Paul Curley at Congressional Briefing
On December 4, 2017, ABLE National Resource Center hosted a Congressional Briefing titled, “The ABLE Act: A Progress Report” in collaboration with Consortium for Citizen with Disabilities and National Association of State Treasurers. ABLE accounts are tax-advantaged savings accounts for certain individuals with disabilities and their families. The event was sponsored by Senator Robert “Bob” Casey, Senator Richard Burr, Representative Cathy McMorris Rodgers, Representative Pete Sessions and Representative Tony Cardenas, and was held in the Kennedy Caucus Room, which is Room 325 in the Russell Senate Office Building in Washington, DC. The goal of the event was to present Members of Congress and ABLE related stakeholders with a progress report on ABLE Act implementation from a market data, industry and legislative perspective. During the event, Andrea Feirstein, Managing Director of AKF Consulting, and Paul Curley, Director of Savings Research with Strategic Insight, presented a section titled “ABLE by the Numbers”. The goal of the presentation was to provide an ABLE landscape and market data update to the Members of Congress and ABLE related stakeholders so that they would understand of how ABLE accounts were being used from an independent third-party source. This week’s 529 Insiders article provides an overview of my comments during the panel.
Photo from Congressional Briefing
Overview of My Comments:
1) ABLE Accounts are Financially Accessible: The first slide highlighted that new accounts opened in 3Q 2017 (July 2017 to September 2017) contributed an average of $2,559 during the quarter, while the average contribution size of all accounts was $2,199 in 3Q 2017. Therefore ABLE accounts are opening, opening with modest amounts and continued to be contributed into subsequent to opening of the account. Given the modest size of the accounts, they can be considered as financially accessible by a broad cross-section of families.
---From a data definition perspective, “Gross Sales is defined as contributions or gross sales during quarter. Gross Sales should include Rollover In transactions”, “Number of New Accounts is defined as the number of total accounts (unique accountholder-beneficiary relationships) FUNDED with a balance greater than $0.00 during the quarter” and “New Account Dollars is defined as the gross contributions from new accounts opened in the quarter. For example, if an account is opened with $25 in January and $25 is contributed into the new account in February and March, then the reported number should be $75.”
2) Modest Usage Size: The second slide highlighted that the average size of distributions from ABLE accounts was $1,911 as of 3Q 2017. Given the size of the distribution, ABLE accounts can be considered as modest and used by a broad cross-section of families. This slide also represents statistically that the product usage cycle is occurring from the perspective of accounts are being opened, money is going into the accounts and money is going out of the accounts. As such, the entire product usage cycle is occurring, and occurring successfully.
---From a data definition perspective, this slide covered money coming into the account with a specific definition as “Qualified and Non-Qualified Distributions (# and Dollars) exclude rollover out transactions. Rollover out transactions are withdrawals only."
3) Growth in ABLE Accounts to Continue: The third slide highlighted that Net Flows will drive growth in ABLE Accounts going forward. From the definition of contributions minus distributions, net flows from 2Q 2016 to 3Q 2017 (April 2016 to September 2017) were a total of positive $48 million. As the amount was positive, there has been a total of $48 million more contributions into ABLE accounts than distributions. Additionally from an alternative perspective, 10.1% is the ratio of distributions occurring in 3Q 2017 divided by contributions occurring in in 3Q 2017. Said differently, for every $100 going into ABLE accounts in 3Q 2017, $10.10 is going out of ABLE Accounts in 3Q 2017. So long as the net flows number is positive and the ratio is low, ABLE accounts will grow going forward.
4) Automatic Contributions Drive Growth: 25% of accounts in 3Q 2017 have automatic contributions set up for their ABLE Account, and the average size of the automatic contribution was $132 per month. This compares well to 529 savings accounts which reported 36% of accounts in 3Q 2017 with automatic contributions set up with an average size of the automatic contribution at $165. Therefore while ABLE accounts launched in 2016 and 529 savings accounts launched in 1998, the usage rates of the automatic contribution features are close and indicates projected growth for 529 plans ABLE accounts. Also, the modest size of the automatic contribution levels for 529s and ABLE indicate a broad cross section of usage.
---From a data definition perspective, this slide covered “% Gross Sales from Auto Funding should be inclusive of both scheduled bank drafts (whether pulled by the 529 administrator or pushed via bill-pay type of bank functionality) as well as payroll deduction contributions via the employer channel. This percentage excludes one-time contributions.”
5) ABLE Provides Versatile Usage: While 22% of ABLE accounts are invested in checking investment options, 78% of ABLE accounts are invested in long-term investment options. Therefore ABLE accounts are allowing users to allocation and choose usage of the account for short-term liquidity and/or long-term investments. The versatility of the ABLE account as a savings and investment product will help usage to grow.
Therefore, advisers, estate planners and accountants have an opportunity to help eligible families in the financial planning process. Last but not least, I would like to thank the ABLE National Resource Center for the invitation to present, my fellow presenter of Andrea Feirstein for the collaboration and the Members of Congress and ABLE related stakeholders for the engaging discussion and insightful questions. Thank you for the opportunity, and have the financial planning discussion today.
Congresswoman Cathy McMorris Rodgers presenting at Congressional Briefing