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Iowa strengthens financial tool for people with disabilities

For Iowa's IAble account holders, the earnings on their savings are federally tax-deferred and tax-free, if used for qualified disability expenses. (Adobe Stock)

MASON CITY – Iowa has updated a law that backers say gives more financial flexibility to people living with disabilities. The changes center around a type of savings account.

Gov. Kim Reynolds has signed a measure that modifies language tied to IAble accounts. Family, friends and account holders can contribute to money to the state-run fund without jeopardizing the account holder’s eligibility for social-aid programs. The bill removes barriers for transferring money from other special-needs trust funds and protects accounts from being garnished by the state to cover Medicaid expenses.

Lisa Yunek, an advocate from Mason City, said the old rules were adding to some people’s hardships.

“We don’t do that to people who have college funds, a 529 savings account,” she said, “and so, we’re giving a more onerous burden on someone with a disability who already has so many barriers in life.”

Yunek has an adult daughter with Down syndrome, who is a member of the Iowa Developmental Disabilities Council. She said the changes also could benefit a nephew with autism, noting difficulties in accessing benefits after his father’s death. The bill won unanimous approval in both the House and Senate, with no stated opposition during the hearing phase.

State Treasurer Michael Fitzgerald said adding protections is vital because they allow the IAble accounts to grow without tax burdens. He said that’s important for people who often are reliant on Medicaid or Supplemental Security Income, and cut off from other assets.

“These accounts are set up to help them achieve a better life,” he said. “Let’s say they want to buy equipment so they can drive their car with just hands steering and shifting. That’s why they were set up.”

The Iowa Developmental Disabilities Council has noted that misinformation is another barrier; many people aren’t aware of these accounts, or assume they’d lose eligibility for social services if they enroll. Currently, more than 1,000 Iowans have an IAble account. The average balance is $8,500.

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