HB 133-AK ED SAVINGS PROGRAMS/ELIGIBILITY  3:23:54 PM CO-CHAIR SPOHNHOLZ announced that the first order of business would be HOUSE BILL NO. 133, "An Act relating to the Alaska savings program for eligible individuals; relating to education savings programs; relating to the Education Trust of Alaska; relating to the Alaska advance college tuition savings fund; relating to the Alaska education savings program for children; and relating to the Governor's Council on Disabilities and Special Education." 3:24:19 PM CO-CHAIR FIELDS introduced HB 133 on behalf of the House Labor and Commerce Standing Committee, sponsor, and offered a PowerPoint presentation entitled, "HB 133 - ABLE Update." He began on slide 1, "What is an ABLE Account?" which read as follows [original punctuation provided]: ABLE: Achieving a Better Life Experience ?Tax-free savings account for individuals with qualifying disabilities ?Funds may be used to pay for items such as disability expenses, education, housing, transportation ?Distributions into accounts are not counted against individual in determining eligibility for Medicaid and needs-based assistance programs CO-CHAIR FIELDS proceeded to slide 4, "ABLE Act of 2013," which read as follows [original punctuation provided]: Signed into federal law in December 2014 as part of the Tax Extenders package ?Established 529A (ABLE) savings account exclusively for individuals with disabilities CO-CHAIR FIELDS added that following the signing, former Alaska State Representative Dan Sadler and former Alaska State Senator Cathy Giessel passed the first iteration of the Alaska ABLE Act. He proceeded to slide 5, "Alaska ABLE Act," which read as follows [original punctuation provided]: ?Signed into law in July 2016 ?Authorized establishment of a state ABLE program to be administered by Department of Revenue ?Matched the 2013 ABLE Act passed by Congress ?Alaska joined the National ABLE Alliance, a group of 17 states formed to share information, create economies of scale and provide a hub for financial inquiries 3:25:59 PM CO-CHAIR FIELDS shared that since the passage of this version of the ABLE Act, there have been significant federal changes. He stated that the purpose of the bill is to conform to and take advantage of those federal changes, which will be discussed in the subsequent slides. He proceeded to slide 7, "ABLE to Work Act," which read as follows [original punctuation provided]: ?Signed into law in 2017 as part of the Tax Cuts and Jobs Act ?Increased annual contributions levels ?Incentivized employment by increasing the contribution level for employed beneficiaries from $15,000 to $27,060 CO-CHAIR FIELDS paraphrased from slide 8, "ABLE Financial Planning Act," which read as follows [original punctuation provided]: ?Signed into law in 2017 as part of the Tax Cuts and Jobs Act Allowed college saving account funds (529 accounts) to roll over into ABLE accounts ?Allowed individuals who incurred disabilities after they established 529 college savings plan to roll over savings into ABLE account CO-CHAIR FIELDS proceeded to slide 9, "ABLE Age Adjustment Act," which read as follows [original punctuation provided]: ?Will increase the age of eligibility from 26 to 46 ?Will allow more participation in ABLE accounts CO-CHAIR FIELDS explained that these changes make sense to him because people with disabilities have a continued need for updated training to keep abreast of current labor market opportunities. 3:27:05 PM CO-CHAIR FIELDS proceeded to slide 10, "HB 133 Proposed Updates," and asked whether the committee would like to embark upon the proposed change of reassigning the management of ABLE to a different department. He stated that he would like to hear ideas on the best department to house this program. He paraphrased the slide, which read as follows [original punctuation provided]: ?Reassigns department responsibility ?Expands age eligibility limits ?Allows greater flexibility in using funds to pay for education expenses Allows 529 program accounts to roll into an ABLE account ?Aligns with federal regulations regarding program savings accounts CO-CHAIR FIELDS began the Sectional Analysis on slide 12, "Section 1," which read as follows [original punctuation provided]: ?Establishes AS 06.65.020(b) ?Requires the Department of Health and Social Services to consult with the Governor's Council on Disabilities and Special Education when overseeing the Alaska Savings Program CO-CHAIR FIELDS moved to slide 13, "Section 2," which read as follows [original punctuation provided]: ?Expands the age of eligibility from 26 to match proposed federal law age of 46. CO-CHAIR FIELDS paraphrased slide 14, "Sections 3-4," which read as follows [original punctuation provided]: ?Expands eligibility of contributors and the amount of contributions to program accounts to match guidelines in AS 14.40.802(f)(3) from Section 10 ?Expanded to include: ?Contributions for the beneficiary or for a new individual who is a member of the family of the former beneficiary and an eligible individual under AS 06.65.100. CO-CHAIR FIELDS proceeded to slide 15, "Section 5," and explained that this section anticipates future federal changes so that state law may not need to be updated as frequently. The slide read as follows [original punctuation provided]: Specifies that a rollover may occur between a program account to another account if the new account is authorized by federal law 3:28:28 PM CO-CHAIR FIELDS paraphrased slide 16, "Section 6," and explained that it shifts departmental responsibility from the Department of Revenue (DOR) to the Department of Health and Social Services (DHSS). He reminded the committee that the question of whether or not this should be done remains unanswered and he would like to hear feedback on this aspect of the proposed bill. The slide read as follows [original punctuation provided]: Redefines "department" to mean the Department of Health and Social Services to mark the shift in supervising authority between the two departments CO-CHAIR FIELDS proceeded to slide 17, "Section 7," which read as follows [original punctuation provided]: Replaces "higher education" with "education" when referring to an education savings account CO-CHAIR FIELDS moved to slide 18, "Section 8," which read as follows [original punctuation provided]: ?Removes the distinction of postsecondary education when referring to an education savings account ?Renames the "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska" CO-CHAIR FIELDS briefly summarized slide 19, "Section 9," which read as follows [original punctuation provided]: ?Removes the distinction of postsecondary education when referring to an education savings account ?Renames the "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska" ?Removes the allowance that education savings accounts can be used to pay for room and board when using funds for education costs as this language is already included in Section 14 3:29:15 PM CO-CHAIR FIELDS continued to slide 20, "Section 10," which read as follows [original punctuation provided]: ?Establishes AS 14.40.802(f)(3) ?ABLE participants were previously only able to change beneficiary of an account to eligible family members with 529 account or other ABLE account ?Participants are now able to change beneficiary of an account to any person, not just family members, who are eligible individuals ?A common reason that transfers happen is that the funds are no longer needed by original beneficiary ?Eligible individuals are defined as those with qualifying disabilities, including blindness CO-CHAIR FIELDS identified that the important item in Section 10 is that Alaskans are not losing savings when they pass away. He skipped slide 21, "Section 11" and proceeded to slide 22, "Section 12," which read as follows [original punctuation provided]: Allows a program participant to designate a successor participant to their account and allows changes to take effect immediately CO-CHAIR FIELDS explained that slide 23, "Section 13," included more information on "designated beneficiaries" related to 529 accounts and proceeded to slide 24, "Section 14," which read as follows [original punctuation provided]: Defines "designated beneficiary" to have the same definition given in 26 U.S.C. 529(e) "Designated beneficiary" means: (A)the individual designated at the commencement of participation in the qualified tuition program as the beneficiary of amounts paid (or to be paid) to the program, (B)in the case of a change in beneficiaries described in subsection (c)(3)(C), the individual who is the new beneficiary, and (C)in the case of an interest in a qualified tuition program purchased by a State or local government (or agency or instrumentality thereof) or an organization described in section 501(c)(3) and exempt from taxation under section 501(a) as part of a scholarship program operated by such government or organization, the individual receiving such interest as a scholarship. 3:31:17 PM CO-CHAIR FIELDS advanced to slide 29, "Section 15," and explained that it relates back to 529 accounts and ABLE Act transfer issues. CO-CHAIR FIELDS paraphrased slide 30, "Sections 16-23," which read as follows [original punctuation provided]: ?Renames the "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska" ?Removes the distinction of higher education when referring to the Alaska education savings program or an education investment program ?Replaces "University of Alaska college savings plan" and "college savings account" with "education savings plan CO-CHAIR FIELDS explained that slide 31, "Section 24," refers to more on conforming changes for educational programs, and that slide 32, "Section 25," continues with these conforming changes. CO-CHAIR FIELDS concluded that the conforming changes in the bill are the increase in age, rollovers from 529 accounts to the ABLE Act, the expanded beneficiaries, and the expanded amount of savings in the ABLE Act account to pay for education and training. 3:32:58 PM REPRESENTATIVE NELSON asked if Co-Chair Fields could return to slide 21, "Section 11," in his presentation and explain it. CO-CHAIR FIELDS responded that he wanted to ask one of the invited testifiers to explain it. 3:33:21 PM PAMELA LEARY, Director, Treasury Division, Department of Revenue, explained that there are certain limits as to what money can go into ABLE funds. There are a variety of people that can add money to an account on behalf of someone who has an ABLE account, and the limit refers to the maximum amount of money that can go into the account. 3:33:41 PM CO-CHAIR SPOHNHOLZ asked whether there are any concerns about exploitation in turning assets over to non-family members. She also asked whether the bill would allow 529 [accounts] to be used for[expenditures related to] kindergarten through twelfth grade ("K-12") and Pre-K. MS. LEARY deferred the question to another testifier, Tammi Weaver. 3:35:48 PM TAMMERA "TAMMI" WEAVER, Trust Administrator, Education Trust of Alaska, University of Alaska, Fairbanks, responded that the modifications to the bill do incorporate the changes in the federal tax law which allow 529 accounts to be used for K-12 education as well as apprenticeship and limited repayments of student loans. CO-CHAIR SPOHNHOLZ asked whether that applies only to those with a disability or to all Alaskans. MS. WEAVER responded that it applies to anyone who invests in a 529 education savings plan. CO-CHAIR SPOHNHOLZ commented that that is a huge policy call change. MS. WEAVER responded that this change is just to bring the state statutes in compliance with the federal law, which has been modified to allow those expenditures. 3:37:07 PM CHAD HAMPTON, Attorney, Disability Law Center of Alaska (DLCA), shared that the DCLA is involved every day in advocacy for people with disabilities, and that the center hears concerns from these individuals about how to maintain their benefits. The solution for many of these individuals, he continued, is an ABLE account. Regarding the earlier question about the potential for exploitation, he said that there has been a trend recently in helping individuals with disabilities that may not have family members to help them, and he gave supportive decision-making agreements as an example of this. He explained that these agreements involve finding people in an individual with disability's network to help the individual understand information and make decisions. He said that he understands that there is a concern that this might lead to some exploitation and that there is no way to necessarily rule out that exploitation wouldn't happen within the family as well, but that's why there are backstops in place to protect people with disabilities such as Adult Protective Services. In advocating for people with disabilities, he said there is a big distinction between a person's ability to make unwise decisions, which everyone has the right to do, and exploitation. MR. HAMPTON opined that it is a great idea to tie the state ABLE statutes more directly to the federal ABLE statutes. He shared that this would allow Alaskans to immediately benefit from changes in the federal law without waiting for Alaska to catch up on national disability norms as they may change. He added that the age extension from 26 to 46 mentioned in the presentation would be excellent as well as the general additional flexibility for how ABLE accounts are used. 3:40:27 PM MR. HAMPTON shared that another challenge to individuals with disabilities is lack of individualized solutions that can lead to segregation from the general community. This can come in the form of separate classrooms for people with disabilities, sheltered workshops where people don't have the same employment options, or universal accommodations that aren't tailored to specific individual needs. Granting more flexibility to make these decisions will allow Alaskans with ABLE accounts greater authority over important decisions. MR. HAMPTON concluded that he has a couple of concerns about HB 133. He considers it a logical change, but did note that even with the governor's plan for splitting the Department of Health and Social Services (DHSS) tabled, he asked the committee to consider potential consequences of implementing ABLE accounts under HB 133. Another concern he identified regards Section 1 of the bill, which would require the department to consult with the Governor's Council on Disabilities and Special Education (GCDSE). He shared that the DLCA understands the intent of this addition, but he said that a potential ambiguous reading of that same statutory language might commit the GCDSE to provide technical support on complex financial matters that it doesn't have the expertise or staffing to provide. He explained that the ambiguity arises out of the word "shall" coupled with the lack of definition on the purpose for consulting with the GCDSE. He concluded by reiterating that the DLCA supports the changes that the bill proposes. 3:42:54 PM CO-CHAIR FIELDS shared that he and his staff talked with the GCDSE, and that the council's perspective was that it can continue to support this program through important outreach and coordination, but agreed that the council is probably not the most logical entity to support complex financial interactions; such interactions would better be housed in another department. He added that the testimony makes him think that although the council should remain in a supporting role, it does not have the capacity to "own" the program. 3:43:43 PM CO-CHAIR SPOHNHOLZ asked Mr. Hampton to provide the committee with a concrete or specific recommendation if he has one. 3:44:11 PM CO-CHAIR FIELDS asked if the departments could provide insight as to whether ABLE accounts would be more appropriately housed in DOR or DHSS. 3:44:43 PM MS. LEARY responded that she was present at the birth of the program, and that it was quite the challenge. The program joined an alliance of 17 states and developed a request for proposal (RFP) to find a vendor for assistance in creating and administering the program. Program coordinators now meet monthly to talk about issues that impact the constituents of the program. She shared that there are aspects of investment involved in the program, which is why it was housed in DOR initially, but the six investment types in which people can invest are fairly well identified and have been the same for the past five years. She added that the alliance of states meets regularly and if there is any discussion about changes, all members of the alliance are given equal input. She shared her opinion that the program in its current state is beyond the capacity of DOR and the department doesn't have "the touch," but transferring it to DHSS will help it to continue and give it that "touch" she identified as missing. She added that she would be happy to continue having discussions surrounding investments but that she thinks that the program would have its needs better served under DHSS. CO-CHAIR SPOHNHOLZ offered her understanding that finding a way to create a combination of the financial expertise of DOR and the programmatic and relational outreach expertise of the GCDSE is going to be important in the final drafting of the bill. She asked if Ms. Leary agrees or if she has another suggestion. MS. LEARY responded that participating in the alliance and discussing issues like self-certification and relevant federal legislation would be better served not within DOR, but in DHSS. She explained that DHSS is much closer to those issues and understands the needs of constituents. She reiterated that she would always be available as would her investment staff to discuss investment choices. 3:48:29 PM MR. HAMPTON added that there is a potential for a finance and management services division within DHSS to oversee the financial management aspects. The GCDSE could be on hand to handle the disability outreach and implementation focus of it. CO-CHAIR SPOHNHOLZ asked whether there might not be a Restructuring Support Agreement (RSA) between DOR and DHSS. She concluded that the committee understands the issue and can dedicate some time to coming up with the right structure for the program during the next meeting. 3:49:41 PM CO-CHAIR FIELDS acknowledged that former State of Alaska Senate President Cathy Giessel did all the "leg work" on this bill and that he and has staff worked to update it. 3:50:06 PM CO-CHAIR SPOHNHOLZ announced that HB 133 was held over.