HB 133-AK ED SAVINGS PROGRAMS/ELIGIBILITY  2:02:15 PM CHAIR COSTELLO announced the consideration of CS FOR HOUSE BILL NO. 133(L&C) "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." She stated that this is the first hearing and the intention is to hear the introduction and take invited and public testimony. 2:02:40 PM REPRESENTATIVE ZACK FIELDS, Alaska State Legislature, Juneau, Alaska, sponsor of HB 133, stated that the House Labor and Commerce Committee worked collectively on the bill. He thanked Representative Nelson whose staff Kim Skipper was working when the original ABLE Act was introduced by Representative Dan Saddler. He said that is relevant because HB 133 has conforming changes to the federal law that passed after that original ABLE Act passed. REPRESENTATIVE FIELDS gave a presentation to explain the updates HB 133 makes to the ABLE Act. He paraphrased slide 2 that read as follows: WHAT IS AN ABLE ACCOUNT?  • 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 REPRESENTATIVE FIELDS provided a brief history of the 2013 federal ABLE Act: • Signed into federal law in December 2014 as part of the Tax Extenders package. • Established 529A (ABLE) savings account exclusively for individuals with disabilities. REPRESENTATIVE FIELDS reviewed the Alaska ABLE Act, paraphrasing slide 5: • Signed into law in July 2016. • Authorized establishment of a state ABLE program to be administered by Department of Revenue. • Matched the 2013ABLEAct 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. • Since passage, 787 accounts have been created in Alaska with more than $7,100,000.00 in assets. 2:05:11 PM REPRESENTATIVE FIELDS reviewed the improvements Congress made to the federal ABLE Act. He spoke to the bullet points on slides 7- 9, which read as follows: ABLE TO WORK ACT  • 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. ABLE FINANCIAL PLANNING ACT  • 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. ABLE AGE ADJUSTMENT ACT  • Will increase the age of eligibility from 26 to reflect federal code-legislation is under way to increase this age eligibility to 46. • Will allow more participation in ABLE accounts. 2:05:46 PM REPRESENTATIVE FIELDS noted that in the previous committee of referral Senator Hughes suggested writing to the federal delegation to voice support for raising the age of eligibility. The argument is why shouldn't someone who becomes disabled after age 26 be allowed to create an ABLE account. HB 133 will link to the federal age threshold so it won't be necessary to amend the statute in the future because it will track the federal enabling law automatically. REPRESENTATIVE FIELDS reviewed the updates proposed in HB 133: HB 133 PROPOSED UPDATES  • 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. CHAIR COSTELLO asked the members if there were any questions. 2:07:46 PM SENATOR MICCICHE summarized this state statute will automatically update when the federal law changes. REPRESENTATIVE FIELDS agreed. 2:08:24 PM GRACE KUBIT, Staff, Representative Zack Fields, Alaska State Legislature, Juneau, Alaska, read the sectional analysis for HB 133. [Original punctuation provided with small formatting changes.] Section 1 Establishes AS 06.65.020(b).  Directs 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. Section 2 Amends AS 06.65.100.  Expands the age of eligibility for a program account from age 26 to match that in the federal authorizing law. This effectively removes an age cap that prevented those who became disabled after 26 years of age from being eligible. Section 3 Amends AS 06.65.160(a).  Expands the rules allowing a person to make a contribution for a designated beneficiary to match the guidelines in AS 14.40.802(f)(3). Section 4 Amends AS 06.65.160(c).  Expands the rules regarding who is eligible to make a program account contribution to match the guidelines in AS 14.40.802(f)(3). Section 5 Amends AS 06.65.200(a).  Specifies that rollover may occur between a program account to another account as long as the new account is authorized by federal law. Section 6 Amends AS 09.38.015(a)(8).  Replaces "higher education" savings account with "education savings account".  Section 7 Amends AS 14.10.170(a).  Replaces "postsecondary education" with "education" when referring to an education savings account and renames the "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska".   2:10:14 PM Section 8 Amends AS 14.40.802(a).  Renames the "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska" and replaces "postsecondary education" with "education" when referring to education savings accounts. 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 included already included federal law. Section 9 Establishes AS 14.40.802(f)(3).  Allows a participant of an account to change the beneficiary of their account to any individual, not just a family member. Allows participants to transfer all or a portion of their account as a contribution to another account if it does not exceed federal limits when added to any other contributions and is for the beneficiary of that new account or for a family member who is an eligible individual as well. Section 10 Amends AS 14.40.802(g).  Makes transfers between accounts limitable or deniable if the transfer does not meet the guidelines established in AS 14.40.802(f)(3). Section 11 Amends AS 14.40.802(j).  Removes the restriction that when a beneficiary designates a successor participant to their account the change cannot take effect until after the death or mental incapacity of the beneficiary. Section 12 Amends AS 14.40.802(n)(2).  Redefines "beneficiary" to match what is defined under federal law. 2:11:59 PM  Section 13 Amends AS 14.40.802(n)(7).  Replaces "qualified higher education expenses" with "qualified education expenses" and redefines the phrase to mean qualified higher education expenses as defined in federal law. Section 14 Amends AS 14.40.802(n)(8).  Redefines "trust" to reflect the name change of "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska". Section 15 Amends AS 14.40.809(b).  Renames the "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska". Section 16 Amends AS 40.25.120(a).  Renames the "Alaska Higher Education Savings Trust" to the "Education Trust of Alaska". Section 17 Amends AS 47.10.093(b).  Removes the distinction of higher education when referring to the Alaska education savings program. Section 18 Amends AS 47.12.310(b).  Removes the distinction of higher education when referring to the Alaska education savings program. Section 19 Amends AS 47.14.400(a).  Removes the distinction of higher education when referring to an education investment program and replaces "University of Alaska college savings plan" with "education savings plan".  2:13:21 PM  Section 20 Amends AS 47.14.400(b).  Removes the distinction of higher education when referring to an education investment program. Section 21 Amends AS 47.14.400(c).  Replaces "college savings plan" with "education savings plan" and replaces "University of Alaska College savings plan" with "education savings plan". Section 22 Amends AS 47.14.400(e)(3).  Replaces "higher education savings program" with "education savings program" and "college savings account" with "education savings plan". Section 23 Establishes AS 47.14.400(e)(5).  Defines "education savings plan" to mean an education savings program. Section 24 Repeals AS 47.14.400(e)(2). CHAIR COSTELLO observed that most of the Act takes effect July 1, 2022, but Section 7 takes effect immediately. 2:14:44 PM REPRESENTATIVE FIELDS replied he believes so and added that most of the sections are conforming changes to rename the Alaska Higher Education Savings Trust to the Education Trust of Alaska. CHAIR COSTELLO asked if there was a reason for renaming the trust. REPRESENTATIVE FIELDS replied it's a conforming change; the UA System renamed the trust in 2019. CHAIR COSTELLO turned to invited testimony. 2:15:50 PM CATHY TAYLOR, Board Member, Alaska Behavioral Health, Kenai, Alaska, testified by invitation in support of HB 133. She stated that she is the mother of two sons who receive disability benefits. Her background is in finance and the ABLE program has been one of the best resources she has found to help disabled persons manage their financial resources and become more independent. It builds self-confidence, she said. MS. TAYLOR stated that the increase in the annual contributions from $15,000 to $20,060 allows people with disabilities to put away as much money as they can when they are able to work without jeopardizing their disability benefits. She described the ability to roll over college funds as a valuable enhancement. It will help people whose education is interrupted because of their disability. Prior to this they would lose the opportunity. Increasing the age of eligibility is another valuable enhancement. As the sponsor mentioned, disability doesn't just strike before age 27 so it makes sense to extend these benefits to a larger range of people. It is also beneficial to be able to use these funds for more than a typical university program. A four-year program isn't what everybody wants or needs, so being able to participate in a certificate or vocational program is very beneficial and will increase employment opportunities. 2:20:23 PM MS. TAYLOR said the ABLE program has been very beneficial to her family, but because she didn't learn about it until just a few years ago she would like to see an education component attached to ensure that agencies that work with the disabled have this information so they can help people set up these accounts. 2:21:19 PM DAN SADDLER, former Representative, Eagle River, Alaska, testified by invitation in support of HB 133. He reminded the committee that he sponsored the original legislation in 2016 that authorized ABLE accounts in Alaska. He shared that he supported ABLE as a legislator and a parent. His son Danny has autism and at age 23 is transitioning into adult life. He needs special behavioral support, special equipment for his physical needs, supplementary educational services, employment support services, and healthy recreational outlets. He said these are qualified disability expenses that will help him achieve a better life experience. He highlighted how important it is that deposits into an ABLE account would not disqualify his son from Medicaid or Supplemental Social Security (SSI) benefits, because both are critical in meeting his life needs. REPRESENTATIVE SADDLER opined that that ABLE accounts clearly have been successful in Alaska. A report in the bill packets indicates that there are 787 ABLE accounts in Alaska, and the private contributions to those accounts totals $7 million. He posited that this has kept many individuals from seeking support from the state. He mentioned the other conforming changes and described HB 133 as legislation that makes the existing law better. He also thanked the Alaska Mental Health Trust that put $100,000 into designing ABLE accounts and the Governor's Council on Disabilities and Education for its tireless efforts to get ABLE accounts established. He concluded his comments with the observation that legislators often are faced with how to allocate limited public assets among limitless needs. The value of HB 133 is that it empowers private citizens to use their own money to take better care of loved ones without cost or burden to the state. CHAIR COSTELLO expressed appreciation for his testimony. 2:25:52 PM CHAIR COSTELLO opened public testimony on HB 133; finding none, she closed public testimony. CHAIR COSTELLO held HB 133 in committee for further consideration.