juneau and has worked for Club Demonstration Services (CDS) at Costco for 16 years demonstrating food products. He is 62 years old and expressed his support for HB 188. The bill would help him save for a house or car and a service dog. 3:59:35 PM MALLORY HAMILTON said she is the parent of a young woman who experiences autism, Down syndrome, and a seizure disorder. She is in support of the proposed legislation. Although she is grateful that her daughter is on a waiver and receives SSI benefits, her daughter must keep her income at well below poverty level, which restricts her choices for items such as eyeglasses. The bill would allow her daughter to save for a home and to save any money she may receive from her relatives. Ms. Hamilton pointed out that in the event of her daughter's death, the state would have the option to claim any funds her daughter has saved to pay for care she received during her lifetime. The bill would allow her daughter to live a more typical life and to have a job, which is important to her self- worth. Speaking as a parent, Ms. Hamilton urged the committee to pass the bill. 4:02:46 PM STUART SPIELMAN, Senior Policy Advisor and Counsel, Autism Speaks, informed the committee Autism Speaks is the nation's largest autism science and advocacy organization. Mr. Spielman said he is the parent of a son severely affected by autism. He has been involved with ABLE Act legislation for over ten years and because of his training as a tax lawyer, he was influenced by the aspect that a person with autism is in a fundamentally different position than a person who does not; for example, his son without autism has a 529 college savings account, but his son with autism must avoid putting assets in his own name. This is one of the reasons the disability community and U.S. Congress is supportive of this legislation. Beyond the technical aspects of the bill, he stressed that the bill inspired overwhelming support from Congress in December 2014, and every state is considering legislation, or has authorized a program. Mr. Spielman noted that people with disabilities are more than twice as likely as others to live in poverty; the ABLE Act represents one effort to improve the status of those with disabilities. With the bill, parents of children with disabilities can provide a little more help to ensure their children have more secure and successful lives. REPRESENTATIVE LEDOUX asked why the bill limits eligibility to those with a disability that occurred prior to the age of 26 years. MR. SPIELMAN explained that the provision represents a compromise in the federal bill. REPRESENTATIVE LEDOUX expressed her interest in knowing how much the legislation would cost the federal government compared to the cost with no age limit. MR. SPIELMAN offered to provide information from the Congressional Budget Office. CHAIR OLSON asked whether other states have achieved a zero budget impact. MR. SPIELMAN said funding mechanisms vary between states, such as intergovernmental loans and fees, and consortiums have the potential for sharing costs. REPRESENTATIVE LEDOUX asked for the effect on the state's Medicaid bill. 4:10:44 PM REPRESENTATIVE SADDLER opined that the bill would not affect the state's Medicaid costs unless the state recovers Medicaid expenses after a beneficiary's death. REPRESENTATIVE LEDOUX surmised that if the bill does not affect the state's Medicaid budget, there would not have been a compromise needed to affect the cost of the federal legislation. REPRESENTATIVE SADDLER said he was unsure of the explanation; however, the forthcoming committee substitute will have a more accurate fiscal note. MR. SPIELMAN clarified that the age limit affects the total number of people who could qualify for an ABLE account. REPRESENTATIVE LEDOUX stated that there must be costs to the federal government, other than additional staff, that led to a compromise age limit. Her concern is that there will be a cost to the state. MR. SPIELMAN acknowledged that there is a federal tax cost because the accounts are tax-preferred accounts and are not subject to federal taxation. CHAIR OLSON added that children are dropped off of their parents' medical insurance at age 26. REPRESENTATIVE SADDLER said another possible expense would be tax reporting. 4:16:21 PM RICK NELSON said he is a self-advocate speaking in support of the ABLE Act, and currently works for the Governor's Council on Disabilities and Special Education, Department of Health and Social Services. Before the ABEL Act, he was only allowed to save up to $2,000, and was unable to buy anything like a house or a means of transportation, or assisted technology to help him communicate with others. Mr. Nelson said the bill is a big game-changer for people with severe disabilities, and will level the playing field for people with disabilities. If a child needs eyeglasses, and they are a preteenager, they don't want the frames that are offered by Medicaid. The bill would allow a teenager to buy eyeglasses that meet her needs, put her in her peer group, and save the state money. Mr. Nelson urged the committee to pass the ABLE Act. 4:21:09 PM CHAIR OLSON announced that public testimony would remain open. [HB 188 was held over.]