July 23, 2025
Ms. Davids of Kansas (for herself and Mr. Fitzpatrick) introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to allow employers to contribute to ABLE accounts in lieu of retirement plan contributions.
Section 1. Short title
This Act may be cited as the ABLE Employment Flexibility Act
.
Sec. 2. Protecting working ABLE individuals from losing benefits because of retirement plan rules
(a) In general
Section 414 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:
(dd) ABLE account contributions
(1) In general
An applicable employer plan (as defined in subsection (v)(6)(A)) which is a defined contribution plan shall not be treated as failing to meet any requirement of this title solely because the plan provides that an eligible ABLE individual may elect for a plan year that employer contributions which would otherwise be made under the terms of the plan for such plan year shall (in lieu of contribution to the plan) be contributed by the employer to a qualified ABLE program described in section 529A on behalf of such eligible ABLE individual.
(2) Treatment of contributions
(A) No deduction for amounts contributed to ABLE account
Except as provided in subparagraph (B), a contribution to a qualified ABLE program pursuant to an election under paragraph (1) shall not be treated as a contribution to an applicable employer plan.
(B) Application of nondiscrimination rules
Under rules prescribed by the Secretary, for purposes of applying sections 401(a)(4), 401(k)(3), 401(k)(12), 401(k)(13), 401(m)(2), 403(b)(12), 408(k)(3), 408(p)(2)(iii), 408(p)(2)(B), 410, and 416, contributions made to a qualified ABLE program pursuant to an election under paragraph (1) shall be treated as if such contributions were made to the plan.
(3) Universal availability
Paragraph (1) shall not apply unless the plan provides that the election described therein is available to all eligible ABLE individuals who are eligible to participate in the plan.
(4) Cash or deferred arrangement
A plan shall not fail to be treated as including a qualified cash or deferred arrangement described in section 401(k)(1) solely because such plan provides for the election described in paragraph (1).
(5) Eligible ABLE individual
For purposes of this subsection, the term eligible ABLE individual means an employee who, as of the first day of a plan year, is an eligible individual within the meaning of section 529A(e)(1) for the taxable year containing such first day of the plan year.
(6) Treatment of permissive withdrawals
An eligible ABLE individual may direct amounts eligible for withdrawal from an eligible contribution arrangement pursuant to section 414(w) to be contributed to a qualified ABLE program described in section 529A on behalf of such eligible ABLE individual.
(b) Treatment as beneficiary contribution
Section 529A(b)(7) of the Internal Revenue Code of 1986 is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph:
(B) Employer contributions
Contributions made to a qualified ABLE program by an employer on behalf of a designated beneficiary described in this paragraph pursuant to paragraph (1) or (6) of section 414(dd) shall be treated as made by the designated beneficiary.
(c) Clarification of availability of employer contributions
Section 529A(e) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:
(7) Employer contributions
An employer of an eligible individual may contribute to any qualified ABLE program for which the eligible individual is the designated beneficiary, including through a contribution matching a contribution made by such eligible individual to the qualified ABLE program.
(d) Deduction for contributions remitted by employer to a qualified ABLE program
Not later than 1 year after the date of the enactment of this Act, the Secretary of the Treasury shall—
(1)
amend the regulations under section 162 of the Internal Revenue Code of 1986 to confirm that contributions made by an employer to a qualified ABLE program described in section 529A of such Code on behalf of an eligible ABLE individual described in section 414(dd)(5) of such Code who is an employee of such employer shall be considered a reasonable allowance for salaries or other compensation for personal service if such contribution for a year, taking into account all other contributions to such qualified ABLE program, does not exceed the maximum contribution described in section 529A(b)(2)(B) of such Code with respect to such individual; and
(2)
update the publications issued for employers to encourage employers offering a retirement plan with automatic enrollment to notify employees who elect not to contribute to the plan and who may be eligible to contribute to a qualified ABLE program to notify such employees of the possibility of a contribution under section 529A(b)(2)(B)(ii) of such Code.
(e) Effective date
(1) In general
Except as provided in paragraph (2), the amendments made by this section shall apply to plan and taxable years beginning after the date of the enactment of this Act.
(2) Clarifications
The amendment made by subsection (c) and the amendments made pursuant to subsection (d)(1) shall apply to plan and taxable years beginning before, on, or after the date of the enactment of this Act.
(f) Model amendment authority
The Secretary of the Treasury (or such Secretary’s delegate) shall promulgate model amendments which plans may adopt to implement contributions to qualified ABLE programs pursuant to the amendments made by this section.
(g) Contributions disregarded for purposes of certain means-Tested Federal programs
(1) In general
Notwithstanding any other provision of Federal law that requires consideration of one or more financial circumstances (including income) of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such provision to be provided to or for the benefit of such individual, a contribution to a qualified ABLE program pursuant to paragraph (1) or (6) of section 414(dd) of the Internal Revenue Code of 1986 shall be disregarded (including disregarded as income) for such purpose with respect to any period during which such individual maintains, makes contributions to, or receives distributions from such ABLE program.
(2) Cross reference
For additional rules relating to the treatment of qualified ABLE programs for purposes of certain means-tested Federal programs, see section 103 of the Stephen Beck, Jr., ABLE Act of 2014 (division B of Public Law 113–295).