Notice 2018-62, 2018-34 I.R.B. ___ (8/20/2018), provides guidance on the application of the new expanded contribution limits to “ABLE” (“Achieving a Better Life Experience”) accounts under IRC section 529A.
According to the IRS, a designated beneficiary who works may contribute (in addition to the annual gift tax exclusion) up to the lesser of (1) the designated beneficiary’s compensation for the tax year, or (2) the poverty line for a one-person household in the state in which the designated beneficiary lives. However, an employed designated beneficiary is not eligible for the increased contribution limit for the taxable year if any contribution is made on behalf of the employee to a 401(a) defined contribution plan or 403(a) annuity contract, a 403(b) annuity contract, or a 457(b) eligible deferred compensation plan.
Notice 2018-62 states that the Treasury Department and the IRS intend to issue new regulations on these contribution limits, and that the guidance provided by the notice may be relied upon until regulations have been issued.