NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7652
TITLE OF BILL:
An act to amend the mental hygiene law, in relation to the residency
requirement for designated beneficiaries of the ABLE program
The purpose of this legislation is to eliminate the New York State resi-
dency requirement for designated beneficiaries in the New York ABLE
SUMMARY OF PROVISIONS:
Section 1 of this proposal amends section 84.03(4) of the mental hygiene
Section 2 of this proposal provides for an immediate effective date.
PRIOR LEGISLATIVE HISTORY:
In December 2014, the Stephen Beck, Jr. Achieving a Better Life Experi-
ence ("ABLE") Act was signed into law at the federal level as section
529A of the Internal Revenue Code. Similar to 529 College Savings
Programs, this Act authorized states to establish qualified ABLE
programs meeting requirements of the federal Act. However, the ABLE Act
differed from the 529 College Savings Program in several ways. The ABLE
Act defined the designated beneficiary as the owner of the ABLE account,
allowed for only one account per designated beneficiary, and required
that a designated beneficiary establish an ABLE account in the state in
which he or she resided or, if such state did not administer its own
ABLE program, in a state which contracted with the designated benefici-
ary's state of residence to so administer a program. This ABLE residency
requirement was eliminated by the federal Protecting Americans from Tax
Hikes ("PATH") Act enacted in December 2015.
In June 2015, the New York State Legislature passed a bill to establish
the NY ABLE Program which was signed into law in December 2015. The New
York legislation contained requirements set forth in the federal ABLE
Act, including the state residency requirement. Given the near simul-
taneous timing of the enactment of the NY ABLE Program and the federal
enactment of the PATH Act, the residency requirement remained in State
legislation, although no longer required at the federal level.
This bill seeks to eliminate the unnecessary state ABLE residency
requirement in New York statute, thereby bringing State law into
conformance with the federal ABLE Act. Currently, New York is one of
only 17 states nationwide, out of a total of 43 states that maintain
ABLE programs, which restricts its ABLE program to state residents only.
This amendment will allow out-of-state residents who are eligible for
ABLE Accounts to choose the NY ABLE program from among other state ABLE
programs, if its program benefits are more desirable than those of other
While the NY ABLE Program is currently available only to New York State
residents, several other states offer national ABLE programs that market
heavily in New York State. New Yorkers are not required to use the NY
ABLE program, and since there is no tax deduction for contributions in
New York State, potential account owners lack the same compelling reason
to use New York's in-state ABLE Program as individuals have to use NY's
529 College Savings Program, which does offer generous tax advantages to
New York taxpayers.
The limitation of one ABLE account per beneficiary results in additional
competition among states that offer their ABLE programs to eligible
account owners regardless of residency. Indeed, the NY ABLE Program is
aware that many eligible New York residents choose to invest and save in
out-of-state ABLE programs for various reasons, among which are more
competitive costs. As assets under management in ABLE programs grow, the
costs of administering such programs on an account-by-account basis
decrease due to economies of scale, such as New York has experienced in
its 529 College Savings Program. Such savings may then be passed onto
program account owners, making programs with lower costs more appealing.
In addition, if an account owner in the NY ABLE Program relocates to
another state, he or she must close his or her NY ABLE account, open an
account in another state ABLE program, and transfer assets from the NY
Program to the other state program. This inconvenience would be elimi-
nated by the change sought.
This amendment would align the NY ABLE statute with federal requirements
by eliminating an outdated residency requirement, thereby placing the NY
ABLE Program in a stronger competitive position.
FISCAL IMPLICATIONS FOR STATE:
This change would be revenue-neutral to the State of New York, since NY
ABLE contributions are not tax deductible.
This act shall take effect immediately.