ABLE Accounts and Self-Employment
Self-employment is a powerful option that can help people with disabilities achieve professional and financial goals by addressing challenges often encountered in traditional employment. Self-employment offers people the choice to design a work environment that maximizes flexibility and builds upon a person’s strengths and interests, creating a tailored path to success. An ABLE account can play a key role in supporting self-employment goals.
Once the decision is made to pursue self-employment, a business plan becomes an essential tool for success. It helps refine and focus business ideas and strategies, providing a clear roadmap for achieving goals. A well-crafted business plan not only guides day-to-day operations but also serves as a powerful tool to attract investors and partners, as well as funding sources.
One of the biggest challenges in self-employment is securing savings or capital to cover start-up and ongoing expenses. Individuals often rely on a patchwork of resources, including financial assistance from family; vocational rehabilitation programs, government loans and grants; business and personal supports; services from community agencies; and work incentives provided by the Social Security Administration (SSA) for those receiving disability benefits.
Given that most businesses take two to three years to become profitable, having reliable funding is crucial during the early stages. ABLE accounts can play a vital role in filling funding gaps or supplementing other financial resources. They provide a flexible and powerful way to address unmet needs and stabilize the business while allowing the owner to focus on building a foundation for long-term success. With a strong business plan and strategic use of resources, like an ABLE account, self-employment becomes a more viable and sustainable option.
ABLE Account Savings
As a service provider, one of the most important ways to support a customer who is interested in self-employment is to introduce them to the advantages of opening, saving and investing in a tax-free ABLE account. ABLE funds supplement, but do not replace, benefits provided by private health insurance or federally funded benefits such as Medicaid, Medicare, Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI), food stamps (SNAP), housing assistance, vocational rehabilitation services or financial aid. Integrating ABLE accounts into discussions and service plan development can enhance your services and elevate your role as a resourceful and proactive service provider. These accounts can act as a financial anchor, helping to improve an account owner’s financial stability and overall outcomes.
To maximize the potential of the ABLE account, it is essential to guide your customers towards community resources and professionals with expertise in benefits, small business development, accounting, marketing, legal matters and tax preparation tailored to the needs of individuals with disabilities. Customers who receive SSDI or SSI from SSA should also seek advice from a benefits counselor before selecting a business structure. Seeking advice early is essential, as certain business structures can impact eligibility for SSDI and SSI disability benefits for those who receive them. The National Disability Institute Small Business HUB is a valuable resource offering connections to experts, self-employment resources and tools, including success stories to inspire and guide individuals on their path towards self-employment.
Qualified Disability Expenses and Business Funding
ABLE account funds may be used for self-employment related “qualified disability expenses” (QDE) such as business start-up costs, emergency funds, adaptive technologies or transportation to support the business, regardless of the availability of free resources. However, exploring free resources first delays disbursements from the ABLE account, allowing the ABLE investments to grow tax-free over time. QDEs are intended to enhance the health, independence or quality of life of individuals with disabilities and encompass a broad range of expenses, including daily living expenses and self-employment costs, tailored to meet the unique needs of each ABLE account owner.
Depending upon the type of business established, self-employment may be performed within the home or outside of it. Examples of QDEs could include the purchase of computers, printers, office supplies, communication devices, furniture and equipment, inventory, rent, utilities, transportation, personnel or attendant costs or expenses for making a home office accessible to conduct business. Business expenses, such as developing a business plan, a business feasibility study, filing state and local taxes, continuing education to enhance job knowledge and covering legal, tax and accounting expenses, as well as marketing, insurance or state and local business licenses needed to operate a business, are also examples of ABLE employment QDEs.
While ABLE accounts provide flexible funding for essential expenses, combining resources from various programs can further enhance financial stability. A “braided” funding strategy which combines multiple resources demonstrates team effort and shared risk-taking. This approach could include government loan programs, the state Office of Vocational Rehabilitation, the American Job Centers Career Onestop system, Department of Defense small business programs (Veterans), Social Security Administration under a Plan to Achieve Self-Support and other financing opportunities in each state as an alternative or supplement to using ABLE funds.
Benefits and Business Counseling – Supports and Services
Free help is available to aspiring business owners from various sources, including benefits counselors and small business counselors. Individuals who receive a disability-based benefit from the Social Security Administration are encouraged to seek guidance from a Community Work Incentive Coordinator (CWIC), who is a benefits counselor that works for a Work Incentives Planning and Assistance Project (WIPA), or a Community Partner Work Incentives Coordinator (CPWIC) prior to establishing a business. Seeking benefits advisement services early is essential, as certain business structures can impact eligibility for disability benefits. Benefits counselors provide vital information on how self-employment could affect benefits, empowering individuals to make informed decisions about their work plans.
Benefits counselors can also help beneficiaries maximize their income by utilizing work supports to launch or expand their business. Examples of work supports that may support self-employment are impairment-related work expenses that do not qualify as business expenses, unincurred business expenses, Property Essential to Self-Support (PESS) and the Plan to Achieve Self-Support (PASS). These supports can be combined with ABLE savings, particularly during the initial phases of self-employment, when funds may be needed for equipment, vehicles, inventory or workspace. Work support also ensures that individuals with disabilities maintain access to crucial healthcare benefits, such as through the extended period of Medicare coverage, Medicaid 1619(b) or Medicaid Buy-In programs.
For additional small business guidance, entrepreneurs can turn to the Senior Corp of Retired Executives (SCORE) which offers free and confidential business advice via phone, email and video. SCORE services have expanded and now include divisions for Black entrepreneurs and women entrepreneurs who may face unique barriers to business success. SCORE mentors connect individuals with experienced business experts to help them navigate obstacles, such as a lack of capital or difficulty accessing government programs, fostering a path to success.
Self-Employment: A Success Story
Robert is an individual with a traumatic brain injury (TBI) and a vision impairment. He always dreamed of owning his own business. He asked Vocational Rehabilitation to help him through a discovery process to identify the perfect business, create a business plan and to launch his business. His VR counselor referred him to a benefits counselor to identify the supports he can use and to inform him about how working would affect his benefits. The benefits counselor recommended that Robert apply for a Plan to Achieve Self Support (PASS) and save a portion of his childhood disability benefits (CDB) in it because he could then qualify for a small amount of Supplemental Security Income (SSI). This strategy helped him to continue to pay his day-to-day living expenses and to save for start-up business expenses.
Robert pays his father for his shelter expenses to live in his father’s home and Robert’s father, in turn, contributes a portion of the monthly “rent” payment into Robert’s ABLE account as another strategy to increase Robert’s savings. ABLE contributions directly deposited into the ABLE account by a third party (Robert’s dad) do not count as income to Robert.
Robert’s employment goal is to own and operate a vending machine business, as a sole proprietor. He and his dad met with an attorney, an accountant, and a benefits counselor to discuss and decide upon the business structure so that they all understood the effect on benefits. VR approved Robert for self-employment support and they purchased six vending machines needed to start the business. VR also paid for four hours of business consulting per month and arranged for placement at an exit on an interstate highway with no-cost rent and utilities. These are considered unincurred business expenses, which reduce income counted by the CDB program. The money he set aside in his PASS account for the SSA-approved expenses helps him to retain his SSI payment until he gets established, meets his goal and can transition off benefits.
Robert’s PASS savings go towards the purchase of additional machines and operating expenses. Currently, the largest expense for the business is the cost of goods to sell but, even with that consideration, the business makes a small profit. Operating expenses include a growing salary for himself, mileage for his vehicle, minimal equipment repairs, a computer and printer, banking charges, office supplies, retail sales, tax preparation and insurance. Although all the expenses are employment-related and ABLE QDEs, as a strategy, Robert pays for these out of the business income so that it decreases his net self-employment income AND he allows the funds in his ABLE account to grow for as long as possible. If an emergency arises, either personal or business related, he will have the ABLE funds as a “cushion.”
Robert’s countable income for CDB benefits is reduced by SSA due to his father’s “unpaid help,” a work incentive he can use because his father assists him with business operations. Robert was also matched up with an experienced business expert through SCORE for ongoing support and advice in growing his business. In time, he expects to be able to operate the business with less support.
Robert’s profit increases as machines are added. He anticipates having enough additional income within the next two years to transition off benefits and to begin paying his father and other employees he hires. He will retain his Medicare and will look for a supplement to replace his Medicaid. Robert, with the help of his father and service provider, seeks out no-cost sources of funding for optional items before using Robert’s ABLE savings which continue to grow. All these strategies work together to allow Robert to meet his expenses and progress towards becoming independent through his hard work and business ownership while regularly saving in his ABLE account. When Robert achieves his long-term goal and retires, he plans to begin using his ABLE funds as his retirement account to supplement his SSA retirement benefit.
Resources
ABLE National Resource Center (ABLE NRC) is the leading, comprehensive source of objective, independent information about federal and state-related ABLE programs and activities. The content-rich website provides a wide array of comparison tools, webinars, podcasts, fact sheets and guides.
Independent Living Centers (ILC) may be able to recommend or provide disability-related accommodations to operate a business in addition to providing other support services.
National Disability Institute’s Small Business HUB helps people who have a disability to start, build and grow their business.
Office of Vocational Rehabilitation and Division for the Blind, in addition to Department of Labor (DOL), helps eligible individuals refine their goal or ideas or determine the feasibility and viability of their self-employment goal. VR and DOL may offer a braided funding strategy that combines resources from VR or others such as the local workforce system, local Community Rehabilitation Providers (CRP), school transition program or through a Social Security work support.
Office of Small & Disadvantaged Business Utilization operates a portal to connect Veteran entrepreneurs to best practices and information including financing a business.
SCORE is a national network of expert business mentors who help small businesses get off the ground, grow and achieve their financial goals.
Small Business Administration (SBA) provides many tools for business planning and access to small business loans through their program.
Small Business Development Centers (SBDC) may be able to assist with business planning and resource identification.
Social Security Administration Plan to Achieve Self Support may be able to provide support to qualified individuals to help them to save and set aside funds for business-related costs. SSA work supports can be found in The Red Book.