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." 9:56:04 AM Co-Chair Neuman MOVED to ADOPT the proposed committee substitute for HB 188(FIN), Work Draft (29-LS0787\I).There being NO OBJECTION, it was so ordered. Co-Chair Thompson called Mr. Anderson to the table to review the bill changes. BRODIE ANDERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, indicated there were three changes in the bill. He looked at page 1, line 2. The bill was amended by adding, "limited" before the word, "property." He pointed to page 9, lines 2 through 8, which amended the bill by adding an exemption (b) to Section 06.65.260, an exemption from creditor claims: (b) If a designated beneficiary is default for 30 or more days on a payment due under a child support judgment or order, the money in the program account is not exempt from a claim for the payment of child support that is in default. 9:58:15 AM AT EASE 10:06:02 AM RECONVENED Mr. Anderson pointed to reiterated that the changes were on page 1, line 2; and the second change was on page 9, lines 2 through 8. The third change was on page 11, line 20, which amended the bill by adding "except as provided in AS 06.65.260(b)." Vice-Chair Saddler, bill sponsor, read the sponsor statement: 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 Wilson queried the number of people that could qualify, who currently could not qualify. 10:11:01 AM KIM SKIPPER, STAFF, REPRESENTATIVE DAN SADDLER, deferred to Patrick Reinhart. Representative Wilson wondered why there was not a consideration of those with low income in the legislation. Vice-Chair Saddler replied that the bill was targeted at Alaskans with disabilities. He stated that the bill was designed to equalize the "playing field." Ms. Skipper furthered that the bill was modeled after federal legislation. Representative Wilson felt that the bill was too limiting to people with disabilities. She stressed that there were people that had a difficult time sustaining a job, and added that she did not know the exact definition of "disabled." She expressed discomfort with the differentiation of groups. Ms. Skipper replied that there was a bill in Congress to expand "able" to the age of 46; and allow anyone with a college savings plan the opportunity to "roll" the plan into an able account. Representative Wilson agreed to hear more information from the department. Representative Edgmon thanked the sponsor for the bill, and expressed support of the legislation. He queried a provision in the bill that would allow the state to adjust the age limit, should Congress increase the age limit. Vice-Chair Saddler replied in the negative. He explained that the federal able legislation set some parameters, because it dealt with the Internal Revenue Service (IRS) provisions. The age parameters were set at 26, and the stat could adapt to that level or not. He restated that the limit could not be changed at the state level. Representative Kawasaki surmised that the underage person with the account would have a parent file the taxes. Vice- Chair Saddler agreed. Representative Pruitt remarked that there was a recently added provision which allowed for a deceased person's remaining funds be used to offset the costs of Medicaid. He wondered where the program fell in the priority of paying out of a person's estate. Ms. Skipper agreed to provide that information. She remarked that Medicaid automatically had a "claw back" provision, but she did not know the priority. Vice-Chair Saddler furthered that the "claw back" provision was not unique to the legislation. He deferred the Department of Law (DOL) for more information. He announced that there was a provision in current Medicaid law that said if a person received value or benefit from the Medicaid program during their life, the state could recover as much as possible to cover the cost after death. 10:17:56 AM Representative Pruitt wondered if the state made effort to recover the cost after death. Vice-Chair Saddler replied in the affirmative. Representative Edgmon asked if the sponsor would be open to a conceptual amendment that would enable the program to adapt to the possible congressional changes. Vice-Chair Saddler thought the bill already incorporated that language. Ms. Skipper announced that the proposed language was already built into the legislation. Representative Edgmon surmised that his concerns were already addressed in the bill. 10:20:14 AM PATRICK REINHART, GOVERNOR'S COUNCIL ON DISABILITIES AND SPECIAL ED, ANCHORAGE (via teleconference), testified in strong support of the bill. He remarked that the effort began to include all people with disabilities of all ages, but Congress chose to limit it to those people who had acquired their disability before the age of 26. He shared that there was an effort in Congress to increase the age to 46, to rollover the 529 accounts, and to increase the deposit amounts based on poverty level guidelines. He stated that there was bipartisan support for those changes, but felt that those changes probably would not occur in the current Congress. He appreciated that the legislation included language to anticipate changes. 10:23:10 AM LORI KING, SELF, JUNEAU (via teleconference), supported HB 188. She shared that she was the mother of a 25-year-old daughter with autism, developmental delays, and was losing her sight. Her daughter was a recipient of social security and public assistance. She explained that her daughter used budgeting skills, but her income was only $1095. She announced that the bills with rent, food, and utilities totaled $1015. 10:27:15 AM JEFF JESSEE, CHIEF EXECUTIVE OFFICER, ALASKA MENTAL HEALTH TRUST AUTHORITY, spoke in support of the bill. He announced that the trustees had approved funding the fiscal note. He felt that the bill provided a tremendous opportunity for its beneficiaries. Co-Chair Thompson OPENED public Testimony. 10:29:03 AM SARA KUECIM, SELF, JUNEAU, spoke in favor of the bill. She felt that the bill would help individuals with supported employment while also receiving Medicaid support. She stressed that the bill helped to provide dignity to individuals with disabilities. 10:30:52 AM STUART SPIELMAN, AUTISM SPEAKS, WASHINGTON DC (via teleconference), spoke in favor of HB 188. He shared that he had been working on the issue at the federal level for over 10 years. He remarked that his interest in the issue was not only professional, because he has a severely autistic 21-year-old son. He pointed out that the legislation was embraced at the federal level as well as other states throughout the country. He shared that 36 states and the District of Columbia had authorized their own state able programs. Co-Chair Thompson CLOSED public testimony. Vice-Chair Saddler reviewed the fiscal notes. 10:33:19 AM Representative Wilson felt that the indeterminate fiscal note should really be a zero fiscal note. She noted that the Department of Health and Social Services (DHSS) would be covering the count, rather than the Department of Revenue (DOR). Ms. Skipper explained that DHSS would be a small component of the program. She deferred to Ms. Leary for more information. PAM LEARY, DIRECTOR, DIVISION OF TREASURY, DEPARTMENT OF REVENUE, stated that it was an administrative issue for the pending fiscal note from DOR, because the CS was not available. She felt that there would be similar fiscal note as the one from the Labor and Commerce Committee. The fiscal note assigned $60,000 in FY 17; and $40,000 in FY 18 from Mental Health Trust receipts. Representative Wilson looked at the fiscal note component number 2077, which stated that staff would be required to monitor and track accounts and file claims; and administration of accounts would involve account deposits and balances to confirm that they did not exceed allowable amounts; and monitoring account dispersements to confirm that they were qualifying expenses. She felt that the fiscal note was not related to eligibility. Ms. Leary replied that DOR would oversee the program, but was not sure of the form of oversight it would need. She remarked that there were a number of states that had their own programs, and also a number of states that were creating a consortium program. She explained that it was envisioned that most of the work, including the determination of benefits, would happen at the vender level. She believed that it was a requirement at the federal level for the vender to be responsible for identifying the records of the individuals. Representative Wilson restated that the fiscal note should be zero. She felt that the work would be done by DOR, and paid out with the receipts from payments. She did not feel that DHSS should be giving an indeterminate amount of money to provide service that would not have a cost. She wondered whether an individual must receive social security disability benefits to be considered "disabled", or was it any type of diagnosis before age 26. Ms. Skipper responded that a person did not have to receive social security disability benefits, rather have a doctor certificate declaring a disability. Representative Wilson felt that there would be many more people added to Medicaid. Co-Chair Neuman requested a comment from the bill sponsor. Mr. Reinhart shared that he could not fully answer Representative Wilson's question. He stated that the eligibility program was more related to the applicant's relationship with the IRS. He remarked that there was not much eligibility determination by the state. 10:39:54 AM Representative Wilson shared that her son with Attention Deficit Hyperactivity Disorder (ADHD) would qualify for the program. She stressed that there could be a great fiscal impact to the state with a broad definition of "disability." Vice-Chair Saddler replied that the savings in the able account would be increase tax free, but would not reduce his taxable income below the point to which he would qualify for Medicaid. Representative Wilson surmised that the money in the able account would not count against Medicaid eligibility. Representative Munoz wondered if the means test was $2000 for Medicaid. Ms. Leary stated that it was $2000, and was the social security amount. She explained that it was the total number of assets that an individual could have, before their benefits were reduced. 10:42:33 AM Representative Pruitt felt that the fund was modeled after a 529 account. He shared that a 529 accounts offered that a parent could start the account, but at the age of 18 the child could receive the account or the parent could maintain ownership of the account. Therefore, the parent was given the ability to ensure that the money was appropriately spent. He remarked that, at a certain point, unspent money could be rolled into a new 529 account or the money became taxable. He noted that the difference with the proposed legislation is that the owner of the account was the actual designee. He queried an advantage of the importance to place the money in the hands of a parent. Vice-Chair Saddler asked Representative Pruitt to restate the question. Representative Pruitt felt that there was a major difference in the proposal and a 529 account. Ms. Skipper thought that Representative Pruitt was correct. She explained that the account holder could have a representative to make the decisions. Representative Pruitt felt that the parent should have the ability to maintain some control. He surmised that the only claim that could go against the program was child support. He queried the development of the provision. Ms. Skipper replied that in any situation of child support, the judgment would overrule. She explained that similar legislation included exemptions from creditor claims without the need for child support. She furthered that an individual had asked that the specification be included in the bill. 10:47:18 AM Representative Pruitt remarked that the provision was not a federal policy. Ms. Skipper replied in the affirmative. Representative Pruitt stressed that the $100,000 could not be used to make restitution. Ms. Skipper responded that the account could technically have a maximum of $400,000, because of the college savings plan contribution limit. She furthered that the money was more fluid, because it would be used for expenses that were not covered by Medicaid. Representative Pruitt stressed that the focus should not be on what would likely happen, rather there needed to be an examination of all the potential occurrences. He remarked that the bill did not specifically mention that the individual was the only person that could deposit into the account. Ms. Skipper replied that anyone could contribute up to $14,000 per year. Vice-Chair Saddler felt that it would take $14,000 to achieve the $40,000 cap on the account. Co-Chair Thompson would be gaveling out in about 5 minutes. Representative Wilson wanted to amend the fiscal note. She thought it should be zero. Vice-Chair Saddler indicated that the fees associated by the program were the fees could be covered by the fees set by the investment company that managed the accounts. He remarked that the indeterminate note was because the number of applicants was unknown. 10:52:40 AM AT EASE 10:53:15 AM RECONVENED Co-Chair Thompson indicated that the committee would be recessing to accommodate floor session. 10:53:27 AM RECESSED 1:25:19 PM RECONVENED Co-Chair Thompson indicated HB 188 would be set aside for a moment. HB 188 was HEARD and HELD in committee for further consideration.